諾威品牌 (NWL) 2012 Q3 法說會逐字稿

Good morning and welcome to Newell Rubbermaid's third-quarter 2012 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. As a reminder, today's conference is being recorded. A live Webcast of this call is available at NewellRubbermaid.com on the Investor Relations home page, under Events and Presentations. A slide presentation is also available for download. I will now turn the call over to Nancy O'Donnell, Vice President of Investor Relations.

Thanks, McKenzie. Good morning, welcome to our third-quarter 2012 earnings call. With me this morning are Newell Rubbermaid's President and CEO, Mike Polk, and Doug Martin, our Executive VP and CFO. Let me remind you that as we conduct this call we will be making forward-looking statements. These statements are made on the basis of our views and assumptions as of this time, and are not guarantees of performance.

Risk factors that may impact these statements are discussed in the risk factors section of our latest annual report on Form 10-K and in today's earnings release. Our press release and this call also contain certain non-GAAP financial measures, including, but not limited to, normalized operating margin and normalized earnings per share. A full reconciliation with the corresponding GAAP measures is provided in our Earnings Release and is available on the Investor Relations section at NewellRubbermaid.com. Now I'll turn it over to Mike.

Good morning, everyone, and thanks for joining our call. We have three objectives this morning. First, we'll review our third-quarter results and provide our outlook for the remainder of the year. Second, we'll discuss the announced expansion of Project Renewal and the five new work streams that will accelerate our transformation.

And third, we'll discuss a significant change in our organization design in my leadership team that will enable us to unlock the upside of the Growth Game Plan. This new organization design aligns our resources to our two key activity systems -- the work we do to develop our brands and categories, and the work we do to ensure best-in-class execution and delivery.

The new organization and leadership we've announced is designed to strengthen our business on both dimensions and lead to accelerated performance. Our track record of solid results and our demonstrated ability to drive delivery, while simultaneously driving change, gives us the confidence to now accelerate the pace of change to more quickly realize our ambition of becoming a bigger, faster-growing, more global, more profitable Newell Rubbermaid.

A sign of our strength and performance and growing confidence is this morning's announcement of a 50% increase in our dividend. A step change that takes us to the high end of our stated dividend payout ratio target range of 30 to 35%. This is the second dividend increase we've announced this year and the third in the last two years, which reflects the Board's confidence in the Company's strong cash generation ability and in the potential of our Growth Game Plan. Our new annualized dividend of $0.60 per share is up from $0.20 a share at the beginning of 2011 and now reflects a dividend yield of nearly 3% at yesterday's share price.

There's a lot to talk about, so let's get into the results. We've reported a solid set of third-quarter numbers that represent a positive step toward delivery of our full-year results, in line with our guidance. Net sales were $1.54 billion, in line with consensus. Core sales grew 1.5%. Normalized earnings per share were $0.47, $0.03 higher than consensus, and 4.4% better than our year-ago results.

Gross margin improved by 50 basis points to 37.9%. Normalized operating income margin was flat to prior year at 13.7%, with the increase in gross margin offset by an absence of compensated related benefits in the year-ago numbers. Operating cash flow was strong at just over $300 million.

Looking at our results through the first nine months, core sales have grown 2.2%. Normalized operating income margins up 20 basis points to 12.9%. Normalized EPS is $1.27, up 6.7% versus prior year, and operating cash flow is over $357 million, up over 27% versus prior year.

Let's take a look now at segment results. Our core sales growth in the consumer group declined 40 basis points. This is actually a sequential improvement versus the first-half run rate. Year-to-date, the consumer group's core sales have declined 1.2%. Our strong Writing & Creative Expressions results continued in Q3, but were offset by macro driven headwinds in our Fine Writing Business in Europe and our ongoing challenges at JC Penney and Decor in North America.

I want to recognize the Writing & Creative Expressions team for a successful back-to-school season. They checked all three boxes, selling in Q2, followed by sell-through and replenishment in Q3. This year we exceeded last year's replenishment orders, which along with great sell-through results, contributed to a strong Writing outcome in the third quarter of 2012. Total Writing category POS was up nearly 5% in the back-to-school window, with Newell brands driving over 60% of the category growth.

Our Professional segment delivered core sales growth of 2.5% in the third quarter, despite having lapped a very strong prior-year quarter in which we reported core growth of 7.5%. Year to date, Professional core sales have increased 4.3%. Professional growth is especially strong in North America, with share gains in most of our categories.

North America Professional core sales grew over 4% in the quarter, and are up over 5% year-to-date. We are seeing softness in Western Europe, in Australia-New Zealand on Irwin and Dymo as general macroeconomic concerns resulted in more difficult sell-in and sell-through. This offset some of the North American momentum.

Baby & Parenting had another strong quarter. Q3 core sales growth was 7.8%. Year-to-date, Baby core sales growth is over 10%. Babies performed well all year due to very strong core sales in Asia, as a result of a terrific new item performance on Aprica in Japan, and strengthening results in North America fueled by better collaboration with customers and stronger Graco innovation.

Year to date for the total Company, we continue to deliver strong emerging market core sales growth of about 12%. Core growth in Asia-Pacific is over 13%, and we have over 12% core growth in Latin America. The developed world has grown about 1%, with competitive levels of US growth of 2.3%, partially offset by weak performance in EMEA, where core growth has declined nearly 5%. Given the challenges in Decor, the US growth is quite strong, with the combined Baby and Professional businesses delivering year-to-date US growth of over 6%.

Let me now make a few comments on the balance of the year. As a reminder, we've guided full year core sales to increase between 2% to 3%. Normalized operating margin to increase up to 20 basis points. Normalized EPS to increase 3% to 6%, or in the $1.63 to $1.69 range, and operating cash flow of between $550 million and $600 million.

As you know from our press release, we have reaffirmed our full-year guidance across all four guidance metrics. Given the strong earnings performance in the third quarter, we now have a pretty good line of sight to the top of our normalized EPS guidance range. The key factors that will influence the outcome on normalized EPS and normalized operating margin will be the degree to which we accelerate brand-building investment in the fourth quarter.

As we've discussed, we knew it would be a tough third quarter to deliver EPS growth because we were comping against unique compensation-related benefits in the year-ago numbers. In that context, we throttled back a bit on brand-building investment versus prior year. As we progress through the fourth quarter, we will start to invest more in an effort to strengthen our core growth momentum as we exit the year.

Beyond brand-building investment levels there are two factors that could influence core sales growth in the balance of the year. The first factor is the continued momentum of our growth businesses in quarter four, as they lap step-ups in year-ago performance. We have assumed Baby & Parenting and Writing & Creative Expressions are able to grow on top of prior-year growth. Combined, these businesses grew core sales roughly 5% in quarter four, 2011.

The second factor is the impact of macroeconomic fiscal policy and political uncertainty in the US and Western Europe as we exit 2012. We are less concerned about near-term consumer response to the uncertainty, believing we've captured that appropriately in our guidance. However, we are less able to predict changes in retailer behavior, given the macro uncertainties, and the potential for retailers to draw down inventories more than they typically would do to manage their key year-end metrics.

At this point, Doug will provide more detail on our financial results and importantly, take you through our announced expansion of Project Renewal. Thanks to the hard work and dedication of everyone here at Newell we've made significant progress over the past nine months since we unveiled the Growth Game Plan. This progress gives us the confidence to press with more urgency toward the Growth Game Plan's acceleration stage.

The expansion of Project Renewal is critical to unlocking our full growth potential. Based on our progresses to date, I'm confident we can go further and faster than we originally intended. Over to you, Doug, and then I'll return to discuss our new organization design and leadership appointments.

I'll spend the next few minutes covering our third-quarter results and our outlook for the year. After that, I'll walk you through some of the details on the expansion of Project Renewal. I'm going to start with Q3. Total Company reported net sales for the quarter were $1.54 billion, a 0.9% decrease versus the prior year, with core sales increasing 1.5%, excluding 240 basis points of unfavorable foreign currency.

Reported net sales in our Consumer segment decreased 2.1%. Core sales, which exclude 170 basis points of negative currency, fell 0.4%, representing a sequential improvement from our first- half results. Normalized operating margin for this segment increased 180 basis points to 17.3%, with price and productivity driving improved gross margins and the deferral of certain brand-building investments from Q3 into Q4 contributing to lower SG&A.

In our Professional segment, Q3 reported net sales declined 1.1%, with core sales, which exclude 360 basis points of unfavorable currency, increasing by 2.5%. Operating margin declined 240 basis points to 13.2%. This reflects our investment in marketing activity around our Irwin National Tradesman Day, as well as strategic sales force and feet-on-the-street initiatives intended to drive future growth.

In our Baby segment, Q3 reported net sales rose 5.2%, with core sales, which exclude 260 basis points of negative currency, increasing by 7.8%. Q3 normalized operating margin was essentially flat to last year at 9.9%.

Looking at our Q3 sales by geography, North America core sales grew 1.1% led by the Baby & Parenting and Professional segments which were collectively up 4.7%. In EMEA, core sales declined 2.8%, slightly better than the SAP adjusted run rate for the past several quarters, but still reflecting ongoing macroeconomic weakness in Western Europe. We're getting good growth, however, in emerging markets like Russia and Middle East and Africa.

In Latin America, core sales increased 11.3%, driven by continued solid growth in our Tools, Commercial Products and Writing businesses. In Asia-Pacific, core sales grew 6.3%. Australia-New Zealand sales were down in the quarter as the consumers become increasingly more cautious and price sensitive due to a slowing economy. Though we are continuing to see good growth from Aprica Japan, we are beginning to see some more competitive activity that has the potential for moderating growth going forward.

Our Q3 gross margin was 37.9%, which represents a 50-basis-point improvement year over year. Productivity and pricing more than offset a 50 basis point negative impact from input cost inflation. Normalized SG&A expense increased $4.1 million, compared to the prior year, and on a percentage of sales basis, increased 50 basis points to 24.2%. A strong dollar reduced year-over-year expense by $11.5 million, so on a constant currency basis SG&A was actually up $15.6 million to the prior year.

Higher strategic SG&A spending on sales force expansion and focused growth areas was offset by the year-over-year comparison against last year's Q3, when we recorded a benefit from our incentive compensation true-up. As Mike mentioned, in Q4 we expect to ramp up discretionary spending behind our brands.

Reported Q3 operating margin of 12.3% compares with negative 12.4% in the year-ago period. Last year we recorded $382.6 million in asset impairment charges that did not repeat this year. On a normalized basis, Q3 operating margin was flat year over year at 13.7% of sales. Q3 reported earnings per share were $0.37, compared with a loss of $0.61 in the prior period.

Normalized earnings per share, which exclude restructuring and restructuring related costs, as well as certain one-time items, was $0.47. That's $0.03 ahead of consensus and 4.4% better than a year ago. About a penny of the year-over-year improvement was driven by lower share count with the remainder of the increase being attributed to lower interest and other income.

Interest expense in the quarter was $18 million, compared to $21.8 million in the previous year. You'll recall in Q2 we refinanced our outstanding quarterly income preferred securities with lower-cost medium-term notes. These will generate annualized interest savings of about $0.02 per share going forward.

The Q3 reported tax rate was 35.3%, compared with a negative 24.4% in the prior-year period. Year over year, the change in reported tax rate was primarily driven by the geographic mix of earnings, and discrete items recorded in each of the quarters. In the third quarter of 2012, the Company's effective tax rate increased, and in the third quarter of 2011, the effective tax rate decreased, both as a result of recording certain tax contingencies, the resolution of tax audits and the expiration of various worldwide statutes of limitation. Our normalized tax rate in the third quarter was 28.9%, compared with 28.2% in the prior year.

Operating cash flow in the quarter was $301.5 million, a $6.2 million improvement over the prior-year quarter. We're making good progress on our working capital initiatives with a three day reduction in inventory days, and a 1.5 day improvement from payables versus the prior year. We also returned $55 million to shareholders in the form of $29.1 million in dividends, and $25.9 million paid for the repurchase of approximately 1.5 million shares. Since we initiated the share repurchase plan in Q3 of 2011, we have repurchased 7.1 million shares at an aggregate cost of $113.3 million.

Turning now to our 2012 outlook. As Mike mentioned earlier, we are reaffirming our full-year guidance on all four key metrics -- core sales, normalized operating margin, normalized earnings per share, and operating cash flow. Based on our year-to-date results and our current view into Q4, we believe we will come in near the high end of the earnings per share range, and in the lower half of the core sales growth range.

With year-to-date cash flow improvement of $77 million, we are also on track to deliver operating cash flow within our guidance range of $550 million to $600 million. We project interest expense to come in between $75 million and $80 million for the year. Our normalized full year effective tax rate for 2012 is projected to be around 26%.

I'd like to shift gears a little bit and talk about the expansion of Project Renewal. We have an opportunity to accelerate growth by going after costs more aggressively to fund investment behind our win-bigger businesses. Achieving growth requires bigger investments in people, and in capabilities like brand support, design, innovation, and better tools for execution. We know we don't have enough money invested in growth and this is how we're going to get it.

Today we announced an expansion of Project Renewal, which encompasses several critical efficiency projects to further unlock capacity for growth and free up funds for investment. We are focused on five key work streams. The first is organizational simplification. We will create a flatter, more efficient structure that will free up structural costs for reinvestment behind brands to fuel growth. It will also offer better direct visibility into the business and promote better-informed and faster decision making. Mike will discuss this in more detail shortly.

The second area is further EMEA transformation. We will make a step-change reduction in complexity in order to improve profitability. These resources will be funneled to win-bigger businesses globally to fuel growth. The broader areas we are looking at include SKU rationalization, route to market, supply chain and platform support.

The third area is best-cost finance. A new simplified organization structure that will enable one Newell approaches to transaction processing and information management. Other opportunities exist in shared services to leverage SAP, to move people resources from reporting and compliance to more value-added analytics and decision support.

The fourth area is best-cost back office. Including consolidated customer service and procurement that offers opportunities to achieve one Newell efficiencies across back office functions. And finally, there are several supply chain footprint opportunities to optimize manufacturing and distribution globally.

This expansion of Project Renewal will generate incremental annualized cost savings of $180 million to $225 million by the middle of 2015 and will affect just over 10% of our current workforce. The majority of the savings will be reinvested in programming to accelerate growth, and strengthen brand-building and selling capabilities in our win-bigger businesses and our win-bigger geographies. We expect to incur cash costs of $225 million to $250 million related to the renewal expansion, and record total charges of $250 million to $275 million over the same period of time.

We've made good progress in the first stage of renewal and are on track to capture $90 million to $100 million in savings by our target date of Q2 2013. This has been a fast-payback project and a necessary first step to simplify our structure and free up resources. The success of phase one gives us confidence we can take this next larger step. It, too, will be a fast payback and will result in a structure that is fully aligned with the Growth Game Plan.

With our balance sheet in good shape, ongoing operating cash flow can comfortably fund the CapEx required to support our growth plans, cash needs for the expansion of Project Renewal, a dividend in the 30% to 35% payout range, and continuing steady progress on share repurchase under our $300 million authorization.

In summary, while we continue to face business and macroeconomic challenges in parts of our portfolio, we are pleased with our results year to date and remain confident in our ability to meet our full-year commitments. We continue to have good momentum across much of the business. We are also executing against plans to mitigate and overcome challenges where they exist. All the while, we remain focused on the Growth Game Plan and unlocking costs in order to invest in our brands and selling infrastructure to drive sustainable growth as we move forward. With that, I'll turn it back over to Mike.

As I said earlier, today we're launching a major transformation of the Company designed to drive the Growth Game Plan into action more boldly and more rapidly. Over the next couple of years, we will both simplify and enhance the way we do business to accelerate our drive to make Newell Rubbermaid a bigger, faster-growing, more global, more profitable company.

This morning we announced a new organization model in strengthened leadership, including top outside appointments to my executive team. We are reorganizing the Company around the first two pillars of our Growth Game Plan. Brand & Category Development, where we strive to make our brands really matter, and Best-in-Class execution and delivery, where we're building an execution powerhouse.

The new development organization will be accountable for building big brand ideas, high-impact disruptive innovation and a true point of difference through superior design and product experience. All of the Company's marketing, insight, design, R&D, and corporate development talent will be part of the new development organization. The new delivery organization will be accountable for P&L management and delivering the maximum commercial value from the growth ideas built by the development organization.

The delivery team will place much greater emphasis on building true strategic partnerships with our customers and suppliers, optimizing supply chain efficiencies across the Company, while also building our go-to-market capabilities in the emerging markets. All of the Company's general management, supply chain, customer and channel development talent will be part of the new delivery organization. I'm confident this new model will strengthen our performance.

When I joined Unilever in 2003, that organization looked very much like our current Newell Rubbermaid structure. In 2006 we deployed a similar organization model to the one we've announced at Newell today. I held top leadership roles in both the delivery and the development pillars of that company, and I know from experience that this model works.

It creates focus on both the important work of developing brands and building disruptive innovation, and the urgent work of day-to-day delivery. And through that focus, does not allow the urgent delivery issues to overwhelm and dilute the important brand growth work, as often happens in single-point-of-accountability models like the one we have today at Newell and Unilever had in 2006. The model we are now moving to now drove significantly improved performance at my former company, and it will do the same at Newell Rubbermaid.

At the same time as strengthening Newell's development and delivery capabilities, we will noticeably flatten our structures, giving bigger roles to key leaders, and driving simplification throughout the organization to focus on growth. The Company will start by delayering the top of the organization, eliminating the Professional and Consumer groups, while further consolidating the global business units from nine GBUs to six business segments.

The six new business segments -- Tools, Commercial Products, Writing, Baby & Parenting, Home Solutions, and Specialty will be part of the delivery organization. The brand alignments to these new business segments are disclosed online and we will report our financial results against these new segments starting with our 2012 year-end results.

In the context of the new organization we've made a series of new leadership appointments to my team. Mark Tarchetti, the former head of global strategy at Unilever, will join the Company in January as Chief Development Officer and lead the new development organization. Originally from the UK, Mark is the founder of the international consulting firm Tarchetti and Company, has been working closely with me and the leadership team over the last year to develop the Growth Game Plan.

Prior to starting his own consulting firm, Mark spent 14 years at Unilever in a variety of senior strategy, business and finance roles, culminating in being appointed the head of global corporate strategy reporting directly to Paul Polman, Unilever's CEO, and driving the development of the Company's new corporate strategy with the top executive team.

Bill Burke, currently Group President Newell Professional, has been appointed Chief Operating Officer, and will lead the new delivery organization. Bill has a proven track record of outstanding leadership and consistent growth in his 10 years at Newell Rubbermaid, including leading and repositioning the Lenox brand to deliver double-digit sales growth, and leading the company's Professional businesses to accelerate international expansion. Bill's businesses have been the growth engine of the Company over the last few years.

Bolstering Bill's delivery organizations are two new additions to the Newell executive team. Joe Cavaliere will join the Company as Chief Customer Officer, reporting to Bill. Joe has 29 years of experience in customer development and brings an outstanding track record of delivering growth, developing strategic customer partnerships, and building world-class customer development capabilities. He is currently the head of customer development for Unilever in North America, and before that was one of the top leaders at Kraft Foods.

Joe has led the transformation of Unilever's customer development capabilities over the last nine years. I recruited him to Unilever from Kraft, have known and worked with him for many years prior to that, and I'm thrilled that he has chosen to join Newell to lead customer development globally as part of the delivery organization.

The Company will also appoint a Chief Supply Chain Officer who will report to Bill. This executive, who we will announce the coming weeks, brings nearly 30 years of supply chain experience, the last eight in senior leadership positions at a large industrial products company. Our new supply chain leader will drive sharper execution and delivery for our sourcing, distribution and transportation, customer and consumer services, manufacturing and planning disciplines.

In development, we've strengthened Mark's team with two new appointments as well. Richard Davies will join the Company as Chief Marketing and Insights Officer. Richard is leaving his role as the head of Unilever's Global Insights Function, where he leads more than 700 people in over 50 countries. Originally from New Zealand, Richard brings over 30 years of marketing, insights and brand strategy experience to Newell.

Richard's proven track record of creating brands and bringing innovation to consumers, combined with his experiences living and working in markets around the world, make him an ideal leader to raise the bar on our marketing and innovation agenda. The marketing and insights talent currently in the business segments will report to Richard.

Richard's partner in new product development will be Chuck Jones, a recently announced Chief Design and R&D Officer. Both Richard and Chuck will report to Mark. The R&D, industrial, graphic and interaction design talent currently in the business segments will report to Chuck. Bill, Mark, Joe, our new Chief Supply Chain Officer, Richard and Chuck, together with our current functional leaders, will all be members of my Newell executive team.

I could not be more excited about partnering with these leaders as we drive the next phase of our transformation and growth. They're all recognized as among the top in their respective fields and they will all be key contributors to my leadership team. Most importantly, they all see the same transformational opportunity to build something bigger and better at Newell Rubbermaid through the Growth Game Plan. The fact that our new teammates have chosen to leave big roles with broad responsibilities to join Newell Rubbermaid is a very strong validation of our potential.

As a result of the structure change, Penny McIntyre, currently Group President Newell Consumer, will leave the Company to pursue other opportunities. I wish Penny the best in her future endeavors and thank her for all of her tremendous efforts and accomplishments during her time with Newell.

In addition, Ted Woehrle, Chief Marketing Officer, and Paul Boitmann, Chief Customer Development Officer, will be leaving the Company. I also want to thank Ted and Paul for their service, leadership and impact, and wish them continued success as they also pursue opportunities outside Newell Rubbermaid.

We've covered a lot of ground today, so let me summarize. We've delivered a solid set of results in the third quarter and are well on our way to delivering our full year guidance across all four of our full-year guidance metrics. We've announced a 50% increase in the quarterly dividend that brings us to the high end of our targeted dividend payout ratio range.

With the on-time and in-full completion of the first phase of Project Renewal right around the corner in the first half of 2013, we've announced the expansion of Project Renewal. The expansion of Renewal has five new work streams that will, by the middle of 2015, generate $180 million to $225 million of incremental savings over that 2.5-year period.

We've announced a simpler, flatter organization model that recognizes -- reorganizes the Company around the first two pillars of the Growth Game Plan, with our structure now aligned to our strategy. And we've appointed a new Newell executive team, with a tremendous blend of top talent, from both within Newell Rubbermaid, and from the outside. I see more potential in our business today than I imagined upon joining the Company 15 months ago, and I'm energized by the choices we're making, the team we're building, and the opportunity that lies ahead.

Our people have proven to me they're capable of driving delivery while simultaneously driving change. By increasing the pace of our transformation, we will more quickly realize the Growth Game Plan ambition of building a bigger, faster-growing, more global, more profitable Newell Rubbermaid. With that, let me open it up to questions.

(Operator Instructions)

Connie Maneaty, BMO Capital Markets

So on the five streams, can you allocate the percentage of savings you expect to get from each one of them?

Connie, this is Doug.

We will be giving more color on the total Project Renewal restructuring, or the expansion pieces of it, on the call in January.

Okay. And then what about the timing of the cost and the savings? It says throughout the life of the program, but it seems like a lot of change has been made now; the new reporting structure happens right around the corner -- so if you could give us a little color on that?

There will be some of the changes will be happening -- the ones that Mike mentioned. It's a relatively small piece of the total, though, that will happen in the next couple months, between now and year-end. Most of the activity will begin occurring beginning in the second quarter of next year, and then the different work streams will roll out after that. Again, we'll give you a little more color on that as we get into the January time frame. But I'd remind you that we do intend to reinvest these savings in the business as they're generated, to further drive growth.

Connie, just one build on that. The structural change at the top happens immediately, and so within the -- certainly my direct reports, that change will happen -- happens effective today; some of the folks will start to report later in the fourth quarter into the beginning of next year, but we're going to get on with that structure. And, in fact, we're meeting later this afternoon with -- in the global webcast to dimensionalize that for folks.

I think the people savings will skew towards the front end. Some of the structural stuff that we need to do, the supply chain will be spread out over the duration. And that won't kick in -- the supply chain work won't kick in for a while. We need to give our new Chief Supply Chain Officer the opportunity to own some of those choices, although we've got a pretty clear view of what we need to go through. So you'll see the savings in the cost spread over that 2.5 year window with the organizational work done earlier and the structural supply chain work done later in that 2.5 year window.

Okay. Thanks.

Chris Ferrara, Bank of America

I guess you guys are set up now with, call it cumulatively, $300 million in savings, which is like $0.75 a share on $1.70 earnings base, or like 5 points of margin. I guess the question is, with that $300 million number, can you bucket what the reinvestment could look like? Because given what you spend on things like R&D, on marketing, on your selling organization, it sounds like the reinvestment of that would be multiples of what you spend now. I was just wondering if you could provide a little color and insight to help us kind of dimensionalize this stuff?

It is the key question that we are asking ourselves -- how much of that flows in and how much of that flows to EPS. Clearly, the intent behind doing this is to unlock the upside in the Growth Game Plan, which is all about shifting our SG&A dollars from structural cost to investing it behind our brands. And we've said the majority of the spend will go into brand spending. We haven't said all of it will, however. So what this does for us is, it releases the cost and gives us the opportunity to invest for faster growth and for the geographic expansion of our leading brands, at the same time as providing a greater line-of-sight to earnings and operating cash flow growth. So this is the key next step in unlocking the traffic capacity for growth, but also provides that line-of -sight.

We won't spend money unless we're spending money behind ideas that are going to create growth. So I'm not -- you've seen my behavior over the last 15 months. Money flows to ideas. So it's really important for the new leadership structure that we've announced, and for the new leadership team, to get in here as quickly as possible, and for us to really galvanize around the set of choices that warrant good investment. Clearly, the portfolio role choices that we've made, the definition of our win-bigger categories, the choice to, in a disciplined and deliberate way, build out our geographic footprint to the faster growing emerging markets -- those will all be filters through which we make the choices of what to invest in. As you get greater visibility into our business through the segment reporting we'll do, and as you're thinking about how you build your view forward, I would use those filters. I would apply a disproportionate amount of the investment against the win-bigger businesses and the win-bigger geographies, as Doug said.

Now, we're not going to provide quarterly guidance, and I do think you need to be careful in terms of how you think about the flow of savings into your models, and into whatever you do with respect to your projections on EPS. Effectively, the flow of savings over the next 2.5 years, will mirror the flow of savings over the last 12 months. The costs and the benefits over the next 2.5 years, effectively, are the same costs and benefits that we've experienced over the last 12 months with renewal, if you think about it. And that's, I think in a broad sense, the way I would look at this, with us investing only in the things that we believe in, believe will yield a sustainable growth return.

Just a reminder, Chris, as well -- as we've generated savings this year from Project Renewal, we have begun investing in selling systems. We talked about that. So we've also increased strategic spend as we've gone throughout the year on a year-over-year basis, by about 50 basis points. You'll see that shift within SG&A.

Chris, the things to look at in our portfolio that we'll bet on -- we'll bet on Writing, we'll bet on Commercial Products, we'll bet on Tools. Those are all our win-bigger categories. We'll bet on Latin America, and then because we believe that we need to develop our business south and east, and eventually we'll bet on China and southeast Asia. We'll do it in a deliberate way, in a disciplined way, that lives up to our commitment to also deliver steady operating income margin improvement.

Got it.

I guess unrelated follow-up -- I think it's great you got the payout ratio up to 35%. But looking ahead, right, that still leaves 65%. I think you've said that tack-ons, or acquisitions, are really not what you're looking at right now. Should we assume that buyback is really where the destination for the remainder of your cash generation?

We believe in the Growth Game Plan. As I've said, that over the last 12 months, the focus of the Growth Game Plan is on organic growth, but that over time we will open our mind to bolt-on acquisitions that are focused strategically against our growth agenda. But now is not the right moment for us to be doing that. So as you look at our capital allocation strategy over a five year window, you shouldn't simply shut down that path to making Newell into a bigger, more profitable, faster growing Company.

That said, there's nothing transformational out there, so we're going to have a lot of interesting choices with respect to what to do with the unallocated cash that this business has the potential to generate. We've set our target payout ratio range is in the 30% to 35%. We've been challenged by some who think that's not competitive enough. I think Bill was the first one to put that to me a year ago. We will have other options available to us with respect to providing returns to shareholders. Of course, choices like that are the Board's choices. Management can make a recommendation, the Board will make the call. I think all of those avenues are open to us.

And what's exciting about our Company is the incredible cash generative nature of the business, and the opportunity we have to make even further progress on that front through attacking, not just the trapped capacity for growth as it's measured in the P&L, but also the trapped capacity for growth that is measured through our working capital ratios.

Got it. Thanks a lot.

Wendy Nicholson, Citi Research

I wanted to follow up on that allocation of capital question, just for a minute, because I know you have one of the lower dividend yields in the group, but you also have one of the lower multiples. So it surprises me, frankly, that even just year-to-date we haven't seen more buybacks. You're in that consistent $20 million to $25 million a quarter. And I guess the question is, does that belie some trepidation on your part in the consistency of the results? Do you think there's going to be a better buying opportunity out there? Or is this just a, hey we kind of want to be consistent for now in terms of our allocation of the excess cash, and just make share repurchases more of a regular thing? Because I'm surprised you haven't been more aggressive on that front.

This is Doug.

I think it's the latter. I think when you think about our overall considerations for the use of cash, we're obviously funding our renewal programs. We are investing in CapEx, then, to continue to build out our growth opportunities and our core businesses. We have increased the dividend a couple times over the last year to something that's consistent with the payout range we'd like to be in, and then we're going to execute our $300 million share repurchase plan on a relatively consistent basis.

Okay. And that leads me to looking into next year. And if I go back to the Analyst Day and the three phases of your growth, I think next year is supposed to be in that strategic bucket, and the concept was earnings growth in the 5% to 8% range. But I hear you talk about these actions unlocking the upside, if you will, in your growth plan, and I'm wondering, as we start to think about 2013, are you comfortable with all of us going to the high end of the range? I know some of these cost savings take a couple years to roll through, but are you feeling good enough about the business that we can migrate to the high end of that range in terms of thinking about earnings growth next year.

Wendy, it's Mike.

I think you captured it right, that we're just emerging into the strategic stage. The choices we're making today are designed, as I said, to unlock the upside, and what I mean by that is we have an opportunity, if we move through this effectively, to pull the acceleration stage in closer to our current timetable. And I don't think 2013 will materially change in terms of what we have to do as a company. 2013 was always going to be the big transition year; that's why we're making these changes now, to get the talent in here to really fill the funnel. So I don't think it materially impacts the long-term guidance we provided when we first laid out the Growth Game Plan in 2013. The question becomes, can we accelerate 2015 into the tail end of 2014, or the second half of 2014; and that's something we will work through over the coming number of months as we get the new leadership in place and we start to really focus our resources and channel them against the biggest impact agenda items we've got.

I think the promise of the upside probably comes a year beyond next, and we'll have to work through whether we can get that pulled forward by a full year, or whether it's something less than that. But the language I used was very choiceful; and, you're right, this restructuring enables us to accelerate the time frame to get to the acceleration phase. And I think there's bound to be opportunity here. What's really nice about what we've chosen to do in the five work streams is, we get a real quick payback on this. It's not materially different than what we have done in the first phase of renewal. And because of that, the effect on uncommitted cash over the five year windows is neutral. There's no difference in our uncommitted cash having executed this program. So you fund it within that time frame and you're still left with $1.5 billion of uncommitted cash and increased borrowing capacity that we'll have the ability to do interesting things with.

Again, we don't want to get specific about that now, but that will most likely involve a blend of both shareholder-friendly actions and a more aggressive point of view on bolt-on M&A.

Wonderful. Thank you so much.

Budd Bugatch, Raymond James.

Pretty excited about some of the transformation, Mike, so congratulations on getting that.

Wendy asked the question that I was going to ask, about whether the guidance for next year, the 3% to 4% sales, core sales growth, and the 5% to 8% EPS growth and where it might be in that. So let me move on to my second question, which was -- you did not name, at least in the release, the heads of the operating units. Do we have any surprises in that? When will those be formally announced publicly?

They're being announced in the Company today. So I'll share them with you now. I didn't want to put them into the press release until our people had the opportunity to hear it from us directly.

There's six segment leads, six business segments that we're moving to, there's six business segment presidents that will be appointed -- have been appointed. We are combining Industrial Products & Services with Construction Tools & Accessories, and Rich [Wordley], who currently runs IP&S, will lead the Combined Tools Business. In Baby, Kristie Juster stays put, she's doing a great job in our Baby Business, and we're really beginning to hit our stride there; and, of course, we're not going to change anything in that place given the momentum we see building.

In Home Solutions, which is the combination of Home Org and Style, GBU, and Culinary, Jeff Hohler will lead the new Home Solutions business segment. In the combination of Tools and the Construction Tools & Accessories, and Industrial Products & Services Business, we will take the hardware business and move it into our new segment called the Specialty segment, which will merge with our Technology, Global Business Unit. David Klatt, who currently has responsibility for the Tech GBU, will assume responsibility for the new Specialty business segment. And Eduardo Senf, who currently runs our wacky Business, Writing & Creative Expression, will assume responsibility for the Writing Business segment. So those -- and then in RCP and Commercial Products, we've appointed Neil Eibeler to continue to lead that Business.

So as you can see we've got good continuity of leadership in those key roles. In the context of those changes, Ross Porter, who currently runs Construction Tools & Accessories, will be leaving the Company, and, as with Penny, Ted, Paul, I do want to thank Ross for his service and leadership over a number of years. He's had quite an impact. And when you make changes like this, good people end up leaving, and I'm optimistic and happy to help any one of these folks really land in key roles, because they're all really talented people and have made significant contributions to getting us to this point.

Congratulations to the folks that will lead those units, and I echo your sentiments about Ross leaving. We in the investment community have had a long and valued relationship with Ross. I hope he does well going forward.

The last question I have is also organizational, because looks like Europe is going to change markedly with your General Counsel running that, and I take it that the matrix level of that organization is going to be collapsed? Can you talk a little about how that's going to work? I think that's a good idea but I'd like to understand how you see that working.

For those that didn't see the leadership announcement, John Stipancich, who is our Chief Legal Officer and General Counsel, will take over P&L responsibility for EMEA, and lead the EMEA transformation through a group of European leaders that are on the ground. Gordon Scott, who is our sales lead in EMEA on the Consumer businesses, will become the General Manager of that geography. And it is the one area of the world that we will manage as a geography as we work through the transformation work stream. Because the critical enabler to unlocking the cost in Europe is to remove the complexity, whether that's SKU complexity, or whether that's route-to-market complexity, or whether that's the nature of our go-to-market strategies in small countries across EMEA.

And in order to do that effectively and fast, you need to have somebody that's got accountability for making those choices. If we were to leave the verticals in place in that geography while we were making the change, we didn't believe we would efficiently be able to make those complexity choices without a lot of cajoling and influencing. We're impatient in some ways with respect to unlocking the cost because we have places we want to spend the money for growth. So we've asked John to step in to lead that work. John's background -- John was, before coming to Newell, involved in private equity, working at KKR-owned companies, and so he's got a lot of experience in leading transformation work of this sort. And so we've asked John to take the lead in driving that portion of our renewal expansion initiative into action.

Thank you very much. Good luck.

Joe Altobello, Oppenheimer

Good morning.

First question is on the expansion of renewal. Seems like over the last decade or so one could argue that Newell has been in a state of restructuring, or a nonstop state of restructuring, and has been thoroughly restructured over that time. How comfortable are you, and how confident are you, that you can effectively triple the size of the original renewal program? Then secondly, I assume the spending won't occur until the cost savings actually do materialize?

Joe, great question.

We've got a very good line-of-sight to each of the five work streams. These have been built bottoms-up. We have more work to do before we make some final choices, particularly in the supply chain, but we've got a pretty good line-of-sight to the opportunities and the linkage of cost and benefit. The thing that needed to happen in order to enable us to go after this is the structural choice we've made this morning. We had to reorganize and reset the organization structure to enable many of these costs to be accessible. And so things happen in a sequence for a reason.

We've aligned the Company's structure to the strategy. We've got SAP in place in 80% of our revenue -- and in geographies representing 80% of our revenue today, slightly more than that, quite frankly. We've got visibility into complexity cost in a way that we've never had before. We have the opportunity now to pursue these -- the release of the cost. So that's the logic for how and why we've done what we're doing and in what sequence.

Your question about whether we can get $300 million -- cumulatively $300 million of benefit out of the cost structure of this company -- the answer clearly is yes. It's just going to take us time to do that, and of course we have to balance the way we do that release of cost against the need to consistently deliver our commitments. So of course it's going to be that tension that's existed so far that will exist over the next 2.5 years, which is finding the balance between delivery and change, which, as I've said, my team has proven to me that they can drive delivery and simultaneously drive change, and that gives me the confidence to really go more aggressively, to go bolder and faster to reach for the transformation of the Company.

That's helpful. Thanks, Mike.

Secondly, on the cost savings you guys are looking for from indirect procurement -- I think the last time you had spoken you mentioned that you're looking at about $50 million of savings by the end of next year. Can you update us on that and where that stands at this point?

Sure, Joe, this is Doug.

We're on track, continue to be on track, for the $50 million, and this year we're on track to deliver about $20 million of that, so we're well on our way. The teams are all fully engaged in supporting the initiative and driving the savings that we're seeing.

Okay, great. Just one last one if I could.

The merchandising activity at JC Penney obviously has been a drag on you guys, in Decor in particular. And it sounds like you're hopeful that by next spring that will change and start to improve. How quickly would you expect to see some improvement from JC Penney?

Look, I think we're going to have a rough ride with JCP until they do their transition in late Q1, into Q2. It's really focused in our Decor and our Culinary business, and to the degree that they can get to the promised land, that could be very exciting for us. So we want to work with them to enable that. In the meantime we're looking to build our businesses out such that we don't have to deal with such a headwind.

Just for reference, through the end of Q3, year-to-date, our core sales, globally, ex-Decor, would be up 3.5%. So that's the degree to which this problem has hurt us. So that's pretty solid performance in a really tough environment from a macro perspective, and I gave you some insight into Baby and Professional in North America -- combined growing over 6%. So we've got many parts of our business performing very well right now, and gives us encouragement that when we release cost and put some money behind these businesses, we should be able to see some benefit from that from a growth perspective.

The answer to your question is, we're going to have to live with the Decor and the Culinary drags as a result of JCP right through that transition in the first half of 2013. But look, I take a longer view than this, and these choices are things we can't control. I want to focus our new energy around building a really compelling innovation and brand growth agenda through the addition of talent we're bringing into the Company, and through the structural change we're making that will enable us to create focus, both on development and delivery. And that those two capabilities will work in an interdependent way, and they are of equal stature, and they together will create a more vibrant future for us.

And so our energy's going to that right now. We will work through the JC Penney issues in those two businesses, and, like I said, if they can get to the promised land, that's a very exciting future for us, but it will be bumpy until then.

Okay. Perfect. Thank you.

Linda Bolton-Weiser, Caris

I was wondering if you could just remind us -- I've kind of lost track here -- of how much increase in strategic spending you were supposed to have in 2012, and if you think by the end of fourth quarter you'll be ahead of that, or kind of just in line with that, or below? And also, you mentioned some shift of spending? Can you just elaborate on that, I think you said from the third quarter to the fourth quarter?

My second question has to do with you had said that there was some weakness in Fine Writing, kind of in the more mid-price point range? Can you just update us on that? Is that trend improving or is that kind of the same, and remind us what geographies? Was that just Europe, or Europe and Asia?

Third question is -- have you given, right now, any thoughts as you've continued to look at the Businesses, and been longer with the Company, to divestitures? Are you happy with the potential future for each of the things? What's your current thought there? Thanks.

Let me start with a couple of them and I'll work back towards the SG&A question. So on Fine Writing Europe, as you recall, we shared with you on the last call the concerns we had on our Fine Writing Business in Europe as a result of the macro pressure that Business was feeling. This is the component of our Fine Writing portfolio that sits probably below $100 a pen. It's not the very high end of our Business, which is growing beautifully, it's the area of our portfolio that's sort of caught in between everyday writing instruments and the super premium end of that portfolio.

That was the segment of the portfolio in Europe that was under duress. It's also the segment of the portfolio in Europe that's distributed more through small stationery stores; and these guys are under pressure in this environment and, therefore, have pulled back on inventories and are, in some cases, having a tough time financing those inventories. So that Business came under pressure in the first half of the year and that dynamic continues with us. We've layered more support, more promotional support into the Business in the second half of the year, and we'll continue to watch that and layer merchandising funding in to stabilize that Business as we move into the fourth quarter.

Don't want to play that lever too hard because everything we spend there is money that could be invested elsewhere in bigger strategic priorities. So we have to be careful about that. But our goal would be to stabilize that Business until the macros turn in Europe by layering in the right merchandising support.

On your question in general, with respect to SG&A, we're right where we thought we'd be. Of course, if we had not had the Decor problem, we'd be really layering the money in right now. But the Decor problem has -- and we haven't given you a specific operating income impact, but needless to say, it's been quite significant. We've needed to cover that through the year. Had we not had that problem, we would have been able to layer in even more investment.

We have spent, as we've said, $30 million so far on selling systems. That's people, that's feet-on-the-street, across Latin America, and, in some select Businesses, in North America. So we've leaned into selling investments first, and on a constant ForEx basis our brand investment is effectively flat. So we have yet to layer big money in that space. As we come into the fourth quarter, and the line-of-sight to EPS is clearer, we will start to layer in brand support money on top of the base we've got today, which is quite substantial.

I mean, if you looked where we would spend the money it would be our Writing business, our Professional business. If you were watching TV around the Olympics you would have seen Paper Mate advertising. If you were watching the Video Music Awards in September, you would have seen Sharpie right in the middle of all that. If you go online and search Sharpie Party on Google you'll see Sharpie everywhere. So I'm not feeling like we're short of investment today, but we have some bigger ideas that are coming through the funnel that will require support going forward. As the new talent gets set, we will have the appetite to spend even more as they make the impact they should make on the business.

Dara Mohsenian, Morgan Stanley

I was hoping to get a better sense of when we should expect to start to see a top line payback from the higher spending. You talked about the line-of-sight on generating the savings, but can you expand on the line-of-sight to when the spending should actually start to materially boost your top line growth?

As we said in the strategic guidance we provided in February, we would expect that acceleration to start to occur through the strategic phase into the acceleration phase. So what needs to happen first is the release of costs so that we have the investment fire power to put that money behind our brands. As I just mentioned to Linda, the Decor problem this year ate into our capacity to invest behind brand. Had we not had that, you would be seeing that investment happening already.

As we've said, we're not going to just spend without living up to our commitment to both accelerate growth and improve our operating income margin year in and year out. So we begin to have greater clarity, greater line-of-sight to opportunities, and as the costs get released we have the opportunity to layer those into brand-building investment. And you should expect us to start to do that as we enter fourth quarter and into 2013; and you should expect to see our growth rates sequentially improve in 2013 versus 2012, as they have in 2012 versus 2011.

Okay. And then can you discuss if you're seeing, or expect to see, any demand benefit from a potential US housing rebound? It sounded like market share was strong in the US in the quarter, but I was hoping for a bit of an update on category growth and maybe just a general update on macros around the world also?

I was asked that question this morning by a reporter on the macros. We haven't seen a material change in consumption patterns in North America. The biggest change we've experienced has been in Europe and that continues to be a tough environment. Same time, we haven't seen a housing driven bounce either. So haven't seen the upside; the tailwinds sort of move behind these businesses. We're winning because we're building market share, and the growth rates that I describe for our Professional portfolio's a function of that in North America.

I look forward to the moment where the winds sort of pivot. We haven't seen that yet. Our planning assumption for next year is that we've got more of the same. We haven't assumed a material change either way. I think from a Consumer perspective, that's probably the right assumption to make, irrespective of whether we go off the cliff or not. There may be a 90-day wobble in Q1 if in fact we do, with all the media headlines, but strategically I don't think that is as much of a risk as perhaps retail or response to that dynamic playing out.

That's where we get the volatility, more so than in the Consumer dynamics. We will have an interesting challenge in the first half of next year, because as you know summer occurred earlier, at least in the Eastern half of the country, last year, which certainly helped our Professional portfolio. But I don't think there's -- we're not experiencing any material impact of the macro shifts on our business. Look at our emerging market growth rate at 12%, roughly, year-to-date. We've all seen the GDP headlines out of China and out of Brazil. But given where we start from, slightly less than $1 billion business, which in absolute is sizable, but relative to the market, a huge opportunity. The GDP dynamics in emerging markets aren't really a factor. It's more what we do and how much we invest to deploy the portions of our portfolio we intend to develop in those geographies than any of the macro impacts.

Okay. And so core sales being at the low end of your range for the full year -- that's more Home Decor than macros causing some down side at this point?

No, it's EMEA -- the macros in EMEA and it's Decor. I think those are the things that cause us to be at the low end of the range, and we have a top -- and we're starting to lap growth. We've got to grow on growth.

But we're 3.5% year-to-date without Decor in the mix, and I don't like to do the wisdom without, so the reality is, we're at 2.2% and I think we'll be hard-pressed to get above the midpoint in our full-year guidance range without some big change in the environment. So I think we've said we have a clear line-of-sight to the top of our EPS range, but given the environment, we're sort of in the bottom half of our core sales range.

Okay. Thank you.

Bill Schmitz, Deutsche Bank

Is there any way you're gauging the effectiveness of some of these investments in emerging markets? Are there systems in place yet to get an early read on what the payback has been so far? Then if you could give us the sales-to-date for renewal.

The sales-to-date or savings-to-date?

Sorry, savings-to-date.

I'll let Doug answer the savings-to-date question. This is how I'm measuring the renewal investments in Latin America. I'm looking at growth rates, and I look at growth rates, the return on the sales investments in terms of the growth yield we're getting in those geographies. So I'm not looking at it from a financial metric perspective. I'm looking for a specific investment yield in those specific geographies. I've got to look at that in aggregate across the total Company.

We're seeing good growth in Latin America by country. So even with the GDP slowdown in Brazil, we've got good numbers coming out of that part of the world and strong double-digit growth in those geographies, and that is a function of getting broader coverage. So when we complement that with good brand investment and we get to building our brands in a sustainable way, we're going to have a nice financial return on those investments, but it will take a longer -- it's a longer period of time, Bill. It's not something that I actually want to even measure on an annualized basis, the financial return.

The growth yield, absolutely. Are we doing good strategically? Absolutely. Are we building our market share from a brand perspective? Yes, we've got to measure that. Do consumers -- what does brand health look like behind those brands? Do we need to measure that? Absolutely. That's the kind of dashboard that we look at.

Got it. Doug, do you have that savings-to-date number?

Yes I do, Bill. The year-to-date number is about $0.10, and the program-to-date, because we had a little bit occur in the fourth quarter last year, is about $0.11.

Gentlemen, that's great. Thank you very much.

Mike, we all know you're a very persuasive guy. Can you give us a little more color on how you got all these folks to come over? And maybe if there's any changes to the incentive compensation metrics as you change the strategic direction of the Company?

Look, I mean, these guys saw the opportunity inherent in the business. All I had to do was show them a couple of charts.

Can I see those charts? (Laughter)

Yes, you have. You saw them at Analyst Day. Go to that cash chart, you can't help but see potential in that one, the one that talks about our unallocated cash and the increased borrowing capacity. And then the fact that the brand portfolio is so concentrated.

You've got 14 brands that represent 85% of our revenue stream, and these are not brands that are in their twilight. These are strong brands with great latent equity, and so with the right investment of energy and insight, we can really create something powerful with that brand portfolio. And then you want to work with people you like, so I don't know, maybe that's a factor.

Got you. The incentive compensation -- is there going to be any change in the way people are paid?

No. We continue to -- I want to put more emphasis over time on the long-term component of our comp, but the metrics we're looking at are going to stay the same. We'll focus on core sales growth, we'll focus on EPS delivery, and we'll focus on cash. And then from a long-term perspective we're looking -- we get comped, all of us, on relative TSR.

So I think those are the right metrics in the business, and if I had a wish it's that we push more of the total direct compensation towards the long-term incentive component of things, because I believe that, that's the best way for our employees to share in the value creation story related to the Growth Game Plan. I think that, while it's a little bit more of a long-term payout than perhaps they're historically used to, I think it's the right perspective to have and it's the best way that they can create wealth for their families.

I'm encouraging the Board to think that way and I definitely talk to our employees about our business that way.

Great, thanks. One quick follow-up.

Typically a good back-to-school correlates to a very good Christmas. Is there any reason to believe that, that's not going to be case this year?

We're hopeful. We're launching Sharpie Metallics and we're putting money behind it -- that's part of what we'll get brand investment. We've got a really good thing going on, on Sharpie, also, with respect to our music partnerships; and we get the full quarter benefit of InkJoy in the marketplace in North America.

So we have good things going on in the business. I wish -- I said to the Board the other day, the impact of this Decor thing is really pretty profound, and had we not had that issue we'd be in a very different place. But we've got live with that and we're going to live with that right into 2013, and if we take this new structure and we work it really hard, we should start to see some benefits as we get out there into 2014 and beyond.

Thanks very much.

John Faucher, JPMorgan

Two questions about the structure, the new GBU structure. The first would be you talked about 14 brands, six GBUs seems like a lot for 14 core brands? Secondly, was there any thought given to aligning the structure from a geographic standpoint instead of a GBU standpoint, given the need to focus on the emerging markets businesses?

Look, John, I like having our structure, our P&L ownership vertical by category, basically. It makes the interface between those first two pillars much easier to manage. You've got a development owner and a category owner that are both global in nature. One of the complexities in my former company is that you have to marry a category owner up to 20 multi-country geography owners, and that gets very complicated and expensive. So we're not the type of Company that can afford to have all those interfaces. So I think this is the right structure for us.

We made a different choice in EMEA for a different reason, which is related to the complexity issue that I raised. But you know what? I don't know what we'll look like five years from now. There's any number of possibilities. And for the next period of time, though, this is the right structure for us. It's the most efficient way for us to make the biggest impact.

Thanks.

Jason Gere, RBC

Thanks for all the color, obviously, that you've provided on this conference call. Just a couple of minor things -- one, as we think about 2013 and the step-up in core sales from maybe where you'll end this year, and knowing that Decor is going to weigh down -- can you talk about the relevance of the innovation pipeline you see for 2013, relevant to what's out there for 2012? So that's the first question.

And then the second question -- just maybe a little bit more color on the SKU rationalization; maybe where you see some of the bigger opportunities? Obviously not going into specific brands, but if you could talk maybe Consumer versus Professional versus Baby -- a little bit more color on that angle?

In terms of innovation funnel, I actually think we've got a pretty good funnel coming forward, both of items are rolling out of 2012 into 2013, and new things that we're doing. Some of which I can talk about; some of which you'll l have to wait to talk about until our next call. And it's pretty balanced, with good activity in Writing, a very good plan in Baby. We've had an excellent sell-in of our new items for 2013 in Baby in the US, in Europe -- which is new news, which will help. And also we've got some exciting things happening in the Professional business that I can't talk about right now. Plus we've got some geographic deployment opportunities that we will pursue in 2013, which, again, I don't want to get specific on yet, but also offer some really interesting opportunity, largely in the Professional category.

So as I think about the growth levers we've got for next year, those are in round terms, the brand and innovation, or portfolio deployment, components of it. We have as much opportunity in strengthening our delivery as we do in strengthening our development pipeline. There's as much creativity and joy to be had in building the right assortment by channel, and creating strategic partnerships, and stripping complexity out of the enterprise-wide value chain from our retailers' cash register back through our supplier interfaces. That work, which will be the work of the delivery organization, can both release cost, but also drive growth. I'm as excited about those opportunities and the channel development opportunities we have as I am about the innovation opportunities we've got.

With respect to the specificity you're looking for on complexity reduction in Europe, there's really three levels to this. There's the SKU complexity that you've talked about -- and I think there's opportunities in probably our biggest Businesses there, which are Writing Business and our Tools Businesses. But we have to be very careful about that. There's equally opportunity to play for different route-to-market models depending on geography. So we have the complexity and the cost associated with a very broad EMEA geographic footprint, but not very big Businesses in some geographies. Of course you want to sustain those Businesses, but there's a more efficient way to deliver those revenues through management of our route-to-market systems in a more synergistic way, and that's a different type of complexity. So without getting too specific, you get the sense for the types of opportunities we'll pursue. John's all over this with the support of the European team and also with some help from the outside.

Thanks.

Sarah Miller, SunTrust.

Hello. I'm on the call today for Bill. But I guess one last question that we had was -- could you provide any more color around the Baby business? I know you mentioned that a lot of your growth in the US was coming more from market share gains, but just if we could get some more color around the overall category, whether you see a lift coming any time soon, both in the US and in other geographies?

Sarah, the headlines on Baby are generally pretty positive. We've strengthened our customer partnerships in the US. We've got better innovation on Graco this year. We have lapped the step-up in growth in Aprica in Japan, which occurred in Q2 of 2011, and we're sustaining good double-digit growth in Japan on Aprica. We do see some competitive activity picking up in Japan now, so there will be some challenges there in terms of sustaining that rate of growth; but pretty good performance.

The Business in Europe has had challenges, and so as we look forward to 2013, we're bringing a new innovation platform to market there which should strengthen the Graco performance in Europe, and we're hopeful that our Business stabilizes there. We feel good about the innovation sell-in for 2013 in the US, and we're hopeful that we can sustain the growth we're currently experiencing on top of year-ago growth in North America, which we have yet to lap until the fourth quarter of 2012. So Q4 will be the real test for the underlying forward-looking momentum in the Baby business in the US, Q4 and Q1. And we're well-staged to be able to sustain certainly more than competitive levels of growth.

Great. Thanks.

Leigh Ferst, Wellington Shields

Congratulations on the results and the new strategy.

I'm interested in hearing more about your go-to-market. I think you've already implemented one Newell sales force, and I was wondering if you could give us examples of success there already? And then what kind of changes do you see going forward?

Leigh, as you know, we, in April of this year, we really rolled out the new customer development organization in the US that, on the Consumer side of the business, took our sales structures from a disaggregated model, where our sales force was in bed within each GBU, and pulled them to the center; and organized our field selling teams around customers and channels. We began to see some impact from that, particularly in the Consumer business, which is where the change was made, in late Q3. I would expect that momentum to continue to build going into Q4 and into the first half of the year.

We're seeing great progress with respect to penetrating new customers, which was part of the design ambition. And we're seeing early progress with respect to broadening our distribution footprint. But I wouldn't be objective if I didn't tell you that I think there's a lot more opportunity for us to go after. One of the powerful things about our new organization structure, and having it focused around development and delivery, is that more energy and more emphasis will go into the development of the right assortment for the right channels, the right pricing strategies, the right merchandising frequencies, the right merchandising vehicles, and the right channel penetration strategies for each one of these Businesses.

If you're a general manager or segment president in this new model, that's where a good chunk of your energy is going to go in the future. And so having now put the CDO in place, we have the opportunity to leverage it through this new structure more completely, and it was done in that sequence for a reason. You needed to get the CDO done first in Consumer before you'd be able to leverage this model that we've rolled to. Now, importantly, with Joe's arrival we will broaden the umbrella across our total portfolio to manage the customer development landscape in that way. It's not a change for the Professional Business but it brings both organizations together so that Bill Burke has one go-to guy on customer development. And I think that's very, very helpful. There's opportunity in the future to take that model beyond the US, but for the time being, our energy's going to be focused there.

And so Joe comes in, having lived in this context at Unilever, and at Kraft previously, and knows how to work the system, and knows how to get the most out of a model like this. He knows the critical nature of the partnership between customer development and the general management infrastructure, and he knows the critical nature of the partnership between that general management structure and the development pillar. So he's operated in this world for 10 years, 15 years, and will be able to help us avoid all the pot holes that you have the potential to step in when you don't have that experience.

Are there any examples of success so far that you can share with us?

We've talked about the Office Depot partnership on Rubbermaid Consumer, talked about broadening our portfolio footprint through our Toys R Us relationship to include more than Baby on the toy side of that partnership. We're seeing expansion of our food and beverage Rubbermaid portfolio into the food, drug and mass channel. So there's a long list. And I'll be happy, when we have less strategic things to talk about, to lay that out.

It's a good challenge, Leigh. If we're not clearly communicating all the wins we're getting I'll make sure to take some time on our January call to dimensionalize that for you.

Thank you.

On the emerging markets, it sounds like you're focusing on Latin America. Could you just quickly clarify what your strategy is there in the long term and short term?

As we said, we are going to invest behind our win-bigger businesses and our win-bigger geographies. The win-bigger businesses are Tools, Professional, Writing, and Commercial Products, and all of those businesses have footprints in Latin America. So we are going to leverage those geographies for expanded brand presence and growth, and at the same time, take the same portfolio to Asia. And so geographically, our focus point in Latin America is three hubs -- Mexico; Colombia, in Andina; and Brazil. And those three countries will serve as platforms for growth across the total Latin American landscape.

In Asia, the prize is in China. We've put hold there in Fine Writing and Industrial Products & Services. We've moved talent to our new office in Shanghai to help develop our Rubbermaid Commercial Products Business, and we will continue to do so to unlock the opportunity in China and also across Southeast Asia.

Thank you.

This concludes our question and answer period. If we were unable to get to your question, please call the Investor Relations team at 770-418-7075. I will now turn the call back to Mr. Polk for any concluding remarks.

Thanks for the questions and thanks for sticking with us through a very complex and complete set of announcements this morning. We've covered a lot of ground. Once again, let me summarize.

We delivered a solid set of results and are well on our way to delivering our full-year guidance across all four of our full-year guidance metrics. We've announced a significant 50% increase in our quarterly dividend that brings us to the high end of our targeted dividend payout ratio range. With the on-time and in-full completion of the first phase of Project Renewal right around the corner in the first half of 2013, we've announced the expansion of Project Renewal. And that expansion has five new work streams that will, by the middle of 2015, generate $180 million to $225 million of incremental savings over that 2.5 year period.

We've announced a new organization structure that's simpler, and flatter, that reorganizes the Company around the first two pillars of the Growth Game Plan; and our structure is now aligned to our strategy. And we've appointed a new Newell executive team with a tremendous blend of top talent from both within Newell Rubbermaid and from the outside.

And so it's a very exciting moment for our Company. This is the pivot where we start to drive the Growth Game Plan into action. We launched the Growth Game Plan in February. We initiated the first round of renewal changes in November to bridge to this moment. And now we take a bigger swing at both cost and releasing the trapped capacity for growth, but perhaps more importantly, building out an organization model and a new team that has the potential to drive the Company towards the acceleration stage of the Growth Game Plan, with the ambition of building a bigger, faster-growing, more global, more profitable Newell Rubbermaid.

So with that, thanks for your questions and your support and we'll talk to you soon.

Today's call will be available on the web at NewellRubbermaid.com, and on digital replay at 800-585-8367, or 855-859-2056, with an access code of 39786031, starting two hours following the end of today's call.

This concludes our conference. You may now disconnect.