Announces Intention to Divest Window Coverings Business
Newell Rubbermaid (NYSE:NWL) has entered into a definitive agreement to
acquire Elmer’s Products, Inc. ("Elmer’s") from an affiliate of Berwind
Corporation, a family-owned investment management company, for a
purchase price of $600 million, subject to customary working capital
adjustments. Elmer’s, whose brands include Elmer’s®, Krazy Glue®, and
X-Acto®, is the leading provider of activity-based adhesive and cutting
products that inspire creativity in the classroom, at home, in the
office, in the workshop and at the craft table. Elmer’s distributes
Krazy Glue, a leading instant adhesive brand in North America, through a
joint venture with Toagosei Chemical Co. Ltd.1
“The acquisition of Elmer’s strengthens our market-leading Writing
Segment with three outstanding arts and craft brands that will not only
enhance our merchandising scale in the key Back to School drive period,
but offer great cross-selling and distribution synergies given the
strong overlap with Newell’s retailer and channel footprint,” said
Michael Polk, President and Chief Executive Officer of Newell
Rubbermaid. “We are delighted to welcome the Elmer’s team and their
leading brands to our company. The addition of Elmer’s adds even more
firepower and long term potential to our building growth acceleration
and margin development story.”
Elmer’s net sales for calendar year 2015 are projected to be
approximately $240 million. The acquisition is expected to be accretive
to normalized earnings and operating margin in 2016. The acquired
business will be reported as part of Newell Rubbermaid’s Writing segment
with Elmer’s, X-Acto and Krazy Glue joining the company's Paper Mate®,
Sharpie®, Expo® and Mr. Sketch® brands. The company will leverage its
brand building, design and innovation capabilities to accelerate Elmer’s
growth while simultaneously delivering synergies in distribution,
cross-selling and merchandising. The acquisition is expected to be
financed through a combination of available liquidity and debt
financings. The company anticipates the transaction closing by year end,
subject to customary conditions and regulatory approvals.
Coincident with the agreement to acquire Elmer’s, the company has
initiated a process to divest its Levolor® and Kirsch® window coverings
brands (“Décor”). The Décor business is expected to generate
approximately $310 million in net sales in 2015. The business will
continue to be reported as part of the Home Solutions Segment and will
be managed as a stand-alone business through this process.
The company expects no material impact to 2015 full year results related
to either the Elmer’s acquisition or the planned Décor divestiture given
the timing of both transactions. Accordingly, 2015 full year guidance
remains unchanged at 4 to 5 percent core sales growth and normalized EPS
of $2.14 to $2.20 per share. As recently communicated in connection with
second quarter earnings, the company continues to track towards the
mid-point of both full year ranges. In 2016, Newell Rubbermaid expects
the normalized EPS accretion from the acquisition of Elmer’s to be
effectively offset by the dilution associated with the disposal of
Décor, resulting in minimal impact to 2016 normalized EPS. The company
plans to provide 2016 full year guidance along with its third quarter
financial results later this month.
1 “Krazy Glue” is a registered trademark of Toagosei Co.
Ltd., used with permission.
Reconciliation of Core Sales Guidance for Year
Ending December 31, 2015
Core sales
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4.0% to 5.0%
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Currency
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(5.0)% to (6.0)%
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Acquisitions, net of planned divestitures
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4.0% to 5.0%
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Net sales growth
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3.0% to 4.0%
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|
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Reconciliation of Normalized EPS Guidance for
Year Ending December 31, 2015
Diluted earnings per share
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$1.69 to $1.75
|
Graco product recall
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$0.03
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Restructuring and other Project Renewal costs
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$0.35 to $0.45
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Acquisition and integration costs
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$0.01
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Devaluation of the Venezuelan Bolivar
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$0.01
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Discontinued operations
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$(0.01) to $0.01
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Normalized earnings per share
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$2.14 to $2.20
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Non-GAAP Financial Measures
This release contains non-GAAP financial measures within the meaning of
Regulation G promulgated by the Securities and Exchange Commission and
includes a reconciliation of these non-GAAP financial measures to the
most directly comparable financial measures calculated in accordance
with GAAP.
The company uses certain non-GAAP financial measures that are included
in this press release and the additional financial information both in
explaining its results to stockholders and the investment community and
in its internal evaluation and management of its businesses. The
company’s management believes that these non-GAAP financial measures and
the information they provide are useful to investors since these
measures (a) permit investors to view the company’s performance using
the same tools that management uses to evaluate the company’s past
performance, reportable business segments and prospects for future
performance and (b) determine certain elements of management’s incentive
compensation.
The company’s management believes that core sales provides a more
complete understanding of underlying sales trends by providing sales on
a consistent basis as it excludes the impacts of acquisitions, planned
or completed divestitures and changes in foreign currency from
year-over-year comparisons. The effect of foreign currency on reported
sales is determined by applying a fixed exchange rate, calculated as the
12-month average in the prior year, to the current and prior year local
currency sales amounts (excluding acquisitions and planned and completed
divestitures), with the difference in these two amounts being the
increase or decrease in core sales, and the difference between the
change in as reported sales and the change in core sales reported as the
currency impact. The company’s management believes that “normalized”
earnings per share, which exclude restructuring and other expenses and
one-time and other events such as costs related to product recalls, the
extinguishment of debt, certain tax benefits and charges, impairment
charges, pension settlement charges, discontinued operations, costs
related to the acquisition and integration of acquired businesses,
advisory costs for process transformation and optimization initiatives,
dedicated personnel costs related to transformation initiatives under
Project Renewal, asset devaluations resulting from the adoption and
continued use of the SICAD Venezuelan Bolivar exchange rate and certain
other items, is useful because it provides investors with a meaningful
perspective on the current underlying performance of the company’s core
ongoing operations. The company also uses core sales and normalized
earnings per share as two of the three criteria in its management cash
bonus plan and performance-based equity compensation arrangements.
The company determines the tax effect of the items excluded from
normalized diluted earnings per share by applying the estimated
effective rate for the applicable jurisdiction in which the pre-tax
items were incurred, and for which realization of the resulting tax
benefit, if any, is expected. In certain situations in which an item
excluded from normalized results impacts income tax expense, the company
uses a “with” and “without” approach to determine normalized income tax
expense.
While the company believes that these non-GAAP financial measures are
useful in evaluating the company’s performance, this information should
be considered as supplemental in nature and not as a substitute for or
superior to the related financial information prepared in accordance
with GAAP. Additionally, these non-GAAP financial measures may differ
from similar measures presented by other companies.
About Newell Rubbermaid
Newell Rubbermaid Inc., an S&P 500 company, is a global marketer of
consumer and commercial products with 2014 sales of $5.7 billion and a
strong portfolio of leading brands, including Sharpie®, Paper
Mate®, Rubbermaid Commercial Products®, Irwin®,
Lenox®, Parker®, Waterman®, Rubbermaid®,
Contigo®, Levolor®, Calphalon®, Goody®,
Graco®, Aprica®, Baby Jogger®, and Dymo®.
As part of the company’s Growth Game Plan, Newell Rubbermaid is making
sharper portfolio choices and investing in new marketing and innovation
to accelerate performance.
This press release and additional information about Newell Rubbermaid
are available on the company’s Web site, www.newellrubbermaid.com.
Caution Concerning Forward-Looking Statements
Statements in this press release that are not historical in nature
constitute forward-looking statements. These forward-looking statements
relate to information or assumptions about the effects of sales,
income/(loss), earnings per share, operating income, operating margin or
gross margin improvements or declines, Project Renewal, capital and
other expenditures, cash flow, dividends, restructuring and other
project costs, costs and cost savings, inflation or deflation,
particularly with respect to commodities such as oil and resin, debt
ratings, changes in exchange rates, product recalls, expected benefits
and financial results from recently completed acquisitions and planned
acquisitions and divestitures (including the Elmer’s transaction and the
proposed disposition of the Décor business) and management's plans,
projections and objectives for future operations and performance. These
statements are accompanied by words such as "anticipate," "expect,"
"project," "will," "believe," "estimate" and similar expressions. Actual
results could differ materially from those expressed or implied in the
forward-looking statements. Important factors that could cause actual
results to differ materially from those suggested by the forward-looking
statements include, but are not limited to, our dependence on the
strength of retail, commercial and industrial sectors of the economy in
light of the continuation or escalation of the global economic slowdown
or regional sovereign debt issues; currency fluctuations; competition
with other manufacturers and distributors of consumer products; major
retailers' strong bargaining power and consolidation of our retail
customers; changes in the prices of raw materials and sourced products
and our ability to obtain raw materials and sourced products in a timely
manner from suppliers; our ability to develop innovative new products
and to develop, maintain and strengthen our end-user brands, including
the ability to realize anticipated benefits of increased advertising and
promotion spend; product liability, product recalls or regulatory
actions; our ability to expeditiously close facilities and move
operations while managing foreign regulations and other impediments; a
failure of one of our key information technology systems or related
controls; the potential inability to attract, retain and motivate key
employees; future events that could adversely affect the value of our
assets and require impairment charges; our ability to improve
productivity and streamline operations; changes to our credit ratings;
significant increases in the funding obligations related to our pension
plans due to declining asset values, declining interest rates or
otherwise; the imposition of tax liabilities greater than our provisions
for such matters; the risks inherent in our foreign operations,
including exchange controls and pricing restrictions; our ability to
complete planned acquisitions and divestitures (including our ability to
obtain contemplated debt financing, whether and when the required
regulatory approvals will be obtained and the closing conditions will be
satisfied); our ability to realize the expected benefits and financial
results from our recently acquired businesses and planned acquisitions
and divestitures; how customers, competitors, suppliers and employees
will react to our recently acquired businesses and planned acquisitions
and divestitures; and those factors listed in our most recently filed
Quarterly Report on Form 10-Q and exhibit 99.1 thereto filed with the
Securities and Exchange Commission. Changes in such assumptions or
factors could produce significantly different results. The information
contained in this news release is as of the date indicated. The company
assumes no obligation to update any forward-looking statements contained
in this news release as a result of new information or future events or
developments.
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