Graco 2009 Annual Report Download - page 23

Newell Rubbermaid Inc. 2009 Annual Report
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• Continued to improve the cost structure of the business by reducing and streamlining structural selling, general and administrative (“SG&A”)
costs, including consolidating the segment structure from four to three. The Company also outlined and implemented an initiative with a focus on
continuing to reduce structural overhead costs by simplifying work and consolidating offices, and implemented selected contingency plans early
in 2009 to eliminate or delay costs where possible.
• Selectively invested in strategic SG&A to drive sales and enhance its new product pipeline. During 2009, the Company’s selective investments in
strategic brand building and consumer demand creation included investments in the following:
– the “Uncap What’s Inside™ ” campaign for the Company’s Sharpie® products;
– the expansion of the Calphalon product family to include the Unison™ line of non-stick, dishwasher safe gourmet cookware;
– the expansion of Rubbermaid Consumer’s food storage product line to include Lock-Its™ storage containers with locking lid tabs;
– the introduction of Graco products such as the Blossom™ 4-in-1 feeding chair and the Pack ‘n Play® Playard with its Newborn Napper™ feature; and
– sales and new product development activities in selected areas to improve public health, including the Technical Concepts™ offering of hand
sanitizer and hand cleanser dispensers, and education, such as mimio®’s interactive whiteboard technology and student response systems.
The Company maintained its investments in research and development in 2009 compared to 2008 despite deterioration in economic conditions
and the associated impact on the Company. The Company expects to continue to make incremental investments in research and development and
other strategic SG&A activities in 2010.
• Improved liquidity and reduced total indebtedness by $371 million in 2009, including raising approximately $590 million in the public debt markets
(after transaction costs and net costs associated with the convertible note hedge and warrant transactions) and completing a new receivables-backed
credit facility that provides for maximum borrowings of up to $200 million. The Company repaid $448 million of amounts outstanding under its previous
receivables facility and redeemed $395 million principal amount of medium-term notes.
• Reduced the dividend payable on its common stock from $0.84 per year to $0.20 per year. The new dividend policy better positions the Company
to protect its investment-grade credit rating and enhance its liquidity.
Ongoing Initiatives
Project Acceleration
Project Acceleration is designed to reduce manufacturing overhead, better align the Company’s distribution and transportation processes, and reorganize
the overall business structure to align with the Company’s core organizing concept, the global business unit, to achieve best total cost. Through the
Project Acceleration restructuring program and other initiatives, the Company has made significant progress in improving capacity utilization rates to
deliver productivity savings and in increasing the use of strategic sourcing partners. During the year ended December 31, 2009, the Company completed or
implemented a number of restructuring programs as part of Project Acceleration to reduce and realign its manufacturing footprint, including two programs
in its Home & Family segment in North America, two programs in its Office Products segment’s international operations, one program in its Office Products
segment’s North American operations, and three programs in its Tools, Hardware & Commercial Products segment’s international operations. Since the
inception of Project Acceleration, the Company has reduced its manufacturing footprint by more than 50%, including the closure or disposition of more than
20 manufacturing facilities and the transfer of 19 manufacturing facilities to purchasers in connection with divestitures of businesses.
The Company expects to have completed implementation of its Project Acceleration restructuring initiative by the end of 2010, and the total costs
incurred over the life of the initiative are expected to be between $475 million and $500 million, including $250 million to $270 million of employee-related
costs, $155 million to $175 million in non-cash asset-related costs, and $50 million to $70 million in other associated restructuring costs. The Company
has incurred $421 million of restructuring costs under Project Acceleration through December 31, 2009 and expects to incur between $60 million and
$80 million of additional costs to complete Project Acceleration. Approximately 67% of the total Project Acceleration restructuring costs are expected to be
cash charges. Cumulative annualized savings expected to be realized from the implementation of Project Acceleration are in excess of $200 million once
completed, with more than $160 million in annualized savings realized to date.
The Company continues to evaluate its supply chain to identify opportunities to realize efficiencies in purchasing, distribution and transportation. In 2009,
the Company began consolidating its Southeast U.S. distribution operations into a single Southeast U.S. distribution center, which included the closure of multiple
distribution facilities throughout the Southeast region of the U.S. The Company also continues to focus on rationalizing its use of multiple third-party distribution
and logistics service providers, consolidating such operations into Company-owned facilities where possible.
In an effort to align the business with the global business unit structure and achieve best total cost, the Company continues to evaluate and optimize
its overall organizational structure and consolidate activities. In this regard, the Company has reduced its worldwide headcount by 10%, or 2,400 employees,
in 2009.
One Newell Rubbermaid
The Company strives to leverage the common business activities and best practices of its business units, and to build one common culture of shared values
with a focus on collaboration and teamwork. Through this initiative, the Company has established regional shared service centers to leverage nonmarket-facing
functional capabilities to reduce costs. The Company is migrating multiple legacy systems and users to a common SAP global information platform in a
phased, multi-year rollout. SAP is expected to enable the Company to integrate and manage its worldwide business and reporting processes more efficiently.
To date, the North American operations of 10 of the Company’s 13 GBUs have successfully gone live with their SAP implementation efforts, with the majority
of the Company’s remaining North American operations scheduled to go live in 2010.