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November 28, 2007
United States Securities and Exchange Commission
Division of Corporation Finance
Washington, D.C. 20549-7010
Attention: John Cash, Accounting Branch Chief
Re: Form 10-K for Fiscal Year Ended December 31, 2006
File No. 1-9608
Dear Mr. Cash:
We are in receipt of your comment letter dated October 11, 2007 to
Newell Rubbermaid Inc. (the "Company") related to the Company's June
29, 2007 and September 4, 2007 responses to your previous comment
letters dated May 17, 2007 and July 17, 2007. On behalf of the
Company, we have addressed the remaining comment in the October 11,
2007 letter by reproducing the comment below and providing the
Company's response immediately following.
FORM 10-K FOR FISCAL YEAR ENDED DECEMBER 31, 2006
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Footnote 19 - Industry Segment Information, page 71
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1. We note your response to prior comment 2 regarding the
appropriateness of aggregating the Rubbermaid Commercial
Products, Rubbermaid Food Products, Rubbermaid Home Products
and Levolor/Kirsch operating segments into your Cleaning,
Organization & Decor reportable segment. In light of the
aggregation criteria set forth in paragraph 17 SFAS 131, we
continue to have concerns regarding the appropriateness of
aggregating Rubbermaid Home products and Levolor/Kirsch
within your Cleaning, Organization & Decor reportable
segment.
Specifically, with regard to the aggregation of Rubbermaid Home
Products, we note the following:
* In 2003, the Company began internally reporting certain
product categories of the Rubbermaid business as Rubbermaid
Home Products. You acknowledge that the products identified
as home products generally had lower gross margins.
* We note your expectation that the forecasted gross margins
of the Rubbermaid Home Products business will "move into
closer alignment" with the other Rubbermaid operating
segments. However, it does not appear to us that this
closer alignment results in Rubbermaid Home Products having
historical or expected long-term average gross margins that
are similar to Rubbermaid Commercial and Rubbermaid Food
Products.
* Your discussion of the fact that you continue to
aggressively position Rubbermaid Home Products for improved
profitability in the future and the need to expand and
improve the product mix of products in the Rubbermaid Home
Products operating segment highlights to us that the
appropriate allocation of resources to this operating
segment is important to the company and that separate
disaggregated segment disclosures in addition to good
quality Management's Discussion and Analysis information
regarding this segment is necessary for a reader's ability
to see the company through the eyes of management.
* While you believe that there is no single measure that
demonstrates the economic similarity of the three Rubbermaid
operating segments, we note that SFAS 131 looks to long term
gross margin and sales trends as an indicator of economic
similarity.
* You indicate that it is management's intention to collapse
the three Rubbermaid operating segments back into a single
operating segment "at an appropriate time". It is unclear
to us your timetable for revising your internal reporting
structure, however, notwithstanding management's intentions,
we continue to believe the segment information presented in
your historical financial statements should be
representative of your current internal reporting structure
such that Rubbermaid Home Products is reported as a separate
reportable segment.
For these reasons, we continue to believe your historical financial
statements should be revised to reflect Rubbermaid Home Products as a
separate reportable segment.
Company Response
----------------
While the Company acknowledges that the gross margins of Rubbermaid
Home Products (RHP) are currently lower than the margins of the other
operating segments within the Cleaning Organization and Decor (COD)
reporting segment, it is the Company's long-term expectation that RHP
margins will be similar to the other operating segments of COD. SFAS
131 does not specify a time horizon for the Company's long-term
expectations; however the Company's efforts and results to date lend
credibility to the Company's expectations that similar margins will be
attained.
The Company noted in its previous response that it was aggressively
positioning RHP for improved profitability in the future. The Company
disagrees with the Staff's view that this indicates an allocation of
resources weighted towards RHP, such that separate disclosures of the
RHP segment may be warranted. The Company focused its prior response
on RHP because that was the segment at issue in the Staff's question.
The Company has considerable resources dedicated throughout the entire
Rubbermaid business. The profitability improvement initiatives noted
in the Company's previous response are corporate wide initiatives such
as innovation, distribution and transportation and Project
Acceleration, none of which are intended to solely benefit RHP, but
rather are initiatives intended to benefit all of the Company's
businesses. The Chief Operating Decision Maker (CODM) allocates
resources at the reporting segment level, and in fact, notably the
Company's allocation of product development resources in the COD
reporting segment is allocated more heavily towards Rubbermaid
Commercial Products and Rubbermaid Food Products.
The Company feels it is important to note again that the Rubbermaid
businesses are extremely integrated. RHP primarily consists of lower
featured products from Rubbermaid Commercial Products and Rubbermaid
Food Products. As noted in our previous response, the RHP margin
improvement is expected to come through, in large part, a shift in mix
to new products with higher margins. These products will be developed
primarily by taking products from the other Rubbermaid businesses,
modifying them to eliminate some features and marketing them as home
products. For example, a commercial grade cleaning product would lose
some of its commercial features and be sold as a home product.
The Company agrees with the Staff's assertion that the reader of its
financial statements should see the Company through the eyes of
management. As noted in the previous response, management believes
that the Rubbermaid business is best viewed as part of a single
reporting unit. The Company continues to pursue increased
placement/visibility and improved profitability of the brand as a
whole. It is important to reiterate that the brand is managed by a
single segment manager, and that the Rubbermaid operating segments
have common customers, shared manufacturing operations, customer
service, purchasing, key account sales management, industrial design,
marketing, and consumer research. In 2007, the Company also combined
all of the Rubbermaid businesses into a single campus to further
leverage synergies across back office functions. Consequently, very
little effort is made to accurately allocate these shared resource
dollars back to individual Rubbermaid operating segments, because more
emphasis is placed on the profitability of the brand as a whole.
The Company noted in its previous response that it would collapse the
Rubbermaid operating segments back into a single operating segment at
an appropriate time. This was in reference to the Company's reporting
package, which is prepared on a quarterly basis and provided to
operating segment managers and its CODM. The Company's internal
reporting to its CODM has historically, for all of its operating and
reporting segments, included reporting of both the individual
operating segments and the consolidated reporting segment. The CODM
manages the business at the reporting segment level. Investment
decisions, strategic planning, resource allocation and quarterly
business reviews are all conducted at the reporting segment level for
the CODM. The Company's internal reporting was a function of a desire
to have a single reporting package usable by both the operating
segment managers and the CODM. The Company never created separate
reporting packages because it continues to believe that it meets the
aggregation requirements of SFAS 131.
The Company does not believe revision of its historical financial
statements is needed because the operating segments of the COD
reporting segment meet the criteria for aggregation as set forth in
paragraph 17 of SFAS 131 and provides the users of the financial
statements with a view consistent with the way the businesses are
viewed and run by management. As noted in our previous response, this
aggregation is also consistent with how the Rubbermaid business
outside of the US is viewed by the consolidated segment manager.
In addition, in the fourth quarter of 2007, the Company will change
its reporting package to the CODM to more accurately reflect how the
business is managed and resources are allocated. Specifically, the
CODM (our CEO) will now receive quarterly financial data of only the
previously designated four reporting segments of the business.
Therefore, under SFAS 131, going forward the Company will have four
operating and four reporting segments. The Company believes the Staff
should consider this change in our operating segments when completing
its consideration of whether RHP meets the aggregation criteria of
SFAS 131. If the Staff were to disagree with the Company's assessment
of SFAS 131, and require a restatement of that data, the Company would
also have to restate the segment footnote again prior to filing its
2007 Form 10-K, consistent with paragraph 34 of SFAS 131. Again, we
believe the Staff's suggested restatement would not provide meaningful
information to our shareholders, and certainly two restatements of our
segment data within months, one to separately disclose RHP and one to
again report RHP within COD, would not be beneficial to our
shareholders and other users of our financial statements.
Please contact Rick Dillon, Vice President Corporate Controller at
(770)-407-3930 or me at (770) 407-3806 should you have any questions
regarding our responses or any related matters.
Sincerely,
Newell Rubbermaid Inc.
By: /s/ J. Patrick Robinson
_____________________________
Title: Executive Vice President and
Chief Financial Officer