Fitch Affirms Newell Rubbermaid Sr Notes 'BBB' Following Announced Acquisition.

NEW YORK -- Fitch Ratings has affirmed the ratings on Newell Rubbermaid Inc. (NWL) as follows:

-- $650 million revolving credit agreement, which matures in June 2007, at 'BBB';

-- $1.5 billion of senior unsecured notes at 'BBB';

-- $650 million commercial paper program at 'F2';

-- $437 million of QUIPs (Trust Convertible Preferred Stock) at 'BBB-'.

The affirmations follow the company's announcement that it will acquire DYMO, a producer and marketer of on-demand labeling solutions, from Esselte Group Holdings AB. The Rating Outlook is Stable.

NWL has announced a definitive agreement to purchase DYMO for approximately $730 million in cash. The acquisition fits well with NWL's office products business given the complementary nature of product lines, distribution, and geographies. NWL's office products group, which accounted for $1.7 billion of revenue in 2004, manufactures and markets writing instruments, art supplies, and office supplies under well-known brands such as, Sharpie, Paper Mate, Parker, Waterman, and Rolodex. The transaction is subject to regulatory approval and is expected to close by year-end 2005.

The fairly sizeable acquisition is anticipated to have a minimal impact on NWL's financial position when completed and should enhance sales, profits, and margins in 2006. DYMO had sales of $225 million in 2004. The acquisition is expected to be financed through cash flow and existing cash balances with little or no debt. For the foreseeable future, margins are forecasted to improve despite still high resin costs and DYMO should add to the increase. Credit measures are anticipated to remain stable compared to current levels but subsequently strengthen given the expected improvement in operating earnings and cash flow as well as incremental operating earnings and synergies from the acquired business. For the 12 months ended June 30, 2005, leverage, measured as total debt plus preferred stock to EBITDA, was 2.8 times (x) and EBITDA coverage of interest and preferred stock dividends was 7.1x.

NWL maintains a portfolio of leading premium brands that span several sectors and provide it with a broad distribution base, although the company continues to strive to improve its portfolio of businesses. The company has not been active in acquiring over the past couple of years, and with the acquisition of DYMO, Fitch does not expect more sizeable acquisitions until DYMO is integrated and expectations are met. In an effort to offset high operating costs related to manufacturing and resin, NWL has been shedding low- or no-profit operations, reducing its manufacturing footprint, paring back high-cost resin-related businesses, and improving productivity over the past several years. This has resulted in the stabilization of profit margins in the face of high inflationary costs. The company is expected to remain focused on these initiatives.

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