Graco 2007 Annual Report Download - page 28

Newell Rubbermaid Inc. 2007 Annual Report
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CONSOLIDATED RESULTS OF OPERATIONS
The following table sets forth for the periods indicated items from the Consolidated Statements of Income as reported and as a percentage of net sales
for the year ended December 31, (in millions, except percentages):
2007 2006 2005
Net sales $6,407.3 100.0% $6,201.0 100.0% $5,717.2 100.0%
Cost of products sold 4,150.1 64.8 4,131.0 66.6 3,959.1 69.2
Gross margin 2,257.2 35.2 2,070.0 33.4 1,758.1 30.8
Selling, general and administrative expenses (SG&A) 1,430.9 22.3 1,347.0 21.7 1,117.7 19.5
Impairment charges
— — — — 0.4 —
Restructuring costs 86.0 1.3 66.4 1.1 72.6 1.3
Operating income 740.3 11.6 656.6 10.6 567.4 9.9
Nonoperating expenses:
Interest expense, net 104.1 1.6 132.0 2.1 127.1 2.2
Other expense (income), net 7.3 0.1 9.7 0.2 (23.1) (0.4)
Net nonoperating expenses 111.4 1.7 141.7 2.3 104.0 1.8
Income from continuing operations before income taxes 628.9 9.8 514.9 8.3 463.4 8.1
Income taxes 149.7 2.3 44.2 0.7 57.1 1.0
Income from continuing operations 479.2 7.5 470.7 7.6 406.3 7.1
Loss from discontinued operations, net of tax (12.1) (0.2) (85.7) (1.4) (155.0) (2.7)
Net income $ 467.1 7.3% $ 385.0 6.2% $ 251.3 4.4%
Results of Operations
— 2007 vs. 2006
Net sales for 2007 were $6,407.3 million, representing an increase of $206.3 million, or 3.3%, from $6,201.0 million for 2006. Positive currency translation
contributed approximately 2.0% of the 3.3% improvement. Excluding the effects of currency translation, sales increased 1.3%. The increase was primarily related
to Home & Family sales growth of 6.0% and Cleaning, Organization & Décor sales growth of 4.1%, partially offset by a decrease in Office Products sales.
Gross margin, as a percentage of net sales, for 2007 was 35.2%, or $2,257.2 million, versus 33.4%, or $2,070.0 million, for 2006. Ongoing productivity
initiatives, favorable mix, and savings from Project Acceleration, which contributed approximately $45 million to gross margin, drove the 185 basis point
improvement year over year, with pricing offsetting raw material inflation.
SG&A expenses for 2007 were 22.3% of net sales, or $1,430.9 million, versus 21.7% of net sales, or $1,347.0 million, for 2006. Approximately
38% of the increase is attributable to foreign currency, with the remainder due to investments in brand building, product development and other
corporate initiatives, including SAP and Shared Services. These investments were partially offset by $15 million in savings from Project Acceleration
and other structural overhead reductions.
The Company recorded restructuring costs of $86.0 million and $66.4 million for 2007 and 2006, respectively. The Company expects cumulative
pre-tax restructuring costs of $375 to $400 million, approximately 67% of which are expected to be cash costs, over the life of the initiative, which began
in 2005 and is expected to conclude in 2009. Annualized savings are projected to exceed $150 million upon completion of the project, with an approximate
$60 million of savings realized in 2007, of which an estimated $45 million in savings is included in the improvement in gross margin. The Company projects
an additional benefit from Project Acceleration of $60 million in 2008 and $30 million in 2009. The 2007 restructuring costs included $27.7 million of
facility and other exit costs, $36.4 million of employee severance and termination benefits and $21.9 million of exited contractual commitments and other
restructuring costs. Since the inception of Project Acceleration, the Company has announced the closure of 16 manufacturing facilities and expects that
approximately eight additional facilities will be closed under this program. The 2006 restructuring costs included $14.9 million of facility and other exit
costs, $44.7 million of employee severance and termination benefits and $6.8 million of exited contractual commitments and other restructuring costs.
See Footnote 4 of the Notes to Consolidated Financial Statements for further information.
Operating income for 2007 was $740.3 million, or 11.6% of net sales, versus $656.6 million, or 10.6% of net sales, in 2006. This increase was driven
by sales and gross margin expansion, partially offset by the increased investment in brand building and product development initiatives, expansion of
shared services and implementation of SAP.
Net nonoperating expenses for 2007 were 1.7% of net sales, or $111.4 million, versus 2.3% of net sales, or $141.7 million, for 2006. The decrease
in net nonoperating expenses was mainly attributable to a decrease in interest expense, reflecting a reduction in average debt outstanding year over year
and slightly lower average borrowing rates. See Footnote 17 of the Notes to Consolidated Financial Statements for further information.