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Newell Rubbermaid (NWL)
Q2 2011 Earnings Call
July 29, 2011 9:00 am ET
Juan Figuereo - Chief Financial Officer and Executive Vice President
Nancy O'Donnell - Vice President of Investor Relations
Michael Polk - Chief Executive officer, President, Director and Member of Audit Committee
Dara Mohsenian - Morgan Stanley
Constance Maneaty - BMO Capital Markets U.S.
Mark Rupe - Longbow Research LLC
Ann Gilpin - Jefferies & Company, Inc.
Joseph Altobello - Oppenheimer & Co. Inc.
William Chappell - SunTrust Robinson Humphrey, Inc.
Jason Gere - RBC Capital Markets, LLC
William Schmitz - Deutsche Bank AG
Linda Weiser - Caris & Company
Christopher Ferrara - BofA Merrill Lynch
Previous Statements by NWL
» Newell Rubbermaid's CEO Discusses Q1 2011 Results - Earnings Call Transcript
» Newell Rubbermaid's CEO Discusses Q4 2010 Results - Earnings Call Transcript
» Newell Rubbermaid CEO Discusses Q3 2010 Results - Earnings Call Transcript
If we were unable to get to your question during this call, please call Newell Rubbermaid Investor Relations at (770) 418-7075. Today's call will be available on the Web at newellrubbermaid.com and on digital replay at (412) 317-0088 with an access code of 452013, starting 2 hours following the conclusion of today's call and ending August 13. This concludes today's conference. You may now disconnect.
Good morning, ladies and gentlemen, and welcome to Newell Rubbermaid's Second Quarter 2011 Earnings Conference Call. [Operator Instructions] Just a reminder, today's conference is being recorded. A live webcast is available at newellrubbermaid.com on the Investor Relations home page under Events and Presentations. A slide presentation is also available for download.
I would now turn the call over to Nancy O'Donnell, Vice President of Investor Relations. Ms. O'Donnell, you may begin.
Great. Thank you. Welcome, everyone, and thank you for joining us for the Newell Rubbermaid second quarter conference call. On the call, in addition to myself, are Mike Polk, our President and Chief Executive Officer; and Juan Figuereo, our Chief Financial Officer.
The conference call today will include forward-looking statements. These statements are subject to certain risks and uncertainties that could cause our actual results to differ materially. And therefore, we direct you to the cautionary statements in the earnings release and in our most recent 10-Q and other SEC filings. The company undertakes no obligation to update any such statements made today.
In addition, we will discuss certain non-GAAP financial measures. Management believes that these measures enable investors to better understand and analyze our ongoing results of operations. I would like to note that we have posted schedules in our press release and on the Investor Relations section of our website at www.newellrubbermaid.com that reconcile these non-GAAP financial measures to the comparable GAAP measures.
With that, let me turn it over to Mike Polk for his comments.
Thank you, Nancy. Good morning, everyone, and thank you for joining us today. First, let me say that I'm very pleased to be here, and I'm excited about joining the company at this important moment in time. The team has done an outstanding job over the past few years transforming Newell Rubbermaid into a more competitive company. I want to thank Mark Ketchum for his determination to build a brand-led company and for the work he and the team did tackling the costs, capital structure and portfolio issues the company faced. We're positioned for growth. My job will be to write the next chapter, a chapter that I believe can end with Newell Rubbermaid being a bigger, faster-growing, more profitable, more global company. There's significant upside for us to unlock, and I'm confident we have the people, the brands and the resources necessary to capture it. ]
I'll talk more about our path forward at a future date. Today, I want to focus on the Q2 results and provide more clarity with respect to the guidance for the balance of the year. Of course, at the end of our prepared remarks, Juan, Nancy, and I are happy to answer any questions you might have.
I spent the first couple of weeks with the team understanding the current state of play and have a good sense of where the opportunities and the risks are in the business. Of course, I was not starting from scratch as I've been a board member since November of 2009. To be clear, there's some revisions to be made to guidance to balance the risk profile in the second half of the year and to set 2012 up for success. In my opinion, they're not major changes, but are appropriate given the challenges in 1 or 2 of our businesses and the need to continue to invest in the long-term growth of our categories.
So let's dive in. I'll focus first on our second quarter headlines and performance highlights, and then outline our expectations for the remainder of the year. As you'd expect, Juan will then go into more detail on the numbers.
Overall, our second quarter core growth was in line with the expectations we communicated in early June, although the profile of delivery was different from what we forecasted. Baby & Parenting continued to underperform, and the Tools, Hardware & Commercial Products group delivered very good results, with overall core growth of nearly 9% and double-digit core growth in Commercial Products and Industrial Products & Services. Total Q2 sales grew 5.1% on a reported basis with core sales growth of 1.9%. Gross margin was 37.5%, largely in line with expectations, but down 175 basis points versus last year's onetime benefit-driven high of 39.3%. Normalized EPS is $0.46, $0.04 above consensus but below the $0.51 delivered in Q2 2010.
We made good progress during the quarter in a number of our businesses, and our brand-led growth agenda continues to gain traction in the marketplace. Six global business units delivered core sales growth greater than 5%, with 3 of those 6 delivering core sales growth greater than 10%. In Asia-Pacific, core sales grew a strong 17.2%, and in Latin America, core sales grew 10.4%.
Our innovations, marketing programs and customer initiatives are making an impact. Paper Mate is gaining share behind new awareness programs and strong innovations like our low viscosity ink innovation introduced in Latin America. Sharpie is gaining share with innovations on pens and pencils and our new Start with Sharpie campaign. As an aside, if you have a few minutes, check out Sharpie's new website at sharpie.com and our new webisodes on Sharpie's YouTube channel.
Office Products was recognized by Walmart in the supply chain area as the 2010 Collaborative Vendor of the Year, an award given to the best provider of customer service in our peer group. Rubbermaid Consumer is growing share in Food and Beverage, with the launch of Glass Easy Find Lids, and also in cleaning, with our Reveal Spray Mop innovation. Calphalon was named 2010 Vendor of the Year at Target for the work that team has done to unlock category growth with the Target guest. Levolor has expanded the number of SmartSide in-store machines at Lowes, leading its great incremental consumer sales and improved customer productivity.
Fine Writing is growing nicely with the launch of Parker Sonnet and Waterman Pure White collections and the opening of our 400 luxury shop-in-shop in China. Our Lenox industrial saw blade business is accelerating growth, leveraging the significant infrastructure investment being made in Asia, as the trend to urbanization continues with our new Q88 band saw blade. And our Commercial Products portfolio is being deployed into high-profile, high-traffic venues. Every time you travel through Heathrow or any other airport in the world, you should increasingly see that bright yellow bucket with the red Rubbermaid logo, or our new Rubbermaid HYGEN Clean Water System, with a built-in filtration device that cleans the water, improving maintenance staff's productivity and reducing water and chemical usage.