Newell Brands (NWL) Q4 2007 earnings summary

Executive summary

• FY07 sales rose 3.3% to $6.407B; gross margin expanded 185 bps and operating income increased 12.7% to $740.3M, while strategic brand, product-development, SAP and shared-services spending lifted SG&A.

• Continuing-operations income was $479.2M; net income was $467.1M after a $12.1M discontinued-operations loss.

Financial highlights

• Net sales increased $206.3M YoY; currency translation contributed ~2.0 percentage points, with 1.3% growth excluding currency.

• Gross margin was $2,257.2M, or 35.2% of sales, versus $2,070.0M, or 33.4%; productivity, mix and Project Acceleration savings drove improvement, with pricing offsetting raw-material inflation.

• Operating income rose to $740.3M from $656.6M; net interest expense fell to $104.1M from $132.0M, mainly on lower average debt and borrowing rates.

• Reported net income was $467.1M versus $385.0M; diluted EPS was $1.68 versus $1.40. Continuing-operations income was $479.2M versus $470.7M.

• Effective tax rate was 23.8% versus 8.6%; tax benefits were $41.3M in FY07 versus $102.8M in FY06, reflecting tax resolutions, statute expirations and European entity reorganization.

Outlook and guidance

• Project Acceleration is expected to conclude in 2009, with annualized savings exceeding $150M; projected additional benefits are $60M in 2008 and $30M in 2009.

• Cumulative Project Acceleration restructuring costs are estimated at $375M–$400M pre-tax, with ~67% expected to be cash; $150M–$160M of costs are expected in 2008.

• 2008 capital expenditures are projected at $160M–$180M, including SAP; approximately $100M of cash restructuring payments are expected.

• Raw-material inflation pressures are expected to continue in 2008; comparable cash dividends to 2007 are expected, subject to Board discretion.