Rubbermaid Inc.

founded: 1920

Contact Information:

phone: (330)264-6464 headquarters: 1147 akron rd.
wooster, oh 44691-6000 fax: (330)287-2846 url: http://www.rubbermaid.com

OVERVIEW

Standing as the top home products company in the United States and number two in Europe, Rubbermaid has four major product lines: Home Products (house-wares and storage), Juvenile Products (Little Tikes toys and playground materials), Commercial Products (janitorial needs, food service/industrial products, and health care supplies), and Seasonal Products (ice chests and lawn and garden supplies). Its top-selling divisions are Home Products and Juvenile Products.

Rubbermaid has undertaken two massive restructurings from 1995 to 1997 in order to focus on its core businesses, expand innovation, improve productivity and customer service, and expand its brands worldwide. The company is in fact very globally focused and is looking to double international sales as a share of total company sales from 16 to 30 percent by the year 2000. Working toward this goal, the company has been purchasing overseas rivals, entering new markets, and forming joint ventures with foreign companies.

In order to maintain its status as a premier brand, Rubbermaid's divisions constantly develop new technologies. These are used to update older products and get new products to the market. The company is one of the best-known and highly regarded in the world, both by consumers and other corporations.

COMPANY FINANCES

Rubbermaid strives to double sales and earnings every five years and to realize 33 percent of yearly sales from new products introduced in the previous five-year period. The company has an extraordinary track record with regard to dividends, increasing them for 43 consecutive years. The annual dividend in 1997 was $.61 per share. In a 52 week period, the company's stock reached a high of $35 and a low of $23; price-earnings ratio was
32.67.

Net earnings for 1997 were $142.5 million, or $.95 per share versus $152.4 million, or $1.01 per share the previous year. The company attributed lower earnings to higher material costs, leaner product lines, and lower selling prices. While net sales in 1997 rose slightly, up from $2.36 billion in 1996 to $2.40 billion, the company blamed the 3–percent net earnings dip on lower prices and the strong dollar.

ANALYSTS' OPINIONS

Rubbermaid has ranked in the top ten of Fortune's Most Admired Companies for an entire decade (1985-1994). Most experts agree that the company has offered virtually unbeatable quality products. Few analysts have questioned the company's standing with customers on such issues. On the other hand, they have pondered Rubbermaid's pricing strategies, competition, culture, and overseas operations. With earnings declining to $29 million in the second quarter of 1995, analysts were not pleased, since just one year prior, earnings had been double that amount. Analysts attributed this loss to several factors.

First, Rubbermaid had begun to lose customers due to its high prices. Buyers like Wal-Mart have given more shelf space to less-expensive competitors like Sterilite. Analysts have also criticized Rubbermaid's turning a deaf ear to the improved products offered by rising competitors. Third, some have traced the company's customer relations troubles to its struggles to maintain 15 percent annual growth. Finally, analysts have been critical of the company's initial launch in Europe, calling it shaky due to the company's push to double its foreign capacity by the year 2000. Some analysts have detected a turnaround at Rubbermaid since 1995 when it had its first earnings decline in 15 years. They point to the restructuring plans as positive signs the company is responding aggressively to its problems.

HISTORY

Wooster Rubber Company was started by nine businessmen in 1920 to manufacture toy balloons. In New England around the same time, James Caldwell was tired of his metal dustpan scraping paint off the walls where it hung. He invented the rubber dustpan, soon following it with drain boards, soap dishes, and sink stoppers, all made of rubber. He called his new company Rubbermaid. In 1934 Wooster Rubber and Rubbermaid merged, forming a new company called Wooster Rubber Co., headquartered in Wooster and headed by Caldwell.

World War II proved to be hard on many businesses, presenting Wooster Rubber with potential disaster when the government froze civilian use of rubber. The company survived by producing self-sealing fuel tanks, life jackets, and tourniquets for the government. It was forced to discontinue its housewares production during this time, but was able to resume this business when the war ended.

During the 1950s, the company gained greater public recognition. It produced its first all-plastic product, a dishpan, and began a new line of commercial products for hotels, motels, restaurants, and institutions. In 1955 it went public, and changed its name shortly afterward to Rubbermaid. Donald Noble became CEO in 1959, and the company was listed on the New York Stock Exchange.

By the end of the 1960s, Rubbermaid had purchased its first company overseas, Dupol (a German company). It also brought to life the idea of using in-home parties as a sales approach, a strategy still widely used today. During this time, Rubbermaid began its push into overseas markets, expanding production both at home and abroad.

Stanley Gault replaced Noble as CEO in 1980 and through restructuring efforts, pushed the company's growth to four times its former annual sales of $300 million to $1.5 billion. The company grew via acquisitions such as Con-Tact (1981), Little Tikes (1984), and SECO (1986). The company also began producing resin-based furniture after it agreed to a partnership with the French company, Allibert, in 1989. Rubbermaid's growth continued into the next decade with more acquisitions, including Mountain Forge (children's playground equipment), Rubbermaid Japan (a joint venture with Richell Co.), Empire Brushes, and Carex (home health care supplies). The company also joined Royal Plastics Group of Canada to produce modular, plastic components and storage sheds. Injectaplastics of France and 75 percent ownership of Dom-Plast of Poland were among Rubbermaid's other purchases during the decade.

Wolfgang Schmitt became CEO in 1992. The company opened a retail store in Wooster, allowing experimentation in advertising and merchandising. In both 1993 and 1994 Rubbermaid was ranked number one in Fortune magazine's annual America's Most Admired Corporations survey. In the 1990s the accolades continued, with Rubbermaid receiving the Thomas Edison Award for making people's lives better through its innovative solutions. Baylor University's study of consumer goodwill in 1994 ranked Rubbermaid the second-most powerful brand.

In 1996 Rubbermaid purchased Graco, a manufacturer of juvenile furniture and infant products. The company also embarked on a two-year restructuring designed to improve efficiencies and save money.

STRATEGY

The United States is by far Rubbermaid's largest market. International sales account for 16 percent of the company total. In line with the company's goal of doubling that figure by the year 2000, Rubbermaid has made several overseas acquisitions. It has also made tremendous efforts to produce new products at a remarkable pace; its Home Products division alone accounts for 100 new products each year.

Rubbermaid's strategic vision for continuous growth includes adding new products (they enter a new market every 12 to 18 months), improving technology and existing products, and aggressive marketing. Global growth is to be driven by buyouts of other companies, as well as joint ventures with foreign companies.

Rubbermaid embarked on an ambitious two-year restructuring program, ending with the sell-off of its Office Products division in late 1997. The plan had four objectives aimed at saving $50 million per year: focus on core businesses, expand innovation, increase productivity and customer service, and expand globally.

In early 1998 Rubbermaid announced a new series of strategic initiatives aimed at saving $200 million by the year 2000. The goals include consolidating worldwide manufacturing operations, centralizing purchasing, increasing advertising, and enhancing product development. Consolidation of purchasing and manufacturing was underway in early 1998.

FAST FACTS: About Rubbermaid Inc.

Ownership: Rubbermaid is a publicly owned company traded on the New York Stock Exchange.

Ticker symbol: RBD

Officers: Wolfgang R. Schmitt, Chmn. & CEO, 1996 salary $792,901; Charles A. Carroll, Pres. & COO, 1996 salary $519,745

Employees: 12,618 (1997)

Chief Competitors: Rubbermaid manufactures and markets more than 4,000 products, including house-wares, children's toys, and juvenile furniture. It competes against many companies, both foreign and domestic, including: American Brands; Coleman; Hasbro; Mattel; and Tupperware.

In April of 1998 Rubbermaid announced the biggest advertising and marketing budget in company history, expected to run more than $50 million. Television and print (magazine) ads were to be increased, with emphasis placed on product quality. Catalog and other direct mailings to consumers were to be stepped up. In addition to the Rubbermaid Home Page, Internet sites for each division have been set up, with online shopping, promotions, and ideas for consumers. The Commercial Products division will distribute a compact disk to distributors and other users of its products.

INFLUENCES

In its earliest years, Rubbermaid faced economic challenges. In the 1930s the Great Depression forced a drastic decline in sales. It survived that obstacle only to confront a government freeze on civilian use of rubber one decade later. Keeping its head above water, Rubbermaid was able to produce enough equipment for the war effort to compensate for its loses in houseware sales. Rubbermaid received its most notable jump-start when CEO Gault took over in 1980. Proving himself an insightful leader, he expanded the company's foreign business ventures and, combined with other acquisitions, accounted for the company's most vigorous growth period to date.

Economic losses, however, bombarded the company in the 1990s. Faced with high manufacturing costs, an intensely competitive retail environment, and declining customer demand, Rubbermaid was forced to rethink its strategy. While it had record sales in 1995, due to a restructuring charge of $158 million, profits showed a 74 percent decline.

Urgently needing to increase profits, Rubbermaid focused its attention overseas on a partnership with Royal Plastics Group of Canada and acquisitions in France and Poland. Cost-cutting programs have included slashing 1,200 jobs in 1996. The company plans to reduce product handling, close nine operations within a two-year period, and reduce the number of product differences. In 1997 Rubbermaid teamed up with Amway to sell products abroad, focusing on Japan as a starting point.

Even with aggressive strategies, Rubbermaid continues to be affected by factors out of its control, such as strong competition keeping selling prices down, higher raw material costs, and the strong U.S. dollar, which makes products more expensive overseas.

PRODUCTS

Rubbermaid markets more than 4,000 products in over 100 countries. Rubbermaid Home Products include housewares, such as organizers, dustpans, and storage containers. Among its brands are Roughtotes see-through storage boxes, Roughneck refuse containers, and Clear Classics canisters and dishpans. The company's seasonal line includes Farm Tough carts and Blue Ice Cool Carrier bottles and jugs. The Commercial division sells sanitary, storage, and cleaning products. Brands include the Closet Organizer, Pedal Rolltop Containers, and Rubbermaid Carts.

Little Tikes boasts that it makes "Toys that Last," and is especially known for toys aimed at those under the age of five. The division makes swings, preschooler athletic equipment, playhouses, and riding toys. Its newest division, Graco, makes juvenile apparatus and furniture such as strollers, swings, portable cribs, high chairs, and other infant accessories.

CHRONOLOGY: Key Dates for Rubbermaid Inc.

1920:

Wooster Rubber Company is started to manufacture toy balloons

1933:

James Caldwell starts the Rubbermaid company

1934:

Rubbermaid and Wooster merge, keeping the Wooster company name and selling Rubbermaid brand products

1955:

Wooster goes public

1956:

The company ventures into plastic products

1957:

Wooster changes its name to Rubbermaid Inc.

1965:

Purchases the German company Dupol

1969:

Added the in-home demonstration to its sales techniques

1976:

1,100 members of the United Rubber Workers union call a strike

1981:

Purchases Con-Tact plastic coverings

1984:

Ventures into the toy industry by acquiring Little Tikes Company

1993:

Rubbermaid is ranked number one in Fortune magazine's America's Most Admired Corporations survey

1998:

Rubbermaid launches its biggest marketing budget ever

CORPORATE CITIZENSHIP

Rubbermaid took an active role in aiding Ohio River flood victims in 1997. As part of the Ohio Office of Emergency Management and Volunteer Organizations Aiding in Disaster, Rubbermaid joined on by sending truckloads of Rubbermaid products like mops, brooms, rubber gloves, ice chests, water coolers, water cans, gas cans, lawn carts, and Little Tikes infant and preschool toys.

GLOBAL PRESENCE

Rubbermaid, Little Tikes, and Graco products have been sold in 125,000 retail facilities in the United States alone. Sales in the United States accounted for 84 percent of the total for 1997. The company has operations in Australia, Canada, France, Great Britain, Ireland, Japan, Korea, Luxembourg, Mexico, and Poland, with manufacturing and/or warehouse facilities in 14 states as well as its foreign venues.

With new strategic operations in place in Europe and Asia, Rubbermaid has its sights on future operations in South America and Southeast Asia, and has begun capitalizing on the Japanese market as well. The company plans to establish a global information system by 1999, using the German-produced SAP systems software to manage customer service, finance, human resources, and purchasing.

EMPLOYMENT

Rubbermaid has a written mission statement regarding employment, stating that the company will endeavor to have the management of the company lead by example, offer equal opportunity for advancement, and develop a global view toward opportunities. It also states that experimentation, creativity, and risk taking is encouraged.

SOURCES OF INFORMATION

Bibliography

"amway and rubbermaid launch strategic alliance in japan." amway home page, 9 may 1997. available at http://www.amway.com.

"rubbermaid and little tikes ease flood recovery." pr newswire, 17 march 1997. available at http://www.prnewswire.com.

rubbermaid home page, 12 may 1998. available at http://www.rubbermaid.com.

"rubbermaid inc." wall street journal interactive, 19 july 1998. available at http://www.wsj.com

"rubbermaid incorporated." hoover's online, 8 may 1998. available at http://www.hoovers.com.

"rubbermaid sells office products unit." reuters ltd., 8 may 1997. available at http://www.yahoo.com.

"rubbermaid sells units." united press international, 8 may 1997. available at http://biz.yahoo.com.

"rubbermaid to buy graco for $320 million, sees flat earnings." san diego daily transcript, 4 september 1996.

"rubbermaid increases dividend." pr newswire, 28 october 1997. available at http://www.prnewswire.com

"rubbermaid reassigns key executive responsiblities to broaden management and accelerate domestic and global growth." pr newswire, 11 august 1997. available at http://www.prnewswire.com.

salomon, r. s., jr. "wallflowers." forbes, 22 january 1996.

schiller, zachary. "the revolving door at rubbermaid." business week, 18 september 1995.

smith, lee. "rubbermaid goes thump." fortune, 2 october 1995.

For an annual report:

on the internet at: http://www.rubbermaid.comor telephone: (330)264-6464 or write: investor relations, 1147 akron rd., wooster, oh 44691-6000

For additional industry research:

investigate companies by their standard industrial classification codes, also known as sics. rubbermaid's primary sics are:

3069 fabricated rubber product manufacturing

3089 plastic product manufacturing

5099 durable goods, nec