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 June 30, 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)
(770) 670-2232
(Registrant's telephone number, including area code)
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 July 31, 2003: 274.4 million
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NEWELL RUBBERMAID INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA)
Three Months Ended Six Months Ended
June 30, June 30,
2003 2002 2003 2002
---- ---- ---- ----
Net sales $1,976.1 $1,895.0 $3,712.5 $3,492.0
Cost of products sold 1,426.1 1,374.4 2,699.1 2,552.3
--------- --------- --------- ---------
GROSS MARGIN 550.0 520.6 1,013.4 939.7
Selling, general and administrative expenses 351.6 330.0 674.2 629.2
Restructuring costs 57.9 8.9 117.6 18.6
--------- --------- --------- ---------
OPERATING INCOME 140.5 181.7 221.6 291.9
Nonoperating expenses:
Interest expense 28.6 29.3 60.6 54.4
Other, net 2.7 18.1 28.0 26.0
--------- --------- --------- ---------
Net nonoperating expenses 31.3 47.4 88.6 80.4
--------- --------- --------- ---------
INCOME BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF
ACCOUNTING CHANGE 109.2 134.3 133.0 211.5
Income taxes 35.4 45.7 43.2 72.0
--------- --------- --------- ---------
INCOME BEFORE CUMULATIVE
EFFECT OF ACCOUNTING CHANGE 73.8 88.6 89.8 139.5
Cumulative effect of accounting change - - - (514.9)
--------- --------- --------- ---------
NET INCOME (LOSS) $73.8 $88.6 $89.8 ($375.4)
========= ========= ========= =========
Weighted average shares outstanding:
Basic 274.2 267.0 273.8 266.9
Diluted 274.7 268.0 274.2 267.8
2
Earnings (loss) per share:
Basic -
Before cumulative effect of accounting change $0.27 $0.33 $0.33 $0.52
Cumulative effect of accounting change - - - (1.93)
--------- --------- --------- ---------
Net income (loss) per common share: $0.27 $0.33 $0.33 ($1.41)
========= ========= ========= =========
Diluted -
Before cumulative effect of accounting change $0.27 $0.33 $0.33 $0.52
Cumulative effect of accounting change - - - (1.92)
--------- -------- --------- ---------
Net income (loss) per common share $0.27 $0.33 $0.33 ($1.40)
========= ======== ========= =========
Dividends per share $0.21 $0.21 $0.42 $0.42
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED).
3
NEWELL RUBBERMAID INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS)
June 30, December 31,
2003 2002
-------- ------------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $35.4 $55.1
Accounts receivable, net 1,455.1 1,377.7
Inventories, net 1,365.1 1,196.2
Deferred income taxes 202.3 213.5
Prepaid expenses and other 221.7 237.5
------- -------
TOTAL CURRENT ASSETS 3,279.6 3,080.0
OTHER ASSETS 313.3 286.7
PROPERTY, PLANT AND EQUIPMENT, NET 1,847.2 1,812.8
DEFERRED INCOME TAXES 10.9 -
GOODWILL, NET 2,308.4 1,847.3
OTHER INTANGIBLE ASSETS, NET 368.2 362.1
------- -------
TOTAL ASSETS $8,127.6 $7,388.9
======== ========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED).
4
NEWELL RUBBERMAID INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONT.)
(IN MILLIONS, EXCEPT PER SHARE DATA)
June 30, December 31,
2003 2002
---- ----
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $37.4 $25.2
Accounts payable 863.0 686.6
Accrued compensation 107.9 153.5
Other accrued liabilities 1,085.3 1,165.4
Income taxes 134.3 159.7
Current portion of long-term debt 129.8 424.0
------- -------
TOTAL CURRENT LIABILITIES 2,357.7 2,614.4
LONG TERM DEBT 2,547.0 1,856.6
OTHER NONCURRENT LIABILITIES 398.6 348.4
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 290.0 283.1
Outstanding shares:
2003 - 290.0 million
2002 - 283.1 million
Treasury stock, at cost: (410.9) (409.9)
Shares held:
2003 - 15.7 million
2002 - 15.7 million
Additional paid-in capital 436.2 237.3
Retained earnings 2,117.8 2,143.2
Accumulated other comprehensive loss (110.3) (190.2)
------- -------
TOTAL STOCKHOLDERS' EQUITY 2,322.8 2,063.5
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $8,127.6 $7,388.9
======== ========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED).
5
NEWELL RUBBERMAID INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(IN MILLIONS)
Six Months Ended June 30,
2003 2002
---- ----
OPERATING ACTIVITIES:
Net income (loss) $89.8 ($375.4)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Cumulative effect of accounting change - 514.9
Depreciation and amortization 137.6 146.4
Deferred income taxes 0.1 38.1
Noncash restructuring and restructuring related charges 62.9 6.1
Loss on sale of business 20.5 -
Other 22.3 13.3
Changes in current accounts excluding the
effects of acquisitions:
Accounts receivable (14.3) (53.2)
Inventories (141.3) (87.3)
Other current assets 8.5 (13.8)
Accounts payable 161.2 132.8
Accrued liabilities and other (205.9) (23.2)
------ ------
NET CASH PROVIDED BY OPERATING ACTIVITIES 141.4 298.7
------ ------
INVESTING ACTIVITIES:
Acquisitions, net of cash acquired (458.7) (228.8)
Expenditures for property, plant and equipment (188.4) (101.2)
Disposals of noncurrent assets and other 10.2 6.9
------ ------
NET CASH USED IN INVESTING ACTIVITIES (636.9) (323.1)
------ ------
FINANCING ACTIVITIES:
Proceeds from issuance of debt 1,036.1 520.8
Proceeds from issuance of stock 200.1 -
Payments on notes payable and long-term debt (651.4) (391.0)
Cash dividends (115.2) (112.1)
Proceeds from exercised stock options and other 4.7 9.4
------ ------
NET CASH PROVIDED BY FINANCING ACTIVITIES 474.3 27.1
------ ------
Exchange rate effect on cash 1.5 0.6
------ ------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (19.7) 3.3
Cash and cash equivalents at beginning of year 55.1 6.8
------- ------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $35.4 $10.1
======= ======
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED).
6
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 January 2003, the Financial
Accounting Standards Board (FASB) issued Interpretation No. 46,
Consolidation of Variable Interest Entities, an Interpretation of
Accounting Research Bulletin No. 51 (the Interpretation). The
Interpretation introduces a new consolidation model - the variable
interests model - which determines control and consolidation based on
potential variability in gains and losses of the entity being
evaluated for consolidation. Under the Interpretation, variable
interest entities (VIE's) are to be evaluated for consolidation based
on their variable interests. Variable interests are contractual,
ownership, or other interests in an entity that expose their holders
to the risks and rewards of the VIE. Variable interests include
equity investments, loans, leases, derivatives, guarantees, and other
instruments whose values change with changes in the VIE's assets. The
provisions of the Interpretation apply to interests in VIE's acquired
before February 1, 2003 and are effective as of the beginning of the
first annual or interim period beginning after June 15, 2003.
Adoption of this standard will not have a material effect on the
Company's financial statements.
7
In April 2003, the FASB issued Statement of Financial Accounting
Standard No. 149 (FAS 149), "Amendment of Statement 133 on Derivative
Instruments and Hedging Activities." FAS 149 amends and clarifies
financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives) and for hedging activities
under FASB Statement No. 133, "Accounting for Derivative Instruments
and Hedging Activities." The statement improves financial reporting
by requiring that contracts with comparable characteristics be
accounted for similarly, which will result in more consistent
reporting of contracts as either derivatives or hybrid instruments.
The Company adopted the provisions of FAS 149, effective June 30,
2003. Adoption of this standard did not have a material effect on the
Company's financial statements.
In May 2003, the FASB issued Statement of Financial Accounting
Standard No. 150 (FAS 150), "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity." FAS
150 establishes standards for how an issuer classifies and measures
certain financial instruments with characteristics of both liabilities
and equity. This statement is effective for financial instruments
entered into or modified after May 31, 2003, and otherwise is
effective at the beginning of the first interim period beginning after
June 15, 2003. Had this statement been adopted on January 1, 2003,
the Company would have reclassified its Company Obligated Mandatorily
Redeemable Convertible Preferred Securities of a Subsidiary Trust into
Long Term Debt in the Company's Consolidated Balance Sheet and reclassi-
fied approximately $6.7 million and $13.4 million of interest expense
from Other, net to Interest Expense in the Company's Consolidated
Statement of Operations for the three and six months ended June 30, 2003,
respectively.
8
NOTE 2 - CHANGES IN ACCOUNTING PRINCIPLE
Effective January 1, 2002, the Company adopted Statement of Financial
Accounting Standards 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 in the
third quarter 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.
A summary of changes in the Company's goodwill during the six months
ended June 30, 2003 is as follows (IN MILLIONS):
Balance at December 31, 2002 $1,847.3
Acquisitions 431.5
Other (primarily foreign exchange) 29.6
--------
Balance at June 30, 2003 $2,308.4
========
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 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 completing 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 million,
which included $197 million for the majority 50.5% ownership stake,
9
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,
other than American Tool, 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 $14.1 million
for facility and other exit costs, $10.3 million for employee
severance and termination benefits and $6.2 million for other pre-
acquisition contingencies.
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 six months ended June 30, (IN MILLIONS, EXCEPT PER SHARE
AMOUNTS):
2003 2002
---- ----
Net sales $3,712.5 $3,725.2
Income before accounting change $89.8 $146.6
Basic earnings per share before
accounting change $0.33 $0.55
Net income (loss) $89.8 ($368.4)
Basic earnings (loss) per share $0.33 ($1.38)
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.
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 strategic restructuring plan, management intends to
10
streamline the Company's supply chain to enable it to be the low cost
global provider throughout the Company's product portfolio. The
plan's terms include reducing worldwide headcount and consolidating
duplicative manufacturing facilities, over a three-year period
beginning in 2001. In the first six months of 2003, the Company
incurred facility exit costs and employee severance and termination
benefit costs for approximately 3,600 employees, as described in the
table below. Under the restructuring plan, 69 facilities have been
exited and headcount has been reduced by 8,400 employees.
Pre-tax restructuring costs consisted of the following (IN MILLIONS):
Three Months Ended Six Months Ended June 30,
June 30,
2003 2002 2003 2002
---- ---- ---- ----
Facility and other exit costs $24.3 $1.8 $56.6 $4.7
Employee severance and termination benefits 30.7 7.0 57.4 13.3
Exited contractual commitments 2.9 0.1 3.6 0.6
------ ------ ------ ------
Total Restructuring Costs $57.9 $8.9 $117.6 $18.6
====== ====== ====== ======
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 $54.1 million and $21.7 million in the
first six months of 2003 and 2002, respectively. A summary of the
Company's restructuring plan reserves is as follows (IN MILLIONS):
12/31/01 Costs 06/30/02
Balance Provision Incurred Balance
-------- --------- -------- -------
Facility and other exit costs $20.1 $4.7 ($7.5) $17.3
Employee severance and termination benefits 6.2 13.3 (15.3) 4.2
Exited contractual commitments 1.9 0.6 (0.7) 1.8
------ ------ ------ ------
$28.2 $18.6 ($23.5) $23.3
====== ====== ====== ======
12/31/02 Costs 06/30/03
Balance Provision Incurred Balance
-------- --------- -------- -------
Facility and other exit costs $36.1 $56.6 ($50.3) $42.4
Employee severance and termination benefits 41.1 57.4 (53.1) 45.4
Exited contractual commitments 2.1 3.6 (4.3) 1.4
------ ------ ------ ------
$79.3 $117.6 ($107.7) $89.2
====== ====== ====== ======
11
The facility and other exit cost reserves of $42.4 million at June 30,
2003 are primarily related to future minimum lease payments on vacated
facilities and other closure costs related to 45 facilities and
administrative offices.
In 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 $30.5
million. The amount of the impairment was determined using a
discounted cash flow analysis.
In 2003, the Company recorded a non-cash restructuring charge of $11.0
million relating to the curtailment of a pension plan associated with
the closure of one of the Company's exited facilities. The non-cash
restructuring charge has been included in employee severance and
termination benefits as disclosed in the table above.
Severance reserves of $45.4 million at June 30, 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):
June 30, December 31,
2003 2002
---- ----
Materials and supplies $342.0 $308.8
Work in process 210.2 174.9
Finished products 812.9 712.5
-------- --------
$1,365.1 $1,196.2
======== ========
12
NOTE 6 - LONG-TERM DEBT
The following is a summary of long-term debt (IN MILLIONS):
June 30, December 31,
2003 2002
---- ----
Medium-term notes $1,804.5 $1,680.9
Commercial paper 414.0 140.0
Preferred debt
securities 450.0 450.0
Other long-term debt 8.3 9.7
------- -------
Total debt 2,676.8 2,280.6
Current portion of
long-term debt (129.8) (424.0)
-------- --------
Long-term Debt $2,547.0 $1,856.6
======== ========
On June 16, 2003, the Company terminated certain interest rate swap
agreements prior to their scheduled maturities and received cash of
$11.4 million. Of this amount, $10.8 million represents the fair
value of the swaps that were terminated and the remainder represents
interest received on the swaps. The cash received relating to the
fair value of the swaps is included in Other as an operating activity
in the Consolidated Statement of Cash Flows. As of June 30, 2003, the
unamortized gain of $10.7 million on the terminated interest rate
swaps is accounted for as long-term debt (of which $3.3 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 June 13, 2003, Newell Rubbermaid rolled over the $650.0 million 364
day Revolving Credit Facility that was scheduled to terminate on June
14, 2003. The new agreement consists of 19 participating banks and
will mature on June 11, 2004. The revolver requires, among other things,
that the Company maintain certain interest coverage and total indebted-
ness to total capital ratio, as defined in the agreement. The agreement
also limits subsidiary indebtedness. As of June 30, 2003, the Company
was in compliance with this agreement. No amounts are outstanding under
the Revolving Credit Facility as of June 30, 2003.
On May 6, 2003, the Company issued $400.0 million of medium term notes
with seven-year and two-year maturities. The $400.0 million of medium
term notes consist of $250.0 million in 4.00% notes due 2010 and
$150.0 million in 2.00% notes due 2005. The seven-year notes pay
interest semi-annually on May 1 and November 1 until final maturity on
May 1, 2010. The two-year notes pay interest semi-annually on May 1
and November 1 until final maturity on May 1, 2005. The proceeds of
these issuances were used to pay down commercial paper. These
13
issuances are reflected in the outstanding amount of medium-term notes
noted above and the entire amount is considered to be long-term debt.
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 received on the swaps. The cash received relating to the
fair value of the swaps is included in Other as an operating activity
in the Consolidated Statement of Cash Flows. As of June 30, 2003, the
unamortized gain of $15.8 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
On May 7, 2003, the Company's stockholders approved a 2003 Stock Plan.
The 2003 Plan provides for grants of up to an aggregate of 15.0
million stock options, stock awards and performance shares (except
that no more than 3.0 million of those grants may be stock awards and
performance shares). Under the 2003 Plan, the option exercise price
will equal the common stock's closing price on the date of grant.
Options will vest over five years (which may be shortened to no less
than three years) and expire ten years from the date of grant. Also,
under the 2003 Plan, none of the restrictions on stock awards will
lapse earlier than the third anniversary of the date of grant.
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
forma amounts for the six months ended June 30, (IN MILLIONS, EXCEPT
PER SHARE DATA):
14
2003 2002
---- ----
Net income (loss):
As reported $89.8 ($375.4)
Fair value option expense (9.0) (8.3)
----- --------
Pro forma $80.8 ($383.7)
Basic earnings (loss) per share:
As reported $0.33 ($1.41)
Pro forma 0.30 (1.44)
Diluted earnings (loss) per share:
As reported $0.33 ($1.40)
Pro forma 0.29 (1.43)
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.
15
NOTE 8 - EARNINGS PER SHARE
The calculation of basic and diluted earnings per share for the three
and six months ended June 30, is shown below (IN MILLIONS, EXCEPT PER
SHARE DATA):
"In the Convertible
Basic Money" Preferred Diluted
Method Options(1) Securities(2) Method
------ ---------- ------------- ------
Three Months Ended June 30, 2003
--------------------------------
Net income $73.8 - - $73.8
Weighted average shares outstanding 274.2 0.5 - 274.7
Earnings per share $0.27 $0.27
Three Months Ended June 30, 2002
--------------------------------
Net income $88.6 - - $88.6
Weighted average shares outstanding 267.0 1.0 - 268.0
Earnings per share $0.33 $0.33
Six Months Ended June 30, 2003
------------------------------
Net income $89.8 - - $89.8
Weighted average shares outstanding 273.8 0.4 - 274.2
Earnings per share $0.33 $0.33
Six Months Ended June 30, 2002
------------------------------
Income before cumulative effect of
accounting change $139.5 - - $139.5
Weighted average shares outstanding 266.9 0.9 - 267.8
Earnings per share $0.52 $0.52
Net loss ($375.4) - - ($375.4)
Weighted average shares outstanding 266.9 0.9 - 267.8
Loss per share ($1.41) ($1.40)
(1) The weighted average shares outstanding for the three months ended June 30, 2003 and 2002 exclude
approximately 7.6 million and 3.0 million stock options, respectively, and by approximately
7.7 million and 3.7 million stock options for the six months ended June 30, 2003 and 2002,
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 and would, therefore, be anti-dilutive.
(2) The convertible preferred securities are anti-dilutive for the three and six months ended June 30, 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 for the three months ended June 30, 2003 and 2002,
respectively, and by $8.4 million and $8.8 million for the six months ended June 30, 2003 and 2002,
respectively, and weighted average shares outstanding would have increased by 9.9 million shares
in all periods.
16
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
Gain (Loss) Gain Liability Loss
----------- ---- --------- ----
Balance at December 31, 2002 ($115.1) $0.4 ($75.5) ($190.2)
Current year change 69.5 3.5 6.9 79.9
------- ------- ------- -------
Balance at June 30, 2003 ($45.6) $3.9 ($68.6) ($110.3)
======= ======= ======= =======
Total comprehensive income (loss) amounted to the following (IN MILLIONS):
Three Months Ended Six Months Ended
June 30, June 30,
2003 2002 2003 2002
---- ---- ---- ----
Net income (loss) $73.8 $88.6 $89.8 ($375.4)
Foreign currency translation gain 78.1 96.3 69.5 62.7
After-tax derivatives hedging gain (loss) (2.9) 6.0 3.5 7.7
After-tax minimum pension liability 6.9 - 6.9 -
------ ------ ------ ------
Comprehensive income (loss) $155.9 $190.9 $169.7 ($305.0)
====== ====== ====== ======
17
NOTE 10 - INDUSTRY SEGMENTS
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
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):
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- ---------------------
2003 2002 2003 2002
---- ---- ---- ----
Net Sales (1)
---------
Rubbermaid $751.2 $738.2 $1,469.2 $1,448.3
Sharpie 485.2 464.0 779.6 765.9
Irwin 520.5 447.3 1,002.6 778.4
Calphalon Home 219.2 245.5 461.1 499.4
-------- -------- -------- --------
$1,976.1 $1,895.0 $3,712.5 $3,492.0
======== ======== ======== ========
Operating Income (2)
----------------
Rubbermaid $39.9 $51.8 $107.3 $112.9
Sharpie 107.6 96.5 137.4 122.3
Irwin 55.6 41.2 95.2 61.1
Calphalon Home 1.6 8.8 12.8 29.4
Corporate (3) (6.3) (7.7) (13.5) (15.2)
Restructuring Costs (57.9) (8.9) (117.6) (18.6)
-------- -------- ------- -------
$140.5 $181.7 $221.6 $291.9
======== ======== ======= =======
Identifiable Assets
-------------------
Rubbermaid $1,908.6 $1,847.2
Sharpie 1,098.1 991.5
Irwin 1,380.4 1,226.4
Calphalon Home 726.5 709.8
Corporate (4) 3,014.0 2,614.0
-------- --------
$8,127.6 $7,388.9
======== ========
18
GEOGRAPHIC AREA INFORMATION
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- --------------------
2003 2002 2003 2002
---- ---- ---- ----
Net Sales
---------
United States $1,391.2 $1,380.0 $2,626.4 $2,554.2
Canada 96.2 81.7 170.6 145.4
-------- -------- -------- --------
North America 1,487.4 1,461.7 2,797.0 2,699.6
Europe 384.5 328.4 731.4 620.6
Central and South America 72.1 76.0 121.5 123.9
All other 32.1 28.9 62.6 47.9
-------- -------- -------- --------
$1,976.1 $1,895.0 $3,712.5 $3,492.0
======== ======== ======== ========
Operating Income
----------------
United States $139.6 $139.2 $211.6 $231.7
Canada 14.5 10.3 24.5 14.6
-------- -------- -------- --------
North America 154.1 149.5 236.1 246.3
Europe (24.4) 15.7 (30.6) 22.6
Central and South America 6.5 10.7 8.6 13.5
All other 4.3 5.8 7.5 9.5
-------- -------- -------- --------
$140.5 $181.7 $221.6 $291.9
======== ======== ======== ========
Identifiable Assets (5)
-----------------------
United States $5,752.3 $5,151.0
Canada 137.0 115.7
-------- --------
North America 5,889.3 5,266.7
Europe 1,876.8 1,802.0
Central and South America 255.6 224.4
All other 105.9 95.8
-------- --------
$8,127.6 $7,388.9
======== ========
1) All intercompany transactions have been eliminated. Sales to Wal*Mart Stores, Inc. and subsidiaries
amounted to approximately 16% of consolidated net sales in the first six months of 2003 and 2002.
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, selling, general and administrative
expenses, and restructuring costs. 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, goodwill, equity investments and deferred tax assets.
5) Transfers of finished goods between geographic areas are not significant.
19
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 representations
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 June 30, 2003, the Company has identified and quantified
exposures under these representations and indemnifications of
approximately $44.0 million, which expire in 2006. As of June 30,
2003, no amounts have been recorded on the balance sheet related to
these indemnifications, as the risk of loss is considered remote.
20
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:
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -----------------------
2003 2002 2003 2002
---- ---- ---- ----
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of products sold 72.2 72.5 72.7 73.1
------ ------ ------ ------
GROSS MARGIN 27.8 27.5 27.3 26.9
Selling, general and administrative expenses 17.8 17.4 18.2 18.0
Restructuring costs 2.9 0.5 3.2 0.5
------ ------ ------ ------
OPERATING INCOME 7.1 9.6 6.0 8.4
Nonoperating expenses:
Interest expense 1.4 1.5 1.6 1.6
Other, net 0.1 1.0 0.8 0.7
------ ------ ------ -------
Net nonoperating expenses 1.6 2.5 2.4 2.3
------ ------ ------ ------
INCOME BEFORE INCOME TAXES
AND CUMULATIVE EFFECT OF
ACCOUNTING CHANGE 5.5 7.1 3.6 6.1
Income taxes 1.8 2.4 1.2 2.1
------ ------ ------ ------
INCOME BEFORE CUMULATIVE
EFFECT OF ACCOUNTING
CHANGE 3.7 4.7 2.4 4.0
------ ------ ------ ------
Cumulative effect of accounting change - - - (14.7)
------ ------ ------ ------
NET INCOME (LOSS) 3.7% 4.7% 2.4% (10.8)%
====== ====== ====== ======
21
THREE MONTHS ENDED JUNE 30, 2003 VS. THREE MONTHS ENDED JUNE 30, 2002
---------------------------------------------------------------------
CONSOLIDATED OPERATING RESULTS:
Net sales for the three months ended June 30, 2003 (second quarter)
were $1,976.1 million, an increase of $81.1 million, or 4.3%, from
$1,895.0 million in the comparable quarter of 2002. The increase
resulted from sales contributions from the American Tool Companies,
Inc. (American Tool) (acquired April 2002) and American Saw & Mfg. Co.
(Lenox) (acquired January 2003) acquisitions.
Gross margin as a percentage of net sales in the second quarter of
2003 was 27.8%, or $550.0 million, versus 27.5%, or $520.6 million, in
the comparable quarter of 2002. The improvement in gross margin is
primarily related to the Company's productivity initiative, higher
margins from the Company's new products and the acquisition of Lenox,
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 second
quarter of 2003 were 17.8% of net sales, or $351.6 million, versus
17.4%, or $330.0 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 $57.9
million ($39.1 million after taxes) and $8.9 million ($5.9 million
after tax) in the second quarter of 2003 and 2002, respectively. The
2003 second quarter pre-tax charge included $24.3 million of facility
and other exit costs, $30.7 million of employee severance and
termination benefits, and $2.9 million in other restructuring costs.
The 2002 second quarter pre-tax charge included $1.8 million of
facility and other exit costs, $7.0 million of employee severance and
termination benefits, and $0.1 million in other restructuring costs.
See Note 4 to the Consolidated Financial Statements (Unaudited) for
further information on the strategic restructuring plan.
Operating income in the second quarter of 2003 was 7.1% of net sales,
or $140.5 million, versus operating income of 9.6%, or $181.7 million,
in the comparable quarter of 2002. Operating income includes
restructuring charges of $57.9 million ($39.1 million after taxes) and
$8.9 million ($5.9 million after taxes) in the second 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.
22
Net nonoperating expenses in the second quarter of 2003 were 1.6% of
net sales, or $31.3 million, versus 2.5%, or $47.4 million, in the
comparable quarter of 2002. The decrease in expenses is primarily
related to $13.6 million ($9.0 million after tax) of Anchor Hocking
transaction related costs incurred in 2002 associated with the
Company's withdrawn divestiture.
The effective tax rate was 32.5% in the second quarter of 2003 versus
34.0% in the second quarter of 2002. This lower rate reflects the
benefit of the full year impact of 2002 tax rate initiatives.
Net income for the second quarter of 2003 was $73.8 million, compared
to $88.6 million in the second quarter of 2002. Diluted earnings per
share were $0.27 in the second quarter of 2003 compared to $0.33 in
the second quarter of 2002. The decrease in net income and earnings
per share was primarily due to increased restructuring charges to
streamline the Company's supply chain.
BUSINESS GROUP OPERATING RESULTS:
Net sales in the four segments in which the Company operates were as
follows for the three months ended June 30, (IN MILLIONS):
2003 2002 % Change
---- ---- --------
Rubbermaid $751.2 $738.2 1.8%
Sharpie 485.2 464.0 4.6
Irwin 520.5 447.3 16.4
Calphalon Home 219.2 245.5 (10.7)
-------- -------- -----
Total Net Sales(1) $1,976.1 $1,895.0 4.3%
======== ======== =====
Operating income by segment was as follows for the three months ended
June 30, (IN MILLIONS):
2003 2002 % Change
---- ---- --------
Rubbermaid $39.9 $51.8 (23.0)%
Sharpie 107.6 96.5 11.5
Irwin 55.6 41.2 35.0
Calphalon Home 1.6 8.8 (81.8)
Corporate Costs (2) (6.3) (7.7)
Restructuring Costs (57.9) (8.9)
------ ------
Total Operating Income(3) $140.5 $181.7
====== ======
23
(1) All intercompany transactions have been eliminated. Sales
to Wal*Mart Stores, Inc. and subsidiaries amounted to
approximately 16% of consolidated net sales in the three
months ended June 30, 2003 and 2002. 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,
selling, general and administrative expenses, and
restructuring costs. 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 second quarter of 2003 were $751.2 million, an
increase of $13.0 million, or 1.8%, from $738.2 million in the second
quarter of 2002. A high single digit increase at Little Tikes and a
double-digit increase at Rubbermaid Europe (primarily currency
driven) were partially offset by a mid-single digit decline in the
Graco business.
Operating income for the second quarter of 2003 was $39.9 million, a
decrease of $11.9 million, or 23.0%, from $51.8 million in the second
quarter of 2002. The decrease in operating income is primarily the
result of higher raw material costs and pricing pressure on opening
price point items.
SHARPIE
Net sales for the second quarter of 2003 were $485.2 million, an
increase of $21.2 million, or 4.6%, from $464.0 million in the second
quarter of 2002. The increase in sales is primarily the result of
high single digit increases in the North American and European writing
instrument businesses driven by strong back-to-school sell-in,
partially offset by the disposition of Cosmolab in March 2003.
Operating income for the second quarter of 2003 was $107.6 million, an
increase of $11.1 million, or 11.5%, from $96.5 million in the second
quarter of 2002. Operating income was positively impacted by core
sales growth, productivity and favorable mix management, partially
offset by investments in marketing initiatives.
24
IRWIN
Net sales for the second quarter of 2003 were $520.5 million, an
increase of $73.2 million, or 16.4%, from $447.3 million in the second
quarter of 2002. The increase in net sales for the second quarter of
2003 was primarily due to sales from the American Tool and Lenox
acquisitions.
Operating income for the second quarter of 2003 was $55.6 million, an
increase of $14.4 million, or 35.0%, from $41.2 million in the second
quarter of 2002. The improvement in operating income was driven by
productivity, new products and the Lenox acquisition, partially offset
by the planned product line exits at Levolor/Kirsch and incremental
investments in marketing initiatives.
CALPHALON HOME
Net sales for the second quarter of 2003 were $219.2 million, a
decrease of $26.3 million, or 10.7%, from $245.5 million in the second
quarter of 2002. The sales decrease was primarily the result of a
double-digit decline at the US picture frame business, partially
offset by a double-digit increase in the European Housewares business.
Operating income for the second quarter of 2003 was $1.6 million, a
decrease of $7.2 million, or 81.8%, from $8.8 million in the second
quarter of 2002. The decrease in operating income is primarily due to
the decline in sales at the US picture frame business, unfavorable
product mix and pricing pressure on opening price point items.
SIX MONTHS ENDED JUNE 30, 2003 VS. SIX MONTHS ENDED JUNE 30, 2002
-----------------------------------------------------------------
CONSOLIDATED OPERATING RESULTS:
Net sales for the six months ended June 30, 2003 were $3,712.5
million, an increase of $220.5 million, or 6.3%, from $3,492.0 million
in the comparable period of 2002. The increase resulted from sales
contributions from the American Tool Companies, Inc. (American Tool)
(acquired April 2002) and American Saw & Mfg. Co. (Lenox) (acquired
January 2003) acquisitions.
Gross margin as a percentage of net sales for the six months ended
June 30, 2003 was 27.3%, or $1,013.4 million, versus 26.9%, or $939.7
million, in the comparable period of 2002. The improvement in gross
margin 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 margin than the Company's average,
partially offset by increased prices for certain raw materials and
unfavorable product mix at certain businesses.
25
Selling, general and administrative expenses ("SG&A") for the six
months ended June 30, 2003 were 18.2% of net sales, or $674.2 million,
versus 18.0%, or $629.2 million, in the comparable period 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 $117.6
million ($79.4 million after taxes) and $18.6 million ($12.3 million
after tax) for the six months ended June 30, 2003 and 2002,
respectively. The 2003 pre-tax charge included $56.6 million of
facility and other exit costs, $57.4 million of employee severance and
termination benefits, and $3.6 million in other restructuring costs.
The 2002 pre-tax charge included $4.7 million of facility and other
exit costs, $13.3 million of employee severance and termination
benefits, and $0.6 million in other restructuring costs. See Note 4
to the Consolidated Financial Statements (Unaudited) for further
information on the strategic restructuring plan.
Operating income for the six months ended June 30, 2003 was 6.0% of
net sales, or $221.6 million, versus operating income of 8.4%, or
$291.9 million, in the comparable period of 2002. The decrease in
operating margins is primarily the result of restructuring charges to
streamline the Company's supply chain.
Net nonoperating expenses for the six months ended June 30, 2003 were
2.4% of net sales, or $88.6 million, versus 2.3%, or $80.4 million, in
the comparable period 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, partially offset by $13.6
million ($9.0 million after tax) of Anchor Hocking transaction related
costs incurred in 2002 associated with the Company's withdrawn
divestiture. See Note 3 to the Consolidated Financial Statements
(Unaudited) for additional details.
The effective tax rate was 32.5% for the six months ended June 30,
2003 versus 34.0% in the comparable period of 2002. This lower rate
reflects the benefit of the full year impact of 2002 tax rate
initiatives.
Income before cumulative effect of accounting change for the six
months ended June 30, 2003 was $89.8 million, compared to $139.5
million in the comparable period of 2002. Diluted earnings per share
before cumulative effect of accounting change were $0.33 for the six
months ended June 30, 2003 compared to $0.52 in the comparable period
of 2002. The decrease in income and earnings per share before
cumulative effect of accounting change was primarily due to increased
26
restructuring charges to streamline the Company's supply chain and the
loss recognized on the sale of the Cosmolab business.
Net income for the six months ended June 30, 2003 was $89.8 million,
compared to a net loss of $375.4 million in the comparable period of
2002. Diluted earnings (loss) per share were $0.33 for the six months
ended June 30, 2003 compared to ($1.40) in the comparable period 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 six months ended June 30, (IN MILLIONS):
2003 2002 % Change
---- ---- --------
Rubbermaid $1,469.2 $1,448.3 1.4%
Sharpie 779.6 765.9 1.8
Irwin 1,002.6 778.4 28.8
Calphalon Home 461.1 499.4 (7.7)
-------- -------- ----
Total Net Sales(1) $3,712.5 $3,492.0 6.3%
======== ======== ====
Operating income by segment was as follows for the six months ended
June 30, (IN MILLIONS):
2003 2002 % Change
---- ---- --------
Rubbermaid $107.3 $112.9 (5.0)%
Sharpie 137.4 122.3 12.3
Irwin 95.2 61.1 55.8
Calphalon Home 12.8 29.4 (56.5)
Corporate Costs (2) (13.5) (15.2)
Restructuring Costs (117.6) (18.6)
------ ------
Total Operating Income(3) $221.6 $291.9
====== ======
27
(1) All intercompany transactions have been eliminated. Sales
to Wal*Mart Stores, Inc. and subsidiaries amounted to
approximately 16% of consolidated net sales in the first six
months 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,
selling, general and administrative expenses, and
restructuring costs. 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 six months ended June 30, 2003 were $1,469.2
million, an increase of $20.9 million, or 1.4%, from $1,448.3 million
in the comparable period of 2002. A double-digit increase at
Rubbermaid Europe (primarily currency driven) was partially offset by
a mid-single digit decrease in the Graco business.
Operating income for the six months ended June 30, 2003 was $107.3
million, a decrease of $5.6 million, or 5.0%, from $112.9 million in
the comparable period of 2002. The decrease in operating income is
primarily the result of higher raw material costs and pricing pressure
in opening price point items.
SHARPIE
Net sales for the six months ended June 30, 2003 were $779.6 million,
an increase of $13.7 million, or 1.8%, from $765.9 million in the
comparable period of 2002. The increase in sales is primarily the
result of high single digit and mid-single digit increases in the
European and North American writing instruments businesses,
respectively, partially offset by the disposition of Cosmolab in March
2003.
Operating income for the six months ended June 30, 2003 was $137.4
million, an increase of $15.1 million, or 12.3%, from $122.3 million
in the comparable period of 2002. Operating income was positively
impacted by core sales growth, productivity and favorable mix
management, partially offset by investments in marketing initiatives.
28
IRWIN
Net sales for the six months ended June 30, 2003 were $1,002.6
million, an increase of $224.2 million, or 28.8%, from $778.4 million
in the comparable period of 2002. The increase in net sales through
the first six months of 2003 was primarily due to sales from the
American Tool and Lenox acquisitions.
Operating income for the six months ended June 30, 2003 was $95.2
million, an increase of $34.1 million, or 55.8%, from $61.1 million in
the comparable period of 2002. The improvement in operating income
was driven by productivity, new products and the Lenox and American
Tool acquisitions, partially offset by the planned product line exits
at Levolor/Kirsch and incremental investments in marketing
initiatives.
CALPHALON HOME
Net sales for the six months ended June 30, 2003 were $461.1 million,
a decrease of $38.3 million, or 7.7%, from $499.4 million in the
comparable period of 2002. The sales decrease was primarily the
result of the Company's planned exit from certain high risk customers
and pricing pressure on opening price point items, partially offset by
a mid single digit increase at the Company's Calphalon division.
Operating income for the six months ended June 30, 2003 was $12.8
million, a decrease of $16.6 million, or 56.5%, from $29.4 million in
the comparable period of 2002. The decrease in operating income is
primarily due to the decline in sales at the US picture frame
business, unfavorable product mix and pricing pressure on opening
price point items.
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 for the six months ended June
30, 2003 was $141.4 million compared to $298.7 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, retail inventory reductions and lower than
expected sales at the Company's Burnes picture frame division.
29
Through the first six months of 2003, the Company received proceeds
from the issuance of debt of $1,036.1 million compared to $520.8
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
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. During the second quarter of 2003, $400.0
million of medium term notes were issued under this shelf registration
statement, the proceeds of which were used to pay down commercial
paper.
USES:
The Company's primary uses of liquidity and capital resources include
acquisitions, dividend payments and capital expenditures.
Cash used for acquisitions was $458.7 million for the first six months
of 2003, compared to $228.8 million in the year ago period, and is
related primarily to the acquisition of Lenox, which was funded
through the issuance of commercial paper.
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 six months of 2003, the Company made payments on long-
term debt of $651.4 million compared to $391.0 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 $54.1 million and $21.7
million in the first six months of 2003 and 2002, respectively. Such
cash payments represent primarily employee termination benefits.
Capital expenditures were $188.4 million and $101.2 million in the
first six months of 2003 and 2002, respectively. The increase in
30
capital expenditures is primarily due to the Company's increased
investment in new product development and productivity initiatives.
Aggregate dividends paid were $115.2 million and $112.1 million during
the first six months of 2003 and 2002, respectively.
Retained earnings decreased in the first six months of 2003 by $25.4
million. The reduction in retained earnings is due to cash dividends
paid on common stock, partially offset by current year earnings.
Working capital at June 30, 2003 was $921.9 million compared to $465.6
million at December 31, 2002. The current ratio at June 30, 2003 was
1.39:1 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 June 30, 2003
and .47:1 at December 31, 2002. Had Financial Accounting Standard
No. 150 been adopted on January 1, 2003, total debt to total capitali-
zation would have been .58:1 at June 30, 2003. Refer to Note 1 in
the Consolidated Financial Statements (Unaudited) for further informa-
tion.
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's 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
31
focuses on natural hedging techniques of the following form: 1)
offsetting or netting of like foreign currency flows, 2) structuring
foreign subsidiary balance sheets with appropriate levels of debt to
reduce subsidiary net investments and subsidiary cash flows subject to
conversion risk, 3) converting excess foreign currency deposits into
U.S. dollars or the relevant functional currency and 4) avoidance of
risk by denominating contracts in the appropriate functional currency.
In addition, the Company utilizes forward contracts and purchased
options to hedge commercial and intercompany transactions. Gains and
losses related to qualifying hedges of commercial and intercompany
transactions are deferred and included in the basis of the underlying
transactions. Derivatives used to hedge intercompany loans are marked
to market with the corresponding gains or losses included in the
Company's 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. This model estimates a
loss in fair market value using statistical modeling techniques that
are based on a variance/covariance approach and includes 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 June 30,
2003 as they represent hypothetical, not realized losses. The
following table indicates the calculated amounts for the six months
ended June 30, (IN MILLIONS):
2003 2002
6 Month June 30, 6 Month June 30, Confidence
Average 2003 Average 2002 Level
------- -------- ------ -------- ----------
Interest rates $23.1 $24.3 $15.5 $15.7 95%
Foreign exchange $1.3 $0.9 $0.2 $0.3 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
32
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 relate to, but are 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, impacts 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 to
this Report.
33
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).
ITEM 4. CONTROLS AND PROCEDURES
a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. As of
June 30, 2003, the Company's chief executive officer and
chief financial officer have evaluated the effectiveness of
the Company's disclosure controls and procedures. Based on
that evaluation, the chief executive officer and the chief
financial officer, concluded that the Company's disclosure
controls and procedures were effective.
b) CHANGES IN INTERNAL CONTROLS. There have been no
significant changes in the Company's internal controls or in
other facts that could significantly affect internal
controls subsequent to the date of their evaluation.
34
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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 7, 2003, the 2003 Annual Meeting of Stockholders of the Company
was held. The following is a brief description of the matters voted
upon at the meeting and tabulation of the voting therefor:
Proposal 1. Election of four directors of the Company to serve
for a term of three years.
Number of Shares
--------------------------
Nominee For Withheld
------- --- --------
Thomas E. Clarke 232,755,762 9,797,510
Joseph Galli, Jr. 232,562,670 9,990,602
Elizabeth Cuthbert Millett 232,655,037 9,898,235
William P. Sovey 158,070,902 84,480,846
Proposal 2. Approval of the Newell Rubbermaid Inc. 2003 Stock
Plan. A proposal to ratify the Newell Rubbermaid Inc. 2003 Stock
Plan was adopted, with 197,494,569 votes cast for, 15,733,613
votes cast against, 2,090,714 votes abstained and 27,234,376
broker non-votes.
Proposal 3. Approval of the Newell Rubbermaid Inc. Management
Cash Bonus Plan. A proposal to ratify the Newell Rubbermaid Inc.
Management Cash Bonus Plan was adopted, with 228,950,344 votes
cast for, 11,407,596 votes cast against, 2,195,332 votes
abstained and 0 broker non-votes.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
3.2 By-Laws of Newell Rubbermaid Inc., as amended through
May 7, 2003.
4.1 Amendment No. 1 to the Five-Year Credit Agreement dated
as of June 13, 2003 between Newell Rubbermaid Inc.,
each of the lenders signatory thereto and JPMorgan
Chase Bank, as administrative agent (amending the Five-
Year Credit Agreement dated as of June 14, 2002 by and
among Newell Rubbermaid Inc., JPMorgan Chase Bank, as
35
administrative agent, J.P. Morgan Securities Inc., as
sole lead arranger and sole bookrunner, Bank of
America, N.A. and Bank One, NA, as co-syndication
agents, and Barclays Bank PLC and BNP Paribas, as co-
documentation agents, which is incorporated by
reference to Exhibit 10.1 to Amendment No. 2 to the
Company's Registration Statement on Form S-3, File No.
333-88050, filed July 10, 2002).
4.2 Amended and Restated 364-Day Credit Agreement dated as
of June 13, 2003 between Newell Rubbermaid Inc., each
of the lenders signatory thereto and JPMorgan Chase
Bank, as administrative agent (amending and restating
the 364-Day Credit Agreement dated as of June 14, 2002
by and among Newell Rubbermaid Inc., JPMorgan Chase
Bank, as administrative agent, J.P. Morgan Securities
Inc., as sole lead arranger and sole bookrunner, Bank
of America, N.A. and Bank One, NA, as co-syndication
agents, and Barclays Bank PLC and BNP Paribas, as co-
documentation agents, which is incorporated by
reference to Exhibit 10.2 to Amendment No. 2 to the
Company's Registration Statement on Form S-3, File No.
333-88050, filed July 10, 2002).
10.1 The Newell Rubbermaid Inc. 2003 Stock Plan, effective
May 7, 2003 (incorporated by reference to Exhibit B of
the Company's 2003 Proxy Statement, dated March 24,
2003, and filed with the Securities and Exchange
Commission on March 31, 2003).
12. Statement of Computation of Ratio of Earnings to Fixed
Charges.
31.1 Certification of Chief Executive Officer Pursuant to
Rule 13a-14(a) or Rule 15d-14(a), As Adopted Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer Pursuant to
Rule 13a-14(a) or Rule 15d-14(a), As Adopted Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 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.
32.2 Certification of Chief Financial Officer Pursuant to 18
U.S.C. Section 1350, as Adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
99.1 Safe Harbor Statement.
36
(b) Reports on Form 8-K:
Report on Form 8-K, dated April 29, 2003, that included a press
release announcing the Company's results for the first fiscal
quarter ended March 31, 2003.
Report on Form 8-K, dated May 5, 2003, stating that the Company
had entered into two separate Underwriting Agreements with
respect to the offering and sale of $250.0 million of unsecured
and unsubordinated notes and the offering and sale of $150.0
million of unsecured and unsubordinated notes.
Report on Form 8-K, dated May 6, 2003, that included the filing
of a legal opinion with respect to the Company's Registration
Statements on Form S-3 (Nos. 333-88050 and 333-103773).
37
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: July 31, 2003 /s/ J. Patrick Robinson
-------------------------------------
J. Patrick Robinson
Vice President - Corporate Controller
and Chief Financial Officer
38
EXHIBIT 3.2
-----------
BY-LAWS
OF
NEWELL RUBBERMAID INC.
(a Delaware corporation)
(as amended May 7, 2003)
ARTICLE I
OFFICES
-------
1.1 REGISTERED OFFICE. The registered office of the Corporation
in the State of Delaware shall be located in the City of Dover and
County of Kent. The Corporation may have such other offices, either
within or without the State of Delaware, as the Board of Directors may
designate or the business of the Corporation may require from time to
time.
1.2 PRINCIPAL OFFICE IN ILLINOIS. The principal office of the
Corporation in the State of Illinois shall be located in the City of
Freeport and the County of Stephenson.
ARTICLE II
STOCKHOLDERS
------------
2.1 ANNUAL MEETING. The annual meeting of stockholders shall be
held each year at such time and date as the Board of Directors may
designate prior to the giving of notice of such meeting, but if no
such designation is made, then the annual meeting of stockholders
shall be held on the second Wednesday on May of each year for the
election of directors and for the transaction of such other business
as may come before the meeting. If the day fixed for the annual
meeting shall be a legal holiday, such meeting shall be held on the
next succeeding business day.
2.2 SPECIAL MEETINGS. Special meetings of the stockholders, for
any purpose or purposes, may be called by the Chairman, by the Board
of Directors or by the President.
2.3 PLACE OF MEETING. The Board of Directors may designate any
place, either within or without the State of Delaware, as the place of
meeting for any annual meeting or for any special meeting called by
the Board of Directors. If no designation is made, or if a special
meeting be otherwise called, the place of meeting shall be the
principal office of the Corporation in the State of Illinois.
2.4 NOTICE OF MEETING. Written notice stating the place, date
and hour of the meeting, and, in the case of a special meeting, the
purpose or purposes for which the meeting is called, shall be given
not less than ten nor more than sixty days before the date of the
meeting, or in the case of a merger or consolidation of the
Corporation requiring stockholder approval or a sale, lease or
exchange of substantially all of the Corporation's property and
assets, not less than twenty nor more than sixty days before the date
of meeting, to each stockholder of record entitled to vote at such
meeting. If mailed, notice shall be deemed given when deposited in
the United States mail, postage prepaid, directed to the stockholder
at his address as it appears on the records of the Corporation. When
a meeting is adjourned to another time or place, notice need not be
given of the adjourned meeting if the time and the place thereof are
announced at the meeting at which the adjournment is taken, unless the
adjournment is for more than thirty days, or unless after adjournment,
a new record date is fixed for the adjourned meeting, in either of
which cases notice of the adjourned meeting shall be given to each
stockholder or record entitled to vote at the meeting.
2.5 FIXING OF RECORD DATE. For the purpose of determining the
stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent (to the
extent permitted, if permitted) to corporate action in writing without
a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion, or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may
fix, in advance, a record date, which shall not be more than sixty nor
less than ten days before the date of such meeting, nor more than
sixty days prior to any other action. If no record date is fixed, the
record date for determining stockholders entitled to notice of or to
vote at a meeting of stockholders shall be the close of business on
the day next preceding the day on which notice is given, or if notice
is waived, at the close of business on the day next preceding the day
on which the meeting is held, and the record date for determining
stockholders for any other purpose shall be the close of business on
the day on which the Board of Directors adopts the resolution relating
thereto. A determination of stockholders of record entitled to notice
of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting unless the Board of Directors fixes a new
record date for the adjourned meeting.
2.6 VOTING LISTS. The officer who has charge of the stock
ledger of the Corporation shall prepare and make, at least ten days
before every meeting of stockholders, a complete list of the
stockholders entitled to vote at the meeting, arranged in alphabetical
order, and showing the address of each stockholder and the number of
shares registered in his name, which list, for a period of tens days
prior to such meeting, shall be kept on file either at a place within
the city where the meeting is to be held and which place shall be
specified in the notice of the meeting, or if not so specified, at the
2
place where the meeting is to be held, and shall be open to the
examination of any stockholder, for any purpose germane to the
meeting, at any time during ordinary business hours. Such lists shall
also be produced and kept at the time and place of the meeting during
the whole time thereof, and may be inspected by any stockholder who is
present. The stock ledger shall be the only evidence as to who are
the stockholders entitled to examine the stock ledger, the list of
stockholders entitled to vote, or the books of the Corporation, or to
vote in person or by proxy at any meeting of stockholders.
2.7 QUORUM. The holders of shares of stock of the Corporation
entitled to cast a majority of the total votes that all of the
outstanding shares of stock of the Corporation would be entitled to
cast at the meeting, represented in person or by proxy, shall
constitute a quorum at any meeting of stockholders; provided, that is
less than majority of the outstanding shares of capital stock are
represented at said meeting, a majority of the shares of capital stock
so represented may adjourn the meeting. If a quorum is present, the
affirmative vote of a majority of the votes entitled to be cast by the
holders of shares of capital stock represented at the meeting shall be
the act of the stockholders, unless a different number of votes is
required by the General Corporation Law, the Certificate of
Incorporation or these By-Laws. At any adjourned meeting at which a
quorum shall be present, any business may be transacted which might
have been transacted at the original meeting. Withdrawal of
stockholders from any meeting shall not cause failure of a duly
constituted quorum at the meeting.
2.8 PROXIES. Each stockholder entitled to vote at a meeting of
stockholder or to express consent or dissent to corporate action in
writing without a meeting may authorize another person or persons to
act for such stockholder by proxy, but no such proxy shall be voted or
acted upon after three years from its date, unless the proxy provides
for a longer period. Without limiting the manner in which a
stockholder may authorize another person or persons to act for such
stockholder as proxy pursuant to the foregoing sentence, a stockholder
may validly grant such authority (i) by executing in writing
authorizing another person or persons to act for such stockholder as
proxy or (ii) by authorizing another person or persons to act for such
stockholder as proxy by transmitting or authorizing the transmission
of a telegram, cablegram, or other means of electronic transmission to
the person who will be the holder of the proxy or to a proxy
solicitation firm, proxy support service organization or like agent
duly authorized by the person who will be the holder of the proxy to
receive such transmission, provided that any such telegram, cablegram
or other means of electronic transmission must either set forth or be
submitted with information from which it can be determined that the
telegram, cablegram or other electronic transmission was authorized by
the stockholder, or by any other means permitted under the Delaware
General Corporation Law.
3
2.9 VOTING OF STOCK. Each stockholder shall be entitled to such
vote as shall be provided in the Certificate of Incorporation, or,
absent provision therein fixing or denying voting rights, shall be
entitled to one vote per share with respect to each matter submitted
to a vote of stockholders.
2.10 VOTING OF STOCK BY CERTAIN HOLDERS. Persons holding stock
in a fiduciary capacity shall be entitled to vote the shares so held.
Persons whose stock is pledged shall be entitled to vote, unless in
the transfer by the pledgor on the books of the Corporation he has
expressly empowered the pledgee to vote thereon, in which case only
the pledgee or his proxy may represent such stock and vote thereon.
Stock standing in the name of another corporation, domestic, or
foreign, may be voted by such officer, agent or proxy as the charter
of by-laws of such corporation may prescribe or, in the absence of
such provision, as the board of directors of such corporation may
determine. Shares of its own capital stock belonging to the
Corporation or to another corporation, if a majority of the shares
entitled to vote in the election of directors of such other
corporation is held by the Corporation, shall neither be entitled to
vote nor counted for quorum purposes, but shares of its capital stock
held by the Corporation in a fiduciary capacity may be voted by it and
counted for quorum purposes.
2.11 VOTING BY BALLOT. Voting on any question or in any election
may be by voice unless the presiding officer shall order or any
stockholder shall demand that voting be by ballot.
ARTICLE III
DIRECTORS
---------
3.1 GENERAL POWERS. The business of the Corporation shall be
managed by its Board of Directors.
3.2 NUMBER, TENURE AND QUALIFICATION. The number of directors
of the Corporation shall be eleven, and the terms of office of each
director shall be as set forth in the Restated Certificate of
Incorporation. A director may resign at any time upon written notice
to the Corporation. Directors need not be stockholders of the
Corporation.
3.3 REGULAR MEETINGS. A regular meeting of the Board of
Directors shall be held without other notice than this By-Law,
immediately after, and at the same place as, the annual meeting of
stockholder. The Board of Directors may provide, by resolution, the
time and place, either within or without the State of Delaware, for
the holding of additional regular meetings without other notice than
such resolution.
4
3.4 SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by or at the request of the Vice Chairman and
Chief Executive Officer or any two directors. The person or persons
authorized to call special meetings of the Board of Directors may fix
any place, either within or without the State of Delaware, as the
place for holding any special meeting of the Board of Directors called
by them.
3.5 NOTICE. Notice of any special meeting of directors, unless
waived, shall be given, in accordance with Section 3.6 of the By-Laws,
in person, by mail, by telegram or cable, by telephone, or by any
other means that reasonably may be expected to provide similar notice.
Notice by mail and, except in emergency situations as described below,
notice by any other means, shall be given at least two (2) days before
the meeting. For purposes of dealing with an emergency situation, as
conclusively determined by the director(s) or officer(s) calling the
meeting, notice may be given in person, by telegram or cable, by
telephone, or by any other means that reasonably may be expected to
provide similar notice, not less than two hours prior to the meeting.
If the secretary shall fail or refuse to give such notice, then the
notice may be given to the officer(s) or director(s) calling the
meeting. Any meeting of the Board of Directors shall be a legal
meeting without notice thereof having been given, if all the directors
shall be present at the meeting. The attendance of a director at any
meeting shall constitute a waiver of notice of such meeting, and no
notice of a meeting shall be required to be given to any director who
shall attend such meeting. Neither the business to be transacted at,
nor the purpose of, any regular or special meeting of the Board of
Directors need be specified in the notice of such meeting.
3.6 NOTICE OF DIRECTORS. If notice to a director is given by
mail, such notice shall be deemed to have been given when deposited in
the United State mail, postage prepaid, addressed to the director at
his home address as it appears on the records of the Corporation. If
notice to a directors is given by telegram, cable or other means that
provide written notice, such notice shall be deemed to have been given
when delivered to any authorized transmission company, with charges
prepaid, addressed to the director at his address as it appears on the
records of the Corporation. If notice to a directors is given by
telephone, wireless, or other means of voice transmission, such notice
shall be deemed to have been given when such notice has been
transmitted by telephone, wireless or such other means to such number
or call designation as may appear on the records of the Corporation
for such director.
3.7 QUORUM. Except as otherwise required by the General
Corporation law or by Certificate of Incorporation, a majority of the
number of directors fixed by these By-Laws shall constitute a quorum
for the transaction of business at any meeting of the Board of
Directors, provided that, if less than a majority of such number of
directors are present at said meeting, a majority of the directors
present may adjourn the meeting from time to time without further
5
notice. Interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a
committee thereof.
3.8 MANNER OF ACTING. The vote of the majority of the directors
present at a meeting at which a quorum is present shall be the act of
the Board of Directors.
3.9 ACTION WITHOUT A MEETING. Any action required or permitted
to be taken at any meeting of the Board of Directors, or of any
committee thereof, may be taken without a meeting if all the members
of the Board or committee, as the case may be, consent thereto in
writing, and the writing or the writings are filed with the minutes of
proceedings of the Board or committee.
3.10 VACANCIES. Vacancies on the Board of Directors, newly
created directorships resulting from any increase in the authorized
number of directors or any vacancies in the Board of Directors
resulting from death, disability, resignation, retirement,
disqualification, removal from office, or other cause shall be filled
in accordance with the provisions of the Certificate of Incorporation.
3.11 COMPENSATION. The Board of Directors, by the affirmative
vote of a majority of directors then in office, and irrespective of
any personal interest of any of its members, shall have authority to
establish reasonable compensation of all directors for services to the
Corporation as directors, officers, or otherwise. The directors may
be paid their expenses, if any, of attendance at each meeting of the
Board and at each meeting of any committee of the Board of which they
are members in such manner as the Board of Directors may from time to
time determine.
3.12 PRESUMPTION OF ASSENT. A director of the Corporation who is
present at a meeting of the Board of Directors or at a meeting of any
committee of the Board at which action on any corporate matter is
taken shall conclusively presumed to have assented to the action taken
unless his dissent shall be entered in the minutes of the meeting or
unless he shall file his written dissent to such action with the
person acting as the secretary of the meeting before the adjournment
thereof or shall forward such dissent by registered mail to the
Secretary of the Corporation within 24 hours after the adjournment of
the meeting. Such right to dissent shall not apply to a director who
voted in favor of such action.
3.13 COMMITTEES. By resolution passed by a majority of the whole
Board, the Board of Directors may designate one or more committees,
each such committee to consist of two or more directors of the
Corporation. The Board may designate one or more directors as
alternate members of any committee, who may replace any absent or
disqualified member of any meeting of the committee. Any such
committee, to the extent provided in the resolutions or in these By-
Laws, shall have and may exercise the powers of the Board of Directors
6
in the management of the business and affairs of the Corporation, and
may authorize the seal of the Corporation to be affixed to all papers
which may require it. In the absence or disqualification of any
member of such committee or committees, the member or members thereof
present at the meeting and not disqualified from voting, whether or
not he or they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of
such absent or disqualified member.
3.14 CHAIRMAN AND VICE CHAIRMEN. The Board of Directors may
from time to time designate from among its members a Chairman of the
Board and one or more Vice Chairmen. The Chairman shall reside at all
meetings of the Board of Directors. In the absence of the Chairman of
the Board, the Chief Executive Officer and the President and Chief
Operating Officer, and, in their absence, a Vice Chairman (with the
longest tenure as Vice Chairman), shall preside at all meetings of the
Board of Directors. The Chairman and each of the Vice Chairmen shall
have such other responsibilities as may from time to time be assigned
to each of them by the Board of Directors.
ARTICLE IV
OFFICERS
--------
4.1 NUMBER. The officers of the Corporation shall be a Chairman
of the Board, a Vice Chairman and Chief Executive Officer, a
President and Chief Operating Officer, one or more Group Presidents
(the number thereof determined by the Board of Directors), one or more
Vice Presidents (the number thereof to be determined by the Board of
Directors), a Treasurer, a Secretary and such Assistant Treasurers,
Assistant Secretaries or other officers as may be elected by the Board
of Directors.
4.2 ELECTION AND TERM OF OFFICE. The officers of the
Corporation shall be elected annually by the Board of Directors at the
first meeting of the Board of Directors held after such annual meeting
of stockholders. If the election of officers shall not be held at
such meeting, such election shall be held as soon thereafter as
conveniently may be. New offices may be created and filled at any
meeting of the Board of Directors. Each officer shall hold office
until his successor is elected and has qualified or until his earlier
resignation or removal. Any officer may resign at any time upon
written notice to the Corporation. Election of an officer shall not
of itself create contract rights, except as may otherwise be provided
by the General Corporation Law, the Certificate of Incorporation, or
these By-Laws.
4.3 REMOVAL. Any officer elected by the Board of Directors may
be removed by the Board of Directors whenever in its judgement the
best interested of the Corporation would be served thereby, but such
7
removal shall be without prejudice to the contract rights, if any, of
the person so removed.
4.4 VACANCIES. A vacancy in any officer occurring because of
death, resignation, removal or otherwise, may be filled by the Board
of Directors.
4.5 THE CHAIRMAN. The Chairman shall preside at all meetings of
the Board of Directors. In general, he shall perform all duties
incident to the officer of Chairman and such other duties as may be
prescribed by the Board of Directors from time to time.
4.6 THE CHIEF EXECUTIVE OFFICER. The Chief Executive Officer
shall be the principal executive officer of the Corporation. Subject
only to the Board of Directors, he shall be in charge of the business
of the Corporation; he shall see that the resolutions and directions
of the Board of Directors are carried into effect except in those
instances in which that responsibility is specifically assigned to
some other person by the Board of Directors; and, in general, he shall
discharge all duties incident to the office of the chief executive
officer of the Corporation and such other duties as may be prescribed
by the Board of Directors from time to time. In the absence of the
Chairman of the Board, the Chief Executive Officer shall preside at
all meetings of the Board of Directors. The Chief Executive Officer
shall have authority to vote or to refrain from voting any and all
shares of capital stock of any other corporation standing in the name
of the Corporation, by the execution of a written proxy, the execution
of a written ballot, the execution of a written consent or otherwise,
and, in respect to any meeting of the stockholders of such other
corporation, and, on behalf of the Corporation, may waive any notice
of the calling of any such meeting. The Chief Executive Officer or,
in his absence, the President and Chief Operating Officer, the Vice
President - Finance, the Vice President - Controller, the Treasurer or
such other person as the Board of Directors or one of the preceding
named officers shall designate, shall call any meeting of the
stockholders of the Corporation to order and shall act as chairman of
such meeting. In the event that no one, the Chief Executive Officer,
the President and Chief Operating Officer, the Vice President -
Finance, the Vice President - Controller, the Treasurer or a person
designated by the board of Directors of by one of the preceding named
officers, is present, the meeting shall not be called to order until
such time as there shall be present the Chief Executive Officer, the
President and chief Operating Officer, the Vice President - Finance,
the Vice President - Controller, the Treasurer or a person designated
by the Board of Directors or by one of the preceding named officers.
The chairman of any meeting of the stockholders of this Corporation
shall have plenary power to set the agenda, determine the procedure
and rules of order, and make definitive rulings at meetings of the
stockholders. The Secretary or an Assistant Secretary of the
Corporation shall act as secretary at all meetings of the
stockholders, but in the absence of the Secretary or an Assistant
8
Secretary, the chairman of the meeting may appoint any person to act
as secretary of the meeting.
4.7 THE PRESIDENT AND CHIEF OPERATING OFFICER. The President
and Chief Operating Officer shall be the principal operating officer
of the Corporation and , subject only to the Board of Directors and to
the Chief Executive Officer, he shall have the general authority over
and general management and control of the property, business and
affairs of the Corporation. In general, he shall discharge all duties
incident to the office of the principal operating officer of the
Corporation and such other duties as may be prescribe by the Board of
Directors and the Chief Executive Officer from time to time. In the
absence of the Chairman of the Board and the Chief Executive Officer,
the President and Chief Operating Officer shall preside at all
meetings of the Board of Directors. In the absence of the Chief
Executive Officer or in the event of his disability, or inability to
act, or to continue to act, the President and Chief Operating Officer
shall perform the duties of the Chief Executive Officer, and when so
acting, shall have all of the powers of and be subject to all of the
restrictions upon the office of Chief Executive Officer. Except in
those instances in which the authority to execute is expressly
delegated to another officer or agent of the Corporation or a
different mode of execution is expressly prescribe by the Board of
Directors of these By-Laws, he may execute for the Corporation
certificates for its shares (the issue of which shall have been
authorized by the Board of Directors), and any contracts, deeds,
mortgages, bonds or other instruments that the Board of Directors has
authorized, and he may (without previous authorization by the Board of
Directors) execute such contracts and other instruments as the conduct
of the Corporation's business in its ordinary course requires, and he
may accomplish such execution in each case either individually or with
the Secretary, any Assistant Secretary, or any other officer these
unto authorized by the Board of Directors, according to the
requirements of the form of the instrument. The President and Chief
Operating Officer shall have authority to vote or to refrain from
voting any and all share of capital stock of any other corporation
standing in the name of the Corporation, by the execution of a written
proxy, the execution of a written ballot, the execution of a written
consent or otherwise, and, in respect of any meeting of stockholders
of such other corporation, and, on behalf of the Corporation, may
waive any notice of the calling of any such meeting.
4.8 THE GROUP PRESIDENTS. Each of the Group Presidents shall
have general authority over and general management and control of the
property, business and affairs of certain businesses of the
corporation. Each of the Group Presidents shall report to the
President and Chief Operating Officer or such other officer as may be
determined by the Board of Directors or the President and Chief
Operating Officer and shall have such other duties and
responsibilities as may be assigned by the President and Chief
Operating Officer and the Board of Directors from time to time.
9
4.9 THE VICE PRESIDENTS. Each of the Vice Presidents shall
report to the President and Chief Operating Officer or such other
officer as may be determined by the Board of Directors of the
President and Chief Operating Officer. Each Vice President shall have
such duties and responsibilities as form time to time may be assigned
to him by the President and Chief Operating Officer and the Board of
Directors.
4.10 THE TREASURER. The Treasurer shall: (i) have charge and
custody of and be responsible for all funds and securities of the
corporation; receive and give receipts for monies due and payable to
the Corporation from any source whatsoever, and deposit all such
monies in the name of the Corporation in such banks, trust companies
or other depositories as shall be selected in accordance with the
provisions of Article V of these By-Laws, (ii) in general, perform all
the duties incident to the office of Treasurer and such other duties
as from time to time may be assigned to him by the President and Chief
Operating Officer or the Board of Directors. In the absence of the
Treasurer, any Assistant Treasurer may perform the duties of the
Treasurer.
4.11 THE SECRETARY. The Secretary shall: (i) record all of the
proceedings of the meetings of the stockholders and Board of Directors
in one or more books kept for the purpose; (ii) see that all notices
are duly given in accordance with the provisions of these By-Laws or
as required by law; (iii) be custodian of the corporate records and of
the seal of the Corporation and see that the seal of the Corporation
is affixed to all certificates for shares in capital stock prior to
the issue thereof and to a l documents, the execution of which on
behalf of the Corporation under its seal is duly authorized in
accordance with the provisions of these By-Laws; (iv) keep a register
of the post office address of each stockholder which shall be
furnished to the Secretary by such stockholder; (v) have general
charge of the stock transfer books of the Corporation and (vi) in
general, perform all duties incident to the office of Secretary and
such other duties as from time to time may be assigned to him by the
President and Chef Operating Officer or the Board of Directors. In
the absence of the Secretary, or in the event of his incapacity or
refusal to act, or at the direction of the Secretary, any Assistant
Secretary may perform the duties of Secretary.
ARTICLE V
CONTRACTS, LOANS, CHECKS AND DEPOSITS
-------------------------------------
5.1 CONTRACTS. Except as otherwise determined by the Board of
Directors or Provided in these By-Laws, all deeds and mortgages made
by the Corporation and all other written contracts and agreements to
which the Corporation shall be a party shall be executed in its name
by the Chief Executive Officer, the President and Chief Operating
10
Officer, or any Vice President so authorized by the Board of
Directors.
5.2 LOANS. No loans shall be contracted on behalf of the
Corporation and no evidences of indebtedness shall be issued in its
name unless authorized by a resolution of the Board of Directors.
Such authority may be general or confined to specific instances.
5.3 CHECKS, DRAFTS, ETC. All checks, drafts or other orders for
the payment of money, notes or other evidences of indebtedness issued
in the name of the Corporation, shall be signed by such officer or
officers, agent or agents of the Corporation and in such manner as
shall from time to time be determined by resolution of the Board of
Directors.
5.4 DEPOSITS. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the
Corporation in such banks, trust companies or other depositories as
the Board of Directors may select.
ARTICLE VI
CERTIFICATES FOR SHARES OF
CAPTIAL STOCK AND THEIR TRANSFER
--------------------------------
6.1 SHARE OWNERSHIP; TRANSFERS OF STOCK. Shares of capital
stock of the Corporation may be certificated or uncertificated.
Owners of shares of the capital stock of the Corporation shall be
recorded in the books of the Corporation and ownership of such shares
shall be evidenced by a certificate of book entry notation in the
books of the Corporation. If shares are represented by certificates,
such certificates shall be in such form as may be determined by the
Board of Directors. Certificates shall be signed by the Chief
Executive Officer or the President and Chief Operating Officer or any
Vice President and by the Treasurer or the Secretary or an Assistant
Secretary. If any such certificate is countersigned by a transfer
agent other than the Corporation or its employee, or by a registrar
other than the Corporation or its employee, any other signature on the
certificate may be a facsimile. In case any officer, transfer agent
or registrar who has signed or whose facsimile signature has been
placed upon a certificate shall have ceased to be such officer,
transfer agent or registrar before such certificate is issued, it may
be issued by the Corporation with the same effect as if he were such
officer, transfer agent or registrar at the date of issue. All
certificates for shares of capital stock shall be consecutively
numbered or otherwise identified. The name of the person to whom the
shares represented thereby are issued, with the number of share and
date of issue, shall be entered on the books of the Corporation. Each
certificate surrendered to the Corporation for transfer shall be
canceled and no new certificate or other evidence of new shares shall
11
be issued until the former certificate for alike number of shares
shall have been surrendered and canceled, except that in case of a
lost, destroyed or mutilated certificate, a new certificate or other
evidence of new shares may be issued therefor upon such terms and
indemnity to the Corporation as the Board of Directors may prescribe.
Uncertificated shares shall be transferred in the books of the
Corporation upon the written instruction originated by the appropriate
person to transfer the shares.
6.2 TRANSFER AGENTS AND REGISTERS. The Board of Directors may
appoint one or more transfer agents or assistant transfer agents and
one or more registrars of transfers, and may require all certificates
for shares of capital stock of the Corporation to bear the signature
of a transfer agent and a registrar of transfers. The Board of
Directors may at anytime terminate the appointment of any transfer
agent or any assistant transfer agent or any registrar of transfers.
ARTICLE VII
LIABILITY AND INDEMNIFICATION
-----------------------------
7.1 LIMITED LIABILITY OF DIRECTORS.
(a) No person who was or is a director of this Corporation shall
be personally liable to The Corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, except
for liability (i) for breach of the of loyalty to the Corporation or
its stockholders; (ii) for acts of omissions not in good faith or that
involve intentional misconduct or known violation of law; (iii) under
Section 174 of the General Corporation Law; or (iv) for any
transaction from which the director derived any improper person
benefit. If the General Corporation Law is amended after the
effective date of the By-Law to further eliminate of limit, or to the
effective date of this By-Law to further eliminate or limit, or to
authorize further elimination or limitation of, the personal liability
of the director to this Corporation or its stockholders shall be
eliminated or limited to the full extent permitted by the General
Corporation Law, as so amended. For purposes of this By-Law,
"fiduciary duty as a director" shall include any fiduciary duty
arising out of serving at the request of this Corporation as a
director of another corporation, partnership, joint venture, trust or
other enterprise, and any liability to such other corporation,
partnership, joint venture, trust or other enterprise, and any
liability to this Corporation in its capacity as a security holder,
joint venturer, partner, beneficiary, creditor, or investor of or in
any such other corporation, partnership, joint venture, trust or other
enterprise.
(b) Any repeal or modification of the foregoing paragraph by the
stockholders of this Corporation shall not adversely affect the
elimination or limitation of the personal liability of a director for
any act or omission occurring prior to the effective date of such
12
repeal or modification. This provision shall not eliminate or limit
the liability of a director for any act or omission occurring prior to
the effective date of this By-Law.
7.2 LITIGATION BROUGHT BY THIRD PARTIES. The Corporation shall
indemnify any person who was or is a party or is threatened to be made
a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason
of the fact that he is or was or has agreed to become a director or
officer of the Corporation; or is or was serving or has agreed to
serve at the request of the Corporation as a director or officer of
another corporation, partnership, joint venture, trust or other
enterprise, or by reason of any action alleged to have been taken or
omitted in such capacity, against costs, charges and other expenses
(including attorney's fees) ("Expenses"), judgements, fines and
amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding and any appeal thereof
if he acted in good faith and in a manner he reasonably believed to be
in or not opposed to the best interests of the Corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause
to believe his conduct was unlawful. The termination of any action,
suit or proceeding by judgement, order, settlement, conviction, or
plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the person did not act in good faith and in
a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action
or proceeding, had reasonable cause to believe that his conduct was
unlawful. For purposes of this By-Law, "serving or has agreed to serve
at the request of the Corporation as a director or officer of another
corporation, partnership, joint venture, trust or other enterprise"
shall include any service by a director or officer of the Corporation
as a director, officer, employee, agent or fiduciary of such other
corporation, partnership, joint venture, trust or other enterprise, or
with respect to any employee benefit plan (or its participants or
beneficiaries) of the Corporation or any such other enterprise.
7.3 LITIGATION BY OR IN THE RIGHT OF THE CORPORATION. The
Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he is or was or has
agreed to become a director or officer of the Corporation, or is or
was serving or has agreed to serve at the request of the Corporation
as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise, or by reason of any action alleged
to have been taken or omitted in such capacity against Expenses
actually and reasonably incurred by him in connection with the
investigation, defense or settlement of such action or suit and any
appeal thereof if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the
13
Corporation and except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable to the Corporation unless and only to
the extent that the Court of Chancery of Delaware or the court in
which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such Expenses as the Court of Chancery of
Delaware or such other court shall deem proper.
7.4 SUCCESSFUL DEFENSE. To the extent that any person referred
to in section 7.2 or 7.3 of these By-Laws has been successful on the
merits or otherwise, including, without limitation, the dismissal of
an action without prejudice, in defense of any action, suit or
proceeding referred to therein or in defense of any claim, issue or
matter therein, he shall be indemnified against Expenses actually and
reasonably incurred by him in connection therewith.
7.5 DETERMINATION OF CONDUCT. Any indemnification under section
7.2 or 7.3 of these By-Laws (unless ordered by a court) shall be made
by the Corporation only as authorized in the specific case upon a
determination that indemnification of the director or officer is
proper in the circumstances because he has met the applicable standard
of conduct set forth in section 7.2 or 7.3. Such determination shall
be made (i) by the Board of Directors by a majority vote of a quorum
(as defined in these By-Laws) consisting of directors who were not
parties to such action, suit or proceeding, or (ii) if such quorum is
not obtainable, or, even if obtainable a quorum of disinterested
directors so directs, by independent legal counsel in a written
opinion, or (iii) by the stockholders.
7.6 ADVANCE PAYMENT. Expenses incurred in defending a civil or
criminal action, suit or proceeding shall be paid by the Corporation
in advance of the final disposition of such action, suit or proceeding
and any appeal upon receipt by the Corporation of an undertaking by or
on behalf of the director or officer to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by
the Corporation.
7.7 DETERMINATION OF ENTITLEMENT TO INDEMNIFICATION. The
determination of the entitlement of any person to indemnification
under section 7.2, 7.4 or 7.4 or to advancement of Expenses under
section 7.6 of these By-Laws shall be made promptly, and in any event
within 60 days after the Corporation has received a written request
for payment from or on behalf of a director or officer and payment of
amounts due under such section shall be made immediately after such
determination. If no disposition of such request is made within said
60 days or if payment has not been made with 10 days thereafter, or if
such request is rejected, the right to indemnification or advancement
of Expenses provided by this By-Law shall be enforceable by or on
behalf of the director or officer in any court of competent
jurisdiction. In addition to the other amounts due under this By-Law,
14
Expenses incurred by or on behalf of a director or officer in
successfully establishing his right to indemnification or advancement
of Expenses, in whole or in part, in any such action (or settlement
thereof) shall be paid by the Corporation.
7.8 BY-LAWS NOT EXCLUSIVE: CHANGE IN LAW. The indemnification
and advancement of Expenses provided by these By-Laws shall not be
deemed exclusive of any other rights to which those seeking
indemnification or advancement of Expenses may be entitled under any
law (common or statutory), the Certificate of Incorporation,
agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action
in another capacity while holding such office, or while employed by or
acting as a director or officer of the Corporation or as a director or
officer of another corporation, partnership, joint venture, trust or
other enterprise, and shall continue as to a person who has ceased to
be a director or officer and shall inure to the benefit of the heirs,
executors and administrators of such a person. Notwithstanding the
provisions of these By-Laws, the Corporation shall indemnify or made
advancement of Expenses to any person referred to in section 7.2 or
7.3 of this By-Law to the full extent permitted under the laws of
Delaware and any other applicable laws, as they now exist or as they
may be amended in the future.
7.9 CONTRACT RIGHTS. All rights to indemnification and
advancement of Expenses provided by these By-Laws shall be deemed to
be a contract between the Corporation and each director or officer of
the Corporation who serves, served or has agreed to serve in such
capacity, or at the request of the Corporation as director or officer
of another corporation, partnership, joint venture, trust or other
enterprise, at any time while these By-Laws and the relevant
provisions of the General Corporation Law or other applicable law, if
any, are in effect. Any repeal or modification of these By-Laws, or
any repeal or modification of relevant provisions of the Delaware
General Corporation Law or any other applicable law, shall not in
anyway diminish any rights to indemnification of or advancement of
Expenses to such director or officer or the obligations of the
Corporation.
7.10 INSURANCE. The Corporation shall have power to purchase and
maintain insurance on behalf of any person who is or was or has to
become a director or officer of the Corporation, or is or was serving
or has agreed to serve at the request of the Corporation as a director
or officer of another corporation, partnership, joint venture, trust
or other enterprise, against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as
such, whether or not the Corporation would have the power to indemnify
him against such liability under the provisions of these By-Laws.
7.11 INDEMNIFICATION OF EMPLOYEES OR AGENTS. The Board of
Directors may, by resolution, extend the provisions of these By-Laws
pertaining to indemnification and advancement of Expenses to any
15
person who was or is a party or is threatened to be made a party to
any threatened, pending or completed action, suit or proceeding by
reason of the fact that he is or was or has agreed to become an
employee, agent or fiduciary of the corporation or is or was serving
or has agreed to serve a the request of the Corporation as a director,
officer, employee, agent or fiduciary of another Corporation,
partnership, joint venture, trust or other enterprise or with respect
to any employee benefit plan (or its participants or beneficiaries) of
the Corporation or any such other enterprise.
ARTICLE VIII
FISCAL YEAR
-----------
8.1 The fiscal year of the Corporation shall end on the thirty-
first day of December in each year.
ARTICLE IX
DIVIDENDS
---------
9.1 The Board of Directors may from time to time declare, and
the Corporation may pay, dividends on its outstanding shares of
capital stock in the manner and upon the terms and conditions provided
by law and its Certificate of Incorporation.
ARTICLE X
SEAL
----
10.1 The Board of Directors shall provide a corporate seal which
shall be in the form of a circle and shall have inscribed thereon the
name of the Corporation and the words "Corporate Seal, Delaware."
ARTICLE XI
WAIVER OF NOTICE
----------------
11.1 Whenever any notice whatever is required to be given under
any provision of these By-Laws or of the Certificate of Incorporation
or of the General corporation Law, a written waiver thereof, signed by
the person entitled to notice, whether before or after the time stated
therein, shall be deemed equivalent to notice. Attendance of a person
at a meeting of stockholders shall constitute a waiver of notice of
such meeting, except when the stockholder attends a meeting for the
express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called
16
or convened. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the stockholders need be
specified in any written waiver of notice.
ARTICLE XII
AMENDMENTS
----------
12.1 These By-Laws may be altered, amended or repealed and new
By-Laws may be adopted at any meeting of the Board of Directors of the
Corporation by a majority of the whole Board of Directors.
17
EXHIBIT 4.1
-----------
AMENDMENT NO. 1
AMENDMENT NO. 1 dated as of June 13, 2003 to the Credit
Agreement referred to below, between NEWELL RUBBERMAID INC. (the
"COMPANY" or the "BORROWER"); each of the lenders party to said Credit
Agreement (individually, a "LENDER" and, collectively, the "LENDERS")
that is a signatory hereto; and JPMORGAN CHASE BANK, as administrative
agent for the Lenders (in such capacity, together with its successors
in such capacity, the "ADMINISTRATIVE AGENT").
The Borrower, the Lenders and the Administrative Agent are
parties to a Five-Year Credit Agreement dated as of June 14, 2002 (as
amended and in effect immediately prior to the effectiveness of this
Amendment No. 1, the "CREDIT AGREEMENT"), providing, subject to the
terms and conditions thereof, for extensions of credit to be made by
the Lenders to the Borrowers (as defined therein). The parties wish
to amend the Credit Agreement in certain respects, and accordingly,
the parties hereto hereby agree as follows:
Section 1. DEFINITIONS. Except as otherwise defined in
this Amendment No. 1, terms defined in the Credit Agreement are used
herein as defined therein.
Section 2. AMENDMENTS. Upon satisfaction of the conditions
set forth in Section 4 of this Amendment No. 1, but effective as of
the date hereof, the Credit Agreement shall be amended as follows:
2.01. CREDIT AGREEMENT REFERENCES. References in the
Credit Agreement to "this Agreement" (and indirect references such as
"hereunder", "hereby", "herein" and "hereof") shall be deemed to be
references to the Credit Agreement as amended hereby.
2.02. CERTAIN DEFINITIONS. Section 1.01 of the Credit
Agreement shall be amended as follows:
A. The definition of ""APPLICABLE FACILITY FEE RATE",
"APPLICABLE UTILIZATION FEE RATE" and "APPLICABLE MARGIN"" shall be
replaced with the following definition (which shall be inserted in the
appropriate alphabetical location):
"ADDITIONAL MARGIN", "APPLICABLE FACILITY FEE RATE", and
"APPLICABLE MARGIN" shall mean, during any period when the Rating
is at one of the Rating Groups specified below, the percentage
set forth below opposite the reference to such fee or to the
relevant Type of Committed Loan:
- 2 -
Rating Rating Rating Rating Rating
Group Group Group Group Group
I II III IV V
------ ------ ------ ------ ------
Applicable Facility
Fee Rate 0.07% 0.10% 0.125% 0.15% 0.225%
Applicable Margin for Committed
LIBOR Loans 0.18% 0.30% 0.375% 0.475% 0.65%
Applicable Margin for
Base Rate Loans 0% 0% 0% 0% 0%
Additional Margin (= 50%) 0.05% 0.10% 0.125% 0.125% 0.25%
Any change in the Additional Margin, the Applicable Facility
Fee Rate or the Applicable Margin by reason of a change in the
Moody's Rating, the Standard & Poor's Rating or the Fitch Rating
shall become effective on the date of announcement or publication
by the respective Rating Agency of a change in such Rating or, in
the absence of such announcement or publication, on the effective
date of such changed rating.
The Additional Margin shall be payable only for each day on
which the aggregate principal amount of outstanding Loans
(including the Term Loans but excluding the Competitive Loans)
equals or exceeds 50% of the aggregate outstanding Commitments
(or at any time following the conversion of Committed Loans to
Term Loans pursuant to Section 2.01(b) or the termination of the
Commitments for any other reason, the aggregate Commitments in
effect immediately prior to such conversion or termination, as
the case may be).
B. Section 1.01 of the Credit Agreement shall be further
amended by adding the following new definition and inserting the same
in the appropriate alphabetical location, as follows:
"APPROVED FUND" means any Person (other than a natural
person) that is engaged in making, purchasing, holding or
investing in bank loans and similar extensions of credit in the
ordinary course of its business and that is administered or
managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an
entity or an Affiliate of an entity that administers or manages a
Lender.
2.03. ADDITIONAL MARGIN. Each reference in the Credit
Agreement to the words "Applicable Utilization Fee Rate" shall be
replaced with the words "Additional Margin".
- 3 -
2.04. FEES. Section 2.06(b) of the Credit Agreement shall
be deleted in its entirety and replaced with the words "(b)
[Intentionally Omitted]".
2.05. INTEREST. Clauses (i) and (ii) of Section 3.02(a) of
the Credit Agreement shall be amended in their entirety to read as
follows:
"(i) during such period as such Loan is a Base Rate Loan,
the Base Rate (as in effect from time to time) plus the
Additional Margin (if any);
(ii) during such period as such Loan is a Committed LIBOR
Loan, for each Interest Period relating thereto, the
Adjusted LIBO Rate for such Loan for such Interest Period
plus the sum of (A) the Applicable Margin plus (B) the
Additional Margin (if any);".
2.06. ASSIGNMENTS AND PARTICIPATIONS. Section 12.05(e) of
the Credit Agreement shall be amended as follows:
A. Section 12.05(b)(ii) thereof shall amended by (i)
inserting the word "and" immediately following the semi-colon, at the
end of clause (C) in the first paragraph thereof, (ii) deleting the
semi-colon and the word "and", and replacing the same with a period,
at the end of clause (D) in the first paragraph thereof, (iii)
deleting in its entirety clause (E) of the first paragraph thereof and
(iv) deleting in its entirety the second paragraph thereof.
B. Section 12.05(e) thereof shall be amended by inserting,
immediately prior to the period at the end thereof, the following
words: "subject, however, to the provisions of Section 12.13(b)".
2.07. SURVIVAL. Section 12.06 of the Credit Agreement
shall be amended by (i) deleting the reference to "Section 10.05" and
(ii) replacing the same with the words "Sections 10.05 and 12.13".
2.08. CONFIDENTIALITY. Section 12 of the Credit Agreement
shall be amended by inserting a new Section 12.13 at the end thereof
to read as follows:
"12.13. TREATMENT OF CERTAIN INFORMATION; CONFIDENTIALITY.
(a) TREATMENT OF CERTAIN INFORMATION. The Company
acknowledges that from time to time financial advisory,
investment banking and other services may be offered or provided
to the Company or one or more of its Subsidiaries (in connection
with this Agreement or otherwise) by any Lender or by one or more
Subsidiaries or Affiliates of such Lender and the Company hereby
authorizes each Lender to share any information delivered to such
Lender by the Company and its Subsidiaries pursuant to this
Agreement, or in connection with the decision of such Lender to
- 4 -
enter into this Agreement, to any such Subsidiary or Affiliate,
it being understood that any such Subsidiary or Affiliate
receiving such information shall be bound by the provisions of
paragraph (b) of this Section 12.13 as if it were a Lender
hereunder. Such authorization (and the related obligations under
Section 12.13(b)) shall survive the repayment of the Loans, the
expiration or termination of the Commitments or the termination
of this Agreement or any provision hereof.
(b) CONFIDENTIALITY. The Administrative Agent and each of
the Lenders agrees to maintain the confidentiality of the
Information (as defined below), except that Information may be
disclosed (i) to its and its Affiliates' directors, officers,
employees and agents, including accountants, legal counsel and
other advisors (it being understood that the Persons to whom such
disclosure is made will be informed of the confidential nature of
such Information and instructed to keep such Information
confidential), (ii) to the extent requested by any Governmental
Authority, (iii) to the extent required by applicable laws or
regulations or by any subpoena or similar legal process, (iv) to
any other party to this Agreement, (v) in connection with the
exercise of any remedies hereunder or under any other Credit
Document or any suit, action or proceeding relating to this
Agreement or any other Credit Document or the enforcement of
rights hereunder or thereunder, (vi) subject to an agreement
containing provisions substantially the same as those of this
paragraph, (x) to any assignee of or participant in, or any
prospective assignee of or participant in, any of its rights or
obligations under this Agreement or (y) any actual or prospective
counterparty (or its advisors) to any swap or derivative
transaction relating to the Company and its obligations,
(vii) with the prior written consent of the Company or (viii) to
the extent such Information (A) becomes publicly available other
than as a result of a breach of this paragraph or (B) becomes
available to the Administrative Agent or any Lender on a
nonconfidential basis from a source other than an Obligor. For
the purposes of this paragraph, "INFORMATION" means all
information received from any Obligor relating to the Company and
its Subsidiaries, other than any such information that is
available to the Administrative Agent or any Lender on a
nonconfidential basis prior to disclosure by an Obligor; PROVIDED
that, in the case of information received from an Obligor after
the Effective Date, such information is clearly identified at the
time of delivery as confidential. Any Person required to
maintain the confidentiality of Information as provided in this
Section 12.13 shall be considered to have complied with its
obligation to do so if such Person has exercised the same degree
of care to maintain the confidentiality of such Information as
such Person would accord to its own confidential information.
- 5 -
Notwithstanding the foregoing, the Administrative Agent, the
Lenders and the Obligors (and each of their respective employees,
representatives or other agents) may disclose to any and all
persons, without limitation of any kind, the U.S. tax treatment
and U.S. tax structure of the transactions contemplated by this
Agreement and all materials of any kind (including opinions or
other tax analyses) that are provided to such person relating to
such tax treatment or tax structure, other than any information
for which nondisclosure is reasonably necessary in order to
comply with applicable securities laws, and except that, with
respect to any document or similar item that in either case
contains information concerning the U.S. tax treatment or U.S.
tax structure of such transactions as well as other information,
this paragraph shall only apply to such portions of the document
or similar item that relate to such tax treatment or tax
structure."
Section 3. REPRESENTATIONS AND WARRANTIES. The Company
represents and warrants to the Lenders that (i) both immediately prior
to this Amendment No. 1 becoming effective and after giving effect
thereto, no Default has occurred and is continuing and (ii) the
representations and warranties made by the Company and each Designated
Borrower, as applicable, in the Credit Agreement (after giving effect
to this Amendment No. 1) and each other Credit Document shall be true
and complete on and as of the date hereof with the same force and
effect as if made on and as of such date (or, if any such
representation or warranty is expressly stated to have been made as of
a specific date, as of such specific date) as if each reference
therein to "this Agreement" (or words of similar import) or in such
other Credit Documents to "the Credit Agreement" (or words of similar
import) included reference to this Amendment No. 1.
Section 4. CONDITIONS. The amendments to the Credit
Agreement set forth in Section 2 of this Amendment No. 1 shall become
effective, as of the date hereof, upon receipt by the Administrative
Agent of one or more counterparts of this Amendment No. 1 executed by
the Borrower and the Majority Lenders.
Section 5. MISCELLANEOUS. The Borrower shall pay all
reasonable expenses incurred by the Administrative Agent, including
the reasonable fees, charges and disbursements of Milbank, Tweed,
Hadley & McCloy LLP, special New York counsel to the Administrative
Agent, in connection with the preparation, negotiation, execution and
delivery of this Amendment No. 1. Except as herein provided, the
Credit Agreement shall remain unchanged and in full force and effect.
This Amendment No. 1 may be executed in any number of counterparts,
all of which taken together shall constitute one and the same
amendatory instrument and any of the parties hereto may execute this
Amendment No. 1 by signing any such counterpart. This Amendment No. 1
shall be governed by, and construed in accordance with, the law of the
State of New York.
- 6 -
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 1 to be duly executed and delivered as of the day and
year first above written.
NEWELL RUBBERMAID INC.
By /s/ Douglas L. Martin
---------------------------------
Name: Douglas L. Martin
Title: Vice President - Treasurer
- 7 -
LENDERS
-------
JPMORGAN CHASE BANK
By /s/ Tina L. Ruyter
-------------------------------
Name: Tina L. Ruyter
Title: Vice President
- 8 -
BANK ONE, NA
By /s/ Sabir Hashmy
--------------------------------
Name: Sabir Hashmy
Title: Director
- 9 -
BANK OF AMERICA, N.A.
By /s/ Shannon Burks Horos
--------------------------------
Name: Shannon Burks Horos
Title: Vice President
- 10 -
BNP PARIBAS
By /s/ Rosalie C. Hawley
--------------------------------
Name: Rosalie C. Hawley
Title: Director
By /s/ Christine L. Howatt
--------------------------------
Name: Christine L. Howatt
Title: Director
- 11 -
BARCLAYS BANK PLC
By /s/ Alison McGuigan
--------------------------------
Name: Alison McGuigan
Title: Associate Director
- 12 -
COMMERZBANK AG, NEW YORK AND GRAND
CAYMAN BRANCHES
By /s/ Albert Morrow
--------------------------------
Name: Albert Morrow
Title: Assistant Vice President
By /s/ Graham A. Warning
--------------------------------
Name: Graham A. Warning
Title: Assistant Vice President
- 13 -
THE BANK OF TOKYO-MITSUBISHI, LTD.,
CHICAGO BRANCH
By /s/ Shinichiro Munechika
--------------------------------
Name: Shinichiro Munechika
Title: Deputy General Manager
- 14 -
CITIBANK, N.A.
By /s/ David L. Harris
--------------------------------
Name: David L. Harris
Title: Vice President
- 15 -
MORGAN STANLEY BANK
By /s/ Jaap L. Tonckens
--------------------------------
Name: Jaap L. Tonckens
Title: Vice President
- 16 -
THE NORTHERN TRUST COMPANY
By /s/ Craig L. Smith
--------------------------------
Name: Craig L. Smith
Title: Vice President
- 17 -
ING BANK N.V.
By /s/ Alan Duffy
--------------------------------
Name: Alan Duffy
Title: Director
By /s/ Aidan Neill
--------------------------------
Name: Aidan Neill
Title: Director
- 18 -
BANCA DI ROMA - CHICAGO BRANCH
By /s/ James Semonchik
--------------------------------
Name: James Semonchik
Title: Vice President
By /s/ Enrico Verdoscia
--------------------------------
Name: Enrico Verdoscia
Title: Senior Vice President
- 19 -
U.S. BANK NATIONAL ASSOCIATION
By /s/ Janell W. Stanosz
--------------------------------
Name: Janell W. Stanosz
Title: Vice President
- 20 -
THE BANK OF NEW YORK
By /s/ M. Scott Donaldson
--------------------------------
Name: M. Scott Donaldson
Title: Assistant Vice President
- 21 -
NORDEA BANK FINLAND PLC
By /s/ Thomas P. Hickey
--------------------------------
Name: Thomas P. Hickey
Title: Vice President
By /s/ Henrik M. Steffensen
--------------------------------
Name: Henrik M. Steffensen
Title: First Vice President
- 22 -
DANSKE BANK
By /s/ John O'Neill
--------------------------------
Name: John O'Neill
Title: Vice President
By /s/ Peter L. Hargraves
--------------------------------
Name: Peter L. Hargraves
Title: Vice President
- 23 -
FIFTH THIRD BANK (CHICAGO)
By /s/ Christopher D. Jones
--------------------------------
Name: Christopher D. Jones
Title: Vice President
- 24 -
BANK HAPOALIM B.M.
By /s/ Marc Bosc
--------------------------------
Name: Marc Bosc
Title: Vice President
By /s/ Lehroy Hackett
--------------------------------
Name: Lehroy Hackett
Title: Vice President
EXHIBIT 4.2
-----------
NEWELL RUBBERMAID INC.
_____________________________
AMENDED AND RESTATED
364-DAY CREDIT AGREEMENT
$650,000,000
Dated as of June 13, 2003
______________________________
JPMORGAN CHASE BANK,
as Administrative Agent
J.P. MORGAN SECURITIES INC.,
as Sole Lead Arranger and Sole Bookrunner
BANK ONE, NA,
BANK OF AMERICA, N.A.,
BNP PARIBAS
and BARCLAYS BANK PLC,
as Co-Syndication Agents
CITIBANK, N.A.,
as Documentation Agent
AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT (this
"AGREEMENT") dated as of June 13, 2003, between NEWELL RUBBERMAID
INC., a corporation duly organized and validly existing under the laws
of the State of Delaware (the "COMPANY"); each of the lenders
signatory hereto (individually, a "LENDER" and, collectively, the
"LENDERS"); and JPMORGAN CHASE BANK, as Administrative Agent (the
"ADMINISTRATIVE AGENT").
The Company, the lenders party thereto including certain of
the Lenders (the "EXISTING LENDERS") and the Administrative Agent are
parties to a 364-Day Credit Agreement dated as of June 14, 2002 (as in
effect immediately prior to the effectiveness of this Agreement, the
"EXISTING CREDIT AGREEMENT"), providing for, subject to the terms and
conditions thereof, extensions of credit (by the making of loans) by
the Lenders to the Borrowers (as defined therein) in an aggregate
principal amount not exceeding $650,000,000. The parties hereto wish
to (a) amend the Existing Credit Agreement in certain respects, to
provide for, among other things, (i) the extension of the Commitment
Termination Date (as defined in the Existing Credit Agreement), (ii)
the Existing Lenders that are not listed as "Lenders" on the signature
pages hereof to cease being parties to the Existing Credit Agreement
as amended and restated hereby (the "RETIRING LENDERS") and (iii)
certain financial institutions to become party as "Lenders" to the
Existing Credit Agreement as amended and restated hereby (the "NEW
LENDERS"), and (b) to restate the Existing Credit Agreement as so
amended (the Existing Credit Agreement as so amended and restated, the
"CREDIT AGREEMENT"). Accordingly, the parties hereto agree to amend
the Existing Credit Agreement as set forth in Section 2 hereof and to
restate the Existing Credit Agreement to read in its entirety as set
forth in the Existing Credit Agreement (which Existing Credit
Agreement is incorporated herein by this reference), as amended by the
amendments set forth in Section 2 hereof:
Section 1. DEFINITIONS. Except as otherwise defined
herein, terms defined in the Existing Credit Agreement are used herein
as defined therein.
Section 2. AMENDMENTS. Subject to the satisfaction of the
conditions precedent specified in Section 4 hereof, the Existing
Credit Agreement is hereby amended as set forth below:
2.01. References in the Existing Credit Agreement to
"this Agreement" (and indirect references such as "hereunder",
"hereby", herein" and "hereof") shall be deemed to be references to
this Agreement.
2.02. Section 1.01 of the Existing Credit Agreement
shall be amended as follows:
A. The definition of ""APPLICABLE FACILITY FEE RATE",
"APPLICABLE UTILIZATION FEE RATE" "APPLICABLE MARGIN" and "APPLICABLE
2
TERM LOAN PREMIUM"" shall be replaced with the following definition
(which shall be inserted in the appropriate alphabetical location):
"ADDITIONAL MARGIN", "APPLICABLE FACILITY FEE RATE",
"APPLICABLE MARGIN" and "APPLICABLE TERM LOAN PREMIUM" shall
mean, during any period when the Rating is at one of the Rating
Groups specified below, the percentage set forth below opposite
the reference to such fee or to the relevant Type of Committed
Loan:
Rating Rating Rating Rating Rating
Group Group Group Group Group
I II III IV V
------ ------ ------ ------ ------
Applicable
Facility Fee Rate 0.05% 0.08% 0.10% 0.125% 0.175%
Applicable Margin
for Committed
LIBOR Loans 0.20% 0.32% 0.40% 0.50% 0.70%
Applicable
Margin for Base
Rate Loans 0% 0% 0% 0% 0%
Additional Margin
(greater than 50%) 0.05% 0.10% 0.125% 0.125% 0.25%
Applicable Term
Loan Premium 0.25% 0.25% 0.25% 0.25% 0.25%
Any change in the Additional Margin, the Applicable Facility
Fee Rate, the Applicable Margin or the Applicable Term Loan
Premium by reason of a change in the Moody's Rating, the Standard
& Poor's Rating or the Fitch Rating shall become effective on the
date of announcement or publication by the respective Rating
Agency of a change in such Rating or, in the absence of such
announcement or publication, on the effective date of such
changed rating.
The Additional Margin shall be payable only for each day on
which the aggregate principal amount of outstanding Loans
(including the Term Loans but excluding the Competitive Loans)
equals or exceeds 50% of the aggregate outstanding Commitments
(or at any time following the conversion of Committed Loans to
Term Loans pursuant to Section 2.01(b) or the termination of the
Commitments for any other reason, the aggregate Commitments in
effect immediately prior to such conversion or termination, as
the case may be).
B. Section 1.01 of the Existing Credit Agreement shall be
further amended by adding the following new definitions (to the extent
not already included in said Section 1.01) and inserting the same in
the appropriate alphabetical locations and by amending in their
3
entirety the following definitions (to the extent already included in
said Section 1.01), as follows:
"APPROVED FUND" means any Person (other than a natural
person) that is engaged in making, purchasing, holding or
investing in bank loans and similar extensions of credit in the
ordinary course of its business and that is administered or
managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an
entity or an Affiliate of an entity that administers or manages a
Lender.
"COMMITMENT TERMINATION DATE" shall mean June 11, 2004;
PROVIDED that, if such date is not a Business Day, the Commitment
Termination Date shall be the next preceding Business Day.
"DISPOSITION PERIOD" shall mean, for any Disposition, a
period of twelve months ending on the date of such Disposition.
"OTHER CREDIT AGREEMENT" shall mean the Five-Year Credit
Agreement dated as of June 14, 2002, between the Borrowers, the
banks party thereto and JPMCB, as Administrative Agent.
2.03. Each reference in the Existing Credit Agreement to
the words "Applicable Utilization Fee Rate" shall be replaced
with the words "Additional Margin".
2.04. Section 2.06(b) of the Existing Credit Agreement
shall be deleted in its entirety and replaced with the words "(b)
[Intentionally Omitted]".
2.05. Clauses (i) and (ii) of Section 3.02(a) of the
Existing Credit Agreement shall be amended in their entirety to read
as follows:
"(i) during such period as such Loan is a Base Rate Loan,
the Base Rate (as in effect from time to time) plus the sum
of (A) Additional Margin (if any) plus (B) (in the case of
Term Loans) the Applicable Term Loan Premium;
(ii) during such period as such Loan is a Committed LIBOR
Loan, for each Interest Period relating thereto, the
Adjusted LIBO Rate for such Loan for such Interest Period
plus the sum of (A) the Applicable Margin plus (B) the
Additional Margin (if any) plus (C) (in the case of Term
Loans) the Applicable Term Loan Premium;".
2.06. Section 7.02 of the Existing Credit Agreement
shall be amended by replacing (i) in clause (a) thereof, (1) the date
"December 31, 2001" with the date "December 31, 2002", and (2) the
reference to "Arthur Anderson LLP" with the words "Ernst & Young LLP",
(ii) in clause (b) thereof, the date "March 31, 2002" with the date
4
"March 31, 2003" and (iii) in clause (c) thereof, the date "December
31, 2001" with the date "December 31, 2002".
2.07. Section 12.04 of the Existing Credit Agreement shall
be amended by deleting in the proviso thereof the words ", unless by
an instrument signed by all of the Lenders or by the Administrative
Agent acting with the consent of all of the Lenders" and inserting in
lieu thereof the following words: ", unless by an instrument signed by
each Lender affected thereby or by the Administrative Agent acting
with the consent of each Lender affected thereby".
2.08. Section 12.05 of the Existing Credit Agreement shall
be amended as follows:
A. Section 12.05(b)(ii) thereof shall amended by (i)
inserting the word "and" immediately following the semi-colon, at the
end of clause (C) in the first paragraph thereof, (ii) deleting the
semi-colon and the word "and", and replacing the same with a period,
at the end of clause (D) in the first paragraph thereof, (iii)
deleting in its entirety clause (E) of the first paragraph thereof and
(iv) deleting in its entirety the second paragraph thereof.
B. Section 12.05(e) thereof shall be amended by inserting,
immediately prior to the period at the end thereof, the following
words: "subject, however, to the provisions of Section 12.13(b)".
2.09. Section 12.06 of the Existing Credit Agreement shall
be amended by (i) deleting the reference to "Section 10.05" and (ii)
replacing the same with the words "Sections 10.05 and 12.13".
2.10. Section 12 of the Existing Credit Agreement shall be
amended by inserting a new Section 12.13 at the end thereof to read as
follows:
"12.13. TREATMENT OF CERTAIN INFORMATION; CONFIDENTIALITY.
(a) TREATMENT OF CERTAIN INFORMATION. The Company
acknowledges that from time to time financial advisory,
investment banking and other services may be offered or provided
to the Company or one or more of its Subsidiaries (in connection
with this Agreement or otherwise) by any Lender or by one or more
Subsidiaries or Affiliates of such Lender and the Company hereby
authorizes each Lender to share any information delivered to such
Lender by the Company and its Subsidiaries pursuant to this
Agreement, or in connection with the decision of such Lender to
enter into this Agreement, to any such Subsidiary or Affiliate,
it being understood that any such Subsidiary or Affiliate
receiving such information shall be bound by the provisions of
paragraph (b) of this Section 12.13 as if it were a Lender
hereunder. Such authorization (and the related obligations under
Section 12.13(b)) shall survive the repayment of the Loans, the
5
expiration or termination of the Commitments or the termination
of this Agreement or any provision hereof.
(b) CONFIDENTIALITY. The Administrative Agent and each of
the Lenders agrees to maintain the confidentiality of the
Information (as defined below), except that Information may be
disclosed (i) to its and its Affiliates' directors, officers,
employees and agents, including accountants, legal counsel and
other advisors (it being understood that the Persons to whom such
disclosure is made will be informed of the confidential nature of
such Information and instructed to keep such Information
confidential), (ii) to the extent requested by any Governmental
Authority, (iii) to the extent required by applicable laws or
regulations or by any subpoena or similar legal process, (iv) to
any other party to this Agreement, (v) in connection with the
exercise of any remedies hereunder or under any other Credit
Document or any suit, action or proceeding relating to this
Agreement or any other Credit Document or the enforcement of
rights hereunder or thereunder, (vi) subject to an agreement
containing provisions substantially the same as those of this
paragraph, (x) to any assignee of or participant in, or any
prospective assignee of or participant in, any of its rights or
obligations under this Agreement or (y) any actual or prospective
counterparty (or its advisors) to any swap or derivative
transaction relating to the Company and its obligations,
(vii) with the prior written consent of the Company or (viii) to
the extent such Information (A) becomes publicly available other
than as a result of a breach of this paragraph or (B) becomes
available to the Administrative Agent or any Lender on a
nonconfidential basis from a source other than an Obligor. For
the purposes of this paragraph, "INFORMATION" means all
information received from any Obligor relating to the Company and
its Subsidiaries, other than any such information that is
available to the Administrative Agent or any Lender on a
nonconfidential basis prior to disclosure by an Obligor; PROVIDED
that, in the case of information received from an Obligor after
the Effective Date, such information is clearly identified at the
time of delivery as confidential. Any Person required to
maintain the confidentiality of Information as provided in this
Section 12.13 shall be considered to have complied with its
obligation to do so if such Person has exercised the same degree
of care to maintain the confidentiality of such Information as
such Person would accord to its own confidential information.
Notwithstanding the foregoing, the Administrative Agent, the
Lenders and the Obligors (and each of their respective employees,
representatives or other agents) may disclose to any and all
persons, without limitation of any kind, the U.S. tax treatment
and U.S. tax structure of the transactions contemplated by this
Agreement and all materials of any kind (including opinions or
other tax analyses) that are provided to such person relating to
such tax treatment or tax structure, other than any information
6
for which nondisclosure is reasonably necessary in order to
comply with applicable securities laws, and except that, with
respect to any document or similar item that in either case
contains information concerning the U.S. tax treatment or U.S.
tax structure of such transactions as well as other information,
this paragraph shall only apply to such portions of the document
or similar item that relate to such tax treatment or tax
structure."
2.11. Annex I to the Existing Credit Agreement shall be
deleted in its entirety and replaced with Annex I hereto, and each
reference in the Existing Credit Agreement to "Annex I" (including any
indirect references thereto) shall be deemed to be references to
Annex I to this Agreement.
Section 3. REPRESENTATIONS AND WARRANTIES. The Company
represents and warrants to the Lenders that (i) both immediately prior
to this Agreement becoming effective and after giving effect thereto,
no Default has occurred and is continuing and (ii) the representations
and warranties made by the Company and each Designated Borrower, as
applicable, in the Credit Agreement (after giving effect to this
Agreement) and each other Credit Document shall be true and complete
on and as of the Effective Date (as defined below) with the same force
and effect as if made on and as of such date (or, if any such
representation or warranty is expressly stated to have been made as of
a specific date, as of such specific date) as if each reference
therein to "this Agreement" (or words of similar import) or in such
other Credit Documents to "the Credit Agreement" (or words of similar
import) included reference to the Credit Agreement.
Section 4. CONDITIONS PRECEDENT. The amendment and
restatement set forth herein (including the amendments set forth in
Section 2 hereof) shall become effective on the date (the "EFFECTIVE
DATE") on which the Administrative Agent shall have received the
following, each of which shall be satisfactory to the Administrative
Agent (and, to the extent specified below, to each Lender) in form and
substance:
(a) EXECUTION OF THIS AGREEMENT. One or more counterparts
of this Agreement executed by the Company, the Administrative
Agent, each of the Existing Lenders (other than the Retiring
Lenders) and each of the New Lenders (and by its execution and
delivery thereof, each New Lender agrees that, as of the
Effective Date, it shall become a "Lender" for all purposes of
this Credit Agreement having a Commitment in the amount set forth
opposite such New Lender's name in Annex I hereto) (or written
evidence satisfactory to the Administrative Agent (which may
include telecopy transmission of a signed signature page of this
Agreement) that such party has signed a counterpart of this
Agreement).
7
(b) OPINIONS. Opinions, each dated the Effective Date, of
Schiff Hardin & Waite, special Illinois counsel to the Company,
and of Dale L. Matschullat, Vice-President - General Counsel to
the Company, each in form and substance satisfactory to the
Administrative Agent (and the Company hereby instructs each such
counsel to deliver such opinion to the Lenders and the
Administrative Agent).
(c) FEES AND EXPENSES. Evidence satisfactory to the
Administrative Agent that the Borrowers shall have paid in full
(i) all unpaid principal and interest on any outstanding Loan
under the Existing Credit Agreement, (ii) all fees, expenses and
any other amounts due and payable in connection with such Loans
accrued to the Effective Date to the Administrative Agent and the
Lenders under the Existing Credit Agreement and (iii) all fees
and other amounts due and payable by the Company on or prior to
the Effective Date in connection with this Agreement.
(d) RETIRING LENDER CONSENTS. An instrument signed by each
Retiring Lender pursuant to which such Retiring Lender shall
cease to be a "Lender" under the Existing Credit Agreement as
amended and restated hereby in form and substance satisfactory to
the Administrative Agent.
(e) OTHER DOCUMENTS. Such certificates or other documents
as the Administrative Agent or any Lender or special New York
counsel to JPMCB may reasonably request.
Section 5. MISCELLANEOUS. This Agreement may be executed
in any number of counterparts, all of which taken together shall
constitute one and the same agreement and any of the parties hereto
may execute this Agreement by signing any such counterpart. This
Agreement shall be governed by, and construed in accordance with the
law of the State of New York.
8
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered as of the day and year
first above written.
NEWELL RUBBERMAID INC.
By /s/ Douglas L. Martin
-------------------------------
Name: Douglas L. Martin
Title: Vice President - Treasurer
Address for Notices:
Newell Rubbermaid Inc.
29 East Stephenson Street
Freeport, Illinois 61032
Attn: Douglas Martin
Vice-President-Treasurer
Telecopier No.: (815) 233-8618
Telephone No.: (815) 233-8060
9
ADMINISTRATIVE AGENT
--------------------
JPMORGAN CHASE BANK,
as Administrative Agent
By /s/ Tina L. Ruyter
------------------------------
Name: Tina L. Ruyter
Title: Vice President
Address for Notices:
JPMorgan Chase Bank
1111 Fannin Street / Floor: 10
Houston, TX 77002
Attn: Cherry Arnaez
Telecopier No.: (713) 750-2789
Telephone No.: (713) 750-2782
10
LENDERS
-------
JPMORGAN CHASE BANK
By /s/ Tina L. Ruyter
---------------------------------
Name: Tina L. Ruyter
Title: Vice President
11
BANK ONE, NA
By /s/ Sabir Hashmy
---------------------------------
Name: Sabir Hashmy
Title: Director
12
BANK OF AMERICA, N.A.
By /s/ Shannon Burks Horos
---------------------------------
Name: Shannon Burks Horos
Title: Vice President
13
BNP PARIBAS
By /s/ Rosalie C. Hawley
-------------------------------
Name: Rosalie C. Hawley
Title: Director
By /s/ Christine L. Howatt
-------------------------------
Name: Christine L. Howatt
Title: Director
14
BARCLAYS BANK PLC
By /s/ Alison McGuigan
-------------------------------
Name: Alison McGuigan
Title: Associate Director
15
CITIBANK, N.A.
By /s/ David L. Harris
-------------------------------
Name: David L. Harris
Title: Vice President
16
COMMERZBANK AKTIENGESELLSCHAFT
NEW YORK BRANCH
By /s/ Albert Morrow
-------------------------------
Name: Albert Morrow
Title: Assistant Vice President
By /s/ Graham A. Warning
-------------------------------
Name: Graham A. Warning
Title: Assistant Vice President
17
THE BANK OF TOKYO-MITSUBISHI, LTD.,
CHICAGO BRANCH
By /s/ Shinichiro Munechika
-------------------------------
Name: Shinichiro Munechika
Title: Deputy General Manager
18
MORGAN STANLEY BANK
By /s/ Jaap L. Tonckens
-------------------------------
Name: Jaap L. Tonckens
Title: Vice President
19
BANCA DI ROMA - CHICAGO BRANCH
By /s/ James Semonchik
-------------------------------
Name: James Semonchik
Title: Vice President
By /s/ Enrico Verdoscia
-------------------------------
Name: Enrico Verdoscia
Title: Senior Vice President
20
THE BANK OF NEW YORK
By /s/ M. Scott Donaldson
-------------------------------
Name: M. Scott Donaldson
Title: Assistant Vice President
21
BANCO BILBAO VIZCAYA ARGENTARIA S.A.
NEW YORK BRANCH
By /s/ Hector O. Villegas
-------------------------------
Name: Hector O. Villegas
Title: Vice President
By /s/ Santiago Hernandez
-------------------------------
Name: Santiago Hernandez
Title: Vice President
22
ING BANK N.V.
By /s/ Alan Duffy
-------------------------------
Name: Alan Duffy
Title: Director
By /s/ Aidan Neill
-------------------------------
Name: Aidan Neill
Title: Director
23
THE NORTHERN TRUST COMPANY
By /s/ Craig L. Smith
-------------------------------
Name: Craig L. Smith
Title: Vice President
24
BANK HAPOALIM B.M.
By /s/ Marc Bosc
-------------------------------
Name: Marc Bosc
Title: Vice President
By /s/ Lehroy Hackett
-------------------------------
Name: Lehroy Hackett
Title: Vice President
25
NATIONAL AUSTRALIA BANK LIMITED
By /s/ Michael Woolrich
-------------------------------
Name: Michael Woolrich
Title: Director - Diversified
Industries
26
DANSKE BANK
By /s/ John O'Neill
-------------------------------
Name: John O'Neill
Title: Vice President
By /s/ Peter L. Hargraves
-------------------------------
Name: Peter L. Hargraves
Title: Vice President
27
NORDEA BANK FINLAND PLC
By /s/ Thomas P. Hickey
-------------------------------
Name: Thomas P. Hickey
Title: Vice President
By /s/ Henrik M. Steffensen
-------------------------------
Name: Henrik M. Steffensen
Title: First Vice President
28
FIFTH THIRD BANK
By /s/ Christopher D. Jones
-------------------------------
Name: Christopher D. Jones
Title: Vice President
29
EXHIBIT 12
----------
NEWELL RUBBERMAID INC. AND SUBSIDIARIES
STATEMENT OF COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN MILLIONS, EXCEPT RATIO DATA)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -----------------
2003 2002 2003 2002
---- ---- ---- ----
Earnings available for fixed charges:
Income before income taxes and cumulative effect
of accounting change $109.2 $134.3 $133.0 $211.5
Fixed charges:
Interest expense 28.6 29.3 60.6 54.4
Portion of rent determined to be interest (1) 11.5 10.3 22.2 19.9
Minority interest in income of subsidiary trust 6.7 6.7 13.4 13.4
Equity earnings - 0.2 - (0.7)
------ ------ ------ ------
$156.0 $180.8 $229.2 $298.5
====== ====== ====== ======
Fixed charges:
Interest expense $28.6 $29.3 $60.6 $54.4
Portion of rent detremined to be interest (1) 11.5 10.3 22.2 19.9
Minority interest income of subsidiary trust 6.7 6.7 13.4 13.4
----- ----- ----- -----
$46.8 $46.3 $96.2 $87.7
===== ===== ===== =====
Ratio of earnings to fixed charges 3.33 3.90 2.38 3.40
===== ===== ===== =====
(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 31.1
------------
CERTIFICATION
I, Joseph Galli, Jr., certify that:
1. I have reviewed this report on Form 1O-Q for the quarterly period
ended June 30, 2003 of Newell Rubbermaid Inc.;
2. Based on my knowledge, this 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 report;
3. Based on my knowledge, the financial statements, and other
financial information included in this 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 report;
4. The registrant's other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under
our supervision, 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
report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
(c) Disclosed in this report any change in the registrant's
internal control over financial reporting that occurred
during the registrant's most recent fiscal quarter (the
registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably
likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant's auditors
and the audit committee of the registrant's board of directors
(or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial
reporting which are reasonably likely to adversely affect
the registrant's ability to record, process, summarize and
report financial information; and
(b) Any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal control over financial reporting.
Date: July 31, 2003
/s/ Joseph Galli, Jr.
----------------------------
Joseph Galli, Jr.
Chief Executive Officer
2
EXHIBIT 31.2
------------
CERTIFICATION
I, J. Patrick Robinson, certify that:
1. I have reviewed this report on Form 1O-Q for the quarterly period
ended June 30, 2003 of Newell Rubbermaid Inc.;
2. Based on my knowledge, this 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 report;
3. Based on my knowledge, the financial statements, and other
financial information included in this 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 report;
4. The registrant's other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under
our supervision, 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
report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
(c) Disclosed in this report any change in the registrant's
internal control over financial reporting that occurred
during the registrant's most recent fiscal quarter (the
registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably
likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant's auditors
and the audit committee of the registrant's board of directors
(or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial
reporting which are reasonably likely to adversely affect
the registrant's ability to record, process, summarize and
report financial information; and
(b) Any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal control over financial reporting.
Date: July 31, 2003
/s/ J. Patrick Robinson
------------------------------
J. Patrick Robinson
Chief Financial Officer
2
EXHIBIT 32.1
------------
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 June 30, 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
July 31, 2003
EXHIBIT 32.2
------------
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 June 30, 2003 as filed
with the Securities and Exchange Commission on the date hereof (the
"Report"), I, J. Patrick Robinson, 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/ J. Patrick Robinson
J. Patrick Robinson
Chief Financial Officer
July 31, 2003
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 June 30, 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 2nd 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
2
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.
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 and 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
