SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED COMMISSION FILE NUMBER
DECEMBER 31, 2001 1-9608
NEWELL RUBBERMAID INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 36-3514169
(State or other (I.R.S. Employer
jurisdiction of Identification No.)
incorporation or
organization)
Newell Center
29 East Stephenson Street
Freeport, Illinois 61032-0943
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: 815) 235-4171
-------------
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ----------------------
Common Stock, $1 par value New York Stock Exchange
per share, and associated Chicago Stock Exchange
Common Stock Purchase
Rights
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the Registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. [ ]
There were 282.5 million shares of the Registrant's Common Stock
outstanding as of February 28, 2002. The aggregate market value of
the shares of Common Stock (based upon the closing price on the New
York Stock Exchange on that date) beneficially owned by non-affiliates
of the Registrant was approximately $7,785.8 million. For purposes of
the foregoing calculation only, which is required by Form 10-K, the
Registrant has included in the shares owned by affiliates those shares
owned by directors and officers of the Registrant, and such inclusion
shall not be construed as an admission that any such person is an
affiliate for any purpose.
DOCUMENTS INCORPORATED BY REFERENCE
PART III
Portions of the Registrant's Definitive Proxy Statement for its Annual
Meeting of Stockholders to be held May 8, 2002.
2
ITEM 1. BUSINESS
--------
"Newell" or the "Company" refers to Newell Rubbermaid Inc. alone or
with its wholly-owned subsidiaries, as the context requires.
GENERAL
-------
The Company is a global manufacturer and full-service marketer of
name-brand consumer products serving the needs of volume purchasers,
including discount stores and warehouse clubs, home centers and
hardware stores, and office superstores and contract stationers. The
Company's basic business strategy is to merchandise a multi-product
offering of everyday consumer products, backed by an obsession with
customer service excellence and new product development, in order to
achieve maximum results for its stockholders. The Company's multi-
product offering consists of name-brand consumer products in five
business segments: Rubbermaid; Parker/Eldon; Levolor/Hardware;
Calphalon/WearEver and Little Tikes/Graco. The Company's financial
objectives are to achieve above-average sales and earnings per share
growth, maintain a superior return on investment and maintain a
conservative level of debt. To accomplish these objectives, the
Company established five key measures to measure financial
performance: internal sales growth, operating income as a percent of
sales, working capital as a percent of sales, free cash flow and
return on invested capital. The Company defines free cash flow as cash
provided from operating activities less capital expenditures and dividends.
In an effort to achieve superior performance in the five key financial
measures, the Company introduced six transformational strategic
initiatives in 2001 as follows: Productivity, New Product Development,
Marketing, Key Accounts, Streamlining, and Collaboration.
Productivity is the initiative to reduce the cost of manufacturing a
product by at least five percent per year, annually. New Product
Development represents the commitment to develop and introduce
cutting-edge, innovative new products to the market. The marketing
initiative represents the Company's commitment to transform from a
push to pull marketing organization, focusing on the end-user. The
Key Account initiative represents the Company's intention to allocate
resources to those strategic retailers the Company believes will
continue to grow in the near future. Streamlining is the commitment
to reduce non-value added costs and cut out excess layers, in an
effort to be the low-cost supplier. Collaboration is the Company's
initiative for the divisional operating units to work together and
maximize economies of scale and the use of best-practices.
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, information or assumptions about sales, income,
earnings per share, return on equity, return on invested capital,
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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, impact of
changes in accounting standards, 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 or the assumptions relating to any of the
forward-looking statements. 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.
4
BUSINESS SEGMENTS
-----------------
RUBBERMAID
----------
The Company's Rubbermaid business is conducted by the Rubbermaid Home
Products, Rubbermaid Commercial Products, Curver (Europe), Rubbermaid
Closet & Organization Products and Goody divisions. Rubbermaid Home
Products and Curver design, manufacture or source, package and
distribute indoor and outdoor organization, storage, and cleaning
products. Rubbermaid Commercial Products designs, manufactures or
sources, packages and distributes industrial and commercial waste and
recycling containers, cleaning equipment, food storage, serving and
transport containers, outdoor play systems and home health care
products. Rubbermaid Closet & Organization Products primarily
designs, manufactures or sources, packages and distributes wire
storage and laminate products and ready-to-assemble closet
organization and work shop cabinets and distributes hardware, which
includes bolts, screws and mechanical fasteners. Goody designs,
sources, manufactures, packages and distributes hair care accessories.
Rubbermaid Home Products, Rubbermaid Commercial Products, Curver,
Rubbermaid Closet & Organization Products and Goody primarily sell
their products under the Rubbermaid{R}, Curver{R}, Blue Ice{R}.
Carex{R}, Wilhold{R}, Dorfile{R}, Lee Rowan{R}, System Works{R},
Ace{R}, and Goody{R} trademarks.
Rubbermaid Home Products, Curver and Goody market their products
directly and through distributors to mass merchants, warehouse clubs,
grocery/drug stores and hardware distributors, using a network of
manufacturers' representatives, as well as regional direct sales
representatives and market-specific sales managers. Rubbermaid
Commercial Products and Rubbermaid Closet & Organization Products
market their products directly and through distributors to commercial
channels and home centers using a direct sales force.
PARKER/ELDON
------------
The Company's Parker/Eldon business is conducted by the Sanford North
America, Sanford International, Eldon Office Products and Cosmolab
divisions. Sanford North America primarily designs, manufactures or
sources, packages and distributes permanent/waterbase markers, dry
erase markers, overhead projector pens, highlighters, wood-cased
pencils, ballpoint pens and inks, and other art supplies. It also
distributes other writing instruments including roller ball pens and
mechanical pencils for the retail marketplace. Sanford International
primarily designs and manufactures, packages and distributes ball
point pens, wood-cased pencils, roller ball pens and other art
supplies for the retail and distributor markets. Eldon Office
Products primarily designs, manufactures or sources, packages and
5
distributes desktop accessories, computer accessories, storage
products, card files and chair mats. Cosmolab primarily designs and
manufactures, packages and distributes private label cosmetic pencils
for commercial customers.
Sanford primarily sells its products under the trademarks Sanford{R},
Sharpie{R}, Paper Mate{R}, Parker{R}, Waterman{R}, Colorific{R},
Eberhard Faber{R}, Berol{R}, Grumbacher{R}, Reynolds{R}, Rotring{R},
Uni-Ball{R} (used under exclusive license from Mitsubishi Pencil Co.
Ltd. and its subsidiaries in North America), Expo{R}, Accent{R}, Vis-
a-Vis{R}, Expresso{R}, Liquid Paper{R}, and Mongol{R}. Eldon Office
Products markets its products under the Rolodex{R}, Eldon{R},
Rogers{R} and Rubbermaid{R} trademarks.
Sanford North America markets its products directly and through
distributors to mass merchants, warehouse clubs, grocery/drug stores,
office superstores, office supply stores, contract stationers, and
hardware distributors, using a network of company sales
representatives, regional sales managers, key account managers and
selected manufacturers' representatives. Sanford International markets
its products directly to retailers and distributors using a direct
sales force. Eldon Office Products markets its products directly and
through distributors to mass merchants, warehouse clubs, grocery/drug
stores, office superstores, office supply stores and contract
stationers, using a network of manufacturers' representatives, as well
as regional zone and market-specific key account representatives and
sales managers.
LEVOLOR/HARDWARE
----------------
The Company's Levolor/Hardware business is conducted by the
Levolor/Kirsch, Newell Window Fashions Europe, Amerock Cabinet and
Window Hardware Systems, EZ Paintr, BernzOmatic and Newell Hardware
Europe. Levolor/Kirsch primarily design, manufacture or source,
package and distribute drapery hardware, made-to-order and stock
horizontal and vertical blinds, as well as pleated, cellular and
roller shades for the retail marketplace. Levolor/Kirsch also
produces window treatment components for custom window treatment
fabricators. Newell Window Fashions Europe primarily designs,
manufactures, packages and distributes drapery hardware and made-to-
order window treatments for the European retail marketplace. Amerock
Cabinet and Window Hardware Systems manufacture or source, package and
distribute cabinet hardware for the retail and O.E.M. marketplace and
window hardware for window manufacturers. EZ Paintr manufactures and
distributes manual paint applicator products. BernzOmatic
manufactures and distributes propane/oxygen hand torches. Newell
Hardware Europe is a manufacturer and marketer of shelving and storage
products, cabinet hardware and functional trims.
Amerock, EZ Paintr, BernzOmatic, and Newell Hardware Europe primarily
sell their products under the trademarks Amerock{R}, Allison{R}, EZ
6
Paintr{R}, Shur-Line{R}, Rubbermaid{R}, BernzOmatic{R}, Douglas
Kane{R}, Spur{R}, Nenplas{R}, Homelux{R} and Ashland{R}.
Levolor Home Fashions, Newell Window Furnishings and Newell Window
Fashions Europe primarily sell their products under the trademarks
Levolor{R}, Newell{R}, LouverDrape{R}, Del Mar{R}, Kirsch{R},
Acrimo{R}, Swish{R}, Gardinia{R}, Harrison Drape{R}, Spectrim{R},
MagicFit{R}, Riviera{R} and Levolor Cordless{TM}. Amerock, EZ Paintr,
BernzOmatic and Newell Hardware Europe primarily sell their products
under the trademarks Amerock{R}, Allison{R}, EZ Paintr{R},
BernzOmatic{R}, Nenplas{R}, Homelux{R}and Ashland{R}.
Levolor/Kirsch, Newell Window Furnishings, Amerock, EZ Paintr and
BernzOmatic market their products directly and through distributors to
mass merchants, home centers, department/specialty stores, hardware
distributors, custom shops and select contract customers, using a
network of manufacturers' representatives, as well as regional account
and market-specific sales managers. Newell Window Fashions Europe and
Newell Hardware Europe market their products to mass merchants and
buying groups using a direct sales force.
On March 3, 2002, the Company reached a definitive agreement to
acquire American Tool Companies, Inc., a leading manufacturer of hand
tools and power tool accessories, in which the Company already holds a
49.5 percent stake. The purchase price is approximately $419 million,
which includes cash for the equity of the other shareholders of
American Tool and the assumption of 100 percent of American Tool's
debt. American Tool had fiscal 2001 revenues of $443.6 million and
has manufacturing and distribution facilities in the U.S., Europe,
South America, Australia and Asia. American Tool will become part of
the Levolor/Hardware Group. The Company expects to close the
transaction, which is subject to regulatory approvals and other
customary closing conditions, by the end of April 2002.
CALPHALON/WEAREVER
------------------
The Company's Calphalon/WearEver business is conducted by the Mirro,
Panex, Calphalon cookware and bakeware divisions, the Anchor Hocking
and Newell Europe glassware divisions, Connoisseur/Burnes and Newell
Photo Fashion Europe divisions. Mirro and Panex primarily design,
manufacture, package and distribute aluminum and steel cookware and
bakeware for the U.S. and Central and South America retail
marketplace. In addition, Mirro designs, manufactures, packages and
distributes various specialized aluminum cookware and bakeware items
for the food service industry. It also produces aluminum contract
stampings and components for other manufacturers and makes aluminum
and plastic kitchen tools and utensils. Mirro's manufacturing
operations are highly integrated, rolling sheet stock from aluminum
ingot, and producing phenolic handles and knobs at its own plastics
molding facility. Calphalon primarily designs, manufactures or
sources, packages and distributes hard anodized aluminum and stainless
7
steel cookware and bakeware for the department/specialty store
marketplace. Anchor Hocking and Newell Europe glassware primarily
design, manufacture, package and distribute glass products. These
products include glass ovenware, servingware, cookware and dinnerware
products. Anchor Hocking also produces foodservice products, glass
lamp parts, lighting components, meter covers and appliance covers for
the foodservice and specialty markets. Newell Europe also produces
glass components for appliance manufacturers, and its products are
marketed primarily in Europe, the Middle East and Africa.
Connoisseur/Burnes and Newell Photo Fashion Europe primarily design,
manufacture or source, package and distribute wood, wood composite and
metal ready-made picture frames and photo albums.
Mirro and Calphalon primarily sell their products under the trademarks
Mirro{R}, WearEver{R}, Calphalon{R}, Regal{R}, Panex{R}, Penedo{TM},
Rochedo{TM}, Clock{TM}, AirBake{R}, Cushionaire{R}, Concentric Air{R},
Channelon{R}, WearEver Air{R}, Club{R}, Royal Diamond{R} and Kitchen
Essentials{R}. Anchor Hocking products are sold primarily under the
trademarks Anchor{TM}, Anchor Hocking{R} and Oven Basics{R}. Newell
Europe's products are sold primarily under the trademarks of Pyrex{R},
Vision and Visions{R} (each used under exclusive license from Corning
Incorporated and its subsidiaries in Europe, the Middle East and
Africa only), Pyroflam{R} and Vitri{R}. Connoisseur/Burnes ready-made
picture frames are sold primarily under the trademarks Intercraft{R},
Decorel{R}, Burnes of Boston{R}, Carr{R}, Rare Woods{R},
Terragrafics{R} and Connoisseur{R}, while photo albums are sold
primarily under the Holson{R} trademark. Newell Photo Fashion Europe
primarily sell their products under the trademarks Albadecor{R} and
Panodia{R}.
Mirro markets its products directly to mass merchants, warehouse
clubs, grocery/drug stores, department/specialty stores, hardware
distributors, cable TV networks and select contract customers, using a
network of manufacturers' representatives, as well as regional zone
and market-specific sales managers. Calphalon primarily markets its
products directly to department/specialty stores. Anchor Hocking
markets its products directly to mass merchants, warehouse clubs,
grocery/drug stores, department/specialty stores, hardware
distributors and select contract customers, using a network of
manufacturers' representatives, as well as regional zone and market-
specific sales managers. Anchor Hocking also markets its products to
manufacturers which supply the mass merchant and home party channels
of trade. Newell Europe markets its products to mass merchants,
industrial manufacturers and buying groups using a direct sales force
and manufacturers' representatives in some markets. Connoisseur/Burnes
markets its products directly to mass merchants, warehouse clubs,
grocery/drug stores and department/specialty stores, using a network
of manufacturers' representatives, as well as regional zone and
market-specific sales managers. Intercraft{R}, Decorel{R} and
Holson{R} products are sold primarily to mass merchants, while the
remaining U.S. brands are sold primarily to department/specialty
stores. Newell Photo Fashion Europe markets its products to mass
merchants, buying groups and the do-it-yourself market using a direct
sales force.
8
LITTLE TIKES/GRACO
------------------
The Company's Little Tikes/Graco business is conducted by the Little
Tikes and Graco/Century divisions. These businesses design,
manufacture or source, package and distribute infant and juvenile
products such as toys, high chairs, infant seats, strollers, play
yards, ride-ons and outdoor activity play equipment.
Little Tikes and Graco/Century primarily sell their products under the
Little Tikes{R}, Graco{R} and Century{R} trademarks.
Little Tikes and Graco/Century market their products directly and
through distributors to mass merchants, warehouse clubs, grocery/drug
stores and hardware distributors, using a network of manufacturers'
representatives, as well as regional direct sales representatives and
market-specific sales managers.
NET SALES BY BUSINESS SEGMENT
-----------------------------
The following table sets forth the amounts and percentages of the
Company's net sales for the three years ended December 31 (including
sales of acquired businesses from the time of acquisition and sales of
divested businesses through date of sale), for the Company's five
business segments. Sales to Wal-Mart Stores, Inc. and subsidiaries
amounted to approximately 15% of consolidated net sales in 2001, 2000
and 1999. Sales to no other customer exceeded 10% of consolidated net
sales.
% of % of % of
(IN MILLIONS, 2001 total 2000 total 1999 total
EXCEPT PERCENTAGES) ---- ----- ---- ----- ---- -----
Rubbermaid $1,819.3 26.4% $1,946.5 28.1% $2,004.3 29.9%
Parker/Eldon 1,673.5 24.2 1,288.0 18.5 1,218.0 18.1
Levolor/Hardware 1,382.6 20.0 1,455.0 21.0 1,400.6 20.9
Calphalon/WearEver 1,161.7 16.8 1,246.9 18.0 1,186.0 17.7
Little Tikes/Graco 872.2 12.6 998.3 14.4 902.9 13.4
------- ----- ------- ----- ------- -----
Total Company $6,909.3 100.0% $6,934.7 100.0% $6,711.8 100.0%
======== ===== ======== ===== ======== =====
Certain 2000 and 1999 amounts have been reclassified to conform with
the 2001 presentation.
9
Growth Strategy
---------------
The Company's growth strategy emphasizes internal growth and
acquisitions. The Company has grown internally principally by
introducing new products, entering new domestic and international
markets, adding new customers, cross-selling existing product lines to
current customers and supporting its U.S.-based customers'
international expansion. The Company has supplemented internal
growth, both domestically and internationally, by acquiring businesses
with brand name product lines and improving the profitability of such
businesses through an integration process referred to as
"Newellization." Since 1990, the Company has completed more than 20
major acquisitions (excluding Rubbermaid) representing more than $3
billion in additional sales.
Internal Growth
---------------
An important element of the Company's growth strategy is internal
growth. Internal growth is accomplished through introducing new
products, entering new domestic and international markets, adding new
customers, cross-selling existing product lines to current customers
and supporting its U.S.-based customers' international expansion.
Internal growth is defined by the Company as growth from its "core
businesses," which include continuing businesses owned more than one
year and minor acquisitions. The Company's goal is to achieve above-
average internal growth, and is committed to achieving 5% internal
growth by the end of 2004.
10
ACQUISITIONS AND INTEGRATION
----------------------------
Acquisition Strategy
--------------------
The Company supplements internal growth by acquiring businesses and
product lines with a strategic fit with the Company's existing
businesses. It also seeks to acquire product lines with a number one
or two position in the markets in which they compete, a low technology
level, a long product life cycle and the potential to reach the
Company's standard of profitability. In addition to adding entirely
new product lines, the Company uses acquisitions to round out existing
businesses and fill gaps in its product offering, add new customers
and distribution channels, expand shelf space for the Company's
products with existing customers, and improve operational efficiency
through shared resources. The Company intends to continue to pursue
acquisition opportunities to complement internal growth.
Newellization
-------------
"Newellization" is the Company's well-established profit improvement
and productivity enhancement process that is applied to integrate
newly acquired product lines. The Newellization process includes
establishing a more focused business strategy, improving customer
service, reducing corporate overhead through centralization of
administrative functions and tightening financial controls. In
integrating acquired businesses, the Company typically centralizes
accounting systems, capital expenditure approval, cash management,
order processing, billing, credit, accounts receivable and data
processing operations. To enhance efficiency, Newellization also
focuses on improving manufacturing processes, eliminating
non-productive lines, reducing inventories, increasing accounts
receivable turnover, extending accounts payable terms and trimming
excess costs. The Newellization process usually takes approximately
two to three years to complete.
Selective Globalization
-----------------------
The Company is pursuing selective international opportunities to
further its internal growth and acquisition objectives. The rapid
growth of consumer goods economies and retail structures in several
regions outside the U.S., particularly Europe, Mexico and South
America, makes them attractive to the Company by providing selective
opportunities to acquire businesses, develop partnerships with new
foreign customers and extend relationships with the Company's domestic
customers whose businesses are growing internationally. The Company's
recent acquisitions, combined with existing sales to foreign
customers, increased its sales outside the U.S. to approximately 27%
of total sales in 2001 from 25% in 2000 and 23% in 1999.
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Additional information regarding acquisitions of businesses is
included in Item 6 and Note 2 to the consolidated financial
statements.
STRATEGIC INITIATIVES
---------------------
Productivity
------------
The Company's objective is to reduce the cost of manufacturing a
product by at least five percent per year on an ongoing basis in order
to become the low-cost supplier to our customers. To achieve
productivity, the Company will focus on reducing purchasing costs,
materials handling costs, manufacturing inefficiencies, and excess
overhead costs to reduce the overall cost of manufacturing products.
New Product Development
-----------------------
The Company is determined to become the leader in introducing cutting-
edge, innovative, and patented new products to the marketplace. The
Company seeks to employ the best and brightest new product engineers
in order to achieve this goal through the implementation and execution
of a world-class product development process. The Company's intention
is to become a "new product machine" that will enhance the brand image
and help secure additional store listings.
Marketing
---------
The Company's objective is to develop long-term, mutually beneficial
partnerships with its customers and become their supplier of choice.
To achieve this goal, the Company has a value-added marketing program
that offers a family of leading brand name staple products, tailored
sales programs, innovative merchandising support, in-store services
and responsive top management.
The Company's marketing skills help customers stimulate store traffic
and sales through timely advertising and innovative promotions. The
Company also assists customers in differentiating their offerings by
customizing products and packaging. Through self-selling packaging
and displays that emphasize good-better-best value relationships,
retail customers are encouraged to trade up to higher-value, best
quality products.
The Company is also committed to selective media advertising,
including national television advertising, where appropriate in order
to increase brand awareness among end-users of the product.
Customer service also involves customer contact with top-level
decision makers at the Company's divisions. As part of its
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decentralized structure, the Company's division presidents are the
chief marketing officers of their product lines and communicate
directly with customers. This structure permits early recognition of
market trends and timely response to customer problems.
Multi-Product Offering
----------------------
The Company's increasingly broad product coverage in multiple product
lines permits it to more effectively meet the needs of its customers.
With families of leading, brand name products and profitable new
products, the Company also can help volume purchasers sell a more
profitable product mix. As a potential single source for an entire
product line, the Company can use program merchandising to improve
product presentation, optimize display space for both sales and income
and encourage impulse buying by retail customers.
Customer Service
----------------
The Company believes that one of the primary ways it distinguishes
itself from its competitors is through customer service. The Company's
ability to provide superior customer service is a result of its
information technology, marketing and merchandising programs designed
to enhance the sales and profitability of its customers and consistent
on-time delivery of its products
Key Accounts
------------
In 2001, the Company introduced the Key Account Program, establishing
sales organizations specifically to handle Wal*Mart, The Home Depot
and Lowe's. As part of this program, the company established
President level positions to more effectively manage the relationships
with these accounts. The program allows the Company to present these
customers with "one face" to enhance the Company's response time and
understanding of the customer's needs, ensuring the best possible
relationship.
Phoenix Program
---------------
In 2001, the Company introduced its Phoenix program. This initiative
is an action-oriented field sales force consisting of approximately
500 recent university graduates. The team works in the field,
primarily within our Key Account structure performing product
demonstrations, merchandising product, interacting with the end-user,
and maintaining an ongoing relationship with store personnel. This
initiative allows the Company to ensure product placement and minimize
stock outages. As a result of this program, the company will leverage
their relationship with these Key Accounts to maximize shelf space
potential.
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Streamlining
------------
The streamlining initiative represents the Company's commitment and
focus on reducing nonvalue-added activities and excess layers within
the organization. The Company's goal is to use the savings generated
from streamlining to fund marketing and other key initiatives, without
increasing total expenses. The Company is vigilant in creating a
leaner organization that is more flexible in its response time, both
internally and externally.
Collaboration
-------------
Collaboration represents the Company's focus to benefit from the
sharing of best-practices and the reduction of costs achieved through
economies of scale. For example, functions, such as purchasing and
distribution and transportation, have been centralized to increase
buying power across the Company.
Additionally, certain administrative functions are centralized at the
corporate level including cash management, accounting systems, capital
expenditure approvals, order processing, billing, credit, accounts
receivable, data processing operations and legal functions.
Centralization concentrates technical expertise in one location,
making it easier to observe overall business trends and manage the
Company's businesses.
14
OTHER INFORMATION
-----------------
On-Time Delivery
----------------
A critical element of the Company's customer service is consistent on-
time delivery of products to its customers. Retailers are pursuing a
number of strategies to deliver the highest-quality, lowest-cost
products to their customers. A growing trend among retailers is to
purchase on a "just-in-time" basis in order to reduce inventory costs
and increase returns on investment. As retailers shorten their lead
times for orders, manufacturers need to more closely anticipate
consumer buying patterns. The Company supports its retail customers'
"just-in-time" inventory strategies through investments in improved
forecasting systems, more responsive manufacturing and distribution
capabilities and electronic communications. The Company manufactures
the vast majority of its products and has extensive experience in
high-volume, cost-effective manufacturing. The high-volume nature of
its manufacturing processes and the relatively consistent demand for
its products enables the Company to ship most products directly from
its factories without the need for independent warehousing and
distribution centers. For 2001, approximately 98% of the items
ordered by customers were shipped on time, typically within two to
three days of the customer's order.
Foreign Operations
------------------
Information regarding the Company's 2001, 2000 and 1999 foreign
operations is included in Note 14 to the consolidated financial
statements and is incorporated by reference herein.
Raw Materials
-------------
The Company has multiple foreign and domestic sources of supply for
substantially all of its material requirements. The raw materials and
various purchased components required for its products have generally
been available in sufficient quantities.
Backlog
-------
The dollar value of unshipped factory orders is not material.
Seasonal Variations
-------------------
The Company's product groups are only moderately affected by seasonal
trends. The Rubbermaid, Little Tikes/Graco and Calphalon/WearEver
business segments typically have higher sales in the second half of
15
the year due to retail stocking related to the holiday season; the
Levolor/Hardware business segment has higher sales in the second and
third quarters due to an increased level of do-it-yourself projects
completed in the summer months; and the Parker/Eldon business segment
has higher sales in the second and third quarters due to the back-to-
school season. Because these seasonal trends are moderate, the
Company's consolidated quarterly sales do not fluctuate significantly,
unless a significant acquisition is made.
Patents and Trademarks
----------------------
The Company has many patents, trademarks, brand names and trade names,
none of which is considered material to the consolidated operations.
Competition
-----------
The Company competes with numerous other manufacturers and
distributors of consumer products, many of which are large and well-
established. The Company's 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 the Company's 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 the Company's 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.
For more than 30 years, the Company has positioned itself to respond
to the challenges of this retail environment by developing strong
relationships with large, high-volume purchasers. The Company markets
its strong multi-product offering through virtually every category of
high-volume retailer, including discount, drug, grocery and variety
chains, warehouse clubs, department, hardware and specialty stores,
home centers, office superstores, contract stationers and military
exchanges. The Company's largest customer, Wal-Mart (including Sam's
Club), accounted for approximately 16% of net sales in 2001. Other
16
top ten customers included The Home Depot, Lowe's, Toys 'R Us, Target,
Kmart, The Office Depot, JC Penney, United Stationers, and Staples.
The Company's other principal methods of meeting its competitive
challenges are high brand name recognition, superior customer service
(including industry leading information technology, innovative "good-
better-best" marketing and merchandising programs), consistent on-time
delivery, decentralized manufacturing and marketing, centralized
administration, and experienced management.
Environment
-----------
Information regarding the Company's environmental matters is included
in the Management's Discussion and Analysis section of this report and
in Note 15 to the consolidated financial statements and is
incorporated by reference herein.
Employees
---------
The Company has approximately 49,425 employees worldwide, of whom
9,705 are covered by collective bargaining agreements or, in certain
countries, other collective arrangements decreed by statute.
17
ITEM 2. REAL PROPERTIES
---------------
The following table shows the location and general character of the
principal operating facilities owned or leased by the Company. The
properties are listed within their designated business segment:
Rubbermaid Group; Calphalon/WearEver Group; Parker/Eldon Group;
Levolor/Hardware Group; and Little Tikes/Graco Group. These are the
primary manufacturing locations and in many instances also contain
administrative offices and warehouses used for distribution of our
products. The Company also maintains sales offices throughout the
United States and the world. The executive offices are located in
Rockford, IL, which is a leased facility occupying approximately
9,800 square feet. The corporate offices are located in Illinois
in owned facilities at Freeport (approximately 91,000 square feet).
Most of the idle facilities, which are excluded from the following
list, are subleased while being held pending sale or lease expiration.
The Company's properties are generally in good condition, well-
maintained, and are suitable and adequate to carry on the Company's
business.
OWNED OR
BUSINESS SEGMENT LOCATION CITY LEASED GENERAL CHARACTER
---------------- -------- ---- ------ -----------------
The Rubbermaid Group
--------------------
AZ Phoenix L Commercial Products
Mexico Cadereyta L Commercial Products
TN Cleveland O Commercial Products - 2 facilities
Mexico Monterrey L Commercial Products
VA Winchester O/L Commercial Products - 2 facilities
GA Manchester O Hair Accessories
AZ Phoenix O Home Products
France Amiens O Home Products
France Grossiat O Home Products
France Lomme L Home Products
Germany Dreieich O Home Products
Hungary Debrecen L Home Products
IA Centerville O Home Products
Mexico Cartagena O Home Products
NC Greenville O Home Products
Netherlands Brunssum O Home Products
OH Mogadore O Home Products
OH Wooster O Home Products
Ontario Mississauga O Home Products
Poland Seupsk O Home Products
Spain Zaragoza O Home Products
TX Cleburne O Home Products
TX Greenville O Home Products
TX Wills Point L Home Products
18
OWNED OR
BUSINESS SEGMENT LOCATION CITY LEASED GENERAL CHARACTER
---------------- -------- ---- ------ -----------------
UK Corby O Home Products
Netherlands Goirle O Home Products
KS Winfield O/L Home Products - 2 facilities
CA Vista L Home Storage Systems
MO Jackson O Home Storage Systems
The Parker/Eldon Group
----------------------
TN Lewisburg O Cosmetic Pencils
TN Maryville O Office & Storage Organizers
WI Madison O/L Office & Storage - 3 facilities
Puerto Rico Moca O Office & Storage Organizers
Puerto Rico Carolina L Writing Instruments
CA Santa Monica L Writing Instruments - 2 facilities
IL Bellwood O Writing Instruments - 3 facilities
IL Bolingbrook L Writing Instruments
TN Lewisburg O Writing Instruments
TN Shelbyville O Writing Instruments
WI Janesville L Writing Instruments
Canada Oakville L Writing Instruments
Colombia Bogota O/L Writing Instruments - 2 facilities
France Nantes O/L Writing Instruments - 2 facilities
France Valence O Writing Instruments
Germany Hamburg O Writing Instruments
Germany Baden-Baden L Writing Instruments
Mexico Pasteje L Writing Instruments
Mexico Mexicali L Writing Instruments
Mexico Tlalnepantla O Writing Instruments
UK Newhaven O/L Writing Instruments
UK Kings Lynn O Writing Instruments
Venezuela Maracay O Writing Instruments
Thailand Bangkok O Writing Instruments
Argentina Buenos Aires L Writing Instruments
South Africa Marlborough Sandton L Writing Instruments
China Shanghai L Writing Instruments
Greece Athens L Writing Instruments
Netherlands Almere O Writing Instruments
Spain Sesena L Writing Instruments
The Levolor/Hardware Group
--------------------------
Canada Woodbridge L Cabinet & Window Hardware
TN Memphis L Cabinet & Window Hardware
IL Rockford O Cabinet & Window Hardware
SD Bismarck L Cabinet & Window Hardware
Canada Watford O Cabinet & Window Hardware
19
OWNED OR
BUSINESS SEGMENT LOCATION CITY LEASED GENERAL CHARACTER
---------------- -------- ---- ------ -----------------
WI Milwaukee O Paint Applicators
NY Medina O Propane/Oxygen Hand Torches
NY Ogdensburg O Small Hardware
IN Lowell O Window Hardware
Mexico Ciudad Juarez L Window Treatments
AZ Bisbee L Window Treatments
Canada Calgary L Window Treatments
Canada Toronto L Window Treatments
Denmark Hornum O Window Treatments
France Ablis L Window Treatments
France Boissellerie L Window Treatments
France Tremblay O Window Treatments
France Quercy O Window Treatments
France Feuquieres O Window Treatments
France Laillet O Window Treatments
GA Athens O Window Treatments
Germany Borken L Window Treatments
Germany Isny O Window Treatments - 2 facilities
Germany Maierhofen O Window Treatments
Germany Bunde O Window Treatments
Germany Zachow O Window Treatments
Germany Nitzschka O Window Treatments
Germany Eckental O Window Treatments
IL Freeport O/L Window Treatments - 2 facilities
Italy Figino O Window Treatments
NC High Point O Window Treatments
NJ Rockaway L Window Treatments
PA Shamokin O Window Treatments
Spain Vitoria O Window Treatments
Sweden Anderstorp O Window Treatments
Sweden Malmo O Window Treatments
TX Waco O Window Treatments
UK Ashbourne O Window Treatments
UK Birmingham O/L Window Treatments
UK Tamworth O Window Treatments
UK Watford Herts L Window Treatments
UT Ogden O Window Treatments
UT Salt Lake City L Window Treatments
CA Westminster L Window Treatments - 2 facilities
The Calphalon/WearEver Group
----------------------------
OH Perrysburg O/L Cookware - 2 facilities
WI Manitowoc O Cookware & Bakeware - 5 facilities
20
OWNED OR
BUSINESS SEGMENT LOCATION CITY LEASED GENERAL CHARACTER
---------------- -------- ---- ------ -----------------
Brazil Sao Paulo L Cookware - 2 facilities
Germany Muhltal O Plastic Storage Ware
UK Sunderland O Glassware & Bakeware
France Chateauroux O Glassware & Bakeware
Canada Toronto O Picture Frames
France La Ferte Milon O Picture Frames
France Neunge Sur Beuvron O Picture Frames
France St. Laurent Sur Gorre O Picture Frames
Mexico Durango O Picture Frames - 2 facilities
NC Statesville O Picture Frames
TX Laredo L Picture Frames
TX Taylor O/L Picture Frames - 4 facilities
NH Claremont O/L Picture Frames & Photo Albums
RI North Smithfield L Picture Frames
TN Covington O Picture Frames
OH Lancaster O Glassware & Bakeware
PA Monaca O Glassware & Food Service
The Little Tikes/Graco Group
----------------------------
MO Farmington O Outdoor Play Systems
Canada Paris L Outdoor Play Systems
CA San Bernadino O Infant Products
OH Canton O Infant Products
OH Macedonia O Infant Products
PA Elverson O/L Infant Products - 2 facilities
SC Greer L Infant Products
Mexico Piedras Negras L Infant Products
CA City of Industry L Juvenile Products - 2 facilities
OH Hudson O Juvenile Products
OH Sebring O Juvenile Products
Luxembourg Niedercorn O Juvenile Products
21
ITEM 3. LEGAL PROCEEDINGS
-----------------
Information regarding legal proceedings is included in Footnote 15 to
the Consolidated Financial Statements and is incorporated by reference
herein.
22
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
There were no matters submitted to a vote of the Company's
shareholders during the fourth quarter of fiscal year 2001.
SUPPLEMENTARY ITEM -- EXECUTIVE OFFICERS OF THE REGISTRANT
Name Age Present Position With The Company
---- --- ---------------------------------
Joseph Galli, Jr. 43 President and Chief Executive
Officer
William T. Alldredge 62 President-Corporate Development and
Chief Financial Officer
Jeffery E. Cooley 49 Group President, Calphalon/WearEver
Group
David A. Klatt 37 Group President, Rubbermaid and
Little Tikes/Graco Groups
Robert S. Parker 56 Group President, Parker/Eldon Group
James J. Roberts 43 Group President, Levolor/Hardware Group
J. Patrick Robinson 43 Vice President - Controller
Timothy J. Jahnke 42 Vice President - Human Resources
Dale L. Matschullat 56 Vice President - General Counsel
Joseph Galli, Jr. has been President and Chief Executive Officer of
the Company since January 8, 2001. Prior thereto, he was President
and Chief Executive Officer of VerticalNet, Inc. (an internet business-
to-business company) from May 2000 until January 2001. From June
1999 until May 2000, he was President and Chief Operating Officer of
Amazon.com (an internet business-to-consumer company). From 1980 until
June 1999, he held a variety of positions with The Black and Decker
Corporation (a manufacturer and marketer of power tools and accessories),
culminating as President of Black and Decker's Worldwide Power Tools
and Accessories.
William T. Alldredge has been President - Corporate Development and
Chief Financial Officer since January 2001. Prior thereto, he was
President - International Business Development from December 1999
until January 2001. From August 1983 until December 1999, he was Vice
President - Finance.
Jeffery E. Cooley has been Group President of the Company's
Calphalon/WearEver business segment since November 2000. Prior
thereto, he was President of the Company's Calphalon division from
1990 through October 2000.
David A. Klatt has been Group President of the Company's Rubbermaid
and Little Tikes/Graco business segments since July 2001. From April
2001 to July 2001, he was Division President of Rubbermaid Home
23
Products. Prior there to, he was Chief Operating Officer of AirClic
Inc. (a web-based software and services platform company for the
mobile information market) from March 2000 until March 2001. From
September 1986 until March 2000, he held a variety of positions with
The Black and Decker Corporation (a manufacturer and marketer of
power tools and accessories), where he most recently served as Vice
President/General Manager of the U.S. Consumer Division.
Robert S. Parker has been Group President of the Company's
Parker/Eldon business segment since August 1998. Prior thereto, he
was President of Sanford Corporation, both before and after the
Company acquired it in 1992, from October 1990 to August 1998.
James J. Roberts has been Group President of the Company's
Levolor/Hardware business segment since April 2001. Prior thereto, he
served as President - Worldwide Hand Tools and Hardware at the Stanley
Works (a supplier of tools, door systems and related hardware) from
September 2000 until March 2001. From July 1981 until September 2000,
he held a variety of positions with The Black and Decker Corporation (a
manufacturer and marketer of power tools and accessories), most recently
as President Worldwide Accessories.
J. Patrick Robinson has been Vice President - Controller since May
2001. Prior thereto, he was Chief Financial Officer of AirClic Inc.
(a web-based software and services platform company for the mobile
information market) from March 2000 until May 2001. From 1983 until
March 2000, he held a variety of financial positions with The Black
and Decker Corporation (a manufacturer and marketer of power tools
and accessories), until his appointment as Vice President of Finance,
Worldwide Power Tools.
Timothy J. Jahnke has been Vice President - Human Resources since
February 2001. Prior thereto, he was President of the Anchor Hocking
Specialty Glass division from June 1999 until February 2001. From
1995 until June 1999, he led the human resources department of the
Company's Sanford division's worldwide operations.
Dale L. Matschullat has been Vice President - General Counsel since
January 2001. Prior thereto, he was Vice President-Finance, Chief
Financial Officer and General Counsel from January 2000 until January
2001. From 1989 until January 2000, he was Vice President - General
Counsel.
24
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
-------------------------------------------------
The Company's common stock is listed on the New York and Chicago Stock
Exchanges (symbol: NWL). As of December 31, 2001, there were 24,868
stockholders of record. The following table sets forth the high and
low sales prices of the common stock on the New York Stock Exchange
Composite Tape (as published in the Wall Street Journal) for the
calendar periods indicated:
2001 2000 1999
---- ---- ----
Quarters High Low High Low High Low
-------- ---- --- ---- --- ---- ---
First $29.21 $23.38 $31.25 $21.50 $50.00 $36.38
Second 27.34 24.00 27.56 23.81 52.00 40.13
Third 25.40 21.20 28.50 21.94 47.69 27.19
Fourth 28.13 22.87 22.88 18.69 36.50 26.25
The Company has paid regular cash dividends on its common stock since
1947. The quarterly cash dividend has been $0.21 per share since
February 1, 2000, when it was increased from the $0.20 per share that
had been paid since February 8, 1999. Prior to this date, the
quarterly cash dividend paid was $0.18 per share since February 10,
1998.
Information regarding the 5.25% convertible quarterly income preferred
securities issued by a wholly owned subsidiary trust of the Company,
which are reflected as outstanding in the Company's Consolidated
Financial Statements as Company-Obligated Mandatorily Redeemable
Convertible Preferred Securities of a Subsidiary Trust, is included in
Footnote 6 to the Consolidated Financial Statements and is
incorporated by reference herein.
25
ITEM 6. SELECTED FINANCIAL DATA
-----------------------
The following is a summary of certain consolidated financial
information relating to the Company at December 31. The summary has
been derived in part from, and should be read in conjunction with, the
Consolidated Financial Statements of the Company included elsewhere in
this report and the schedules thereto.
2001 (1) 2000 (1) 1999 (1) 1998 1997
-------- -------- -------- ---- ----
(In thousands, except per share data)
INCOME STATEMENT DATA
Net sales $6,909,319 $6,934,747 $6,711,768 $6,493,172 $5,910,717
Cost of products sold 5,046,587 5,108,703 4,975,369 4,670,358 4,290,934
--------- --------- --------- --------- ---------
Gross Income 1,862,732 1,826,044 1,736,399 1,822,814 1,619,783
Selling, general and administrative
expenses 1,168,240 899,424 1,104,491 967,916 838,877
Restructuring costs 66,683 43,010 241,581 115,154 (2) 21,500 (2)
Goodwill amortization 56,957 51,930 46,722 59,405 119,743 (3)
--------- --------- --------- --------- ---------
Operating Income 570,852 831,680 343,605 680,339 639,663
Nonoperating expenses (income):
Interest expense 137,453 130,033 100,021 100,514 114,357
Other, net 17,534 16,160 12,645 (237,148) (4) (19,284)
--------- --------- --------- -------- ---------
Net Nonoperating Expenses
(Income) 154,987 146,193 112,666 (136,634) 95,073
--------- --------- --------- --------- ---------
Income before income taxes 415,865 685,487 230,939 816,973 544,590
Income taxes 151,230 263,912 135,502 335,139 222,973
--------- --------- --------- --------- ---------
Net Income $264,635 $421,575 $ 95,437 $481,834 $321,617
======== ======== ======== ======== ========
Weighted average shares outstanding:
Basic 266,657 268,437 281,806 280,731 280,300
Diluted 267,048 268,500 281,978 291,883 281,138
Earnings per share:
Basic $0.99 $1.57 $0.34 $1.72 $1.15
Diluted $0.99 $1.57 $0.34 $1.70 $1.14
Dividends per share $0.84 $0.84 $0.80 $0.76 $0.70
26
BALANCE SHEET DATA
Inventories, net $1,113,797 $1,262,551 $1,034,794 $1,033,488 $902,978
Working capital (5) 316,800 1,329,541 1,108,686 1,278,768 1,006,624
Total assets 7,266,122 7,261,825 6,724,088 6,289,155 5,775,248
Short-term debt 826,604 227,206 247,433 101,968 258,201
Long-term debt, net of current maturities 1,365,001 2,319,552 1,455,779 1,393,865 989,694
Stockholders' equity 2,433,376 2,448,641 2,697,006 2,843,732 2,661,417
(1) Supplemental data regarding 2001, 2000 and 1999 is provided in
Item 7, Management's Discussion and Analysis of Results of
Operations and Financial Condition.
(2) The 1998 restructuring costs included $53.4 million for costs to
exit business activities at five facilities, $45.8 million to
write down impaired long-lived assets to their fair value and
$16.0 million relating to employee severance and termination
benefits. The 1997 Restructuring Costs included $16.0 million of
charges recorded by Rubbermaid for impaired fixed assets, $4.1
million for employee terminations costs and $1.4 million for
plant closures. An additional $15.7 million for product line
discontinuance costs is recorded in Cost of Products Sold.
(3) The 1997 goodwill amortization included an $81.0 million charge
for the write-off of impaired assets.
(4) The 1998 other nonoperating income included a $191.5 million gain
on the sale of Black & Decker common stock and $59.8 million of
gains on the sale of the Decora, Newell Plastics and Stuart Hall
businesses.
(5) Working capital is defined as Current Assets less Current
Liabilities.
27
ACQUISITIONS OF BUSINESSES
2001, 2000 and 1999
-------------------
Information regarding businesses acquired in the last three years is
included in Footnote 2 to the Consolidated Financial Statements.
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 the acquisitions made in 1998, the Company paid $615.7 million in
cash and assumed $99.5 million in debt. The finalized purchase price
allocations for these acquisitions resulted in trade names and
goodwill of approximately $387.1 million.
1997
----
On March 5, 1997, the Company purchased the Rolodex business, a
marketer of office products such as card files, personal organizers
28
and paper punches, from Insilco Corporation. Rolodex was integrated
into Eldon.
On May 30, 1997, the Company acquired the Kirsch business, a
manufacturer and distributor of drapery hardware and custom window
coverings, from Cooper Industries Incorporated. The Kirsch North
American operations were combined with Newell Window Furnishings and
Levolor Home Fashions; the Kirsch European portion operates as part of
Newell Window Fashions Europe.
For the acquisitions made in 1997, the Company paid $514.2 million in
cash and assumed $4.3 million in debt. The finalized purchase price
allocations for these acquisitions resulted in trade names and
goodwill of approximately $351.3 million.
29
QUARTERLY SUMMARIES
Summarized quarterly data for the last three years is as follows (unaudited):
Calendar Year 1st 2nd 3rd 4th Year
------------- --- --- --- --- ----
(In thousands, except per share data)
2001
----
Net sales $1,610,736 $1,724,653 $1,767,818 $1,806,112 $6,909,319
Gross income 391,776 453,535 489,575 527,846 1,862,732
Net income 38,421 72,007 83,470 70,737 264,635
Earnings per share:
Basic 0.14 0.27 0.31 0.27 $0.99
Diluted 0.14 0.27 0.31 0.27 0.99
2000
----
Net sales $1,628,979 $1,787,025 $1,756,372 $1,762,371 $6,934,747
Gross income (1) 408,397 486,588 468,268 462,791 1,826,044
Net income 76,220 128,015 122,999 94,341 421,575
Earnings per share:
Basic 0.28 0.48 0.46 0.35 $1.57
Diluted 0.28 0.48 0.46 0.35 1.57
1999
----
Net sales $1,589,776 $1,671,635 $1,683,344 $1,767,013 $6,711,768
Gross income 423,308 420,806 444,570 447,715 1,736,399
Net (loss) income (78,999) 30,054 72,737 71,645 95,437
(Loss) Earnings per share:
Basic (0.28) 0.11 0.26 0.25 $0.34
Diluted (0.28) 0.11 0.26 0.25 0.34
(1) Quarterly gross income amounts differ from those disclosed in the
Form 10-Q for each respective quarter due to the reclassification
of restructuring charges related to discontinued product lines to
conform with the 2001 presentation. Charges reclassified from
Restructuring Costs to Cost of Goods Sold were (in thousands):
$87, $888, $485 and $4,091 for the first, second, third and
fourth quarters, respectively; the full year 2000
reclassification totaled $5,551.
30
ITEM 7. 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 footnotes thereto.
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated items from
the Consolidated Statements of Income as a percentage of net sales:
Year Ended December 31, 2001 2000 1999
---- ---- ----
Net sales 100.0% 100.0% 100.0%
Cost of products sold 73.0 73.7 74.1
----- ----- -----
Gross Income 27.0 26.3 25.9
Selling, general and
administrative expenses 16.9 13.0 16.5
Restructuring costs 1.0 0.6 3.6
Goodwill amortization 0.8 0.7 0.7
----- ----- -----
Operating Income 8.3 12.0 5.1
Nonoperating expenses:
Interest expense 2.0 1.9 1.5
Other, net 0.3 0.2 0.2
----- ----- -----
Net Nonoperating Expenses 2.3 2.1 1.7
Income before income taxes 6.0 9.9 3.4
Income taxes 2.2 3.8 2.0
----- ----- -----
Net Income 3.8% 6.1% 1.4%
===== ===== =====
2001 VERSUS 2000
Net sales for 2001 were $6,909.3 million, representing a decrease of
$25.4 million, or 0.4%, from $6,934.7 million in 2000. The sales
decline was primarily due to shelf space losses at key customers and a
significant downturn in the US economy partially offset by
$498.5 million of sales contributions from Paper Mate/Parker (acquired
December 2000). Net sales for each of the Company's segments (and the
primary reasons for the year-to-year changes) were as follows:
31
Year Ended December 31, 2001 2000 % Change
---- ---- --------
(In millions)
Rubbermaid (1) $1,819.3 $1,946.5 (6.5)%
Parker/Eldon (2) 1,673.5 1,288.0 29.9
Levolor/Hardware (1) 1,382.6 1,455.0 (5.0)
Calphalon/WearEver (1) 1,161.7 1,246.9 (6.8)
Little Tikes/Graco (1) 872.2 998.3 (12.6)
------- -----
$6,909.3 $6,934.7 (0.4)%
======== ========
Primary reasons for changes:
(1) Internal sales decline primarily due to shelf space losses at key
customers and a significant downturn in the US economy.*
(2) $498.5 million of sales contribution from the Paper Mate/Parker
acquisition+ (December 2000) offset by internal sales decline of
8.8% primarily due to softness in the commercial channel and a
significant downturn in the US economy.
* Internal sales growth/decline is defined by the Company as
growth/decline from its core businesses, which include continuing
businesses owned more than one year and minor acquisitions.
+ Acquisitions and divestitures are described in Footnote 2 to the
Consolidated Financial Statements.
Gross income as a percentage of net sales in 2001 was 27.0%, or
$1,862.7 million, versus 26.3%, or $1,826.0 million, in 2000.
Excluding restructuring related and other charges relating to
integration costs of recent acquisitions of $7.4 million ($4.7 million
after taxes) and $7.9 million ($4.9 million after taxes) in 2001 and
2000, respectively, gross income as a percent of net sales was 27.1%,
or $1,870.1 million in 2001 versus 26.4%, or $1,833.9 million in 2000.
This improvement in gross income is primarily due to the
implementation of a productivity initiative throughout the Company and
contributions from the Paper Mate/Parker acquisition. The Company's
productivity objective is to reduce the cost of manufacturing a
product by at least five percent per year on an ongoing basis in order
to become the low-cost supplier to our customers. To achieve
productivity improvements, the Company will focus on reducing
purchasing costs, materials handling costs, manufacturing
inefficiencies, and excess overhead costs to reduce the overall cost
of manufacturing products. The Company's productivity in 2001 was
affected primarily by the increased costs associated with slowed
manufacturing in an effort to reduce inventory levels (net inventories
decreased $148.8 million during 2001) offset by improved raw material
costs.
Selling, general and administrative expenses ("SG&A") in 2001 were
16.9% of net sales, or $1,168.2 million, versus 13.0%, or $899.4
32
million, in 2000. Excluding charges relating to integration costs of
recent acquisitions of $12.0 million ($7.7 million after taxes) and
$8.8 million ($5.4 million after taxes) in 2001 and 2000,
respectively, SG&A as a percent of net sales was 16.7% or $1,156.2
million in 2001 compared to 12.8% or $890.6 million in 2000. The
increase in SG&A is a result of the Paper Mate/Parker acquisition and
planned investments in marketing initiatives, including the Company's
Key Account and Phoenix Programs, supporting the Company's brand
portfolio and key account strategy.
In 2001, the Company introduced the Key Account Program, establishing
sales organizations specifically for Wal*Mart, The Home Depot and
Lowe's. As part of this program, the company established President-
level positions to more effectively manage the relationships with
these accounts. The program allows the Company to present these
customers with "one face" to enhance the Company's response time and
understanding of the customer's needs, to support the best possible
relationship.
In 2001, the Company also introduced its Phoenix Program. This
initiative is an action-oriented field sales force consisting of
approximately 500 recent university graduates. The team works in the
field, primarily within our Key Account structure, performing product
demonstrations, merchandising product, interacting with the end-user,
and maintaining an ongoing relationship with store personnel. This
initiative allows the Company to enhance product placement and
minimize stock outages and, together with the Key Account Program, to
maximize shelf space potential. This program, implemented July 2001,
gained traction throughout the year. Impact from this initiative is
expected to translate to the Consolidated Financial Statements through
the impact of shelf space gains going forward.
During 2001, the Company recorded pre-tax restructuring charges
associated with the Company's strategic restructuring plan. The
restructuring plan is intended to streamline the Company's supply
chain to ensure its position as the low cost global provider
throughout the Company's product portfolio. The plan consists of
reducing worldwide headcount over the three years beginning in 2001,
and includes consolidating duplicate manufacturing facilities. As
part of this plan, the Company incurred employee severance and
termination benefit costs for approximately 1,700 employees.
Additionally, the Company incurred facility exit costs related
primarily to the closure of 14 facilities (four at Rubbermaid, one at
Parker/Eldon, six at Levolor/Hardware and three at
Calphalon/WearEver). See Footnote 3 to the Consolidated Financial
Statements for a review of the charges.
During 2000, the Company recorded pre-tax restructuring charges
related primarily to the continued Rubbermaid integration and plant
closures in the Home Decor segment. The Company incurred employee
severance and termination benefit costs related to approximately 700
employees terminated in 2000. Such costs included severance and
33
government mandated settlements for facility closures at Rubbermaid
Europe, change in control payments made to former Rubbermaid
executives, employee terminations at the domestic Rubbermaid divisions
and severance at the Home Decor segment. The Company incurred merger
transaction costs 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 other exit costs related primarily to the closure of five
European Rubbermaid facilities, three window furnishings facilities as
well as the exit of various Rubbermaid product lines. See Footnote 3
to the Consolidated Financial Statements for a review of the charges.
For the year ended December 31, 2001 goodwill amortization and other
as a percentage of net sales were 0.8%, or $57.0 million, versus 0.7%,
or $51.9 million, for the year ended December 31, 2000. The increase
in goodwill amortization is a result of additional goodwill associated
with the Paper Mate/Parker acquisition in December 2000.
Operating income in 2001 was 8.3% of net sales, or $570.9 million,
versus 12.0% of net sales, or $831.7 million, in 2000. Excluding
restructuring and other charges of $86.1 million ($54.8 million after
taxes) in 2001 and $59.7 million ($36.7 million after taxes) in 2000,
operating income was $657.0, or 9.5%, of net sales in 2001 versus
$891.4 million, or 12.9%, of net sales in 2000. The decrease in
operating margins was primarily due to planned investment in marketing
initiatives supporting the Company's brand portfolio and key account
strategy.
Net nonoperating expenses in 2001 were 2.3% of net sales, or $155.0
million, versus 2.1%, or $146.2, million in 2000. The increased
expenses in 2001 are a result of the Company's increased average level
of debt, partially offset by lower interest rates.
The effective tax rate was 36.4% for the year ended December 31, 2001
versus 38.5% in the prior year. See Footnote 12 to the Consolidated
Financial Statements for an explanation of the effective tax rate.
Net income for 2001 was $264.6 million compared to net income of
$421.6 million in 2000. Basic and diluted earnings per share in 2001
decreased to $0.99 versus $1.57 in 2000. Excluding 2001 pre-tax
charges of $86.1 million ($54.8 million after taxes) as discussed
above, net income in 2001 was $319.4 million. Excluding 2000 pre-tax
charges of $59.7 million ($36.7 million after taxes), net income in
2000 was $458.3 million. Diluted earnings per share, calculated on
the same basis, decreased 29.8% to $1.20 versus $1.71 in 2000. The
decrease in net income and earnings per share for 2001 was primarily
due to internal sales declines and planned investment in the Company's
marketing initiatives.
34
2000 VERSUS 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:
Year Ended December 31, 2000 1999 % Change
---- ---- --------
(IN MILLIONS)
Rubbermaid $1,946.5 $2,004.3 (2.9)%
Parker/Eldon (1) 1,288.0 1,218.0 5.7
Levolor/Hardware 1,455.0 1,400.6 3.9
Calphalon/WearEver (2) 1,246.9 1,186.0 5.1
Little Tikes/Graco (3) 998.3 902.9 10.6
------- -------
$6,934.7 $6,711.8 3.3%
======== ========
Primary reasons for changes:
(1) Internal sales growth of 3.8% enhanced by $30.6 million of
sales contribution from the acquisitions of Rotring and
Reynolds.
(2) Internal sales decline of 1.4% offset by $77.1 million of
sales contribution from the acquisitions of Ceanothe,
Mersch, Brio and Panex.
(3) Internal sales growth due to shelf space gains at key retailers.
Gross income as a percent of net sales in 2000 was 26.3%, or $1,826.0
million, versus 25.9%, or $1,736.4, million in 1999. Excluding costs
associated with the Rubbermaid merger and certain realignment and
other charges of $7.9 million and $111.0 million in 2000 and 1999,
respectively, gross income as a percent of net sales was 26.4%, or
$1,833.9 million, in 2000 versus 27.5%, or $1,847.4 million, in 1999.
This decrease in gross margins in 2000 was primarily attributable to
lower sales volume and higher material costs.
SG&A in 2000 was 13.0% of net sales, or $899.4 million versus 16.5%,
or $1,104.5 million, in 1999. Excluding costs associated with the
Rubbermaid merger and certain realignment and other charges of
$8.8 million and $178.8 million in 2000 and 1999, respectively,
SG&A as a percent of net sales was 12.8%, or $890.6 million, in 2000
versus 13.8%, or $925.7 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.
During 2000, the Company recorded pre-tax restructuring charges
related primarily to the continued Rubbermaid integration and plant
closures in the Home Decor segment. The Company incurred employee
35
severance and termination benefit costs related to approximately 700
employees terminated in 2000. Such costs included severance and
government mandated settlements for facility closures at Rubbermaid
Europe, change in control payments made to former Rubbermaid
executives, employee terminations at the domestic Rubbermaid divisions
and severance at the Home Decor segment. The Company incurred merger
transaction costs 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 other exit costs related primarily to the closure of five
European Rubbermaid facilities, three window furnishings facilities as
well as the exit of various Rubbermaid product lines. See Footnote 3
to the Consolidated Financial Statements for a review of the charges.
During 1999, the Company recorded pre-tax restructuring charges
related primarily to the integration of the Rubbermaid business into
Newell. Merger transaction costs related primarily to investment
banking, legal and accounting costs for the Newell/Rubbermaid merger.
Employee severance and termination benefits related to approximately
750 employees terminated in 1999. Such costs included change in
control payments made to former Rubbermaid executives and severance
and termination costs at Rubbermaid's former headquarters, Rubbermaid
Home Products division, Little Tikes division, Rubbermaid Commercial
Products division and Newell divisions. Facility and other exit costs
representing impaired Rubbermaid centralized computer software
(abandoned as a result of converting Rubbermaid onto existing Newell
centralized computer software) and costs related to discontinued
product lines, the closure of seven Rubbermaid facilities, write-off
of assets associated with abandoned projects and impaired assets and
other exit costs. See Footnote 3 to the Consolidated Financial
Statements for a review of the charges.
Goodwill amortization 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.
Net 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 Footnote 12 to the Consolidated Financial Statements for an
explanation of the effective tax rate.
36
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 lower 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.
37
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 2001 was $865.4 million,
compared to $623.5 and $554.0 million for 2000 and 1999, respectively.
The increase in operating cash flows is primarily due to improved
working capital management, principally in the areas of inventory and
accounts payable. In 2001, the Company announced an increased focus
on working capital which resulted in reduced inventory of $148.8
million and increased accounts payable of $158.9 million. As a
result, the Company generated free cash flow (defined by the Company
as cash provided by operating activities less capital expenditures and
dividends) of $391.6 million compared to $81.8 million and $128.1
million in 2000 and 1999, respectively.
The Company has short-term foreign and domestic 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 the Company's lines of credit at December 31, 2001
totaled $19.1 million.
The Company has a revolving credit agreement of $1,300.0 million that
will terminate in August 2002. The Company intends to extend the
revolving credit agreement beyond 2002. During 2000, the Company
entered into a 364-day revolving credit agreement in the amount of
$700.0 million which expired in October 2001. As of December 31,
2001, there were no borrowings under the remaining $1,300.0 million
revolving credit agreement.
In lieu of borrowings under the Company's revolving credit agreement,
the Company may issue up to $1,300.0 million of commercial paper. The
Company's revolving credit agreement provides 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 agreement. At December 31, 2001,
$707.5 million (principal amount) of commercial paper was outstanding.
Because the backup revolving credit agreement expires in August 2002,
the entire $707.5 million is classified as current portion of long-
term debt. The company plans to extend maturities by replacing a
portion of current debt with longer-term debt facilities. By
extending maturities, the Company can reduce its reliance on the
current commercial paper program.
38
The revolving credit agreement permits the Company to borrow funds on
a variety of interest rate terms. The agreement requires, among other
things, that the Company maintain a certain Total Indebtedness to
Total Capital Ratio and limits Subsidiary Indebtedness, as defined in
the agreement. As of December 31, 2001, the Company was in compliance
with this agreement.
The Company had outstanding at December 31, 2001 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%. Of the outstanding amount of medium-term notes, $100.0 million
is classified as current portion of long-term debt and the remainder
of $912.5 million is classified as long-term debt. A $779.5 million
universal shelf registration statement became effective in July 1999.
As of December 31, 2001, $449.5 million of Company debt and equity
securities may be issued under the shelf.
On September 18, 2001, the Company entered into an agreement with a
financial institution creating a financing entity which is
consolidated in the Company's financial statements. Under the
agreement, the Company regularly enters into transactions with the
financing entity to sell an undivided interest in the Company's
receivables. In the quarter ended September 30, 2001, the financing
entity issued $450.0 million in preferred debt securities to a
financial institution. Those preferred debt securities must be
retired or redeemed before the Company can have access to the
financing entity's receivables. The receivables and the corresponding
$450.0 million preferred debt issued by the subsidiary to the
financial institution are recorded on the consolidated accounts of the
Company. The proceeds of this debt were used to pay down commercial
paper. Because this debt matures in 2008, the entire amount is
considered to be long-term debt. The provisions of the debt agreement
allow the entire outstanding debt to be called upon certain events
including the Company's long-term senior unsecured debt rating falling
below Baa2 (Moody's) or BBB (Standard & Poor's) and certain levels of
accounts receivable write-offs. As of December 31, 2001, the Company
was in compliance with the agreement.
Uses
----
The Company's primary uses of liquidity and capital resources include
acquisitions, dividend payments and capital expenditures.
In 2001, cash used for 2001 acquisitions and deferred payments on
prior acquisitions was $107.5 million. The Company made several minor
acquisitions in 2001 for cash purchase prices totaling $61.2 million.
In 2000, cash used for 2000 acquisitions and deferred payments on
prior acquisitions was $597.8 million. The Company acquired Mersch,
Brio and Paper Mate/Parker and made other minor acquisitions in 2000
for cash purchase prices totaling $635.2 million. In 1999, cash used
for 1999 acquisitions and deferred payments on prior acquisitions was
39
$345.9 million. The Company acquired Ateliers, Reynolds, McKechnie,
Ceanothe and made other minor acquisitions for cash purchase prices
totaling $397.3 million.
The following table summarizes the Company's contractual obligations
as of December 31, 2001:
Contractual Obligations Payments Due by Period (in millions)
------------------------------------------------------------------------
Less than After
Total 1 year 1-3 years 4-5 years 5 years
----- --------- --------- --------- -------
Notes Payable to Banks $ 9.1 $ 19.1 - - -
Long-term Debt 2,172.5 807.5 415.5 172.0 777.5
Operating Leases 180.3 56.6 68.9 30.7 24.1
Total Contractual Obligations $2,379.1 $891.9 $484.1 $201.7 $801.4
In 2001, the Company made payments on long-term debt, net of proceeds,
of $354.7 million, compared to net additional borrowings of $836.8
million in 2000 and $194.7 million in 1999. The Company's ability to
pay down additional debt was due primarily to increased focus on
working capital management (primarily inventory and accounts payable)
and current year cash earnings.
Cash used for restructuring activities was $49.7 million, $32.9
million and $145.5 million for the years ended December 31, 2001, 2000
and 1999, respectively. Such payments represent primarily employee
termination benefits and facility closure and other exit costs related
to the Company's strategic restructuring plan and recent acquisitions.
Capital expenditures were $249.8 million, $316.6 million and $200.1
million in 2001, 2000 and 1999, respectively. Aggregate dividends paid
during 2001, 2000 and 1999 were $224.0, $225.1 million and $225.8
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 2001 and 2000 by $40.4 million and
$196.3 million, respectively. The decrease in the earnings growth rate
between 2001 and 2000 was primarily due to reduced net income from
lower than expected sales volume and planned investment in marketing
initiatives supporting the Company's brand portfolio and key account
strategy.
Working capital at December 31, 2001 was $316.8 million compared to
$1,329.5 million at December 31, 2000 and $1,108.7 million at December
31, 1999. The decrease in working capital is primarily due to
40
reclassifying $707.5 million in long-term debt in 2000 as current in
2001 as discussed above, and the Company's increased focus on working
capital management.
The current ratio at December 31, 2000 was 1.13:1 compared to 1.86:1
at December 31, 2000 and 1.68:1 at December 31, 1999.
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 .43:1 at December 31,
2001, .46:1 at December 31, 2000 and .33:1 at December 31, 1999.
The Company believes that cash provided from operations and 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.
CRITICAL ACCOUNTING POLICIES
The Company's accounting policies are more fully described in Footnote
1 of the Footnotes to the Consolidated Financial Statements. As
disclosed in Footnote 1, the preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions about future events that
affect the amounts reported in the financial statements and
accompanying footnotes. Future events and their effects cannot be
determined with absolute certainty. Therefore, the determination of
estimates requires the exercise of judgment. Actual results
inevitably will differ from those estimates, and such differences may
be material to the Consolidated Financial Statements.
The most significant accounting estimates inherent in the preparation
of the Company's financial statements include estimates as to the
recovery of accounts receivable, inventory, goodwill and other long-
lived assets as well as those used in the determination of liabilities
related to litigation, product liability, customer discounts,
taxation, restructuring, post-retirement and pension benefits and
environmental matters. Various assumptions and other factors underlie
the determination of these significant estimates. The process of
determining significant estimates is fact specific and takes into
account factors such as historical experience, current and expected
economic conditions, product mix, and in some cases, actuarial
techniques. The Company re-evaluates these significant factors as
facts and circumstances dictate. Historically, actual results have
not differed significantly from those determined using the estimates
described above.
Sales of merchandise and freight billed to customers, net of
provisions for cash discounts, returns, customer discounts (such as
volume or trade), co-op advertising and other sales discounts are
41
recognized as revenue upon shipment to customers and when all
substantial risks of ownership change.
RECENT ACCOUNTING PRONOUNCEMENTS
At the beginning of 2001, the Company adopted Statement of Financial
Accounting Standards ("FAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement requires
companies to record derivatives on the balance sheet as assets or
liabilities, measured at fair value. Any changes in fair value of
these instruments are recorded in the income statement or other
comprehensive income. The impact of adopting FAS No. 133 on January
1, 2001 resulted in a cumulative after-tax gain of approximately $13.0
million, recorded in accumulated other comprehensive income. The
cumulative effect of adopting FAS No. 133 did not materially impact
the results of operations.
In June 2001, the Financial Accounting Standards Boards ("FASB")
issued FAS No. 141, "Business Combinations", and FAS No. 142,
"Goodwill and Other Intangible Assets". FAS No. 141 requires all
business combinations initiated after June 30, 2001 to be accounted
for using the purchase method of accounting. Historically, all
acquisitions by the Company have been accounted for as purchases, thus
there was no effect on the Company's Consolidated Financial Statements
upon adoption of this standard, in contrast, all mergers have been
accounted for as poolings of interest. FAS No. 142 becomes effective
in fiscal years beginning after December 15, 2001, with early adoption
permitted. The Company plans to early adopt the provisions of FAS No.
142 beginning in the first quarter of fiscal 2002. In accordance with
this standard, goodwill will no longer be amortized but will be
subject to annual assessment for impairment by applying a fair-value-
based test. All other intangible assets will continue to be amortized
over their estimated useful lives. Goodwill amortization expense was
$57.0 million for the twelve months ended December 31, 2001. The
Company anticipates that the application of the nonamortization
provisions will increase annual net income by approximately $41.0
million or $0.15 per share. During 2001 and the first quarter 2002,
the Company performed the required impairment tests of goodwill and
indefinite lived intangible assets as of January 1, 2002. Subject to
final analysis, the Company expects to record a pre-tax goodwill
impairment charge of $500.0 million to $550.0 million in the first
quarter of 2002.
In August 2001, the FASB issued FAS No. 144, "Accounting for
Impairment of Disposal of Long-Lived Assets." This statement
established a single accounting model for long-lived assets to be
disposed of by sale and provides additional implementation guidance
for assets to be held and used and assets to be disposed of other than
by sale. The statement supersedes FAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of" and amends the accounting and reporting provisions of
Accounting Principles Board ("APB") Opinion No. 30 related to the
42
disposal of a segment of a business. The statement is effective for
fiscal years beginning after December 15, 2001. The Company adopted
FAS No. 144 on January 1, 2002, and the standard did not have a
material impact on its financial position or results of operations.
In August 2001, the Emerging Issues Task Force ("EITF") issued EITF
No. 01-09 "Accounting for Consideration Given by Vendor to a Customer
or a Reseller of Vendor's Product" which codified and reconciled the
Task Force's consensuses in EITF 00-14 "Accounting for Certain Sales
Incentives", EITF 00-22 "Accounting for Points and Certain Other Time
Based Sales Incentives or Volume Based Sales Incentive Offers, and
Offers of Free Products or Services to Be Delivered in the Future",
and EITF 00-25 "Vendor Income Statement Characterization of
Consideration Paid to a Reseller of the Vendor's Products". These
EITF's prescribe guidance regarding the timing of recognition and
income statement classification of costs incurred for certain sales
incentive programs to resellers and end consumers. EITF No. 01-09 did
not impact results of operations because the Company recognizes sales
incentives upon recognition of revenue and classifies them as
reductions of gross revenue and recognizes free goods as a cost of
goods sold when shipped, both in accordance with the prescribed rules.
In May 2000, the EITF 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 had 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 cost of products sold by $286.1 million
and $298.7 million for the years ended December 31, 2000 and December
31, 1999, respectively. There was no impact on gross income resulting
from this change.
LEGAL AND ENVIRONMENTAL MATTERS
The Company is subject to legal proceedings and claims, including
various environmental matters, in the ordinary course of its business.
Such legal proceedings are more fully described in Footnote 15 to the
Company's Consolidated Financial Statements. Although management of
the Company cannot predict the ultimate outcome of these legal
proceedings with certainty, it believes that the ultimate resolution
of the Company's legal proceedings, 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
43
the years ended December 31, 2001, December 31, 2000 and December 31,
1999, the Company's non-U.S. business accounted for approximately 27%,
25% and 23% of net sales, respectively (see Footnote 14 to the
Consolidated Financial Statements). Growth of both U.S. and non-U.S.
businesses is shown below:
Year Ended December 31, 2001 2000 % Change
---- ---- --------
(IN MILLIONS)
Net sales:
U.S. $5,040.6 $5,191.5 (2.9)%
Non-U.S. 1,868.7 1,743.2 7.2
------- -------
$6,909.3 $6,934.7 (0.4)%
======== ========
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%
======== ========
44
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 short-term forward contracts 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. Derivative instruments are recorded on the Company's
balance sheet at fair value, and any changes in fair value of these
instruments are recorded in the income statement or other
comprehensive 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
45
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 do not have an impact on current results of operations or
financial condition, but are shown as an illustration of the impact of
adverse changes in interest rates.
Time Confidence
Amount Period Level
------ ------ ----------
(IN MILLIONS)
Interest rates $14.5 1 day 95%
Foreign exchange $0.5 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.
46
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 noncash transactions, if the parties elected to use it.
On January 1, 2001, another country (Greece) also adopted the Euro,
fixing the conversion rate against their legacy currency. The legacy
currencies remained legal tender through December 31, 2001. On January
1, 2002, participating countries introduced 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
substantially completed this conversion process and has deemed its
information systems to be Euro compliant. As a result of the Euro
conversion, the Company experienced no adverse impact to its business
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, 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, impact of changes in accounting
standards, 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 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.
47
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
----------------------------------------------------------
The information required by this item is incorporated herein by
reference to the section entitled "Market Risk" in the Company's
Management's Discussion and Analysis of Results of Operations and
Financial Condition (Part II, Item 7).
48
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
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 oversees 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 the external audit 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 J. Patrick Robinson
President - Corporate Development Vice President - Controller
& Chief Financial Officer & Chief Accounting Officer
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, 2001, 2000 and 1999 and the related consolidated
statements of income, Stockholders' equity and comprehensive income
and cash flows for the years then ended. These consolidated financial
statements and the schedule referred to below are the responsibility
of Newell Rubbermaid Inc.'s management. Our responsibility is to
express an opinion on these consolidated financial statements and
schedule based on our audits.
49
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 provide
a reasonable basis for our opinion.
In our opinion, 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, 2001, 2000 and
1999 and the results of their operations and their cash flows for the
years then ended, in conformity with accounting principles generally
accepted in the United States.
Our audits were made for the purpose of forming an opinion on the
basic financial statements taken as a whole. The schedule listed in
Part IV Item 14(a)(2) of this Form 10-K is presented for the purposes
of complying with the Securities and Exchange Commission's rules and
is not part of the basic financial statements. This schedule has been
subjected to the auditing procedures applied in our audits of the
basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein
in relation to the basic financial statements taken as a whole.
Arthur Andersen LLP
Milwaukee, Wisconsin
January 25, 2002
50
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31, 2001 2000 1999
---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NET SALES $6,909,319 $6,934,747 $6,711,768
Cost of products sold 5,046,587 5,108,703 4,975,369
--------- --------- ---------
Gross Income 1,862,732 1,826,044 1,736,399
Selling, general and administrative expenses 1,168,240 899,424 1,104,491
Restructuring costs 66,683 43,010 241,581
Goodwill amortization 56,957 51,930 46,722
--------- --------- ---------
OPERATING INCOME 570,852 831,680 343,605
Nonoperating expenses:
Interest expense 137,453 130,033 100,021
Other, net 17,534 16,160 12,645
--------- --------- ---------
Net Nonoperating Expenses 154,987 146,193 112,666
--------- --------- ---------
Income before income taxes 415,865 685,487 230,939
Income taxes 151,230 263,912 135,502
--------- --------- ---------
NET INCOME $264,635 $421,575 $95,437
======== ======== =======
Weighted average shares outstanding:
Basic 266,657 268,437 281,806
Diluted 267,048 268,500 281,978
Earnings per share:
Basic $0.99 $1.57 $0.34
Diluted $0.99 $1.57 $0.34
Dividends per share $0.84 $0.84 $0.80
See Footnotes to Consolidated Financial Statements.
51
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31, 2001 2000 1999
---- ---- ----
(IN THOUSANDS)
OPERATING ACTIVITIES
Net income $264,635 $421,575 $95,437
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 328,775 292,576 271,731
Noncash restructuring charges 36,906 18,452 100,924
Deferred income taxes 25,500 59,800 (9,600)
Income tax savings from employee
stock plans 360 997 2,269
Other 16,823 1,947 52,448
Changes in current accounts excluding the
effects of acquisitions:
Accounts receivable (104,777) 36,301 (16,137)
Inventories 128,610 (100,495) 52,662
Other current assets (6,814) 6,598 (41,793)
Accounts payable 149,341 (45,606) 14,617
Accrued liabilities and other 26,059 (68,658) 31,393
------- ------- -------
Net Cash Provided by Operating Activities $865,418 $623,487 $553,951
INVESTING ACTIVITIES
Acquisitions, net of cash acquired $(107,479) $(597,847) $(345,934)
Expenditures for property, plant and equipment (249,775) (316,564) (200,066)
Sale of business, net of taxes paid 15,428 - -
Sales of marketable securities, net
of taxes paid 7,775 - 14,328
Disposals of noncurrent assets and other 30,491 5,119 720
------- ------- -------
Net Cash Used in Investing Activities $(303,560) $(909,292) $(530,952)
FINANCING ACTIVITIES
Proceeds from issuance of debt $464,241 $1,265,051 $803,298
Payments on notes payable and long-term debt (818,979) (428,211) (608,573)
Common stock repurchases - (402,962) -
Cash dividends (223,998) (225,083) (225,774)
Proceeds from exercised stock options
and other 2,863 1,263 27,411
------- ------- -------
Net Cash (Used in) Provided by Financing Activities $(575,873) $210,058 $(3,638)
Exchange rate effect on cash (1,708) (3,892) (3,751)
------- ------- -------
52
(Decrease) Increase in Cash and Cash
Equivalents (15,723) (79,639) 15,610
Cash and Cash Equivalents at Beginning of Year 22,525 102,164 86,554
------- ------- -------
Cash and Cash Equivalents at End of Year $ 6,802 $ 22,525 $102,164
======= ======== ========
Supplemental cash flow disclosures -
cash paid during the year for:
Income taxes, net of refunds $ 69,840 $152,787 $194,351
Interest, net of amounts capitalized 118,333 145,455 98,536
See Footnotes to Consolidated Financial Statements.
53
CONSOLIDATED BALANCE SHEETS
December 31, 2001 2000 1999
---- ---- ----
(Dollars in thousands)
ASSETS
Current Assets:
Cash and cash equivalents $6,802 $22,525 $102,164
Accounts receivable, net 1,298,177 1,183,363 1,178,423
Inventories, net 1,113,797 1,262,551 1,034,794
Deferred income taxes 238,468 231,875 250,587
Prepaid expenses and other 193,408 180,053 172,601
--------- --------- ---------
Total Current Assets 2,850,652 2,880,367 2,738,569
Marketable Equity Securities - 9,215 10,799
Other Long-term Investments 79,492 72,763 65,905
Other Assets 329,886 352,629 335,699
Property, Plant and Equipment, Net 1,689,152 1,756,903 1,548,191
Trade Names and Goodwill, Net 2,316,940 2,189,948 2,024,925
--------- --------- ---------
Total Assets $7,266,122 $7,261,825 $6,724,088
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable $19,104 $23,492 $97,291
Accounts payable 501,259 342,406 376,596
Accrued compensation 124,660 126,970 113,373
Other accrued liabilities 936,146 781,122 892,481
Income taxes 145,183 73,122 -
Current portion of long-term debt 807,500 203,714 150,142
--------- --------- ---------
Total Current Liabilities 2,533,852 1,550,826 1,629,883
Long-term Debt 1,365,001 2,319,552 1,455,779
Other Noncurrent Liabilities 359,526 347,855 354,107
Deferred Income Taxes 73,685 93,165 85,655
Minority Interest 685 1,788 1,658
Company-Obligated Mandatorily Redeemable
Convertible Preferred Securities of a Subsidiary Trust 499,997 499,998 500,000
54
Stockholders' Equity:
Common stock, authorized shares,
800.0 million at $1.00 par value;
Outstanding shares: 282,376 282,174 282,026
2001 - 282.4 million
2000 - 282.2 million
1999 - 282.0 million
Treasury stock, at cost; (408,457) (407,456) ( 2,760)
Shares held:
2001 - 15.6 million
2000 - 15.6 million
1999 - 0.1 million
Additional paid-in capital 219,823 215,911 213,112
Retained earnings 2,571,255 2,530,864 2,334,609
Accumulated other comprehensive loss (231,621) (172,852) (129,981)
--------- --------- ---------
Total Stockholders' Equity 2,433,376 2,448,641 2,697,006
--------- --------- ---------
Total Liabilities and Stockholders' Equity $7,266,122 $7,261,825 $6,724,088
========= ========= =========
See Footnotes to Consolidated Financial Statements.
55
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
Current
Year
Accumulated Compre-
Additional Other Compre- hensive
Common Paid-In Retained hensive Income
Stock Treasury Stock Capital Earnings Income (Loss) (Loss)
------ -------------- ------- -------- ------------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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 (loss):
Foreign currency translation
adjustments (48,045) (48,045)
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
------
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 (loss):
Foreign currency translation
adjustments (41,670) (41,670)
Unrealized loss on securities
available for sale, net of
$(0.7) million tax (1,201) (1,201)
--------
Total comprehensive income $ 378,704
========
56
Cash dividends:
Common stock, $0.84 per share (225,083)
Exercise of stock options 148 (190) 1,495
Common stock repurchases (402,962)
Other (1,544) 1,304 (237)
------- ------- ------- ------- -------
Balance at December 31, 2000 $282,174 $(407,456) $215,911 $2,530,864 $(172,852)
Net income 264,635 $264,635
Other comprehensive income (loss):
Foreign currency translation
adjustments (41,343) (41,343)
Loss on derivative
instruments, net of$(7.9)
million tax (13,987) (13,987)
Minimum pension liability (4,506) (4,506)
adjustment, net of $(2.8)
million tax
Unrealized loss on securities (2,138) (2,138)
available for sale, net of
$(1.1) million tax
Reclassification adjustment
for losses realized in net
income, net of $1.8 million tax 3,205 3,205
-------
Total comprehensive income $205,866
========
Cash dividends:
Common stock, $0.84 per share (223,998)
Exercise of stock options 202 (822) 3,696
Other (179) 216 (246)
------- ------- ------- ------- --------
Balance at December 31, 2001 $282,376 $(408,457) $219,823 $2,571,255 $(231,621)
======= ======= ======= ========= =======
See Footnotes to Consolidated Financial Statements.
57
FOOTNOTE 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 2000 and 1999 amounts have been
reclassified to conform with the 2001 presentation.
REVENUE RECOGNITION: Sales of merchandise and freight billed to
customers, net of provisions for cash discounts, returns, customer
discounts (such as volume or trade discounts), co-op advertising and
other sales related discounts are recognized upon shipment to
customers and when all substantial risks of ownership change. Staff
Accounting Bulletin ("SAB") No. 101, which clarified the existing
accounting rules for revenue recognition, did not impact the Company's
net sales for any years presented. In conformity with SAB 101,
revenue is recognized when all of the following circumstances are
satisfied: pervasive evidence of an arrangement exists, the price is
fixed or determinable, collection is reasonably assured and delivery
has occurred.
In August 2001, the Emerging Issues Task Force ("EITF") issued EITF
No. 01-09 "Accounting for Consideration Given by Vendor to a Customer
or a Reseller of Vendor's Product" which codified and reconciled the
Task Force's consensuses in EITF 00-14 "Accounting for Certain Sales
Incentives", EITF 00-22 "Accounting for Points and Certain Other Time
Based Sales Incentives or Volume Based Sales Incentive Offers, and
Offers of Free Products or Services to Be Delivered in the Future",
and EITF 00-25 "Vendor Income Statement Characterization of
Consideration Paid to a Reseller of the Vendor's Products". These
EITF's prescribe guidance regarding the timing of recognition and
income statement classification of costs incurred for certain sales
58
incentive programs to resellers and end consumers. EITF No. 01-09 did
not impact results of operations because the Company recognizes sales
incentives upon recognition of revenue and classifies them as
reductions of gross revenue and recognizes free goods as a cost of
goods sold when shipped, both in accordance with the prescribed rules.
In May 2000, the EITF 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 had 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 cost of products sold by $286.1 million
and $298.7 million for the years ended December 31, 2000 and December
31, 1999, respectively. There was no impact on gross income resulting
from this change.
DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS: The Company's
financial instruments include cash and cash equivalents, accounts
receivable, notes payable, short and long-term debt and Company-
obligated Mandatorily Redeemable Convertible Securities of a
Subsidiary Trust. The fair value of these instruments approximates
carrying values due to their short-term duration, except as follows:
Derivative Instruments: The fair value of the
Company's derivative instruments is recorded in the
Consolidated Balance Sheets and is described in more
detail in Footnote 7.
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 as of December 31, 2001. 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 $377.5 million at December 31,
2001, based on quoted market prices.
CASH AND CASH EQUIVALENTS: Cash and highly liquid short-term
investments having a maturity of three months
or less.
59
ALLOWANCES FOR DOUBTFUL ACCOUNTS: Allowances for doubtful accounts at
December 31 totaled $57.9 million in 2001, $36.1 million in 2000 and
$41.9 million in 1999. On January 22, 2002, one of the Company's
largest customers filed for bankruptcy under Chapter 11 of the
Bankruptcy Code. The Company increased bad debt provisions throughout
2001 to adequately reserve for this bankruptcy.
INVENTORIES: Inventories are stated at the lower of cost or market
value. Cost of certain domestic inventories (approximately 63%, 59%
and 67% of total inventories at December 31, 2001, 2000 and 1999,
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 $20.1
million, $15.9 million and $11.4 million at December 31, 2001, 2000
and 1999, respectively. Inventory reserves (excluding LIFO reserves)
at December 31 totaled $117.3 million in 2001, $114.6 million in 2000
and $119.4 million in 1999. The components of net inventories were as
follows:
December 31, 2001 2000 1999
---- ---- ----
(IN MILLIONS)
Materials and supplies $223.2 $244.8 $240.0
Work in process 162.0 165.3 149.5
Finished products 728.6 852.5 645.3
------- ------- -------
$1,113.8 $1,262.6 $1,034.8
======== ======== ========
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 $79.5 million at December
31, 2001. The Company's share of undistributed earnings of the
investment included in consolidated retained earnings was $43.9
million at December 31, 2001.
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.
The Company sold all of its marketable equity securities in December
2001, and realized a $5.0 million pre-tax loss. Long-term marketable
equity securities for prior years are summarized as follows:
60
December 31, 2000 1999
---- ----
(IN MILLIONS)
Aggregate market value $9.2 $10.8
Aggregate cost 11.0 10.6
----- -----
Unrealized pre-tax (loss) ga in $(1.8) $0.2
===== =====
PROPERTY, PLANT AND EQUIPMENT: Replacements and improvements are
capitalized. Expenditures for maintenance and repairs are charged to
expense. Depreciation expense is calculated to amortize, principally
on the straight-line basis, the cost of the depreciable assets over
their depreciable lives. Maximum useful lives determined by the
Company are: buildings and improvements (20-40 years) and machinery
and equipment (3-12 years). Property, plant and equipment consisted
of the following:
December 31, 2001 2000 1999
---- ---- ----
(IN MILLIONS)
Land $59.5 $60.7 $63.4
Buildings and improvements 732.5 736.1 691.3
Machinery and equipment 2,546.2 2,421.6 2,200.7
------- ------- -------
3,338.2 3,218.4 2,955.4
Accumulated depreciation (1,649.0) (1,461.5) (1,407.2)
-------- ------- -------
$1,689.2 $1,756.9 $1,548.2
======== ======== ========
61
TRADE NAMES AND GOODWILL: In June 2001, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting
Standards ("FAS") No. 141, "Business Combinations" and No. 142,
"Goodwill and Other Intangible Assets" effective for fiscal years
beginning after December 31, 2001. Under the new rules, goodwill and
intangible assets deemed to have indefinite lives will no longer be
amortized, but will be subject to periodic impairment tests in
accordance with the statements. Other intangible assets will continue
to be amortized over their useful lives. The statement also required
business combinations initiated after June 30, 2001 to be accounted
for using the purchase method of accounting, and broadens the criteria
for recording intangible assets separate from goodwill.
Effective January 1, 2002, all amortization expense on goodwill and
intangible assets with indefinite lives will stop. The Company
anticipates that the application of the nonamortization provisions
will increase annual net income by approximately $41.0 million or
$0.15 per diluted share. During 2001 and the first quarter 2002, the
Company performed the required impairment tests of goodwill and
indefinite lived intangible assets as of January 1, 2002. Subject to
final analysis, the Company expects to record a pre-tax goodwill
impairment charge of $500.0 million to $550.0 million in the first
quarter of 2002.
The cost of trade names and goodwill represents the excess of cost
over identifiable net assets of businesses acquired. Prior to the
adoption of FAS 141, the Company did not allocate such excess cost to
trade names separate from goodwill, but allocated it to other
identifiable intangible assets recorded in long-term Other Assets.
Through the year ended December 31, 2001, trade names and goodwill
were amortized over 40 years and other identifiable intangible assets
were amortized over 5 to 20 years. Trade names and goodwill consisted
of the following:
December 31, 2001 2000 1999
---- ---- ----
(IN MILLIONS)
Cost $2,671.6 $2,485.8 $2,270.5
Accumulated amortization (354.7) (295.9) (245.6)
------- ------- -------
$2,316.9 $2,189.9 $2,024.9
======== ======== ========
62
Other identifiable intangible assets (recorded in Other Assets)
consisted of the following:
December 31, 2001 2000 1999
---- ---- ----
(IN MILLIONS)
Cost $82.0 $96.1 $93.0
Accumulated amortization (36.7) (34.7) (34.3)
----- ----- -----
$45.3 $61.4 $58.7
===== ===== =====
LONG-LIVED ASSETS: Subsequent to 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 uses 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.
In August 2001, the FASB issued FAS No. 144, "Accounting for
Impairment of Disposal of Long-Lived Assets." This statement
established a single accounting model for long-lived assets to be
disposed of by sale and provides additional implementation guidance
for assets to be held and used and assets to be disposed of other than
by sale. The statement supersedes FAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of" and amends the accounting and reporting provisions of
Accounting Principles Board ("APB") Opinion No. 30 related to the
disposal of a segment of a business. The statement is effective for
fiscal years beginning after December 15, 2001. The adoption of FAS
No. 144 on January 1, 2002 will require separate presentation of the
discontinued operations for the Company's pending divestiture of
Anchor Hocking Glass ("Anchor"), as disclosed further in Footnote 2.
OTHER ACCRUED LIABILITIES: Customer accruals are promotional
allowances and rebates given to customers in exchange for their
selling efforts. The self-insurance accrual is primarily casualty
liability such as workers' compensation, general and product liability
and auto liability and is estimated based upon historical loss
experience. Accrued liabilities included the following:
63
December 31, 2001 2000 1999
---- ---- ----
(IN MILLIONS)
Customer accruals $253.3 $240.7 $296.6
Accrued self-insurance
liability 107.2 99.9 92.0
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 nonmonetary 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 losses were $1.9
million, $1.9 million and $1.1 million in 2001, 2000 and 1999,
respectively.
ADVERTISING COSTS: The Company expenses advertising costs as
incurred, including cooperative advertising programs with customers.
Total cooperative advertising expense was $196.8 million, $209.2
million and $205.3 million for 2001, 2000 and 1999, respectively.
Cooperative advertising is recorded in the Consolidated 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 and totaled $100.3
million, $80.0 million and $80.0 million in 2001, 2000 and 1999,
respectively.
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 $67.2 million, $49.4 million and $49.9 million in 2001,
2000 and 1999, respectively.
EARNINGS PER SHARE: The calculation of basic and diluted earnings per
share for the years ended December 31, 2001, 2000 and 1999,
respectively, is shown below (IN MILLIONS, EXCEPT PER SHARE DATA):
64
"In the
Money" Convertible
Basic Stock Preferred Diluted
2001 Method Options (1) Securities (2) Method
---- ------ ----------- -------------- ------
Net income $264.6 - - $264.6
Weighted average
shares outstanding 266.7 0.3 - 267.0
Earnings per share $0.99 $ 0.99
2000
----
Net income $421.6 - - $421.6
Weighted average
shares outstanding 268.4 0.1 - 268.5
Earnings per share $1.57 $ 1.57
1999
----
Net income $ 95.4 - - $ 95.4
Weighted average
shares outstanding 281.8 0.2 - 282.0
Earnings per share $ 0.34 $ 0.34
(1) The weighted average shares outstanding for 2001, 2000 and 1999
exclude the dilutive effect of approximately 3.9 million, 7.6
million and 4.2 million options, respectively, since such options
had an exercise price in excess of the average market value of
the Company's common stock during the respective years.
(2) The convertible preferred securities are anti-dilutive in 2001,
2000 and 1999 and, therefore, have been excluded from diluted
earnings per share. Had the convertible preferred shares been
included in the diluted earnings per share calculation, net
income would be increased by $16.8 million, $16.4 million and
$16.3 million in 2001, 2000 and 1999, respectively and weighted
average shares outstanding would have increased by 9.9 million
shares in all years.
65
COMPREHENSIVE INCOME: Comprehensive income and accumulated other
comprehensive income encompass net income, net after-tax unrealized
gains or losses on securities available for sale, foreign currency
translation adjustments, net losses on derivative instruments and net
minimum pension liability adjustments in the Consolidated Statements
of Stockholders' Equity and Comprehensive Income. The following table
displays the components of accumulated other comprehensive income or
loss (IN MILLIONS):
After-tax Foreign After-tax
Unrealized Currency After-tax Minimum Accumulated
Gain (Loss) on Translation Derivatives Pension Other Compre-
Securities Loss Hedging Loss Liability hensive Loss
---------- ----------- ------------ --------- ------------
Balance at 12/31/98 $(4.1) $(82.1) $ - $ - $(86.2)
Current year change 4.2 (48.0) - - (43.8)
----- ----- ------ ------ ------
Balance at 12/31/99 0.1 (130.1) - - (130.0)
Current year change (1.2) (41.7) - - (42.9)
------ ------ ------ ------ ------
Balance at 12/31/00 (1.1) (171.8) - - (172.9)
Current year change 1.1 (41.3) (14.0) (4.5) (58.7)
------ ------ ------ ------ ------
Balance at 12/31/01 $ - $(213.1) $(14.0) $(4.5) $(231.6)
====== ====== ====== ====== ======
66
FOOTNOTE 2
----------
ACQUISITIONS OF BUSINESS
2001:
----
The Company made only minor acquisitions in 2001, for $61.2 million in
cash and $0.1 million of assumed debt.
2000:
----
In 2000, the Company acquired the following:
Business Acquisition Industry
Business Name Description Date Segment
------------- ----------- ----------- --------
Mersch SA Picture Frames January 24 Calphalon/WearEver
Brio Picture Frames May 24 Calphalon/WearEver
Paper Mate/Parker Writing December 29 Parker/Eldon
Instruments
For these and for other minor acquisitions made in 2000, the Company
paid $635.2 million in cash and assumed
$15.0 million of debt.
1999:
----
In 1999, the Company acquired the following:
Business Acquisition Industry
Business Name Description Date Segment
------------- ----------- ---- -------
Ateliers 28 Drapery Hardware April 2 Levolor/Hardware
Reynolds SA Writing October 18 Parker/Eldon
Instruments
McKechnie plc Drapery October 29 Levolor/Hardware
consumer product Hardware, Window
division Fashions,
Shelving &
Hardware
Ceanothe Holding Picture Frames December 29 Calphalon/WearEver
For these and for other minor acquisitions made in 1999, the Company
paid $397.3 million in cash and assumed
$45.1 million of debt.
The transactions summarized above 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 for the 2001 acquisitions were allocated
67
on a preliminary basis to the fair market value of the assets acquired
and liabilities assumed. The Company's finalized integration plans
may include exit costs for certain plants and product lines and
employee termination costs. The final adjustments to the purchase
price allocations are not expected to be material to the Consolidated
Financial Statements. The preliminary purchase price allocations for
the 2001 acquisitions and the finalized purchase price allocations for
the 2000 and 1999 acquisitions resulted in trade names and goodwill of
approximately $705.9 million.
The Company began to formulate integration plans for the Paper
Mate/Parker, Brio and Mersch SA acquisitions as of their respective
dates of acquisition. The integration plans for these acquisitions
were finalized during 2001 and resulted in integration plan
liabilities of $67.9 million for facility and other exit costs, $32.6
million for employee severance and termination benefits and $3.4
million for other pre-acquisition contingencies. These reserves are
primarily related to the closure of Paper Mate manufacturing
facilities in California and integration of Paper Mate's European
operations into existing Newell European writing instruments
businesses. In addition, integration reserves were established for
the closure of several Mersch and Brio facilities as these businesses
are integrated into existing Newell European picture frame businesses.
As of December 31, 2001, $32.4 million of integration plan reserves
remain related to the 2000 and 1999 acquisitions.
None of the 2001 acquisitions were included in the pro forma
calculations because their effect was immaterial. The unaudited
consolidated results of operations for the years ended December 31,
2001 and 2000 on a pro forma basis, as though the 2000 acquisitions of
Mersch, Brio and Paper Mate/Parker had been acquired on January 1,
2000, are as follows (unaudited):
Year Ended December 31, 2001 2000
---- ----
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
Net sales $6,909.3 $7,489.7
Net income 264.0 382.5
Earnings per share (basic) $0.99 $1.43
68
MERGERS
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
(those of the Company as a combined entity) 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 and Rubbermaid individually to those
presented in the accompanying Consolidated Financial Statements:
Year Ended December 31, 1999
----
(In millions)
Net sales:
Newell $4,146.8
Rubbermaid 2,565.0
-------
$6,711.8
=======
Net income (loss):
Newell $285.2
Rubbermaid (189.8)
-------
$ 95.4
=======
PENDING DIVESTITURE
On June 18, 2001, the Company announced the sale of Anchor for $322.0
million. On January 14, 2002, the Federal Trade Commission ("FTC")
filed a complaint challenging the legality of the sale of Anchor. The
FTC believes the sale of Anchor to the current buyer could create a
monopoly in the market for glassware in the foodservice industry. On
January 21, 2002, the Company signed an amended agreement with the
buyer to divest of Anchor, excluding the foodservice business, for
$277.5 million. The Company is defending the restructured
69
transaction. Annual net sales from Anchor (including the foodservice
business) totaled $196.6 million, $206.7 million and $210.8 million
for the years ended December 31, 2001, 2000 and 1999, respectively.
Anchor is included in the Calphalon/WearEver segment.
Effective January 1, 2002, the carrying amount of Anchor will be
classified as held for sale in the Consolidated Balance Sheets in
accordance with FAS No. 144. The results of operations for Anchor
will be reported separately in the Consolidated Statements of Income
as a discontinued operation. The expected gain from this divestiture
will be recognized when the sale is finalized.
70
FOOTNOTE 3
----------
RESTRUCTURING COSTS
Certain expenses incurred in the reorganization of the Company's
operations are considered to be restructuring expenses. Pre-tax
restructuring costs consisted of the following:
Year Ended December 31, 2001 2000 1999
---- ---- ----
(IN MILLIONS)
Facility and other exit costs $34.6 $14.0 $27.8
Employee severance and termination benefits 28.5 26.8 101.9
Exited contractual commitments 1.0 - 72.0
Rubbermaid transaction costs - - 39.9
Other 2.6 2.2 -
---- ---- ----
Recorded as Restructuring Costs $66.7 $43.0 $241.6
Discontinued Product Lines (in Cost of Sales) 3.8 5.6 4.8
---- ---- ----
Total Costs Related to Restructuring Plans $70.5 $48.6 $246.4
==== ==== =====
Restructuring provisions were determined based on estimates prepared
at the time the restructuring actions were approved by management.
An analysis of the Company's restructuring plan reserves is as
follows (IN MILLIONS):
12/31/99 Costs 12/31/00
Balance Provision Incurred* Balance
------- --------- --------- -------
Facility and other exit costs $9.9 $19.6 $(17.7) $11.8
Employee severance and
termination benefits 0.6 26.8 (24.1) 3.3
Exited contractual commitments 7.4 - (2.8) 4.6
Other - 2.2 - 2.2
---- ---- ---- ----
$17.9 $48.6 $(44.6) $21.9
==== ==== ==== ====
12/31/00 Costs 12/31/01
Balance Provision Incurred* Balance
------- --------- -------- -------
Facility and other exit costs $11.8 $38.4 $(30.1) $20.1
Employee severance and
termination benefits 3.3 28.5 (25.6) 6.2
Exited contractual commitments 4.6 1.0 (3.7) 1.9
Other 2.2 2.6 (4.8) -
---- ---- ---- ----
$21.9 $70.5 $(64.2) $28.2
==== ==== ==== ====
* Cash paid for restructuring activities was $49.7 million, $32.9
million and $145.5 million in 2001, 2000 and 1999, respectively.
71
The facility and other exit cost reserves of $20.1 million at
December 31, 2001 are primarily related to future minimum lease
payments on a vacated Levolor/Hardware European facility and closure
costs related to six additional facilities (one at Rubbermaid, one at
Parker/Eldon, two at Levolor/Hardware and two at Calphalon/WearEver).
Severance reserves of $6.2 million at December 31, 2001 are primarily
related to payments to approximately 25 former Newell executives who
are receiving severance payments under employment agreements. As of
December 31, 2001, $1.9 million of reserves remain for restructuring
charges recorded in 1999 for contractual commitments on abandoned
Rubbermaid computer software. No other restructuring reserves remain
from the 2000 and 1999 restructuring charges.
2001
----
During 2001, the Company recorded pre-tax restructuring charges
associated with the Company's strategic restructuring plan. The
restructuring plan is intended to streamline the Company's supply
chain to ensure its position as the low cost global provider
throughout the Company's product portfolio. The plan consists of
reducing worldwide headcount over the three years beginning in 2001,
and includes consolidating duplicate manufacturing facilities. As
part of this plan, the Company incurred employee severance and
termination benefit costs for approximately 1,700 employees.
Additionally, the Company incurred facility exit costs related
primarily to the closure of 14 facilities (four at Rubbermaid, one at
Parker/Eldon, six at Levolor/Hardware and three at
Calphalon/WearEver).
72
2000
----
During 2000, the Company recorded pre-tax restructuring charges
related primarily to the continued Rubbermaid integration and plant
closures in the Home Decor segment. The Company incurred employee
severance and termination benefit costs related to approximately 700
employees terminated in 2000. Such costs included severance and
government mandated settlements for facility closures at Rubbermaid
Europe, change in control payments made to former Rubbermaid
executives, employee terminations at the domestic Rubbermaid
divisions and severance at the Home Decor segment. The Company
incurred merger transaction costs 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 other exit costs related primarily to
the closure of five European Rubbermaid facilities, three window
furnishings facilities as well as the exit of various Rubbermaid
product lines.
1999
----
During 1999, the Company recorded pre-tax restructuring charges
related primarily to the integration of the Rubbermaid business into
Newell. Merger transaction costs related primarily to investment
banking, legal and accounting costs for the Newell/Rubbermaid merger.
Employee severance and termination benefits related to approximately
750 employees terminated in 1999. Such costs included change in
control payments made to former Rubbermaid executives and severance
and termination costs at Rubbermaid's former headquarters, Rubbermaid
Home Products division, Little Tikes division, Rubbermaid Commercial
Products division and Newell divisions. Facility and other exit
costs representing impaired Rubbermaid centralized computer software
(abandoned as a result of converting Rubbermaid onto existing Newell
centralized computer software) and costs related to discontinued
product lines, the closure of seven Rubbermaid facilities, write-off
of assets associated with abandoned projects and impaired assets and
other exit costs.
73
FOOTNOTE 4
----------
CREDIT ARRANGEMENTS
The Company has short-term foreign and domestic 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
uncommitted lines of credit do not have a material impact on the
Company's liquidity. The following is a summary of borrowings under
foreign and domestic lines of credit:
December 31, 2001 2000 1999
---- ---- ----
(IN MILLIONS)
Notes payable to banks:
Outstanding at year-end
- borrowing $ 19.1 $ 23.5 $97.3
- weighted average interest rate 10.0% 8.6% 6.8%
Average for the year
- borrowing $ 24.1 $ 61.1 $59.1
- weighted average interest rate 12.1% 7.7% 9.9%
Maximum outstanding during the year $401.5 $178.0 $ 97.3
The Company can also issue commercial paper (as described in Footnote
5 to the Consolidated Financial Statements), as summarized below:
December 31, 2001 2000 1999
---- ---- ----
(IN MILLIONS)
Commercial paper:
Outstanding at year-end -
borrowing $ 707.5 $1,503.7 $718.5
- average interest rate 2.8% 6.6% 5.9%
Average for the year
- borrowing $1,240.3 $ 987.5 $534.9
- average interest rate 4.1% 6.3% 5.2%
Maximum outstanding during the year $1,603.3 $1,503.7 $807.0
74
FOOTNOTE 5
----------
LONG-TERM DEBT
The following is a summary of long-term debt:
December 31, 2001 2000 1999
---- ---- ----
(IN MILLIONS)
Medium-term notes $1,012.5 $1,012.5 $859.5
Commercial paper 707.5 1,503.7 718.5
Preferred debt securities 450.0 - -
Other long-term debt 2.5 7.1 27.9
------- ------- -------
Total debt 2,172.5 2,523.3 1,605.9
Current portion of long-term debt (807.5) (203.7) (150.1)
------- ------- -------
Long-term Debt $1,365.0 $2,319.6 $1,455.8
======= ======= =======
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 364-day revolving credit agreement in the amount of $700.0 million.
The 364-day revolving credit agreement terminated in October 2001. At
December 31, 2001, there were no borrowings under the remaining
$1,300.0 million revolving credit agreement.
In lieu of borrowings under the Company's revolving credit agreement,
the Company may issue commercial paper. The Company's revolving
credit agreement provides 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 agreement. At December 31, 2001, $707.5 million
(principal amount) of commercial paper was outstanding. Because the
backup revolving credit agreement expires in August 2002, the entire
$707.5 million is classified as current portion of long-term debt.
The revolving credit agreement permits the Company to borrow funds on
a variety of interest rate terms. The agreement requires, among
other things, that the Company maintain a certain Total Indebtedness
to Total Capital Ratio and limits Subsidiary Indebtedness, as defined
in the agreement. As of December 31, 2001, the Company was in
compliance with this agreement.
The Company had outstanding at December 31, 2001 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%. Of the outstanding amount of medium-term notes, $100.0
million is classified as current portion of long-term debt and $912.5
million is classified as long-term debt. A $779.5 million universal
75
shelf registration statement became effective in July 1999. As of
December 31, 2001, $449.5 million of Company debt and equity
securities may be issued under the shelf registration statement.
On September 18, 2001, the Company entered into an agreement with a
financial institution creating a financing entity which is
consolidated in the Company's financial statements. Under the
agreement, the Company regularly enters into transactions with the
financing entity to sell an undivided interest in the Company's trade
receivables to the financing entity. In the quarter ended September
30, 2001, the financing entity issued $450.0 million in preferred
debt securities to a financial institution. Those preferred debt
securities must be retired or redeemed before the Company can have
access to the financing entity's receivables. The receivables and
the corresponding $450.0 million preferred debt issued by the
subsidiary to the financial institution are recorded in the
Consolidated Balance Sheets of the Company. The proceeds of this debt
were used to pay down commercial paper issued by the Company.
Because this debt matures in 2008, the entire amount is considered to
be long-term debt. The provisions of the debt agreement allow the
entire outstanding debt to be called upon certain events including
the Company's debt rating falling below investment grade (Baa2;
Moody's debt rating and BBB; Standard & Poor's debt rating), and
certain levels of accounts receivable write-offs. As of December 31,
2001, the Company was in compliance with the agreement.
The aggregate maturities of long-term debt outstanding are as
follows:
Aggregate
December 31, Maturities
----------
(IN MILLIONS)
2002 $ 807.5
2003 415.5
2004 -
2005 22.0
2006 150.0
Thereafter 777.5
-------
$2,172.5
=======
76
FOOTNOTE 6
----------
COMPANY-OBLIGATED MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED
SECURITIES OF A SUBSIDIARY TRUST
The Company fully and unconditionally guarantees 10.0 million shares
of 5.25% convertible preferred securities issued by a 100% owned
finance subsidiary of the Company, which are callable at 103.15% of
the liquidation preference, decreasing over time to 100% by December
2007. Each of these "Preferred Securities" is convertible into 0.9865
of a share of Company common stock, and is entitled to a quarterly
cash distribution at the annual rate of $2.625 per share.
The proceeds of the Preferred Securities were invested in $500.0
million of Company 5.25% Junior Convertible Subordinated Debentures.
The Debentures are the sole assets of the subsidiary trust, mature on
December 1, 2027, bear interest at an annual rate of 5.25%, are
payable quarterly and became redeemable by the Company beginning in
December 2001. The Company may defer interest payments on the
Debentures for a period up to 20 consecutive quarters, during which
period 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 common or preferred stock
or debt securities that do not rank senior to the Debentures.
As of December 31, 2001, the Company has not elected to defer
interest payments. The $500.0 million of the Preferred Securities is
classified as Company-Obligated Mandatorily Redeemable Convertible
Preferred Securities of a Subsidiary Trust in the Consolidated
Balance Sheet.
77
FOOTNOTE 7
----------
DERIVATIVE FINANCIAL INSTRUMENTS
At the beginning of 2001, the Company adopted FAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." This
statement requires companies to record derivatives on the balance
sheet as assets or liabilities, measured at fair value. Any changes
in fair value of these instruments are recorded in the income
statement or other comprehensive income. The impact of adopting FAS
No. 133 on January 1, 2001 resulted in a cumulative after-tax gain of
approximately $13.0 million, recorded in accumulated other
comprehensive income. The cumulative effect of adopting FAS No. 133
did not materially impact the results of operations.
The Company has limited involvement with derivative financial
instruments and does not use them for trading purposes. Derivative
financial instruments are used to manage certain interest rate and
foreign currency risks. These instruments include interest rate
swaps, long-term cross currency interest rate swaps, and short-term
forward exchange contracts.
The Company entered into several interest rate swap agreements,
designated as cash flow hedging relationships, as a means to mitigate
the risk of rising interest rates in future periods by converting
certain floating rate debt instruments into fixed rate debt. Gains
and losses on these instruments, to the extent that the hedge
relationship has been effective, are deferred in other comprehensive
income and recognized in interest expense over the period in which
the Company recognizes interest expense on the related debt
instrument. Any ineffectiveness on these instruments is immediately
recognized in interest expense in the period that the ineffectiveness
occurs. During 2001 the ineffectiveness related to these instruments
was insignificant. The maximum length of time over which the Company
is hedging its interest rate exposure through the use of interest
rate swap agreements is seven years, and the Company expects
approximately $10.9 million of losses, net of tax, deferred in other
comprehensive income to be recognized in earnings over the 12 months
ended December 31, 2002. At December 31, 2001, the Company had
interest rate swaps with an outstanding notional principal amount of
$372.0 million, with accrued interest payable of $1.6 million.
The Company utilizes forward exchange contracts to manage foreign
exchange risk related to both known and anticipated intercompany
transactions and third-party commercial transaction exposures of one
year duration or less. The Company also utilizes long-term cross
currency interest rate swaps to hedge long-term intercompany
transactions. The maturities on these long-term cross currency
interest rate swaps range from three to five years. At December 31,
2001, the Company had long-term cross currency interest rate swaps
78
with an outstanding notional principal amount of $337.3 million, with
accrued interest receivable of $2.9 million.
Gains and losses related to qualifying forward exchange contracts,
which hedge intercompany transactions or third-party commercial
transactions, are deferred in other comprehensive income with a
corresponding asset or liability until the underlying transaction
occurs and are considered to have a cash flow hedging relationship.
The gains and losses reported in accumulated other comprehensive
income will be reclassified to earnings upon completion of the
underlying transaction being hedged. The net loss recognized in 2001
for matured cash flow forward exchange contracts was $1.0 million,
which was recognized in the income statement. The Company estimates
$0.6 million of losses, net of tax, deferred in accumulated other
comprehensive income will be recognized in earnings over the 12
months ending December 31, 2002.
Derivative instruments used to hedge intercompany loans are marked to
market with the corresponding gains or losses included in accumulated
other comprehensive income and are considered to have a fair value
hedging relationship. The net gain recognized in 2001 for forward
exchange contracts and cross currency interest rate swaps was $2.2
million, which was recognized as part of interest income on the
income statement.
The following table summarizes the Company's short-term forward
exchange contracts and long-term cross currency interest rate 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 the
local needs of the subsidiaries. The contractual amounts of
significant short-term forward exchange contracts and long-term cross
currency interest rate swaps and their fair values as of December 31,
2001 were as follows:
December 31, 2001 2000
---- ----
(IN MILLIONS)
Buy Sell Buy Sell
--- ---- --- ----
British Pounds $174.9 $178.2 $1.6 $165.2
Canadian Dollars 207.8 31.6 149.4 24.0
Euro 43.7 232.2 0.2 350.2
Other 23.9 9.8 - 8.6
----- ----- ----- -----
$450.3 $451.8 $151.2 $548.0
===== ===== ===== =====
Fair Value recorded in the
Consolidated Balance Sheet $440.0 $448.2 $146.9 $508.4
===== ===== ===== =====
79
The Company's short-term forward exchange contracts and long-term
cross currency interest rate swaps do not subject the Company to risk
due to foreign exchange rate movement, since gains and losses on
these instruments generally offset gains and losses 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.
80
FOOTNOTE 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 2013. Rent
expense was $112.0 million, $102.9 million and $91.9 million in 2001,
2000 and 1999, 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)
2002 $56.6
2003 40.3
2004 28.6
2005 18.5
2006 12.2
Thereafter 24.1
-----
$180.3
=====
81
FOOTNOTE 9
----------
EMPLOYEE BENEFIT AND RETIREMENT PLANS
As of December 31, 2001, the Company continued to maintain various
deferred compensation plans with varying terms. The total liability
associated with these plans was $52.3 million, $49.2 million and
$49.6 million as of December 31, 2001, 2000 and 1999, respectively.
These liabilities are included in Other Noncurrent Liabilities in the
Consolidated Balance Sheet. These plans are partially funded with
asset balances of $41.9 million, $39.6 million and $37.6 million as
of December 31, 2001, 2000 and 1999, respectively. These assets are
included in Other Noncurrent Assets in the Consolidated Balance
Sheet.
Effective January 1, 2002, the Company adopted a deferred
compensation plan pursuant to which certain management and highly
compensated employees are eligible to defer up to 50% of their
regular compensation and up to 100% of their bonuses, and nonemployee
board members are eligible to defer up to 100% of their directors
compensation. The compensation deferred under this plan along with
earnings is fully vested at all times.
The Company has a Supplemental Executive Retirement Plan ("SERP"),
which is a nonqualified defined benefit plan pursuant to which the
Company will pay supplemental pension benefits to certain key
employees upon retirement based upon the employees' years of service
and compensation. The SERP is being funded through a trust agreement
with the Northern Trust Company, as trustee, that owns life insurance
policies on key employees. At December 31, 2001, 2000 and 1999, the
life insurance contracts had a cash surrender value of $56.0 million,
$44.1 million and $30.0 million, respectively. These assets are
included in Other Noncurrent Assets in the Consolidated Balance
Sheet. The amount of coverage is designed to provide sufficient
reserves to cover all costs of the plan. The projected benefit
obligation was $59.8 million, $57.1 million and $44.8 million at
December 31, 2001, 2000 and 1999, respectively. The SERP liabilities
are included in the pension table below; however, the Company's
investment in the life insurance contracts are excluded from the
table as they do not qualify as plan assets under FAS No. 87,
Employers' Accounting for Pensions.
The Company and its subsidiaries have noncontributory pension, profit
sharing and contributory 401(k) 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, as amended, the Internal Revenue Code of 1986, as amended or
local statutes to assure that plan assets will be adequate to provide
retirement benefits. The Company's common stock comprised $56.6
82
million, $46.7 million and $48.7 million of noncontributory pension
plan assets at December 31, 2001, 2000 and 1999, respectively.
The Company's matching contributions to the profit sharing plans were
$15.4 million, $14.5 million and $12.3 million for the years ended
December 31, 2001, 2000 and 1999, respectively.
In addition, several of the Company's subsidiaries currently provide
retiree health care and life insurance benefits for certain employee
groups.
The following provides a reconciliation of benefit obligations, plan
assets and funded status of the Company's noncontributory pension
plans, SERP and postretirement benefit plans within the guidelines of
FAS No. 132:
Other
Pension Benefits Postretirement Benefits
------------------------------ ------------------------------
December 31, 2001 2000 1999 2001 2000 1999
---- ---- ---- ---- ---- ----
(IN MILLIONS)
Change in benefit obligation:
Benefit obligation at
January 1 $740.9 $709.1 $691.1 $166.7 $196.3 $184.0
Service cost 38.9 29.0 25.4 3.3 3.6 3.5
Interest cost 54.9 48.9 50.1 12.5 12.9 12.6
Amendments (1.2) 3.8 6.5 - - (0.5)
Actuarial (gain) loss (15.9) (0.7) (59.6) 50.8 (31.4) 11.9
Acquisitions 79.8 - 50.4 - - 1.7
Currency translation (4.1) (2.2) ( 5.0) - - -
Benefits paid from plan assets (46.6) (47.0) (49.8) (20.7) (14.7) (16.9)
----- ----- ----- ----- ----- -----
Benefit obligation at
December 31 $846.7 $740.9 $709.1 $212.6 $166.7 $196.3
===== ===== ===== ===== ===== =====
Change in plan assets:
Fair value of plan assets at
January 1 $888.3 $858.6 $713.8 $ - $ - $ -
Actual return on plan assets (176.0) 76.4 119.5 - - -
Acquisitions 83.8 - 62.3 - - -
Contributions 7.6 3.1 11.6 20.7 14.7 16.9
Currency translation (0.6) (2.8) 1.2 - - -
Benefits paid from plan assets (46.6) (47.0) (49.8) (20.7) (14.7) (16.9)
------ ------ ------ ------ ------ ------
Fair value of plan assets
at December 31 $756.5 $888.3 $858.6 $ - $ - $ -
----- ----- ----- ----- ----- -----
83
Funded Status:
Funded status at December 31 $(90.2) $147.4 $149.5 $(212.6) $(166.7) $(196.3)
Unrecognized net loss (gain) 142.8 (110.7) (118.9) 13.7 (38.6) (8.0)
Unrecognized prior service cost 2.7 3.4 (0.9) - - (0.2)
Unrecognized net asset (1.1) (2.2) (3.3) - - -
----- ----- ----- ----- ----- -----
Net amount recognized $ 54.2 $ 37.9 $ 26.4 $(198.9) $(205.3) $(204.5)
===== ===== ===== ===== ===== =====
Amounts recognized in the
Consolidated Balance Sheets:
Prepaid benefit cost (1) $142.0 $110.0 $102.9 $- $- $-
Accrued benefit cost (2) (98.6) (78.2) ( 80.9) (198.9) (205.3) (204.5)
Intangible asset (1) 3.5 6.1 4.4 _ _ _
Accumulated other
comprehensive loss 7.3 - - - - -
----- ----- ----- ----- ----- -----
Net amount recognized $54.2 $37.9 $26.4 $(198.9) $(205.3) $(204.5)
===== ===== ===== ===== ===== =====
Assumptions as of December 31:
Discount rate 7.25% 7.5% 7.5% 7.25% 7.5% 7.5%
Long-term rate of return on
plan assets 10.0% 10.0% 10.0% - - -
Long-term rate of compensation
Long-term rate of compensation increase 5.0% 5.0% 5.0% - - -
Health care cost trend rate - - - 6.0% 6.0% 7.0-9.0%
(1) Recorded in Other Noncurrent Assets
(2) Recorded in Other Noncurrent Liabilities
84
Net pension (income) expenses and other postretirement benefit
expenses include the following components:
Pension Benefits Other Postretirement Benefits
------------------------------ -----------------------------
Year Ended December 31, 2001 2000 1999 2001 2000 1999
---- ---- ---- ---- ---- ----
(IN MILLIONS)
Service cost-benefits earned
during the year $33.2 $29.2 $30.9 $ 3.3 $ 3.6 $ 3.5
Interest cost on projected
benefit obligation 53.7 49.5 50.9 12.5 12.9 12.6
Expected return on plan assets (87.1) (82.8) (76.7) - - -
Amortization of:
Transition asset (1.4) (1.9) (1.2) (1.5) (1.1) (0.2)
Prior service cost recognized (1.1) (0.5) (0.4) - - -
Actuarial (gain) loss (0.3) (1.3) 0.8 - - -
---- ---- ---- ---- ---- ----
Net pension (income) expense $(3.0) $(7.8) $4.3 $14.3 $15.4 $15.9
==== ==== ==== ==== ==== ====
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, 2001 2000 1999
---- ---- ----
(IN MILLIONS)
Projected benefit
obligation $(443.0) $103.7 $145.2
Accumulated benefit
obligation (404.1) 85.3 131.0
Fair value of plan assets 307.0 - 50.8
Assumed health care cost trends have been used in the valuation of
postretirement benefits. The trend rate is 6% in 2001, but will
increase to 10% (for retirees under age 65) and 12% (for retirees
over age 65) in 2002, declining to 6% for all retirees in 2009 and
thereafter. The Company increased the medical care cost trend due to
significant increases in actual medical costs.
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 interest
cost components $1.8 $(1.6)
Effect on postretirement
benefit obligations 17.5 (16.1)
85
FOOTNOTE 10
-----------
STOCKHOLDERS' EQUITY
At December 31, 2001, the Company's common stock consists of 800.0
million authorized shares with a par value of $1.00 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 $26.00 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 $200.00, 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.
86
FOOTNOTE 11
-----------
STOCK OPTIONS
The Company's stock option plans are accounted for under APB 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 FAS 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, 2001 2000 1999
---- ---- ----
(In millions, except per share data)
Net income:
As reported $264.6 $421.6 $95.4
Pro forma 249.1 410.5 88.2
Diluted earnings per share:
As reported $0.99 $1.57 $0.34
Pro forma 0.93 1.53 0.31
Because the FAS 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 16.1 million shares of common stock to be
issued under various stock option plans. As of January 1, 2001,
under the Company's primary 1993 Stock Option Plan, the Company could
grant options for up to 13.3 million shares, of which the Company has
granted 12.0 million options and canceled 2.4 million options through
December 31, 2001. 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 ten years from the
date of grant.
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:
87
Weighted
Average
Exercise
2001 Shares Price
---- ------ -----
Outstanding at beginning of year 8,045,499 $32
Granted 4,366,750 25
Exercised (201,744) 19
Canceled (2,297,144) 33
----------
Outstanding at end of year 9,913,361 29
==========
Exercisable at end of year 2,928,507 33
Weighted average fair value of options
granted during the year $7
Options Outstanding at December 31, 2001:
Range of Weighted Average
Exercise Weighted Average Remaining
Prices Number Outstanding Exercise Price Contractual Life
------ ------------------ -------------- ----------------
$16.00 - $24.99 3,123,007 $23 8
$25.00 - $34.99 5,002,780 29 8
$35.00 - $44.99 1,648,974 41 7
$45.00 - $50.00 138,600 48 7
---------
$16.00 - $50.00 9,913,361 29 8
=========
88
Options Exercisable at December 31, 2001:
Range of Weighted
Exercise Number Average
Prices Exercisable Exercise Price
------ ----------- --------------
$16.00 - $24.99 341,757 $20
$25.00 - $34.99 1,523,968 30
$35.00 - $44.99 985,622 40
$45.00 - $50.00 77,160 48
---------
$16.00 - $50.00 2,928,507 33
=========
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
Weighted
Average
1999 Shares Exercise 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
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 2001, 2000 and 1999, respectively:
risk-free interest rate of 5.1%, 6.5% and 6.6%; expected dividend
yields of 3.0%, 3.0% and 2.0%; expected lives of 9.0, 9.0 and 9.0
years; and expected volatility of 28%, 28% and 25%.
89
FOOTNOTE 12
-----------
INCOME TAXES
The provision for income taxes consists of the following:
Year Ended December 31, 2001 2000 1999
---- ---- ----
(IN MILLIONS)
Current:
Federal $90.8 $154.8 $120.6
State 11.6 14.9 6.3
Foreign 23.3 34.4 18.2
----- ----- -----
125.7 204.1 145.1
Deferred 25.5 59.8 (9.6)
----- ----- -----
$151.2 $263.9 $135.5
===== ===== =====
The non-U.S. component of income before income taxes was $69.9
million in 2001, $84.7 million in 2000 and $56.3 million in 1999.
The components of the net deferred tax asset are as follows:
December 31, 2001 2000 1999
---- ---- ----
(IN MILLIONS)
Deferred tax assets:
Accruals not currently deductible $173.5 $158.7 $198.0
for tax purposes
Postretirement liabilities 76.2 81.8 80.5
Inventory reserves 48.3 42.2 28.4
Self-insurance liability 36.1 32.1 29.5
Foreign net operating losses 109.2 70.6 26.6
Amortizable intangibles - 9.6 27.2
Other 12.2 - 6.0
----- ----- -----
455.5 395.0 396.2
----- ----- -----
Deferred tax liabilities:
Accelerated depreciation (135.4) (139.6) (157.5)
Prepaid pension asset (42.0) (38.8) (33.7)
Amortizable intangibles (9.2) - -
Other (18.8) (24.7) (16.2)
----- ----- -----
(205.4) (203.1) (207.4)
----- ----- -----
90
Net deferred tax asset $250.1 $191.9 $188.8
Valuation allowance (85.3) (53.2) (23.9)
----- ----- -----
Net deferred tax asset after
valuation allowance $164.8 $138.7 $164.9
===== ===== =====
At December 31, 2001, the Company had the following net operating
loss ("NOL") carryovers:
Tax Benefit
of NOL Valuation
Country Carryover Allowance Expiration
------- --------- --------- ----------
(IN MILLIONS)
France $37.1 $31.2 2005-2007
Germany 20.1 12.1 No expiration
Luxembourg 6.2 6.2 No expiration
Netherlands 6.6 4.3 No expiration
United Kingdom 26.8 21.7 No expiration
Other 12.4 9.8 No expiration
----- ----
$109.2 $85.3
===== ====
The Company generated losses in certain jurisdictions and legal
entities for which management believes it is unlikely that such
benefits will be realized and, therefore, provided a valuation
allowance against such benefits. Approximately $17.4 million of the
total net operating loss benefits relate to the acquisition of the
Gillette Stationery Products Group in 2000. To the extent that these
losses are utilized in the future, such benefits will reduce goodwill
associated with this acquisition.
The net deferred tax asset is classified in the Consolidated Balance
Sheets as follows:
December 31, 2001 2000 1999
---- ---- ----
(IN MILLIONS)
Current net deferred income $238.5 $231.9 $250.6
tax asset
Noncurrent deferred income (73.7) (93.2) (85.7)
tax liability ----- ----- -----
$164.8 $138.7 $164.9
===== ===== =====
91
A reconciliation of the U.S. statutory rate to the effective income
tax rate is as follows:
Year Ended December 31, 2001 2000 1999
---- ---- ----
(IN PERCENT)
Statutory rate 35.0% 35.0% 35.0%
Add (deduct) effect of:
State income taxes, net of
federal income tax effect 2.8 2.2 2.7
Nondeductible trade names and 4.2
goodwill amortization 3.4 1.3
Nondeductible transaction costs - - 19.7
Foreign tax credit (3.3) (.5) -
Foreign rate differential 5.1 .7 (.6)
Federal, state and foreign audit
settlements and other (6.6) (.2) (2.3)
---- ---- ----
Effective rate 36.4% 38.5% 58.7%
==== ==== ====
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, 2001, the estimated amount of total
unremitted non-U.S. subsidiary earnings is
$72.7 million.
92
FOOTNOTE 13
-----------
OTHER NONOPERATING EXPENSES (INCOME)
Total other nonoperating expenses (income) consist of the following:
Year Ended December 31, 2001 2000 1999
---- ---- ----
(IN MILLIONS)
Minority interest in income of
subsidiary trust (2) $26.7 $26.7 $26.8
Equity earnings (1) (7.2) (8.0) (8.1)
Loss on sales of marketable
equity securities 5.0 - 1.1
Gain on sale of business (5.0) - -
Interest income (3.9) (5.5) (9.9)
Currency transaction losses 1.9 1.9 1.1
Dividend income (0.1) (0.1) (0.3)
Other 0.1 1.2 1.9
---- ---- ----
$17.5 $16.2 $12.6
==== ==== ====
(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 Footnote 6).
93
FOOTNOTE 14
-----------
INDUSTRY SEGMENT INFORMATION
On April 2, 2001, the Company announced the realignment of its
operating segment structure. This realignment reflects the Company's
focus on building large consumer brands, promoting organizational
integration and operating efficiencies and aligning the businesses
with the Company's key account strategy. The five new segments have
been named for leading worldwide brands in the Company's product
portfolio. The realignment streamlines what had previously been six
operating segments. Based on this management structure, the
Company's segment results are as follows (IN MILLIONS):
2001 2000 1999
---- ---- ----
Net Sales (1) (2)
-----------------
Year Ended December 31,
Rubbermaid $1,819.3 $1,946.5 $2,004.3
Parker/Eldon 1,673.5 1,288.0 1,218.0
Levolor/Hardware 1,382.6 1,455.0 1,400.6
Calphalon/WearEver 1,161.7 1,246.9 1,186.0
Little Tikes/Graco 872.2 998.3 902.9
------- ------- -------
$6,909.3 $6,934.7 $6,711.8
======== ======= ========
Operating Income (3)
--------------------
Year Ended December 31,
Rubbermaid $169.2 $210.1 $70.9
Parker/Eldon 268.4 249.3 218.3
Levolor/Hardware 126.5 207.2 204.6
Calphalon/WearEver 120.1 172.9 201.3
Little Tikes/Graco 41.6 117.2 28.4
Corporate (84.4) (76.4) (133.5)
----- ----- -----
641.4 880.3 590.0
Restructuring Costs (4) (70.5) (48.6) (246.4)
----- ----- -----
$570.9 $831.7 $343.6
===== ===== =====
94
Identifiable Assets
-------------------
December 31,
Rubbermaid $1,094.6 $1,185.2 $1,177.1
Parker/Eldon 1,145.3 1,050.9 720.9
Levolor/Hardware 790.8 775.9 831.8
Calphalon/WearEver 787.4 849.3 825.9
Little Tikes/Graco 528.2 537.5 488.6
Corporate (5) 2,919.8 2,863.0 2,679.8
------- ------- -------
$7,266.1 $7,261.8 $6,724.1
======= ======= =======
Capital Expenditures
--------------------
Year Ended December 31,
Rubbermaid $76.3 $144.1 $86.6
Parker/Eldon 48.2 42.2 24.9
Levolor/Hardware 26.6 16.0 18.1
Calphalon/WearEver 34.7 43.9 47.8
Little Tikes/Graco 38.8 48.2 17.7
Corporate 25.2 22.2 5.0
----- ----- -----
$249.8 $316.6 $200.1
===== ===== =====
Depreciation and Amortization
-----------------------------
Year Ended December 31,
Rubbermaid $92.1 $81.1 $90.3
Parker/Eldon 54.5 34.0 35.7
Levolor/Hardware 29.3 24.3 22.4
Calphalon/WearEver 40.7 44.7 37.2
Little Tikes/Graco 32.6 30.7 29.2
Corporate 79.6 77.8 56.9
----- ----- -----
$328.8 $292.6 $271.7
===== ===== =====
GEOGRAPHIC AREA INFORMATION
2001 2000 1999
---- ---- ----
Net Sales
---------
Year Ended December 31,
United States $5,040.6 $5,191.5 $5,135.4
Canada 299.5 308.9 275.6
------- ------- -------
North America 5,340.1 5,500.4 5,411.0
Europe 1,215.4 1,112.5 1,015.3
Central and South America (6) 263.4 289.0 253.8
All other 90.4 32.8 31.7
------- ------- -------
$6,909.3 $6,934.7 $6,711.8
======= ======= =======
95
Operating Income
----------------
Year Ended December 31,
United States $455.7 $643.4 $276.6
Canada 39.1 54.5 22.6
----- ----- -----
North America 494.8 697.9 299.2
Europe 47.4 77.2 4.5
Central and South America 17.9 53.2 43.6
All other 10.8 3.4 (3.7)
----- ----- -----
$570.9 $831.7 $343.6
===== ===== =====
Identifiable Assets (7)
-----------------------
December 31,
United States $5,067.8 $5,048.8 $4,813.3
Canada 118.0 139.9 157.1
------- ------- -------
North America 5,185.8 5,188.7 4,970.4
Europe 1,737.0 1,746.4 1,459.8
Central and South America 295.7 290.2 273.2
All other 47.6 36.5 20.7
------- ------- -------
$7,266.1 $7,261.8 $6,724.1
======= ======= =======
(1) Sales to Wal-Mart Stores, Inc. and subsidiaries amounted to
approximately 15% of consolidated net sales in 2001, 2000 and
1999. Sales to no other customer exceeded 10% of consolidated
net sales for any year.
(2) All intercompany transactions have been eliminated.
(3) Operating income is net sales less cost of products sold and
selling, general and administrative 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.
(4) Restructuring costs are recorded as both Restructuring Costs and
as part of Cost of Products Sold in the Consolidated Statements
of Income (refer to Footnote 3 for additional detail.)
(5) Corporate assets primarily include trade names and goodwill,
equity investments and deferred tax assets.
(6) Includes Argentina, Brazil, Colombia, Mexico and Venezuela.
(7) Transfers of finished goods between geographic areas are not
significant.
96
FOOTNOTE 15
-----------
LITIGATION
The Company is involved in legal proceedings in the ordinary course
of its business. These proceedings include claims for damages
arising out of use of the Company's products, allegations of
infringement of intellectual property, commercial disputes and
employment matters as well as the environmental matters described
below. Some of the legal proceedings include claims for punitive as
well as compensatory damages, and a few proceedings purport to be
class actions.
As of December 31, 2001, 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.
The Company's estimate of environmental response costs associated
with these matters as of December 31, 2001 ranged between $14.2
million and $18.1 million. As of December 31, 2001, the Company had a
reserve equal to $15.8 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
year) operations 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
97
acquired, actual costs to be incurred by the Company may vary from
the Company's estimates.
Although management of the Company cannot predict the ultimate
outcome of these legal proceedings with certainty, it believes that
the ultimate resolution of the Company's legal proceedings, 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.
98
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
-----------------------------------------------------------
None.
99
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------------------------------------------------
Information regarding executive officers of the Company is included
as a Supplementary Item at the end of Part I of this
Form 10-K.
Information regarding directors of the Company is included in the
Company's Definitive Proxy Statement for the Annual Meeting of
Stockholders to be held May 8, 2002 ("Proxy Statement") under the
caption "Proposal 1 - Election of Directors," which information is
hereby incorporated by reference herein.
Information regarding compliance with Section 16(a) of the Exchange
Act is included in the Proxy Statement under the caption "Section
16(a) Beneficial Ownership Compliance Reporting," which information
is hereby incorporated by reference herein.
ITEM 11. EXECUTIVE COMPENSATION
----------------------
Information regarding executive compensation is included in the Proxy
Statement under the caption "Proposal 1 - Election of Directors -
Compensation of Directors," under the captions "Executive Compensation
- Summary Compensation Table; - Option Grants in 2001; - Option Exercises
in 2001; - Pension and Retirement Plans; - Employment Security and Other
Agreements," and the caption "Executive Compensation Committee Interlocks
and Insider Participation," which information is hereby incorporated by
reference herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
-----------------------------------------------
Information regarding security ownership is included in the Proxy
Statement under the caption "Certain Beneficial Owners," which
information is hereby incorporated by reference herein.
100
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
Not applicable.
101
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 10-K
-------------------------------------------
(a)(1) The following is a list of the financial statements of Newell
Rubbermaid Inc. included in this report on Form 10-K, which are filed
herewith pursuant to Item 8:
Report of Independent Public Accountants
Consolidated Statements of Income - Years Ended December 31,
2001, 2000 and 1999
Consolidated Balance Sheets - December 31, 2001, 2000 and 1999
Consolidated Statements of Cash Flows - Years Ended December 31,
2001, 2000 and 1999
Consolidated Statements of Stockholders' Equity - Years Ended
December 31, 2001, 2000 and 1999
Footnotes to Consolidated Financial Statements - December 31,
2001, 2000 and 1999
(2) The following consolidated financial statement schedule of the
Company included in this report on Form 10-K is filed herewith
pursuant to Item 14(d) and appears immediately preceding the Exhibit
Index:
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
-----------------------------------------------
(3) The exhibits filed herewith are listed on the Exhibit Index
filed as part of this report on Form 10-K. Each management contract
or compensatory plan or arrangement of the Company listed on the
Exhibit Index is separately identified by an asterisk.
(b) Reports on Form 8-K:
None.
102
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
NEWELL RUBBERMAID INC.
Registrant
By /s/ William T. Alldredge
---------------------------
Date February 5, 2002
-------------------------
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below on February 5, 2002 by the
following persons on behalf of the Registrant and in the capacities
indicated.
Signature
---------
Title
-----
/s/ William P. Sovey Chairman of the Board and Director
------------------------------
William P. Sovey
/s/ Joseph Galli, Jr. President, Chief Executive Officer
------------------------------ and Director
Joseph Galli, Jr.
/s/ J. Patrick Robinson Vice President - Corporate
------------------------------ Controller and Chief Accounting
J. Patrick Robinson Officer
/s/ William T. Alldredge President - Corporate Development
------------------------------ and Chief Financial Officer
William T. Alldredge
/s/ Scott S. Cowen Director
------------------------------
Scott S. Cowen
/s/ Alton F. Doody Director
------------------------------
Alton F. Doody
103
/s/ Daniel C. Ferguson Director
------------------------------
Daniel C. Ferguson
/s/ Robert L. Katz Director
------------------------------
Robert L. Katz
/s/ William D. Marohn Director
------------------------------
William D. Marohn
/s/ Elizabeth Cuthbert Millett Director
------------------------------
Elizabeth Cuthbert Millett
/s/ Cynthia A. Montgomery Director
------------------------------
Cynthia A. Montgomery
/s/ Allan P. Newell Director
------------------------------
Allan P. Newell
/s/ Gordon R. Sullivan Director
------------------------------
Gordon R. Sullivan
104
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
------------------------------------------------
Balance Charges to
at Other Balance
Beginning Accounts (1) at
Allowance for Doubtful of (IN Write- End of
Accounts Period Provision THOUSANDS) offs Period
---------------------------- -------- --------- ------------ ------ --------
Year ended December 31, 2001 $36,098 $38,924 $1,031 $(18,180) $57,873
Year ended December 31, 2000 41,870 4,821 4,861 (15,454) 36,098
Year ended December 31, 1999 34,157 17,928 1,922 (12,137) 41,870
Balance
at Balance
Beginning Write-offs at
of (IN Other End of
Inventory Reserves Period Provision THOUSANDS) (2) Period
------------------- -------- ---------- ---------- ------ ---------
Year ended December 31, 2001 $114,601 $64,668 $(63,700) $1,704 $117,273
Year ended December 31, 2000 119,389 45,319 (52,294) 2,187 114,601
Year ended December 31, 1999 113,775 75,660 (72,768) 2,722 119,389
Balance
at Costs Balance
Reginning Incurred at
of Provision (4) (IN End of
Restructuring Reserves Period (3) THOUSANDS) Other Period
----------------------- -------- --------- ---------- ----- ---------
Year ended December 31, 2001 $21,867 $70,459 $(64,080) - $28,246
Year ended December 31, 2000 17,930 48,561 (44,624) - 21,867
Year ended December 31, 1999 1,559 246,381 (230,010) - 17,930
(1) Represents recovery of accounts previously written off and net
reserves of acquired or divested businesses.
(2) Represents net reserves of acquired and divested businesses,
including provisions for product line rationalization.
(3) The restructuring provision is classified as both Restructuring
Costs and as part of Cost of Products Sold in the Consolidated
Statements of Income (refer to Footnote 3 for additional detail).
(4) Represents costs incurred or charged to restructuring reserves in
accordance with the restructuring plan.
105
(C) EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------ ----------------------
Item 3. Articles of 3.1 Restated Certificate of
Incorporation Incorporation of Newell
and By-Laws Rubbermaid Inc., as amended as
of April 5, 2001 (incorporated
by reference to Exhibit 3.1 to
the Company's Quarterly Report
on Form 10-Q for the quarterly
period ended March 31, 2001).
3.2 By-Laws of Newell Rubbermaid
Inc, as amended through
January 5, 2001(incorporated
by reference to Exhibit 3.1 to
the Company's Annual Report on
Form 10-K for the year ended
December 31, 2000 (the "2000
Form 10-K")).
Item 4 Instruments 4.1 Restated Certificate of
defining the Incorporation of Newell
rights of Rubbermaid Inc., as amended as
security of April 5, 2001, is included
holders, in Item 3.1.
including
indentures
4.2 By-Laws of Newell Rubbermaid
Inc., as amended through
January 5, 2001, are included
in Item 3.2.
4.3 Rights Agreement dated as of
August 6, 1998, between the
Company and First Chicago
Trust Company of New York, as
Rights Agent (incorporated by
reference to Exhibit 4 to the
Company's Current Report on
Form 8-K dated August 6,
1998).
106
Exhibit
Number Description of Exhibit
------ ----------------------
4.4 Indenture dated as of April
15, 1992, between the Company
and The Chase Manhattan Bank
(National Association), as
Trustee (incorporated by
reference to Exhibit 4.4 to
the Company's Report on Form 8
amending the Company's
Quarterly Report on Form 10-Q
for the quarterly period ended
March 31, 1992 (File No. 001-
09608)).
4.5 Indenture dated as of November
1, 1995, between the Company
and The Chase Manhattan Bank
(National Association), as
Trustee (incorporated by
reference to Exhibit 4.1 to
the Company's Current Report
on Form 8-K dated May 3,
1996).
4.6 Credit Agreement dated as of
June 12, 1995 and amended and
restated as of August 5, 1997,
among the Company, certain of
its affiliates, The Chase
Manhattan Bank (National
Association), as Agent, and
the banks whose names appear
on the signature pages thereto
(incorporated by reference to
Exhibit 10.17 to the Company's
Quarterly Report on Form 10-Q
for the quarterly period ended
June 30, 1997).
4.7 Junior Convertible
Subordinated Indenture for the
5.25% Convertible Subordinated
Debentures, dated as of
December 12, 1997, among the
Company and The Chase
Manhattan Bank, as Indenture
Trustee (incorporated by
reference to Exhibit 4.3 to
the Company's Registration
Statement on Form S-3, File
No. 333-47261, filed March 3,
1998 (the "1998 Form S-3").
107
Exhibit
Number Description of Exhibit
------ ----------------------
4.8 Specimen Common Stock
(incorporated by reference to
Exhibit 4.1 to the Company's
Registration Statement on Form
S-4, File No. 333-71747, filed
February 4, 1999).
Pursuant to item
601(b)(4)(iii)(A) of
Regulation S-K, the Company is
not filing certain documents.
The Company agrees to furnish
a copy of each such document
upon the request of the
Commission.
Item 10. Material *10.1 Newell Co. Deferred
Contracts Compensation Plan, as amended,
effective August 1, 1980, as
amended and restated effective
January 1, 1997 (incorporated
by reference to Exhibit 10.3
to the Company's Annual Report
on Form 10-K for the year
ended December 31, 1998 (the
"1998 Form 10-K")).
*10.2 Newell Rubbermaid Inc. 2002
Deferred Compensation Plan,
effective January 1, 2002.
*10.3 Summary of Newell Rubbermaid
Inc. Cash Bonus Plan,
effective January 1, 2002.
*10.4 Newell Operating Company's
Restated Supplemental
Retirement Plan for Key
Executives, effective January
1, 1982, as amended effective
January 1, 1999 (incorporated
by reference to Exhibit 10.5
to the Company's 2000 Form 10-
K).
*10.5 Form of Employment Security
Agreement with nine executive
officers.
108
Exhibit
Number Description of Exhibit
------ ----------------------
10.6 Credit Agreement dated as of
June 12, 1995 and amended and
restated as of August 5, 1997,
among the Company, certain of
its affiliates, The Chase
Manhattan Bank (National
Association), as Agent, and
the banks whose names appear
on the signature pages
thereto, is included in Item
4.6.
10.7 Shareholder's Agreement and
Irrevocable Proxy dated as of
June 21, 1985, among American
Tool Companies, Inc., the
Company, Allen D. Petersen,
Kenneth L. Cheloha, Robert W.
Brady, William L. Kiburz,
Flemming Andresen and Ane C.
Patterson (incorporated by
reference to Exhibit 10.15 to
the Company's Annual Report on
Form 10-K for the year ended
December 31, 1997).
*10.8 Newell Rubbermaid Inc. 1993
Stock Option Plan, effective
February 9, 1993, as amended
May 26, 1999 and August 15,
2001 (incorporated by
reference to Exhibit 10.12 to
the Company's Quarterly Report
on Form 10-Q for the quarterly
period ended June 30, 1999 and
Exhibit 10 to the Company's
Quarterly Report on Form 10-Q
for the quarterly period ended
September 30, 2001).
10.9 Amended and Restated Trust
Agreement, dated as of
December 12, 1997, among the
Company, as Depositor, The
Chase Manhattan Bank, as
Property Trustee, Chase
Manhattan Delaware, as
Delaware Trustee, and the
Administrative Trustees
(incorporated by reference to
Exhibit 4.2 to the 1998 Form
S-3).
109
Exhibit
Number Description of Exhibit
------ ----------------------
10.10 Junior Convertible
Subordinated Indenture for the
5.25% Convertible Subordinated
Debentures, dated as of
December 12, 1997, between the
Company and The Chase
Manhattan Bank, as Indenture
Trustee, is included in Item
4.7.
*10.11 Newell Rubbermaid Medical Plan
for Executives, as amended and
restated effective January 1,
2000 (incorporated by
reference to Exhibit 10.13 to
the Company's 2000 Form 10-K).
Item 11. 11 Statement of Computation of
Earnings per Share of Common
Stock.
Item 12. 12 Statement of Computation of
Earnings to Fixed Charges.
Item 21. Subsidiaries 21 Significant Subsidiaries of
of the the Company.
Registrant
Item 23. Consent of 23.1 Consent of Arthur Andersen
experts and LLP.
counsel
Item 99. Additional 99 Safe Harbor Statement.
Exhibits
* Management contract or compensatory plan or arrangement of the
Company.
110
EXHIBIT 10.2
------------
NEWELL RUBBERMAID INC.
2002 DEFERRED COMPENSATION PLAN
Newell Rubbermaid Inc. hereby establishes, effective as of
January 1, 2002, the Newell Rubbermaid Inc. 2002 Deferred Compensation
Plan on the terms and conditions hereinafter set forth. Such Plan
provides certain eligible employees and directors with the opportunity
to defer portions of their base salary, bonus payments and director
fees in accordance with the provisions of the Plan.
SECTION I
DEFINITIONS
-------------------
For the purposes hereof, the following words and phrases shall
have the meanings set forth below, unless their context clearly
requires a different meaning:
1.1 "Account" means the bookkeeping account maintained by the
Committee on behalf of each Participant pursuant to Section 2.4. The
sum of each Participant's Sub-Accounts, in the aggregate, shall
constitute his Account.
1.2 "Affiliate" means any corporation, joint venture,
partnership, unincorporated association or other entity that is
affiliated, directly or indirectly, with the Company and which is
designated by the Committee from time to time.
1.3 "Base Salary" means the annual base rate of cash
compensation (which, in the case of a Participant who is a Director,
shall include his annual director's fees or other similar amounts
payable in cash) payable by the Company and/or by any Affiliate to a
Participant.
1.4 "Beneficiary" or "Beneficiaries" means the person or
persons, including one or more trusts, designated by a Participant in
accordance with the Plan to receive payment of the remaining balance
of the Participant's Account in the event of the death of the
Participant prior to the Participant's receipt of the entire amount
credited to his Account.
1.5 "Board" means the Board of Directors of the Company.
1.6 "Bonus" means cash incentive compensation payable pursuant
to a bonus or other incentive compensation plan, whether such plan is
now in effect or hereafter established by the Company, which the
Committee may designate from time to time.
1.7 "Change in Control" means the occurrence of any of the
following events without the prior written approval of a majority of
the entire Board as it exists immediately prior to such event;
provided that, in the case of an event described in (i) or (iii)
below, such approval occurs before the time of such event and, in the
case of an event described in (ii) below, such approval occurs prior
to the time that any other party to the event described in (ii) (or
any affiliate or associate thereof) acquires 20% or more of the Voting
Power:
(i) The acquisition by an entity, person or group
(including all affiliates or associates of such entity, person or
group) of beneficial ownership, as that term is defined in Rule
13d-3 under the Securities Exchange Act of 1934, of capital stock
of the Company entitled to exercise more than 50% of the
outstanding voting power of all capital stock of the Company
entitled to vote in elections of directors ("Voting Power");
(ii) The effective time of (A) a merger or consolidation of
the Company with one or more other corporations as a result of
which the holders of the outstanding Voting Power of the Company
immediately prior to such merger or consolidation (other than the
surviving or resulting corporation or any affiliate or associate
thereof) hold less than 50% of the Voting Power of the surviving
or resulting corporation, or (B) a transfer of a majority of the
Voting Power, or a Substantial Portion of the Property, of the
Company other than to an entity of which the Company owns at
least 50% of the Voting Power; or
(iii) The election to the Board of the Company, of
directors constituting a majority of the number of directors of
the Company then in the office.
For this purpose, "Substantial Portion of the Property of the Company"
shall mean 75% of the aggregate book value of the assets of the
Company and its affiliates and associates as set forth on the most
recent balance sheet of the Company, prepared on a consolidated basis,
by its regularly employed, independent, certified public accountants.
1.8 "Committee" means the committee appointed to administer the
Plan. Unless and until otherwise specified, the Committee under the
Plan shall be the Company's Benefit Plans Administrative Committee.
1.9 "Company" means Newell Rubbermaid Inc. and its successors,
including, without limitation, the surviving corporation resulting
from any merger or consolidation of Newell Rubbermaid Inc. with any
other corporation or corporations.
1.10 "Director" means a member of the Board.
1.11 "Disability" has the meaning given to such term in the
long-term disability plan of the Company or Affiliate, as applicable
to any Participant, or if no such plan exists, as determined by the
Committee.
1.12 "Election Agreement" means a Participant's agreement, on a
form provided by the Committee, to defer his Base Salary and/or Bonus.
2
1.13 "Eligible Employee" means an employee of the Company or an
Affiliate who is, as determined by the Committee, a member of a
"select group of management or highly compensated employees," within
the meaning of Sections 201, 301 and 401 of ERISA, and who is selected
by the Committee to participate in the Plan. Unless otherwise
determined by the Committee, an Eligible Employee shall continue as
such until termination of employment.
1.14 "Employer Contributions" has the meaning given to such term
in Section 2.14.
1.15 "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
1.16 "In-Service Sub-Account" means each bookkeeping Sub-Account
maintained by the Committee on behalf of each Participant pursuant to
Sections 2.4 and 2.5(ii). The Committee shall specify from time to
time the maximum number of In-Service Sub-Accounts that may be
established for any one Participant.
1.17 "Insolvent" means that the Company or an Affiliate,
whichever is applicable, has become subject to a pending voluntary or
involuntary proceeding as a debtor under the United States Bankruptcy
Code or has become unable to pay its debts as they mature.
1.18 "Participant" means any Eligible Employee or Director who
has at any time elected to defer the receipt of a Bonus and/or Base
Salary in accordance with the Plan and who, in conjunction with his
Beneficiary, has not received a complete distribution of the amount
credited to his Account.
1.19 "Plan" means this deferred compensation plan, which shall be
known as the Newell Rubbermaid Inc. 2002 Deferred Compensation Plan.
1.20 "Retirement Sub-Account" means the bookkeeping Sub-Account
maintained by the Committee on behalf of each Participant pursuant to
Sections 2.4 and 2.5(i).
1.21 "Sub-Account" means each bookkeeping Retirement Sub-Account
and In-Service Sub-Account maintained by the Committee on behalf of
each Participant pursuant to Section 2.5.
1.22 "Termination of Service Date" means the date a Participant
ceases to be an employee of the Company and its Affiliates by death,
retirement, Disability or otherwise. The "Termination of Service Date"
of any Participant who is a Director and who is not an Eligible
Employee shall be the date such Participant ceases to be a member of
the Board.
1.23 "Year" means a calendar year.
3
SECTION II
DEFERRALS, CONTRIBUTIONS AND ACCOUNTS
--------------------------------------
2.1 ELIGIBILITY. Subject to Section 2.3, an Eligible Employee
or Director may elect to defer receipt of all or a specified part of
his Base Salary and/or Bonus for any Year in accordance with Section
2.2. An Eligible Employee's, or Director's, entitlement to defer
shall cease with respect to the Year following the Year in which he
ceases to be an Eligible Employee or Director, as applicable.
2.2 ELECTION TO DEFER. Unless otherwise provided by the
Committee, an Eligible Employee or Director who desires to defer all
or part of his Base Salary and/or Bonus pursuant to the Plan must
complete and deliver an Election Agreement to the Committee before the
first day of the Year for which such compensation would otherwise be
paid. An Eligible Employee or Director who timely delivers an
executed Election Agreement to the Committee shall be a Participant.
Unless otherwise provided by the Committee, an Election Agreement that
is timely delivered to the Committee shall be effective for the Year
following the Year in which the Election Agreement is delivered to the
Committee, unless such Election Agreement is revoked or modified with
the consent of the Committee or until terminated automatically upon
either the termination of the Plan, the Company or any Affiliate which
employs the Participant becoming Insolvent or the Participant's
Termination of Service Date. Notwithstanding the above, in the event
that an individual first becomes an Eligible Employee or Director
during the course of a Year, rather than as of the first day of a
Year, the individual's Election Agreement must be filed no later than
thirty (30) days following the date he first becomes an Eligible
Employee or Director, as applicable, and such Election Agreement shall
be effective only with regard to Base Salary and Bonuses earned
following the filing of the Election Agreement with the Committee.
2.3 AMOUNT DEFERRED. A Participant shall designate on the
Election Agreement the portion of his Base Salary and/or Bonus that is
to be deferred in accordance with the following rules.
(i) BASE SALARY. A Participant may defer up to 50% of the
Base Salary that the Participant would otherwise receive during
the Year for services performed as an Eligible Employee,
provided, however, that the Participant shall not be permitted to
defer less than $2,000 of such amount during any one Year, and
any such attempted deferral shall not be effective. A
Participant may defer up to 100% of the Base Salary that the
Participant would otherwise receive during the Year for services
performed as a Director, provided, however, that the portion of
such Base Salary that is eligible for deferral will be reduced by
applicable employment taxes if such reduction is required in
order to provide the Company or its Affiliates with a source of
funds, from such Base Salary, with which to pay such employment
taxes.
4
(ii) BONUS. A Participant may defer up to 100% of the Bonus
that the Participant earns during the Year. Notwithstanding the
preceding sentence, the portion of a Participant's Bonus that is
eligible for deferral will be reduced by applicable employment
taxes if such reduction is required in order to provide the
Company or its Affiliates with a source of funds, from the Bonus,
with which to pay such employment taxes. In any event, a
Participant shall not be permitted to defer less than $2,000 of
his Bonus during any one Year, and any such attempted deferral
shall not be effective. To the extent permitted by the
Committee, a Participant may specify in the Election Agreement
that different percentages or dollar amounts shall apply to
Bonuses payable under different bonus or incentive compensation
plans.
2.4 ACCOUNTS.
(i) CREDITING OF DEFERRALS. Base Salary and/or Bonus that
a Participant elects to defer shall be treated as if it were set
aside in one or more Sub-Accounts on the date the Base Salary
and/or Bonus would otherwise have been paid to the Participant.
in accordance with procedures established from time to time by
the Committee. A Participant may specify, in his Election
Agreement, the portion of his deferral that is to be credited to
a Retirement Sub-Account and/or to one or more In-Service
Sub-Accounts. To the extent that a Participant does not specify
the Sub-Account to which deferrals shall be credited, such
deferrals shall be credited to the Participant's Retirement
Sub-Account.
(ii) CREDITING OF GAINS, LOSSES AND EARNINGS TO ACCOUNTS.
Each Participant's Account will be credited with gains, losses
and earnings based on investment directions made by the
Participant in accordance with investment deferral crediting
options and procedures established from time to time by the
Committee. The Committee specifically retains the right in its
sole discretion to change the investment deferral crediting
options and procedures from time to time. By electing to defer
any amount pursuant to the Plan, each Participant shall thereby
acknowledge and agree that the Company or any Affiliate is not
and shall not be required to make any investment in connection
with the Plan, nor is it required to follow the Participant's
investment directions in any actual investment it may make or
acquire in connection with the Plan or in determining the amount
of any actual or contingent liability or obligation of the
Company or an Affiliate thereunder or relating thereto. Any
amounts credited to a Participant's Account with respect to which
a Participant does not provide investment direction shall be
credited with gains, losses and earnings as if such amounts were
invested in an investment option to be selected by the Committee
in its sole discretion.
5
2.5 DATE OF DISTRIBUTION.
(i) RETIREMENT SUB-ACCOUNT. Subject to the following
provisions, a Participant may elect, on the first Election
Agreement that he delivers to the Committee pursuant to which
amounts are credited to his Retirement Sub-Account, to defer the
distribution or commencement of the distribution of his
Retirement Sub-Account to (A) January of the Year commencing
immediately after the Year in which occurs his Termination of
Service Date or (B) January of any Year following his Termination
of Service Date provided that such Year is no later than the Year
following the Year in which the Participant attains age 65.
(A) TERMINATION PRIOR TO AGE 60. If a Participant's
Termination of Service Date occurs as a result of his
voluntary termination, or involuntary termination without
cause, prior to his attainment of age 60, his Retirement
Sub-Account will be distributed as soon as practicable after
his Termination of Service Date. If a Participant's
Termination of Service Date occurs as a result of his
involuntary termination without cause (as determined by the
Committee in its sole discretion) prior to his attainment of
age 60, his Retirement Sub-Account will be distributed in
January of the Year elected by the Participant.
(B) TERMINATION AFTER AGE 60 AND PRIOR TO AGE 65. If
a Participant's Termination of Service Date occurs after he
attains age 60 and prior to his attainment of age 65, his
Retirement Sub-Account will be distributed or will commence
to be distributed in January of the Year elected by the
Participant.
(C) TERMINATION AFTER AGE 65. If a Participant's
Termination of Service Date occurs after he attains age 65,
his Retirement Sub-Account will be distributed or will
commence to be distributed in January of the Year commencing
immediately after his Termination of Service Date.
(ii) IN-SERVICE SUB-ACCOUNT. Subject to the following
provisions, a Participant may elect, on the first Election
Agreement that he delivers to the Committee pursuant to which
amounts are credited to an In-Service Sub-Account, to defer the
distribution or commencement of the distribution of such
In-Service Sub-Account to January of any Year that commences
prior to the Participant's Termination of Service Date as long as
that Year commences not less than two Years after the date of the
initial election pursuant to which amounts are credited to such
In-Service Sub-Account. If a Participant's Termination of
Service Date occurs as a result of his voluntary termination, or
involuntary termination without cause, prior to the complete
distribution of his In-Service Sub-Account, amounts credited to
that In-Service Sub-Account will be distributed as soon as
6
practicable after his Termination of Service Date. If a
Participant's Termination of Service Date occurs as a result of
his involuntary termination without cause (as determined by the
Committee in its sole discretion) prior to the complete
distribution of his In-Service Sub-Account, amounts credited to
that In-Service Sub-Account will be distributed pursuant to the
payment schedule elected by the Participant.
2.6 FORM OF DISTRIBUTION.
(i) RETIREMENT SUB-ACCOUNT. Subject to the following
provisions, a Participant may elect, on the first Election
Agreement that he delivers to the Committee pursuant to which
amounts are credited to his Retirement Sub-Account, to receive
his Retirement Sub-Account in cash in a single lump sum or in
annual installments over a period not in excess of ten years.
(A) TERMINATION PRIOR TO AGE 60. If a Participant's
Termination of Service Date occurs as a result of his
voluntary termination, or involuntary termination without
cause, prior to his attainment of age 60, his Retirement
Sub-Account will be distributed in a single lump sum. If a
Participant's Termination of Service Date occurs as a result
of his involuntary termination without cause (as determined
by the Committee in its sole discretion) prior to his
attainment of age 60, his Retirement Sub-Account will be
distributed in the distribution form elected by the
Participant.
(B) TERMINATION AFTER AGE 60. If a Participant's
Termination of Service Date occurs after he attains age 60,
his Retirement Sub-Account will be distributed in the
distribution form elected by the Participant.
(ii) IN-SERVICE SUB-ACCOUNT. Subject to the following
provisions, a Participant may elect, on the first Election
Agreement that he delivers to the Committee pursuant to which
amounts are credited to an In-Service Sub-Account, to receive
that In-Service Sub-Account in cash in a single lump sum or in
annual installments over a period not in excess of five years.
If a Participant's Termination of Service Date occurs as a result
of his voluntary termination, or involuntary termination without
cause, prior to the complete distribution of his In-Service
Sub-Account, amounts credited to that In-Service Sub-Account will
be distributed in a single lump sum. If a Participant's
Termination of Service Date occurs as a result of his involuntary
termination without cause (as determined by the Committee in its
sole discretion) prior to the complete distribution of his
In-Service Sub-Account, amounts credited to that In-Service
Sub-Account will be distributed in the distribution form elected
by the Participant.
7
(iii) GENERAL. The lump sum payment or the first
installment, as the case may be, shall be made as specified in
Section 2.5. In the event that a Sub-Account is paid in
installments, the amount of such Sub-Account remaining unpaid
shall continue to be credited with gains, losses and earnings as
provided in Section 2.4. The payment to a Participant or his
Beneficiary of a single lump sum or the number of installments
elected by the Participant pursuant to this Section shall
discharge all obligations of the Company and the Affiliates to
such Participant or Beneficiary under the Plan with respect to
that Sub-Account. In the event that a Sub-Account is paid in
installments, the amount of each installment shall be determined
in accordance with procedures established from time to time by
the Committee.
2.7 MODIFICATION OF DATE AND/OR FORM OF DISTRIBUTION.
Notwithstanding the payment terms designated by a Participant on the
first Election Agreement that he delivers to the Committee under the
Plan, a Participant may elect to change the form of payment of a
Sub-Account to a form of payment otherwise permitted under Section 2.6
and a Participant may elect to change the date of distribution of a
Sub-Account to a date otherwise permitted under Section 2.5; provided
that such election shall be made on a form provided by the Committee,
and provided further that any election made less than eighteen months
prior to the Participant's Termination of Service Date (or less than
eighteen months prior to the scheduled date of the first, or only,
payment from the Sub-Account) shall not be valid, and in such case,
the distribution of his Sub-Account shall be made in accordance with
the latest valid election of the Participant.
2.8 DEATH OF A PARTICIPANT.
(i) General. In the event of the death of a Participant,
the remaining amount of his Account shall be paid to his
Beneficiary or Beneficiaries as described in Section 2.8(ii).
Each Participant shall designate a Beneficiary or Beneficiaries
on a beneficiary designation form provided by the Committee. A
Participant's Beneficiary designation may be changed at any time
prior to his death by the execution and delivery of a new
beneficiary designation. The Beneficiary designation on file
with the Company that bears the latest date at the time of the
Participant's death shall govern. In the absence of a
Beneficiary designation, the amount of the Participant's Account
shall be paid to the Participant's estate in a lump sum amount
within 90 days after the appointment of an executor or
administrator or as otherwise determined by the Committee.
(ii) Form and Date of Distribution. Notwithstanding any
other provision, upon the death of a Participant, the remaining
balance in his Account shall be paid as follows. If the
Participant dies after payment of his Account has commenced, the
remaining balance of his Account will continue to be paid to his
8
Beneficiary or Beneficiaries in accordance with the payment
schedule that has already commenced. Unless otherwise provided by
the Committee, if the Participant dies before payments from his
Account have commenced, his Account will be paid to his
Beneficiary or Beneficiaries in accordance with the form of
payment elected by the Participant, commencing (A) in the event
that the Participant has not attained age 60 at the time of his
death, in January of the Year commencing after the Year in which
occurs the Participant's death or (B) in the event that the
Participant has attained age 60 at the time of his death, in
January of the Year elected by the Participant.
2.9 DISABILITY. Notwithstanding any other provision, and unless
otherwise provided by the Committee, upon the Disability of a
Participant, the remaining balance in each of his Sub-Accounts shall
be paid as follows. If the Disability occurs after payment of the
Participant's Sub-Account has commenced, the remaining balance of his
Sub-Account will continue to be paid in accordance with the payment
schedule that has already commenced. If the Disability occurs before
payment of the Participant's Sub-Account has commenced, his
Sub-Account will be paid in accordance with the form of payment
elected by the Participant commencing either (a) as soon as
practicable after the Participant is no longer entitled to any
benefits under the long-term disability plan, if any, of the Company
or Affiliate, as applicable or (b) with the consent of the Committee,
as soon as practicable after the occurrence of the Disability.
2.10 SMALL PAYMENTS. Notwithstanding the foregoing, if a
Participant elects to receive his Retirement Sub-Account in
installment payments and his Retirement Sub-Account has a balance of
less than $25,000 at the time that installment payments are scheduled
to commence, the entire amount of the Participant's Retirement
Sub-Account may at the discretion of the Committee be paid in a single
lump sum.
2.11 ACCELERATION.
(i) Notwithstanding any other provision of the Plan, in the
event of an unforeseeable emergency, as defined in section
1.457-2(b)(4) and (5) of the Treasury Regulations, that is caused
by an event beyond the control of the Participant and that would
result in severe financial hardship to the individual if
acceleration were not permitted, the Committee may in its sole
discretion accelerate the payment to the Participant of the
amount of his Account, but only up to the amount necessary to
meet the emergency.
(ii) Notwithstanding any other provision of the Plan, each
Participant shall be permitted, at any time, to make an election
to receive, payable as soon as practicable after such election is
received by the Committee, a distribution of part or all of his
Account in a single lump sum, if (and only if) the amount in the
9
Participant's Account subject to such distribution is reduced by
10%, which 10% amount shall thereupon irrevocably be forfeited.
2.12 TERMINATION OF PARTICIPATION. Notwithstanding any other
provision of the Plan, no Participant who is an Eligible Employee
shall be permitted to continue to participate in the Plan upon a
determination by the Committee that such Participant is not a member
of a select group of management or highly compensated employees of his
employer, within the meaning of ERISA. Upon such a determination, the
Committee may direct that the Participant receive an immediate lump
sum payment equal to the amount credited to his Account.
2.13 VESTING OF ACCOUNTS. Subject to Sections 2.1 1(ii) and
2.15(iii) and the following sentence, each Participant shall at all
times have a nonforfeitable interest in his Account balance.
Notwithstanding the preceding sentence, the portion of each
Participant's Account, if any, attributable to Employer Contributions
shall be subject to such vesting schedule as may be determined by the
Company or Affiliate from time to time in accordance with the
provisions of Section 2.14.
2.14 EMPLOYER CONTRIBUTIONS. The Company or any Affiliate may,
in its discretion, provide contributions ("Employer Contributions")
under this Plan with respect to one or more Participants. The amount
and vesting schedule of such Employer Contributions, if any, shall be
determined by the Company or Affiliate in its sole discretion.
2.15 CHANGE IN CONTROL. Notwithstanding any other provisions of
the Plan, the following provisions shall apply upon the occurrence of
a Change in Control.
(i) TRUST. As soon as administratively practicable
following the occurrence of a Change in Control, the Company
shall transfer to a trust, the assets of which shall remain
liable for the claims of the Company's or its Affiliate's general
creditors in the event of the Insolvency of the Company or any
such Affiliate, an amount (which amount may include a letter of
credit, as specified in such trust) equal to the aggregate
account balances, determined as of the date of the Change in
Control, of all persons then participating in the Plan.
(ii) UNREDUCED DISTRIBUTION. A Participant may make an
election, on an Election Agreement that he delivers to the
Committee at least one year prior to the occurrence of a Change
in Control, to receive his entire Account in a single lump sum as
soon as administratively practicable following the occurrence of
a Change in Control. In the event that a Change in Control
occurs prior to the distribution of a Participant's entire
Account, any such election made by a Participant shall override
his other elections regarding the form and timing of the
distribution of his Account.
10
(iii) REDUCED DISTRIBUTION. Notwithstanding any other
provision of the Plan, each Participant shall be permitted,
during the one-year period commencing upon the occurrence of a
Change in Control, to make an election to receive, payable as
soon as practicable after such election is received by the
Committee, a distribution of part or all of his Account in a
single lump sum, if (and only if) the amount in the Participant's
Account subject to such distribution is reduced by 5%, which 5%
amount shall thereupon irrevocably be forfeited.
SECTION III
ADMINISTRATION
---------------------------
The Company, through the Committee, shall be responsible for the
general administration of the Plan and for carrying out the provisions
hereof. The Committee shall have all such powers as may be necessary
to carry out the provisions of the Plan, including the power to (i)
resolve all questions relating to eligibility for participation in the
Plan and the amount in the Account of any Participant and all
questions pertaining to claims for benefits and procedures for claim
review, (ii) resolve all other questions arising under the Plan,
including any factual questions and questions of construction, and
(iii) take such further action as the Company shall deem advisable in
the administration of the Plan. The actions taken and the decisions
made by the Committee hereunder shall be final and binding upon all
interested parties. In accordance with the provisions of Section 503
of ERISA, the Committee shall provide a procedure for handling claims
of Participants or their Beneficiaries under the Plan. Such procedure
shall be in accordance with regulations issued by the Secretary of
Labor and shall provide adequate written notice within a reasonable
period of time with respect to the denial of any such claim as well as
a reasonable opportunity for a full and fair review by the Committee
of any such denial. Unless the context clearly requires otherwise,
the masculine pronoun wherever used herein shall be construed to
include the feminine pronoun.
SECTION IV
AMENDMENT AND TERMINATION
--------------------------------------------------
4.1 AMENDMENT. The Company reserves the right to amend the Plan
at any time by action of the Board; provided, however, that no such
action shall adversely affect any Participant or Beneficiary who has
an Account, or result in any change in the timing or manner of payment
of the amount of any Account (except as otherwise permitted under the
Plan), without the consent of the Participant or Beneficiary.
4.2 Termination. The Company reserves the right to terminate
the Plan at any time by action of the Board. In the event that the
Company terminates the Plan, each Participant shall receive a
distribution of his Account, at the discretion of the Committee,
11
either (a) in a single lump sum as soon as administratively
practicable following termination of the Plan or (b) in the form of
payment elected by the Participant commencing as soon as
administratively practicable following termination of the Plan.
SECTION V
MISCELLANEOUS
--------------------------
5.1 NON-ALIENATION OF DEFERRED COMPENSATION. Except as
permitted by the Plan, no right or interest under the Plan of any
Participant or Beneficiary shall, without the written consent of the
Company, be (i) assignable or transferable in any manner, (ii) subject
to alienation, anticipation, sale, pledge, encumbrance, attachment,
garnishment or other legal process or (iii) in any manner liable for
or subject to the debts or liabilities of the Participant or
Beneficiary.
5.2 PARTICIPATION BY EMPLOYEES OF AFFILIATES. An Eligible
Employee who is employed by an Affiliate and who elects to participate
in the Plan shall participate on the same basis as an Eligible
Employee of the Company.
5.3 INTEREST OF PARTICIPANT.
(i) The obligation of the Company and the Affiliates under
the Plan to make payment of amounts reflected in an Account
merely constitutes the unsecured promise of the Company and the
Affiliates to make payments from their general assets and no
Participant or Beneficiary shall have any interest in, or a lien
or prior claim upon, any property of the Company or any
Affiliate. Nothing in the Plan shall be construed as
guaranteeing future employment to Eligible Employees. It is the
intention of the Company and the Affiliates that the Plan be
unfunded for tax purposes and for purposes of Title I of ERISA.
The Company may create a trust to hold funds to be used in
payment of its and the Affiliates' obligations under the Plan,
and may fund such trust; provided, however, that any funds
contained therein shall remain liable for the claims of the
Company's and any Affiliate's general creditors.
(ii) In the event that, in the discretion of the Committee,
the Company and/or its Affiliates purchases an insurance policy
or policies insuring the life of any Participant (or any other
property) to allow the Company and/or its Affiliates to recover
the cost of providing the benefits, in whole or in part,
hereunder, neither the Participants nor their Beneficiaries or
other distributees shall have nor acquire any rights whatsoever
therein or in the proceeds therefrom. The Company and/or its
Affiliates shall be the sole owner and beneficiary of any such
policy or policies and, as such, shall possess and may exercise
all incidents of ownership therein. A Participant's
12
participation in the underwriting or other steps necessary to
acquire such policy or policies may be required by the Company
and, if required, shall not be a suggestion of any beneficial
interest in such policy or policies to such Participant or any
other person.
5.4 CLAIMS OF OTHER PERSONS. The provisions of the Plan shall
in no event be construed as giving any other person, firm or
corporation any legal or equitable right as against the Company or any
Affiliate or the officers, employees or directors of the Company or
any Affiliate, except any such rights as are specifically provided for
in the Plan or are hereafter created in accordance with the terms and
provisions of the Plan.
5.5 SEVERABILITY. The invalidity and unenforceability of any
particular provision of the Plan shall not affect any other provision
hereof, and the Plan shall be construed in all respects as if such
invalid or unenforceable provision were omitted.
5.6 GOVERNING LAW. Except to the extent preempted by federal
law, the provisions of the Plan shall be governed and construed in
accordance with the laws of the State of Illinois.
5.7 RELATIONSHIP TO OTHER PLANS. The Plan is intended to serve
the purposes of and to be consistent with any bonus or incentive
compensation plan approved by the Committee for purposes of the Plan.
5.8 SUCCESSORS. The Company shall require any successor
(whether direct or indirect, by purchase, merger, consolidation,
reorganization or otherwise) to all or substantially all of the
business and/or assets of the Company expressly to assume this Plan.
This Plan shall be binding upon and inure to the benefit of the
Company and any successor of or to the Company, including without
limitation any persons acquiring directly or indirectly all or
substantially all of the business and/or assets of the Company whether
by sale, merger, consolidation, reorganization or otherwise (and such
successor shall thereafter be deemed the "Company" for the purposes of
this Plan), and the heirs, beneficiaries, executors and administrators
of each Participant. In the event that any successor to the Company
shall fail to assume this Plan, the Plan shall immediately terminate
and each Participant shall immediately receive distribution of his
Account in a single lump sum.
5.9 Withholding of Taxes. The Company and its Affiliates may
withhold or cause to be withheld from any amounts deferred or payable
under the Plan all federal, state, local and other taxes as shall be
legally required.
5.10 ELECTRONIC OR OTHER MEDIA. Notwithstanding any other
provision of the Plan to the contrary, including any provision that
requires the use of a written instrument, the Committee may establish
procedures for the use of electronic or other media in communications
13
and transactions between the Plan or the Committee and Participants
and Beneficiaries. Electronic or other media may include, but are not
limited to, e-mail, the Internet, intranet systems and automated
telephonic response systems.
EXECUTED at Freeport, Illinois on this 28th day of December,
2001.
NEWELL RUBBERMAID INC.
By: ________________________________________
Title: Senior Vice President & Treasurer
14
EXHIBIT 10.3
------------
SUMMARY OF NEWELL RUBBERMAID INC. CASH BONUS PLAN
The Company has a corporate bonus plan, effective January 1, 2002,
that provides for the payment of annual cash bonuses to group
presidents and other corporate executives. Payments to group
presidents are based on the operating income (75% of the bonus payout)
and cash flow (25% of the bonus payout) for the fiscal year of the
group for which the group president is responsible. Payments to other
participating corporate executives are based on the Company's total
earnings per share (75% of the bonus payout) and cash flow (25% of the
bonus payout) for the fiscal year. If the group's operating income
and cash flow, or the Company's earnings per share and cash flow, as
applicable, equal target levels, the designated employees receive
specified percentages of their annual salaries in the form of cash
bonuses. Company or group performance below the target levels will
result in lower or no bonus payments, and Company or group performance
above the target levels will result in higher bonus payments.
EXHIBIT 10.5
------------
EMPLOYMENT SECURITY AGREEMENT
This Employment Security Agreement ("Agreement") is entered into
as of this ____ day of ________, ___, by and between Newell Rubbermaid
Inc., a Delaware corporation ("Employer") and ________________________
("Executive").
WITNESSETH:
WHEREAS, Executive is currently employed by Employer and by
Newell Operating Company, a subsidiary of Employer, as the
____________________of each of Employer and Newell Operating Company;
WHEREAS, Employer desires to provide certain security to
Executive in connection with Executive's employment with Employer; and
WHEREAS, Executive and Employer desire to enter into this
Employment Security Agreement ("Agreement") pertaining to the terms of
the security Employer is providing to Executive with respect to his
employment;
NOW, THEREFORE, in consideration of the mutual covenants and
promises contained herein, and other good and valuable consideration,
the receipt of which is hereby acknowledged, the parties agree as
follows:
1. TERM. The term of this Agreement shall be the period
beginning on the date hereof and terminating on the first to occur of
(a) the date 24 months after the date of Executive's termination of
employment under circumstances described in paragraph 2 and (b) the
date Executive attains or would have attained age 65 (the "Term").
2. BENEFITS UPON TERMINATION OF EMPLOYMENT. If, at any time
during the twelve month period following a Change in Control and prior
to Executive's attainment of age 65, (1) the employment of Executive
with Employer is terminated by Employer for any reason other than Good
Cause, or (2) Executive terminates his employment with Employer for
Good Reason, the following provisions will apply:
(a) Employer shall, as hereinafter described in this
subsection (a), pay Executive:
(1) Executive's Base Salary during the Severance Period;
and
(2) Executive's Bonus for each year during the Severance
Period. Such Base Salary will be paid during the Severance
Period in monthly or other installments of the same frequency as
the payments of his salary being received by Executive at the
date of the Change in Control, and will commence as soon as
practicable, but in no event later than the date 30 days after
termination of employment. Such Bonus for any calendar year will
be paid on March 1 of the next following calendar year.
(b) Executive shall receive any and all benefits accrued
under any other Incentive Plans and Retirement Plans to the date
of termination of employment, the amount, form and time of
payment of such benefits to be determined by the terms of such
Incentive Plans and Retirement Plans, and Executive's employment
shall be deemed to have terminated by reason of retirement under
circumstances that have the most favorable result for Executive
thereunder for all purposes of such Plans. Payment shall be made
at the earliest date permitted under any such Plan that is not
funded with a trust agreement.
2
(c) For purposes of all Incentive Plans and Retirement
Plans Executive shall be given service credit for all purposes
for, and shall be deemed to be an employee of Employer during,
the Severance Period, notwithstanding the fact that he is not an
employee of Employer or any Affiliate or Associate thereof during
the Severance Period; provided that, if the terms of any of such
Incentive Plans or Retirement Plans do not permit such credit or
deemed employee treatment, Employer will make payments and
distributions to Executive outside of the Plans in amounts
substantially equivalent to the payments and distributions
Executive would have received pursuant to the terms of the Plans
and attributable to such credit or deemed employee treatment, had
such credit or deemed employee treatment been permitted pursuant
to the terms of the Plans. Executive shall not receive any amount
under an Incentive Plan pursuant to this subsection (c) to the
extent that such amount is included within the Executive's Bonus
payable pursuant to clause (a)(2) above.
(d) If upon the date of termination of Executive's
employment, Executive holds any options with respect to stock of
Employer, all such options will immediately become exercisable
upon such date and will be exercisable for 90 days thereafter. To
the extent such acceleration of exercise of such options is not
permissible under the terms of any plan pursuant to which the
options were granted, Employer will pay to Executive, in a lump
sum, within 90 days after termination of employment, an amount
equal to the excess, if any, of the aggregate fair market value
3
of all stock of Employer subject to such options, determined on
the date of termination of employment, over the aggregate option
price of such stock, and Executive will surrender all such
options unexercised.
(e) During the Severance Period, Executive and his spouse
will continue to be covered by all Welfare Plans, maintained by
Employer in which he or his spouse were participating immediately
prior to the date of his termination, as if he continued to be an
employee of Employer; provided that, if participation in any one
or more of such Welfare Plans is not possible under the terms
thereof, Employer will provide substantially identical benefits.
Such coverage will cease if and when Executive obtains employment
with another employer during the Severance Period, and becomes
eligible for coverage under any substantially similar plans
provided by his new employer.
(f) During the Severance Period Employer shall reimburse
Executive for the expenses of an automobile in accordance with
the arrangement, if any, in effect at the time of termination of
Executive's employment. Such reimbursement will cease if and when
Executive obtains employment with another employer during the
Severance Period and receives such reimbursement from his new
employer.
(g) Executive shall not be entitled to receive any payments
or other compensation during the Severance Period attributable to
vacation periods he would have earned had his employment
continued during the Severance Period or to unused vacation
4
periods accrued as of the date of termination of employment, and
Executive waives any right to receive such compensation.
(h) During the Severance Period Executive shall not be
entitled to reimbursement for fringe benefits such as dues and
expenses related to club memberships, automobile telephones,
expenses for professional services and other similar perquisites.
3. SETOFF. No payments or benefits payable to or with respect
to Executive pursuant to this Agreement shall be reduced by any amount
Executive or his spouse may earn or receive from employment with
another employer or from any other source, except as expressly
provided in subsections 2(e) and 2(f).
4. DEATH. If Executive dies during the Severance Period all
amounts payable hereunder to Executive shall, during the remainder of
the Severance Period, be paid to his surviving spouse, and his spouse
shall continue to be covered under all applicable Welfare Plans during
the remainder of the Severance Period. On the death of the survivor of
Executive and his spouse, no further benefits will be paid, and no
further Welfare Plan coverage will be provided, under the Agreement;
except for benefits accrued under any Incentive Plans and Retirement
Plans to the date of termination of employment, to the extent such
benefits continue following Executive's death pursuant to the term of
such Plans.
5. DEFINITIONS. For purposes of this Agreement:
(a) "Affiliate" or "Associate" shall have the meaning set
forth in Rule 12b-2 under the Securities Exchange Act of 1934.
5
(b) "Base Salary" shall mean Executive's annual base salary
at the rate in effect on the date of a Change in Control.
(c) "Bonus" shall mean an amount determined by multiplying
Executive's Base Salary by a percentage that is the average
percentage of base salary that was paid (or payable) to Executive
as a bonus under the Revised ROI Cash Bonus Plan or the ROA Cash
Bonus Plan of Employer, or any successor plan or arrangement, for
the three full fiscal years of Employer preceding the date of a
Change in Control.
(d) "Change in Control" shall be deemed to occur on the
occurrence of any of the following events without the prior
written approval of a majority of the entire Board of Directors
of Employer as it exists immediately prior to such event;
provided that, in the case of an event described in (1) or (3)
below, such approval occurs before the time of such event and, in
the case of an event described in (2) below, such approval occurs
prior to the time that any other party to the event described in
(2) (or any Affiliate or Associate thereof) acquires 20% or more
of the Voting Power:
(1) The acquisition by an entity, person or group
(including all Affiliates or Associates of such entity, person or
group) of beneficial ownership, as that term is defined in
Rule13d-3 under the Securities Exchange Act of 1934, of capital
stock of Employer entitled to exercise more than 50% of the
outstanding voting power of all capital stock of Employer
entitled to vote in elections of directors ("Voting Power");
6
(2) The effective time of (I) a merger or consolidation of
Employer with one or more other corporations as a result of which
the holders of the outstanding Voting Power of Employer
immediately prior to such merger or consolidation (other than the
surviving or resulting corporation or any Affiliate or Associate
thereof) hold less than 50% of the Voting Power of the surviving
or resulting corporation, or (II) a transfer of a majority of the
Voting Power, or a Substantial Portion of the Property, of
Employer other than to an entity of which Employer owns at least
50% of the Voting Power; or
(3) The election to the Board of Directors of Employer, of
directors constituting a majority of the number of directors of
Employer then in office.
(e) "Good Cause" shall be deemed to exist if, and only if:
(1) Executive engages in acts or omissions constituting
dishonesty, intentional breach of fiduciary obligation or
intentional wrongdoing or malfeasance; or
(2) Executive is convicted of a criminal violation
involving fraud or dishonesty. Notwithstanding anything herein to
the contrary, in the event Employer shall terminate the
employment of Executive for Good Cause hereunder, Employer shall
give Executive at least thirty (30) days prior written notice
specifying in detail the reason or reasons for Executive's
termination.
7
(f) "Good Reason" shall exist if:
(1) there is a significant change in the nature or the
scope of Executive's authority;
(2) there is a reduction in Executive's rate of base
salary;
(3) Employer changes by 100 miles or more the principal
location in which Executive is required to perform services; or
(4) Employer terminates or amends any Incentive Plan or
Retirement Plan so that, when considered in the aggregate with
any substitute Plan or Plans, the Incentive Plans and Retirement
Plans in which he is participating fail to provide him with a
level of benefits provided in the aggregate by such Incentive
Plans or Retirement Plans prior to such termination or amendment.
(g) "Incentive Plans" shall mean any incentive, bonus, deferred
compensation or similar plan or arrangement currently or hereafter
made available by Employer in which Executive is eligible to
participate.
(h) "Retirement Plans" shall mean any qualified or supplemental
defined benefit retirement plan or defined contribution retirement
plan, currently or hereinafter made available by Employer in which
Executive is eligible to participate.
(i) "Severance Period" shall mean the period beginning on
the date the Executive's employment with Employer terminates
under circumstances described in Section 2 and ending on the
first to occur of the date 24 months thereafter and the date
Executive attains or would have attained age 65.
8
(j) "Substantial Portion of the Property of Employer" shall mean
75% of the aggregate book value of the assets of Employer and its
Affiliates and Associates as set forth on the most recent balance
sheet of Employer, prepared on a consolidated basis, by its regularly
employed, independent, certified public accountants.
(k) "Welfare Plan" shall mean any health and dental plan,
disability plan, survivor income plan and life insurance plan or
arrangement currently or hereafter made available by Employer in which
Executive is eligible to participate.
6. RESTRICTIVE COVENANTS. Executive shall not, during the
Term of this Agreement be associated, directly or indirectly, as
employee, proprietor, stockholder, partner, agent, representative,
officer, or otherwise, with the operation of any business that is
competitive with any business of Employer or any of its Affiliates,
except that Executive's ownership (or that of his wife and children)
of publicly-traded securities of any such business having a cost of
not more than $50,000, shall not be considered a violation of this
Section. For purposes of the preceding sentence, Executive shall be
considered as the "stockholder" of any equity securities owned by his
spouse and all relatives and children residing in Executive's
principal residence.
7. NO SOLICITATION OF REPRESENTATIVES AND EMPLOYEES. Executive
agrees that he shall not, during the Term of this Agreement, directly
or indirectly, in his individual capacity or otherwise, induce, cause,
persuade, or attempt to do any of the foregoing in order to cause, any
representative, agent or employee of Employer or any of its Affiliates
9
to terminate such person's employment relationship with Employer or
any of its Affiliates, or to violate the terms of any agreement
between said representative, agent or employee and Employer or any of
its Affiliates.
8. CONFIDENTIALITY. Executive acknowledges that preservation of
a continuing business relationship between Employer or its Affiliates
and their respective customers, representatives, and employees is of
critical importance to the continued business success of Employer and
that it is the active policy of Employer and its Affiliates to guard
as confidential the identity of its customers, trade secrets, pricing
policies, business affairs, representatives and employees. In view of
the foregoing, Executive agrees that he shall not during the Term of
this Agreement and thereafter, without the prior written consent of
Employer (which consent shall not be withheld unreasonably), disclose
to any person or entity any information concerning the business of, or
any customer, representative, agent or employee of, Employer or its
Affiliates which was obtained by Executive in the course of his
employment by Employer. This section shall not be applicable if and to
the extent Executive is required to testify in a legislative, judicial
or regulatory proceeding pursuant to an order of Congress, any state
or local legislature, a judge, or an administrative law judge.
9. EXECUTIVE ASSIGNMENT. No interest of Executive or his spouse
or any other beneficiary under this Agreement, or any right to receive
any payment or distribution hereunder, shall be subject in any manner
to sale, transfer, assignment, pledge, attachment, garnishment, or
other alienation or encumbrance of any kind, nor may such interest or
10
right to receive a payment or distribution be taken, voluntarily or
involuntarily, for the satisfaction of the obligations or debts of, or
other claims against, Executive or his spouse or other beneficiary,
including claims for alimony, support, separate maintenance, and
claims in bankruptcy proceedings.
10. BENEFITS UNFUNDED. All rights of Executive and his spouse or
other beneficiary under this Agreement shall at all times be entirely
unfunded and no provision shall at any time be made with respect to
segregating any assets of Employer for payment of any amounts due
hereunder. Neither Executive nor his spouse or other beneficiary shall
have any interest in or rights against any specific assets of
Employer, and Executive and his spouse or other beneficiary shall have
only the rights of a general unsecured creditor of Employer.
11. WAIVER. No waiver by any party at any time of any breach by
any other party of, or compliance with, any condition or provision of
this Agreement to be performed by any other party shall be deemed a
waiver of any other provisions or conditions at the same time or at
any prior or subsequent time.
12. LITIGATION EXPENSES. Employer shall pay 50% of Executive's
attorney's fees in connection with any judicial proceeding to enforce
this Agreement or to construe or determine the validity of this
Agreement or otherwise in connection herewith, whether or not
Executive is successful in such litigation.
13. APPLICABLE LAW. This Agreement shall be construed and
interpreted pursuant to the laws of Illinois.
11
14. ENTIRE AGREEMENT. This Agreement contains the entire
Agreement between Employer and Executive and supersedes any and all
previous agreements, written or oral, between the parties relating to
the subject matter hereof. No amendment or modification of the terms
of this Agreement shall be binding upon the parties hereto unless
reduced to writing and signed by Employer and Executive.
15. NO EMPLOYMENT CONTRACT. Nothing contained in this Agreement
shall be construed to be an employment contract between Executive and
Employer. Executive is employed at will and Employer may terminate his
employment at any time, with or without cause.
16. COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original.
17. SEVERABILITY. In the event any provision of this Agreement
is held illegal or invalid, the remaining provisions of this Agreement
shall not be affected thereby.
18. SUCCESSORS. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective heirs,
representatives and successors.
19. EMPLOYMENT WITH AN AFFILIATE. If Executive is employed by
Employer and an Affiliate, or solely by an Affiliate, on the date of
termination of employment of Executive under circumstances described
in Section 2, then (i) employment or termination of employment as used
in this Agreement shall mean employment or termination of employment
of Executive with Employer and such Affiliate, or with such Affiliate,
as applicable, and (ii) the obligations of Employer hereunder shall be
12
satisfied by Employer and/or such Affiliate as Employer, in its
discretion, shall determine; provided that Employer shall remain
liable for such obligations to the extent not satisfied by such
Affiliate.
20. NOTICE. Notices required under this Agreement shall be in
writing and sent by registered mail, return receipt requested, to the
following addresses or to such other address as the party being
notified may have previously furnished to the others by written
notice.
If to Employer: Newell Rubbermaid Inc.
29 East Stephenson Street
Freeport, Illinois 61032
Attention: ______________________
If to Executive: _______________________
_______________________
_______________________
_______________________
21. BOARD APPROVAL. The rights and obligations of Employer under
this Agreement are contingent upon the approval or ratification by its
Board of Directors of the execution of this Agreement on its behalf.
IN WITNESS WHEREOF, Executive has hereunto set his hand, and
Employer has caused these presents to be executed in its name on its
behalf, all as of the day and year first above written.
NEWELL RUBBERMAID INC.
By: ____________________________________
Title: __________________________________
_________________________________________
EXECUTIVE
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EXHIBIT 11
----------
NEWELL RUBBERMAID INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE OF COMMON STOCK
-------------------------------------------------
YEAR ENDED DECEMBER 31,
2001 2000 1999
---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
BASIC EARNINGS PER SHARE:
Net income $264,635 $421,575 $95,437
Weighted average shares outstanding 266,657 268,437 281,806
Basic earnings per share $0.99 $1.57 $0.34
DILUTED EARNINGS PER SHARE:
Net income $264,635 $421,575 $95,437
Minority interest in income of subsidiary
trust, net of tax (1) - - -
------- ------- -------
Net income, assuming conversion of all applicable
securities $264,635 $421,575 $95,437
Weighted average shares outstanding 266,657 268,437 281,806
Incremental common shares applicable to common
stock options based on the average market price
during the period 391 63 172
Average common shares issuable assuming conversion
of the Company-Obligated Mandatorily Redeemable
Convertible Preferred Securities of a Subsidiary
Trust (1) - - -
------- ------- -------
Weighted average shares outstanding assuming full
dilution 267,048 268,500 281,978
Diluted earnings per share, assuming
conversion of all applicable securities $0.99 $1.57 $0.34
(1) The convertible preferred securities are anti-dilutive in 2001,
2000 and 1999 and, therefore, have been excluded from diluted
earnings per share. Had the convertible preferred shares been
included in the diluted earnings per share calculation, net
income would be increased by $16.8 million, $16.4 million and
$16.3 million in 2001, 2000 and 1999, respectively and weighted
average shares outstanding would have increased by 9.9 million
shares in all years.
EXHIBIT 12
----------
NEWELL RUBBERMAID INC. AND SUBSIDIARIES
STATEMENT OF COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
--------------------------------------------------------------
YEAR ENDED DECEMBER 31
2001 2000 1999 1998 1997
---- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT RATIO DATA)
EARNINGS AVAILABLE TO FIXED CHARGES:
Income before income taxes $415,865 $685,487 $230,939 $816,973 $544,590
Fixed Charges -
Interest expense 137,453 130,033 100,021 100,514 114,357
Portion of rent determined
to be interest (1) 36,951 33,957 30,319 26,287 23,343
Minority interest in income
of subsidiary trust 26,707 26,725 26,771 26,692 1,528
Equity in earnings elimination (7,221) (7,996) (8,118) (7,127) (5,831)
------- ------- ------- ------- -------
$609,755 $868,206 $379,932 $963,339 $677,987
======= ======= ======= ======= ========
FIXED CHARGES:
Interest expense $137,453 $130,033 $100,021 $100,514 $114,357
Portion of rent determined
to be interest (1) 36,951 33,957 30,319 26,287 23,343
Minority interest in income
subsidiary trust 26,707 26,725 26,771 26,692 1,528
------- ------- ------- ------- -------
$201,111 $190,715 $157,111 $153,493 $139,228
======= ======= ======= ======= =======
RATIO OF EARNINGS TO FIXED CHARGES 3.03 4.55 2.42 6.28 4.87
==== ==== ==== ==== ====
(1) A standard ratio of 33% was applied to gross rent expense to
approximate the interest portion of short-term and long-term
leases.
EXHIBIT 21
----------
NEWELL RUBBERMAID INC. AND SUBSIDIARIES
SIGNIFICANT SUBSIDIARIES
------------------------
STATE OF
NAME ORGANIZATION OWNERSHIP
---- ------------ ---------
Berol Corporation Delaware 72.65% of stock is owned by
Newell Rubbermaid Inc.;
27.35% of stock is owned by
Newell Operating Company
Newell Investments, Delaware 52.4% of stock is owned by
Inc. Newell Operating Company; 24.1%
of stock is owned by Newell
Rubbermaid Inc.;
11.4% of stock is owned by
Newell Window Furnishings, Inc.;
11.3% of stock is owned by
Intercraft Company;
0.8% of stock is owned by
Rubbermaid Incorporated
Newell Operating Delaware 77.5% of stock is owned by
Company Newell Rubbermaid Inc.;
22.5% of stock is owned by
Newell Holdings Delaware, Inc.
Rubbermaid Ohio 100% of stock is owned by Newell
Incorporated Rubbermaid Inc.
Rubbermaid Texas Texas Rubbermaid Incorporated is a
Limited general partner with a 1%
ownership interest;
Rubfinco Inc. (which is 100%
owned by Rubbermaid
Incorporated) is a limited
partner with a 99% ownership
interest
Sanford Investment Delaware 100% of stock is owned by Berol
Company Corporation
Sanford, L.P. Illinois Newell Operating Company is a
general partner with a 1.62%
ownership interest;
Sanford Investment Company
(which is 100% owned by Berol
Corporation) is a limited
partner with a 98.38% ownership
interest
EXHIBIT 23.1
------------
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the
incorporation by reference in this Form 10-K of our report dated
January 25, 2002, 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 Statement
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 5, 2002
EXHIBIT 99
----------
NEWELL RUBBERMAID INC. SAFE HARBOR STATEMENT
--------------------------------------------
The Company has made statements in its Annual Report on Form 10-K
for the year ended December 31, 2001, and the documents incorporated
by reference therein 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,
impact of changes in accounting standards, 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," "target," "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 are set forth generally in the 2001 Form 10-K and the
documents 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, which, in turn, are affected by general economic conditions
and events such as those of September 11, 2001. 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. Because
such competition, particularly in weak retail economies, can cause
retailers to fail, the Company must continuously monitor, and adapt to
changes in, the creditworthiness of its customers.
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 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 is for
retailers to import 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
continuing introduction of innovative new products and constant
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 improve our new product development capability. There are
numerous uncertainties inherent in successfully developing and
introducing innovative new products on a consistent basis.
MARKETING
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.
Our success also requires increased focus on serving our largest
customers through key account management efforts. We will need to
devote more marketing resources to achieving these objectives.
PRODUCTIVITY AND STREAMLINING
Our success also depends on our ability to improve productivity
and streamline operations to control and reduce costs. We need to do
this while maintaining consistently high customer service levels and
making substantial investments in new product development and in
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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 sources of supply on a world-wide basis.
The Company has within the last year added or promoted more than
60 executives. The Company's long-term success depends on its ability
to integrate these management changes.
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.
FOREIGN OPERATIONS
Foreign operations, which include manufacturing and/or sourcing
in many countries in Europe, Asia, Central and South America 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.
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