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Newell Rubbermaid Inc. 2010 Annual Report
NEWELL RUBBERMAID 2010 Annual Report 27
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Operating income for 2009 was $274.7 million, or 11.6% of net sales, an increase of $56.4 million, or 25.8%, from $218.3 million,
or 8.2% of net sales, for 2008. The 340 basis point improvement in operating margin was primarily due to moderating input costs,
product line exits and rationalizations and productivity improvements. In the aggregate, these improvements contributed 450 basis
points to the net expansion in operating margin and were partially offset by unfavorable mix and an increase in SG&A expenses
as a percentage of net sales.
Office Products
Net sales for 2009 were $1,674.7 million, a decrease of $316.1 million, or 15.9%, from $1,990.8 million for 2008. Core sales declined
6.5%, which was primarily attributable to weak consumer demand both domestically and internationally and inventory destocking
at the retail level. Reduced sales relating to product line exits and rationalizations and unfavorable foreign currency contributed
an additional 6.0% and 3.4%, respectively, to the year-over-year decline.
Operating income for 2009 was $235.2 million, or 14.0% of net sales, an increase of $22.8 million, or 10.7%, from $212.4 million,
or 10.7% of net sales for 2008. The 330 basis point improvement in operating margin was primarily attributable to product line
exits and rationalizations. In constant currency, SG&A expenses as a percentage of net sales in 2009 were comparable to 2008.
Tools, Hardware & Commercial Products
Net sales for 2009 were $1,525.7 million, a decrease of $299.3 million, or 16.4%, from $1,825.0 million for 2008. Core sales declined
15.8% as sales volumes were negatively impacted by inventory management by retail, commercial and industrial customers;
continued softness in the residential construction market, both domestically and internationally; and sustained weakness in
industrial and commercial channels. Unfavorable foreign currency contributed an additional 2.0% decline, and the Technical
Concepts acquisition increased sales $26.2 million, or 1.4%, versus the prior year.
Operating income for 2009 was $245.6 million, or 16.1% of net sales, a decrease of $26.1 million, or 9.6%, from $271.7 million,
or 14.9% of net sales, for 2008. The 120 basis point expansion in operating margin was primarily driven by the moderation of
input costs compared to the prior year and improved product mix, which combined contributed 190 basis points to the expansion,
as well as productivity gains, all of which were partially offset by the adverse impacts of lower production volumes. The lower
production volumes were primarily the result of aggressive management of inventory levels by the Company’s customers and lower
sales resulting from weak demand. In constant currency, SG&A expenses as a percentage of net sales in 2009 were comparable
to 2008.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
Cash and cash equivalents increased (decreased) as follows for the year ended December 31, (in millions):
2010 2009 2008
Cash provided by operating activities $ 582.6 $ 602.8 $ 454.9
Cash used in investing activities (153.4) (149.4) (804.1)
Cash (used in) provided by financing activities (571.9) (427.0) 306.0
Exchange rate effect on cash and cash equivalents 4.0 (23.5) (10.6)
(Decrease) increase in cash and cash equivalents $ (138.7) $ 2.9 $ (53.8)
In the cash flow statement, the changes in operating assets and liabilities are presented excluding the effects of changes in foreign
currency exchange rates and the effects of acquisitions. Accordingly, the amounts in the cash flow statement differ from changes
in the operating assets and liabilities that are presented in the balance sheets.
Sources
Historically, the Company’s primary sources of liquidity and capital resources have included cash provided by operations, issuance
of debt and use of available borrowing facilities.
Cash provided by operating activities for 2010 was $582.6 million compared to $602.8 million for 2009. This reduction is
primarily attributable to changes in working capital, specifically accounts receivable, inventory and accounts payable, as net
changes in working capital generated cash of $237.5 million in 2009, as the Company implemented initiatives to significantly
reduce inventory in 2009 due to the global economic downturn. The cash provided by net reductions in working capital in 2009
compared to a use of cash for working capital of $79.0 million in 2010. The year-over-year decline in cash provided by working
capital of $316.5 million was offset by the following items:
• a $55.0 million increase in operating income;
• an $11.2 million decline in cash paid for interest;
• a $31.7 million decline in cash paid for income taxes;
• a $25.0 million decline in voluntary contributions to the Company’s primary U.S. defined benefit pension plan, from
$75.0 million in 2009 to $50.0 million in 2010; and
• $126.6 million of cash used in 2009 to settle foreign exchange contracts on intercompany financing arrangements, which
is included in accrued liabilities and other in 2009, with similar settlements not occurring in 2010.