諾威品牌 (NWL) 2015 Q1 法說會逐字稿

Good morning and welcome to Newell Rubbermaid's first-quarter 2015 earnings conference call.

(Operator Instructions)

As a reminder, today's conference is being recorded. A live webcast of the call is available at newellrubbermaid.com on the investor relations homepage under the 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. Ms. O'Donnell, you may begin.

Thank you. Good morning, everyone. I want to welcome you to Newell Rubbermaid's first-quarter earnings call. With me here in Atlanta are Mike Polk, President and Chief Executive Officer; and John Stipancich, our Chief Financial Officer.

I'll remind you that our discussion today will include forward-looking statements. Such statements are based on assumptions and estimates which could be inaccurate and are subject to risk. Actual results may differ materially. Newell encourages you to review the explanation of related risks and uncertainties provided in our earnings release and in our most recent 10-K filing.

In addition, certain information presented and discussed today constitutes non-GAAP financial measures. We have provided in our press release an 8-K filing, reconciliations on a GAAP basis for he these measures. With that, I'll turn it over to Mike.

Thank you, Nancy. Good morning, everyone, and thanks for joining our call. Before we discuss our Q1 results, I'd like to briefly address two new strategic initiatives approved by the Newell Rubbermaid Board of Directors.

First, this morning we announced our decision to expand the third phase of Project Renewal beyond our current supply chain-focused initiatives to include the next level of cost outwork in our corporate overhead business partnering functions. This new authorization will utilize $150 million in incremental restructuring and project-related costs to generate $150 million in incremental annualized savings by the end of 2017.

We've made good progress increasing our brand spending through 2014 and we'll continue to increase investment this year and beyond. In this context, a significant amount of the incremental savings generated from the expansion of Project Renewal will be reinvested in new capabilities and brand support, but with an increasingly higher proportion of the incremental savings flowing to margin and earnings than in the earlier phases of Project Renewal.

Secondly, this morning we announced our intention to sell our Rubbermaid medical cart business. This business is not core for Newell. The medical carts business had net sales of roughly $65 million in 2014. In 2015, the Rubbermaid medical cart business will be treated as a planned divestiture and therefore excluded from core sales.

So with these preambles done, let's get into our results. We've had a very good start to the year. Core sales grew 4.7%. Net sales grew 4.1%, with 550 basis point negative impact from foreign currency, largely offset by a net contribution of 490 basis points from acquisitions and planned divestitures.

Normalized gross margin increased 50 basis points, driven by input cost deflation, productivity and pricing, partially offset by negative foreign exchange and the mix effect from acquisitions. This improvement funded a 50 basis point increase in advertising and promotion as a percentage of sales, with advertising up nearly 40% versus prior year. Despite the significant increase in brand support, normalized operating income margin improved 90 basis points as a result of our progress on overheads.

Normalized EPS was $0.36, $0.02 ahead of consensus and 5.9% ahead of prior year. We achieved this normalized EPS growth despite having to overcome the negative impacts of about $0.08 due to foreign currency, and $0.04 due to the absence of prior-year discrete benefits in our tax rate.

Our first-quarter growth was broad-based with core sales growth in all five segments. We delivered 5% core sales growth in North America and over 25% core growth in Latin America, which more than offset weakness in Europe and currency-related challenges in Russia.

We continued to deliver he very strong growth on our Win Bigger businesses. Combined, our three Win Bigger businesses grew core sales 7.4%.

Writing grew core sales 9%, driven by increased market share in most geographies a as a result of strong innovation and increased marketing investment and pricing. Commercial products also grew core sales 9% as a result of new innovation and strong sales execution in the US and China. Tools grew core sales over 3%, driven by solid mid single-digit growth in North America and Latin America.

Positive momentum in writing, commercial products and tools has helped us absorb the continued impact of our strategic choice to reposition the Rubbermaid consumer business for profitable growth. In Q1, home solutions core sales grew 0.9% with double-digit Rubbermaid food storage growth offsetting planned declines on the low-margin Rubbermaid consumer storage business.

Our newly acquired Contigo and bubba brands delivered outstanding results and enabled home solutions net sales growth of 15.2%. Our baby business grew core sales 0.8%, with strong growth in North America of nearly 8% and stabilization of the business in Asia offsetting weakness in Europe. Our newly acquired Baby Jogger business delivered strong results and enabled baby net sales growth of 7.1%.

We're pleased with our start to the year. We've had a strong start to global core sales. We've sustained excellent growth in our Win Bigger businesses. We've got baby momentum building in key markets outside of Europe.

We've had a strong contribution from acquisitions offsetting the net impact of currency to yield over 4% net sales growth. We've got expanding gross margins despite unprecedented currency pressure. We've got increased normalized operating income margin, despite another large step-up in brand investment, all yielding nearly 6% normalized EPS growth and strong double-digit EPS growth on a currency-neutral basis.

We have building momentum in our business and our strong start to the year is evidence of the progress we're making. Let me hand the call over to John to go through our results in a little bit more detail and then I'll return to provide perspective on the balance of 2015.

Thanks, Mike, and good morning. First-quarter reported net sales were $1.26 billion, a 4.1% increase versus last year. Core sales, which exclude acquisitions, foreign currency and the planned disposal of our Rubbermaid medical cart business, increased 4.7%.

The net impact of acquisitions and planned divestitures contributed 490 basis points to reported net sales. Foreign currency had a negative impact of 550 basis points. The strong core sales performance was led by writing, commercial products and tools, our Win Bigger businesses, aided by improvements in baby and home solutions.

Reported gross margin was 38.6%, with normalized gross margin at 38.8%, up 50 basis points over last year. This improvement was driven by productivity, lower input cost, pricing and favorable business mix, which more than offset unfavorable currency and the negative mix impact from the gross margin structure of our recent acquisitions.

Normalized SG&A expense was $337.9 million or 26.7% of sales, down 50 basis points versus prior year. Our 110 basis point reduction of overheads fueled a 50 basis point increase in advertising and promotion, with the balance of the overhead savings flowing to offset FX headwinds.

We invested incremental A&P across all five segments with the largest year-over-year increases in baby, writing and commercial products. In baby, we supported the advertising campaign for our Graco Nautilus Plus 3-in-1 car seat.

Our writing segment benefited from advertising for Sharpie Clear View highlighters and investments in e-commerce and incremental in-store merchandising activity. In a Rubbermaid commercial we ran numerous concurrent campaigns in North America, China and Brazil, to support Brute containers, HYGEN microfiber cleaning, WaveBrake mop buckets and our new Maximizer mops.

Normalized operating margin was 12.1%, up 90 basis points, reflecting the benefit of Project Renewal and other cost savings initiatives, partially offset by an increase in strategic investment and significant FX headwinds. Reported operating margin was 7.8%, compared with 8.6% in the prior year.

Interest expense of $19.2 million increased $4.8 million year over year, reflecting the impact of our late 2014 debt refinancing and higher overall borrowings related to our acquisitions in the back half of last year. Our normalized tax rate was 27.2%, compared with 18.3% a year ago, due to the absence of prior-year discrete benefits. We still expect our full year normalized 2015 tax rate to be around 24%.

Normalized EPS, which excludes restructuring and other project costs, was $0.36, a 5.9% increase to last year, despite about $0.08 of FX headwinds. And on a reported basis, first-quarter EPS was $0.20 compared with $0.19 last year.

I'll now move on to our segment results starting with writing. Reported first-quarter net sales declined 1.8% to $341.8 million. Core sales increased 9% with continued high single-digit growth in North America. We're driving strong POS in the US, thanks to the combined impact of increased A&P and more robust merchandising efforts.

In our writing businesses, in emerging markets are performing well with pricing and strong sellout fueling good Latin America results and a healthy start to the year for fine writing in Asia. Q1 normalized operating margin in the writing segment was 24.3%, a 240 basis point increase over the prior year, due to strong productivity, pricing, favorable mix and cost management, which more than offset foreign currency impacts and increased advertising and promotion spend.

Net sales in our home solutions segment grew 15.2% to $364.5 million, with acquisitions contributing $48.4 million. Core sales increased 90 basis points due to solid results at our decor business and growth in Rubbermaid food storage. This more than offset our continued exit of portions of the low-margin consumer storage business and a comparison against last year's Calphalon pipeline fill at a major new customer.

We continue to see strong growth in Rubbermaid food storage, fueled by increased advertising and promotion. Home solutions normalized operating margin was 10.6%, up 210 basis points, reflecting the accretive impacts of acquisitions and lower input costs.

Our tools segments delivered net sales of $180.4 million, a 3.9% decrease, all of which and then some, was driven by FX. Core sales grew 3.2%. Tools delivered another good quarter in Latin America, reflecting the continuing success of our Irwin offerings in Brazil.

Our Lennox industrial tools business also grew nicely in North America and in EMEA, thanks to distribution gains and pricing, offsetting softening of the market in APAC. Normalized operating margin in the tools segment was 12.3%, a 90 basis point improvement versus last year. This increase was driven by disciplined overhead cost management, partially offset by increased advertising and promotion, and negative FX.

Reported net sales in our commercial products segment increased 1.4% to $185.2 million. Core sales increased 9% driven by pricing and strong volume growth in North America due to increased marketing support, as well as strategic investments and expanded distribution in Asia-Pacific. Commercial products normalized operating margin was 9.5%, a 190 basis point increase to last year, due to pricing, productivity, and input cost benefits, partially offset by higher advertising and promotion spend and negative FX.

Our baby segment reported $192.1 million in net sales, a 7.1% increase compared to last year. The Baby Jogger acquisition contributed $18.2 million in net sales during the quarter. Core sales grew 80 basis points, though Graco North America grew high single-digits, as we saw very good POS growth fueled by new innovative products and increased advertising and promotion.

Partially offsetting this growth was a decline in EMEA, driven largely by macro related challenges in Russia and continued softness in the balance of Europe and exits. Our baby business in Asia-Pacific was essentially flat, which is a great step forward compared to last year. Baby's normalized operating margin was 6.4%, down 270 basis points to last year, largely due to increased advertising and promotion spend to reignite growth, pricing actions on the value end of our product line at key retailers to defend our core, and negative FX.

Looking at Q1 core sales by geography, North America core sales grew 5%, with strong results from writing, baby and commercial products, with all five segments contributing to growth. In EMEA, core sales declined 5.2%, due largely to weakness in Russia and baby. However, our normalized operating margin in EMEA continues to significantly improve, exceeding last quarter's all-time high as a result of our extensive transformation initiatives in the region.

In Latin America, core sales grew 25.5% reflecting pricing in the region, and volume gains in writing and tools. Finally, Asia-Pacific, core sales declined 40 basis points as growth in our writing and commercial products businesses was offset by softness in industrial band saw sales.

Moving on to cash and our balance sheet. In Q1 we used $154.3 million in operating cash, compared with a use of $92.1 million in the prior year. This increase in use reflects our $70 million voluntary US pension contribution we made in the first quarter of 2015.

We returned $126.8 million to shareholders in Q1, including $53.2 million in dividends and $73.6 million to repurchase 1.9 million of our shares. As of the end of Q1, we have $363 million available under our authorized open market repurchase plan.

Finally, our balance sheet remains healthy with significant cash on hand and about $423 million of liquidity. Our balance sheet metrics continue to be strong, giving us continued financial flexibility to support our expansion of Project Renewal and for further acquisitions, should we choose to pursue them. With that, I'll turn the call back over to Mike.

Thanks, John. Let's now turn to the balance of 2015. This morning we reaffirmed our 2015 full-year guidance of 3.5% to 4.5% core sales growth and normalized EPS of $2.10 to $2.18. We've had a strong start to the year and believe we are continuing to track toward the midpoint of both full-year guidance ranges.

Our latest view of the full-year negative foreign currency impact to operating income is $0.35 to $0.37, about $0.04 worse than the impact previously communicated in the full-year guidance. We've taken action to cover as much of the new currency impact as possible with line of sight today to at least half the incremental currency exposure. We expect to close the balance of the gap over the next few quarters. The expansion of Project Renewal should help.

Our conviction to steadily increase brand support remains strong, given the core growth acceleration we're experiencing. Our plans to increase brand investment remain unchanged, despite the incremental currency pressure. We expect to increase A&P investment in 2015 by about 20%.

Our 2015 full-year guidance assumes we sustain mid single-digit core growth on our Win Bigger businesses of writing, tools and commercial products; that we recover growth momentum on our baby business with acceleration from Q2 through the balance of the year; that we deliver strong growth on Rubbermaid food storage, offsetting planned declines on the low-margin Rubbermaid consumer storage business; that we deliver strong year-over-year growth on our newly acquired brands of Contigo, bubba and Baby Jogger; and that we offset the negative impact of transaction ForEx with positive pricing, productivity and input cost deflation. And we continue to reduce overheads, which when coupled with growth enables us to increase brand support.

There are two factors that could influence where we fall in our 2015 full-year guidance ranges. The first factor is the planned acceleration of growth in our baby business. We expect baby core growth to accelerate through the balance of 2015 and deliver solid single-digit core growth for the full year.

We're well staged to deliver very good growth in North America and Japan, behind strong innovation, great customer partnering and increased marketing support. We expect strength in North America and Japan to more than cover continued pressure in Europe. We're investing significant marketing support behind baby innovation in 2015 in order to reignite growth, while accepting the related operating income margin compression.

The second factor that could influence where we land on the full year is foreign exchange. In 2014, our team did an excellent job overcoming $0.17 per share of negative currency impact, to deliver underlying core sales growth acceleration and an all-time record normalized EPS result.

Our guidance assumes we do the same in 2015, overcoming an incremental negative $0.35 to $0.37 foreign currency impact, while accelerating growth and delivering a third consecutive all-time high normalized EPS outcome for Newell Rubbermaid. We are on track to achieve this outcome.

Our guidance assumes the major currencies are at current market rates and that we continue to transact and translate at the SICAD rate in Venezuela. While devaluation of the Venezuelan bolivar seems likely at some point in the future, we had access to the SICAD 1 rate through auctions in the fourth quarter of 2014, and have raw material and inventory on hand to support the business well into the second half of 2015, without having to access another auction.

The Company remeasures its financial statements in Venezuela at the end of each month, at the exchange rate at which it expects to remit future dividends, which for us is the SICAD rate. In this context t, we will hold our current position on currency in Venezuela until market conditions, the currency framework or the laws, change. Obviously, the environment remains dynamic and we will continue to adapt our plans and outlook to changing conditions.

While we do not provide quarterly guidance, let me make a few comments regarding the phasing of this year's sales and earnings. While we've had a terrific momentum on our writing business, having delivered core sales growth of 9% in Q1 2015, on top of year-ago Q1 core sales growth of 7.9%, as we previously communicated our Q2 core growth rate should step back from these levels, related to the shift of some back-to-school shipments on writing from Q2 to Q3.

As a consequence, and as previously shared, we expect our Q2 total Company core growth rate to be toward the bottom of our full-year guidance range in Q2, and our Q3 core growth rate to be at or slightly above the higher end of our full-year growth guidance range. That said, as a result of the building momentum in the business and the strong start to the year, we now expect first-half core sales growth to be at or near the middle of the full-year guidance range of 4%, above our prior expectations.

Normalized EPS growth will likely skew towards the back half of the year, driven by two factors. First, the Q2 negative foreign currency impact is now expected to increase to $0.11 to $0.12 per share versus the $0.08 impact experienced in Q1. Q3 should experience similar headwinds to Q2, with a negative impact beginning to temper in Q4, assuming current market rates.

Second, the majority of the incremental advertising and promotion investment planned for the balance of the year is tied to innovation launch and merchandising windows which are set to occur in May, June, July, and August. In this context, we expect the first-half normalized EPS growth rate to be just below the bottom of our full-year growth guidance range of 5%, and the second-half normalized EPS growth rate to be just above the top of our full-year growth guidance range of 9%.

So let me close by saying we've had a very good start to the year, delivering strong, competitive results. The Growth Game Plan is accelerating. We're investing to create advantaged brand development and innovation capabilities and are backing them up with category-leading marketing investment.

These investments have been enabled by our determination to make Newell leaner and more efficient. And when coupled with actions to strengthen our portfolio, are yielding both growth acceleration and margin expansion.

There is more opportunity ahead of us than behind, and today we announced a new commitment to deliver incremental annualized overhead savings of $150 million by the end of 2017. A significant amount of these new savings will be invested back into the business for further growth acceleration.

But as we scale our brand investment levels, an increasingly higher proportion of the savings will flow through to margin and earnings. About half of the Project Renewal Phase 3 annualized savings of $350 million will flow through to brand investment and half to the P&L in earnings.

We're well on our way to transforming Newell Rubbermaid into a growth leader in our industry. With the kind of growth acceleration we experienced in Q1 and a continued aggressive posture on costs, we will simultaneously transform the margin structure of the Company, delivering what I think can be a competitively differentiated story of both category-leading growth acceleration and margin development. That is the Growth Game Plan into action. That is the new Newell Rubbermaid. Let me now pass the line to the operator for questions.

Thank you.

(Operator Instructions)

Your first question comes from Dara Mohsenian with Morgan Stanley.

Hi, Dara.

Dara, your line is open.

Sorry about that, I was on mute. So your guidance this year implies mid-20%s FX-neutral EPS growth. Obviously you've got a commodity benefit and you're pushing hard to offset FX.

But that level would still be much higher than your peers and your long-term guidance despite ad spend being up. And you've now announced incremental cost savings that will help drive 2016 with half of the Phase 3 savings dropping to the bottom line.

So the question is, can you give us some insight on if the strong underlying EPS growth in 2015 is giving you more confidence for 2016 and 2017? Or why we shouldn't believe that some of this strength from this year is sustainable as you look out longer term, and could allow you to beat the previously outlined EPS goals.

Thanks, Dara, good question. Obviously we're pleased with the start to the year. It strengthens our conviction on multiple dimensions. It's good evidence that the framework that we laid out in the Growth Game Plan is really beginning to work.

We certainly will, through the new tranche of savings captured in this morning's announcement, have more flexibility than we did when we guided the acceleration phase of the Growth Game Plan to greater than 4% core and greater than 10% EPS growth. So I think your challenge on the future upside potential is real.

The thing that I would say is that the proof of the pudding's in the eating. So we're one quarter into 2015 and we want to make sure we demonstrate consistency through the acceleration phase before we articulate a different point of view forward.

Of course, we will always have the option to think about a more aggressive deployment of our selective portions of our portfolio into what I would describe as white space markets. We've talked about China on writing for 2016, but there's plenty of other white space out there.

Any decision to let the savings flow to greater than 10% EPS delivery would have to be measured against the opportunity to set up a different future by a more aggressive deployment of the portfolio, particularly writing, than what we've committed to do at this point. Part of that will be governed by our organizational capacity to be able to handle that, but that will be the opportunity cost of letting it flow to EPS. But we will come to that fork in the road probably sometime in 2016 second half, or 2017.

Okay. And then on the writing instruments front, obviously you continue to post exceptional results there. How sustainable is the market share gains behind that business in your mind, as you look out over the next couple of years? What's the competitive response you're seeing and are there learnings from the success in that business you can apply to other businesses?

The reason writing is performing so well is because of these capabilities that we've built, both on the development side of our agenda, the brand development side of our agenda, with a strengthened pipeline of innovation, strengthened advertising, sharpened packaging, really some creative marketing programs, coupled with a real focus on getting the right assortment to retail, to get the right merchandising frequency at retail.

So it's a combination of the first two pillars of the Growth Game Plan, that's focused on making our brands really matter. And that's focused on creating commercial value from the ideas we're driving through our selling and our delivery organization more broadly.

So that's beginning to work really well, I'd characterize. I wouldn't say it's perfect. I'd say there's more opportunity to strengthen the algorithm there. And we have a stronger pipeline of ideas coming in 2016 than we even have in 2015. So I'm encouraged.

I don't think we've seen the full competitive response yet, Dara. We'll see that in Q3 when we come to that critical merchandising window. We are very, very well staged for that moment in time, but I think we will start to see more competitiveness from the folks we're up against.

The thing that they will have a hard time competing against is the capability investment we've made. We've gone from a holding Company to an operating Company and released all these costs that built a set of capabilities that cross over the top of these five segments. That puts us in a position that is competitively advantaged capabilities relative to the folks we're up against. I think that puts us in a sustained advantaged position versus the others.

That, coupled with the cost-out that's enabling us to put money behind the brands, sets up a pretty good algorithm that should enable sustained share growth in our home markets and then perhaps more importantly long term, the deployment of our portfolio around the world. That algorithm, that model, is as relevant to writing as it is to tools, as it is to the core of our commercial products portfolio, and increasingly to elements within home solutions and geographies within baby.

And so when we think about the portion of our home solutions portfolio that could benefit from the same principles and same approach, food storage, our recently acquired beverages businesses, these offer similar types of opportunities long term. And the challenge to us is to create the P&L capacity to be able to play for all those opportunities.

So I think the capabilities are transferable, even though the categories are quite different. That's the model we're building. I think the evidence is building that in fact the theory behind the model can work. And time will tell how effective we are at driving towards the upside.

Great, thanks.

Your next question comes from Bill Schmitz with Deutsche Bank.

Hi, Mike, good morning.

Hi, Bill.

Can you break down the contribution of sales volume versus price and then how you think about that going forward? Because it looks like -- I know you're much less resin-exposed than you used to be, but resin's clearly fallen off a cliff. So maybe the puts and takes on the resin deflation versus some of the trucking inflation and probably some SG&A inflation as well. Then I have a follow-up, if you don't mind.

Sure. Bill, unlike other businesses I've worked in and other people you cover, the ability to tease apart volume from pricing's a little bit muddled here, given our systems and the algorithms we've got behind those systems. I'll give you directional answers, but not as precise an answer as perhaps one of my peers could provide.

Clearly we have a lot of pricing in the algorithm this year as a result of our need to cover the transaction, ForEx issues around the world. That's true in Europe. That's true in Latin America. We've even taken pricing on writing in North America. It's true in Canada where we've got Canadian dollar, US dollar issues. And across parts of Asia-Pacific.

So we're doing the tough slog of pricing to cover transaction ForEx. That comes with some risks on volume, although quite frankly, we haven't seen the volume risks materialize at the rate some folks might have expected them to.

But I'd say more than 50% of our growth this year is going to be pricing related. That's not too dissimilar to where we've been in the prior year, but it may skew a little bit further in that direction.

And we'll have to watch the volumes. Particularly as resin and other input costs fall, our ability to hold the pricing we've taken in response to the transaction ForEx impacts we've had, may be challenged. And that's one of those things we have to watch and we're very vigilant on, because we're in the business of selling more stuff to consumers, not just at a higher price.

But we've got our eyes on that one, and I think we've got the right balance in what we've done to date. But we watch it very closely.

And out of the sort of mesh with the massive resin deflation we've seen. I know it's an special situation on the transaction offset, but do you think you can hold pricing in the US, given how dramatically resin's declined recently

The part of our portfolio where that would be the biggest issue is the part of the portfolio that we're pulling back from. Where we don't have differentiated propositions, it's very difficult to hold price when your input costs are falling.

So the consumer storage business that we're really pulling back hard on the throttle on, is the place where we're most vulnerable. And in part, that's why we're moving away from that portion of our business and surging into the place we can create a point of difference, which is food storage.

We said that there are three food storage platforms that we want to develop over time. One is food on-the-go and portion control. One is a better approach to storage in-home and in-fridge and in-pantry. And the third is food preservation, all under this umbrella we call food storage.

The work we're doing to build our propositions in our products in this area will allow us to command a premium price, because they will have a product-based point of difference and the brand promise will provide the right emotional connection to consumers. That mix of activities is what allows you to hold price. And retailers want us to bring that kind of value proposition to their shelves so they can hold price.

It's in the areas where you can't create those points of difference where we will have to be very careful and watch the volume. And we may not be able to hold price in every area where we don't have as differentiated a set of propositions. But that, in fact, is why we're contracting that portion of our portfolio and taking the same manufacturing capacity that supports that business and transferring it to support this differentiated platform in storage and beverages that we believe in.

Got you, great. The follow-up is, is there any disconnect between sell-in and sell-through in some of these international markets? Because obviously distributors in a lot of other categories have been destocking as they adjust to the macro environment and the currency moves.

And then what would the impact be if you guys had to go to the SIMADI rate in terms of EPS? I'm sure it's in the 10-Q, I just haven't had a chance to read it yet.

Those are different questions, Bill. Let me handle the sell-in, sell-out question then I'll pass to John on Venezuela.

There's always balancing issues that are going on, either in your developed world retail partners and in the distributed trade. We've experienced that. We don't tend to call it out because I think of it as a normal course of doing business, this rebalancing that retailers are always doing and trying to drive inventories out, which does constrain your ability to drive sell-in. That's for us to deal with.

Unless there's a huge event, I wouldn't call that out as a reason why we're dealing with revenue growth issues. So I don't see that's as materially changed, even though there are a lot of people focused on inventories right now. And I'm pleased that our results in North America were as strong as they were in the context of that.

In the distributed trade this balance issue is a real topic that you have to stay on top of. As you know, we had our own issues in China on fine writing probably two years ago, and we lived through that transition and rebalancing in that time frame. And there are always individual distributor issues that you have to wrestle with.

We do not see a macro issue that cuts across geographies. There's always individual issues you have to be dealing with, with specific distributors. We've had some challenges with our distributor base in Russia, not related to inventory positions but related to their ability to access enough rubles to buy our dollar-denominated baby gear. But again, that's not inventory related, that's currency related. So John, on SIMADI.

Yes, so Bill, if we move for example to SIMADI, so if you assume we transact and translate in SIMADI, for example, on today made that switch, that cost to us on an EPS basis would probably be about $0.05, give or take. The big question for us would be whether the government would even let us transact at SIMADI because obviously the impact to the marketplace for school supplies goes up dramatically in terms of the pricing. But right now, with the partial year behind us, it's probably about $0.05.

Great, thank you, guys.

And your next question will come from John Faucher with JPMorgan.

Thank you, good morning. Two questions here. First off, heading into this year it seemed as though there was some optimism on the consumer coming back. From what we've seen, it doesn't appear that that's happened.

Organic core sales growth seems be a little bit better. Can you talk about how much you're seeing? Maybe the underlying consumer come through versus where you feel like you're executing? How much of that improvement you're seeing is self-generated versus macro?

And then, if we look at the medical cart business, if we included it in both periods, the core sales growth was a little bit lower. But there was a big year-over-year decline there on that medical cart business. Is that the type of decline you were expecting? Or should we see that moderate if we try to map that out over the balance of the year? Thanks.

Thanks, John. I would have expected to have seen more consumer momentum in the US than we have to date. I would have thought that the reduction in energy prices, reduction in gasoline prices, would have driven a change in trajectory on purchasing behavior.

We obviously see positive trends in attitude through the consumer confidence data in the US, but has that translated to or converted to a difference in actual behavior? I don't see it yet. But I'm optimistic that over time that should come into play.

We have not assumed in our guidance, a macro recovery in the US beyond the conditions we're living with today. So if that would occur, that would be a positive and we would have to think about the implications for our business and how we manage things.

What I've said from the time I've joined is that I think that ideas trump the macros. That we're in control of our own destiny, whether it's the choice to deploy our portfolio into a new market, or whether it's the opportunity connected to building our share position in these categories.

We also have, though, the obligation as the leaders in most of our categories, if not all, maybe one exception, we have the responsibility to actually lead category development, not just drive share shifting. And so our ideas are designed to expand the size of the pie for us and for our retail partners. I think we're increasingly doing that well, and in some cases doing that better than others, and in some cases better than I would have expected us to be able to do at this point in the transformation.

So I'm encouraged by what we're seeing. I'd say, John, on balance our progress is largely driven by actions we're taking as opposed to some macro tailwind. So that's one part of the question.

The other question was on the medical carts business. This business declined just about 12% in 2014, and we saw a further decline in the first quarter more amplified. This is a spikey business. This isn't a business where you get continuous replenishment.

If you've got a new order that comes in, it's a lumpy profile for revenue flow. And so we were up against a very strong quarter in the first quarter, but the trends in the business have been with us for a while. I guess that's all I would say, because we're in the midst of a sale process, John, at this point.

Okay, but just to clarify, it sounds like we should expect excluding that to benefit core sales over the balance of the year, but probably not as much as we saw in the first quarter? Is that fair?

Definitely not as much as the first quarter but you should expect that core sales will benefit by a bit. It's not a big business, as I disclosed, it was $65 million last year. But we should see some benefit.

Okay, thank you.

We'll now take our next question from Bill Chappell from SunTrust.

Hey, Bill.

Thanks, good morning. Digging into on the baby side, I'm not sure I fully understood. In the first quarter I think you talked about North America being up high single-digits. Is that including or excluding the recall from last year?

And I guess if it's including, can you maybe help us understand how it accelerates from here? I mean, in terms of what do we see that really gets it off of where you won't have the benefit from a recall for the next two, three quarters.

Yes, let me take North America and then I'll pass to John to talk to you about what's going on in Russia and Europe on the baby business. That's the down elevator we're facing into at the moment.

We're pleased with both the POS growth in North America and the net sales growth in North America on baby. We expect that growth rate to accelerate through the balance of the year. We've got a stronger innovation platform.

And we obviously had pretty easy comps in Q1. We'll have easy comps probably April, May as well. Because if you remember the recall time frame, it was really from mid-March through mid-May that we were really on our heels.

So we're going to have some pretty easy comps in baby for that period of time. And we see that -- you may not see that -- but we see that in our POS data year over year. Very strong, stronger than the growth rate that we've communicated which is sell-in based.

And so we think things are setting up for a very good year in North America on baby. We're being quite aggressive to defend our flank from the low-cost side of the portfolio. But we've got a tremendous pipeline of innovation, and we are spending money on the brand through television advertising and we're getting great partnering with our key customers. So I'm quite optimistic about what baby will be able to do in North America.

In Japan, we've turned the corner. We have a good pipeline of innovation and we've lapped, if you remember, the consumption tax issue in Q1 of 2014. We've lapped that tax increase which created an artificial spike in the first quarter of 2014, that we've now passed. And so we have, again, easier comps but more importantly, a stronger program in Japan for the balance of the year than we did last year at this time. We can see that all unfolding.

Europe's more challenging. There's two pieces to Europe. There's the underlying issues in Western Europe, but then there's some challenges in Russia. So, John.

So Bill, Russia, as Mike said, really did with the decline of the ruble and the challenges our distributors have in terms of paying us for our goods which are sold in dollars, it's been unfortunately a drag on the overall segment. So it shouldn't sour your interest on the overall recovery of the baby business, because as Mike said, North America's doing extremely well.

The balance of Europe has been soft for us as well. We've got a little bit -- we got the last piece of our exits that's flowing through as well in the quarter, of our planned exits, and then some overall softness. We do have new products that should be hitting in Q2 that should give us hopefully a slight bounce back, and then help mitigate the further challenges that we expect to see in Russia over the balance of the year.

Got it. And John, while I have you, just on the housekeeping side. On the tax rate as we look forward, is there a catch-up in any specific quarter to get you down to 24%? Or should it be slightly below that level for the next three quarters?

Right now I would assume it's going to be relatively flat to get us back to 24%. We still have bits and pieces that move in and out, but nothing necessarily line of sight to overall.

I'd also remind you on the net income mix by quarter, Q1's our smallest quarter in absolute terms. So you're getting a mix effect on tax rate that will happen as the top line and bottom line, in absolute terms, grows Q2, Q3, Q4.

Thanks, that's helpful.

We'll now take our next question from Chris Ferrara with Wells Fargo.

Hey, Chris.

Good morning. So Mike, obviously you guys have opinion increasing advertising pretty substantially. Sales are reacting in different places. I know you started to get into this at the last Analyst Day, but I was wondering if you can step pack and explain what you're seeing on the sustainability of POS following periods where you do advertise?

In other words, how sticky is the business? Have you been able to raise the base of business with the advertising, which has been episodic by business. It's another way of getting at the returns on that investment question, but if you can explain some of that it would be really helpful.

This is the big question also, Chris, and we're just beginning to be able to lap periods where we spent real money. And encouragingly, in writing in particular, we're seeing year-on-year growth.

I won't quote POS data, but just look at the revenue data. So 9% core sales growth in Q1 of 2015 up 15%, up against 7.9% core sales growth in Q1 of 2014. You're beginning to get growth on growth. And we're seeing really strong POS growth in writing in the US, and so that encourages us to continue to spend.

However, the one thing I would say is Richard and his team, Richard, Mark and the team, Maria, are looking at this really, really closely. Because we have to decide how much money to layer in there and whether the next dollar spent is wise to be spent in our home markets. Or whether we ought to be using that money to support the more aggressive deployment of our portfolio into white-space geographies.

And so this question is really quite pivotal, and we're asking it across every one of our businesses. It's a little early for us to declare whether we've got the balance right or not. Encouragingly, we have very, very strong POS in the business in Q1. And we're spending significantly more in Q2 than we did in the year-ago period. And we'll start to get that read.

But it is one of the big questions we have to reconcile for ourselves, which is how do you balance where to deploy the money. And then we have questions that we're asking ourselves across categories. So are we getting the same kind of growth yield for $1 invested in commercial or $1 invested behind innovation and tools or $1 invested in Internet advertising on Goody?

So the return on -- the growth yield. Not the return. I don't want to confuse you, we're not looking at it as a financial return. The growth yield for these dollars is something we're looking at very, very closely. The challenge we've got in our business relative to others that I've worked in, is that we don't have as broad a set of syndicated data to be able to marry GRPs right up to sell-out data. We're building some close proxies for that, and we'll learn more through the year.

That's helpful. And as a follow-up, if you unpack where the growth is coming from, because obviously those Win Bigger businesses are doing real well, if I told you a year and a half ago that you'd be putting up these kinds of growth rates and growth on growth in Win Bigger, would you have thought that core would have been pacing even better than it is today? In other words, the other businesses may be lagging a little more than you thought. If you could explore that a little, it would be great.

You know what it's afforded us the ability to do? Is to pull back harder on the throttle on the portions of the portfolio we were going to have to come to grips with some other way over time. So there's no way I thought we would have been able to pull back on consumer storage as aggressively as we did last year.

And we've done it again this year, as we pivot that injection molding capacity to food storage. It's the same injection molding presses, just different molds. So we're able to shift the capacity within our manufacturing network to the more value-accretive portions of the portfolio where we can create differentiation.

If I look back, I never would have thought we would have been able to pull back as hard as we have. I also wouldn't have thought we would have been able to pull back as hard as we have on the less attractive portions of our European business.

And so there are two things that we've done that have constrained core sales growth that I think are really important strategically for the future, and set up perhaps the potential to grow even faster than we originally envisioned on a long-term basis. That we've been able to do as a result of the Win Bigger businesses being more responsive to both the new capabilities that we've deployed and the investment we put in the business.

Thanks, that's helpful. I appreciate it.

We'll now take our next question from Lauren Lieberman with Barclays.

Hey, Lauren.

Thanks. Hi, good morning. I wanted to talk a little bit about two things. One was a follow-up on baby. I think there was a comment about adjusting some price points at the low end in the US. I was hoping you could further follow up on that.

And then secondly was on the tools business. Just curious your view on market growth in the US and where the soft spots were. Was China significantly worse or keeping pace with what we've seen? And any kind of slowdown you've seen in Latin America there. Thanks.

Hey, Lauren, it's John. So with respect to baby, as we've talked about before, we see some competitive pressure with some of our guys vertically integrating within the space right now. And that obviously puts some constraints overall on our core.

Thankfully with our brand and with a good supply partner, we're able to defend that core. And as Mike mentioned before, we'll fight to preserve that volume at some of our key retailers. And that's in our plan and that's in our long-term interest.

With respect to tools, right now our tools business does seem to get a nice tie to industrial output, certainly on the band saw business. So we're getting some benefit in North America right now, as industrial production seems to be still going fairly well, even though consumer confidence may not be up.

With respect to Asia, so we're definitely seeing a slowing in China and a little bit in Japan on our band saw business, which overall, is a little bit of a drag on the tools business. Then we're still doing well on Latin America, but certainly starting to see signs of that slowing a little bit. But of course we're expanding our offerings in Brazil, so we definitely have that benefit. But Latin America, we are starting to see a little bit of the signs of the weakness but maybe not as much at some of our competitors there.

Do you think that for this year tools ends up among the Win Bigger businesses being at the lower end of the growth rate range, macro-related?

I don't think it's macro-related. I think we're lapping some initiatives from prior year in the first quarter, the launch of the Brazil re-stage of the business. You had all that pipeline that we had to lap, the second tranche of the Brazil new items we lapped in the first quarter.

But no, I think tools is going to be a mid single-digit type of grower this year, maybe a little stronger. We're taking the portfolio from Brazil and we're in the midst of deploying it into the Philippines. There are other opportunities across Southeast Asia to do the same. I'm more optimistic on tools, to be honest with you.

Our issue is not macro related, I don't think. Our issue is really -- we're not macro dependent right now. It's more, with the exception of industrial products as John said, this is more about what we're doing versus what we did year ago, and the timing with which we're going to do the things we've got in the plan for 2015. But I do think tools is a mid single-digits grower for us.

Okay, great. Thank you.

We'll now go to Wendy Nicholson with Citi.

Hi, good morning. Just a follow up, first on the writing business. I think last year when you put up such strong organic growth in writing, some of it came from distribution expansion. But I didn't hear you call that out today in terms of contributing to the 9% growth. Do you feel like at least in North America you're distributed where you need or are there still pockets of opportunity?

Then second, as a follow-up, also on writing. Can you tell us roughly how that's split between North America and Latin America. If you did, I apologize, I missed it.

Can I have Nancy follow up with you on the split of the writing growth rate?

Okay.

Because I don't have it at my fingertips. Both businesses -- we grew writing strongly in both North America and Latin America and we grew writing in Asia as well. So we've had a good run on writing.

In Europe, we had a choppier first quarter, but in broad terms we had strong growth. More pricing-driven growth in Latin America, more volume-driven growth in North America, and market share-driven growth in North America.

Your question's a great question. If I had Joe Cavaliere, who is our Head of Customer Development, in the room with me right now and he was sitting across the table, I'd be winking at him. I think we still have a ton of opportunity left in our home markets to get our brands more broadly distributed with the right assortment in the right channels. In fact, I think there's more commercial innovation opportunity on our writing business at the moment than anything else.

And so we've made very good progress. We see what we call total distribution points, TDPs, up. And we see our share of TDPs up in the US. But I still believe we are nowhere near where we could be with respect to depth of availability and having the right assortment in different channels.

We're not yet maximizing the revenue per linear inch of the store shelf. We have a ton of opportunity to get that right. It's not easy work; it's collaborative work. It's work that needs to be validated through analytics in partnership with the customer to demonstrate why resetting shelving to the perfect assortment creates value for them and conversely for us.

And so it's painstaking work. We've made good progress, but we have a lot more opportunity to get what we describe as the perfect store, in place with perfect assortment. And it's true in the US; it's true in Canada. Certainly true in Europe, in the UK and France and in parts of Mexico within our mass channels.

So there's a lot of opportunity still in front of us. We're making good progress. I don't mean to be too negative about it for our own people but we've got more we can do.

Terrific. I had a second unrelated question, which is the $150 million of incremental cost savings, sounds like that's SG&A and you said overhead-related. But how much of that is related to either stranded overhead for some of the brands that you're selling? Or incremental synergy opportunities for the brands that you've bought? And how much of it, if you can tease it out, is the core business?

It surprises me that you've done so much restructuring. Newell did even before you got there. It's amazing that you keep peeling back the layers of the onion and finding more opportunity.

Hey, Wendy, it's John. The vast majority of it is basically the core underlying business. There's not a whole lot that's left from the stranded dispositions. And your recognition is fair, although I think the previous projects had been more focused on manufacturing, distribution, footprint and so forth.

I'm not sure we've taken a hard enough look ever at the SG&A structure on the overheads piece. And certainly a lot of our peers are starting to do that. So we recognize that we still have plenty of opportunity overall.

Our overhead ratios are just below 20% right now. So go benchmark that against anybody in our industry and you'll see that that's quite high. The exception might be a couple of the tools and commercial products industry players.

So we have a lot of opportunity. We have to do this in a disciplined I way, Wendy. And part of this is a legacy of having operated in a disaggregated structure.

We have to be disciplined because we have to change the way we work to enable the costs to come out. We did a lot of the macro structural work already, but now we need to get into the way we transact our business in order to release these overheads. And then we've got too high a real estate footprint costs. Pretty much every line item that you could look down, you could challenge.

And so one of the reasons I was so happy that John was interested in doing this, is he's proven through the European experience, how to go about doing this. He's the perfect player to lead this charge on behalf of the Company, given his experiences to date. We're going to get this sorted. This is one of the things that will give us the degrees of freedom within the P&L to make some of the choices that Dara was challenging us on earlier.

Terrific, thanks.

Our next question comes from Joe Altobello with Raymond James.

Thanks, good morning, guys.

Hi, Joe.

Not to harp too much on baby, but I did want to go back and see where the first quarter came in relative to your expectations, number one. Number two, do you think it could accelerate fast enough to get into that 3.5% to 4.5% range for the full year?

Yes.

(laughter) Okay, in terms of expectations, was it in line or --?

Lauren [Horn] and her team are listening, I'm sure. Hopefully they'd tell me what they think, but I hope we can get to solid single digit-growth on baby globally, despite the headwinds in Russia, despite the challenges that will persist in Europe through the balance of the year. I would not get too optimistic about what we're going to be able to do in Europe, but we've got a great setup planned in North America and in Asia.

And then we've had all the conversations we need to have about strengthening Europe as we move out of 2015 into 2016. We've got a better innovation plan coming. In fact, there were meetings in London this week with our two biggest customers in Europe that went very, very well, designed to set up 2016 for success. But 2015 will be muted growth, maybe a slight decline in Europe that will cover through progress in North America and Asia.

Got it, okay. I was just trying to put the 80 basis points into some context there. Secondly, in terms of the acquisitions, it looked like you're looking for a bigger contribution from them than you were previously. Maybe an update on where those stand, Contigo, bubba and Baby Jogger, obviously. Are you seeing more growth opportunities or distribution expansion from them?

We couldn't be happier with these acquisitions, they're just beautiful brands. And we've got great people that we've brought into the business with the brands, and so we couldn't be happier. Baby Jogger, again, we're talking 2016 innovation on Baby Jogger now. And we've got some really interesting things that we're going to be doing then.

Contigo and bubba, awesome brands. Huge distribution opportunities, still in the US and the world to play for with these brands. Again, the constraining factor on these will be our P&L capacity to be able to place all these bets.

But we're really pleased with these categories, and they are, quite importantly, all growth accretive. With new investment that we're going to be able to put behind them, we would expect to be able to sustain, if not accelerate, the growth momentum in these businesses. And we're right where we hoped we would be with them at this point in time.

Great, thank you.

Our next question comes from Olivia Tong with Bank of America.

Thanks, good morning. Want to ask you about gross margin. I know there's lots of puts and takes there. You obviously had a strong start to the year. Commodities do get better as the year progresses. I know with the baby commentary, there's probably a little bit of a mix drag as the year progresses. Can you continue to accelerate gross margin from here, to continue fueling even more incremental spending?

We were pleased with the start on gross margin. It was actually a little bit better than we anticipated it being. Part of that was mix-related. But a lot of it had to do with how aggressively we dealt with our transaction ForEx issues, and some progress that we're making on supply chain.

The first half of Project Renewal, the $200 million that we the Board had previously authorized us to spend, is very much focused on gross margin. In fact, most of it's in gross margin, a small piece of it is in overhead. And so we should -- if input costs continue to fall and hold at this level, and we're able to capture the benefit of the strategic pricing work we're doing through our new go-to-market programs, we should be able to deliver in 2016 and 2017 quite nice gross margin progression.

2015 will be challenged by the mix effect of baby recovery, home solutions recovery. Again, remind you, our acquisitions are dilutive at gross margin. And so the growth there will work against us, although we're making great progress within each of those acquisitions on gross margin improvement.

So 2015 will not be as impressive a year in terms of gross margin delivery for all the reasons, including the transaction ForEx pressure we have. But assuming things hold together from a currency perspective and that we deliver the first $200 million of savings in the third phase of Renewal, which are almost all gross margin related, we should be able to see some nice movement forward on gross margin in 2016 and 2017.

Got it, appreciate that. In terms of the US and capturing a little bit of the lift from lower gas prices, lower commodity prices, why do you think you're not seeing more of a lift, particularly in the US?

I think the industry's not seeing the lift. I'm making that judgment based on the retail comps I'm seeing, not based on our movement. We're seeing good momentum. I'm reluctant to ascribe any of that to the macros, based on the retail comps I'm hearing.

There's some exceptions to that. The home centers retailers are doing quite well. But if I look at the mass channel, I don't see this massive shift that I would have expected from Q3, Q4 to Q1, yet. And we don't see it in the GDP growth either. I'm reluctant to call upside in the macros. That said, doesn't seem to be impacting our ability to drive a sequential improvement in our growth rates.

Fair enough. Thanks, Mike.

Our next question comes from Jason Gere with KeyBanc Capital Markets.

Good morning. I got to be honest, I think every question and topic has been exhausted. So the only thing I'll ask is if you could talk a little about the cash flow for the year, cash flow from operations, how we should see that kind of playing out. Obviously the first quarter was a use of cash. So wondering if you could talk about the priorities, how you're thinking about the next 12 months.

Sure, Jason. So we anticipated using -- we always use cash in the first quarter, so nothing new there. And you saw it was a good opportunity for us to put money into our US pension plan, a wise investment for us. Once we back that out, we're almost flat year over year on cash in Q1.

We'll consume cash as well in Q2, and then eventually turn positive in the back half overall. So typical for our business overall. That said, net-net we should land cash. We're not going to guide to it, but fairly consistent with where we have in the past.

But we do know that we have a lot of opportunity still on working capital. So that's one of the things that, in addition to some of the other projects Mike's tasked me with, that we need to tackle this year, is to improve our working capital position. We're starting to sketch out the framework for doing that in a comprehensive yet collaborative way, with all the stake holders including our suppliers.

Okay. In terms of the new cost savings, the update there, is there any change to that five-year target on cash flow from operations you guys laid out at one of the of past analyst meetings? I think it was like $4 billion.

I know obviously acquisitions have stepped up a little bit earlier than anticipated. I was wondering if there was any update to the longer term cash flow outlook.

We haven't updated that since, gosh, I think probably back-to-school. Highlighted at CAGNY. It's a good challenge; we should update that. We'll update that for -- the next big conference we're at is Deutsche Bank. So we'll make sure we provide an update that reflects all the M&A that we've done, both the in and the outs.

I don't think it will make a materially huge difference in the overall framework. Our capital allocation strategies are going to remain the same. We will hold our dividend payout ratio in that 30% to 35% range. We're trying to peg it towards the high end of that so that we're competitive with the fast-moving consumer goods guys.

We're obviously buying back our stock because we think we're undervalued. We continue to believe we're undervalued, given the agenda that we're deploying and the results we're beginning to put up, and the fact that they are competitive with some of the best that are out there.

And then obviously we have an appetite to continue to strengthen each of our five pillars through bolt-on M&A. And we will continue to do that. We have lots of opportunity there. We should set that up a little bit more clearly than we have in the last couple of big conferences that we've done, and we'll take that on.

Sounds good. Thanks, guys.

Your next question comes from Steph Wissink with Piper Jaffray.

Hi, good morning, everyone. A really quick question from us on the A&P increased spend. Can you talk a little about the strategies? And are you testing new strategies that you're finding are working better than your expectations? And then Mike, if you could talk about how widespread those A&P increases are across the globe, or is it concentrated by region?

Good question, Steph. We're comfortable putting the money in because we're validating what we're spending behind in advance of putting money behind it. So every piece of advertising that airs that we invest behind goes through a battery of tests. And we've had very, very strong advertising testing results.

We use the same methodology that all of the academy consumer goods companies would use, same supplier, same methodology. And we test our advertising against all industry ads, so we know how they're performing versus the best. And they've done extremely well in pre-testing before we take them to market.

So we have quantitatively validated the ads we're spending behind. That's the first threshold before we'll put any money behind a piece of advertising.

The second is driven by portfolio strategy and the where-to-play choices we're making in the business. Writing has gotten a disproportionate amount of investment relative to the rest of the portfolio because of its Win Bigger status, and because it is proving to be very, very responsive to the investment.

We are increasingly broadening the geographic footprint for that investment. We started that in 2014. We will increase the amount of that money that's being deployed into markets like Mexico and Colombia, Brazil, UK, France, Italy. Our geographic footprint will continue to broaden within the writing portfolio.

On tools, we've seen good responsiveness when we spend behind advertising that's new-product focused. When we do what's called anthematic advertising on the big brands, we don't see responsiveness. We've pulled the money off of the anthematic campaigns on tools and put it behind new items, both in the US and in Brazil, for the biggest investments have been made up until now. We will evaluate whether to continue to broaden that advertising, but again, it will have to be measured against the upside potential of deploying the money against a writing opportunity.

We're spending more heavily than we ever have before on baby to reignite growth and we will continue to do that. That advertising is largely new-item focused and seems to be really yielding a good sell-through impact. So we're going to continue to play that story out and at the end of 2015 we'll evaluate how much more we should be deploying behind that brand.

The Graco brand in particular is one of our strongest brands from an equity standpoint. So there's great resonance when we spend money behind it and we're seeing when Graco advertising that is new-item focused is coupled with great merchandising, we get this synergistic effect on sell-through. So we're going to continue to play that out.

We just began advertising Calphalon in the fourth quarter of 2014 and we're in the midst of evaluating that. That looked to have been a positive experience for us. And then we have opportunities in many other places that we'll have to govern the deployment of the money against, until we've fulfilled all the opportunities on our higher-priority brands.

So that's the logic behind which we're making choices. I think over the next few years you should expect us to be able to tell you that an increasingly higher proportion of our total media spend is outside of North America.

Great, appreciate the response. Best of luck, guys.

Thank you.

Your final question comes from Rupesh Parikh with Oppenheimer.

Good morning, thanks for taking my question. I just wanted to touch on, go a little further into your core sales growth. Clearly you mentioned in your press release a number of times benefits from the strong innovation. Is there any way to quantify how much more growth you're seeing right now from new innovation versus maybe last year?

We don't quote that number externally. It's considerably stronger. The number that we talk about is the innovation rate in the business. And we're pressing towards an ambition that to compete with the best in our industry, which typically is measured by this metric of, some people call it by tally rate, other people call it innovation rate.

We're looking to try to get our innovation rate to having about 30% of our revenue generated by innovations launched in the last three years. That's the gold standard that most consumer goods companies would point to.

We're getting close; by 2016 we'll with there. We're getting close; we're not quite there yet. But we're certainly way stronger than we were a year ago, and that will continue to progress as ideas come through the funnel.

Okay, thank you.

This does conclude our question-and-answer session. I would like to turn the call back to Mr. Polk for closing remarks.

Thank you. I think it's probably us talking to ourselves, because I don't know that there's anybody left on the line. I wanted to thank everybody for what were a great set of questions.

We're very proud of the start to the year we've had. We think it provides good evidence of the progress we're making as a Company. And we're excited to be able to continue to play forward for the upside in the business. Thank you very much.

Thank you. A replay of today's call will be available later today on our website, newellrubbermaid.com. This concludes our conference. You may now disconnect.