“We have delivered very strong second quarter results across all key metrics,” said Michael Polk, Newell Rubbermaid’s President/CEO. “Outstanding top line performance in Writing, Tools and Commercial Products drove core sales growth of 4.6 percent. Normalized gross margin increased to 40.3 percent driven by pricing, productivity and positive mix. Normalized operating margin increased to
15.8 percent despite more than doubling our investment in advertising, and normalized EPS increased 18 percent to 59 cents. These strong results give us increased confidence that our strategy of accelerating advertising and promotion in support of our brands is working. In fact, we now believe we are tracking toward the high end of our normalized
EPS guidance range of $1.94 to $2 for the full year.
“Beyond an excellent set of results, we are very pleased with the recently announced agreement to acquire Ignite Holdings and its Contigo(R) and Avex(R) brands. Ignite has a proven design and innovation capability in the fast growing on-the-go beverage container market and has built a strong track record of growth. I am excited by the prospects of leveraging both our own investments in our new state-of-the-art design center and Ignite’s capabilities to strengthen Newell Rubbermaid into a brand- and innovation-led company that is famous for design and product performance.”
Second Quarter 2014 Operating Results
Net sales in 2Q were $1.52 billion, compared with $1.47 billion in the prior year. Core sales, which exclude 150 basis points of negative foreign currency impact, grew 4.6 percent.
Reported gross margin was 40 percent. Normalized gross margin was 40.3 percent, an 80 basis point improvement versus prior year results.
The benefits of pricing, productivity and positive mix more than offset inflation.
2Q reported operating margin was 14 percent compared with 12.6 percent in the prior year. Reported operating income was $213.4 million versus $185.4 million.
Normalized operating margin was 15.8 percent, compared with 14.9 percent in the prior year period. Normalized operating income was $239.8 million compared with $219.5 million in the prior year period.
2Q 2014 normalized operating income excludes restructuring and restructuring-related costs of $22 million, $4 million of charges associated with the first turn of Venezuela inventory after 1Q 2014 devaluation and $400,000 of costs associated with the recall of harness buckles on select car seats. 2Q 2013 normalized operating income excludes $34.1 million of restructuring and restructuring-related costs.
Both reported and normalized operating margins reflect gross margin expansion and significantly improved operating results in Writing, Tools and Commercial Products.
The reported tax rate was 25.8 percent versus 29.8 percent in the prior year period. The normalized tax rate was 27.2 percent compared with 26.6 percent in the prior year.
Reported net income was $150.6 million, compared with $109.8 million in the prior year. Reported diluted earnings per share were 54 cent compared with the prior year’s 37 cents per diluted share. Increased sales, lower restructuring costs, a lower tax rate and the positive impact from a
lower share count drove the improvement.
Normalized net income was $165.6 million, compared with $147.1 million in the prior year. Normalized diluted earnings per share of 59 cents compared with the prior year’s 50 cents. The year over year improvement was attributable to increased sales volume, gross margin expansion and
the positive impact of a lower share count.
For 2Q 2014, normalized diluted earnings per share excludes six cents per diluted share for restructuring and restructuring-related costs associated with Project Renewal, one cent per diluted share for the increased cost of products sold for the first turn of Venezuela inventory after the 1Q 2014 devaluation, one cent per diluted share of income tax benefits attributable to the resolution of tax contingencies and net income from discontinued operations of one cent per diluted share. For 2Q 2013, normalized diluted earnings per share excludes 10 cents per diluted share for restructuring and restructuring-related costs associated with Project Renewal, and a net loss, including impairments, from discontinued operations of two cents per diluted share.
Operating cash flow was $96.2 million compared with $63.3 million in the prior year period.