TO OUR
SHAREHOLDERS

The past year has been a transformative one for Newell Rubbermaid. We recorded one of our best performances ever, reflecting accelerating operating momentum in our businesses. We continued to strengthen our portfolio with the acquisition of Elmer’s Products Company, extending the footprint of our Writing segment into crafts and drawing. And in December 2015, we announced a definitive agreement to combine Newell Rubbermaid with Jarden Corporation to create Newell Brands. When completed, this transaction will establish Newell Brands as one of the leading consumer brand companies in the world with pro forma revenues of over $16 billion.

Importantly, we enter into this combination with momentum. Our performance in 2015 was strong, representing the early payoff of the Growth Game Plan. We accelerated our results, delivering core sales growth of 5.5 percent, increased gross and normalized operating margins, and record normalized earnings per share. In addition, we returned $387 million to shareholders through dividends and stock repurchases.

Our accelerating growth and performance is due to the sharp choices we have made regarding brands, capabilities and portfolio priorities, and excellent commercial execution on the part of our people. We have built advantaged brand development, insights, design and innovation capabilities, including a purpose-built design center, and supported our brands with industry-leading investment that has reshaped the performance arc of the company. Our capacity to invest in our capability agenda and our brands has been enabled by our work to make Newell Rubbermaid a leaner, more efficient enterprise. We have attacked the structural costs in the business and pivoted the investment to those activities that strengthen our brands and drive growth. Coupled with our actions to optimize our portfolio, these choices are yielding strong, competitive results.

In short, the Growth Game Plan is working and is delivering performance acceleration a year earlier than we had planned when we launched the new strategy in 2012.

Win Bigger Businesses
Led Growth in 2015

In 2015, Newell Rubbermaid grew reported net sales 3.3 percent to $5.92 billion. Core sales increased 5.5 percent, an acceleration from 3.0 percent last year, with core growth in every business segment and all four geographic regions. Our Win Bigger businesses, which include Writing & Creative Expression, Tools, Commercial Products and Food & Beverage, recorded combined core sales growth of 9.4 percent.

Our Writing business performed exceptionally well, growing core sales 10.9 percent, led by a great Back-to-School marketing effort, our best ever innovation, record brand support and pricing. Core sales in drawing and coloring, comprising Mr. Sketch^®, Prismacolor^® and Flair^®, were up strong double digits for the year. We also recorded strong performances in our Baby segment, which delivered a 6.4 percent increase in core sales thanks to strong innovation and excellent commercial execution, and in our Commercial Products business, which grew core sales 4.8 percent driven by strong pricing and volume growth in North and Latin America.

Despite unprecedented currency volatility and pressure on costs, normalized gross margin expanded by 40 basis points to 39.2 percent. Advertising and promotion investment increased 17 percent to 4.9 percent of sales. The effectiveness of this enhanced level of investment, combined with more impactful advertising campaigns, enabled Newell Rubbermaid to grow value market share in ten of thirteen product categories measured in the U.S. While spending more behind our brands, we also simultaneously increased normalized operating margin by 50 basis points, enabled by the savings from Project Renewal. These accomplishments resulted in normalized earnings per share of $2.18, a 9 percent increase over the previous year, despite an approximately $0.39 per share negative foreign currency impact.

Investments to Accelerate Growth

As part of the Growth Game Plan, we are expanding investments behind our brands and enhanced capabilities to further drive sales and margin expansion. Over the past several years we have increased the level of advertising and promotion investment from 2.7 percent in 2011 to nearly 5 percent as a percentage of sales in 2015. And we expect to increase that level even more in 2016 on our way to our long-term ambition of approximately 7 percent of sales.

This increase in brand investment has been largely focused on our rapidly strengthening innovation funnel. Since our investments in insights, design and innovation began in 2013, the value of the projects in our innovation funnel has more than doubled, and individual project size has increased by over 150 percent. We measure the impact of our innovation by evaluating the innovation rate or the percentage of our revenue that’s been touched by products launched in the last three years. Our strengthened capabilities have resulted in our innovation rate increasing from the low teens in 2013 to an expected 30 percent in 2016.

Sharper Portfolio Choices

Our organic growth agenda has been complemented by making sharp choices to strengthen our portfolio. We are pivoting the business toward more attractive, higher-growth and higher-margin opportunities while simultaneously exiting businesses that offer less strategic potential. During 2015, we seized the opportunity to acquire Elmer’s Products, whose brands include Elmer’s^®, Krazy Glue^® and X-Acto^®. These arts and crafts brands further strengthen our market-leading Writing segment, enhance our merchandising scale in the key Back-to-School period, and offer great cross-selling and distribution synergies with our retailer and channel footprint.

A Transformative Opportunity

Four years we ago we made the strategic choice to reposition Newell Rubbermaid from a holding company to an operating company, releasing costs through Project Renewal and reinvesting those savings in support of our brands and an advantaged set of capabilities. Our strong 2015 performance gives us confidence that the operating model we have in place today can be extended to more categories, more brands and more geographies. That is the core logic behind our decision to combine with Jarden Corporation, which was announced in late 2015. The deal is expected to close in the second quarter of 2016.

The combination provides a unique and exciting opportunity for long-term growth and value creation. Newell Brands will possess a complementary and focused portfolio in which 80 percent of the combined revenue will be concentrated in just 30 brands – virtually all of which are leaders in their respective categories. Newell Brands will also be a profitable and cash-generative portfolio, with 80 percent of the combined portfolio enjoying a gross margin of more than 39 percent and a normalized operating margin over 15 percent before realizing any cost synergies.

The combination immediately scales the company in key geographies, customers and channels, more than doubling the business with our strategic customers and in our top 12 geographic markets. It also offers a number of intuitive combinations of brands and categories, such as Graco^® and NUK^® in baby gear and Rubbermaid^® food storage and FoodSaver^®, that will yield greater consumer and customer impact for accelerated growth and category development.

Beyond the opportunities for top-line growth synergies, the combination offers substantial cost synergies. We expect to realize at least $500 million in anticipated cost savings within four years. Greater scale will provide greater efficiencies in areas such as corporate costs, procurement and distribution and transportation.

The economics of this transaction are very attractive, with high single-digit accretion expected in year 1, increasing to mid- to high-teens in year 2 and strong double digits in year 3. Over time, we expect to see significant opportunity to drive even more value creation beyond initial assumptions by establishing clear portfolio priorities, increasing investment in the businesses with the greatest right to win and strengthening the portfolio through active portfolio management.

The transaction has been financed through a combination of new and existing debt and the issuance of shares. We are committed to maintaining an investment-grade credit rating and to paying a dividend per share at or above our current level.

The creation of Newell Brands will allow the talent at both Jarden and Newell Rubbermaid to apply the best of what is working at both companies across a broader, more compelling and more diversified landscape of opportunities and brands. We will build one of the most exciting companies in our industry, a destination for talent, while simultaneously unlocking a significant amount of value for our shareholders. That is the Growth Game Plan in action. And that is the future of Newell Brands.

Thank you for your continued support.

Michael B. Polk
President and Chief Executive Officer

¹KRAZY GLUE is a registered trademark of Toagosei Co. Ltd., used with permission.