Newell Brands (NWL) Q4 2006 earnings summary

Executive summary

• FY06 net sales rose 8.5% to $6,201.0M; excluding DYMO, sales increased 4.7%, including 2.6% core growth and ~2 percentage points from currency and pricing.

• Strategy shifted toward consumer-led brands and innovation, alongside supply-chain cost reductions, portfolio pruning and organizational integration.

Financial highlights

• Gross margin reached 33.4% vs. 30.8%; operating income was $656.6M vs. $567.4M, and net income was $385.0M vs. $251.3M.

• Diluted EPS was $1.40 vs. $0.91; continuing-operations income was $470.7M vs. $406.3M, while discontinued operations recorded an $85.7M loss vs. $155.0M.

• Effective tax rate was 8.6% vs. 12.3%, reflecting a $102.8M tax benefit in 2006 compared with $73.9M in 2005 from tax resolutions and related matters.

Outlook and guidance

• 2007 priorities: sales growth and gross-margin expansion through increased consumer research, innovation, advertising and brand-building investment; SG&A expected to rise with these and other long-term initiatives.

• Project Acceleration targets >$150M in annualized savings at completion in 2009; projected benefits are ~$50M in 2007 and $70M in 2008, with the balance in 2009.

• 2007 restructuring costs are projected at $100M–$130M; cash use for restructuring is expected at $100M–$125M, and capital expenditures at $140M–$160M.

• Raw-material inflation was expected to continue in 2007; comparable cash dividends to 2006 were expected, subject to board discretion.