Global consumer and commercial product marketer Newell Rubbermaid Inc. announced 28 October 2004 its results for the 3Q 2004. The company highlighted the generation of strong free cash flow and result…
Global consumer and commercial product marketer Newell Rubbermaid Inc. announced 28 October 2004 its results for the 3Q 2004. The company highlighted the generation of strong free cash flow and results at the high-end of guidance, exceeding Wall Street consensus. THIRD QUARTER RESULTS Net loss from continuing operations in the 3Q 2004 was USD 235.0 million, or USD 0.86 per share, compared to net income from continuing operations of USD 85.5 million, or USD 0.31 per share, in the 3Q 2003. During the 3Q 2004, the company recorded a non-cash impairment charge of USD 348.9 million (USD 332.8 million after-tax). Net income from continuing operations, excluding the impairment charge, was USD 97.8 million in the 3Q 2004, compared to net income from continuing operations, excluding charges, of USD 108.2 million in the 3Q 2003. Diluted earnings per share from continuing operations, calculated on the same basis, was USD 0.36 per share in the 3Q 2004, compared to Wall Street consensus of USD 0.33 per share and USD 0.39 per share earned in the 3Q 2003. The 3Q 2004 results include a tax benefit of USD 2.9 million (USD 0.01 per share). Net sales in the 3Q 2004 were USD 1.67 billion, compared to USD 1.73 billion in the 3Q 2003, a fall of 3.3%. Foreign currency translation was a benefit to sales of 1.7% and pricing was a favorable 0.2%. These were offset by the planned exit of certain low-margin product lines of 4.3%, primarily in the Rubbermaid Home Products division. Free cash flow was USD 202.2 million in the 3Q 2004, a USD 39.7 million improvement over USD 162.5 million in the 3Q 2003. This improvement was driven by reduced capital spending, primarily in the Rubbermaid Home Products division, offset by a voluntary USD 50.0 million cash contribution to fund the company“s pension plan. Newell Rubbermaid defines free cash flow as cash generated from operations, net of capital expenditures and dividends. “Our team delivered yet another quarter of strong free cash flow. We have demonstrated improved capital spending discipline throughout 2004 while we continue to strategically support the high-potential businesses in our portfolio,” said Newell Rubbermaid CEO Joe Galli. “We“re on track for another year of outstanding free cash flow performance.” Gross margin declined to 28.3% in the 3Q 2004 from 28.4% in the 3Q 2003, driven primarily by higher raw materials costs, partially offset by favorable pricing and productivity savings. Excluding charges, gross margin was 28.3% in the 3Q 2004, down from 28.5% in the 3Q 2003. “During the 3Q we saw record-high costs for several of our raw materials. The team did a good job offsetting this inflation through a combination of productivity and pricing initiatives,” said Galli. “As we look to the balance of 2004 and beyond, we are anticipating significant pressure in the commodity environment. We are committed to continue offsetting commodity inflation through cost reductions in our manufacturing network and price increases.” In conjunction with the company“s annual test of impairment for goodwill and other indefinite-lived intangible assets in the 3Q and its testing of other long-lived assets for impairment, the company recorded a non-cash impairment charge of USD 348.9 million (USD 332.8 million after-tax) in the 3Q 2004. The impairment is primarily related to European and Latin American businesses within the Office Products segment and the European business in the Cleaning & Organization segment. Additional information regarding the impairment charge is provided in the company“s Form 8-K filed 28 October 2004. During the quarter the company recorded an after-tax gain of USD 8.6 million, shown as discontinued operations, primarily related to the previously announced sale of its Little Tikes Commercial Play Systems business. NINE-MONTH RESULTS Net sales for the first nine months of 2004 were USD 4.94 billion, a decrease of 2.6% from USD 5.07 billion for the first nine months of 2003. Internal sales, which excludes the impact of material acquisitions and divestitures made in the past year, declined 2.4%. Foreign currency translation favorably impacted sales by 2.3%, primarily offset by pricing declines of 0.5% and the planned exit of certain low-margin product lines of 3.9%. Net loss from continuing operations for the first nine months of 2004 was USD 143.3 million, or USD 0.52 per share, compared to net income of USD 208.9 million, or USD 0.76 per share in 2003. Excluding charges, net income from continuing operations for the first nine months of 2004 was USD 254.1 million versus USD 301.8 million in 2003. Diluted earnings per share, calculated on the same basis, were USD 0.93 in the first nine months of 2004 versus USD 1.10 in 2003. Free cash flow was USD 153.4 million for the first nine months of 2004, a USD 153.1 million improvement over USD 0.3 million for the first nine months of 2003. The improvement was driven by reduced capital spending, primarily in the Rubbermaid Home Products division. In the first nine months of 2004, the company recorded a pre-tax restructuring charge of USD 47.9 million and other pre-tax charges of USD 17.5 million, primarily related to product line exits. The company also recorded impairment charges of USD 374.0 million, primarily related to asset impairment in the European and Latin American businesses within the Office Products segment and the European business in the Cleaning & Organization segment. Related to the divestitures of non-core businesses, the company also recorded a net loss of USD 97.0 million, shown as discontinued operations. OUTLOOK For 2004, Newell Rubbermaid continues to expect internal sales to decline 1% – 3% and continues to expect diluted earnings per share from continuing operations to be in the range of USD 1.36 to USD 1.41. This range excludes restructuring charges of USD 47.9 million (USD 0.12 per share), other charges of USD 17.5 million (USD 0.04 per share), primarily related to product line exits, charges of USD 374.0 million (USD 1.28 per share) related to asset impairment and a net loss on discontinued operations related to the divestiture of non-core businesses of USD 97.0 million (USD 0.35 per share). For the 4Q 2004, the company expects internal sales to decline 1% – 3% and diluted earnings per share from continuing operations to be in the range of USD 0.43 to USD 0.47.