Good morning, ladies and gentlemen, and welcome to the Newell Rubbermaid's Third Quarter 2010 Earnings Conference Call. [Operator Instructions] A live webcast is available at newellrubbermaid.com, on the Investor Relations homepage under events and presentations. A slide presentation is also available for download. I will now turn the call over to Ms. Nancy O'Donnell, Vice President of Investor Relations. Ms. O'Donnell, you may begin.

Thank you. Good morning, everybody. Welcome to our third quarter earnings call. I'm Nancy O'Donnell, and with me today are Mark Ketchum, our President and Chief Executive Officer; and our Chief Financial Officer, Juan Figuereo. Before we begin, please note that this conference call includes forward-looking statements. These statements are made on the basis of our views and assumptions as of this time and are not guarantees of future performance. Actual results may differ materially. If you refer to our most recent 10-K, 10-Q and 8-K reports, you will find cautionary statements and risk factors, which provide a more detailed explanation of the inherent limitations in such forward-looking statements. We undertake no obligation to update any such statements made today. Also we will refer to non-GAAP financial measures. Please refer to the non-GAAP to GAAP reconciliation's in our earnings release and on the Investor Relations section of our website. Thank you. And now I would like to turn the call over to Mark Ketchum.

Thank you, Nancy. Good morning, everyone, and thank you for joining us today. I'm pleased to report that Newell Rubbermaid delivered very solid results this quarter. We generated core sales growth in the mid-single digits, healthy gross margin expansion and year-over-year normalized EPS growth, all consistent with our year-to-date trends as well. I wish we were getting a little more help from the economies in North America and Western Europe, but we're not waiting for these economies to turn. We are making our own momentum. As a result, we are on track to deliver our full year financial targets, and we continue to advance our long-term growth strategies. We also made good progress on the implementation of our European Transformation Program during the quarter, and we completed four out of the five legs of our Capital Optimization plan. More on this later. Third quarter core sales increased 5.7%, more than a full percentage point higher than our first-half growth rate. Our growth was broad-based, with virtually all of our business units posting year-over-year core sales growth. We are winning in the marketplace on the strength of compelling new product innovations, impactful advertising and consumer promotions and continuing investments in strategic sales support. Our constantly improving consumer insights, shopper insights, and targeted marketing are helping us drive more consistent and sustainable sales growth. As expected, our growth was led by our International businesses, which grew 11% in the local currency during the quarter. We're seeing particular strength in the faster-growing, emerging markets of Asia, Latin America and Eastern Europe, where several of our business units are growing strong double-digits. Increasing our international exposure is a key element of Newell's long-term growth strategy. And we will continue to invest strategically to expand our business in these higher growth regions. Domestic core sales…

Thank you, Mark. As usual, I'll start with the review of the income statement on a normalized basis. Net sales for the quarter were $1.5 billion, a 2.6% improvement versus the prior year. Core sales, which excludes the impact of foreign currency and product line exits increased 5.7%. Foreign currency had a negative impact of 1.1% on sales during the quarter, and the carryover impact of 2009 product line exits reduced sales by approximately 2%. In North America, net sales were up 2%, driven by increased shelf space and share gains in most of our business units. Core sales increased 4% while product line exits reduced sales 2.6%, and foreign currency had a positive impact of 0.6%. Our International business, led by our APAC region, continued to gain momentum with reported net sales growth of 5% or 11% in local currency. On a year-to-date basis, we reported net sales of $4.3 billion, a 3.2% increase versus the year-ago period while core sales increased 4.6%. We generated gross margin of $567 million or 38.1% of sales, an increase of 70 basis points compared to the third quarter of 2009. The biggest contributors to the improvement were productivity gains resulting from a number of initiatives, including Project Acceleration, higher overhead absorption and favorable product mix driven by product innovation. These positive factors offset significant input cost inflation in the quarter. Year-to-date, we generated gross margin of $1.6 billion or 37.9% of sales, an increase of 130 basis points over the prior year. Although this would appear to be ahead of our guidance, the fact is we are on track to deliver our full year gross margin target improvement of 75 to 100 basis points. I'll provide more details later. SG&A. On a normalized basis, SG&A expenses were $370 million or 24.8% of…

Thanks, Juan. Before we open the call to questions, I would like to thank all of our employees for the hard work that is represented by our strong year-to-date results. Knowing that there would be little help from the economy, I challenged the organization to make our own momentum to grow the top line, and the organization has risen to that challenge. By focusing on the levers that are within our control, we have successfully delivered core sales growth, healthy gross margin expansion and year-over-year EPS growth. There's still much to do, and we know that there will be challenges to overcome. However, I remain confident that Newell Rubbermaid is better positioned for growth now than it has been at any other point in the company's history. The progress we have made over the past several years in transforming the portfolio, the business model and the supply chain is becoming evident in our financial results. And with an unwavering focus on consumer-driven innovation, brand building and best cost, I believe we can and will continue to drive profitable growth well into the future. So with that, I'll ask the operator to open up the line for questions.

[Operator Instructions] Your first question comes from Wendy Nicholson from Citi Investment Research.

My first question is just housekeeping. One, could you actually just give us a share count number to use for the fourth quarter, just to simplify everything? And then my second question, Mark, is on the European restructuring. I know you said that year-to-date your margins are running 8.5%-ish. And even though that's going to be a little bit weaker in the fourth quarter, my understanding is that you've kind of just started all of your restructuring initiatives. So to get from sort of an 8% run rate so far, up to double digits, doesn't seem that heroic. And that's great. What I'm wondering is can the European margins get, not just to double digits, but sort of to low- to mid-teens as you work through all your restructuring?

I'll start with the shares number. You should use to 294.

And to your second question, Wendy, so let me -- a little more background on Europe. Our European business is heavily skewed Office Products. And as you know, as in the U.S., Office Products always has a margin peak in the second quarter as they build inventory and ship out the back-to-school. And that's why the 8.5% won't be 8.5% for the full year. It's inflated, if you will, by that effect. But you have 6.5%, 7% or something in that range, it will be the best that we've done in at least in 10 years. So your question is certainly valid. Now the thing that -- while we announced this transformation plan in June, we had actually started on other elements of the transformation plan. But we couldn't announce it in June because, as you recall, there was significant work that we had to do with works councils in terms of prior notification and in terms of putting together the plans and intentions and the business case. And therefore, we couldn't announce that even though we were working on some of the elements that I referenced in my call. Elements like the gross to net and the pricing architecture and those kinds of things. We were actually working on those as early as January. So we actually did get a jumpstart from January, even though we didn't announce it until June, because of the legal issues I just referenced. So going forward, we're off to a great start on that. Certainly, our stretch targets are above 10%, and time will tell whether or not we can get there. It will depend on competition, how rapidly we try and expand some into some new businesses, which also usually takes an investment that would dilute the earnings. But we're quite confident we'll hit the 10%, and we're aspiring to do better.

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

Mark, I know you've been clear that the economy isn't helping you, and you're not thinking it's going to be even the next year. I guess, taking a step back as we look at the progression of the comps, they definitely get harder. You've had some pretty massive help from Goody with some pretty good big growth in that business, even I think on a low sales number in total. But I guess, what's your confidence level that you can sustain this level of growth with no economic help and as comps get tempered? Because the 5.7% core is great right now, but the comps are really, really weak. So as we move forward, I mean is there been an acceleration in the new product pipeline that you're going see that will allow you to do that?

Chris, we are confident, and I think our confidence -- I'll give you two data points that would back up that. One is our fourth quarter. And the fourth quarter, those comps are not nearly as weak as they were in the first three quarters. Again, in the fourth quarter, we continue to expect our core sales growth to be mid-single digits. So first, a quarter that won't have the easier comps you just referenced will continue to show that level of growth. And then second, as you implied, we do have a really strong lineup of new products that are hitting the market, both in the second half of this year as well as continued throughout next year. And I'd remind you of one more thing, which is you've heard me talk about launch it and love it, don't launch it and leave it. Many of our products take two or three years to really fully exploit, in terms of driving awareness and trial with our target consumer. So even products that have been launched throughout this year will continue to get growth by investing marketing spending behind them in 2011 and beyond.

And then I guess, how do we think about -- you have an SG&A target of 25% of sales. I think it's kind of ongoing, right? I mean, you're going to see some pretty sizable reinvestment, or sorry, EPS help in savings from the European restructuring from the capital structure savings. How are you thinking about redeploying that? I mean, is there any reason to think you could take a break from your 25% on SG&A commitment to temporarily take advantage of reinvestment opportunities in the near term with that savings? Or are you not thinking about it that way?

Well, I think on any given quarter -- again, I'm trying to focus on our long-term plans. And so for any given year, I think we'll hit the 25%. But I think on any given quarter, there might be a quarter with somewhat slightly higher investment. One of the things that we will be doing is as we expand our international footprint, which we've been very public about, desiring to do. And we've got couple of examples of things that we've launched recently in Brazil, both in our Baby Care business as well as in Rubbermaid Consumer, where we're launching new products for the first time into a region and that's always incremental investments. So where some of that incremental profit that we're generating will be reinvested, will be in growing internationally.

I would add to that Chris, we feel really good about the opportunities that we see, particularly outside of North America where we are gaining penetration and growing. So that's at the base that we have constantly because there are opportunities there. I hope to find myself in the unusual position for a CFO counseling Mark to be flexible on that one.

Our next question comes from John Faucher from JPMorgan. John Faucher - JP Morgan Chase & Co: Quick question, are you seeing much of a response from a competitive standpoint? As you guys have sort of raised the bar from that standpoint, you're putting new processes in place, et cetera. Have the competitors picked up on what you're doing, and do they really have the flexibility to respond?

I don't think they have the flexibility, most of them don't have the flexibility to respond in the short term. For the same reason it took us two or three years to kind of build the infrastructure, to build the business processes, to build the pipeline of ideas that eventually turn into initiatives. It would take most of them that same period of time if they dedicate themselves to doing that. There's always competitors out there that offer new products and offer ideas that we need to respond to. So it's not like there's no competition. But I do think what we have is an edge. We have a competitive advantage because of the -- both of the resources and the effort that we've dedicated ourselves to putting against this.

Our next question comes from Constance Maneaty from BMO Capital Markets.

I'd like to talk a little bit about your International businesses. In particular, could you talk about how there was a 30% increase in Asia-Pacific? That business all year seems to have been growing at really stellar rates. So which product lines, which countries are you distributing on your own? Have you linked up with someone? And also the same question for Latin America?

Well, for Asia, Asia-Pacific, it's a couple of different businesses in a couple of different regions. It's Fine Writing in China, where we've talked before about expanding our fixturing and store and store concept, and that's been highly successful. And it's also our IPS business, our Lenox bandsaw business, which is this Q88 blade that we said it was designed specifically for that market. We have nice results in our Tools & Hardware business and our Office Products business in Australia and New Zealand. And also Graco. Graco also has now started to pickup -- Graco and Aprica, our Total Baby Care business is starting to pick up both in China and Japan. So those have been the most important drivers. Juan, am I leaving anything out here?

Well, I think they probably would want to know about the recent research we did with Parker in China?

Yes, that's a good example. We've done some extensive research in terms of consumer attitudes and brand equity in China. And Parker is the overwhelming strongest brand in the fine writing area. I mean the numbers are astonishing, frankly in terms of awareness, consideration, loyalty, preference and so on versus our competition. So we've really got an inherent gem there, and we're really investing behind that. The other part of your question was Latin America. In Latin America, our Tools business in Brazil was particularly strong, and we started launching some of these new products in Brazil that I referenced before, which is our Baby & Parenting business, responding to the new Car Seat Legislations, as well as we've just entered a test in the three Southern states of Rubbermaid Consumer at retail, Rubbermaid food storage.

Our next question comes from Andrew Sawyer from Goldman Sachs.

I was hoping you could help size up the way you're thinking about commodity inflation, looking into 2011, and how you're thinking about managing that as part of the budget process?

Well, that something that we watch closely, Andrew. And we feel really proud about what our global sourcing team, they have done, in terms of forward buying and getting predictability on the cost. Because while we cannot stop inflation, if we're able to predict within enough advance time, we know how much productivity we're working on. And if it's not enough, we know that we can take pricing. We did that early this year in Q1, really was effective in Q2 when we took pricing in two of our business units because we had, really, the highest commodity inflation of the year in the first half. Q2 was the highest. So as we look forward, we'll continue with the same approach. We're watching it carefully. We know that there's pressure, particularly labor and currency from China, and some of the commodities have been -- even with the soft economy, having fairly high increases lately. But again, for us, the biggest increase came in the first half. Q2 was the highest. We took pricing. We expanded margin, so we feel good about the approach.

On the pricing side, is there any difference in the receptivity of price increases between your kind of your commercial customers versus the retail customers?

Historically, I'd say we've had a little less resistance, or it's been a little easier to do it with our commercial consumers. I think recently, even our commercial and industrial consumers are seeing the trends to resist price increases. And so I'd say it's now equally difficult everywhere. And yet having said that, as Juan said, we've got a good track record and we have set up the expectation with them that if we see extraordinary inflation we will have to take pricing and we will take price. And our brands are strong enough to do that.

And then just a quick housekeeping one. When you say $0.03 to $0.05 accretion from the capital structure changes, is that versus the GAAP number or versus your adjusted numbers?

This is, actually, should work for both. Yes.

So even when you adjust out the convertible dilution? Because it's $0.03 to $0.05 accretive. I'll take it off-line.

Well, it's versus a normalized. The $0.03 to $0.05 is versus a normalized. But again, it will be accretive to both for a normalized.

Our next question comes from Bill Schmitz from Deutsche Bank.

I know it's early in the '11 planning cycle, but is there any reason to believe that you're not going to do sort of the long-term strategic plan next year? Sort of like the 3% to 4% top line and the solid double-digit EPS growth?

No. I don't think there is any. As you've just referenced, those are long-term aspirations, 3% to 5% organic growth, double-digit EPS growth and continued gross margin expansion and I expect that's the right ballpark for 2011. Although, as you just said, we have not put our budgets together for next year yet.

Do you have a GDP growth assumption for next year?

We basically are, for North America, we're kind of looking at more of the same. It's not our own assumption. Basically, we take average assumptions from Bloomberg. But basically, more of the same in terms of the overall economy. Soft economy, North America and Europe; slightly better, the emerging markets.

On the strategic spending, when do you get to like a level you're comfortable with, where it'll kind of growth sales? I mean how far off are we on that?

We're still a couple points away from having the strategic spending as a percent of sales where we wanted to be. Although, again, we told you, through the next couple of years, we expect that, that growth will be able to come by shifting more and more of our structural spending.

And then the other one is on the sales per employee and the profits per employee. I mean, those metrics are still pretty lousy relative to peers, like it exited like sort of from the bottom left corner. I mean, is it the nature of the business that they kind of come up that way, or is there still a pretty good opportunity to get those ratios up?

We're not using the same peers that you're using because they aren't really peers in terms of their business model. The fact is, I don't think -- I think what you have to do is compare it to a company that is similarly diverse in terms of its channels and customers.

Is there one?

I'm sure you'll find one. So the answer is I don't think your looking at those metrics is going to be appropriate as a benchmark. Having said that, the other half of your question is any reason to believe we can't and won't improve that? And the answers is no. We can and will improve that.

And then lastly, just another housekeeping item, how much of the repurchase have done so far? And how much is remaining until you get to the full $500 million?

As soon as we're done when we're settled, Bill, we'll put out a press release. We'll let people know when we're done, average share price, et cetera. For now, I think you would understand why we would not want to disclose exactly where we are.

Our next question comes from Joe Altobello from Oppenheimer. Joseph Altobello - Oppenheimer & Co. Inc.: Just wanted to deconstruct the gross expansion this year. Just use a round number of 100 basis points. How much of that -- I imagine most of it is going to come from productivity, but how much of that is coming from pricing, and maybe some leftover benefits from the effect from last year? And what's the headwind from commodities this year?

Is the question for the quarter or for the estimate for the full year? Joseph Altobello - Oppenheimer & Co. Inc.: For the full year.

We're not counting on pricing, as Mark has indicated on several occasions. We're saying excess commodity inflation we'll cover with pricing. So far, we haven't had, really, except for the pricing we took in the first quarter, we haven't really had to rely on pricing. We have a strong record of productivity. So we're looking to productivity still on a full year basis to offset most of the inflation in raw materials and import costs. And mix, because the new products that we launched are designed to be margin accretive. Mix is also -- has a factor that is helping. So between productivity and mix, we expect to cover all of the forecasted inflation in gross margin for the year. Joseph Altobello - Oppenheimer & Co. Inc.: And as we fast forward to 2011, those dynamics should remain in place, I would imagine?

It all depends on the level of commodity increase for the year. The models, the dynamic of the overall model, yes. You first make some productivity and if that's not enough, pricing. But we don't know the commodity piece, right? Joseph Altobello - Oppenheimer & Co. Inc.: And just for, again, for housekeeping here, the share count for fourth quarter was helpful. What about for next year? I know it's early, and there are a lot of puts and takes, but what kind of share count should we use for 2011?

I think what we should do is really wait until we're really done with the buy back. The number I gave you is an estimate. That's my own estimate. I don't know what the final number is going to be. What I do know is that in every case, this will be EPS accretive.

Our next question comes from Lauren Lieberman from Barclays Capital.

Quickly, I wanted to kind of check in on retail or really, broadly speaking, customer inventories. So retail inventory levels with the Home & Family and Office Products category, particularly after back-to-school. And then also in Home & Family, with the selling of a lot of the new product launched this quarter. And then just checking in also on commercial and industrial?

I think the retail inventory levels are pretty stable and what I'd call okay. The other dynamic we are seeing there, Lauren, is they're not building either. Whereas in the past, they might have been more aggressive in taking in incremental display stock and so on for the holiday season. They're being more conservative on that, and they have been in past years. But their inventory levels for our categories look to be pretty well-balanced with where they want to be.

To what degree did the growth in Home & Family this quarter -- I don't need a number, more qualitative, but really benefit from selling and shelf-space gains that won't be directly repeated in the fourth quarter, so should we think about some sequential slow down for that business?

Well, I think more of it as being affected by shelf-space gains, which you'll get a full one-year benefit, a full 12-month benefit, more than the initial stocking. So we saw a lot of that initial stocking actually starting to happen in the second quarter. So the third quarter that we just reported, which is around 20% growth, is no longer impacted by the initial stocking of the incremental shelf space. It's really affected by now that you have more shelf space, you've got more sell-through.

And to be clear, Lauren, almost, I would say the overwhelming majority of the new products that Home & Family has launched, they're still expanding distribution. So there's really...

That's a great point. There's more distribution yet to be had in the next coming quarters, and enrollment really is starting to turn on some of the strong marketing support. So we're continuing to do a year or three of marketing support behind our Easy Find Lids system, and this year's launch was a revised premier lineup. The Reveal mop has gone into some channels, some customers, but it's not in all the customers that we anticipate it will be. And we're just starting to turn on the marketing support there. We've got most of the distribution gains from Beauty & Style, but we still have a couple more quarters, at least, of year-over-year, realizing the differential. So we've got a lot of -- we've got some new, a number of our new Baby & Parenting products, both coming to market as well as, for instance, is Aprica expansion that I've talked about in the past in the U.S. And so we've got a lot of -- still a lot of runway. A lot of growth runway ahead of us from both distribution and from a marketing support that we're really just starting to do behind many of these.

Although sequentially, just sequentially on this last half, you get your bigger portion distribution when you first introduce. And then you continue, but it's lower.

Our next question comes from Jason Gere from RBC Capital Markets.

I guess carrying on with Home & Family, I was just wondering, can you just talk about the margin structure? And obviously, this is the lowest of your three segments. I know there's some near-term hiccups with commodities, but can you just talk about the opportunity? Is there an opportunity to kind of get them up to the mid-teen level like the other segments?

The short answer is yes, there is an opportunity to mid-teens, and we've got very specific and targeted plans to do that. And it is behind launching more differentiated products. And the two businesses that have the greatest upside opportunity to deliver on that are both our Rubbermaid Consumer business, as you know, spent the last couple of years exiting a lot of categories that were little margin and not responsive to innovation, and entering new categories such as floor cleaning like we're doing this year. And then our Baby Care business, which is -- we've continued to do structural -- restructuring of the supply chain. As recently as this year, we've closed three more plants and relocated the production from those plants in the Baby Care business. So we're still actively restructuring the gross margins in that business.

Also, Mark, remember the EMEA transformation? Because that has also helped.

I guess the next question is just kind of a hashing of past questions. But when you look to next year, the 3% to 5%, I guess with some tough comps coming out of the U.S, is just the basic assumption right, were modest U.S. growth and tougher comps, but really the international core sales continue the momentum accelerating into 2011. Is that the way we should think about it right now?

I think in broad strokes, the way you just framed it is correct. In other words, we'll continue to see higher growth rates on international, especially from developing markets. And we'll see below average, low or average growth rates for North America and Western Europe.

Our next question comes from Bill Chappell from SunTrust.

On the Office Products side, Mark, you said it was a little later than normal season, back-to-school season, but a good one. And does that mean there was any push out of sales from 3Q to 4Q, or was it just kind of from August to September?

More of the latter, more from August to September.

As I'm looking at the kind of the SG&A spend and your target of no lower than 25%, we're kind of running at a run rate where it should be down in this percentage of sales in the fourth quarter to stay at that 25% rate. Are you looking if there's any other near-term initiatives to kind of move past that 25% as you see the opportunities in the fourth quarter kind of like last year?

Our fourth quarter will be heavy investment quarter. We've got a lot of terrific stuff that's in the marketplace that I've already referenced several times on this call. And for a number of our businesses, the holiday gift-giving season is a big opportunity. It's a good opportunity for parts of Handy Tools business, for our Cookware business. It's for some Office Products, so a number of our businesses that respond well to the gift-giving season. Fine Writing. So we are continuing to invest strongly in the fourth quarter.

So we could, for the full year, see SG&A above the 25% range.

I think you'll see it right around the 25% range.

One last housekeeping. One, as I look towards the European consolidation or reorg, could you see an improved tax rate for 2011 or is it more 2012?

It would be 2012 before we see improvement, or I would say significant improvement in tax rates over there.

Our next question comes from Mark Rupe from Longbow Research.

Mark, just wanted to follow up on the new product conversation headed into next year. Obviously, you had a decent amount of focus on it this year, and it's been a part of the process. But as we go into next year, on the magnitude of some of the innovation, should we expect it to be similar to what we've seen in 2010?

Yes, you should. And again, I'd remind you that you'll see us continuing to invest behind things that we launched in 2010. So there's a huge amount of upside from continuing to create awareness and trial in year two and year three on many of these initiatives.

I'll remind you that we included some pictures so you have some idea. But typically, the way it works is with successful innovation is you roll it out, when you get to your target level of distribution, you turn on the media, and then you let it ride for a while. If it works well, then you give it more. In most cases, everything that's launched in the second half of this year, that should continue well into next year.

Our final question comes from Budd Bugatch from Raymond James.

This is actually Chad filling in for Budd. I guess, if you could just help me understand something, I certainly appreciate all the detail on the slides and your comments. But I think, Juan had said that there is a roughly $6 million increase in SG&A investment and brand building in Home & Family, 26 in Office and 10 in Tool & Hardware. But I saw it in his earlier comments, he said that the total was about $25 million. Did I just hear that wrong or are those different? Is it year-over-year or sequential? Could you just help clarify that?

Well, I didn't give all of the details, so that's why the numbers maybe are not adding up for you, because I didn't say exactly how much structural decrease. I just gave the color on the ForEx. And what I was trying to do, and I hope I did that, was just to show, give you evidence that the model of reducing structural and investing behind our brands and our growth is working.

So the 25 is increased investment, net of some structural savings, where the others is just a gross increase of investment?

Yes, that's correct.

And I guess just looking forward to Q4, you did say that you expect increased strategic and brand building spend. Could you quantify that for us either on a year-over-year or sequential basis? And give us a sense of how that would be allocated by the segments?

Yes. What we can tell you is we're fortunate to have a lot of opportunities to spend in brand building and growth, because we feel good about what we're seeing in, particularly, outside of North America, but even here. And that's a good position to be in this economy. We can also tell you that Q4 SG&A will be higher. Sequentially, we are going to be spending more. The breakout by segment, we're not ready to discuss at this point, so we'll provide that information in the next call.

If we're unable to get to your questions during this call, please call Newell Rubbermaid's Investor Relations at (770) 418-7075. Today's call will be available on the web at newellrubbermaid.com, and on digital replay at (877) 344-7529 with the conference code of 444992, starting two hours following the conclusion of today's call and ending November 12. This concludes today's conference. You may now disconnect.