Newell Brands (NWL) Q4 2010 earnings summary

Executive summary

• FY10 net sales rose 3.3% YoY to $5.759B; operating income increased 9.6% to $629.9M, while net income reached $292.8M vs. $285.5M in 2009.

• Q4 net sales were $1.469B, gross margin $544.7M, net income $75.7M, and diluted EPS $0.25.

• Results improved on higher core sales, productivity and mix; a $218.6M pretax debt-extinguishment charge weighed on reported earnings.

Financial highlights

• Gross margin was $2.171B, or 37.7% of sales, up 100 bps YoY; productivity and favorable mix more than offset input inflation.

• Operating income was $629.9M, or 10.9% of sales, vs. $574.9M and 10.3% in 2009; lower restructuring costs and productivity helped.

• Basic EPS was $1.04 and diluted EPS $0.96; income tax expense was $7.5M, with a 2.5% effective rate, including a $63.6M tax benefit from resolving tax examinations.

• Operating cash flow was $582.6M vs. $602.8M; working capital used $79.0M in cash in 2010, versus generating $237.5M in 2009.

Outlook and guidance

• FY11 operating cash flow expected to exceed $550M after $90–$100M of restructuring and related cash payments; capex planned at $180–$200M, including SAP Europe.

• Project Acceleration annualized savings expected to exceed $220M by end-2011; European Transformation Plan expected to deliver $55–$65M annualized after-tax savings and target European operating margin of at least 10%.

• Available liquidity, future operating cash flow, capital-market access and borrowing facilities expected to cover business needs and debt maturities, including $150M due on the term loan in September 2011.

• Expected 2011 pension and postretirement contributions were approximately $50M in total; minimum-plan estimates elsewhere specify about $20M for the primary U.S. plan and $20M for international defined-benefit plans.