Good morning. My name is Sean, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Fortune Brands First Quarter (sic) [Second Quarter] Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Mr. Bruce Carbonari, Chairman and CEO of Fortune Brands. Sir, you may begin your call.

Thanks, Sean. Good morning. Welcome to our discussion of Fortune Brands 2011 second quarter results. Before we begin, please note that our presentation includes forward-looking statements. The statements are subject to risks and uncertainties, including those listed in the cautionary language at the end of our news release and our actual results could differ materially from those targeted. This presentation also includes certain non-GAAP measures that are reconciled to the most closely comparable GAAP measures in our news release or in the supplemental information linked to the Webcast page on our website. I'm pleased to be joined today by Craig Omtvedt, CFO of Fortune Brands, as well as the executive leadership of our 2 brands independent companies; from Beam, CEO, Matt Shattock, and CFO Bob Probst; and from Fortune Brands Home & Security, CEO, Chris Klein and CFO, Lee Wyatt. As we approach the planned separation of our 2 remaining businesses, both Beam and Home & Security are outperforming their markets and will be ready to hit the ground running on day one as independent companies. As expected, earnings per share before charges and gains for the second quarter was modestly lower due to the challenging comparisons we highlighted 3 months ago. The guidance we highlighted included: first, the $0.10 to $0.15 per share benefit to the year-ago quarter, primarily from the mid-2010 expiration of the U.S. homebuyer tax credit; second, the diverse [ph] impact in year-over-year costs for raw materials and transportation; and third, the impact in the current-year period of our double-digit increase in strategic spend to more profitable long-term growth. Looking at the businesses briefly. Beam achieved record second quarter sales, with gains across its 3 geographic regions. Notably, our investments in innovation and brand building are paying off in profitable share gains, and we're further stepping…

Thanks, Bruce. Excluding Golf and looking at our numbers on a continuing operations basis, net sales were $1.59 billion, up 5%. Excluding excise tax, foreign exchange, acquisition and divestitures, and further adjusting for our new Australia spirits distribution arrangement we discussed last quarter, sales were up 5% on a comparable basis as well. By business comparable net sales were up 13% at Beam and up 0.5% at Home & Security. Including the divested golf unit, sales would have reached $1.99 billion for the quarter. Net income and EPS, our net income for the quarter was $102.9 million or $0.65 per diluted share. Our results include an after-tax charge of $8.4 million or $0.06 per share primarily associated with our separation plan. Excluding charges and gains, diluted EPS from continuing operations was $0.71. That's off $0.03 or 4% versus $0.74 in the year-ago quarter. Layering in the earnings from the divested Golf business, Q2 EPS before charges/gains would have been $0.93 versus $0.98 a year ago when the results were up $0.40. Overall, our results came in a bit ahead of what we were targeting. And considering the year-ago quarter benefit, $0.10 to $0.15 per share from the pull forward in demand we previously discussed, we consider this a very good result. Operating income came in at $187.5 million. On a before charges/gains basis, operating income was $199.5 million for the quarter, down 5%, versus the year-ago quarter. Reviewing our asset and investment return measures, and I'd highlight that these measures are inclusive of Golf, and as always, our last 12 month averages. After-tax return on net tangible assets before charge/gains was 16%. Working capital efficiency came in at 35%. Tax and maturing inventories for Spirits, WCE was 18% and that's a year-over-year improvement of [indiscernible]. Return on equity before charges/gains was 8%, and return on invested capital before charges/gains was 6%. For the quarter, our tax rate before charges/gains came in at 27.7% and that's in line with expectations. On the cash flow front, we'll note the first 6 months were negative, approximately $90 million. I'm happy to state this is simply timing-related. We continue to target strong 2011 cash flow for both Spirit and Home, with strong earnings to free cash flow conversion ratio in the 100%-plus range. And lastly, with the benefit of the sale of Acushnet, our current bond tender and our strong cash flow. we continue to be confident both businesses will start [ph] independent with strong capital structures. As we've discussed before, we're targeting year-end net debt to EBITDA ratios in the range of 2.5% for Beam and in the range of 1.5% for Home & Security. For a closer look at Beam and its second quarter results, let me introduce our Beam President and CEO, Matt Shattock.

Thank you Craig. Let me start by saying that the Beam team is sharply focused, confident and highly energized, as we prepare for our future as a leading pure-play spirits company. I'd like to outline for you today the strategies we're pursuing to prime our business to accelerate profitable long-term growth. In doing so, I'll emphasize 3 points. First, we're right where we want to be in our journey. We've reshaped the root [ph] to Beam portfolio. We've invested the strength in our risk to market and accelerated the growth of our brands, and we've put together a team that's built to win. Second, we're executing a simple and effective strategy that's driving our results today and positioning us for the future. And third, we're focused on leveraging our current marketplace momentum and financial strength into profitable long-term growth and returns as a stand-alone public company. Underpinning our confidence in the future is our strong foundation, which is built on the unique combination of scale with agility that we believe gives us a distinct competitive advantage. With an enviable portfolio of leading brands in key categories, Beam is the world's fourth largest premium spirits company and the #2 in the U.S., the world's most profitable market. And we've built a high performance organization that's simpler, smarter, faster and closer to customers and consumers. So as a result, we have the size to lead in key categories in the markets, as well as the speed to seize opportunities and accelerate key growth initiatives. We're driving momentum in our business with a strategy focused on 3 simple platforms: creating famous brands, building winning markets and fueling our growth. When it comes to creating famous brands, we focus on 3 initiatives to grow our brands. First, building our core equities, which includes investing…

Thanks, Matt. Our team at Home & Security is also very excited without thinking about our position as the industry leader and our future as a stand-alone company, ways to create value today and with the hallmark returns. We have a strong management team. And together, we're continuing to outperform the market. I'd like to discuss how we're succeeding now and how we intend to outperform going forward. [indiscernible] of our business is our leading market position across a diversified mix of channels, our small consumer trade-ins [ph], lean and flexible supply chains, our best-in-class customer service, driven by experience [indiscernible]. Leveraging includes [indiscernible] consumer-driven products with program innovations, standing in the new and adjacent markets, we continue to improve [indiscernible] in our operating platform. [indiscernible] strategy for fuel, possible shares gains through this challenging market. We have outperformed the industry [indiscernible], we are positioned to continue to do so. In addition, [indiscernible] and the housing market at whatever [indiscernible] or recovery. At Moen, we've been rolling out our new spot-resistant stainless finishes and Reflex pulldown kitchen faucets, 2 innovations which responds to real consumer needs. Similarly, the rollout of Martha Stewart Living cabinet line at Home Depot and our Diamond Prelude line at Lowe's address the consumer needs for new on-trend designs and finishes at affordable prices. In a way, that's also a compelling value proposition for us and our retail partners. Therma-Tru's smooth Classic-Craft paintable doors and new vented sidelites and Simonton's brickmould series enhancements for the new construction segment have again excited consumers with a fresh clean look that our builders and remodelers are excited to take to their customers. Waterloo's new garage storage organization system with improved functionality, ease of installation and new styling at more affordable price points is performing well, which again meets a…

Thank you, Chris. I think both Matt and Chris' discussions give you a very clear sense that these 2 companies are performing very well and are ready to create substantial value for shareholders as independent companies. Each company has great brands, powerful market positions, strong management and proven strategies. I couldn't be more confident in their future. Let me also offer a word of thanks to the team at Acushnet, which we divested last week. Wally Uihlein and his team are second-to-none in the golf industry, and they have a great future ahead as they continue to passionately grow the iconic Titleist and FootJoy brands. Both Beam and Home & Security are planning to conduct equity road shows in September to introduce these 2 new companies to a broad range of investors. And we will announce further details related to the spin-off as the spin date approaches. Lastly, as this is likely to be the last earnings call as Fortune Brands, I want to thank all of you for your confidence you've demonstrated in Fortune Brands over the years. This diversified structure of Fortune Brands has served shareholders very well. In fact, since we began trading as Fortune Brands in 1997, the investment of Fortune Brands has nearly tripled in value, including dividend reinvestment, and outperformed the S&P 500 by more than 40%. I'm excited for the journey that lies ahead for both Beam and Home & Security. Each company has a great future ahead. Thank you again for joining us, and I'll be happy to take questions.

[Operator Instructions] Your first question comes from the line of Pete Lisnic, Robert W. Baird.

I guess, first question, if I look at Home & Security, the sales and operating income comps year-over-year were basically the same so leverage tempered or muted I guess. Can you give us a sense as to how much of that was price cost or how much of it was mix? Just some of the components that kind of led to that margin?

Yes, sure, Pete. I'm going to let Chris and Lee handle that question. Chris?

Pete, most of that is commodity and transportation fuel impact. So if we adjust that out as well as the investments that we're making to support our new business and brand building, that would explain the difference.

Okay. Is there a way of maybe calling that out numerically or just assume the majority is the transport materials cost?

That's the majority of it as well as some investments in the programs we've talked before about, kind of the setup costs associated with some of the business in the cabinetry programs, as well as the setup costs and some of our other initiatives.

Okay. Then, in terms of follow-up, if I could, just as you look at the business going forward from your perspective strategically, I think historically, we've looked at the business where the goal is to try to get something near 300 basis points of productivity every year. Is that a comparable goal for you looking forward? Or is there anything strategically there that would suggest that goal could be stronger or weaker as you look at the business?

From a productivity standpoint, every year we have strong continuous improvement initiatives. It will remain about the same. That's a key component to improving our operational efficiency. And then, frankly, some of that savings could fuel investments over time. So as we get into a normal run rate where pricing, with the actions that we've taken in the first half, offset the commodity costs and we get into kind of steady-state growth, we'll see that historic formula return.

Your next question comes from Vivien Azer, Citigroup.

My question is for Matt. In terms of the growth that you saw in the quarter for the Spirit segment, clearly Skinnygirl has just been a home run, the Skinnygirl data we're seeing would point to contributing about 50% of your growth at each of the last 2-4 weeks periods. I'm just wondering, can you help us think about kind of how the rest of the portfolio if we stripped out Skinnygirl and then we strips out any other kind of new product selling that you've got, how is the rest of the portfolio doing?

Vivien, yes, the most encouraging part of this is that base business, excluding Skinnygirl, continues to outperform the market. We're seeing that in a number of markets around the world. For example, in the U.S., we're seeing the most recent data, we're seeing very good performance in end markets outside the U.S. Obviously, I mentioned the performance in Australia and also the performance in our other core markets, such as Germany and emerging markets like India. So the preponderance of our growth came from the core business and Skinnygirl really took a very good result leading to a great result we're having [ph] on top.

That all makes great sense and that's terrific to hear. Just given how fast it is growing, are there any concerns about capacity issues? Do you have ample excess capacity to keep up with the robust demand that you're seeing?

Yes, we are doing, I think, a sterling job in our supply chain keeping up with demand. When you take the brand up by 70 percentage points of distribution so quickly, they have really done a tremendous entrepreneurial job getting access to materials, packaging and ensure we keep our customers in supply. And going forward, obviously, one of the opportunities I'll refer to will be to leverage that more fully through our supply chain. But in the short term, our focus is on service and we're pleased with the progress we've made there.

Terrific. And my last question has to do with kind of the go-forward on Skinnygirl. Should we expect to see kind of 100% ACV in the next quarter or 2? How close are we from a distribution standpoint? And secondly, how has the retail acceptance been for the Sangria? Did you see a big boost in the third quarter from the shipments of that?

Yes. I think whether the distribution we've got was pretty explosive and reflective of I think our real sense of consumer demand and consumers actually going into customers and asking for it, so a lot of our normal lead times, we beat there. I suspect there's still some headroom for the base brand. It's a little early to tell on the new Skinnygirl Sangria. It's just going into the market as of July, and we suspect that will be a very helpful and sustainable increment to the brand's performance going forward.

Your next question comes from Eric Bosshard, Cleveland Research Company.

On the Home side of the business, can you talk a little bit about what you're seeing develop in terms of your market share trends and the pricing environment? It seems like perhaps there's a little more competition in faucets and cabinets, and perhaps, some trade-down in cabinets. Can you just flesh out a little bit of what's going on in that area in cabinets and faucets?

Sure, Eric. I'll be happy to. We think about share, overall, we're up if I take it by segment. Cabinets, we're performing very well, the heavy promotional environment today in the home centers. And we're being kind of cautious in terms of pulls on, pulls off, but overall, we continue to gain share there. And on the dealers side of the market, that's a long run game. And we've been winning there over multiple years. And quarter-over-quarter, we continue to perform on the dealers side. On the faucet market, I think what we're seeing is we continue to gain share. We think the other major brands continue to gain share. It's that second-tier that we see is probably weakening, and the in-store brands are kind of sitting flat to where they are. And the window and door market, pretty flat share in a stagnant market. So that's kind of what we're seeing right now.

From a profitability opportunity with the promotional and the price mix, is that anything to be concerned with? Is it getting better or getting worse? Where does it go from here in the second half and as you start to think about 12?

It's been more aggressive the first half. We've tried to be kind of tried to moderate a bit. As we go into the second half, I think it will be potentially about what it was in the first half. Eventually as more volume comes into this market, I think we'll see a little bit more discipline kind of across the board. So we're planning for it to be about the same, and we're comfortable that we're very competitive. As we got close on price, we tend to win. We've got terrific product, terrific service, quality, the designers like us. So in the end we kind of feel like we got get close. But we're not in a pure price competition state of mind.

And then last related -- in terms of the input cost pressure, at what point does price catch up to inputs, or what point to input cycle that we shouldn't see sort of a normalization of comparisons?

Well, second half, we'll get better. There's always a lag here, and we took pricing action late first quarter into second quarter and that pricing in addition to our continuous improvement initiative. So we take those 2 things together, we'll recover commodity cost. If they stay at about where they are -- and it's kind of stabilized. I mean they shot up but they've been pretty stable over the last couple of months. And so if things stabilize where they are, fourth quarter will start to get close. And going into next year, we should be able to cover. So we'll be in good shape in 2012.

Your next question comes from Judy Hong, Goldman Sachs.

Just a question on Beam, Matt. Just as you think about going forward, obviously, you've spent a lot of money this year in brand investment. Some of that, I guess, would be more strategic in nature. So as you go forward, can you help us understand what you think is more normalized brand investment? And then, just given that your operating income this year has been lagging sales and has resulted in margin pressure, can we see margin really recovering to what we saw 2, 3 years ago, where spending was a little bit more normalized?

Yes, Judy, I think it's just putting in context. And as I said on my comments, we're really exactly where we wanted to be in our journey. And I think that assures [indiscernible] to the investments we've made in our business and our portfolio are routes to market in the past 2 years in our brand has really primed the business to deliver strong and sustainable earnings gross going forward. And as we get to the end of this year, our P&L profile will be the one that we will use in staying out of the water going forward into '12 and beyond. And specifically to your question on brand investment, we see that being in the ratio in the mid-teens and that will be one that we will grow in line with sales going forward. And I'd get this get this to a P&L profile with a level of margins delivery, which we think is both attractive and competitive. It will be, as I said my comments, before excise tax, EBITDA margins in the range of 30%, so really going forward. The metric we'll be focused on will be earnings growth and returns, driving the top line ahead of our markets, growing their first of after the sales and then leveraging our balance sheet to make sure EPS grows in excess of OI.

Okay. And then, can you just maybe help us understand just the price/mix outlook, especially if we think about inflation picking up a little bit more in the spirits side? Do you think that we should see more pricing in the industry going forward? What sort of magnitude in terms of cost inflation should we think about if we look out more 2012?

Let me take that in 2 parts. I'll talk about price and I'll ask Bob Probst, our CFO, talk a little bit about the cost base. I think, overall, we are encouraged by what we're seeing from the full year of pricing. We're very pleased with the fact that we didn't have share gains in the first half, but we grew our value faster than our volume. And it looks like our premier innovations are really enhancing that trend. So our pricing is very much now coming into line with the market. And speaking of the market, if you take the U.S. as an example, about 3.5% aggregate growth in the period that we're looking at most recently, I'd say probably 3 points of that is volume and then there is a further point coming from mix, which is reflecting the return to premiumization and probably about 0.5 point give back. But going forward, it looks like the pricing environment is looking more positive it will enable us to take selective and targeted price increases, as we go towards the end of the year and probably set up to lever as we go into 2012. Bob, would you like to cover the commodities.

Yes, please. We've highlighted before, we're going to have a commodity impact this year, about $15 million to $20 million. But Matt mentioned we really won't see the offset in pricing in that this year. So we will have some targeted price increases towards the end of the year. We expect to see the full year benefit of a pricing next year. At the same time this year, we see some startup costs related to innovation of Skinnygirl. That's a cyclical [ph] margin. But again, as we think about 2012, we'll cycle through that from a cost perspective as we get the supply chain in-house. We feel good about where we're going for a margin perspective in '12.

Okay. Matt, just following up on premiumization trend. More recently, we've seen consumer confidence weaken a bit. You've heard some of the CPG companies in terms of how things have actually gotten worse for them more recently. Are you seeing any evidence of premiumization perhaps starting to slow down a little bit, on-premise starting to show another leg down? Any color as to more recently what's happening with the consumers and your trends?

No, Judy. I mean, it's something we track very closely in the correlation between the consumer sentiment and the economy and their purchasing habits. The good news is, as I said, we are seeing the return of premiumization as we look at the data unfolding. The most recent reads, again, reflected the fact that we saw good mix in the market, which reflects driving premiumization and the data we're seeing on the on-trade is that it is coming back steadily but surely. So at the moment there is no indication that those trends are being interrupted. In fact, we see them strengthening as the year has gone on.

Your next question comes from Dennis McGill, Zelman & Associates.

I guess this first question is for Chris. Chris, I'm just trying to understand whether or how the guidance for EPS would compare to the prior full year guidance for operating profit that you guys had given before, and whether those are apples-to-apples.

Well, the guidance we gave on a pro forma basis for the full year or for second half?

For the full year, but I guess we can talk about the puts and takes of the second half.

Well, the difference we called out is really going to be the market. So overall, we're now where before we had the market up mid to low double when we talked last quarter. Now we're calling it down mid-low to low double on the market overall. Therefore, for us, our change is going to be down.

Okay, so just to be clear, before, I think, the operating profit for the way the prior segment was disclosed was up mid-single to up low double, and the operating EPS for the pro forma today is down mid-single to down low double. So it's a complete reversal, and those are apples-to-apples changes.

Yes, they are.

Okay. And can you maybe, I guess, given that's a pretty sizable impact on the second half of the year, can you just walk through within the portfolio where there's pluses and minuses by product category? And then I guess by end channels, if you think about it, new construction versus repair/remodel, where you would see the biggest expectations there?

Yes, it's really market-driven overall. So the new construction market that we're seeing right now into the second half is a lot weaker than what we had thought we were going to see at the beginning of the year as well as even when we came out of the first quarter. So that's the biggest change. The R&R market we're looking at is probably kind of low single-digit bouncing along. And so where that impact hits us the hardest on the faucet side of the market, we're very strong in wholesale linked to new construction, on the cabinet side of the market as well and in entry doors. So when you see the kind of moment that we are projecting down in new construction from where we were before into now, our new second half outlook, it's all market-driven. There's nothing else in our business model that's changed from the way we're operating. Our share gains are rolling through. All the new business continues to roll through. We talked before about getting price to offset the commodity increases. So the business that we're running as we would intent, it's really just our view on the market is a lot more conservative for the second half.

Okay. And just to be clear, within that change, the new construction piece coming down is where all the change is and the home improvement is stable? Or are you seeing the home improvement weaker than you thought a quarter ago?

It's really all new construction. Home improvement, we kind of saw it's roughly 2% and we're kind of projecting out roughly 2% second half. So I think it's kind of bumping along, at least, in our categories. It's really new construction that's off sizably, and we just don't see the kind of activity right now in the marketplace that would indicate that the second half is going to produce at where we thought it would.

Your next question comes from Tim Ramey, D.A. Davidson.

Matt, I think you said a few minutes ago that you thought 2011 category would be up 3.5%. Does that represent a change in your view of category growth, and would you hazard a guess on 2012? It sounds like you think the market has gathering momentum.

Tim, let me just clarify. The comment I made there, 3.5%, was what we were seeing in the U.S. market from the available data year-to-date. Our global view is that we see the global spirits market up low single-digits with the sense that there could be some upside to get us [indiscernible] if we see strength continuing in markets like the U.S. and some of the emerging markets space.

And any initial view and category for 2012?

Well, we continue to see the market growing at a very similar rate into 2012. And that's the basis on which we would rate our performance objectives.

Your next question comes from Michael Rehaut, JP Morgan.

I guess I just want to make sure -- there's been a few different numbers thrown around with regards to Home & Security. And maybe I wrote them down incorrectly. I just wanted to make sure we have this right. Going into this quarter, the expectations were operating profit growth for the full year of mid-single-digit to a low double-digit. You've put out an EPS of a decline of those rates, but I thought I heard you say that you think operating profit for the full year will still be up slightly less but still be up at a low single-digit to low double-digit rate. Is that correct?

No. Thanks for asking to clarify. Lee?

Let's start with the EPS for the full year. We've said EPS for the full year will be down mid- to low double digits, and then, actually, flat to up double digits in the second half, and obviously, down in the first half. And we've said operating profit actually kind of mirrors that same thing. Operating profit for the year will probably be down on an adjusted basis mid-single to low double.

Okay. So I guess just going back to Dennis' question, how much of that -- are you saying that all of that is a change in growth outlook for the second half, more of a top line issue while your -- the raw material costs and brand spend in investments that obviously you highlighted affected 2Q, those expectations for the back half remain roughly where it was 3 months ago?

Yes, it's our market outlook. So it's basically our view on the new construction market. We're slightly more balanced in new construction than R&R than the market general. And so our strength in faucets where we're very strong, new construction, cabinets and entry doors, when we revise down our market outlook, it impacts it to that magnitude.

Okay and also in terms of the second half sales outlook, you were expecting, I believe, the market to be roughly flat year-over-year, but that you expect to continue to outperform the market. You mentioned that you estimate you were about 5 points ahead of the market in the second quarter. Do you expect that similar type of outperformance in the back half, given the momentum with the -- again, the share gains in cabinets and faucets?

Yes, I think that's a good assumption.

Okay. And just lastly, if I could, as we're thinking about 2012 and, of course, look forward to seeing you on the road, I mean, are there any changes that we could expect in terms of either corporate or other kind of restructuring, et cetera, there that might provide some, let's say, an incremental boost to productivity in '12? Or given that you've been operating as an independent for -- within the umbrella for a while, stuff on a corporate level or things of that nature should be more stable?

Yes, I think we'll be relatively stable. The structure of our business as a division under Fortune Brands, really, we're a stand-alone operating enterprise. We've done an enormous amount of restructuring over the last 4, 5 years and are operating at a very efficient level. So I think most of the restructuring we're doing is coming into the spin-off. And so there may be some things just ahead of the spinoff, just on the other side of it. But things will be cleaned up in '11, and we'll go into '12 clean, stable, running as we're running.

Our last question comes from the line of Christine Farkas, Bank of America.

I'm wondering if I could follow up, Matt, on Skinnygirl. Just with respect to the incentive payments that came in the quarter, is this something that's ongoing? Will this continue to grow along with sales, or does this end at some point in the near future?

Well, I don't want to go into too much of the -- to the specific details of that. But certainly, there is a disproportionate front load as we've exceeded some of our initial targets with the great success we've initially had. Net-net that, combined with the leverage we'll get from our supply chain, means that this will be a positive OI driver as we look forward to 2012.

Okay, great. And then, while I have you, with respect to the OI growth for the segment or for Beam going forward, you did some clarification of the change in guidance. I'm just wondering if you can reiterate that, now up low single digit, which excludes or includes the impact from the Australian inventory?

Let me take that one for you. It's Bob here. So the guidance on an OI level for the year, we gave, last quarter, was up mid-single digits. We've made one adjustment to that, adjusting now to an adjusted pro forma basis, which is taking the onetime CCA impact. That's what takes us to a low single-digits OI full year forecast. On an EPS basis coming down from that, on an adjusted pro forma basis, we're at high single-digit. So the one and only change in OI is just the adjustment for that CCA impact in the first quarter.

Okay. And then, Bob, just on the interest guidance. I just want to understand what the comment in the press release about a $60 million reduction in interest expense, that's coming off of the 2010 actual, the $214 million level, is that right?

There are 2 things going on in interest. In the adjusted pro forma, what we're doing is effectively restating both last year and this year for the reduction in debt, which we anticipate to be about $1.7 billion, as we recapitalize from the separation. So the interest benefit of that is in both years and, therefore, isn't an EPS benefit year-on-year from a growth perspective. We are seeing an interest benefit this year as a result of a bond that was retired in the first quarter in January of about $600 million. So that is the interest expense benefit you're seeing flowing through in the EPS year-on-year.

Okay. The 2010 looks back with that. But my point with respect to the total debt then, are we taking $1.7 billion off current net debt or 2010 net debt? What's our starting point for that level?

Our expected is year end and backed up to beginning of January 2010. So it's as if we restated January 2010 for that debt reduction.

[Operator Instructions] Your final question comes from the line of Matt McGinley, ISI.

I have a question on the inventory composition and free cash flow conversion, and the comment that was made on that. First of all, when I look at that inventory growth, was Home up or was that primarily driven by the maturation of the Spirits? And then second, given what we've seen with raw material inflation across the Home segment, would that impact the conversion at all? I know you said that they still had a pretty good free cash flow conversion on the year, but if raw materials continue to cycle through and the outlook for the back half is kind of flattish, as you said, would that impact the cash flow on the year specific to the Home segment?

Okay, let me just deal -- this is Craig. Let me just deal with aggregate cash flow of Fortune Brands. As you look at the balance sheet and you look year-over-year, obviously, inventory is up pretty significantly. But first and foremost, about $120 million of that is just FX translation. And as we look then at the remaining $100 million, it's fundamentally -- it was build of inventory for Golf and secondly, then, it was build of inventory for Beam in the range of about $50 million. And about 50% of that was just increase maturing inventory and then about 50% of that is just simply the timing related to finished goods inventories. So in the grand scheme of things, not really an issue to the discussion that we mentioned in terms of what the free cash flow conversion rates are going to be for both Home and for Spirits. So we saw a little bit more inventory in Home but not meaningful.

Okay, that's helpful. And then a last question. When you look at the new business that you won in the quarter, how much of that drive in terms of the top line? And then when would the expenses associated with that new business that you won start to cycle through? Is that a 2012 impact, or should we start to see better cycling of that into the second half?

We haven't broken out the exact dollar of the new business other than to say it's hundreds of millions of dollars, so between $200 million, $300 million annually. That business is still being rolled out and will be complete and in the system by early fourth quarter. And then as we move into '12, they'll start to annualize, so you'll really see the impact in lift '12 and '13. It's important to note it's not just loading in new business, we work closely with our partners to get those programs up to full potential. So you'll see it building in '12 and '13. The expenses have been rolling through the system this year, so we amortize some of the costs of putting up displays and other costs associated with bringing that business online. So it's already flowing through and a part of the investments. So that will -- still there will be kind of flowing through this year, next year. It will start to drop off in the out years, '13, '14. So that business will become more profitable over time, both with top line level as well as the expense associated with it will start to amortize through.

There are no further questions. I turn the call back to Mr. Carbonari for closing remarks.

Thanks, Sean. Thank you again for joining us. We look forward to keeping you posted on the progress of our separation plan and to discuss the performance of 2 great new independent companies going forward. Thank you.

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