諾威品牌 (NWL) 2010 Q4 法說會逐字稿

Good morning, ladies and gentlemen. And welcome to Newell Rubbermaid fourth quarter 2010 earnings conference call. After a brief discussion by management, we will open up the call for questions. Just a reminder, today's conference is being recorded. A live webcast is available at newellrubbermaid.com on the Investor Relations homepage under Events and Presentations. A slide presentation is also available for download.I would now like to turn the conference call over to Ms. Nancy O'Donnell Vice President of Investor Relations. Ms. O'Donnell, you may begin.

Great, thank you. Welcome, everyone, to Newell Rubbermaid's fourth quarter call. I'm Nancy O'Donnell. With me today are Mark Ketchum our President and CEO, and our Chief Financial Officer Juan Figuereo.

During the call today we will refer to non-certain GAAP financials measures. Management believes providing insight on these measures enables investors to better understand and analyze our ongoing results of operations. Reconciliation with a comparable GAAP numbers can be found in our earnings release and on the investor relations area of our website. As well as in our filings with the SEC.

Please recognize that this conference call includes forward-looking statements. These statements are subject to certain risks and uncertainties that could cause our actual results to differ materially from managements current expectations and plans. The Company undertakes no obligation to update any such statements made today. To review our most recent 10-Q filings and our other SEC filings, you will find a more detailed explanation of inherent limitations in such forward-looking statements.

With that, let me turn it over to Mark Ketchum for his comments. Mark?

Thank you, Nancy. Good morning, everyone and thank you for joining us today. I am pleased to report the conclusion of a successful year for Newell Rubbermaid. Finishing out 2010 with very positive fourth-quarter results. I know some of you were concerned about whether we could continue our sales momentum against tougher Q4 comps. The answer is, we could.

For both the quarter and the full-year, we delivered mid single-digit core sales growth, year-over-year gross margin improvement, and strong double-digit normalized EPS growth. During the 4th quarter, our ongoing investments in innovation, brand building, and marketing helped drive a 4.9% core sales increase. We delivered a 10 basis point improvement in gross margin to 37.1%, as we were able to offset inflation with improved product and portfolio mix and our continued focus on productivity. The combination of higher sales and gross margins drove normalized EPS of $0.34 in Q4, a 26% increase over the prior year. All this in the face of tougher Q4 comps and in an economy that is slow to rebound in our larger markets. I am proud of this quarter's results, and Juan will provide more detail shortly.

First, I'd like to take this opportunity to reflect on our full-year accomplishments. As I look back on 2010, I think is most notable that we achieved or exceeded all of our financial targets, while continuing to advance our long-term growth strategies. By staying focused on the drivers that are in our control, we have created our own momentum to deliver the growth trifecta once again in 2010. Top line sales growth, significant gross margin expansion, and bottom-line earnings improvement.

2010 core sales grew 4.7% driven by a strong roster of new product launches, distribution gains, and by geographic expansion. I am proud to report that this growth was broad-based with all three operating segments posting a year-over-year increase in core sales. Perhaps even more encouraging, core sales growth accelerated in the back half of the year in line with our expectations. Going at a rate of 5.3% compared with 4.1% in the first half of the year. So, we are entering 2011 with good momentum.

Not surprisingly, our strongest contributor in sales growth this year was our international business, which collectively grew almost 8% in local currency. In North America sales grew 2.5% with 3.6% core growth after factoring in currency and category exits. A key objective in our long-term growth strategy is to expand the percentage of sales from outside of North America with a particular emphasis on fast-growing emerging markets such as Brazil and China. We concluded 2010 with 31% of our sales outside of the US A new high for us. We will continue to invest strategically in the coming year to build an even more meaningful presence across the globe.

We also delivered a solid improvement in gross margins this year, expanding 100 basis points to 37.7%.Primarily, the result of strong productivity and improved product and portfolio mix. Across all of our markets, we continued to invest in consumer driven innovation and brand building, to support long-term sales growth. We took strategic brand building as a percentage of sales to 6.4% this year, making good progress toward our target of about 8%. While holding SG&A to approximately 25% of sales. Operating income margin improved to 12.5% from 12.1% last year. Normalized EPS rose 16% to $1.52. It was a very strong year.

One of the 2010 accomplishments, of which I am most proud, is the significant progress we have made in our European operations. This region delivered solid core sales growth of 4.6% in local currency and operating margins were 7%. The best in at least a decade and likely our best ever. We are reaping the productivity benefits of key restructuring projects, executed under project acceleration. And are on track to achieve our goal of at least 10% operating margins in Europe by the end of 2012. Our 2010 performance is a significant first step on the path towards that goal. The initial work that we have done in key areas, which is pricing architecture and organizational structure is already starting to yield results. These efforts, along with other profitability enhancing initiatives, will drive further improvements in operating margin 2011 and again in 2012.

As we announced earlier, we are currently building out our new EMEA headquarters in Geneva. Expected to begin relocating the operating personnel in the second quarter and all affected employees in place by Q4 of this year. Another notable strategic milestone in 2010 was the completion of project Acceleration. This multi year restructuring program was designed to consolidate and streamline our manufacturing and supply chain operations, to achieve greater efficiency and best cost. Since the inception of Acceleration reduced our manufacturing footprint by 60%, substantially increasing the percentage of low cost manufacturing, and streamlined our distribution and transportation network.

We have also increased our use of strategic sourcing partners to achieve what we think is our optimal balance of approximately 50/50, versus self-manufactured. As a result, we will realize $220 million in annualized savings by the end of 2011. Project Acceleration represented significant effort in resources, more than most people don't know and can't imagine. With all the hard work behind us, we can now redirect those resources to focus on more growth oriented activities. All in all, 2010 was another year of meaningful progress for us. 2011 we are emerging from the transformation story of the past five years and are leveraging the benefits of this transformation to accelerate growth.

Now I would like to take a few minutes to discuss some of the individual business units highlights for the year. I will start with the home and family segment. Here we delivered 0.5% core sales growth in 2010. This segment showed improvement sequentially throughout the year. Slight sales declines in the first half, accelerating to solid growth in the back half.

Our investments in consumer relevant innovation and increased advertiser promotion of payoffs in the form of significant shelf space gains and incremental distributions. Our beauty and style and culinary lifestyles GBUs were the big drivers of their growth. Beauty and style benefited from significant shelf space gains and distribution wins behind the success of the new Simple Styles hair accessories. Calphalon successfully launched redesigned, contemporary non-stick and tri-ply stainless steel cookware lines which resulted in shelf space for market share gains. Continued advertising and promotion support for our top-of-the-line Unison cookware, which is in its second year, also contributed to the sales lift.

Decor saw sales declines in the first half of the year, but came on strong in the second half. Driven by Levolor's new Accordia Cellular shades; the most energy-efficient shade on the market. We are also gaining significant retail presence with the Levolor brand, as we continue to roll out our new size and store machines which make it easy to create custom sized window treatments right in the store. Completing the rollout of this capital investment and realizing the growth that comes with it will make the core of key growth engine for 2011.

Baby and Parenting showed a similar sales trend improvement throughout the year. Driven primarily by growth outside of North America. Brazil, new car seat legislation is driving demand for the Graco brand. More importantly, our Japanese business is turning the corner from the challenges that it faced. Aprica Q4 core sales were up 13% over last year. The brand is gaining momentum on the strength of successful new product launches such as Cadence and Presto, lines of baby strollers.

Rubbermaid consumer, the easy-find lids platform performed well in 2010 and we are gaining traction with the new Reveal micro-fiber spray mop. Which is receiving overwhelmingly positive reviews from consumers. We will be expanding reveal distribution in the mass retail channel during Q1. And we are investing strategically to drive increased awareness in trial. We expect this to be a key growth platform for our Rubbermaid consumer business in 2011.

Now let's turn to office products. This segment had a strong year generating core sales growth of 7.4%.With positive contributions from all GBUs behind innovation, increased marketing, and expanded distribution. For example, Sharpie and Expo continue to lead the market with new and innovative products such as the Sharpie pen, Sharpie Liquid Pencil, and Expo Washable Dry Erase Markers. Our latest innovation is the newly launched Sharpie Gel Highlighter, which incorporates gel stick technology that protects against smearing, wont bleed through paper, and won't dry out if left un-capped. We will continue spending behind these innovations in 2011 to increase awareness and drive demand.

We are also investing heavily to build capability and drive sales in our faster growing and more global categories. For example, our Mimio business continues generate very strong double-digit sales growth behind it's industry-leading Mimio classroom technology platform. Our investments to build out the sales force and create educational content are clearly paying off. We will invest further in 2011 to support the global expansion of this fast growth trend-forward business.

Fine writing is another example of global business with good momentum. They've been investing in dedicated Parker shops and remodeled display furniture in key markets such as China, Russia, and Japan, where sales are growing double-digits. This business has also benefited from great new pen designs and the phase-out of the lower end of its legacy product lines.

The tools, hardware, and commercial product segment also had a good year generating 8.2% core sales growth in 2010. The growth was led by industrial products and construction tools and accessories. Rubbermaid commercial products got off to a good start in the year, but under performed our expectations in the second half. What is working, is innovation and marketing. For example, our construction tools and accessories business introduced a new GrooveLock pliers, that feature a simple press and slide button to adjust the jaws twice as fast as any other groove-joint pliers.

We upped our brand with an investment behind GrooveLock with Irwin's first North America TV campaign. The ad campaign helped drive double-digit point of sale growth. We are also benefiting from positive PR for new innovations such as the Irwin Universal handsaw. Which features a unique ergonomic design that cuts three times faster than traditional handsaw's. The Irwin Universal handsaw won a prestigious international Red Dot award for outstanding product design. And was recently featured in Men's Health magazine as one of the 100 best new products for men this past year.

Internationally, tools and hardware was also strong. For example, we are driving industry-leading Band Saw conversion rates in Asia and Eastern Europe. Due to an award-winning product lineup and significant investments in building out our sales force. In Latin America, we continue building upon an already strong existing tools business, taking advantage of the more robust economies and housing markets in that region.

Rubbermaid medical, which resides in our commercial products GBU, is a good example of a high growth near-neighbor category. As a premier provider in medication and record-keeping cards for health care facilities, Rubbermaid medical is poised to capture significant market share in this rapidly growing market. This business doubled it's sales in 2010. Much like our Mimio technology business, Rubbermaid medical is trend forward and fast growing, a great potential to be a significant contributor over the next few years.

Overall, we are very pleased with the results from all three operating segments. Our innovative new products are resonating with consumers. Our investments in consumer understanding, shopper insights, advertising and marketing, and strategic sales support are driving sustainable sales growth across the portfolio.

So, let's now turn to what you have all been waiting for; 2011 guidance. I am excited about our prospects for continued growth and further progress towards our long-term financial objectives. We have a lot of momentum coming into 2011. We expect full-year 2011 core sales growth of 4% to 5%. This growth will be driven by new product introductions, [some new] marketing support behind our 2010 introductions, distribution gains, and geographic expansion. Our new product pipeline is robust. We continue to enhance and develop our innovation brand building and marketing capabilities, and that effort is paying dividends.

We are accelerating the pace of organic expansion in key international markets, most notably China and Brazil. In Brazil, where we already have a meaningful tools business, Baby and Parenting and Rubbermaid Consumer have recently entered the region with good prospects for more success. Leveraging our increased presence, we have formulated detailed plans to enter Brazil later this year with additional GBUs. Stay tuned for more details. In China, we are focused on accelerating the penetration of fine writing and on our Lenox industrial products. Results in 2010 have demonstrated our right to win in these categories, and we remain focused on building out a robust and profitable presence.

Expanding distribution with existing customers will also be a critical driver of core sales growth this year. We have already benefited from major shelf space expansion at two large US retailers and will continue to benefit from these gains in 2011. We are also investing to expand our sales force in selected high-growth GBUs, like Office Technology and Industrial Products, to drive greater sales penetration and enhance the availability of our products across the globe.

We expect to deliver 50 to 75 basis points of gross margin expansion in 2011, adding to the almost 800 basis point improvement over the last five years. Improved product mix and productivity will be the primary drivers. While we will look first to productivity to offset inflation, we plan to take targeted pricing as necessary to protect their margins. In fact, we have announced selective cost driven pricing actions in all three operating segments take effect in its first quarter. We will continue to invest behind our brands and our organizational capability. We will increase SG&A spending in line with sales growth. Holding SG&A as a percent of sales to approximately 25%. We believe the combination of core sales growth and gross margin expansion will generate normalized EPS growth of 10% to 12%.

As of last year, I will ask you to focus on our commitments of the full-year and not on the variations across the quarters. For instance, I can tell you right now we are planning a higher level of SG&A spend in the first half of the year. Attributable to our expansion into new geographies and seeding other business initiatives. Pay off for these investments will be back-end loaded. Additionally, the top line growth rate will see swings due to comping against one-time factors in prior-year quarters. Gross margin improvement will also not be a straight line. I know that you put your financial models together on a quarterly basis, but I encourage you to focus on the full-year results as we do. We are confident that our full-year 2011 results will validate this confidence.

Let me share with you some of the growth drivers that give me such encouragement for 2011. In the Mimio Teaching Technology business we plan to increase our global sales force by over 50% in 2011. We believe we will accelerate sales beyond the 40%-plus growth we experienced in 2010. Dymo; behind the leverage we have gained in the industrial markets with our 3-M distribution partnership, is accelerating already strong growth trends.

A multi million dollar investment in advertising and marketing support behind our Brazilian home and family expansion plans adds to my confidence. Graco has already has established good retail presence and is now increasing investment in general awareness. Rubbermaid easy-find lids launched in the three southern states at the end of 2010. And we are exceeding in further category expansion in 2011.

Back in North America, Rubbermaid Reveal Spray Mop, which is getting great consumer acceptance, soon begins shipping to meet commitments for increased retail distribution. We are also investing in a TV ad campaign for Reveal across North America to support the expanded availability. Decor; [investment in] our successful size and store machine rollout is gaining significant shelf space at a top customer. And the continuation of the successful 2010 innovation and marketing programs in our industrial products and our construction tools and accessories businesses, will fuel a strong sales growth in 2011. These are just a few examples. They give you some insight into the types of initiatives we are executing this year to deliver our growth targets.

I will now turn the call over to Juan, to walk you through the financials in more detail, and then I will return for some wrap-up comments before taking your questions. Juan?

Thank you, Mark. I will start with a review of the income statement on a normalized basis.

Net sales for the quarter were $1.47 billion at 3.4% improvement versus the prior year. Core sales, which excludes the impact of foreign currency and product line exits, increased 4.9%. Foreign currency had a negative impact of 0.7% on sales during the quarter, and a carryover impact of 2009 product line exits, reduced sales another 0.8%.

In North America, net sales were up 4.8%, 5 .4% core sales growth. Driven by the success of our consumer driven innovation, increased sales base, and share gains. In our international business, EMEA was soft this quarter. While Latin America and CAPAC regions delivered strong double-digit growth of 12.8% and 15.2%, respectively, on a constant currency basis. For the full year, we reported net sales of $5.76 billion, a 3.3% increase versus a year ago period, while core sales increased 4.7%.

This performance is right in line with our long-term objective of 3% to 5% growth. There was some variability by quarter reflecting shifts in ordering patterns from Q2 to Q1 as customers bought ahead of our SAP implementations. But, by year-end everything smoothed out and our results came in as expected. We generated gross margin of $545 million or 37.1% of sales, an increase of 10 basis points compared to the fourth quarter of 2009. As sales volume, product mix, and productivity offset input cost inflation experienced during the quarter. As you may recall, we had unusually high levels of manufacturing overhead absorption helped gross margin in previous quarters. This had the opposite affect on the fourth quarter.

For the full year, we generated gross margin of $2.2 billion or 37.7% set of sales, an increase of 100 basis points over the prior year. The high end of our 75 to 100 basis point expansion guidance. Product mix and productivity helped drive our eighth consecutive quarter of improved margins. Again, we are pleased to report that performance in this important metric came in as expected at the top end of our range. On a normalized basis, fourth-quarter SG&A expenses were $392 million or 26.7% of net sales compared with $384 million or 27% of net sales last year. As Mark described during his remarks, increased brand building, SG&A of about $15 million in support of new product launches and seasonal promotions, and other strategic spending of about $10 million, were partially offset by reduction in structural spending of $13 million and foreign currency impact of $4 million.

Total brand building SG&A for the quarter was approximately 7.2% of sales. Full-year normalized SG&A expenses were $1.4 billion or 25.1% of sales. Structural SG&A at the percentage of sales decreased to 60 basis points freeing up funds to spend on brand building and other strategic initiatives. Total brand building SG&A for the year was approximately 6.4% of sales.

Operating income on a normalized basis was $153 million or 10.4% of sales compared to 10% last year. For the full year, our normalized operating income was $723 million or 12.5% of sales versus 12.1% last year. Interest expense for the quarter and full year was $22.9 million and $118.4 million respectively, representing a decrease versus the previous year of $10.5 million in the quarter and $21.6 million for the full-year. This improvement was driven by the benefits of our capital structure optimization plan. Lower average debt levels and a more favorable interest rate environment also contributed to the lower cost.

Our continuing tax rate in the fourth quarter was 21.2%, compared to 29.3% last year. Recent US legislation changes helped as did improved profitability outside of the United States, which allowed the company to benefit from foreign losses that have not been previously benefited. Our full-year continuing tax rate was a better than anticipated 28%. Our normalized EPS for the quarter came in at $0.34, a 26% increase over last year. This $0.34 excludes $0.08 per share reflecting $24.1 million of project acceleration restructuring and related impairment charges. And $6.7 million of restructuring related costs associated with the European transformation plan. Restructuring charges included in the prior year quarter were $13 million or $0.04 per share.

On a full-year basis, the Company delivered a normalized EPS of $1.52, a 16% increase over last year. A lower effective tax rate helped us over-deliver the EPS guidance range. If our effective tax rate had been 30%, we would have come in around the top end of the range as we guided. A reconciliation of our full-year normalized EPS can be found in the earnings release.

As Mark mentioned, we reached a strategic milestone in 2010 with the completion of project Acceleration. Cumulative restructuring costs incurred through the completion of the project Acceleration totaled $498 million, which we estimate will deliver in excess of $220 million in annualized savings by the end of 2011. Evidence of the project's success is the almost 800 basis points of gross margin improvement we've generated since it's inception back in 2005.

We generated $205 million in operating cash flow during the fourth quarter, $18 million ahead of last year's cash generation of $187 million. CapEx for the quarter was approximately $57 million versus $46 million last year. Full year operating cash flow was $583 million compared to $603 million in 2009. Capital expenditures were $165 million versus $153 million in the year ago period. We generated in excess of $400 million in free cash flow during the year. Now I will turn to our segment information.

Home and Family net sales for the quarter were $621 million, a 2.5% increase versus last year. Core sales in the segment increased 2.1%, and Forex contributed a positive 0.4%. Our beauty and style business, once again, led the group with double-digit core sales growth. Home and family operating income was $61 million or 9.9% of sales, an increase of 160 basis points in operating income margin as compared to last year. This increase was mostly a result of $14 million reduction in structural SG&A versus last year.

In our office product segment, fourth-quarter net sales were $424 million, a 3% increase versus last year. Core sales grew by 8.2% with all GBUs contributing to the improvement. Product line exits reduced sales by 2.4%, and unfavorable Forex reduced sales by 2.8%. About 2% of this core sales increase was attributable to certain retail customers accelerating the timing of orders to qualify for annual volume rebates.

Office product operating income was $52 million or 12.3% of sales versus 12.4% last year. Better mix and productivity initiatives that expanded gross margin were offset by $27 million increase in brand building and strategic SG&A spend across the segment. Structural SG&A spend decreased $10 million as a result of project Acceleration and early benefits from the European transformation plan.

In our tools, hardware, and commercial product segment, fourth quarter net sales were $425 million, a 5.3% improvement over last year driven by 5.4% core sales growth. Forex had a negligible impact in sales in the quarter. Tools, hardware, and commercial products operating income was $61 million or 14.3% of sales, a decrease of 170 basis points in operating margin from a year ago. Higher customer rebate payouts due to increased purchases and $10 million of additional brand building and strategic SG&A spend across the GBUs contribute to the operating margin decline.

Turning now to our full-year 2011 outlook. Even assuming slow economic growth in North America and Western Europe, we remain confident in our ability to deliver against our long-term objectives. New product innovations are resonating with consumers, and were gaining shelf space and market share. We remain committed to strategic marketing and sales investments that have proven to drive the sales lists we are seeing across our portfolio. We have strong momentum coming out of 2010 driven by what we believe are initiatives that can sustain core sales growth in the future. Based on this momentum, we expect full year core sales growth of 4% to 5%. We expect foreign currency translation to have a negligible impact on sales for the year.

We anticipate gross margin expansion of 50 to 75 basis points in 2011. Consistent with our strategy, this guidance reflects our direction that productivity gain and improved product mix more than offset normal levels of inflation. Targeted pricing actions will be activated to offset extraordinary input cost inflation pressures we expect to realize. I would remind you that just as we saw in 2010, we expect fluctuation in our 2011 gross margin expansion from quarter-to-quarter that will not be indicative of the full-year trend. The main driver of the fluctuations in 2011 will likely arise from comparisons to 2010 when production timing and the resulting impact on overhead absorption caused unusually high gross margins in Q2.

SG&A spend for 2011 is expected to be around 25% of net sales on a normalized basis. Our plan calls for the majority of the incremental spend to be front-half weighted, as we invest behind organic growth opportunities Mark discussed in his remarks. Global expansion including significant new market entries, the exploitation of distribution gains, new product launches, and other strategic brand building initiatives summarized in the spending. We expect about two thirds of the increase will be incurred in the first half of the year.

Interest expense for 2011 is expected to be around $110 million, a decline of approximately 7% compared to 2010. Reflecting lower debt levels and lower interest rate on the new debt financed through our 2010 capital structure optimization plan. Partially offset by the rising interest rate environment that we project for 2011. Our affected tax rate for 2011 is projected to be approximately 29%. We expect normalized earnings per diluted share to increase 10% to 12% in 2011, with most of the increase weighted to the back half. This normalized EPS expectation excludes between $80 million and $85 million for $0.22 and $0.26 per share of restructuring and other plan related costs associated with the Company's European transformation plan.

We expect annualized net income improvement of $55 million to $65 million upon completion of the European transformation plan. The initiative is projected to result in aggregate restructuring and other plan related costs of $110 million to $115 million to be substantially incurred by the end of 2011. This compares to the previously communicated annualized savings of $50 million to $60 million and a project cost range of $90 million to $100 million. Additionally, the implementation of SAP in Europe previously expected to be substantially complete by the end of 2011, is now estimated to conclude in the first half of 2012, marking the final completion of the EMEA transformation plan.

As we gained a better understanding of the complexities involved with implementing SAP and EPC simultaneously, we extended the project timeline to reduce execution risk. This decision and adverse Forex impact are the main drivers of the cost increase. Operating cash flow is expected to exceed $550 million for the full year, including $90 million to $100 million in restructuring and restructuring related cash payments. We plan to fund capital expenditures of approximately $180 million to $200 million The increase versus previous years is targeted as systems-enabling growth primarily our Europe SAP implementation, innovation and growth at our Decor business and productivity projects. Particularly, in the Rubbermaid businesses preparing the foundation for continued volume growth and margin expansion in future years.

In conclusion, we continue to be encouraged by the evidence we are seeing in the marketplace that our strategy is working with customers and consumers. We continue to gain share in crucial states and gain new customers. As we look back on 2010, we achieved what exceeded every metric we set for ourselves at the beginning of the year. Core sales growth gross margin expansion, normalized earnings improvement, and cash flow. It was a very good year for us, and it feels particularly rewarding to have been able to do this in a soft economy and what could be characterized as an investment year for the Company.

This year we effectively supported one of our most active new product launch calendars in recent history. We added significant capacity to our sales force in our faster growing business. We continued to invest behind operating efficiency through our SAP implementation, and we made important investments to improve our business in Europe. We anticipate some headwinds from the slow pace of recovery in North America and Europe as well as increasing inflationary pressures. On the other hand, our businesses are gaining momentum and we feel comfortable with our ability to manage through the challenges and opportunities ahead of us. We are excited about our growth plans for 2011, and are looking forward to creating an even stronger Company for our employees and shareholders.

With that, I will turn the call back over to Mark for his final comments.

Thanks, Juan.

Before we move on to the Q&A, I'd like to take a moment to address my upcoming departure from Newell Rubbermaid. This is not goodbye yet, because I fully expect to have the pleasure of your company on at least one more earnings call. As you are all aware, after four decades in business and more than five years at the helm of his Company, I've made the decision to retire. It wasn't an easy decision, because I am so emotionally invested in this Company. But, the timing is right.

Today, as a result of a lot of hard work and effort by everyone at the Company, I am proud to say that we've made great strides to achieving our vision of becoming a global Company of brands that matter and great people and the best in class results. The transformation into a new Newell Rubbermaid is largely complete. I extend my thanks and congratulations to all of my Newell Rubbermaid colleagues for enabling me to say this.

As we begin 2011, Newell is poised for strong growth. With the right strategy and the right portfolio and the right leadership team. The strength of the Company today gives me and the Board of Directors confidence that now is the right time to transition to a new leader. The board has retained an executive recruiting firm to conduct a comprehensive of search, including both internal and external candidates. I expect this process will take four to six months. I will continue as CEO until my successor is in place and continue on the board for about a year to ensure a smooth transition. I know the board is approaching the process carefully and thoughtfully to make the best decision for all Newell Rubbermaid stakeholders.

The journey that you have been on with us over the past five years will continue in the same strategic direction. Building on the foundation we've created and further accelerating our global growth agenda. I am confident that the entire Newell Rubbermaid organization is focused and aligned to execute against delivering the growth trifecta in 2011 and beyond in order to create value for you, our shareholders. With that, I'll be happy to take your questions.

Thank you. (Operator Instructions) Our first question comes from Dara Mohsenian from Morgan Stanley.

Good morning. Juan, your 2011 gross margin forecast looks pretty solid, particularly relative to your peers, but is ahead of the expansion you delivered in Q4. I'm just looking for more clarity on what is driving the outlook and in terms of key components between pricing commodity, costs, pressure mix, et cetera.

We expect inflation next year as we faced this year. And as with the case this year, we expect to cover most of that with productivity and with product mix. What we call excess inflation, what is ahead of our productivity estimate, will cost us the price to cover it. Mark already mentioned that there are pricing initiatives already in place across the three groups.

Okay. Can you give us a rough sense for how much of the commodity cost pressure you are expecting to offset through pricing?

It's about one-third of the expected pressure that we are going to cover with pricing.

Okay. Great. And then, Mark, obviously --

The other comment I would make, though, is that the total inflation that we are anticipating in 2011 is probably no more and maybe less than what we have actually experienced in 2010. Again, I think we have shown in 2010 that we have the capability with productivity, product mix, and pricing as needed to offset inflation and still deliver gross margin improvement.

Okay. That's helpful. And then, obviously, you are experiencing strong revenue growth in Latin America and Asia. Can you give us some sort of clarity on how much of your growth in these regions is stemming from entry into new product categories or new geographies? And if you think the growth in these areas is somewhat sustainable in 2011. And also, a related question, Europe looked weak in the quarter. Can you give us more detail on what happened there?

Okay, let's start with Latin America and Asia-Pacific. An increasing amount of that growth will be driven by new entries. As I mentioned in my remarks, we entered two Home and Family categories in the third and fourth quarters of the year. And we have plans to enter a couple of additional GBUs which we are not at liberty to be specific on at this point in time. All of those that I just referenced are in Brazil.

As I look, though, around our growth in those regions, the largest total amount of our growth is actually driven by continuing to drive the businesses we already have in those regions. It's driving Fine Writing in China, driving our Tools and the Hardware business in China and Australia. Frankly our Baby and Parenting business in Japan. In Latin America -- it's driving our Office Products business throughout the region. Countries like Mexico, Venezuela, Columbia our tools and hardware business across the region but particularly in Brazil. The largest percent of our growth in those regions is from growing out existing businesses. In some cases, and that's new distributions, additional investments in marketing and sales support. The biggest portion of the total is driving existing business.

Now, relative to Europe, which is the second half of your question, we did see some slowdown in the fourth quarter. Primarily, that was a couple reasons. One, we were comping against a particularly strong Q4 and 2009. That strong Q4 in 2009 was driven by couple things. One, we had a really strong hand sanitizer buy-in that was driven by the H1N1 scare from 2009. We had some customers buying in infront of a January price increase in Everyday Writing in Europe last year. And also in 2009 we were launching some new items in Fine Writing that we had some sell in. So most of the difference is strong comps.

I guess I would ask you to think about Europe is that, again, look at the year. I think 2011 we ought to see similar kinds of growth as we saw in 2010.

Thanks so much.

Our next question comes from Bill Chappell from SunTrust.

Good morning. Just wanted to dig in a little bit more in the Home and Family, in particular in infant and baby care. At one point the thought was that business could grow kind of mid-single digits in the back half. It seems like that fell short. Just trying to understand if there is anything particular going on, if there are recalls, or if it is just a timing of new product launches or how we should look at that going into 2011.

What I will tell you is I am still encouraged about the long-term prospects for that category, but there are some short-term dynamics driven by the economy. That is a really trade down in price points. What we're seeing, I think I've referenced this, I know I have referenced this in previous calls, but we continue to see that pressure. While units remain about the same, what we are seeing is consumers increasingly willing in this tight economy to trade down to lower price points.

I've made the easy example that across our stroller platform or across our car seat platform, we typically market three, four, five different price points, which have varying levels of performance. And we are just seeing consumers more willing to trade down to lower price points in this tight economy. That is where the most competition in the US is coming from. You got that is causing kind of a dampening effect on the business offset by the strong growth that we have seen in the fourth quarter and Japan. We think that resurgence will continue next year. As well as the growth that we are seeing behind our expansion of Graco into Brazil.

Okay. And then just switching to Office Products. You said there was like a 2% of the improvement came from forward buying. Is that just directly taking out of the March quarter, or how should we look at that?

Generally, I think that would be the best way to look at it. Because, to the extent that goes into inventory, right? Since it's not driven by consumer demand. It should be lower sales in the next quarter.

And just one housekeeping. What is the expected tax rate for 2011? Thanks.

29%.

29%. Thanks so much.

And our next question comes from Bill Schmitz from Deutsche Bank.

Good morning. Mark, it's going to be sad to see you go.

Thanks for saying that, Bill.

Sure. So, I know you don't want to go quarter by quarter, but I can I just ask some broad questions about the tenor of earnings. Will there be a quarter where sales will decline, do you think?

No. But you'll definitely see variability, it wont all be 4% to 5% every quarter.

Okay. Just in terms of gross margin, I think right now the tough cost comparisons, at least on spot-prices at in the front half of the year, is that consistent with your thinking as you model out gross margin?

Well, you know, yes and no. Here is where the no is. We've actually done a lot of good work on locking in prices on some of our commodity raw materials. So with forward contracts and locking in prices, we've got -- we've been able to control. So looking at spot pricing won't necessarily reflect what we expect to pay either now or for the full year. That's one of the reasons why I made the statement we did before. That I think our total inflation burden, which is some combination of raw materials and ocean freight and increased labor costs from the far East . It will probably not be significantly different than what it was

Got you. Okay. And Juan, you made a comment about EPS growth being weighed to the back half of the year. Does that mean there will be very little growth in the front half and almost all of it's in the back half? Because I know, obviously, first-quarter EPS comp on a one-year basis is really hard, but on a two-year basis it is not that difficult.

Yes, well I think that's a good inference, Bill.I did mention that we are make significant SG&A investments across several initiatives and that they are weighted toward the first half. More than two thirds will be in the first half.

Two-thirds of that 6.4% or whatever that number is, for strategic SG&A?Is that right?

About two thirds of all the incremental SG&A that we are planning to spend in 2011.

Okay. I got you, but I think your point is that the structural SG&A still comes down. So if you could say like 6.4% of sales is what SG&A is going to be, if you just like multiply that by the sales number, you would take two thirds in the front half and one third in the back half?Is that right?

Well, we said we are going to try to keep SG&A around 25%, total SG&A. And then, there is an increase that we are planning to do. And the total increase, we are not discriminating between brand buildings and other strategic -- of about two thirds of that total increase will be in the first half.

Okay. And two more quick ones. Do you have a target for the distribution or the ACV on Reveal? I think you were kind of cryptic about it, but it sounds like the Wal-Mart tests worked and you might get Wal-Mart in the first quarter. Is that true?

Well, without mentioning customers, we do have a significant customer.

A large mass customer.

A lot of additional (multiple speakers) in distribution.

Okay. That's fine. Oh, the restructuring savings from-- because you said, I think, like a couple hundred million bucks of cash restructuring costs. Are we going to start to see any savings from the European restructuring this year at all?

Yes, in fact Bill, we are already seeing some of the savings. Mark alluded to that. If you look at the improvement in all margins in Europe from one to seven, that is already showing some improvement.

Got you. And the other thing -- sorry, I promise I will stop now. The 29% tax rate. I thought, because you're moving to Geneva and you were going to start using some of those NOLs, that was going to be sort of a step-change in the corporate tax rate. Is that not happening this year?

That's a very good point, Bill. When we complete SAP in the middle of 2012, that is when the new EPC model is also activated, so the savings -- the tax savings from that structure will start to come in the second half of 2012.

Okay, so you are not going to ship from Geneva until midway into 2012?

Technically, in terms of legal amnesties, right.

Okay. Thanks guys. Sorry for all the time.

Our next question comes from Lauren Lieberman from Barclays Capital.

Thanks. I wanted to know if you could talk a little bit about US growth in the tools, industrial and hardware segment. It does feel like the majority of the growth is overseas. From what we can tell, at least in terms of-- some lateral of data points out there would suggest that there is some growth in the US , but I don't feel like you guys are capturing maybe your fair share. Can you maybe comment on that and talk a little bit about the outlook for US growth in that business this

Let me start by saying we are growing in North America in our tools and hardware business. That's one of the reasons I referenced the investment we made behind the GrooveLock plier launch.

I am looking for the number.

Without referencing specific numbers, while we are experiencing strong growth outside the US, we are also experiencing significant growth in the US.

It will take me a while to get the number Mark, so I suggest we take the next question and then we can come back to it.

By the way, we will probably not give you a very specific number anyway. Other than to reaffirm what we told you. As you know Lauren, we don't like to get into that level of detail, especially prospectively.

Okay.

Our next question comes from Chris Ferrara from Bank of America.

Hey. Thanks. Mark, again, some congratulations on some well-deserved time off you will have.

Thank you.

I just wanted to ask about the volume rebates. Back to that, you talked about in office. I think it was mentioned again in tools and hardware. So, the office numbers in kind of big. I think you said like 2% of the growth was from customers buying ahead because of volume rebates you offered? And in tools and hardware you mentioned it, too. Am I right, are these atypically high for the quarter? If so, why was there so much rebating going on in the quarter?

Well, again, our promotional plans with our customers incent them to hit growth targets. And often times if they are close to that growth target, but have to buy a little beyond what their current sell through will be, they will do that, obviously, in order to get those promotional monies. So, we saw that, and we saw that primarily in our Office Products business. As Juan said, it will dampen our sales in Q1.

So it is not necessarily that you offered a greater number of rebates, you just think you have more --

These are plans that were in place since the beginning of the year. So, it was in any last minute loading or last minute -- no, these are all plans. We set these plans in the first quarter of every year as part of the business plan. As they come down to the wire, if they, and I'll make the number, if their incentive is to hit 105 and they are at 104, they are going to go buy the extra and hit 105.

Got it. That helps. And I guess, Mark, I know one of the things you have been thinking about is revisiting the dividend, right?I think what you had said before was if the right acquisition was there, maybe the dividend wouldn't be first priority. So, the question is, given your decision to require, are all major cash use decisions kind of put on hold? Will you defer that to your successor, or is that something you guys are still going to have a decision on sometime soon, you think?

Well, I don't want to commit to a timing. I don't want to try and imply a timing by referencing it to my leaving, but I can assure you I am going to be fully engaged and fully in charge and not going to delay anything until the day I leave. If it is right to do before I leave, we will do it. There's nothing that's on hold.

Great. Thanks.

Before we take the next question, Lauren, to the question you had asked before, I am going to give you a number, although I don't like to give this level of detail. Tools and Hardware business we said it grew in total tools hardware and commercial products business grew over 8% last year. It was almost 7% in North America. As I said, while we saw stronger growth outside the US, we are still seeing substantial growth within. I am not going to give it to you by the specific GBUs, but in terms of the total segment growth in North America was almost as strong as the total global growth.

Chris, was at the end of your questions?

Our next question comes from Joe Altobello from Oppenheimer.

Hey, guys. Good morning. My first question, I just wanted clarification on your comments about pricing earlier. It sounds like you are going to be pricing to exactly offset the commodity cost inflation, or would you price above that inflation to, potentially, maintain your margins?

Well, I think your first assumption is not necessarily correct, because, number one, this isn't commodity. This is all inflation. So, it's a combination of raw materials, as I said, ocean freight, and our anticipated and continuing increase in labor costs in China. It's a combination of those. And some of that -- some of our pricing decisions aren't always prospective. Some of them are retrospective as well. So, some combination there. Trying to do an exact match between what it's covering and what it's not would not be possible. Suffice it to say, that we do believe that the level of inflation that we've seen last year and what we anticipate this year, some of amount of pricing is appropriate. There is some amount of pricing that is usually surgical. It's almost never across the board, but there is some amount of pricing going on in all three business segments in the first quarter of this year.

And let me just reemphasizes strategy so it's clear. We cover installation with productivity and mix. If we deem the inflation to be excessive, then we take the pricing. But, in our guidance, we are assuming that most of the inflation is covered with productivity and mix.

Okay. Great. In terms of your core sales growth for 2011, the 4% to 5%, is it safe to assume that international growth would probably exceed North America growth this year?

I'm sorry. What exceed that?

Yes.

Well certainly in Latin America and APAC. Not in Europe. You know, in Europe our priority is still to continue that progress toward the 10% align margin, and that's our first priority. So we'll grow, but probably not ahead of what the company grows . Where as in Latin America APAC, we will

It sounds like not much difference between international verses North America. In terms of growth this year.

I don't know. I think even when you weight average, Europe and higher growth rates outside of Europe, international will be growing faster than North America.

Just one last housekeeping one. The average share cap for 2011?

Yes. You may recall that the accelerator start buy-back settles in March, in the middle of March. Since the stock price is, hopefully, going to keep moving up, then we don't know what is going to be at the end. I know that a previous time we said 294. It is clearly going to be higher than that. However, we don't think it is going to be high enough to be material to your model. You could use 295, 296 but even with that we won't know what it's going to be when it settles in March.

Okay. That's helpful. Thank you.

Our next question comes from Connie Maneaty from BMO capital. Ma'am, your line is open. Is it possible your phone is on mute? And we will proceed to the next question. Our next question comes from Jason Gere from RBC capital markets.

Good morning.

Hi, Jason.

I guess I kind of want to go back and revisit the raising of the low end of the organic sales. Mark, the last time we were talking, I think 3% to 5% was definitely in the bag, but the swing factors were the category growth. I think that was the one area where you were still a little bit cautious. It sounds like your comments today -- are you calling for an acceleration in the back half of the year with improved economy? What's kind of built into that? And then on the same level, as you look at distribution games maybe this year versus next year, is that another area of improved optimism? Same with the innovation pipeline. Just trying to look at some of the different factors at play in. Obviously, you've got some good momentum, but I'm just wondering if there was anything that specifically-- or if it was just an accumulation of all those points?

When we referenced in the past to that 3% to 5% long-term goal, I wanted to make sure that we weren't changing that number in a way that implied we were giving guidance. So, my reference the 3% to 5% was just that; it was a reference to what we establish and communicated as our long-term goal. If I had actually given you what I thought was going to happen this year, three months ago, I probably would have given you 4% to 5%. Our outlook really hasn't changed. It really is the same. It is just that now we are willing to be specific and let that number be a guidance number as opposed to referring to a long-standing target.

The second half of your question is, and I try to provide some of the examples in here, it really is a combination of launching new items. Which we don't usually tell you ahead of time what they are going to be because they don't want to give my competition a head start in responding to them. It is distribution gains that we are getting in many cases because of the things that we started doing in the last half of 2010. It is distribution gains that we'll get through our geographic expansion of categories. And it is continuing to invest in the innovations that we launched a year ago that, as I've said on previous calls, oftentimes you need to spend two to three years behind those initiatives to really deliver the level of awareness and trial that they deserve. It's really a combination of all those factors.

Relative to the economy, I think we are seeing slow growth in mature markets as kind of the order of the day. There's some little signs of optimism, but not materially different than what we were assuming three months ago.

Fair enough. Just in terms of inventory levels at your major retailers right now, any type of observations you can give? Whether or not there is any -- I don't think there is any de-stocking or anything of that nature, but I was wondering if you could comment briefly across the three segments if there is anything that kind of stands out?

Let me take that, Mark. We are not seeing any levels of the stocking. Generally, I think inventories continue to be lean at retail, but they are probably where they want them to be in general. Of course we mentioned the specific cases for some customers, right, where we had to buy to make the volume rebates. So those would be kind of specific, but in general we think inventories are where they want them to be.

Okay. If I could just ask a last question since three seems to be the new two in terms of questions to ask. The guidance one that you gave on interest expensing and even the shares, that's all exclusive of the quips though, right? So we should, in the second and third quarter for certain, see that the interest expense lower and the share count higher because of quips? Is that how your guidance plays out?

Yes, that's right. When the quips becomes diluted, that would be a visual incremental for the shareholder.

Okay. Would interest expense, would it be something more like [90 to 95] and then your share count for the year could end up being closer to [300]? I'm just trying to -- I know with the share buy back there's still some uncertainty, but I was wondering if there was a little post-quip commentary.

All of that is within the realm of possible, but I don't have the numbers I can give you because there is so many variables. The only thing I know is that I would be wrong.

Fair enough. Thanks.

Our next question comes from Mark Rupe from Longbow Research.

This is actually Andy standing in for Mark. On your 4% to 5% core sales growth guidance, could you give us maybe any detail on how much of that is represented by market share gains? Any sort of detail you can give there?

Boy, it would be hard to put a number on it. I guess I wouldn't even try. Again, we will be growing faster than the economy in both North America and internationally. A portion of that is from our weight space expansion. Obviously, I guess you can say that, that is share growth as well. I guess you would say that the majority of it is going to be share growth because growing faster than the US economy, which is maybe 1% and growing faster than the international economies are growing. Because that is what our Latin America and Asia-Pacific growth rate would assume.

Okay.

It took me a long time to answer that question.

Okay. Fair enough. And on the home and family side, you mentioned in the baby and parenting GBU, you saw some trade down in terms of price points.

And that's been going on all year, by the way.

Okay. Would you say you've seen that in any of the other GBUs within this segment, or has it been pretty much exclusive?

It's been more pronounced. I think this is a trend that has gone on since the end of 2008. Since the economy really collapsed in 2009, there's been more pressure on consumer saying, where can I save money? You can save money by trading down within the lineup. I think the pressure moves on. It's probably more pronounced in our baby and parenting business and RCP, our Rubbermaid commercial products business is probably where we have seen the most pressures for trade down.

Okay. That's all for me guys. Good luck.

Thanks, Andy.

And your final question today comes from Bud Bugatch from Raymond James.

Good morning, Mark. This is actually Chad filling in for Bud. I just wanted to get back to the SG&A for a second to make sure I understand. You expected the total SG&a ratio to be maintained at 25% of sales or so. But do I understand that as the brand building component of SG&A, the 6.4% in 2010 should actually increase as a percentage of sales, but be offset by other structural savings initiatives?

The short answer is yes. We've disclosed before that we are thinking of targeting somewhere around 8% as probably more in tune with what we'll continue to drive the business and give a good return. We have spent probably over 7% in the fourth quarter. But let me also just kind of give you some other perspective because I will in on a couple little secrets here. Secret number one, I looked at our back five fastest growing businesses from last year and five on our 13 global business units that are fastest-growing. And all five of them spent north of the 25% corporate average in terms of SG&A as a percent of sales. Is that a coincidence? I think not.

Second, and here's the other part of the secret, a good part of the secret, is that all five of those businesses are above the company average in gross margins, and most of them are well above 40%. The fact of the matter is that it works. It's a business model that works and we keep investing behind it. It's a nice problem to have. Just on mix alone, right, if you are fastest-growing businesses are growing fast partly because they've got the gross margin to afford it, they are reinvesting that gross margin, and it's working to build the business fast, then that mix affect is going to try to drive the corporate number about 25%.

Normally for us to hold it at 25% or thereabouts is going to have to find deficiencies elsewhere. It's a nice kind of problem to have, right, and that's the way you ought to think about it. I think knowing that the plan works, that our highest gross margin businesses can afford more SG&A, they are spending that, and they are growing faster because of that, it works. We are going to keep on doing it.

That's great. That's very helpful. And I guess just to key in on that, how soon does it take to get to 8%? Can you give us kind of an expectation for next year?

Well, I don't know how long it's going to take. I think it's going to be maybe a couple years at least, but frankly that would depend on how fast the business accelerates in so on. I think we will still be -- incrementally going for that number. I don't think we are going to see a any point in time where it goes up 100 basis points, but I think 40 or 50 or 60 basis points a year on the way to that 8%.

Great. Thanks a lot.

And again, I would like to turn the conference call over to management for any final marks.

I don't think we have any final remarks. Thank you for your attention and for staying with us today.

If we were unable to get your question during this call, please call Newell Rubbermaid investor relations at 770-418-7075. Today's call will be available on the web at Newell Rubbermaid. com and on digital replay. 412-317-0088. With an access code of 447303. Starting two hours following the conclusion of today's call and ending February 11. This concludes today's conference. You may now disconnect your telephone lines.