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CONFIDENTIAL TREATMENT REQUESTED BY NEWELL RUBBERMAID INC.
Page NR-1
September 4, 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 July 17, 2007 to Newell
Rubbermaid Inc. (the "Company") which requests additional information
related to the Company's June 29, 2007 response to your initial
comment letter dated May 17, 2007. On behalf of the Company, we have
addressed your comment letter by reproducing each comment below and
providing the Company's response immediately following. We have also
provided supplemental information as requested or where we believe
appropriate to the response.
CRITICAL ACCOUNTING POLICIES, PAGE 30
1. We note your response to prior comment 1. Given the significance
of goodwill as well as the subjectivity and judgment involved in
determining the estimates and assumptions you use in assessing
your goodwill for impairment and the susceptibility of such
estimates and assumptions to change, we continue to believe that
your disclosures surrounding your goodwill critical accounting
policy should include a more robust analysis of your process of
determining and measuring goodwill impairment. We remind you
that the Critical Accounting Estimates section of the Release No.
33-8350 sets forth the Staff's view that companies should provide
quantitative disclosures when quantitative information is
reasonably available and will provide material information for
investors. As a result, to the extent you gather and analyze
information regarding the potential impairment of goodwill, such
information may be required to be disclosed if it would be
material and useful to investors.
COMPANY RESPONSE
In future filings, to the extent that the Company gathers and
analyzes information regarding potential impairment of goodwill
that would be material and useful to investors, the Company will
provide additional disclosures, including quantitative
disclosures in accordance with Release No. 33-8350.
CONFIDENTIAL TREATMENT REQUESTED BY NEWELL RUBBERMAID INC.
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FOOTNOTE 19 INDUSTRY SEGMENT INFORMATION
2. Thank you for the information you provided in response to prior
comment 3. We have the following comments in this regard.
We note that prior to your 2006 Form 10-K, the Cleaning &
Organization reportable segment consisted of (i) Rubbermaid
Commercial Products, (ii) Rubbermaid Food Products and (iii)
Rubbermaid Home Products. The gross margins for the Rubbermaid
Home Products operating segment for the past four fiscal years as
well as the expected future gross margins are materially below
the gross margins generated by your Rubbermaid Commercial
Products and Rubbermaid Food Products segments. The aggregation
of this operating segment therefore does not appear appropriate.
We note that in your 2006 Form 10-K, you aggregated Levolor
Kirsch in the Cleaning, Organization and Decor reportable segment
based on your belief that the nature of the products sold by
Rubbermaid Home, Rubbermaid Commercial and Rubbermaid Food were
similar to the products sold by Levolor Kirsch. However, we
continue to believe your analysis of the similarity of the nature
of the products within your Levolor and Rubbermaid operating
segments is too broad. As you indicated, we note that both
Levolor and Rubbermaid are meaningful brands to your target
customers. We also believe that these brands represent
significantly different products to those customers.
Please reassess the guidance set forth in paragraph 17 of SFAS
131 given our above concerns and revise your segment disclosures
accordingly.
COMPANY RESPONSE
RUBBERMAID HOME PRODUCTS. The Cleaning, Organization & Decor
reporting segment is comprised of Rubbermaid Commercial Products,
Rubbermaid Food Products, Rubbermaid Home Products (collectively
"Rubbermaid") and Levolor/Kirsch. Rubbermaid is a leader in high
quality cleaning and refuse and indoor, outdoor and home
organization products. For many years, the Company had a single
operating segment identified as Rubbermaid. The Company believes
this holistic view of the segment provided the most accurate view
of the gross margins and operating income of the products and was
reflective of the impact of the substantial brand equity across
the spectrum of Rubbermaid products. The Company continues to
believe presenting the Rubbermaid business collectively is the
most appropriate and meaningful presentation for investors.
In 2003, the Company began internally reporting certain product
categories of the Rubbermaid business as Rubbermaid Home Products.
CONFIDENTIAL TREATMENT REQUESTED BY NEWELL RUBBERMAID INC.
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The products identified as home products generally had lower gross
margins than the balance of the products sold through the
consumer channel. The Rubbermaid consumer channel is comprised
of products from all three Rubbermaid operating segments. The
process of segregating these products, for financial reporting
purposes, was then and remains very complex. The international
Rubbermaid business continues to be managed collectively as
Rubbermaid, including Canada, Europe and Asia. Given the
Company's belief that looking at the Rubbermaid business as a
whole provides the most appropriate view of the business, it is
management's intention to collapse the three Rubbermaid operating
segments back into a single operating segment, at an appropriate
time.
The decision in 2003 to divide the Rubbermaid U.S. business was a
part of the Company's overall assessment of its portfolio of
businesses and facilitated its discussion with the investment
community of "invest" versus "fix" businesses. A principal
reason for the division of Rubbermaid was to help focus efforts
on driving gross margin expansion, in the medium term, for the
home products category. Since 2003, the Company's Chief
Operating Decision Maker has periodically reviewed the results of
the Rubbermaid Home Products segment to monitor progress on gross
margin expansion.
The Company believes and has discussed openly with the investment
community that the profitability of the product lines comprising
Rubbermaid Home Products is in the process of a transformation.
The Company recognizes that the current and forecasted margins
for Rubbermaid Home Products are lower than the margins of the
other operating segments of the Cleaning, Organization & Decor
reporting segment; however, the Company's expectation is that
these margins will move into closer alignment. The Company has
taken several steps towards reaching this objective. For example,
it has exited unprofitable product lines, significantly reduced
excess capacity, aggressively pursued lower cost sourcing and
continued to launch innovative new product lines with higher
gross margins. All of these efforts have resulted in forecasted
gross margin expansion of *** basis points from 2003 to 2009 (a
combined annual growth rate of ***%) in spite of significant raw
material cost pressures.
*** Confidential treatment requested; certain information has
been omitted and filed separately with the Commission Staff.
CONFIDENTIAL TREATMENT REQUESTED BY NEWELL RUBBERMAID INC.
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The Company continues to aggressively position Rubbermaid Home
Products for improved profitability in the future. Although the
Company has made significant progress in these efforts, it will
be a multi-year process as the Company continues to execute
Project Acceleration coupled with its distribution and
transportation initiatives and to focus on sourcing and
innovation. The Company recognizes the need to expand and
improve the mix of products in the Rubbermaid Home Products
operating segment in order to continue to improve the
profitability of the segment. The Company intends to deliver
future gross margin expansion through continued innovation of its
existing product lines, new product lines and expansion into
select new near neighbor categories.
The Rubbermaid Home Products business is critical to the overall
welfare of the Rubbermaid brand and the Company is committed to
continuing to improve its profitability. The Company believes
these product lines are very important to the
placement/visibility of all of the products sold under the
Rubbermaid brand which contributes to and enhances the
profitability of the Rubbermaid business as a whole. It is
important to note that the Rubbermaid business is extremely integrated
and there is no single measure that demonstrates the economic
similarity or interdependency of the three operating segments.
In addition to sharing a common senior management team and many
common customers, these businesses also share common manufacturing
operations, customer service, purchasing, key account sales
management, industrial design, marketing, consumer research and
back office functions such as finance and human resources.
The Company believes its long term view, future plans and
execution to date support the fact that the economics of
Rubbermaid Home Products are integrally linked to the performance
of the Rubbermaid brand as a whole, and in the long term, that
Rubbermaid Home Products will produce gross margins similar to
those of Rubbermaid Food Products, Rubbermaid Commercial Products
and Levolor/Kirsch.
The Company believes that the non-economic criteria outlined in
its previous response also support the appropriateness of
aggregating Rubbermaid Home Products in the Cleaning, Organization
& Decor segment.
For all of the reasons discussed above, the Company believes that
Rubbermaid Home Products meets the criteria for aggregation.
LEVOLOR/KIRSCH. With regard to the Levolor/Kirsch business, the
Company does not agree with the Staff's assertion that its
assessment of the nature of the products is too broad. As stated
CONFIDENTIAL TREATMENT REQUESTED BY NEWELL RUBBERMAID INC.
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previously, the Company believes that the products in the segment
serve the decorative needs of the consumer, including decorative
refuse containers, closet organizers and window coverings. The
Company believes that its current segmentation provides the most
accurate and clear view of the businesses included in its
portfolio, which includes a very broad array of products and
categories, and is consistent with how the business is managed.
The Company believes it is important to note again, that the
divestitures in its previously reported Home Fashion segment have
left the Levolor/Kirsch business remaining as an individually
immaterial operating segment. The Company considered its
management structure, how the Chief Operating Decision Maker
views the business and how to provide the investment community
with the best information about the performance of the segment in
its assessment of the aggregation criteria of SFAS 131. The
Company considered including this business in its "Other"
category along with other individually immaterial businesses,
which are all also included in the Company's Home & Family
operating group, and concluded that this would provide a less
informative view of these businesses and would be inconsistent
with the expectations of the investor community, the intent of
SFAS 131 and the Company's operating structure. Each of the
Company's reporting segments has a Group president and the
investment community has access to these leaders through various
investor relations events. The more appropriate presentation in the
Company's view was to include the Levolor/Kirsch business in the
Cleaning, Organization and Decor segment, consistent with the
aggregation criteria in SFAS 131, including how the business is
managed.
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