NWL-12.31.2012-10K
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED
DECEMBER 31, 2012
 
COMMISSION FILE NUMBER
1-9608
NEWELL RUBBERMAID INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
 
 
DELAWARE
  
36-3514169
(State or other jurisdiction of
  
(I.R.S. Employer
incorporation or organization)
  
Identification No.)
 
 
Three Glenlake Parkway
  
30328
Atlanta, Georgia
  
(Zip Code)
(Address of principal executive offices)
  
 
Registrant’s telephone number, including area code: (770) 418-7000
Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS
Common Stock, $1 par value per share
  
 
NAME OF EACH EXCHANGE
ON WHICH REGISTERED
New York Stock Exchange
Chicago Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  þ    No  ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes  ¨    No  þ
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  þ    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  þ    No  ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

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Large Accelerated Filer þ
  
Accelerated Filer o
Non-Accelerated Filer o
  
Smaller Reporting Company o
(Do not check if a smaller reporting company)
  
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes  ¨    No  þ
There were 286.4 million shares of the Registrant’s Common Stock outstanding (net of treasury shares) as of January 31, 2013. The aggregate market value of the shares of Common Stock (based upon the closing price on the New York Stock Exchange on June 30, 2012) beneficially owned by non-affiliates of the Registrant was approximately $5.2 billion. For purposes of the foregoing calculation only, which is required by Form 10-K, the Registrant has included in the shares owned by affiliates those shares owned by directors and officers of the Registrant, and such inclusion shall not be construed as an admission that any such person is an affiliate for any purpose.
* * *
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s Definitive Proxy Statement for its Annual Meeting of Stockholders to be held May 7, 2013.
 


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TABLE OF CONTENTS 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Statement of Computation of Earnings to Fixed Charges
 
Significant Subsidiaries
 
Consent of Independent Registered Public Accounting Firm
 
302 Certification of Chief Executive Officer
 
302 Certification of Chief Financial Officer
 
906 Certification of Chief Executive Officer
 
906 Certification of Chief Financial Officer
 


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PART I
ITEM 1. BUSINESS
“Newell Rubbermaid” or the “Company” refers to Newell Rubbermaid Inc. alone or with its wholly owned subsidiaries, as the context requires. When this report uses the words “we” or “our,” it refers to the Company and its subsidiaries unless the context otherwise requires.
Website Access to Securities and Exchange Commission Reports
The Company’s Internet website can be found at www.newellrubbermaid.com. The Company makes available free of charge on or through its website its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as practicable after the Company files them with, or furnishes them to, the Securities and Exchange Commission.
GENERAL
Newell Rubbermaid is a global marketer of consumer and commercial products that help people flourish every day, where they live, learn, work and play. The Company’s products are marketed under a strong portfolio of leading brands, including Rubbermaid®, Levolor®, Goody®, Calphalon®, Sharpie®, Paper Mate®, Parker®, Waterman®, Irwin®, Lenox®, Graco®, Aprica® and Dymo®.
On January 1, 2012, the Company, as part of Project Renewal, implemented changes to its organizational structure that resulted in the consolidation of the Company’s three operating groups into two and the consolidation of its 13 global business units (“GBUs”) into nine. One of the two operating groups was consumer-facing (“Newell Consumer”), while the other was commercial-facing (“Newell Professional”). In addition, while not an operating group, the Baby & Parenting GBU was treated as a stand-alone operating segment.
In October 2012, the Company committed to an expansion of Project Renewal, designed to further simplify and align the business around two key activities – Brand & Category Development and Market Execution & Delivery. As part of the expanded program, the Company’s Consumer and Professional groups were eliminated and the Company’s nine GBUs were streamlined into six business segments. The six business segments and the key brands included in each of the six business segments are as follows:

•
Home Solutions: Rubbermaid®, Calphalon®, Levolor®, Kirsch® and Goody® 
•
Writing: Sharpie®, Paper Mate®, Expo®, Prismacolor®, Parker® and Waterman® 
•
Tools: Irwin® and Lenox® tools and Dymo® Industrial
•
Commercial Products: Rubbermaid Commercial Products® and Rubbermaid® Healthcare
•
Baby & Parenting: Graco®, Aprica® and Teutonia® 
•
Specialty: Bulldog®, Ashland™, Shur-Line®, Dymo® Office, Endicia® and Mimio®

The actions taken by the Company in 2012 are intended to simplify the organization and free up resources to invest in growth initiatives and strengthened capabilities. These changes are considered key enablers to building a bigger, faster-growing, more global and more profitable Newell Rubbermaid.
Refer to the forward-looking statements section of Management’s Discussion and Analysis of Financial Condition and Results of Operations for a discussion of the Company’s forward-looking statements included in this report.
STRATEGIC INITIATIVES
Newell Rubbermaid’s vision is to become a global company of Brands That Matter™ and great people, known for best-in-class results. The Company is committed to building consumer-meaningful brands through understanding the needs of consumers and using those insights to create innovative, highly differentiated product solutions that offer superior performance and value.
The transformation that began several years ago building Brands That Matter™ and insight-driven innovations that win in the marketplace has created a solid foundation. The Company now has a stronger and more tightly focused portfolio of leading brands with a margin structure that allows for brand investment. The Company has devised its new Growth Game Plan, which is the strategy the Company is implementing to fulfill its ambition to build a bigger, faster-growing, more global and more profitable company.

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The Growth Game Plan encompasses the following aspects:
Business Model
◦
A brand-led business with a strong home in the United States and global ambition.
◦
Consumer brands that win at the point of decision through excellence in performance, design and innovation.
◦
Professional brands that win the loyalty of the chooser by improving the productivity and performance of the user.
◦
Collaboration with our partners across the total enterprise in a shared commitment to growth and creating value.
◦
Delivering competitive returns to shareholders through consistent, sustainable and profitable growth.
Where To Play
◦
Win Bigger — Deploying resources to businesses and regions with higher growth opportunities through investments in innovation and geographic expansion.
◦
Win Where We Are — Optimizing the performance of businesses and brands in existing markets by investing in innovation to increase market share and reducing structural spend within the existing geographic footprint.
◦
Incubate For Growth — Investing in businesses that have unique opportunities for growth, with a primary focus on businesses that are in the early stages of the business cycle.
5 Ways To Win
◦
Make The Brands Really Matter — Sharpening brand strategies on the highest impact growth levers and partnering to win with customers and suppliers.
◦
Build An Execution Powerhouse — Realigning the customer development organization and developing joint business plans for new channel penetration and broader distribution.
◦
Unlock Trapped Capacity For Growth — Delivering savings from ongoing restructuring projects, working capital reductions and simplification of business processes.
◦
Develop The Team For Growth — Driving a performance culture aligned to the business strategy and building a more global perspective and talent base.
◦
Extend Beyond Our Borders — Accelerating investments and growth in emerging markets.
During 2012, the Company executed against the delivery phase of the Growth Game Plan. In this phase, the Company implemented structural changes in the organization while ensuring consistent execution and delivery. The Company expects 2013 to be a transition year from the delivery phase to the strategic phase. In the strategic phase, the Company expects to expand investment behind its Win Bigger businesses to drive accelerated growth.

In 2013, the Company will continue implementing changes to drive the Growth Game Plan into action. These changes are the foundation of the expansion of Project Renewal and are organized into the following five workstreams:
◦
Organizational Simplification: The Company has de-layered its top structure by eliminating the two groups (Newell Consumer and Newell Professional) and further consolidating its businesses from nine GBUs to six business segments.
◦
EMEA Simplification: The Company will focus its resources on fewer products and countries, while simplifying go-to-market, delivery and back office support structures.
◦
Best Cost Finance: The Company will deliver a simplified approach to decision support, transaction processing and information management by leveraging SAP and the streamlined business segments to align resources with the Growth Game Plan.
◦
Best Cost Back Office: The Company will drive “One Newell Rubbermaid” efficiencies in customer and consumer services and sourcing functions.
◦
Supply Chain Footprint: The Company will further optimize manufacturing and distribution facilities across its global supply chain.
In implementing the tenets of its strategy and its change agenda, the Company is focused on Every Day Great Execution, or EDGE, to capitalize on and maximize the benefits of investment and growth opportunities and to optimize the cost structure of the business.

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BUSINESS SEGMENTS
The Company’s segments reflect the Company’s focus on building large consumer and professional brands and leveraging its understanding of similar markets and distribution channels. The Company’s six segments and the key brands included in each of the six business segments are as follows:
Segment
  
Key Brands
 
Description of Primary Products
Home Solutions
 
Rubbermaid®, Calphalon® Levolor®, Goody®
 
Indoor/outdoor organization, food storage and home storage products; gourmet cookware, bakeware, cutlery and small kitchen electrics; drapery hardware and window treatments; hair care accessories
Writing
 
Sharpie®, Paper Mate®, Expo®, Parker®, Waterman®
 
Writing instruments, including markers and highlighters, pens and pencils; art products; fine writing instruments
Tools
 
Irwin®, Lenox®, Dymo® Industrial
 
Hand tools and power tool accessories; industrial bandsaw blades; cutting tools for pipes and HVAC systems; label makers and printers for industrial use
Commercial Products
 
Rubbermaid®
Commercial
Products, Rubbermaid® Healthcare
 
Cleaning and refuse products, hygiene systems, material handling solutions; medical and computer carts and wall-mounted workstations
Baby & Parenting
 
Graco®, Aprica®
 
Infant and juvenile products such as car seats, strollers, highchairs and playards
Specialty
 
Bulldog®, Shur-line®, Dymo®, Endicia®, Mimio®
 
Convenience and window hardware; manual paint applicators; office technology solutions such as label makers and printers, on-line postage and interactive teaching solutions

Home Solutions
The Company’s Home Solutions segment designs, manufactures or sources and distributes a wide range of consumer products under multiple brand names, primarily targeting the female head of household. Indoor/outdoor organization products and food and home storage products are primarily sold under the Rubbermaid®, Roughneck® and TakeAlongs® trademarks. Aluminum and stainless steel cookware, bakeware, cutlery, small kitchen electrics, and kitchen gadgets and utensils are primarily sold under the Calphalon®, Kitchen Essentials®, Cooking with Calphalon™, Calphalon®Unison™ and Katana™ trademarks. Window treatments, drapery hardware and cabinet hardware are primarily sold under the Levolor®, Kirsch® and Amerock® trademarks. Hair care accessories and grooming products are marketed primarily under the Goody® and Solano® trademarks.
The Home Solutions segment primarily markets its products directly to mass merchants and specialty, grocery/drug and department stores.
Writing
The Company’s Writing segment designs, manufactures or sources and distributes writing instruments, primarily for use in business and the home. The segment’s product offerings include markers, highlighters, art and office organization products, and everyday and fine writing instruments and accessories. Permanent/waterbase markers, dry erase markers, highlighters and art supplies are primarily sold under the Sharpie®, Expo®, Sharpie® Accent®, Eberhard Faber®, Berol® and Prismacolor® trademarks. Ballpoint pens and inks, roller ball pens, mechanical pencils and correction supplies are primarily sold under the Paper Mate®, InkJoy®, Uni-Ball® (used under exclusive license from Mitsubishi Pencil Co. Ltd. and its subsidiaries in North America and certain areas in Latin America), Sharpie®, Eberhard Faber®, Berol®, Reynolds® and Liquid Paper® trademarks. Fine writing instruments are primarily sold under the Parker®, Waterman® and Rotring® trademarks.
The Writing segment generally markets its products directly to mass merchants, warehouse clubs, grocery/drug stores, office superstores, office supply stores, contract stationers, travel retail and other retailers.
Tools
The Company’s Tools segment designs, manufactures or sources and distributes hand tools and power tool accessories, industrial bandsaw blades, cutting tools for pipes and HVAC systems, and industrial labeling solutions. Hand tools and power tool accessories are primarily sold under the Irwin®, Vise-Grip®, Marathon®, Quick-Grip®, Unibit® and Strait-Line® trademarks, while industrial bandsaw blades and cutting and drilling accessories are sold under the Lenox® trademark. Industrial label makers are sold under the Dymo® trademark.

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The Tools segment primarily markets its products through distributors and directly to mass merchants, home centers, industrial/construction outlets and other professional customers.
Commercial Products
The Company’s Commercial Products segment designs, manufactures or sources and distributes cleaning and refuse products, hygiene systems, material handling solutions and medical and computer carts. Rubbermaid Commercial Products primarily sells its cleaning and refuse products, hygiene systems, material handling solutions and medical and computer carts and wall-mounted workstations under the trademarks Rubbermaid® and Brute®.
The Commercial Products segment primarily markets its products through distributors and directly to mass merchants, home centers, commercial products distributors, select contract customers and other professional customers.
Baby & Parenting
The Company’s Baby & Parenting segment designs and distributes infant and juvenile products such as swings, highchairs, car seats, strollers and playards, and primarily sells its products under the trademarks Graco®, Aprica® and Teutonia®. The Baby & Parenting segment sources substantially all of its products.
The Baby & Parenting segment primarily markets its products directly to mass merchants and department stores.
Specialty
The Company’s Specialty segment designs, manufactures or sources and distributes products that include convenience and window hardware, manual paint applicators, label makers and printers, on-line postage, and interactive teaching solutions. Hardware and paint applicator products are primarily sold under the Bulldog®, Ashland™ and Shur-Line® trademarks. Labeling and other technology products include on-demand labeling products, online postage and interactive teaching solutions and are primarily sold under the trademarks Dymo®, Endicia® and Mimio®.
The Specialty segment primarily markets its products through distributors and directly to mass merchants, home centers, industrial/construction outlets, and other professional customers.
NET SALES BY BUSINESS SEGMENT
The following table sets forth the amounts and percentages of the Company’s net sales for 2012, 2011 and 2010 (in millions, except percentages) (including sales of acquired businesses from the time of acquisition) for the Company’s six business segments.
 
 
 
2012
 
% of
Total
 
2011
 
% of
Total
 
2010
 
% of  
Total  
Home Solutions
 
$
1,644.0

 
27.8
%
 
$
1,710.2

 
29.2
%
 
$
1,678.0

 
29.6
%
Writing
 
1,416.2

 
23.9
%
 
1,399.3

 
23.9
%
 
1,355.8

 
23.9
%
Tools
 
806.1

 
13.7
%
 
779.6

 
13.3
%
 
687.6

 
12.2
%
Commercial Products
 
759.7

 
12.9
%
 
741.5

 
12.6
%
 
683.1

 
12.1
%
Baby & Parenting
 
736.1

 
12.5
%
 
680.4

 
11.6
%
 
700.2

 
12.4
%
Specialty
 
540.6

 
9.2
%
 
553.6

 
9.4
%
 
553.5

 
9.8
%
Total Company
 
$
5,902.7

 
100.0
%
 
$
5,864.6

 
100.0
%
 
$
5,658.2

 
100.0
%
Sales to Wal-Mart Stores, Inc. and subsidiaries, which includes Sam’s Club, amounted to approximately 10.8%, 11.0% and 11.9% of consolidated net sales for 2012, 2011 and 2010, respectively, substantially across all segments. For more detailed segment information, including operating income and identifiable assets by segment, refer to Footnote 19 of the Notes to Consolidated Financial Statements.
OTHER INFORMATION
Multi-Product Offering
The Company’s broad product offering in multiple categories permits it to more effectively meet the needs of its customers. With families of leading brand names and profitable and innovative new products, the Company can assist volume purchasers in selling a more profitable product mix. As a potential single source for an entire product line, the Company can use program merchandising

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to improve product presentation, optimize display space for both sales and income, and encourage impulse buying by retail consumers.
Customer Marketing and Service
The Company strives to develop long-term, mutually beneficial partnerships with its customers and to be their supplier and brand of choice. To achieve this goal, the Company has a value-added marketing program that offers a family of leading brand name consumer products, tailored sales programs, innovative merchandising support, in-store services and responsive top management.
The Company strives to enhance its relationships with customers through exceptional customer service. The Company’s ability to provide superior customer service is a result of its supply chain, information technology, and marketing and merchandising programs that are designed to enhance the sales and profitability of its customers and provide consistent on-time delivery of its products.
A critical element of the Company’s customer service is consistent on-time delivery of products to its customers. Retailers are pursuing a number of strategies to deliver the highest-quality, best-cost products to their customers. Retailers frequently purchase on a “just-in-time” basis in order to reduce inventory carrying costs and increase returns on investment. As retailers shorten their lead times for orders, manufacturers and suppliers need to more closely anticipate consumer buying patterns. The Company supports its retail customers’ “just-in-time” inventory strategies through more responsive manufacturing and distribution capabilities and electronic communications.

Foreign Operations
Information regarding the Company’s 2012, 2011 and 2010 foreign operations and financial information by geographic area is included in Footnote 19 of the Notes to Consolidated Financial Statements and is incorporated by reference herein. Information regarding risks relating to the Company’s foreign operations is set forth in Part I, Item 1A, of this report and is incorporated by reference herein.
The Company began accounting for its Venezuelan operations using highly inflationary accounting in January 2010. Under highly inflationary accounting, the Company remeasures assets, liabilities, sales and expenses denominated in Bolivar Fuertes into U.S. Dollars using the applicable exchange rate, and the resulting translation adjustments are included in earnings. In June 2010, the Venezuelan government introduced a newly regulated foreign currency exchange system, Transaction System for Foreign Currency Denominated Securities (“SITME”). Foreign currency exchange through SITME is allowed within a specified band of 4.5 to 5.3 Bolivar Fuerte to U.S. Dollar, but most of the exchanges have been executed at the rate of 5.3 Bolivar Fuerte to U.S. Dollar. The Company began applying the SITME rate of 5.3 Bolivar Fuerte to U.S. Dollar in May 2010. The transition to the SITME rate resulted in a foreign exchange gain of $5.6 million, which is recognized in other income for 2010. The SITME rate has remained unchanged at 5.3 Bolivar Fuerte since June 2010, and consequently, there was no foreign exchange gain or loss recorded for the Company’s Venezuelan operations during 2011 and 2012.
As of December 31, 2012, the Company’s Venezuelan subsidiary had $63.4 million of net monetary assets denominated in Bolivar Fuertes at the SITME rate of 5.3 Bolivar Fuertes to U.S. Dollar, and as a result, a 10% increase (decrease) in the applicable exchange rate would result in an estimated one-time pretax charge (benefit) of $6 million. On an ongoing basis, excluding the impacts of any actions management might otherwise take in response to a change in exchange rates, such as raising or decreasing prices, a 10% increase (decrease) in the exchange rate would unfavorably (favorably) impact annual net sales and operating income by an estimated $5 million and $3 million, respectively.
In February 2013, the exchange rate for Bolivar Fuertes declined to 6.3 Bolivar Fuertes to U.S. Dollar, and as a result, the Company expects to record an estimated $10 million one-time charge in the first quarter of 2013, based on the decline in value of the net monetary assets of its Venezuelan operations that are denominated in Bolivar Fuertes at the time the devaluation is effective. In addition, the Company’s 2013 reported net sales and operating income are expected to be adversely impacted by an estimated $9 million and $5 million, respectively, due solely to the devaluation of the Bolivar Fuerte. The Company is unable to predict with certainty whether future devaluations will occur because of the economic uncertainty in Venezuela; however, future devaluations would adversely impact the Company’s future financial results.
Raw Materials and Sourced Finished Goods
The Company has multiple foreign and domestic sources of supply for substantially all of its material requirements. The raw materials and various purchased components required for its products have generally been available in sufficient quantities. The Company’s product offerings require the purchase of resin, corrugate and metals, including steel, stainless steel, zinc, aluminum and gold. The Company’s resin purchases principally comprise polyethylene and polypropylene in roughly equal quantities. Over the long-term, the Company has experienced inflation in raw material prices, and the Company expects continued inflation pressures

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in 2013. The Company has reduced the volume of its resin purchases through rationalizing and exiting product lines. On an annualized basis, commodities consumed as raw materials generally represent approximately 10% to 15% of annual cost of products sold, with no single type of commodity representing more than 10% of cost of products sold.
The Company also relies on third-party manufacturers as a source for finished goods. In a limited number of cases, a single manufacturer or a limited number of manufacturers may supply substantially all of the finished goods for a product line. In particular, certain businesses within the Baby & Parenting and Home Solutions segments rely on third-party manufacturers for substantially all of their products.
See Management’s Discussion and Analysis of Financial Condition and Results of Operations for further discussion.
Backlog
The dollar value of unshipped factory orders is not material.
Seasonal Variations

Sales of the Company’s products tend to be seasonal, with sales and operating income in the first quarter generally lower than any other quarter during the year, driven principally by reduced volume and the mix of products sold in the first quarter. Historically, the Company has earned more than 60% of its annual operating income during the second and third quarters of the year. The seasonality of the Company’s sales volume, combined with the accounting for fixed costs such as depreciation, amortization, rent, personnel costs and interest expense, impacts the Company’s results on a quarterly basis. In addition, the Company has historically generated more than 60% of its operating cash flow in the second half of the year due to seasonal variations in operating results, the timing of annual performance-based compensation payments and customer rebates, and credit terms provided to customers.
Patents and Trademarks
The Company has many patents, trademarks, brand names and trade names that are, in the aggregate, important to its business. The Company’s most significant registered trademarks are “Rubbermaid®,” “Graco®,” “Aprica®,” “Levolor®,” “Calphalon®,” “Goody®,” “Sharpie®,” “Paper Mate®,” “Dymo®,” “Parker®,” “Waterman®,” “Irwin®” and “Lenox®.”

Customers/Competition
The Company’s principal customers are large mass merchandisers, such as discount stores, home centers, warehouse clubs, office superstores, commercial distributors and e-commerce companies. The rapid growth of large mass merchandisers, together with changes in consumer shopping patterns, has contributed to a significant consolidation of the consumer products retail industry and dominant multi-category retailers and e-commerce companies that have strong negotiating power with suppliers. This environment may limit the Company’s ability to recover cost increases through selling prices.
Current trends among retailers and e-commerce companies include fostering high levels of competition among suppliers, demanding innovative new products and requiring suppliers to maintain or reduce product prices and deliver products with shorter lead times. Other trends, in the absence of a strong new product development effort or strong end-user brands, are for retailers and e-commerce companies to import generic products directly from foreign sources and to source and sell products, under their own private label brands, which compete with products of the Company. The combination of these market influences has created an intensely competitive environment in which the Company’s principal customers continuously evaluate which product suppliers to use, resulting in downward pricing pressures and the need for big, consumer-meaningful brands, the ongoing introduction and commercialization of innovative new products, continuing improvements in category management and customer service, and the maintenance of strong relationships with large, high-volume purchasers. The Company competes with numerous manufacturers and distributors of consumer products, many of which are large and well-established.
The Company’s principal methods of meeting its competitive challenges are creating and maintaining consumer-meaningful brands and differentiated products that deliver superior value and performance; delivering superior customer service and consistent on-time delivery; producing and procuring products at a competitive cost; and experienced management.
The Company has also positioned itself to respond to the competitive challenges in the retail environment by developing strong relationships with large, high-volume purchasers. The Company markets its strong multi-product offering through virtually every category of high-volume retailer, including discount, drug, grocery and variety chains; warehouse clubs; department, hardware and specialty stores; home centers; office superstores; and contract stationers. The Company’s largest customer, Wal-Mart (which includes Sam’s Club), accounted for approximately 10.8% of net sales in 2012, across substantially all segments. The Company’s top-ten customers in 2012 included (in alphabetical order): Bed Bath & Beyond, Lowe’s, Office Depot, OfficeMax, Staples, Target, The Home Depot, Toys ‘R’ Us, United Stationers and Wal-Mart.

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Environmental Matters
Information regarding the Company’s environmental matters is included in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of this report and in Footnote 20 of the Notes to Consolidated Financial Statements and is incorporated by reference herein.
Research and Development
Information regarding the Company’s research and development costs for each of the past three years is included in Footnote 1 of the Notes to Consolidated Financial Statements and is incorporated by reference herein. The Company’s research and development costs are incurred to develop new, differentiated and innovative products to meet consumers’ needs.
Employees
As of December 31, 2012, the Company had approximately 18,300 employees worldwide, of whom approximately 2,200 are covered by collective bargaining agreements or are located in countries that have collective arrangements decreed by statute.

ITEM 1A. RISK FACTORS
The factors that are discussed below, as well as the matters that are generally set forth in this report on Form 10-K and the documents incorporated by reference herein, could materially and adversely affect the Company’s business, results of operations and financial condition.

The Company is subject to risks related to its dependence on the strength of retail, commercial and industrial sectors of the economy in various parts of the world.
The Company's business depends on the strength of the retail, commercial and industrial sectors of the economy in various parts of the world, primarily in North America, and to a lesser extent Europe, Central and South America, and Asia. These sectors of the economy are affected primarily by factors such as consumer demand and the condition of the retail industry, which, in turn, are affected by general economic conditions. With continuing challenging and volatile economic conditions in the U.S., Western Europe and elsewhere, there has been considerable pressure on consumer demand, and the resulting impact on consumer spending has had and may continue to have an adverse effect on demand for the Company's products as well as its financial condition and results of operations. The Company could also be negatively impacted by economic crises in specific countries or regions, including the deterioration in the creditworthiness of, or a default by, the issuers of sovereign debt. Such events could negatively impact the Company's overall liquidity and/or create significant credit risks relative to its local customers and depository institutions. Consumer demand and the condition of these sectors of the economy may also be impacted by other external factors such as war, terrorism, geopolitical uncertainties, public health issues, natural disasters and other business interruptions. The impact of these external factors is difficult to predict, and one or more of the factors could adversely impact the Company's business.
The Company is subject to intense competition in a marketplace dominated by large retailers and e-commerce companies.
The Company competes with numerous other manufacturers and distributors of consumer and commercial products, many of which are large and well-established. The Company's principal customers are large mass merchandisers, such as discount stores, home centers, warehouse clubs, office superstores, commercial distributors and e-commerce companies. The rapid growth of these large mass merchandisers, together with changes in consumer shopping patterns, have contributed to the formation of dominant multi-category retailers and e-commerce companies that have strong negotiating power with suppliers. Current trends among retailers and e-commerce companies include fostering high levels of competition among suppliers, demanding innovative new products and requiring suppliers to maintain or reduce product prices, and delivering products with shorter lead times. Other trends are for retailers and e-commerce companies to import products directly from foreign sources and to source and sell products, under their own private label brands, that compete with the Company's products.
The combination of these market influences and retailer consolidation has created an intensely competitive environment in which the Company's principal customers continuously evaluate which product suppliers to use, resulting in downward pricing pressures and the need for big, consumer-meaningful brands, the ongoing introduction and commercialization of innovative new products, continuing improvements in category management and customer service, and the maintenance of strong relationships with large, high-volume purchasers. The Company also faces the risk of changes in the strategy or structure of its major customers, such as overall store and inventory reductions and consolidation. The intense competition in the retail and e-commerce sectors, combined with the overall economic environment, may result in a number of customers experiencing financial difficulty or failing in the future. In particular, a failure by one of the Company's large customers would adversely impact the Company's sales and operating cash flows. As a result of these factors, the Company may experience a loss of sales, reduced profitability and a limited ability to recover cost increases through price increases.

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The Company's plans to continue to improve productivity and reduce complexity and costs may not be successful, which would adversely affect its ability to compete.
The Company's success depends on its ability to continuously improve its manufacturing operations to gain efficiencies, reduce supply chain costs and streamline or redeploy nonstrategic selling, general and administrative expenses in order to produce products at a best-cost position and allow the Company to invest in innovation and brand building. In October 2011, the Company announced Project Renewal, a global initiative designed to reduce the complexity of the organization and increase investment in the Company's most significant growth platforms, and in October 2012, the Company announced an expansion of Project Renewal, designed to further simplify and align the business around two key activities — Brand & Category Development and Market Execution & Delivery. As part of the expanded program, the Company's Consumer and Professional groups were eliminated and the Company's nine global business units were streamlined into six business segments. In June 2010, the Company announced its European Transformation Plan, a program to centralize its European business and leverage the benefits of scale and to facilitate a more efficient and cost-effective implementation of an enterprise resource planning program. The Company runs the risk that these and similar initiatives may not be completed substantially as planned, may be more costly to implement than expected, or may not have the positive effects anticipated. In addition, these various initiatives require the Company to implement a significant amount of organizational change which could divert management’s attention from other concerns, and if not properly managed, could cause disruptions in the Company’s day-to-day operations and have a negative impact on the Company’s financial results. It is also possible that other major productivity and streamlining programs may be required in the future.
If the Company is unable to commercialize a continuing stream of new products that create demand, the Company's ability to compete in the marketplace may be adversely impacted.
The Company's long-term success in the competitive retail environment and the industrial and commercial markets depends on its ability to develop and commercialize a continuing stream of innovative new products that create demand. The Company also faces the risk that its competitors will introduce innovative new products that compete with the Company's products. The Company's strategy includes investment in new product development and a focus on innovation. There are, nevertheless, numerous uncertainties inherent in successfully developing and commercializing innovative new products on a continuing basis, and new product launches may not deliver expected growth in sales or operating income.
If the Company does not continue to develop and maintain consumer-meaningful brands, its operating results may suffer.
The Company's ability to compete successfully also depends increasingly on its ability to develop and maintain consumer-meaningful brands so that the Company's retailer and other customers will need the Company's products to meet consumer demand. Consumer-meaningful brands allow the Company to realize economies of scale in its operations. The development and maintenance of such brands require significant investment in brand-building and marketing initiatives. While the Company plans to continue to increase its expenditures for advertising and other brand-building and marketing initiatives over the long term, the increased investment may not deliver the anticipated results.
Price increases in raw materials and sourced products could harm the Company's financial results.
The Company purchases raw materials, including resin, principally polyethylene and polypropylene, corrugate, steel, gold, zinc, brass and aluminum, which are subject to price volatility and inflationary pressures. The Company attempts to reduce its exposure to increases in those costs through a variety of programs, including periodic purchases, future delivery purchases, long-term contracts and sales price adjustments. Where practical, the Company uses derivatives as part of its risk management process. Also, the Company relies on third-party manufacturers as a source for its products. These manufacturers are also subject to price volatility and labor cost and other inflationary pressures, which may, in turn, result in an increase in the amount the Company pays for sourced products. Raw material and sourced product price increases may more than offset the Company's productivity gains and price increases and adversely impact the Company's financial results.
If the Company is unable to make strategic acquisitions and to integrate its acquired businesses, the Company's future growth could be adversely impacted.
Although the Company is increasingly emphasizing internal growth rather than growth by acquisition, the Company's ability to continue to make strategic acquisitions and to integrate the acquired businesses successfully, including obtaining anticipated cost savings and operating income improvements within a reasonable period of time, remain important factors in the Company's future growth. Furthermore, the Company's ability to finance major acquisitions may be adversely affected by the Company's financial position and access to credit markets. In addition, significant additional borrowings would increase the Company's borrowing costs and could adversely affect its credit rating and could constrain the Company's future access to capital.

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Circumstances associated with divestitures and product lines exits could adversely affect the Company's results of operations and financial condition.
The Company continues to evaluate the performance and strategic fit of its businesses and products and may decide to sell or discontinue a business or product based on such an evaluation. A decision to divest or discontinue a business or product may result in asset impairments, including those related to goodwill and other intangible assets, and losses upon disposition, both of which could have an adverse effect on the Company's results of operations and financial condition. In addition, the Company may encounter difficulty in finding buyers or executing alternative exit strategies at acceptable prices and terms and in a timely manner. In addition, prospective buyers may have difficulty obtaining financing. Divestitures and business discontinuations could involve additional risks, including the following:
•
difficulties in the separation of operations, services, products and personnel;
•
the diversion of management's attention from other business concerns;
•
the retention of certain current or future liabilities in order to induce a buyer to complete a divestiture;
•
the disruption of the Company's business; and
•
the potential loss of key employees.

The Company may not be successful in managing these or any other significant risks that it may encounter in divesting or discontinuing a business or exiting product lines.

The Company is subject to risks related to its international operations and sourcing model.
International operations, especially in Europe, but also in Asia, Central and South America, and Canada, are important to the Company's business, and the Company's strategy emphasizes international growth. In addition, as the Company sources products in low-cost countries, particularly in Asia, it is exposed to additional risks and uncertainties. Foreign operations can be affected by factors such as currency devaluation; other currency fluctuations; tariffs; nationalization; exchange controls; labor inflation; interest rates; limitations on foreign investment in local business; and other political, economic and regulatory risks and difficulties. The Company also faces risks due to the transportation and logistical complexities inherent in reliance on foreign sourcing.
Venezuela was designated as a highly inflationary economy effective January 1, 2010, and, accordingly, gains and losses resulting from the translation of the net assets (excluding nonmonetary assets) of operations in Venezuela into U.S. Dollars are recorded in earnings. In February 2013, the exchange rate for the Venezuelan currency, Bolivar Fuerte, declined approximately 15%, which will adversely impact the Company’s financial results. The Company is unable to predict with certainty whether future devaluations will occur because of the economic uncertainty in Venezuela; however, future devaluations would adversely impact the Company’s future financial results. See Footnote 1 of the Notes to Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations for further information.
The inability to obtain raw materials and finished goods in a timely manner from suppliers would adversely affect the Company's ability to manufacture and market its products.
The Company purchases raw materials to be used in manufacturing its products. In addition, the Company relies on third-party manufacturers as a source for finished goods. The Company typically does not enter into long-term contracts with its suppliers or sourcing partners. Most raw materials and sourced goods are obtained on a “purchase order” basis; however, in limited cases where the Company has supply contracts with fixed prices, the Company may be required to purchase raw materials at above-market prices, which could adversely impact gross margins. In addition, in some instances the Company maintains single-source or limited-source sourcing relationships, either because multiple sources are not available or the relationship is advantageous due to performance, quality, support, delivery, capacity or price considerations. In particular, the Company's Baby & Parenting business has a single source of supply for many of its products.  Financial, operating or other difficulties encountered by the Company's suppliers and/or sourcing partners or changes in the Company's relationships with them could result in manufacturing or sourcing interruptions, delays and inefficiencies, and prevent the Company from manufacturing or obtaining the finished goods necessary to meet customer demand.
Complications in connection with the Company's current information system initiative may adversely impact its results of operations, financial condition and cash flows.
The Company is in the process of replacing various business information systems worldwide with an enterprise resource planning system from SAP. Through December 31, 2012, the North American and European operations of substantially all of the Company's six segments have successfully gone live with their SAP implementation efforts. The Company's Asia Pacific and Latin American operations have yet to go live on SAP. This activity involves the migration of multiple legacy systems and users to a common SAP information platform. Throughout this process, the Company is changing the way it conducts business and employees' roles in

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processing and utilizing information. In addition, this conversion will impact certain interfaces with the Company's customers and suppliers, resulting in changes to the manner in which the Company takes orders, procures materials, schedules production, remits billings, makes payments and performs other business functions. Based upon the complexity of this initiative, there is risk that the Company will be unable to complete the implementation in accordance with its timeline and will incur additional costs. The implementation could result in operating inefficiencies, and the implementation could impact the Company's ability to perform necessary business transactions, including its ability to supply products on a timely basis. The Company's go-lives have been and will continue to be in a phased approach to reduce the risk of business disruption throughout the Company's business units and regions. However, there can be no assurance that the risk of business disruption can be eliminated with the Company's phased approach. All of these risks could adversely impact the Company's results of operations, financial condition and cash flows.
Impairment charges could have a material adverse effect on the Company's financial results.
Future events may occur that would adversely affect the reported value of the Company's assets and require impairment charges. Such events may include, but are not limited to, strategic decisions made in response to changes in economic and competitive conditions, the impact of the economic environment on the Company's sales and customer base, the unfavorable resolution of litigation, a material adverse change in the Company's relationship with significant customers or business partners, or a sustained decline in the Company's stock price. The Company continues to evaluate the impact of economic and other developments on the Company and its business units to assess whether impairment indicators are present. Accordingly, the Company may be required to perform impairment tests based on changes in the economic environment and other factors, and these tests could result in impairment charges in the future.
The Company's businesses are subject to regulation in the U.S. and abroad.
Changes in laws, regulations and related interpretations may alter the environment in which the Company does business. This includes changes in environmental, competitive and product-related laws, as well as changes in accounting standards, taxation and other regulations. Accordingly, the Company's ability to manage regulatory, tax and legal matters (including environmental, human resource, product liability, patent and intellectual property matters), and to resolve pending legal matters without significant liability could require the Company to take significant reserves in excess of amounts accrued to date or pay significant fines during a reporting period, which could materially impact the Company's results. In addition, new regulations may be enacted in the U.S. or abroad that may require the Company to incur additional personnel-related, environmental or other costs on an ongoing basis, significantly restrict the Company's ability to sell certain products, or incur fines or penalties for noncompliance, any of which could adversely affect the Company's results of operations. For example, the United States Consumer Product Safety Commission continues to advocate for more strict design standards for window blinds that if implemented, would require the Company to redesign all window blinds sold in the U.S.  For certain products, redesign may not be possible or practical, and as a result, the Company would lose revenues from the sales of such products.
As a U.S.-based multinational company, the Company is also subject to tax regulations in the U.S. and multiple foreign jurisdictions, some of which are interdependent. For example, certain income that is earned and taxed in countries outside the U.S. is not taxed in the U.S., provided those earnings are indefinitely reinvested outside the U.S. If these or other tax regulations should change, the Company's financial results could be impacted.
The resolution of the Company's tax contingencies may result in additional tax liabilities, which could adversely impact the Company's cash flows and results of operations.
The Company is subject to income tax in the U.S. and numerous jurisdictions outside the U.S. Significant estimation and judgment is required in determining the Company's worldwide provision for income taxes. In the ordinary course of the Company's business, there are many transactions and calculations where the ultimate tax determination is uncertain. The Company is regularly under audit by tax authorities. Although the Company believes its tax estimates are reasonable, the final outcome of tax audits and related litigation could be materially different than that reflected in its historical income tax provisions and accruals. There can be no assurance that the resolution of any audits or litigation will not have an adverse effect on future operating results.
Product liability claims or regulatory actions could adversely affect the Company's financial results or harm its reputation or the value of its end-user brands.
Claims for losses or injuries purportedly caused by some of the Company's products arise in the ordinary course of the Company's business. In addition to the risk of substantial monetary judgments, product liability claims or regulatory actions could result in negative publicity that could harm the Company's reputation in the marketplace, adversely impact the value of its end-user brands, or result in an increase in the cost of producing the Company's products. The Company could also be required to recall possibly defective products, which could result in adverse publicity and significant expenses. Although the Company maintains product liability insurance coverage, potential product liability claims are subject to a self-insured retention or could be excluded under

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the terms of the policy.
If the Company is unable to access the capital markets to refinance its maturing debt, its borrowing costs could increase.
As of December 31, 2012, the Company had $211.9 million of debt that it will be required to refinance or repay within the next 12 months. It is possible that the Company may seek to address its short-term obligations through the capital markets or other arrangements. However, access to the capital markets cannot be assured, and although the Company believes that alternative arrangements will be available to refinance these obligations, such arrangements could result in an increase in the Company's borrowing costs.
A reduction in the Company's credit ratings could materially and adversely affect its business, financial condition and results of operations.
The Company's current senior debt credit ratings from Moody's Investors Service, Standard & Poor's and Fitch Ratings are Baa3, BBB- and BBB, respectively. Its current short-term debt credit ratings from Moody's Investors Service, Standard & Poor's and Fitch Ratings are P-3, A-3 and F-2, respectively. Moody's, Standard & Poor's and Fitch have a stable outlook on their ratings. The Company cannot be sure that any of its current ratings will remain in effect for any given period of time or that a rating will not be lowered by a rating agency if, in its judgment, circumstances in the future so warrant. A downgrade by Moody's or Standard & Poor's, which would reduce the Company's senior debt below investment-grade, could increase the Company's borrowing costs, which would adversely affect the Company's financial results. The Company would likely be required to pay a higher interest rate in future financings, and its potential pool of investors and funding sources could decrease. If the Company's short-term ratings were to be lowered, it would limit, or eliminate entirely, the Company's access to the commercial paper market. The ratings from credit agencies are not recommendations to buy, sell or hold the Company's securities, and each rating should be evaluated independently of any other rating.
The level of returns on pension and postretirement plan assets and the actuarial assumptions used for valuation purposes could affect the Company's earnings and cash flows in future periods. Changes in government regulations could also affect the Company's pension and postretirement plan expenses and funding requirements.
The funding obligations for the Company's pension plans are impacted by the performance of the financial markets, particularly the equity markets, and interest rates. Funding obligations are determined under government regulations and are measured each year based on the value of assets and liabilities on a specific date. If the financial markets do not provide the long-term returns that are expected under the governmental funding calculations, the Company could be required to make larger contributions. The equity markets can be, and recently have been, very volatile, and therefore the Company's estimate of future contribution requirements can change dramatically in relatively short periods of time. Similarly, changes in interest rates and legislation enacted by governmental authorities can impact the timing and amounts of contribution requirements. An adverse change in the funded status of the plans could significantly increase the Company's required contributions in the future and adversely impact its liquidity.
Assumptions used in determining projected benefit obligations and the fair value of plan assets for the Company's pension and other postretirement benefit plans are determined by the Company in consultation with outside actuaries. In the event that the Company determines that changes are warranted in the assumptions used, such as the discount rate, expected long-term rate of return on assets, or expected health care costs, the Company's future pension and postretirement benefit expenses could increase or decrease. Due to changing market conditions or changes in the participant population, the assumptions that the Company uses may differ from actual results, which could have a significant impact on the Company's pension and postretirement liabilities and related costs and funding requirements.

ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.


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ITEM 2. PROPERTIES
The following table shows the location and general character of the principal operating facilities owned or leased by the Company. The properties are listed within their designated business segment: Home Solutions, Writing, Tools, Commercial Products, Baby & Parenting and Specialty. These are the primary manufacturing locations, administrative offices and distribution warehouses of the Company. The Company’s headquarters are in Atlanta, Georgia, and the Company also maintains sales offices throughout the U.S. and the world. Most of the Company’s idle facilities, which are excluded from the following list, are subleased, pending lease expiration, or are for sale. The Company’s properties currently in use are generally in good condition, well-maintained, and are suitable and adequate to carry on the Company’s business.
BUSINESS SEGMENT
  
LOCATION    
  
CITY
  
OWNED
OR
LEASED
  
GENERAL CHARACTER
 
  
 
  
 
  
 
  
 
HOME SOLUTIONS
 
OH
  
Mogadore
  
O
  
Home Products
 
 
KS
  
Winfield
  
L/O
  
Home Products
 
 
OH
  
Wooster
  
L
  
Home Products
 
 
Canada
  
Calgary
  
L
  
Home Products
 
 
MO
  
Jackson
  
O
  
Home Storage Systems
 
 
OH
  
Perrysburg
  
O
  
Cookware
 
 
OH
  
Toledo
  
L
  
Cookware
 
  
Mexico
  
Agua Prieta
  
L
  
Window Treatments
 
  
NC
  
High Point
  
L
  
Window Treatments
 
  
UT
  
Ogden
  
L
  
Window Treatments
 
  
IL
  
Freeport
  
L
  
Window Treatments
 
  
Canada
  
Etobicoke
  
L
  
Window Furnishings
WRITING
  
IL
  
Oakbrook
  
L
  
Writing Instruments
 
  
TN
  
Shelbyville
  
O
  
Writing Instruments
 
  
TN
  
Maryville
  
O
  
Writing Instruments
 
  
TN
  
Manchester
  
O
  
Writing Instruments
 
  
Thailand
  
Bangkok
  
O
  
Writing Instruments
 
  
India
  
Chennai
  
L
  
Writing Instruments
 
  
China
  
Shanghai
  
L
  
Writing Instruments
 
  
Colombia
  
Bogota
  
O
  
Writing Instruments
 
  
Germany
  
Hamburg
  
O
  
Writing Instruments
 
  
Mexico
  
Tlalnepantla
  
L
  
Writing Instruments
 
  
Mexico
  
Mexicali
  
L
  
Writing Instruments
 
  
Australia
  
Melbourne
  
L
  
Writing Instruments
 
  
France
  
Nantes
  
O
  
Writing Instruments
 
  
Venezuela
  
Maracay
  
O
  
Writing Instruments
TOOLS
  
MA
  
East Longmeadow
  
O
  
Tools
 
  
China
  
Shanghai
  
L
  
Tools
 
  
China
  
Shenzhen
  
L
  
Tools
 
  
ME
  
Gorham
  
O
  
Tools
 
 
IN
 
Greenfield
 
L
 
Tools
 
  
Australia
  
Lyndhurst
  
L
  
Tools
 
  
Brazil
  
Sao Paulo
  
L
  
Tools
 
  
Brazil
  
Carlos Barbosa
  
O
  
Tools
 
  
Germany
  
Hallbergmoos
  
L
  
Tools
COMMERCIAL PRODUCTS
 
TN
  
Cleveland
  
O
  
Commercial Products
 
 
VA
  
Winchester
  
O
  
Commercial Products
 
 
WV
  
Martinsburg
  
L
  
Commercial Products
 
 
PA
  
Pottsville
  
L
  
Commercial Products

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BUSINESS SEGMENT
  
LOCATION    
  
CITY
  
OWNED
OR
LEASED
  
GENERAL CHARACTER
 
 
Brazil
  
Rio Grande Do Sul
  
L
  
Commercial Products
 
 
Brazil
  
Cachoeirinha
  
O
  
Commercial Products
 
 
Netherlands
  
Bentfield
  
O
  
Commercial Products
BABY & PARENTING
 
PA
  
Exton
  
L
  
Infant Products
 
 
Japan
  
Nara
  
O
  
Infant Products
 
 
Germany
  
Hiddenhausen
  
O
  
Infant Products
 
 
Poland
  
Wloclawek
  
L
  
Infant Products
 
 
China
  
Zhongshan
  
L
  
Infant Products
 
 
China
 
Beijing
 
L
 
Infant Products
SPECIALTY
  
WI
  
Saint Francis
  
O
  
Paint Applicators
 
  
IN
  
Lowell
  
O
  
Window Hardware
 
  
Mexico
  
Monterrey
  
L
  
Window Hardware
 
  
Belgium
  
Sint Niklaas
  
O
  
Labeling Technology
 
  
CT
  
Norwalk
  
L
  
Labeling Technology
 
  
MA
 
Cambridge
 
L
 
Interactive Teaching Solutions
 
  
WA
  
Seattle
  
L
  
Interactive Teaching Solutions
 
  
CA
  
Palo Alto
  
L
  
On-line Postage
CORPORATE
  
GA
  
Atlanta
  
L
  
Office
 
  
Canada
  
Oakville
  
L
  
Office
 
  
Switzerland
  
Geneva
  
L
  
Office
 
  
France
  
Paris
  
L
  
Office
 
  
China
  
Hong Kong
  
L
  
Office
 
  
Australia
  
Dandenong
  
L
  
Office
 
  
Italy
  
Milan
  
L
  
Office
SHARED FACILITIES
  
CA
  
Victorville
  
L
  
Shared Services
 
  
GA
  
Union City
  
L
  
Shared Services
 
  
IL
  
Freeport
  
L/O
  
Shared Services
 
  
NC
  
Huntersville
  
L
  
Shared Services
 
  
UK
  
Lichfield
  
L
  
Shared Services
 
  
Netherlands
  
Goirle
  
O
  
Shared Services
 
  
AR
  
Bentonville
  
L
  
Shared Services
 
  
France
  
Malissard
  
L/O
  
Shared Services
 
  
Canada
 
Bolton
 
L
 
Shared Services

ITEM 3. LEGAL PROCEEDINGS
Information regarding legal proceedings is included in Footnote 20 of the Notes to Consolidated Financial Statements and is incorporated by reference herein.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.


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SUPPLEMENTARY ITEM — EXECUTIVE OFFICERS OF THE REGISTRANT
Name
 
Age
 
Present Position with the Company
Michael B. Polk
 
52
 
President and Chief Executive Officer
William A. Burke
 
52
 
Executive Vice President, Chief Operating Officer

Mark S. Tarchetti
 
37
 
Executive Vice President, Chief Development Officer

Douglas L. Martin
 
50
 
Executive Vice President, Chief Financial Officer
John K. Stipancich
 
44
 
Executive Vice President, General Counsel and Corporate Secretary and EMEA Executive Leader
James M. Sweet
 
60
 
Executive Vice President, Human Resources & Corporate Communications (Chief Human Resources Officer)
Michael B. Polk has been President and Chief Executive Officer of the Company since July 2011. He joined the Company’s Board of Directors in November 2009 and served as a member of the Audit Committee prior to assuming his current role. Prior thereto, he was President, Global Foods, Home & Personal Care, Unilever (a consumer packaged goods manufacturer and marketer) since 2010. He joined Unilever in 2003 as Chief Operating Officer, Unilever Foods USA and subsequently became President, Unilever USA in 2005. From 2007 to 2010, he served as President, Unilever Americas. Prior to joining Unilever, he spent 16 years at Kraft Foods Inc. and three years at The Procter & Gamble Company. At Kraft Foods, he was President, Kraft Foods Asia Pacific, President, Biscuits and Snacks Sector, and was a member of the Kraft Foods Management Committee.
William A. Burke has been Executive Vice President and Chief Operating Officer since October 2012. He served as President, Newell Professional from January 2012 to September 2012, having previously served as President, Tools, Hardware & Commercial Products from January 2009 through 2011, and President, Tools and Hardware from December 2007 to January 2009. Prior thereto, he was President, North American Tools from 2004 through 2006. He served as President of the Company’s Lenox division from 2003 through 2004. From 1992 through 2002, he served in a variety of positions with The Black & Decker Corporation (a manufacturer and marketer of power tools and accessories), culminating as Vice President and General Manager of Product Service.
Mark S. Tarchetti has been Executive Vice President and Chief Development Officer since January 2013.  From September 2011 to December 2012, Mr. Tarchetti was the Director of Tarchetti & Co. Ltd., a consulting firm he founded where he advised clients, including the Company, on business strategy and change management.  From 1997 to 2011, he served in a variety of senior strategic, business and finance roles at Unilever, including as Head of Corporate Strategy from 2009 to 2011, Vice President of Corporate Strategy in 2008, Finance Director of the UK Home & Personal Care business from 2007 to 2008, and Global Head of Financial Planning & Analysis from 2004 to 2007.
Douglas L. Martin has been Executive Vice President and Chief Financial Officer since September 2012. He has been employed by the Company since 1987, and has served in a variety of senior financial roles, including Deputy Chief Financial Officer from February 2012 to September 2012, Vice President of Finance - Newell Consumer from November 2011 to February 2012, Vice President of Finance - Office Products from December 2007 to November 2011, and Vice President and Treasurer from June 2002 to December 2007.
John K. Stipancich has been Executive Vice President, General Counsel and Corporate Secretary and EMEA Executive Leader since October 2012. Prior thereto, he served as Senior Vice President, General Counsel and Corporate Secretary from January 2010 to October 2012. From November 2004 through December 2009, he served as Vice President and General Counsel to several of the Company’s businesses.
James M. Sweet has been Executive Vice President, Human Resources and Corporate Communications since May 2007. Prior thereto, he served as the Company’s Chief Human Resources Officer from May 2004 through May 2007. He was Group Vice President, Human Resources for the Sharpie/Calphalon Group from January 2004 to April 2004. From 2001 to 2004, he was President of Capital H, Inc., a human resource services company that Mr. Sweet co-founded. From 1999 to 2001, he was Vice President of Human Resources for the Industrial Automation Systems and Rexnord divisions of Invensys PLC (an industrial manufacturing company). Prior thereto, he held executive human resource positions at Kohler Co., Keystone International and Brady Corp.

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PART II. OTHER INFORMATION

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
The Company’s common stock is listed on the New York and Chicago Stock Exchanges (symbol: NWL). As of January 31, 2013, there were 12,349 stockholders of record. The following table sets forth the high and low sales prices of the common stock on the New York Stock Exchange Composite Tape for the calendar periods indicated:
 
 
 
2012
 
2011
Quarters
 
High
 
Low
 
High
 
Low
First
 
$
19.49

 
$
15.93

 
$
20.38

 
$
17.57

Second
 
19.12

 
16.63

 
19.81

 
14.14

Third
 
19.74

 
16.67

 
16.27

 
11.31

Fourth
 
22.49

 
18.80

 
16.53

 
10.87

The Company has paid regular cash dividends on its common stock since 1947. For 2012, the Company paid a quarterly cash dividend of $0.08 per share in the first quarter, $0.10 per share in each of the second and third quarters, and $0.15 per share in the fourth quarter. For 2011, the Company paid a quarterly cash dividend of $0.05 per share in the first quarter and $0.08 per share in each of the second, third and fourth quarters. The payment of dividends to holders of the Company’s common stock remains at the discretion of the board of directors and will depend upon many factors, including the Company’s financial condition, earnings, legal requirements and other factors the board of directors deems relevant.
ISSUER PURCHASES OF EQUITY SECURITIES
The following table provides information about the Company’s purchases of equity securities during the quarter ended December 31, 2012:
Period
Total Number of Shares Purchased(1)
 
Average Price
Paid per Share
 
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(2)
 
Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs(2)
10/1/12-10/31/12
61,700

 
$
18.96

 
61,700

 
$
185,544,827

11/1/12-11/30/12
415,340

 
20.87

 
397,200

 
177,249,105

12/1/12-12/31/12
687,361

 
21.83

 
680,000

 
162,403,104

Total
1,164,401

 
$
21.34

 
1,138,900

 

 __________________
(1)
During the three months ended December 31, 2012, all share purchases other than those pursuant to the $300.0 million share repurchase program (the “SRP”) were made to satisfy employees’ tax withholding and payment obligations in connection with the vesting of awards of restricted stock units, which are repurchased by the Company based on their fair market value on the vesting date. In November and December, in addition to the shares purchased under the SRP, the Company purchased 18,140 shares (average price: $20.49) and 7,361 shares (average price: $21.90), respectively, in connection with vesting of employees’ stock-based awards.
(2)
Under the SRP, the Company may repurchase its own shares of common stock through a combination of a 10b5-1 automatic trading plan, discretionary market purchases or in privately negotiated transactions. The SRP is authorized to run through August 2014. The average per share price of shares purchased in October, November and December was $18.96, $20.89 and $21.83, respectively.



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ITEM 6. SELECTED FINANCIAL DATA
The following is a summary of certain consolidated financial information relating to the Company as of and for the year ended December 31, (in millions, except per share data). The summary has been derived in part from, and should be read in conjunction with, the Consolidated Financial Statements of the Company included elsewhere in this report and the schedules thereto.
 
 
2012(1)
 
2011(1)
 
2010(1) (2)
 
2009(2)
 
2008(2)
STATEMENTS OF OPERATIONS DATA
 
 
 
 
 
 
 
 
 
 
Net sales
 
$
5,902.7

 
$
5,864.6

 
$
5,658.2

 
$
5,483.4

 
$
6,340.9

Cost of products sold
 
3,673.6

 
3,659.4

 
3,509.5

 
3,453.3

 
4,245.8

Gross margin
 
2,229.1

 
2,205.2

 
2,148.7

 
2,030.1

 
2,095.1

Selling, general and administrative expenses
 
1,521.1

 
1,515.3

 
1,447.8

 
1,354.8

 
1,478.3

Impairment charges
 
—

 
382.6

 
—

 
—

 
296.3

Restructuring costs(3)
 
56.1

 
50.1

 
77.4

 
100.0

 
120.3

Operating income
 
651.9

 
257.2

 
623.5

 
575.3

 
200.2

Nonoperating expenses:
 
 
 
 
 
 
 
 
 
 
Interest expense, net
 
76.1

 
86.2

 
118.4

 
140.0

 
137.9

Losses related to extinguishments of debt
 
10.9

 
4.8

 
218.6

 
4.7

 
52.2

Other (income) expense, net
 
(1.0
)
 
13.7

 
(7.3
)
 
2.0

 
6.9

Net nonoperating expenses
 
86.0

 
104.7

 
329.7

 
146.7

 
197.0

Income before income taxes
 
565.9

 
152.5

 
293.8

 
428.6

 
3.2

Income taxes
 
166.3

 
17.9

 
5.6

 
142.8

 
50.9

Income (loss) from continuing operations
 
399.6

 
134.6

 
288.2

 
285.8

 
(47.7
)
Income (loss) from discontinued operations, net of tax(4)
 
1.7

 
(9.4
)
 
4.6

 
(0.3
)
 
(2.6
)
Net income (loss)
 
401.3

 
125.2

 
292.8

 
285.5

 
(50.3
)
Net income noncontrolling interests
 
—

 
—

 
—

 
—

 
2.0

Net income (loss) controlling interests
 
$
401.3

 
$
125.2

 
$
292.8

 
$
285.5

 
$
(52.3
)
Weighted-average shares outstanding:
 
 
 
 
 
 
 
 
 
 
Basic
 
291.2

 
293.6

 
282.4

 
280.8

 
279.9

Diluted
 
293.6

 
296.2

 
305.4

 
294.4

 
279.9

Earnings (loss) per share:
 
 
 
 
 
 
 
 
 
 
Basic:
 
 
 
 
 
 
 
 
 
 
Income (loss) from continuing operations
 
$
1.37

 
$
0.46

 
$
1.02

 
$
1.02

 
$
(0.18
)
Income (loss) from discontinued operations
 
0.01

 
(0.03
)
 
0.02

 
—

 
(0.01
)
Net income (loss) controlling interests
 
$
1.38

 
$
0.43

 
$
1.04

 
$
1.02

 
$
(0.18
)
Diluted:
 
 
 
 
 
 
 
 
 
 
Income (loss) from continuing operations
 
$
1.36

 
$
0.45

 
$
0.94

 
$
0.97

 
$
(0.18
)
Income (loss) from discontinued operations
 
0.01

 
(0.03
)
 
0.02

 
—

 
(0.01
)
Net income (loss) controlling interests
 
$
1.37

 
$
0.42

 
$
0.96

 
$
0.97

 
$
(0.18
)
Dividends
 
$
0.43

 
$
0.29

 
$
0.20

 
$
0.26

 
$
0.84

BALANCE SHEET DATA
 
 
 
 
 
 
 
 
 
 
Inventories, net
 
$
696.4

 
$
699.9

 
$
701.6

 
$
688.2

 
$
912.1

Working capital(5)
 
700.3

 
487.1

 
466.1

 
422.6

 
159.7

Total assets
 
6,222.0

 
6,160.9

 
6,405.3

 
6,423.9

 
6,792.5

Short-term debt, including current portion of long-term debt
 
211.9

 
367.5

 
305.0

 
493.5

 
761.0

Long-term debt, net of current portion
 
1,706.5

 
1,809.3

 
2,063.9

 
2,015.3

 
2,118.3

Total stockholders’ equity
 
$
2,000.2

 
$
1,852.6

 
$
1,905.5

 
$
1,782.2

 
$
1,588.6

 
(1)
Supplemental data regarding 2012, 2011 and 2010 is provided in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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(2)
2010, 2009 and 2008 Statement of Operations information has been adjusted to reclassify the results of operations of the hand torch and solder business to discontinued operations.
(3)
Restructuring costs include asset impairment charges, employee severance and termination benefits, employee relocation costs, and costs associated with exited contractual commitments and other restructuring costs.
(4)
Income (loss) from discontinued operations, net of tax, attributable to noncontrolling interests was not material.
(5)
Working capital is defined as Current Assets less Current Liabilities.

Acquisitions of Businesses

2012 to 2009

No significant acquisitions occurred in 2012, 2011, 2010 or 2009.
2008
On April 1, 2008, the Company acquired 100% of the outstanding limited liability company interests of Technical Concepts Holdings, LLC (“Technical Concepts”) for $452.7 million, which includes transaction costs and the repayment of Technical Concepts’ outstanding debt obligations at closing. Technical Concepts provides touch-free and automated restroom hygiene systems in the away-from-home washroom category. The Technical Concepts acquisition gives the Company’s Rubbermaid Commercial Products business an entry into the away-from-home washroom market and fits within the Company’s strategy of leveraging its existing sales and marketing capabilities across additional product categories. In addition, with approximately 40% of its sales outside the U.S., Technical Concepts increased the global footprint of the Company’s Rubbermaid Commercial Products business. The acquisition of Technical Concepts was accounted for using the purchase method of accounting.
On April 1, 2008, the Company acquired substantially all of the assets of Aprica Childcare Institute Aprica Kassai, Inc. (“Aprica”), a maker of strollers, car seats and other children’s products, headquartered in Osaka, Japan. The Company acquired Aprica’s assets for $145.7 million, which includes transaction costs and the repayment of Aprica’s outstanding debt obligations at closing. Aprica is a Japanese brand of premium strollers, car seats and other related juvenile products. The acquisition provides the opportunity for the Company’s Baby & Parenting business to broaden its presence worldwide, including expanding the scope of Aprica’s sales outside Asia. The acquisition of Aprica was accounted for using the purchase method of accounting.

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Quarterly Summaries
Summarized quarterly data for the last two years is as follows (in millions, except per share data) (unaudited):
Calendar Year
 
1st(1)
 
2nd(1)
 
3rd
 
4th
 
Year
2012
 
 
 
 
 
 
 
 
 
 
Net sales
 
$
1,332.4

 
$
1,516.2

 
$
1,535.3

 
$
1,518.8

 
$
5,902.7

Gross margin
 
$
510.6

 
$
581.2

 
$
582.3

 
$
555.0

 
$
2,229.1

Income from continuing operations
 
$
79.3

 
$
111.8

 
$
106.6

 
$
101.9

 
$
399.6

Income from discontinued operations
 
$
—

 
$
—

 
$
1.7

 
$
—

 
$
1.7

Net income
 
$
79.3

 
$
111.8

 
$
108.3

 
$
101.9

 
$
401.3

Earnings per share:
 
 
 
 
 
 
 
 
 
 
Basic
 
 
 
 
 
 
 
 
 
 
Income from continuing operations
 
$
0.27

 
$
0.38

 
$
0.37

 
$
0.35

 
$
1.37

Income from discontinued operations
 
—

 
—

 
0.01

 
—

 
0.01

Net income
 
$
0.27

 
$
0.38

 
$
0.37

 
$
0.35

 
$
1.38

Diluted
 
 
 
 
 
 
 
 
 
 
Income from continuing operations
 
$
0.27

 
$
0.38

 
$
0.36

 
$
0.35

 
$
1.36

Income from discontinued operations
 
—

 
—

 
0.01

 
—

 
0.01

Net income
 
$
0.27

 
$
0.38

 
$
0.37

 
$
0.35

 
$
1.37

2011(1)
 
 
 
 
 
 
 
 
 
 
Net sales
 
$
1,274.2

 
$
1,545.3

 
$
1,549.9

 
$
1,495.2

 
$
5,864.6

Gross margin
 
$
484.9

 
$
584.4

 
$
579.3

 
$
556.6

 
$
2,205.2

Income (loss) from continuing operations
 
$
73.9

 
$
145.4

 
$
(166.4
)
 
$
81.7

 
$
134.6

Income (loss) from discontinued operations
 
$
1.8

 
$
1.3

 
$
(11.2
)
 
$
(1.3
)
 
$
(9.4
)
Net income (loss)
 
$
75.7

 
$
146.7

 
$
(177.6
)
 
$
80.4

 
$
125.2

Earnings per share:
 
 
 
 
 
 
 
 
 
 
Basic
 
 
 
 
 
 
 
 
 
 
Income (loss) from continuing operations
 
$
0.25

 
$
0.49

 
$
(0.57
)
 
$
0.28

 
$
0.46

Income (loss) from discontinued operations
 
0.01

 
—

 
(0.04
)
 
—

 
(0.03
)
Net income (loss)
 
$
0.26

 
$
0.50

 
$
(0.61
)
 
$
0.28

 
$
0.43

Diluted
 
 
 
 
 
 
 
 
 
 
Income (loss) from continuing operations
 
$
0.25

 
$
0.49

 
$
(0.57
)
 
$
0.28

 
$
0.45

Income (loss) from discontinued operations
 
0.01

 
—

 
(0.04
)
 
—

 
(0.03
)
Net income (loss)
 
$
0.25

 
$
0.49

 
$
(0.61
)
 
$
0.27

 
$
0.42


(1)
The first and second quarters of 2011 have been adjusted to reclassify the results of operations of the hand torch and solder business to discontinued operations.

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Table of Contents

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis provides information which management believes is relevant to an assessment and understanding of the Company’s consolidated results of operations and financial condition. The discussion should be read in conjunction with the accompanying Consolidated Financial Statements and Notes thereto.

Business Overview
Newell Rubbermaid is a global marketer of consumer and commercial products that help people flourish every day, where they live, learn, work and play. The Company’s products are marketed under a strong portfolio of leading brands, including Rubbermaid®, Levolor®, Goody®, Calphalon®, Sharpie®, Paper Mate®, Parker®, Waterman®, Irwin®, Lenox®, Graco®, Aprica® and Dymo®.
On January 1, 2012, the Company, as part of Project Renewal, implemented changes to its organizational structure that resulted in the consolidation of the Company’s three operating groups into two and the consolidation of its 13 global business units (“GBUs”) into nine. One of the two operating groups was consumer-facing (“Newell Consumer”), while the other was commercial-facing (“Newell Professional”). In addition, while not an operating group, the Baby & Parenting GBU was treated as a stand-alone operating segment.
In October 2012, the Company committed to an expansion of Project Renewal, designed to further simplify and align the business around two key activities – Brand & Category Development and Market Execution & Delivery. As part of the expanded program, the Company’s Consumer and Professional groups were eliminated and the Company’s nine GBUs were streamlined into six business segments. The six business segments and the key brands included in each of the six business segments are as follows:

•
Home Solutions: Rubbermaid®, Calphalon®, Levolor®, Kirsch® and Goody® 
•
Writing: Sharpie®, Paper Mate®, Expo®, Prismacolor®, Parker® and Waterman® 
•
Tools: Irwin® and Lenox® tools and Dymo® Industrial
•
Commercial Products: Rubbermaid Commercial Products® and Rubbermaid® Healthcare
•
Baby & Parenting: Graco®, Aprica® and Teutonia® 
•
Specialty: Bulldog®, Ashland™, Shur-Line®, Dymo® Office, Endicia® and Mimio®

The actions taken by the Company in 2012 are intended to simplify the organization and free up resources to invest in growth initiatives and strengthened capabilities. These changes are considered key enablers to building a bigger, faster-growing, more global and more profitable Newell Rubbermaid.
Business Strategy
Newell Rubbermaid’s vision is to become a global company of Brands That Matter™ and great people, known for best-in-class results. The Company is committed to building consumer-meaningful brands through understanding the needs of consumers and using those insights to create innovative, highly differentiated product solutions that offer superior performance and value.
The transformation that began several years ago building Brands That Matter™ and insight-driven innovations that win in the marketplace has created a solid foundation. The Company now has a stronger and more tightly focused portfolio of leading brands with a margin structure that allows for brand investment. The Company has devised its new Growth Game Plan, which is the strategy the Company is implementing to fulfill its ambition to build a bigger, faster-growing, more global and more profitable company.
The Growth Game Plan encompasses the following aspects:
Business Model
◦
A brand-led business with a strong home in the United States and global ambition.
◦
Consumer brands that win at the point of decision through excellence in performance, design and innovation.
◦
Professional brands that win the loyalty of the chooser by improving the productivity and performance of the user.
◦
Collaboration with our partners across the total enterprise in a shared commitment to growth and creating value.
◦
Delivering competitive returns to shareholders through consistent, sustainable and profitable growth.

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Where To Play
◦
Win Bigger — Deploying resources to businesses and regions with higher growth opportunities through investments in innovation and geographic expansion.
◦
Win Where We Are — Optimizing the performance of businesses and brands in existing markets by investing in innovation to increase market share and reducing structural spend within the existing geographic footprint.
◦
Incubate For Growth — Investing in businesses that have unique opportunities for growth, with a primary focus on businesses that are in the early stages of the business cycle.
5 Ways To Win
◦
Make The Brands Really Matter — Sharpening brand strategies on the highest impact growth levers and partnering to win with customers and suppliers.
◦
Build An Execution Powerhouse — Realigning the customer development organization and developing joint business plans for new channel penetration and broader distribution.
◦
Unlock Trapped Capacity For Growth — Delivering savings from ongoing restructuring projects, working capital reductions and simplification of business processes.
◦
Develop The Team For Growth — Driving a performance culture aligned to the business strategy and building a more global perspective and talent base.
◦
Extend Beyond Our Borders — Accelerating investments and growth in emerging markets.
During 2012, the Company executed against the delivery phase of the Growth Game Plan. In this phase, the Company implemented structural changes in the organization while ensuring consistent execution and delivery. The Company expects 2013 to be a transition year from the delivery phase to the strategic phase. In the strategic phase, the Company expects to expand investment behind its Win Bigger businesses to drive accelerated growth.

In 2013, the Company will continue implementing changes to drive the Growth Game Plan into action. These changes are the foundation of the expansion of Project Renewal and are organized into the following five workstreams:
◦
Organizational Simplification: The Company has de-layered its top structure by eliminating the two groups (Newell Consumer and Newell Professional) and further consolidating its businesses from nine GBUs to six business segments.
◦
EMEA Simplification: The Company will focus its resources on fewer products and countries, while simplifying go-to-market, delivery and back office support structures.
◦
Best Cost Finance: The Company will deliver a simplified approach to decision support, transaction processing and information management by leveraging SAP and the streamlined business segments to align resources with the Growth Game Plan.
◦
Best Cost Back Office: The Company will drive “One Newell Rubbermaid” efficiencies in customer and consumer services and sourcing functions.
◦
Supply Chain Footprint: The Company will further optimize manufacturing and distribution facilities across its global supply chain.
In implementing the tenets of its strategy and its change agenda, the Company is focused on Every Day Great Execution, or EDGE, to capitalize on and maximize the benefits of investment and growth opportunities and to optimize the cost structure of the business.

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Table of Contents

Organizational Structure
The Company’s segments reflect the Company’s focus on building large consumer and professional brands and leveraging its understanding of similar markets and distribution channels.The Company’s six segments and the key brands included in each of the six business segments are as follows:
Segment
  
Key Brands
 
Description of Primary Products
Home Solutions
 
Rubbermaid®, Calphalon® Levolor®, Goody®
 
Indoor/outdoor organization, food storage and home storage products; gourmet cookware, bakeware, cutlery and small kitchen electrics; drapery hardware and window treatments; hair care accessories
Writing
 
Sharpie®, Paper Mate®, Expo®, Parker®, Waterman®
 
Writing instruments, including markers and highlighters, pens and pencils; art products; fine writing instruments
Tools
 
Irwin®, Lenox®, Dymo® Industrial
 
Hand tools and power tool accessories; industrial bandsaw blades; cutting tools for pipes and HVAC systems; label makers and printers for industrial use
Commercial Products
 
Rubbermaid®
Commercial
Products, Rubbermaid® Healthcare
 
Cleaning and refuse products, hygiene systems, material handling solutions; medical and computer carts, and wall-mounted workstations
Baby & Parenting
 
Graco®, Aprica®
 
Infant and juvenile products such as car seats, strollers, highchairs and playards
Specialty
 
Bulldog®, Shur-line®, Dymo®, Endicia®, Mimio®
 
Convenience and window hardware; manual paint applicators; office technology solutions such as label makers and printers, on-line postage and interactive teaching solutions

Market and Performance Overview
The Company operates in the consumer and commercial products markets, which are generally impacted by overall economic conditions in the regions in which the Company operates. The Company’s results in 2012 were impacted by the following factors:
 
•
Core sales, which exclude foreign currency, increased 2.2% in 2012 compared to the same period last year. New products, geographic expansion and core sales growth in emerging markets were the primary drivers of the core sales growth, with double- and high-single-digit core sales growth in Latin America and Asia Pacific, respectively. Deteriorating macroeconomic conditions in Western Europe and lower merchandising in Europe in advance of the SAP go-live adversely impacted core sales and were the primary drivers of a 4.7% core sales decline in the Europe, Middle East, and Africa region. Core sales is determined by applying the prior year monthly exchange rates to the current year local currency monthly sales amounts, with the difference in core sales and prior year reported sales representing core sales increases or decreases.

•
Core sales increased 9.8% in the Baby & Parenting segment, with improved retail-level sales in North America and sustained momentum in the Asia Pacific region primarily due to new product launches. Core sales grew 7.0% in the Tools segment with approximately half of the growth attributable to the segment’s international businesses. Core sales increased 3.2% in the Writing segment driven by the continued global rollout of Paper Mate® InkJoy® and a strong back-to-school season. The Home Solutions segment realized a core sales decline of 3.6%, primarily due to continued operational challenges in the Décor business (Levolor window treatments) within the Home Solutions segment and challenges in the Culinary and Décor businesses related to a change in merchandising strategy at a significant retail customer.

•
Input and sourced product cost inflation was more than offset by pricing and productivity, which resulted in a 20 basis point improvement in gross margin compared to 2011. The Company’s gross margin increased despite continued operational challenges in the Décor business within the Home Solutions segment and pressures due to uncertain macroeconomic conditions in Western Europe.

•
Continued focused spend for strategic SG&A activities to drive sales, enhance the new product pipeline, develop growth platforms and expand geographically. During 2012, the Company’s spend for strategic brand-building and consumer demand creation and commercialization activities included spend for the following:

•
Continued investments to support the global roll out of Paper Mate®’s InkJoy® line of writing instruments, which feature innovative ultra-low viscosity ink for a smooth writing experience;


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Table of Contents

•
Supported the Express Yourself with Sharpie® music campaigns, including the partnership with the musical group One Direction, to inspire Sharpie users to boldly express themselves in creative and innovative ways;

•
Continued expansion of dedicated Parker® “shop-in-shop” retail outlets in China and other regions to enhance in-store merchandising;

•
Expanded the launch of the Parker® Ingenuity Collection featuring Parker 5th™ Technology into Japan and China in the first half of 2012;

•
Continued support for “Irwinization” marketing and merchandising initiatives, including the Irwin National Tradesmen Day, “Blue wall” and other merchandising vehicles that get the Irwin® brand and new innovations in front of contractors in a more effective way;

•
Launched Irwin® 2500 Series Level featuring a robust new frame design that enables guaranteed vial accuracy for the life of the product;

•
Expanded the sales forces in the Tools, Writing and Commercial Products segments to drive greater sales penetration, enhance the availability of products and to support geographic expansion;

•
Supported new innovations in the Baby & Parenting segment, including the Graco® Fast-Action and Ready2Grow™ travel systems, which are driving significant market share gains; and

•
Supported the launch of the Rubbermaid® Clean & Dry Plunger with NeverWet™ nanotech coating, which forms a shield that repels water, Rubbermaid® Bathroom Scrubbers with four tools to choose from, and Rubbermaid® LunchBlox™ – a collection of customizable, modular food storage containers that snap together to save space and stay organized in lunch bags.

•
Continued the execution of Project Renewal to simplify the business, reduce structural costs and increase investment in the most significant growth platforms within the business.

•
Completed the implementation of the European Transformation Plan, which includes projects designed to improve the financial performance of the European business and centralize decision-making in the Geneva headquarters, and successfully went live with SAP in Europe in April 2012.

•
Improved the Company’s capital structure by completing the offering and sale of $500.0 million unsecured senior notes, consisting of $250.0 million principal amount of 2.0% notes due 2015 and $250.0 million principal amount of 4.0% notes due 2022, the aggregate proceeds of which were used in July 2012 to redeem the $436.7 million of outstanding 5.25% junior convertible subordinated debentures due December 2027, underlying the Company’s 5.25% convertible preferred securities.

•
Completed the offering and sale of $350.0 million 2.05% unsecured senior notes due 2017 and used the proceeds together with cash on hand and short-term borrowings to repay the $500.0 million principal amount of the 5.50% senior notes due April 2013 (the “2013 Notes”), for which interest expense was previously recorded at a rate of approximately 3.5% after contemplating the effects of the interest rate swaps related to the 2013 Notes.

•
Retired $250.0 million principal amount of the 6.75% medium-term notes due 2012 (the “2012 Notes”) upon maturity, for which interest expense was previously recorded at a rate of approximately 2.3% after contemplating the effect of the terminated interest rate swaps related to the 2012 Notes.

•
Continued the $300.0 million three-year share repurchase plan that expires in August 2014, pursuant to which the Company repurchased and retired an additional 4.9 million shares of common stock for $91.5 million during 2012.

•
Increased the Company’s quarterly dividend by 88% during 2012, from $0.08 per share in the first quarter to $0.15 per share in the fourth quarter.


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Table of Contents

Key Initiatives
Project Renewal
In October 2011, the Company launched Project Renewal, a program designed to reduce complexity in the organization and increase investment in the most significant growth platforms within the business, funded by a reduction in structural selling, general & administrative (”SG&A”) costs.  The consolidation of a limited number of manufacturing facilities and distribution centers was also initiated as part of the program, with the goal of increasing operational efficiency, reducing costs, and improving gross margin. In October 2012, the Company committed to an expansion of Project Renewal, designed to further simplify and align the business around two key activities — Brand & Category Development and Market Execution & Delivery. As expanded, Project Renewal encompasses projects centered around five workstreams, as follows:

•
Organizational Simplification: The Company has de-layered its top structure by eliminating the two groups (Newell Consumer and Newell Professional) and further consolidated its businesses from nine GBUs to six business segments.
•
EMEA Simplification: The Company will focus its resources on fewer products and countries, while simplifying go-to-market, delivery and back office support structures.
•
Best Cost Finance: The Company will deliver a simplified approach to decision support, transaction processing and information management by leveraging SAP and the streamlined business segments to align resources with the Growth Game Plan.
•
Best Cost Back Office: The Company will achieve “One Newell Rubbermaid” efficiencies in customer and consumer services and sourcing functions.
•
Supply Chain Footprint: The Company will further optimize manufacturing and distribution facilities across its global supply chain.

The following table depicts estimated pre-tax restructuring and restructuring-related costs, annualized savings, and headcount impacts associated with Project Renewal (dollars in millions):
 
Total Costs(1)
 
Cash Costs
 
Annualized Savings
 
Approx. Headcount Impacts
Project Renewal (October 2011)
$90 to $100
 
$75 to $90
 
$90 to $100
 
500
Renewal Expansion (October 2012)
$250 to $275
 
$225 to $250(2)
 
$180 to $225
 
1,750
Project Renewal
$340 to $375
 
$300 to $340
 
$270 to $325
 
2,250
(1)
Restructuring and restructuring-related charges of $69 million and $10 million, respectively, have been incurred through December 31, 2012, the majority of which were employee-related cash costs, including severance, retirement, and other termination benefits and costs. Restructuring-related charges represent incremental cost of products sold and SG&A expenses associated with the implementation of Project Renewal.
(2)
Consists of approximately 80% employee-related cash costs including severance, retirement, and other termination benefits and costs.
Project Renewal in total is expected to be fully implemented by mid-2015, with annualized savings of $90 to $100 million expected by the first half of 2013. The majority of the savings from Project Renewal will be invested in the business to unlock accelerated growth and to strengthen brand building and selling capabilities in priority markets around the world.
Since the inception of Project Renewal through December 31, 2012, the Company has reduced structural overhead and consolidated three operating groups into two and 13 GBUs into nine, which resulted in a headcount reduction of approximately 175 employees. In 2012, the Company completed the closure of the Home Solutions segment's Greenville, Texas, manufacturing facility, aiming to consolidate operations of the facility into the Company's existing facilities in Kansas and Ohio. The Company also began implementing a distribution center consolidation in the Home Solutions segment as well as a project to align the Home Solutions segment's sales and marketing organizations with the Company's newly created Customer Development Organization. In the Tools and the Commercial Products segments, the Company began reorganizing its sales and marketing functions and began a project to centralize Commercial Products' distribution operations. In the Specialty segment, the Company began a project to close one of its U.S. manufacturing facilities in Lowell, Indiana. In the fourth quarter of 2012, the Company's Consumer and Professional groups were eliminated and the Company's nine GBUs were streamlined into six business segments.
European Transformation Plan
In June 2010, the Company announced a program to centralize its European business (the “European Transformation Plan”). The European Transformation Plan includes initiatives designed to transform the European organizational structure and processes to centralize certain operating activities, improve performance, leverage the benefits of scale and to facilitate a more efficient and cost-effective implementation of SAP, an enterprise resource planning system, in Europe, all with the aim of increasing operating margin in the European region to approximately 10%. As of December 31, 2012, the Company had completed the implementation of its European Transformation Plan initiative with cumulative restructuring and restructuring-related costs of $38 million and $77 million, respectively. The European Transformation Plan was expected to result in the realization of annual after-tax savings

25
Table of Contents

of $55 to $65 million, and substantially all of these savings have been realized and were included in the Company’s 2011 and 2012 operating results.
In April 2012, the Company migrated its enterprise resource planning systems in Europe to SAP and began operating in a centralized European business model. Since the Company reports sales and operating income based on the region from which the products are shipped and invoiced to external customers and the new model defines how certain regions import and export products, the new model impacted the regions in which the Company’s sales and operating income are reported in 2012. Compared to prior periods, the new model generally results in the European region’s sales and operating income being lower with corresponding increases in the Company’s other regions.
One Newell Rubbermaid
The Company strives to leverage the common business activities and best practices of its segments, 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. In addition, through the expansion of Project Renewal, the Company will expand its focus on leveraging the common business activities and best practices by enhancing its newly created Customer Development Organization and by reorganizing the business around two of the critical elements of the Growth Game Plan — Brand & Category Development and Market Execution & Delivery.
The Company is also 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. Through December 31, 2012, the North American and European operations of substantially all of the Company’s six segments have successfully gone live with their SAP implementation efforts.
The Company continues to evaluate and optimize nonstrategic SG&A expenditures throughout the organization, including centralizing indirect procurement to better leverage the Company's spend.

CONSOLIDATED RESULTS OF OPERATIONS

The Company believes the selected data and the percentage relationship between net sales and major categories in the Consolidated Statements of Operations are important in evaluating the Company’s operations. The following table sets forth items from the Consolidated Statements of Operations as reported and as a percentage of net sales for the years ended December 31, (in millions, except percentages):
 
2012
 
2011
 
2010
Net sales
$
5,902.7

 
100.0
 %
 
$
5,864.6

 
100.0
 %
 
$
5,658.2

 
100.0
 %
Cost of products sold
3,673.6

 
62.2

 
3,659.4

 
62.4

 
3,509.5

 
62.0

Gross margin
2,229.1

 
37.8

 
2,205.2

 
37.6

 
2,148.7

 
38.0

Selling, general and administrative expenses
1,521.1

 
25.8

 
1,515.3

 
25.8

 
1,447.8

 
25.6

Impairment charges
—

 
—

 
382.6

 
6.5

 
—

 
—

Restructuring costs
56.1

 
1.0

 
50.1

 
0.9

 
77.4

 
1.4

Operating income
651.9

 
11.0

 
257.2

 
4.4

 
623.5

 
11.0

Nonoperating expenses:

 
 
 

 
 
 

 
 
Interest expense, net
76.1

 
1.3

 
86.2

 
1.5

 
118.4

 
2.1

Losses related to extinguishments of debt
10.9

 
0.2

 
4.8

 
0.1

 
218.6

 
3.9

Other (income) expense, net
(1.0
)
 
—

 
13.7

 
0.2

 
(7.3
)
 
(0.1
)
Net nonoperating expenses
86.0

 
1.5

 
104.7

 
1.8

 
329.7

 
5.8

Income before income taxes
565.9

 
9.6

 
152.5

 
2.6

 
293.8

 
5.2

Income tax expense
166.3

 
2.8

 
17.9

 
0.3

 
5.6

 
0.1

Income from continuing operations
399.6

 
6.8

 
134.6

 
2.3

 
288.2

 
5.1

Income (loss) from discontinued operations
1.7

 
—

 
(9.4
)
 
(0.2
)
 
4.6

 
0.1

Net income
$
401.3

 
6.8
 %
 
$
125.2

 
2.1
 %
 
$
292.8

 
5.2
 %


26
Table of Contents

Results of Operations — 2012 vs. 2011
Net sales for 2012 were $5,902.7 million, representing an increase of $38.1 million, or 0.6%, from $5,864.6 million for 2011. The following table sets forth an analysis of changes in consolidated net sales for 2012 as compared to 2011 (in millions, except percentages):
Core sales
$
129.2

 
2.2
 %
Foreign currency
(91.1
)
 
(1.6
)
Total change in net sales
$
38.1

 
0.6
 %
Core sales increased 2.2% compared to the prior year, driven by double-digit core sales growth in the Latin America region and high-single-digit core sales growth in the Asia Pacific region. The growth in emerging markets was partially offset by a decline in the Company’s European businesses due to a challenging macroeconomic environment. Excluding foreign currency, sales in North America and international businesses increased 1.8% and 3.3%, respectively, versus the prior year. Foreign currency had the impact of reducing net sales by 1.6%.
Gross margin, as a percentage of net sales, for 2012 was 37.8%, or $2,229.1 million, versus 37.6% of net sales, or $2,205.2 million, for 2011. The primary drivers of the 20 basis point gross margin increase were pricing and productivity, partially offset by input cost inflation.
SG&A expenses for 2012 were 25.8% of net sales, or $1,521.1 million, versus 25.8% of net sales, or $1,515.3 million, for 2011. In constant currency, SG&A expenses increased $32.6 million, primarily due to $37.1 million of incremental investments in brand building and strategic SG&A activities to support new products, marketing initiatives, new market entries and global expansion, and a $7.3 million increase in structural SG&A due to increased annual incentive compensation offset by savings from structural cost savings initiatives and ongoing restructuring projects. Restructuring-related costs associated with the European Transformation Plan decreased $13.1 million to $24.3 million, as the project neared completion toward the end of 2012. In 2012, the Company incurred $7.6 million of restructuring-related costs associated with Project Renewal. Lastly, $6.3 million of incremental costs in 2011 associated with the Company’s Chief Executive Officer transition did not recur in 2012.
The Company recorded non-cash impairment charges of $382.6 million during 2011, principally relating to the impairment of goodwill in the Company’s Baby & Parenting and Hardware businesses. There were no similar charges recorded during 2012.
The Company recorded restructuring costs of $56.1 million and $50.1 million for 2012 and 2011, respectively. The restructuring costs in 2012 relate to Project Renewal and the European Transformation Plan and consisted of $44.0 million of employee severance, termination benefits and employee relocation costs, $12.8 million of exited contractual commitments and other restructuring costs, and a net benefit of $0.7 million for facility and other exits, including impairment costs. The restructuring costs for 2011 relate to Project Renewal and the European Transformation Plan and consisted of $8.4 million of facility and other exit and impairment costs, $33.2 million of employee severance, termination benefits and employee relocation costs, and $8.5 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 2012 was 11.0% of net sales, or $651.9 million, versus 4.4% of net sales, or $257.2 million for 2011. Excluding the impact of the $382.6 million of impairment charges, which were 6.5% of net sales, operating income for 2011 would be $639.8 million, or 10.9% of net sales for 2011.
Net nonoperating expenses for 2012 were $86.0 million versus $104.7 million for 2011. Interest expense for 2012 was $76.1 million, a decrease of $10.1 million from $86.2 million for 2011, due to lower average debt levels in 2012. Losses related to extinguishments of debt were $10.9 million for 2012 compared to $4.8 million in 2011. During 2012, the Company has recognized foreign exchange transactional gains of $2.3 million compared to foreign exchange losses of $14.7 million for 2011, as currencies generally appreciated against the U.S. Dollar during 2012 compared to depreciating in the prior year.
The Company recognized income tax expense of $166.3 million and $17.9 million for 2012 and 2011, respectively. The increase in income tax expense is primarily attributable to pretax income in 2012 and a change in the geographical mix in earnings, as well as $23.1 million of income tax expense attributable to charges resulting from incremental tax contingencies and the expiration of various statutes of limitation and audit settlements. The income tax expense in 2011 is net of a $76.2 million tax benefit the Company was able to record associated with a portion of the $382.6 million of impairment charges. Additionally, the 2011 income tax expense is net of the favorable impact of $49.0 million of benefits due to the reversal of accruals for certain tax contingencies, including interest and penalties, upon the expiration of various worldwide statutes of limitation.
The net income from discontinued operations was $1.7 million for 2012 compared to net loss from discontinued operations of $9.4 million for 2011. Income (loss) from discontinued operations during 2012 and 2011 primarily relate to the Company’s hand

27
Table of Contents

torch and solder business which was sold on July 1, 2011. During 2012, all conditions related to the escrow were satisfied and resolved, and the Company had received $7.8 million from the escrow and recognized the proceeds as a gain from the sale of the hand torch and solder business in discontinued operations. The loss on disposal of discontinued operations for 2011 related to the disposal of the hand torch and solder business. See Footnote 2 of the Notes to Consolidated Financial Statements for further information.
Results of Operations — 2011 vs. 2010
Net sales for 2011 were $5,864.6 million, representing an increase of $206.4 million, or 3.6%, from $5,658.2 million for 2010. The following table sets forth an analysis of changes in consolidated net sales for 2011 as compared to 2010 (in millions, except percentages):
Core sales
$
102.0

 
1.8
%
Foreign currency
104.4

 
1.8

Total change in net sales
$
206.4

 
3.6
%
Core sales increased 1.8% compared to the prior year, driven by growth in the Company’s international businesses, particularly in emerging markets, with double-digit core sales growth in the Latin America and Asia Pacific regions, across substantially all segments. Excluding foreign currency, sales at the Company’s international and North American businesses increased 3.5% and 1.2%, respectively. Foreign currency contributed 1.8% to the increase in net sales.
Gross margin, as a percentage of net sales, for 2011 was 37.6%, or $2,205.2 million, versus 38.0% of net sales, or $2,148.7 million, for 2010. The primary drivers of the 40 basis point gross margin decrease were input and sourced product cost inflation, partially offset by pricing and productivity.
SG&A expenses for 2011 were 25.8% of net sales, or $1,515.3 million, versus 25.6% of net sales, or $1,447.8 million, for 2010. In constant currency, SG&A expenses increased $36.6 million due to $39.8 million of incremental investments in brand building and other strategic SG&A activities to support marketing initiatives, advertising and promotions, new market entries and global expansion. SG&A expenses for 2011 include $6.3 million of incremental costs incurred due to the Company’s Chief Executive Officer transition and an increase of $22.2 million in restructuring-related costs for the European Transformation Plan. The aforementioned increases were partially offset by $31.7 million lower structural SG&A costs, which resulted primarily from lower incentive compensation costs in 2011 compared to 2010.
As a result of the Company’s annual impairment testing of goodwill and indefinite-lived intangible assets, the Company recorded non-cash impairment charges of $382.6 million during 2011, principally relating to the impairment of goodwill in the Company’s Baby & Parenting and Hardware businesses. There were no similar charges recorded during 2010.
The Company recorded restructuring costs of $50.1 million and $77.4 million for 2011 and 2010, respectively. The year-over-year decrease in restructuring costs was attributable to the completion of Project Acceleration in 2010. The restructuring costs for 2011 relate to Project Renewal and the European Transformation Plan and consisted of $8.4 million of facility and other exit and impairment costs; $33.2 million of employee severance, termination benefits and employee relocation costs; and $8.5 million of exited contractual commitments and other restructuring costs. The restructuring costs in 2010 primarily relate to Project Acceleration and included $6.0 million of facility and other exit and impairment costs; $53.5 million of employee severance, termination benefits and employee relocation costs; and $17.9 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 2011 was 4.4% of net sales, or $257.2 million, versus 11.0% of net sales, or $623.5 million for 2010. Excluding the impact of the $382.6 million of impairment charges, which were 6.5% of net sales, operating income for 2011 would be $639.8 million, or 10.9% of net sales.
Net nonoperating expenses for 2011 were $104.7 million versus $329.7 million for 2010. Interest expense for 2011 was $86.2 million, a decrease of $32.2 million from $118.4 million for 2010, due to lower overall borrowing costs resulting from the Capital Structure Optimization Plan, a more favorable interest rate environment and a higher mix of short-term borrowings. Losses related to extinguishments of debt were $4.8 million for 2011 compared to $218.6 million in 2010. The losses related to extinguishments of debt of $218.6 million recognized in 2010 relate to the retirement of $279.3 million of the $300.0 million aggregate principal amount of 10.60% senior unsecured notes due April 2019 and $324.7 million principal amount of the $345.0 million 5.50% convertible senior notes due 2014 pursuant to the Capital Structure Optimization Plan. During 2011, the Company recognized $14.7 million of foreign exchange transactional losses; however, during 2010, the Company recognized foreign exchange gains of $6.9 million principally related to a foreign exchange gain of $5.6 million associated with the Company’s transition to the Transaction System for Foreign Currency Denominated Securities (“SITME”) rate for remeasuring the Company’s Venezuelan assets and liabilities denominated in Bolivar Fuerte.

28
Table of Contents

The Company recognized income tax expense of $17.9 million and $5.6 million for 2011 and 2010, respectively. The change in the income tax expense was primarily attributable to the $382.6 million of impairment charges in 2011, which were only partially deductible, and $218.6 million of losses related to extinguishments of debt in 2010, which were fully deductible. The change in the income tax expense was also attributable to the recognition of income tax benefits of $49.0 million in 2011 due to the reversal of accruals for certain tax contingencies, including interest and penalties, upon the expiration of various worldwide statutes of limitation, and the recognition of $63.6 million of previously unrecognized tax benefits in 2010 as a result of the Company entering into a binding closing agreement related to its 2005 and 2006 U.S. Federal income tax examination, including all issues that were at the IRS Appeals Office.
The net loss from discontinued operations was $9.4 million for 2011 compared to net income from discontinued operations of $4.6 million for 2010. The loss on disposal of discontinued operations for 2011 was $15.2 million, after tax, related to the disposal of the hand torch and solder business. See Footnote 2 of the Notes to Consolidated Financial Statements for further information.

Business Segment Operating Results:
2012 vs. 2011 Business Segment Operating Results
Net sales by segment were as follows for the years ended December 31, (in millions, except percentages):
 
2012
 
2011
 
% Change    
Home Solutions
$
1,644.0

 
$
1,710.2

 
(3.9
)%
Writing
1,416.2

 
1,399.3

 
1.2

Tools
806.1

 
779.6

 
3.4

Commercial Products
759.7

 
741.5

 
2.5

Baby & Parenting
736.1

 
680.4

 
8.2

Specialty
540.6

 
553.6

 
(2.3
)
Total net sales
$
5,902.7

 
$
5,864.6

 
0.6

The following table sets forth an analysis of changes in net sales in each segment for 2012 as compared to 2011:
 
Home Solutions
 
Writing
 
Tools
 
Commercial Products
 
Baby & Parenting
 
Specialty
Core sales
(3.6
)%
 
3.2
 %
 
7.0
 %
 
3.6
 %
 
9.8
 %
 
(0.4
)%
Foreign currency
(0.3
)
 
(2.0
)
 
(3.6
)
 
(1.1
)
 
(1.6
)
 
(1.9
)
Total change in net sales
(3.9
)%
 
1.2
 %
 
3.4
 %
 
2.5
 %
 
8.2
 %
 
(2.3
)%

Operating income (loss) by segment was as follows for the years ended December 31, (in millions, except percentages):
 
2012
 
2011
 
% Change
Home Solutions(1)
$
217.5

 
$
228.9

 
(5.0
)%
Writing(1)
261.9

 
246.9

 
6.1

Tools
109.8

 
119.1

 
(7.8
)
Commercial Products
92.9

 
108.3

 
(14.2
)
Baby & Parenting
72.7

 
51.6

 
40.9

Specialty
68.2

 
60.2

 
13.3

Impairment charges
—

 
(382.6
)
 
NMF

Restructuring costs
(56.1
)
 
(50.1
)
 
(12.0
)
Corporate(2)
(115.0
)
 
(125.1
)
 
8.1

Total operating income
$
651.9

 
$
257.2

 
NMF

NMF - Not meaningful
(1)
For 2012, includes restructuring-related costs associated with Project Renewal of $4.9 million and $1.2 million attributable to the Home Solutions and Writing segments, respectively.
(2)
Includes restructuring-related costs of $24.3 million and $37.4 million for 2012 and 2011, respectively, associated with the European Transformation Plan and $4.1 million of restructuring-related costs associated with Project Renewal for 2012. The 2011 operating income also includes $6.3 million of incremental costs associated with the Company’s Chief Executive Officer transition in 2011.

29
Table of Contents

Home Solutions
Net sales for 2012 were $1,644.0 million, a decrease of $66.2 million, or 3.9%, from $1,710.2 million for 2011. Core sales declined 3.6%, primarily due to continuing challenges in the Décor business and also due to a change in merchandising strategy by a significant retail customer in North America, which impacted the Décor and Culinary businesses. Excluding the impacts of currency, sales at the segment’s North American and international businesses declined 3.6% and 1.5%, respectively. Foreign currency had an unfavorable impact of 0.3%.
Operating income for 2012 was $217.5 million, or 13.2% of net sales, a decrease of $11.4 million, or 5.0%, from $228.9 million, or 13.4% of net sales, for 2011. The 20 basis point decrease in operating margin is primarily attributable to a reduction in gross margin, as input cost inflation and unfavorable mix were partially offset by pricing and productivity gains. In constant currency, SG&A costs as a percentage of net sales remained relatively unchanged as reductions in SG&A driven by savings realized from Project Renewal were consistent with the declines in net sales.
Writing
Net sales for 2012 were $1,416.2 million, an increase of $16.9 million, or 1.2%, from $1,399.3 million for 2011. Core sales increased 3.2%, driven by a strong back-to-school season and double-digit core sales growth in the Latin American markets due to the rollout of new products, partially offset by a challenging macroeconomic environment in Western Europe which adversely impacted the fine writing business. Excluding the impacts of currency, sales at the segment’s North American and international businesses increased 3.0% and 3.3%, respectively. Foreign currency had an unfavorable impact of 2.0%.
Operating income for 2012 was $261.9 million, or 18.5% of net sales, an increase of $15.0 million, or 6.1%, from $246.9 million, or 17.6% of net sales, for 2011. The 90 basis point increase in operating margin is primarily attributable to gross margin expansion, as pricing and productivity more than offset input cost inflation. In constant currency, SG&A costs as a percentage of net sales increased 20 basis points, primarily due to higher brand building and ongoing strategic SG&A spending to support the continued rollout of Paper Mate® InkJoy®.
Tools
Net sales for 2012 were $806.1 million, an increase of $26.5 million, or 3.4%, from $779.6 million for 2011. Core sales increased 7.0% driven by the introduction of new products in North America and continued investment in sales forces in international markets. Excluding the impacts of foreign currency, sales at the segment’s North American and international businesses increased 6.6% and 7.7%, respectively. Foreign currency had an unfavorable impact of 3.6%.
Operating income for 2012 was $109.8 million, or 13.6% of net sales, a decrease of $9.3 million, or 7.8%, from $119.1 million, or 15.3% of net sales, for 2011. The 170 basis point decrease in operating margin is partially attributable to input cost inflation and unfavorable mix, partially offset by pricing and productivity. The decrease was also the result of a 100 basis point increase in constant currency SG&A costs as a percentage of net sales due to higher brand building and ongoing strategic SG&A spending, structural SG&A to support geographic expansion, and sustained investment in selling and marketing resources in certain businesses.
Commercial Products
Net sales for 2012 were $759.7 million, an increase of $18.2 million, or 2.5%, from $741.5 million for 2011. Core sales increased 3.6%. Excluding the impacts of foreign currency, sales at the segment’s North American businesses increased 6.2% while sales declined 10.1% at international businesses, primarily due to continued softness in the European markets. Foreign currency had an unfavorable impact of 1.1%.
Operating income for 2012 was $92.9 million, or 12.2% of net sales, a decrease of $15.4 million, or 14.2%, from $108.3 million, or 14.6% of net sales, for 2011. The 240 basis point decrease in operating margin is primarily attributable to a 290 basis point increase in constant currency SG&A costs as a percentage of net sales due to higher brand building and ongoing strategic SG&A spending, structural SG&A to support geographic expansion primarily in Latin America, and sustained investments in selling and marketing resources, partially offset by gross margin expansion.
Baby & Parenting
Net sales for 2012 were $736.1 million, an increase of $55.7 million, or 8.2%, from $680.4 million for 2011. Core sales increased 9.8%, which was primarily attributable to improvements in sales at the retail level in North America and sustained growth momentum in the Asia Pacific markets attributable to new products. Excluding the impacts of foreign currency, sales at the segment’s North American and international businesses increased 10.5% and 8.8%, respectively. Foreign currency had an unfavorable impact of 1.6%.

30
Table of Contents

Operating income for 2012 was $72.7 million, or 9.9% of net sales, an increase of $21.1 million, or 40.9%, from $51.6 million, or 7.6% of net sales, for 2011. The 230 basis point increase in operating margin is attributable to productivity, favorable mix, and better leverage of constant currency SG&A costs on the net sales increase, partially offset by input cost inflation.
Specialty
Net sales for 2012 were $540.6 million, a decrease of $13.0 million, or 2.3%, from $553.6 million for 2011. Core sales decreased 0.4%, primarily due to declines in the window hardware and interactive teaching technologies product lines, partially offset by increases in labeling. Excluding the impacts of currency, sales at the segment’s North American businesses increased 0.9% while sales declined 2.7% at international businesses. Foreign currency had an unfavorable impact of 1.9%.
Operating income for 2012 was $68.2 million, or 12.6% of net sales, an increase of $8.0 million, or 13.3%, from $60.2 million, or 10.9% of net sales, for 2011. The 170 basis point increase in operating margin is attributable to a 280 basis point decrease in constant currency SG&A costs as a percentage of net sales, driven by reductions in strategic SG&A activities, partially offset by input cost inflation.
2011 vs. 2010 Business Segment Operating Results
Net sales by segment were as follows for the years ended December 31, (in millions, except percentages):
 
 
2011
 
2010
 
% Change    
Home Solutions
 
$
1,710.2

 
$
1,678.0

 
1.9
 %
Writing
 
1,399.3

 
1,355.8

 
3.2

Tools
 
779.6

 
687.6

 
13.4

Commercial Products
 
741.5

 
683.1

 
8.5

Baby & Parenting
 
680.4

 
700.2

 
(2.8
)
Specialty
 
553.6

 
553.5

 
—

Total net sales
 
$
5,864.6

 
$
5,658.2

 
3.6

The following table sets forth an analysis of changes in net sales in each segment for 2011 as compared to 2010:
 
Home Solutions
 
Writing
 
Tools
 
Commercial Products
 
Baby & Parenting
 
Specialty
Core sales
1.2
%
 
0.8
%
 
10.3
%
 
7.4
%
 
(5.5
)%
 
(2.1
)%
Foreign currency
0.7

 
2.4

 
3.1

 
1.1

 
2.7

 
2.1

Total change in net sales
1.9
%
 
3.2
%
 
13.4
%
 
8.5
%
 
(2.8
)%
 
0.0
 %
Operating income (loss) by segment was as follows for the years ended December 31, (in millions, except percentages):
 
 
2011
 
2010
 
% Change    
Home Solutions
 
$
228.9

 
$
228.3

 
0.3
 %
Writing
 
246.9

 
222.4

 
11.0

Tools
 
119.1

 
93.0

 
28.1

Commercial Products
 
108.3

 
134.2

 
(19.3
)
Baby & Parenting
 
51.6

 
53.4

 
(3.4
)
Specialty
 
60.2

 
66.5

 
(9.5
)
Impairment charges
 
(382.6
)
 
—