諾威品牌 (NWL) 2009 Q1 法說會逐字稿

Good morning, ladies and gentlemen. Welcome to Newell Rubbermaid first quarter 2009 earnings conference call. At this time all participants are in a listen-only mode. After a brief discussion by management we will open up the call for questions. (Operator Instructions). I will now turn the call over to Nancy O'Donnell, Vice President of Investor Relations. You may begin.

Thank you, Mark. Good morning, everyone. Welcome to Newell Rubbermaid's first quarter investor review. We appreciate your participation.

Presenting this morning, as usual, are Mark Ketchum the Company's President and Chief Executive Officer, and Chief Financial Officer, Pat Robinson. I will begin the call with our forward-looking statement reminder. On our call today, management will make certain forward-looking statements that it believes to be reasonable at this time. Actual results could differ materially from those indicated by these forward-looking statements, as a result of various important factors, including those detailed in our most recently filed form 10-K and 10Q.

We further caution you that the Company does not undertake and specifically disclaims any obligation to update any forward-looking statements that we make today. We will also provide certain non-GAAP financial measures during the call, reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures, are included in our press release and are also available on our web site. Thank you, and I will turn the call over to Mark Ketchum.

Thank you, Nancy. Good morning, everyone. And thank you for joining us today. While the economy continues to be a major challenge for all of us, I am pleased to report that Newell delivered first quarter normalized EPS well ahead of our guidance range. In addition, we generated meaningful expansion of both gross margin and operating margin. And a significant year-over-year improvement in operating cash flow. All in the face of a very tough sales environment.. When we last reported to you, at the end of January, we told you we were committed to protecting earnings, and optimizing cash generation as we manage through this recession.

We told you revenues would be more volatile and unpredictable than normal. We also committed to being flexible and adaptable to these conditions. That mindset, and the contingency plans that we put in place have allowed us to get out in front of the situation this quarter and exceed our EPS and cash flow targets. As we continue to weather this economic downturn, we remain focused on delivering our cash and EPS targets, while protecting the long term health of Newell Rubbermaid, and positioning the company for growth as the economy rebounds. Let me briefly review our Q1 results. Net sales declined 16% in the quarter. This was in line with our most recent guidance and slightly worse than the decline we had anticipated at the beginning of the quarter, as customers continued to pare back their inventories. Product line exits, and foreign exchange, negatively impacted sales by almost 10 points. While acquisitions added about four points. In simple terms, core sales were down 10%, about half due to customer destocking and half due to lower consumption..

Gross margin was 35.1%, an improvement of 90 basis points compared to last year. This expansion was driven in large part by the planned exit from low margin commoditized product categories, and the read through of pricing taken in 2008. The expanded gross margin, along with significant lower SG&A expense, resulting from our focused cost management, drove normalized EPS of $0.20, well above our guidance range of $0.07 to $0.12. Operating margin in the first quarter improved 20 basis points to 9.2% of sales. Our cash performance during the quarter also improved significantly, a credit to our disciplined management of working capital. Our Q1 use of $11 million in operating cash compares to a use of $123 million in last year's first quarter. Lower inventory levels down 15% over prior year, were a primary driver of this year's better performance..

We also took important actions during the quarter to enhance our liquidity, and protect our investment grade credit rating. We have successfully addressed our short-term financing needs, in a volatile credit market.. With a capital structure now in place, we believe we will not need to access the capital markets through 2012. As we look out to the remainder of the year, we expect business conditions to remain challenging. While there has been some anecdotal evidence to suggest the economy may be starting to bottom out, we believe it is too soon to come to this conclusion. Our retail point-of-sale trends are stronger than our revenue trends. But consumer confidence remains low, and retail customers continue to take down inventories wherever possible. We are also seeing increased weakness in Europe, and in commercial and industrial channels, two areas which had performed relatively better through the fourth quarter. Accordingly, we are maintaining our full-year 2009 sales, EPS and cash flow guidance.

We continue to expect net sales decline of 10% to 15%. This assumes a year-over-year core sales decline of 3% to 8%. A negative currency exchange impact of 2% to 4%, and an additional 4% to 6% negative impact from planned product line exits. As I have said before, forecasting sales is difficult, in this economic environment. However, I am more confident in our EPS and cash guidance, because of the disciplined approach we have put in place to execute contingency plans and to manage expenses and working capital. Indeed our strong first quarter performance gives us even greater confidence in our full-year earnings and cash flow projections. For the full-year 2009, we continue to expect normalized EPS in the range of $1.00 to $1.25. And expect cash flow in excess of $400 million. We expect approximately $100 million in SG&A savings this year, as a result of cost-cutting initiatives that began in the fourth quarter of last year. And cash flow will continue to benefit from lower inventories and more efficient use of working capital..

Gross margin expansion expansion will also be a benefit to us to in 2009. Product line exits are the most significant driver of this expansion. Once completed, the exit of low margin commoditized product categories, such as insulated coolers, low-end plastic shelving, opening price point totes and refuse containers, wooden pencils and plastic chair mats, should improve gross margins by over 200 basis points. In addition, we believe the overall combination of pricing, input cost moderation, and productivity will more than offset the negative impact of volume and transaction currency effects, and will be net favorable to margins this year. We will also continue to carefully manage our structural and strategic SG&A spending to protect our bottom line. As we did in the first quarter, we will implement contingency plans to reduce costs more aggressively should we see sales trends come in below expectations.

Now, despite our stringent cost management, we continue to fund our best investments in strategic brand building and consumer demand creation. Our brand building spending as a percent of sales will be virtually unchanged from 2008. Many of our brands are continuing to make inroads by launching innovative new products, and engaging in effective marketing campaigns to gain market share.. For example, over the past several months, Calphalon, Rubbermaid Food, Levelor and Sharpie have all seen share gains in their respective categories in North America, as has Dymo in Europe. These brands have successfully used consumer insights to create differentiated solutions. In many cases, we can call out a compelling value proposition. Let me review just a few of the highlights.. Rubbermaid Food and Home continues to expand sales and grow market share on its innovative food storage platform. Which includes Premiere, Produce Saver and Easy Find lids.

The newest addition is Lockits, featuring locking lid tab force an extra secure lid seal. And as with all of the offerings in the Rubbermaid food storage platform, Lockits incorporates interlocking lids and bases for easy organization and storage. Look for Lockits in stores and on TV this spring. In our Office Products segment our Sharpie brand has managed to gain share even in a very difficult category. Sharpie pen, which offers the writing experience of a Sharpie marker, but without the ink bleed through, has been a strong seller. In addition, we have gained additional placement at key retailers with the unique merchandising concepts such as the Sharpie Try and Buy Center. This store-within-a-store concept provides consumers with more options, with individual customization, and the ability to experience the product before making the purchase. Our Culinary Lifestyles business delivered mid-single digits sales growth in the first quarter. Driven largely by new product introductions.

You will recall, Calphalon launched a new line of premium heating electrics, in the fall of 2008. Calphalon Electrics are doing quite well at retail with sales exceeding initial projections by over 80%. More recently, Calphalon introduced its new UNISON line of nonstick dishwasher-safe gourmet cookware. UNISON combines two revolutionary nonstick surfaces in the same set -- Slide for easy release and Sear to seal in flavor. Initially launched exclusively with William Sonoma, Unison is featured prominently in their print and in-store marketing. Early results have been very encouraging and we have high expectations as we continue to expand the availability of this line. We have continued to invest in marketing campaigns behind the Dymo brand in select European markets with good success. Resulting in meaningful market share gains and increased distribution.

And we're continuing to drive double digit growth on Dymo's internet postage and classroom technology offerings, by marketing their ease of use and value advantages versus competitive offerings. So, even in challenging times we're making progress and driving consumer driven innovation branding and marketing across our portfolio. Our new products are resonating with consumers because they offer performance and value. The share gains we are achieving demonstrate that our brands do indeed matter. At this point, I will turn the call over to Pat who will walk through the financials in additional detail, then I will return to provide final comments. Pat?

Thank you, mark. I will start with our first quarter 2009 income statement on a normalized earnings basis.. Net sales for the quarter, were $1.2 billion down 16% the last year and consistent with our revised guidance of a sales decline, in the mid-to-high teens. Our core sales decline, excluding currency, acquisitions and product line exits, was approximately 10% in the quarter.. We estimate that about one half of this was driven by retail inventory destocking, and the remainder was due to lower consumer foot traffic, and corresponding lower demand. Planned product line exits contributed a negative five points and unfavorable foreign currency also contributed a negative 5 points to the sales decline. Both of these numbers were in line with our expectations. Acquisitions contributed approximately four points of growth in the quarter. Gross margin was a positive story for us in the first quarter.

We generated $423 million, or 35.1% of net sales, which was a 90 basis point improvement over quarter one of last year, and at 230 basis point improvement over full-year 2008.. This improvement was largely driven by the favorable impact of product line exits along with better than anticipated input costs, and the read through from 2008 pricing. These improvements more than offset an unfavorable customer and product mix, as well as the drag on margins from lower volume in our manufacturing facilities, caused by the significant sales decline, and the disciplined management of inventory levels.. We also did a good job this quarter managing down our structural SG&A costs. We told you in December we were taking aggressive actions to manage SG&A spending this year. We saw the benefit of those actions during the quarter.. We also told you if sales trend were more negative than our guidance, we would proactively implement contingency plans to calibrate our spending, eliminating or delaying cost where possible to offset that weakness.

We did implement those contingency plans in certain areas of our business this quarter. The result, as you see, was SG&A expense of $311 million or 25.9% of sales for the quarter, down $50 million to last year. The $311 million of spend includes an incremental $20 million from acquisitions, which was offset by $20 million of beneficial impact from foreign currency translation. Operating income was $111 million or 9.2% of sales compared to $130 million or 9% of sales last year. Interest expense was $5 million higher than the previous year, primarily as a result of the additional borrowings used to fund acquisitions in April 2008. While our debt balances reflect our first quarter financing activities, this had no impact on interest expense, given their timing in the quarter. I will talk a little more about the details of our financing actions in a few moments. The company's continuing tax rate was 30.6%, compared to 28.5% last year.

So, between gross margin expansion, and our aggressive monitoring and managing of SG&A expenses this quarter, we were able to more than offset greater than anticipated sales softness, and deliver normalized EPS of $0.20, well above our guidance of $0.07 to $0.12. We recorded approximately $30 million or $0.08 per share in restructuring charges related to Project Acceleration. These charges have been excluded from continuing earnings described previously. The other big win for us this quarter was in operating cash flow. We used $11 million in operating cash this quarter, and improvement of $112 million versus last year. Despite an $18 million reduction in normalized earnings between years. This accomplishment came as a result of a very focused and disciplined management of our working capital, particularly inventory.

In the first quarter of 2008, we built inventory of $132 million. This year the inventory build was held to $30 million, an improvement of over $100 million. This working capital improvement comes at the expense of some gross margin pressure, of course since lower manufacturing volume means a loss of productivity and absorption in our plants. But our primary focus this year has been strengthening our balance sheet, and providing assurance to the rating agencies and our share holders that we are still able to generate significant cash flow even in difficult economic times. Our first quarter cash performance is a strong start out of the gate towards our 2009 guidance, of operating cash flow of more than $400 million.

I will now take a few moments to talk about our first quarter 2009 segment information. I will remind you that we have reported first quarter results using our reconfigured segment structure. Revised historical segment information was provided by press release two weeks ago and is available on our web site. I will start with our Home and Family segment. Net sales were $558 million a decrease 8% versus last year. Core sales volume in this segment declined about 3%, largely attributable to the Baby and Parenting Essentials business, as we worked with the retailers to bring their existing inventories into compliance with newly enacted child safety protection laws. Approximately six points of the sales decline was attributable to the planned product line exits in our Rubbermaid Home business. Unfavorable currency contributed negative three points, and the acquisition of Aprica contributed four points of growth. Operating income for the segment was $60 million, or 10.8% of net sales versus $53 million, or 8.8% of sales a year-ago.

Favorable input costs and aggressive management of SG&A spend, more than offset the impact of lower sales volume, and unfavorable mix. In our Tools, Hardware and Commercial Products segment, net sales were $328 million, down 19% to last year. Core sales declined about 20%, as we continued to see very tight management of inventory at retail in this segment. As well as continued softness in the housing market. We also saw increased weakness in the industrial and commercial channels in the quarter. Unfavorable foreign currency accounted for approximately five points of the decline. And acquisitions contributed six points of growth. Operating income for the segment was $38 million, or 11.6% of sales, down from $61 million, or 15% of sales last year. As the decline in sales and tight inventory management more than offset SG&A reductions and favorable pricing.

Office Products first quarter net sales were $318 million, a decrease of 24%. Core sales declined about 10% in the quarter. The Office Products category continues to be challenged both domestically and internationally by increased softness in the commercial channels, weak consumer demand and aggressive inventory destocking at the retail level, and our business was impacted along with the industry. Approximately seven points of the decline resulted from product line exits and another seven points was attributable to foreign currency translation. Operating income in the segment was $31 million or 9.8% of sales, versus $34 million or 8.1% of sales last year. The sales volume decline in an unfavorable mix were partially offset by tight management of SG&A spending in the quarter..

Let me now turn to our 2009 outlook. We continue to expect to generate more than $400 million cash from operations in 2009, after restructuring cash payments of $100 million. This projection assumes $100 million in cash from continued disciplined working capital management, primarily driven by a significant reduction in inventory levels. We expect capital expenditures to be approximately $150 million, resulting in free cash flow in excess of $250 million, available to cover dividend payments and reduce outstanding debt.. During the quarter, as most of you know, we accessed the public debt markets to raise $645 million, through a combination of $345 million in convertible securities, and $300 million in straight investment grade bonds. After payment of fees and the purchase of a call spread on the converts, we netted approximately $600 million. As a result of this financing activity, at quarter-end, the company had $755 million in available cash.

In addition we have $690 million of unused capacity under our revolving credit agreement, which expires in 2012. We have $750 million of debt maturities in 2009, about $500 million in September, and $250 million in December. Earlier this month, we completed a tender offer to repurchase $180 million of the $250 million, of our December 2009 notes. We also are conducting a tender offer for $145 million of the $250 million of our May 2010 notes. We expect to complete this second tender offer in the next few days.. The tender offers are being funded with the proceeds from our quarter one refinancings. Total debt at the end of the first quarter was $3.4 billion. We expect to reduce debt to $3.1 billion by the end of the second quarter through our tender offer, and to approximately $2.8 billion by the end of the year. As Mark pointed out earlier, the actions we have taken in the capital markets this year, we have successfully addressed our short-term financing needs, and are confident we will be able to fund all scheduled debt maturities through 2012, to available cash and future operating cash flows.

Turning now to our full-year sales guidance. Like you we're hearing some companies suggest that things have begun to stabilize, and even offer some anecdotal evidence that the economy has started to show some growth. However, we are not ready to call the bottom. Our guidance for the remainder of 2009, assumes the year will continue to be challenging from a top-line perspective. For the full-year, we reiterate our expectation that net sales will decline 10 to 15 percentage points, with core sales declining in the mid-to-high single digits. We continue to expect a four to six point decline from planned product line exits, and a two to four point decline from currency. Acquisitions will contribute about one point of growth for the year.. Our full year guidance for normalized EPS is between $1.00 and $1.25 per share. As discussed previously, we issued convertible bonds during the quarter, which will have a dilutive impact on our earnings per share for GAAP purposes, when our average stock price for a period exceeds $8.61. Due to the uncertainty of protecting the stock price, we will continue to provide guidance excluding any dilutive impact of the convertible bonds. Please reference the presentation on our web site, for details on the potential accounting dilution calculation. If the first quarter sales softness continues unchanged for the year, we will likely be at the lower end of the net sales guidance range. However, as we stated previously, we remain confident that we can deliver our earnings and cash flow guidance even at the low-end of our sales guidance..

In other full-year data points, interest expense is estimated to be approximately $170 million. Our effective tax rate for 2009, is expected to be 30%. We anticipate pre-tax restructuring charges of between $100 million and $150 million, or $0.28 to $0.43 per share. And restructuring charges are excluded from our normalized EPS guidance. Moving to our second quarter, we're assuming net sales will be down approximately 20%. We expect the high single digit core sales decline, similar to what we have seen in the past two quarters. Our guidance assumes a six to eight point decline from product line exits and a four to six point decline from unfavorable foreign currency. Product line exits are expected to be highest this quarter and next. Due to the seasonal nature of some of the products exited, for example, wood case pencils and cores.

The negative translation impact from FX is also expected to peak in quarters two and three, as the dollar did not begin to strengthen significantly until Q4 of last year. We anticipate normalized EPS for the quarter, to range from $0.30 to $0.37, compared to $0.49 a year ago. We expect operating cash flow to be consistent with the second quarter of last year, excluding the one time cash payment of approximately $75 million to settle a foreign currency swap in the quarter. This $75 million payment has been anticipated and included in our full-year cash flow guidance of more than $400 million.

In closing, our performance in quarter one increases our confidence that we will deliver full-year EPS and cash flow guidance, since we have been able to successfully demonstrate our ability to both improve gross margin and manage SG&A costs in the face of top-line challenges during the first quarter. Now before we open the call for questions, Mark has some final comments.

Thank you, Pat. Over the past several months, we have asked everyone at Newell Rubbermaid to rise to the challenge and help make 2009 a year of fulfilled opportunity. We have asked them to focus on the things that are in our control. This means finding new ways to simplify work, reduce costs, conserve cash, gain market share, and build organizational capability for the future across all of our businesses. Our first quarter results are a testament to the hard work of Newell associates. They are rising to the challenge and I appreciate their efforts.

It is our responsibility to manage the company appropriately for these challenging times and yet always keep an eye on Newell Rubbermaid's long term success. And so, while we are relentlessly focused on managing through the near-term challenges, our long-term strategy has not changed. We remain committed to investing in consumer driven, innovation and brand building to drive sustainable growth. To optimizing our portfolio, toward higher growth, higher margin, innovative, responsive branded businesses. And to achieving best cost and efficiency throughout the Enterprise. We have made demonstratable progress on all of these fronts in the last few years and we will make further progress in 2009. The biggest opportunity presented by the current crisis, is to challenge the status quo.

The cost reductions that we need to make, are being made very thoughtfully. We are cutting the least essential and least effective structural and demand creation SG&A dollars. Conversely we're protecting the most effective. This not only allows us to deliver our short-term objectives but, also gives us tremendous upside leverage when consumer confidence and spending recovers, as of course it will. Given the volatility and unpredictability of 2009, we will remain flexible and adaptable, managing the business to protect earnings and cash flow. If economic conditions worsen, we have contingency plans in place. To help us ensure that we can continue to deliver on our cash and EPS targets.

Our solid first quarter results, in the face of a weaker than expected sales environment, support our confidence in doing so. We are encouraged by the market share gains achieved across key portions of our portfolio, as a result of our investments in consumer driven innovation, and strategic brand building. The exits from low margin commoditized product lines, while painful in the short term, make us healthier long term. We have demonstrated that our brands do matter to consumers. And we believe that they will be the key growth driver, as we return to a more robust economic environment. Our transformation to a best in class consumer innovation and branding company is continuing, and we look forward to sharing our progress with you. With that, I will now ask the operator to open up the line for questions.

Thank you. We will now begin the question-and-answer session. (Operator Instructions) Your first question is from Chris Ferrara with Merrill Lynch.

You talked about us seeing and other people seeing possibly a bottoming out of of the economy. You said you're not read to make that call. I am just wondering is it because you're not seeing it in your end markets or is it because maybe you're seeing it but you don't want to base anything on one quarter's worth of seeing it or one month's worth of saying it.

Chris let me take that one. The answer is we're not seeing a strong enough indication across a big enough portion of our portfolio to make that call. So, the evidence is still too spotty.

Okay and real quickly on gross margin, obviously you were up pretty nicely this quarter relative to where you would have come in. I guess simply, is there any structural reason why Q4 gross margins in the business would be lower than any other quarter across the business? Because I'm just looking at that 30 you guys put up last quarter and obviously there was a lot going on in the December quarter of '08, versus the 35 we saw in the December quarter of '07. So I guess simply stated structurally is there any reason why Q4 would be lower than every other quarter.

No, there is not, no. Think fourth quarter of last year was specifically impacted by, as we saw the rather sudden decline in November and December, we reacted and our manufacturing locations and started shutting down production and obviously that affected our ability to absorb some of the costs.

There was also some inventory break downs in the quarter that affected fourth quarter of '08 that were sort of one-time in nature if you will.

Thanks guys, I appreciate it.

Your next question comes from Joe Altobello with Oppenheimer.

First quick, to follow-up on Chris' question on the gross margin. When do we start to see the commodity costs pull back really push gross margin higher. Is it 2Q or 3Q or have we started to see that already?

Well, as you know, Rubbermaid has been running favorable for us. That is one of our commodities. Some of our other commodities have certainly leveled off. But year-over-year they are still showing increases for us, but we're not going to comment on each of the pieces. Product line exits are probably the biggest, are the biggest driver of our gross margin improvement. We had the 2008 pricing carryover, and our normal productivity in our plants, that were driving positive gross margin improvement. On the negative side, we have the transactional FX, that we're still seeing the negative mix from the consumers and customers frankly trading down. But the net of all that we have said is going to be positive, and the product line exits alone, will be positive to hundred basis points when we're completed so -- we have said that all along so -- those are the drivers, but we don't want to break out each of those for you individually just because they move so frequently and we will be wrong whatever we tell you.

So even if you exclude the product exits, all the other moving parts you mentioned are moving in the right direction, so I guess the point I'm trying to make that is the up 90 points this quarter that is probably a low water mark.

Yeah I think as a delta, maybe the low mark, yes as a delta, it would probably be the low mark, right. But as a absolute number I'm not sure it would be the low mark because margins can be maintained for the rest of the year, it would be a reasonable assumption there.

Okay. And then in terms of the Office Products business, obviously the sales were pretty weak but you held your operating profit very nicely. What is going on there, that is different from the other segments?

Well, I think they took the most actions from an SG&A standpoint. Because of that substantial sales decline. So of our SG&A decline they were the largest piece.

I just remind you, Joe, of that decline, that 24 point decline, 14 points of that was FX and purposeful product line exits.

Which have very little drop to the bottom line compared to a core sales decline.

So, that is not due to the guy who is running Office Products these days?

He's doing a really great job I have to say.

Got it. Okay and then lastly if I could you mentioned some weakness in Europe. And in the commercial and industrial end users. Is Europe getting worse at a faster pace and then secondly, what percentage of your business is commercial industrial.

Well, Europe has certainly caught up with the US quickly, I will say that. I won't say they are worse that the US right now, but they are certainly equal to the US as far as their economic impact. The commercial industrial piece -- Mark do you have that percentage of the total business, are you talking Office Products ?

Just in general. Just roughly.

You know I don't have it. I don't want to I have good you a number I don't know. Can we get back to you on that.

Sure absolutely. Okay, great, thank you.

Your next question comes from Bill Schmitz with Deustche Bank.

Hey, guys good morning,. Could we just get some more of the assumptions into the model. Maybe it is too much granularity, but did you say what you think the commodity pressure would be in aggregate for the year, what the benefit will be.

We're not saying that. We don't want to break that out because it changing every quarter, Bill and you know if we told you a number even a quarter ago it would be wrong right now, if I told you six months ago it would be really wrong. It changes so rapidly we don't want to give specifics on each number any more.

But I think the other thing that is true is that we're expecting that to be offset, to also offset positive benefits of pricing potentially so, we took some pricing as you know last year, we're getting some carry through effect of that in the first quarter, but to the extent that commodities go down, they will put pressure on the pricing and we may have to give back some of that pricing so we're assuming that that is a wash.

Gotcha. And on production down time, is that limited to this quarter. Or are we going to see that throughout the year. Seems like you made great progress on the inventory side. Are you going to start firing these facilities up again.

Well, no, we did a nice job this quarter. $100 million less growth in inventory than a year-ago is a super job by the operations, and especially in the face of the sales decline we're seeing. But we expect that inventories will be down year-over-year. They will be the biggest driver of our working capital being down $100 million. We still have work to do to make sure we do that. I like what we have done the first quarter and it is a great start.

We will have to continue to take down time in our factories throughout the year to get our inventory targets throughout all four quarters.

Gotcha. Last one if I could. When you talk about retail and inventory destocking, how much is destocking and how much is deletions? Are you saying, guys we just don't want this product any more for good, or is it just we have too much inventory in the warehouse and we want to work some of it down.

It really is the latter. It really is we have too much inventory and we're going to work it down. They are risking and seeing some increased level of out of stocks, and so on, in order to do that, they are aggressively managing cash as well. I would say in some cases, in some channels, customers recognize that they haven't been as diligent in this area as they could have been in the past and obviously times demand they be diligent.

Gotcha. I lied. Just one more if I could. Is there any change in the pace of sales. I know January and February were really week. But, March and April, did you see any uptick at all in some of the sales trend.

Our first quarter was relatively flat month to month, as far as change to last year.

How about April?

I would say so far, again not a material change.

Okay. Great, thank you very much.

Your next question comes from John Faucher with JPMorgan.

All my questions have been asked, thanks.

Okay.

Thank you very much your next question from come Wendy Nicholson with Citi Investment Research.

Back to Chris' question, if the fourth quarter was really just an anomaly, due to production down times, is it reasonable to expect that in 2009 full-year gross margin could be in the kind of 34% to 35% range again, or is that just too aggressive ?

No, I don't think that is unreasonable at all.

Okay. And then the 200 basis points of the product line exits, I want to go back to the original guidance I think you gave us, was that two-thirds of product line exits would come from SKU discontinuation and third from the sale of the businesses, or the sale of the products? Has that ratio changed and I am just wondering how the timing of that is going to flow?

Well, I would say the ratio is probably not changed. Again, though, as we assess our ability to make the divestitures of those businesses that we think are, can be pulled out and divested, and don't find the right markets for those, we continue to consider all other alternatives. So ultimately that ratio could change. And if it changes it will change in the direction of less divestiture and more flat-out exits.

Do you have a timeframe in mind? I am trying to figure out that 200 basis points, is it we have to realize that over the next four quarters or six quarters, if we can't sell it boom it is gone, or what is kind of the internal discipline or thinking around that?

Well, we think we we're going to be out of roughly 80% of it by the end of this year. I think is the best we to think of it and that will effect all four quarters of the year. You will recall we made this announcement in July of last year. I told you at the time we were giving our customers time to find alternative supplies, normally about six months.

While we started to see a little bit of exit in the fourth quarter last year, most of that decline we're going to see throughout this year because most of them took advantage of that six month window we gave them to continue buying our product lines, and then we will see it effect, it will be a year-over-year effect in all four quarters this year. It started out reasonably strong in the first quarter, it will be even stronger in the second and third quarter, and will start to fall off in the fourth quarter, because as I said we saw some of that last year in the fourth quarter.

The only reason -- our goal is to be out of all of it this year, but because the market for trying to sell these businesses, it is just not available right now. We won't reach that goal.

Fair enough, fair enough but that sounds great. But, my last question is just on the pricing side Mark, in response to another question I think you said that you were anticipating maybe, some price roll backs given the raw material environment, and how much relief you seen. I am honestly surprised that you haven't started to do see that sooner or already, given just how much revenue has gone down, how big private label is in some of your categories and how weak the consumer is, but it sounds look you haven't seen anything yet. Is that right?

Let me respond to each of those elements, Wendy. One, remember we're getting out a lot of these [resident] sensitive categories. The very categories we're exiting in many cases are the ones that are [resident] sensitive commoditized. We wouldn't have to get back pricing because we're getting out. I think we're seeing pricing pressure in general just because -- not just because of the effects of commodity costs, but the economy in general. Right. And so I am seeing as much pressure I think that is due to that.

Pat said before, and it may have not registered, but we're actually seeing cost increases still, year-over-year, in several key areas. Packaging, our source product, some metals, and so, we actually are still seeing increases, and therefore we have got pretty good information to go back to our customers and say the pricing that we took is still pricing that is appropriate to be taking.. But , as I said we're going to be responding to pricing, I think, as much because of the total competitive environment, as anything else.

And the other thing is, what we're doing is, we're really judiciously looking at some of the requests because the requests from some of the customer are crazy, we think. They are going to destroy the value in the category. We don't want to chase those price points. We would rather walk away from the promotional sales on some of these possibilities than to let our brand be exposed to extreme deep discounting because it doesn't help in the long run. So, we're considering all of those factors in there when we're talking about what we expect to see happen with pricing. That is why we're not being too aggressive with our -- the positive potential positive impact of pricing even though we had a good effect from that in the first quarter.

Got it. Wonderful. Thank you very much.

Your next question comes from Bud Bugatch with Raymond James.

Good morning, Mark, Pat and Nancy, this is Chad filling in for Bud.

Good morning,.

A couple of questions if I might. Congratulations obviously on a very good performance in Q1. Although, we were certainly surprised by the magnitude of the upside relative to your guidance, considering you had reaffirmed that fairly close to the end of the quarter. Could you maybe give us a little more detail or help us understand what went right. What really drove the variance versus the guidance, and why was it so much better?

Right. Well, first let me respond to why we didn't say anything different on the guidance when we talked in March. I would remind you that our visibility of sales is very immediate, we get daily sales reports. By the end of March I got a real good idea what the first quarter sales were going to look like. We only rolled up our profit numbers, on a monthly basis, and even then not all the items on every line item there. And so, we didn't have any reason to believe that we were going to exceed guidance by that much. We were tracking at the top end of origins range, but not there.

Second thing I would tell you is that my expectation is that our businesses are all managing their business, conservatively. We have told you before, we're doing everything we can to protect our cash and our EPS numbers and so, we're seeing that come through. Businesses are managing. I have told them to manage for the worst. And then be pleasantly surprised when things turn out a little better, and then in fact that is exactly what they are doing. So, we saw a penny or two across each of our businesses, and penny or two from corporate, and that added up to the difference between us being at the high-end of our guidance and being at $0.20.

Great, well, that is obviously very good to hear. Another question, you maintained the FY '09 revenue outlook for down 10 to 15, and even though sales in Q1 were down worse than that, and we're later expecting Q2 to be down about 20. I think Pat talked about Q2 being a little heavier impact from the product line exits and currency, but it does seem to assume a moderation in the decline in the core sales, and should I read that as you're assuming consumer demand remains pretty weak, but maybe less of an inventory reduction, consumers or how do we think about that.

That is exactly the right way to think about it. We will have less of an impact from inventory reductions by customers as the year goes on, and then finally when we get to the fourth quarter we actually will see an easier comp.

Okay. And, one last question. Pat, could you share with us, the assumptions for sales and operating margins by segment, that you're embedded into the '09 guidance?

Well, not operating margin but sales we said before, Home and Family should be at the better end of our guidance and the other two segments at the lower end. So, that's the extent of what we have talked about before, and we haven't given operating guidance by segment and we're not going to now.

Okay. Thanks a lot, guys. Good luck for the rest of the year.

Thank you.

Your next question comes from Connie Maneaty with BMO Capital Markets.

Just to follow-up on that last question. The variance from your last guidance was so surprising, were you looking, before you realized how strong the quarter was going to be, were you anticipating that the gross margin would decline because of the product line exits?

No, we were never anticipating it was going to decline. We thought it would be up, year-over-year. But, as Mark said, we don't get realtime updates on our earnings. Our update on our earnings is on a monthly basis. So at the time we did the preannouncement, we had the February information, and really the improvement was spread across all the segments. All the segments beat their numbers by a penny or two, and we had a about a penny or two of profit at corporate, so, we expected to be at the high-end, but the combination of that, brought us to $0.20.

Okay. Why was interest expense so low in the quarter? Is it the timing of all the financing, or there is something quirky in the quarter?.

That's correct. Now, you should expect now that interest expense would increase because of the new financing we have done and will be relatively flat by quarter for the rest of the year, kind of in the mid $0.40 range, $0.45 to $0.46 a quarter. I'm sorry, $45 million to $46 million, a quarter.

Thanks that's all I had.

Your last question is from Linda Bolton-Weiser with Caris.

I was under the impression that really your intent on the product line exits was to eliminate things that were highly based on certain commodities, like plastic, but it does seem like some of the stuff you're doing is quite strategic. I think you mentioned the wood case pencil.

I just said commodity sensitive and not responsive to innovation, wooden pencils, a number 2 yellow pencil with a pink eraser has not been innovated on for a long time.

I will point out that is only an exit in North America, not other areas of the world where wood case pencils are still very important. Primarily Latin America. So, we'll stay in the business there. But in North America they have become commoditized, and not a good category for us.

Are there any other areas that are like that, that are not just commodity based, but based on the nature of the product that you're exiting or planning to exit?

There are some that don't fit our business model. Such as our Ashland business doesn't fit our model. It is an OEM business in our Tools and Hardware segment that's an OEM supplier to the window industry. So it is not business that would respond to any type marketing or input so -- it is another example of one that wouldn't fit, the original characterization.

Okay. And I mean just in years of following Newell it just seems like you're always exiting and divesting, and deciding something isn't a good business to be in. I remember Newell always used to say never get into anything with electrical cords attached. Here you are getting into electrical things in Calphalon. So, are you kind of coming to a period where you think the product line exits and all of this will be really over, or is this just a perpetual thing with the way Newell is as a company.

I wouldn't want to characterize it as perpetual because of the way Newell is as a company. I would tell you Linda, that I think that this has been a key strategic plank for the time I have been sitting in this chair, and, that key plank has been, we're going to change our business model and we're going to get the portfolio right to fit that business model. We started telling you, we started breaking down our business into, one of the ways we looked at it was looking at it as what part of it is commoditized, what part of it is premium branded, what part of it is affordable luxury, what part of it is commercial industrial. We said we want to be in those latter three categories, but not the commoditized part of it. In 2003 or 2004, we had as much as 44% of our total revenue in that commoditized category. Coming into 2008, it was still roughly 10%.

So, we still had a portion left to go. With the moves we announced in July, we are at basically addressing that last 10%. So, as we come out of 2009, we think that portion that is commoditized will be low single digits, 1%, 2%, 3%. So, I think we have been doing what we said we were going to do, and we will have a portfolio at the end of 2009, that we think is almost entirely a good fit with our business model. That said, I will never say that we shouldn't be continuing to look at what is it going to take to optimize the business model. You know businesses change. Competitive situation changes and so on. But at least with this round I think we will now have the vast majority done, but I would hope that you would expect us to always evaluate our portfolio every year and add good things and take away less good things.

And can you just tell us what is the magnitude of the dilutive impact if the share price stays as high as it is? How much of that is EPS?

It is out on the web but let me help you out here. There are two types of dilutions, first of all, one is economic and the other is GAAP. The economic dilution is less than the GAAP dilution. They will become the same at the maturity of the security in five years, but in the meantime the GAAP's dilution will be higher. We can explain that off line why that is, but the GAAP dilution at a share price of, let's call $11 a share, is around 3%. Zero from an economic standpoint. At that price.

Thank you very much.

If we are unable to get to your question during this call please call Newell Rubbermaid Investor Relations at 770-418-7662. Today's call will be available on the web at www.newellRubbermaid.com and on digital replay at 888-203-1112 or area code 719-457-0820 for international callers. Conference code of 8804754. This concludes today's conference. You may disconnect.