SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
for the Quarterly Period Ended March 31, 2003
Commission File Number 1-9608
NEWELL RUBBERMAID INC.
(Exact name of registrant as specified in its charter)
DELAWARE 36-3514169
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
Deerfield Corporate Centre One
13010 Morris Road, Suite 100
Alpharetta, Georgia 30004
------------------------------ -----
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (770) 670-2232
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, and (2) has been
subject to such filing requirements for the past 90 days.
Yes /x/ No / /
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act).
Yes /x/ No / /
Number of shares of common stock outstanding (net of treasury shares)
as of April 25, 2003: 274.2 million
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NEWELL RUBBERMAID INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in millions, except per share data)
Quarter Ended March 31,
2003 2002
---- ----
Net sales $1,736.4 $1,597.0
Cost of products sold 1,273.0 1,177.9
-------- --------
GROSS INCOME 463.4 419.1
Selling, general and administrative expenses 322.6 299.2
Restructuring costs 59.7 9.7
-------- --------
OPERATING INCOME 81.1 110.2
Nonoperating expenses:
Interest expense 32.0 25.1
Other, net 25.3 7.9
-------- --------
Net nonoperating expenses 57.3 33.0
-------- --------
INCOME BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF ACCOUNTING CHANGE 23.8 77.2
Income taxes 7.8 26.3
-------- --------
INCOME BEFORE CUMULATIVE
EFFECT OF ACCOUNTING CHANGE $16.0 $50.9
Cumulative effect of accounting change - (514.9)
-------- --------
NET INCOME (LOSS) $16.0 ($464.0)
======== ========
Weighted average shares outstanding:
Basic 273.6 266.8
Diluted 274.0 267.5
Earnings (loss) per share:
Basic -
Before cumulative effect of accounting change $0.06 $0.19
Cumulative effect of accounting change - (1.93)
-------- --------
Net income (loss) per common share $0.06 ($1.74)
======== ========
Diluted -
Before cumulative effect of accounting change $0.06 $0.19
Cumulative effect of accounting change - (1.92)
-------- --------
Net income (loss) per common share $0.06 ($1.73)
======== ========
Dividends per share $0.21 $0.21
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED).
2
NEWELL RUBBERMAID INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In millions)
March 31, December 31,
2003 2002
---- ----
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $10.2 $55.1
Accounts receivable, net 1,276.4 1,377.7
Inventories, net 1,285.4 1,196.2
Deferred income taxes 212.8 213.5
Prepaid expenses and other 224.3 237.5
-------- --------
TOTAL CURRENT ASSETS 3,009.1 3,080.0
OTHER ASSETS 302.8 286.7
PROPERTY, PLANT AND EQUIPMENT, NET 1,853.2 1,812.8
DEFERRED INCOME TAXES 9.8 -
GOODWILL 2,217.7 1,847.3
OTHER INTANGIBLE ASSETS, NET 366.1 362.1
-------- --------
TOTAL ASSETS $7,758.7 $7,388.9
======== ========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED).
3
NEWELL RUBBERMAID INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONT.)
(Dollars in millions, except per share data)
March 31, December 31,
2003 2002
---- ----
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $24.5 $25.2
Accounts payable 736.5 686.6
Accrued compensation 94.9 153.5
Other accrued liabilities 1,037.7 1,165.4
Income taxes 156.5 159.7
Current portion of long-term debt 227.9 424.0
-------- --------
TOTAL CURRENT LIABILITIES 2,278.0 2,614.4
LONG-TERM DEBT 2,377.6 1,856.6
OTHER NONCURRENT LIABILITIES 379.8 348.4
DEFERRED INCOME TAXES - 4.7
MINORITY INTEREST 1.5 1.3
COMPANY-OBLIGATED MANDATORILY
REDEEMABLE CONVERTIBLE PREFERRED
SECURITIES OF A SUBSIDIARY TRUST 500.0 500.0
STOCKHOLDERS' EQUITY:
Common stock, authorized shares,
800.0 million at $1.00 par value; 289.9 283.1
Outstanding shares:
2003 - 289.9 million
2002 - 283.1 million
Treasury stock, at cost; (410.2) (409.9)
Shares held:
2003 - 15.7 million
2002 - 15.7 million
Additional paid-in capital 432.9 237.3
Retained earnings 2,101.6 2,143.2
Accumulated other comprehensive loss (192.4) (190.2)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 2,221.8 2,063.5
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $7,758.7 $7,388.9
======== ========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED).
4
NEWELL RUBBERMAID INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in millions)
Quarter Ended March 31,
2003 2002
---- ----
OPERATING ACTIVITIES:
Net income (loss) $16.0 ($464.0)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization 65.1 68.0
Noncash restructuring charges 44.6 3.8
Deferred income taxes (10.6) 35.6
Cumulative effect of accounting change - 514.9
Loss on sale of business 21.2 -
Other 17.0 5.8
Changes in accounts excluding the
effects of acquisitions:
Accounts receivable 128.6 95.7
Inventories (88.1) (50.0)
Other current assets 9.4 (12.6)
Accounts payable 48.0 28.7
Accrued liabilities and other (210.7) (103.4)
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 40.5 122.5
-------- --------
INVESTING ACTIVITIES:
Acquisitions, net of cash acquired (452.3) 11.3
Expenditures for property, plant and equipment (93.2) (36.0)
Disposals of noncurrent assets and other 7.5 3.4
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (538.0) (21.3)
-------- --------
FINANCING ACTIVITIES:
Proceeds from issuance of debt 619.3 515.1
Proceeds from issuance of stock 200.1 -
Payments on notes payable and long-term debt (312.0) (561.1)
Cash dividends (57.7) (56.0)
Proceeds from exercised stock options and other 2.0 3.8
-------- --------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 451.7 (98.2)
Exchange rate effect on cash 0.9 0.4
-------- --------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (44.9) 3.4
Cash and cash equivalents at beginning of year 55.1 6.8
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $10.2 $10.2
======== ========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED).
5
NEWELL RUBBERMAID INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Newell
Rubbermaid Inc. (collectively with its subsidiaries, the "Company")
have been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission, and do not include all the
information and notes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, the unaudited consolidated financial statements include
all adjustments, consisting of only normal recurring accruals,
considered necessary for a fair presentation of the financial position
and the results of operations. It is suggested that these unaudited
consolidated financial statements be read in conjunction with the
financial statements and the notes thereto included in the Company's
latest Annual Report on Form 10-K.
SEASONAL VARIATIONS: The Company's product groups are only moderately
affected by seasonal trends. The Rubbermaid and Calphalon Home
business segments typically have higher sales in the second half of
the year due to retail stocking related to the holiday season; the
Irwin business segment typically 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 Sharpie business segment
typically 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 generally do not fluctuate
significantly.
RECENT ACCOUNTING PRONOUNCEMENTS: In June 2002, the Financial
Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standard No. 146 (FAS 146), "Accounting for Costs
Associated with Exit or Disposal Activities." FAS 146 addresses
financial accounting and reporting for costs associated with exit or
disposal activities included in restructurings. This Statement
eliminates the definition and requirements for recognition of exit
costs as defined in EITF Issue 94-3, and requires that liabilities for
exit activities be recognized when incurred instead of at the exit
activity commitment date. Additionally, FAS 146 requires recognition
of one-time severance benefits that require employees to render future
service beyond a minimum retention period over the future service
period. The Company adopted the provisions of FAS 146, effective
January 1, 2003. With respect to severance benefits, the Company
believes the majority of its severance agreements require only a
minimum or no retention period or are made pursuant to pre-existing
plans as defined by Statement of Financial Accounting Standard No. 112
(FAS 112), "Employers' Accounting for Postemployment Benefits."
6
NOTE 2 - CHANGES IN ACCOUNTING PRINCIPLE
Effective January 1, 2002, the Company adopted Statement of Financial
Accounting Standard No. 142 (FAS 142), "Goodwill and Other Intangible
Assets." Pursuant to the adoption of FAS 142, the Company performed
the required impairment tests of goodwill and indefinite lived
intangible assets and recorded a pre-tax goodwill impairment charge of
$538.0 million, $514.9 million net of tax, in the first quarter of
2002. In determining the goodwill impairment, the Company measured
the impairment loss as the excess of the carrying amount of goodwill
(which included the carrying amount of trademarks) over the implied
fair value of goodwill (which excluded the fair value of identifiable
trademarks). The Company conducts annual impairment tests and will
also test for impairment if events or circumstances occur subsequent
to the Company's annual impairment tests that would more likely than
not reduce the fair value of a reporting unit below its carrying
amount. There are no impairment charges anticipated for 2003.
A summary of changes in the Company's goodwill during the three months
ended March 31, 2003 is as follows (IN MILLIONS):
Balance at December 31, 2002 $1,847.3
Acquisitions 368.5
Other (primarily foreign exchange) 1.9
--------
Balance at March 31, 2003 $2,217.7
========
NOTE 3 - ACQUISITIONS AND DIVESTITURES
ACQUISITIONS
Effective January 1, 2003, the Company completed its acquisition of
American Saw & Mfg. Co. (Lenox), a leading manufacturer of power tool
accessories and hand tools marketed under the Lenox brand. The
purchase price was approximately $450 million. This purchase marks
the continued expansion and enhancement of the Company's product lines
and customer base in the $12 billion global power tool accessories and
hand tools market and strengthens the company's platform in the
professional and fast growing "do-it-yourself" channels. Lenox had
2002 net sales of $185.4 million and is included in the Irwin
operating segment. The Company is in the process of obtaining third
party valuations of certain financial positions; thus, the allocation
of the purchase price is preliminary.
On April 30, 2002, the Company completed the purchase of American Tool
Companies, Inc. (American Tool), a leading manufacturer of hand tools
and power tool accessories. The Company had previously held a 49.5%
stake in American Tool, which had been accounted for under the equity
method prior to acquisition. The purchase price was $467.0 million,
7
which included $197 million for the majority 50.5% ownership stake,
the repayment of $243 million in American Tool debt and $27 million of
transaction costs.
The 2003 and 2002 transactions were accounted for as purchases;
therefore, results of operations are included in the accompanying
Consolidated Financial Statements since their respective acquisition
dates. The acquisition costs for the 2003 and 2002 acquisitions were
allocated on a preliminary basis to the fair market value of the
assets acquired and liabilities assumed. The Company's final
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 Company continues to formulate integration plans for Lenox and
other acquisitions. In 2003, integration plans for acquired
businesses resulted in integration plan liabilities of $3.8 million
for facility and other exit costs, $3.2 million for employee severance
and termination benefits and $0.5 million for other pre-acquisition
contingencies. The purchase prices for the 2003 and 2002 acquisitions
have been allocated on a preliminary basis to the fair market value of
the assets acquired and liabilities assumed.
The unaudited consolidated results of operations on a pro forma basis,
as though the 2003 and 2002 acquisitions of Lenox and American Tool,
respectively, had been completed on January 1, 2002, are as follows
for the quarter ended March 31, (IN MILLIONS, EXCEPT PER SHARE
AMOUNTS):
2003 2002
---- ----
Net sales $1,736.4 $1,746.8
Income before accounting change $16.0 $55.5
Basic earnings per share before accounting
change $0.06 $0.21
Net income (loss) $16.0 ($459.4)
Basic earnings (loss) per share $0.06 ($1.72)
DIVESTITURES
On March 27, 2003, the Company completed the sale of its Cosmolab
business, a division of the Sharpie segment, for approximately $13.0
million. The Cosmolab business had annual net sales of approximately
$50 million. The Company used the proceeds from the sale to reduce
its commercial paper borrowings. The Company recorded a pre-tax loss
on the sale of $21.2 million in the first quarter of 2003 as a
component of Other, net in the Consolidated Statement of Operations.
8
NOTE 4 - RESTRUCTURING COSTS
The Company continues to record restructuring charges associated with
the Company's strategic restructuring plan announced on May 3, 2001.
Through this restructuring plan, management intends to streamline the
Company's supply chain to enable it to be the best cost global
provider throughout the Company's product portfolio. The plan
includes reducing worldwide headcount and consolidating duplicate
manufacturing facilities over a three-year period beginning in 2001.
In the first three months of 2003, the Company incurred facility exit
costs and employee severance and termination benefit costs for
approximately 2,500 employees, as described in the table below. Under
the 2001 restructuring plan, 62 facilities have been exited and
headcount has been reduced by 7,300 employees.
Pre-tax restructuring costs consisted of the following for the quarter
ended March 31, (IN MILLIONS):
2003 2002
---- ----
Facility and other exit costs $31.8 $3.0
Employee severance and termination benefits 26.7 6.3
Exited contractual commitments 1.2 0.4
----- ----
Total Restructuring Costs $59.7 $9.7
===== ====
Restructuring provisions were determined based on estimates prepared
at the time the restructuring actions were approved by management, and
also include amounts recognized as incurred. Cash paid for
restructuring activities was $20.6 million and $11.7 million in the
first three months of 2003 and 2002, respectively. A summary of the
Company's restructuring plan reserves is as follows (IN MILLIONS):
12/31/01 Costs 3/31/02
Balance Provision Incurred Balance
-------- --------- -------- -------
Facility and other exit costs $20.1 $3.0 ($5.1) $18.0
Employee severance and termination benefits 6.2 6.3 (7.7) 4.8
Exited contractual commitments 1.9 0.4 (0.6) 1.7
----- ---- ---- -----
Total Restructuring Costs $28.2 $9.7 ($13.4) $24.5
===== ==== ===== =====
9
12/31/02 Costs 3/31/03
Balance Provision Incurred Balance
-------- --------- -------- -------
Facility and other exit costs $36.1 $31.8 ($37.0) $30.9
Employee severance and termination benefits 41.1 26.7 (15.5) 52.3
Exited contractual commitments 2.1 1.2 (0.1) 3.2
----- ----- ----- -----
Total Restructuring Costs $79.3 $59.7 ($52.6) $86.4
===== ===== ===== =====
The facility and other exit cost reserves of $30.9 million at March
31, 2003 are primarily related to future minimum lease payments on
vacated facilities and closure costs related to 55 facilities and
administrative offices.
In the first quarter of 2003, the Company announced its intention to
close one of its manufacturing facilities in the Calphalon Home
operating segment by the end of 2003. As a result of this decision,
the Company evaluated its long-lived assets, primarily property, plant
and equipment, for impairment and recorded a non-cash restructuring
charge of $29.0 million. The amount of the impairment was determined
using a discounted cash flow analysis.
Severance reserves of $52.3 million at March 31, 2003 are primarily
related to the employees of the exited facilities.
NOTE 5 - INVENTORIES
Inventories are stated at the lower of cost or market value. The
components of inventories, net of LIFO reserve, were as follows (IN
MILLIONS):
March 31, December 31,
2003 2002
---- ----
Materials and supplies $312.5 $308.8
Work in process 203.2 174.9
Finished products 769.7 712.5
-------- --------
$1,285.4 $1,196.2
======== ========
10
NOTE 6 - LONG-TERM DEBT AND EQUITY
The following is a summary of long-term debt (IN MILLIONS):
March 31, December 31,
2003 2002
---- ----
Medium-term notes $1,396.4 $1,680.9
Commercial paper 749.9 140.0
Preferred debt securities 450.0 450.0
Other long-term debt 9.2 9.7
-------- --------
Total debt 2,605.5 2,280.6
-------- --------
Current portion of long-term debt (227.9) (424.0)
-------- --------
Long-term Debt $2,377.6 $1,856.6
======== ========
On February 24, 2003, the Company terminated certain interest rate
swap agreements prior to their scheduled maturities and received cash
of $21.0 million. Of this amount, $17.3 million represents the fair
value of the swaps that were terminated and the remainder represents
interest receivable on the swaps. The cash received relating to the
fair value of the swaps was included as an operating activity in the
Consolidated Statement of Cash Flows. As of March 31, 2003, the
unamortized gain of $16.9 million on the terminated interest rate
swaps is accounted for as long-term debt (of which $4.4 million is
classified as current). The unamortized gain will be amortized as a
reduction to interest expense over the remaining term of the
underlying debt.
On January 10, 2003, the Company completed the sale of 6.67 million
shares of its common stock at a public offering price of $30.10 per
share pursuant to a shelf registration statement filed with the
Securities and Exchange Commission. Total proceeds from the sale were
approximately $200.8 million, resulting in net proceeds to the
Company, before expenses, of $200.1 million. The proceeds were used
to reduce the Company's commercial paper borrowings.
NOTE 7 - FAIR VALUE OF STOCK OPTIONS
The Company's stock option plans are accounted for under Accounting
Principles Board Opinion No. 25. As a result, the Company grants fixed
stock options under which no compensation cost is recognized. Had
compensation cost for the plans been determined consistent with
Statement of Financial Accounting Standard No. 123 (FAS 123),
"Accounting for Stock Based Compensation," the Company's net income
and earnings per share would have been reduced to the following pro
11
forma amounts for the quarter ended March 31, (IN MILLIONS, EXCEPT PER
SHARE DATA):
2003 2002
---- ----
Net income (loss):
As reported $16.0 ($464.0)
Fair value option expense (3.7) (4.1)
----- ------
Pro forma $12.3 ($468.1)
Basic earnings (loss) per share:
As reported $0.06 ($1.74)
Pro forma 0.04 (1.75)
Diluted earnings (loss) per share:
As reported $0.06 ($1.73)
Pro forma 0.04 (1.75)
Because the FAS 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.
NOTE 8 - EARNINGS PER SHARE
The calculation of basic and diluted earnings per share for the
quarter ended March 31, 2003 and 2002, respectively, is shown below
(IN MILLIONS, EXCEPT PER SHARE DATA):
"In the Convertible
Basic Money" Preferred Diluted
Method Options(1) Securities(2) Method
------ ---------- ------------- -------
2003
----
Net income $16.0 - - $16.0
Weighted average shares outstanding 273.6 0.4 - 274.0
Income per share $0.06 $0.06
2002
----
Income before cumulative effect of
accounting change $50.9 - - $50.9
Weighted average shares outstanding 266.8 0.7 - 267.5
Earnings per share $0.19 $0.19
Net loss ($464.0) - - ($464.0)
Weighted average shares outstanding 266.8 0.7 - 267.5
Loss per share ($1.74) ($1.73)
12
(1) The weighted average shares outstanding for 2003 and 2002 exclude the dilutive effect of approximately 5.6
million and 2.3 million stock options, respectively, because such options had an exercise price in excess of
the average market value of the Company's common stock during the respective periods.
(2) The convertible preferred securities are anti-dilutive in 2003 and 2002, 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 $4.2 million and $4.4 million in 2003 and 2002,
respectively, and weighted average shares outstanding would have increased by 9.9 million shares in both
periods.
NOTE 9 - ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Accumulated other comprehensive income (loss) encompasses 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 and is
recorded within stockholders' equity. The following table displays
the components of accumulated other comprehensive income or loss (IN
MILLIONS):
Foreign After-tax After-tax Accumulated
Currency Derivatives Minimum Other
Translation Hedging Pension Comprehensive
Loss Gain Liability Loss
---- ---- --------- ----
Balance at December 31, 2002 ($115.1) $0.4 ($75.5) ($190.2)
Current year change (8.6) 6.4 - (2.2)
------- ---- ------ ------
Balance at March 31, 2003 ($123.7) $6.8 ($75.5) ($192.4)
====== ==== ===== ======
Total comprehensive income (loss) amounted to the following (IN
MILLIONS):
March 31, March 31,
2003 2002
---- ----
Net income (loss) $16.0 ($464.0)
Foreign currency translation loss (8.6) (33.5)
After-tax derivatives hedging gain 6.4 1.7
----- ------
$13.8 ($495.8)
===== ======
NOTE 10 - INDUSTRY SEGMENT INFORMATION
The Company manages its business in four operating segments that
have been named for leading worldwide brands in the Company's product
portfolio. In the first quarter of 2003, the Company realigned its
Eldon and Panex divisions out of its Sharpie and Calphalon Home
operating segments, respectively, and into its Rubbermaid operating
segment (prior years' segment data has been reclassified to conform to
13
the current 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 strategic account management strategy.
The Company's segment results are as follows (IN MILLIONS):
2003 2002
---- ----
Net Sales (1) - Quarter Ended March 31,
--------------------------------------
Rubbermaid $718.0 $710.1
Sharpie 294.4 301.9
Irwin 482.1 331.1
Calphalon Home 241.9 253.9
-------- --------
$1,736.4 $1,597.0
======== ========
Operating Income (2) - Quarter Ended March 31,
---------------------------------------------
Rubbermaid $67.4 $61.0
Sharpie 29.8 25.8
Irwin 39.6 20.0
Calphalon Home 11.2 20.6
Corporate (3) (7.2) (7.5)
------ -------
140.8 119.9
Restructuring Costs (59.7) (9.7)
------ -------
$81.1 $110.2
====== =======
Identifiable Assets - At March 31 and December 31,
-------------------------------------------------
Rubbermaid $1,884.3 $1,847.2
Sharpie 912.3 991.5
Irwin 1,334.6 1,226.4
Calphalon Home 662.2 709.8
Corporate (4) 2,965.3 2,614.0
-------- --------
$7,758.7 $7,388.9
======== ========
14
GEOGRAPHIC AREA INFORMATION 2003 2002
---- ----
Net Sales - Quarter Ended March 31,
----------------------------------
United States $1,235.2 $1,174.2
Canada 74.4 63.7
-------- --------
North America 1,309.6 1,237.9
Europe 346.9 292.2
Central and South America 49.4 47.9
All other 30.5 19.0
-------- --------
$1,736.4 $1,597.0
======== ========
Operating Income - Quarter Ended March 31,
-----------------------------------------
United States $72.0 $92.5
Canada 10.0 4.3
-------- --------
North America 82.0 96.8
Europe (6.2) 6.9
Central and South America 2.1 2.8
All other 3.2 3.7
-------- --------
$81.1 $110.2
======== ========
Identifiable Assets (5) - At March 31 and December 31,
-----------------------------------------------------
United States $5,557.0 $5,151.0
Canada 110.4 115.7
-------- --------
North America 5,667.4 5,266.7
Europe 1,772.6 1,802.0
Central and South America 219.8 224.4
All other 98.9 95.8
-------- --------
$7,758.7 $7,388.9
======== ========
(1) All intercompany transactions have been eliminated. Sales to Wal*Mart Stores, Inc. and subsidiaries amounted
to approximately 15% and 16% of consolidated net sales in the first quarter of 2003 and 2002, respectively.
Sales to no other customer exceeded 10% of consolidated net sales for either period.
(2) 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 amortization is considered a corporate expense and not
allocated to business segments.
(3) Corporate operating expenses consist primarily of administrative costs that cannot be allocated to a
particular segment.
(4) Corporate assets primarily include trade names and goodwill, equity investments and deferred tax assets.
(5) Transfers of finished goods between geographic areas are not significant.
15
NOTE 11 - CONTINGENCIES
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 related
matters, as well as environmental matters. Some of the legal
proceedings include claims for punitive as well as compensatory
damages, and a few proceedings purport to be class actions.
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 financial statements.
In the normal course of business and as part of its acquisition and
divestiture strategy, the Company may provide certain representation
and indemnifications related to legal, environmental, product
liability, tax or other types of issues. Based on the nature of these
representations and indemnifications, it is not possible to predict
the maximum potential payments under all of these agreements due to
the conditional nature of the Company's obligations and the unique
facts and circumstances involved in each particular agreement.
Historically, payments made by the Company under these agreements did
not have a material effect on the Company's business, financial
condition or results of operation.
As of March 31, 2003, the Company has identified and quantified
exposures under these representations and indemnifications of
approximately $44.0 million, which expire in 2006. As of March 31,
2003, no amounts have been recorded on the balance sheet related to
these indemnifications, as the risk of loss is considered remote.
NOTE 12 - SUBSEQUENT EVENTS
A $1.0 billion universal shelf registration statement became effective
in April 2003 under which debt and equity securities may be issued.
No debt or equity securities have been issued under this shelf
registration statement.
16
PART I. FINANCIAL INFORMATION
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
---------------------
The following table sets forth for the periods indicated items from
the Consolidated Statements of Operations as a percentage of net sales
for the three months ended March 31:
2003 2002
---- ----
Net sales 100.0% 100.0%
Cost of products sold 73.3 73.8
----- -----
GROSS INCOME 26.7 26.2
Selling, general and
administrative expenses 18.6 18.7
Restructuring costs 3.4 0.6
----- -----
OPERATING INCOME 4.7 6.9
Nonoperating expenses:
Interest expense 1.8 1.6
Other, net 1.5 0.5
----- -----
Net nonoperating expenses 3.3 2.1
INCOME BEFORE INCOME TAXES
AND CUMULATIVE EFFECT OF
ACCOUNTING CHANGE 1.4 4.8
Income taxes 0.5 1.6
----- -----
NET INCOME BEFORE CUMULATIVE
EFFECT OF ACCOUNTING CHANGE 0.9 3.2
Cumulative effect of accounting change - (32.3)
----- -----
NET INCOME / (LOSS) 0.9% (29.1)%
===== =====
Three Months Ended March 31, 2003 vs.
Three Months Ended March 31, 2002
-------------------------------------
Net sales for the three months ended March 31, 2003 (first quarter)
were $1,736.4 million, representing an increase of $139.4 million, or
8.7%, from $1,597.0 million in the comparable quarter of 2002. The
increase resulted from sales contributions from American Tool
Companies, Inc. (American Tool) (acquired April 2002) of $105.4
17
million and American Saw & Mfg. Co. (Lenox) (acquired January 2003) of
$47.6 million.
Gross income as a percentage of net sales in the first quarter of 2003
was 26.7%, or $463.4 million, versus 26.2%, or $419.1 million, in the
comparable quarter of 2002. The improvement in gross income is
primarily related to the Company's productivity initiative, higher
margins from the Company's new products and the acquisition of Lenox
which generates higher gross income than the Company's average,
partially offset by increased prices for certain raw materials and
unfavorable product mix at certain businesses.
Selling, general and administrative expenses (SG&A) in the first
quarter of 2003 were 18.6% of net sales, or $322.6 million, versus
18.7%, or $299.2 million, in the comparable quarter of 2002. The
increase in SG&A is primarily the result of the American Tool and
Lenox acquisitions and planned investments in marketing initiatives,
including the Company's Strategic Account Management Program and
Phoenix Program, supporting the Company's brand portfolio and
strategic account strategy.
The Company recorded pre-tax strategic restructuring charges of $59.7
million ($40.3 million after taxes) and $9.7 million ($6.4 million
after tax) in the first quarter of 2003 and 2002, respectively. The
2003 first quarter pre-tax charge included $31.8 million of facility
and other exit costs, $26.7 million of employee severance and
termination benefits, and $1.2 million in other restructuring costs.
The 2002 first quarter pre-tax charge included $3.4 million of
facility and other exit costs and $6.3 million of employee severance
and termination benefits. See Note 4 to the Consolidated Financial
Statements (Unaudited) for further information on the strategic
restructuring plan.
Operating income in the first quarter of 2003 was 4.7% of net sales,
or $81.1 million, versus operating income of 6.9% or $110.2 million,
in the comparable quarter of 2002. Operating income includes
restructuring charges of $59.7 million ($40.3 million after taxes) and
$9.7 million ($6.4 million after taxes) in the first quarter of 2003
and 2002, respectively. The decrease in operating margins is
primarily the result of restructuring charges to streamline the
Company's supply chain.
Net nonoperating expenses in the first quarter of 2003 were 3.3% of
net sales, or $57.3 million, versus of 2.1%, or $33.0 million, in the
comparable quarter of 2002. The increase in expenses is primarily
related to the $21.2 million non-cash pre-tax loss recognized on the
sale of the Cosmolab business in March 2003. See Note 3 to the
Consolidated Financial Statements (Unaudited) for additional details.
The effective tax rate was 32.5% in the first quarter of 2003 versus
34.0% in the first quarter of 2002. This lower rate reflects the
benefit of the full year impact of 2002 tax rate initiatives.
18
Net income before cumulative effect of accounting change for the first
quarter of 2003 was $16.0 million, compared to $50.9 million in the
first quarter of 2002. Diluted earnings per share before cumulative
effect of accounting change were $0.06 in the first quarter of 2003
compared to $0.19 in the first quarter of 2002. The decrease in net
income and earnings per share before cumulative effect of accounting
change was primarily due to increased restructuring charges to
streamline the Company's supply chain and the loss recognized on the
sale of the Cosmolab business.
Net income for the first quarter of 2003 was $16.0 million, compared
to net loss of $464.0 million in the first quarter of 2002. Diluted
earnings per share based on net income (loss) were $0.06 in the first
quarter of 2003 compared to ($1.73) in the first quarter of 2002. The
difference in net income and diluted earnings per share is primarily
the result of the $538.0 million, $514.9 million net of tax,
cumulative effect of an accounting change adjustment related to the
Company's adoption of FAS 142 as discussed in Note 2 to the
Consolidated Financial Statements (Unaudited).
BUSINESS SEGMENT OPERATING RESULTS:
Net Sales in the four segments in which the Company operates were as
follows for the quarter ended March 31, (IN MILLIONS):
2003 2002 % Change
---- ---- --------
Rubbermaid $718.0 $710.1 1.1%
Sharpie 294.4 301.9 (2.5)%
Irwin 482.1 331.1 45.6%
Calphalon Home 241.9 253.9 (4.7)%
-------- -------- ----
Total Net Sales (1) $1,736.4 $1,597.0 8.7%
======== ======== ====
Operating Income by segment were as follows for the quarter ended
March 31, (IN MILLIONS):
2003 2002 % Change
---- ---- --------
Rubbermaid $67.4 $61.0 10.4%
Sharpie 29.8 25.8 15.5%
Irwin 39.6 20.0 98.0%
Calphalon Home 11.2 20.6 (45.6)%
----- ------ -----
148.0 127.4 16.2%
Corporate Costs (2) (7.2) (7.5)
Restructuring Costs (59.7) (9.7)
----- ------
Total Operating Income (3) $81.1 $110.2
===== ======
19
(1) All intercompany transactions have been eliminated. Sales to
Wal*Mart Stores, Inc. and subsidiaries amounted to
approximately 15% and 16% of consolidated net sales in the
first quarter of 2003 and 2002, respectively. Sales to no other
customer exceeded 10% of consolidated net sales for either
period.
(2) Corporate operating expenses consist primarily of
administrative costs that cannot be allocated to a particular
segment.
(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 amortization is considered a corporate
expense and not allocated to business segments.
RUBBERMAID
Net sales for the first quarter of 2003 were $718.0 million, an
increase of $7.9 million, or 1.1%, from $710.1 million in the first
quarter of 2002. The 1.1% sales growth was primarily due to 4.0%
sales growth at the Rubbermaid Home Products division, partially
offset by a 2.7% sales decline at Graco. The decline at Graco was
primarily due to an increase in competitive pressures. The primary
reasons for the overall sales increase were sales gains at strategic
accounts and new product introductions, such as the Rubbermaid
TakeAlongs{R} and Stain Shield{TM}, partially offset by product price
reductions.
Operating income for the first quarter of 2003 was $67.4 million, an
increase of $6.4 million, or 10.4%, from $61.0 million in the first
quarter of 2002. The increase is primarily related to productivity
improvements and streamlining initiatives.
SHARPIE
Net sales for the first quarter of 2003 were $294.4 million, a
decrease of $7.5 million, or 2.5%, from $301.9 million in the first
quarter of 2002. The 2.5% sales decline was caused by a 5.5% sales
decline at Sanford North America.
Operating income for the first quarter of 2003 was $29.8 million, an
increase of $4.0 million, or 15.5%, from $25.8 million in the first
quarter of 2002. The increase is primarily related to mix management
and increased margin from new products, partially offset by continued
investments in divisional growth initiatives.
IRWIN
Net sales for the first quarter of 2003 were $482.1 million, an
increase of $151.0 million, or 45.6%, from $331.1 million in the first
quarter of 2002. The increase in net sales for the first quarter of
20
2003 was primarily due to $105.4 million and $47.6 million in sales
from the American Tool and Lenox acquisitions, respectively.
Operating income for the first quarter of 2003 was $39.6 million, an
increase of $19.6 million, or 98.0%, from $20.0 million in the first
quarter of 2002. The increase in operating income was primarily due
to $11.7 million of operating income from the Lenox acquisition, $4.9
million of operating income from the American Tool acquisition and
cost savings from productivity initiatives.
CALPHALON HOME
Net sales for the first quarter of 2003 were $241.9 million, a
decrease of $12.0 million, or 4.7%, from $253.9 million in the first
quarter of 2002. The decrease in sales was primarily attributable to
the Burnes picture frame business, which lost sales primarily due to a
planned exit from certain high risk customers, partially offset by an
8.3% sales increase at the Calphalon division.
Operating income for the first quarter of 2003 was $11.2 million, a
decrease of $9.4 million, or 45.6%, from $20.6 million in the first
quarter of 2002. The decrease in operating income was due primarily
to lower sales at Burnes and unfavorable product mix.
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 from operating activities in the first three months
ended March 31, 2003 was $40.5 million compared to $122.5 million for
the comparable period of 2002. The decrease in cash provided from
operating activities was due primarily to increased cash restructuring
charges and inventory levels. The increased inventory levels were
the result of increased safety stock related to restructuring programs
and new product launches and lower than expected sales at the
Company's Burnes picture frame division.
In the first three months of 2003, the Company received proceeds from
the issuance of debt of $619.3 million compared to $515.1 million in
the year ago period.
On January 10, 2003, the Company completed the sale of 6.67 million
shares of its common stock at a public offering price of $30.10 per
share pursuant to a shelf registration statement filed with the
Securities and Exchange Commission. Total proceeds from the sale were
21
approximately $200.8 million, resulting in net proceeds to the
Company, before expenses, of $200.1 million. The proceeds were used
to reduce the Company's commercial paper borrowings.
The Company has a $1.0 billion universal shelf registration statement
that became effective in April 2003 under which debt and equity
securities may be issued. No debt or equity securities have been
issued under this shelf registration statement.
Uses:
The Company's primary uses of liquidity and capital resources include
acquisitions, dividend payments and capital expenditures.
Cash used for acquisitions was $452.3 million for the first three
months of 2003 and is related primarily to the acquisition of Lenox,
which was funded through the issuance of commercial paper. In the
first three months of 2002, the Company received net proceeds of
approximately $11.3 million related to post-acquisition settlements on
prior transactions.
On March 27, 2003, the Company completed the sale of its Cosmolab
business, a division of the Sharpie segment. The Company received
cash proceeds of $7.5 million related to the Cosmolab transaction.
The Company used the proceeds from the sale to reduce its commercial
paper borrowings.
In the first three months of 2003, the Company made payments on long-
term debt, net of proceeds, of $312.0 million compared to $561.1
million in the year ago period.
On January 10, 2003, the Company received proceeds from the issuance
of stock of $200.1 million. The proceeds received were used to reduce
the Company's commercial paper borrowings. Refer to Note 6 in the
Consolidated Financial Statements (Unaudited) for further information.
Cash used for restructuring activities was $20.6 million and $11.7
million in the first three months of 2003 and 2002, respectively.
Such cash payments represent primarily employee termination benefits.
Capital expenditures were $93.2 million and $36.0 million in the first
three months of 2003 and 2002, respectively. The increase in capital
expenditures is primarily due to the Company's increased investment in
new product development and productivity initiatives.
Aggregate dividends paid were $57.7 million and $56.0 million during
the first three months of 2003 and 2002, respectively.
Retained earnings decreased in the first three months of 2003 by $41.6
million. The reduction in retained earnings is due to cash dividends
paid on common stock, partially offset by current year earnings.
22
Working capital at March 31, 2003 was $731.1 million compared to
$465.6 million at December 31, 2002. The current ratio at March 31,
2003 was 1.32:1 compared to 1.18:1 at December 31, 2002. The increase
in working capital and the current ratio is due to the American Tool
and Lenox acquisitions, and a reduction in the current portion of
long-term debt.
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 .49:1 at March 31, 2003
and .47:1 at December 31, 2002.
The Company believes that cash provided from operations and available
borrowing facilities will continue to provide adequate support for the
cash needs of existing businesses; however, certain events, such as
significant acquisitions, could require additional external financing.
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 foreign exchange and interest
rate exposure.
The Company manages interest rate exposure through its conservative
debt ratio target and its mix of fixed and floating rate debt.
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 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.
23
In addition, the Company utilizes forward contracts and purchased
options to hedge commercial and intercompany transactions. Gains and
losses related to qualifying hedges of commercial transactions are
deferred and included in the basis of the underlying transactions.
Derivatives used to hedge intercompany transactions are marked to
market with the corresponding gains or losses included in the
consolidated statements of operations.
Due to the diversity of its product lines, the Company does not have
material sensitivity to any one commodity. The Company manages
commodity price exposures primarily through the duration and terms of
its vendor contracts.
The amounts shown below represent the estimated potential economic
loss that the Company could incur from adverse changes in either
interest rates or foreign exchange rates using the value-at-risk
estimation model. The value-at-risk model uses historical foreign
exchange rates and interest rates to estimate the volatility and
correlation of these rates in future periods. It estimates a loss in
fair market value using statistical modeling techniques and including
substantially all market risk exposures (specifically excluding
equity-method investments). The fair value losses shown in the table
below have no impact on results of operations or financial condition
at March 31, 2003 as they represent hypothetical not realized losses.
The following table indicates the calculated amounts for each of the
quarters ended March 31, (IN MILLIONS):
2003 March 31, 2002 March 31, Confidence
Market Risk Average 2003 Average 2002 Level
----------- ------- -------- ------- -------- ---------
Interest rates $21.8 $21.8 $18.2 $15.3 95%
Foreign exchange $1.7 $1.7 $0.3 $0.2 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, because actual results may differ
significantly depending upon activity in the global financial markets.
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
24
not limited to, such matters as sales, income, earnings per share,
return on equity, return on invested capital, capital expenditures,
working capital, dividends, capital structure, debt to capitalization
ratios, interest rates, internal growth rates, 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 because 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 99.1 of
this Report.
25
PART I. FINANCIAL INFORMATION
ITEM 3. 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 I, Item 2).
PART I. FINANCIAL INFORMATION
ITEM 4. CONTROLS AND PROCEDURES
(a) Within 90 days prior to the date of this report, the Company
carried out an evaluation - under the supervision and with the
participation of the Company's management, including the Chief
Executive Officer and the Chief Financial Officer - of the
effectiveness of the design and operation of the Company's
disclosure controls and procedures pursuant to Exchange Act
Rule 13a-15. Based on that evaluation, the Company's Chief
Executive Officer and the Chief Financial Officer have
concluded that the Company's disclosure controls and procedures
are effective.
(b) There have been no significant changes in the Company's
internal controls or in other factors that could affect these
controls subsequent to the date of the evaluation described in
the preceding paragraph.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Information required under this Item is contained above in the Part I.
Financial Information, Item 1 and is incorporated herein by reference.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
12. Statement of Computation of Ratio of Earnings
to Fixed Charges
99.1. Safe Harbor Statement
99.2. Certification of Chief Executive Officer
Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
99.3. Certification of Chief Financial Officer
Pursuant to 18 U.S.C. Section 1350, as
26
Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
(b) The following reports on Form 8-K were filed by the
Registrant during the quarter ended March 31, 2003:
Report on Form 8-K, dated January 8, 2003,
reporting the entering into of an Underwriting
Agreement with respect to the offering and sale of
6,670,000 shares of the Company's common stock.
Report on Form 8-K, dated January 10, 2003, that
included the filing of a legal opinion with
respect to the Company's Registration Statement on
Form S-3 (No. 333-88050).
Report on Form 8-K, dated January 22, 2003, that
included a press release announcing the
appointment of Dr. Thomas E. Clarke to the
Company's Board of Directors.
Report on Form 8-K, dated March 25, 2003, that
included the Company's Summary Annual Report for
the year ended December 31, 2002.
27
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
NEWELL RUBBERMAID INC.
Registrant
Date: April 30, 2003 /s/ William T. Alldredge
-------------------------------------
William T. Alldredge
President - Corporate Development and
Chief Financial Officer
Date: April 30, 2003 /s/ J. Patrick Robinson
-------------------------------------
J. Patrick Robinson
Vice President - Corporate Controller
and Chief Accounting Officer
28
CERTIFICATION
I, Joseph Galli, Jr., certify that:
1. I have reviewed this quarterly report on Form 1O-Q of Newell
Rubbermaid Inc.;
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light
of the circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition,
results of operations and cash flows of the registrant as of,
and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-
14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "EVALUATION
DATE"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent
function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and
report financial data and have identified for the
registrant's auditors any material weaknesses in internal
controls; and
29
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated
in this quarterly report whether or not there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date
of our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material
weaknesses.
Date: April 30, 2003
/s/ Joseph Galli, Jr.
-------------------------
Joseph Galli, Jr.
Chief Executive Officer
30
CERTIFICATION
I, William T. Alldredge, certify that:
1. I have reviewed this quarterly report on Form 1O-Q of Newell
Rubbermaid Inc.;
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light
of the circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition,
results of operations and cash flows of the registrant as of,
and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-
14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "EVALUATION
DATE"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent
function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and
report financial data and have identified for the
registrant's auditors any material weaknesses in internal
controls; and
31
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated
in this quarterly report whether or not there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date
of our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material
weaknesses.
Date: April 30, 2003
/s/ William T. Alldredge
------------------------------
William T. Alldredge
Chief Financial Officer
32
EXHIBIT 12
----------
NEWELL RUBBERMAID INC. AND SUBSIDIARIES
STATEMENT OF COMPUTATION OF
RATIO OF EARNINGS TO FIXED CHARGES
Quarter Ended March 31,
2003 2002
---- ----
(IN MILLIONS, EXCEPT RATIO DATA)
Earnings available to fixed charges:
Income before income taxes and cumulative effect
of accounting change $23.8 $77.2
Fixed charges:
Interest expense 32.0 25.1
Portion of rent determined to be interest (1) 10.8 9.6
Minority interest in income of subsidiary trust 6.7 6.7
Equity earnings - (1.0)
------ ------
$73.3 $117.6
====== ======
Fixed charges:
Interest expense $32.0 $25.1
Portion of rent determined to be interest (1) 10.8 9.6
Minority interest in income of subsidiary trust 6.7 6.7
----- ------
$49.5 $41.4
===== ======
Ratio of earnings to fixed charges 1.48 2.84
====== =======
(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 99.1
------------
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, 2002, as well as in its Quarterly
Report on Form 10-Q for the quarter ended March 31, 2003, 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, debt to capitalization ratios,
interest rates, internal growth rates, 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 because 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 2002 Form 10-K, the 1st Quarter 2003 Form 10-Q 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 the terrorist attacks 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 struggle or 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 strategic account management efforts. We
will need to continue to devote substantial marketing resources to
achieving these objectives.
2
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
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 continuously to improve our manufacturing
efficiencies and develop sources of supply on a worldwide basis.
Acquisition Integration
-----------------------
The acquisition of companies that sell name brand, staple
consumer product lines to volume purchasers has historically been one
of the foundations of our growth strategy. Over time, our ability to
continue to make sufficient strategic acquisitions at reasonable
prices and to integrate the acquired businesses successfully,
obtaining anticipated cost savings and operating income improvements
within a reasonable period of time, will be important factors in our
future growth.
Foreign Operations
------------------
Foreign operations, especially in Europe (which is a focus of
our international growth) but also in 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.
3
EXHIBIT 99.2
------------
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Newell Rubbermaid Inc. (the
"Company") on Form 10-Q for the period ending March 31, 2003 as filed
with the Securities and Exchange Commission on the date hereof (the
"Report"), I, Joseph Galli, Jr., Chief Executive Officer of the
Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section
13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in
all material respects, the financial condition and result of
operations of the Company.
/s/ Joseph Galli, Jr.
---------------------------
Joseph Galli, Jr.
Chief Executive Officer
April 30, 2003
EXHIBIT 99.3
------------
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Newell Rubbermaid Inc. (the
"Company") on Form 10-Q for the period ending March 31, 2003 as filed
with the Securities and Exchange Commission on the date hereof (the
"Report"), I, William T. Alldredge, Chief Financial Officer of the
Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section
13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in
all material respects, the financial condition and result of
operations of the Company.
/s/ William T. Alldredge
----------------------------
William T. Alldredge
Chief Financial Officer
April 30, 2003
