Newell Brands Inc. (NWL) Q3 2011 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen and welcome to the Newell Rubbermaid Third Quarter 2011 Earnings Conference Call. [Operator Instructions] Just a reminder, today's conference is being recorded. A live webcast is available at newellrubbermaid.com on the Investor Relations home page under Events and Presentations. A slide presentation is also available for download. I will now turn the call over to Nancy O'Donnell, the Vice President of Investor Relations. Ms. O'Donnell, you may begin.

Thanks, Amy and good morning, everyone. Welcome to Newell Rubbermaid's third quarter conference call. On the call, in addition to myself, are Mike Polk, our President and CEO; and Juan Figuereo, Executive Vice President and CFO. We have a lot of news to cover today, so I'll give you a heads up now that we'll extend the call as needed to make sure that we answer as many of your questions as possible. Now, before we begin, let me remind you that we will be making forward-looking statements in our presentation today. Actual results could differ materially from those projected and therefore, we direct you to the cautionary statements in the earnings release in our most recent 10-Q. The company undertakes no obligation to update any such statements made today. I'd also like to point out that we will be referring to normalized results and outlook, which are not GAAP measures. We present this non-GAAP information for comparative purposes so that investors may better understand and analyze our ongoing operating trends. For further information on reconciliations to comparable financial measures determined under GAAP, please see today's news release and the additional presentation slides posted at our website, www.newellrubbermaid.com. With that, let me turn it over to Mike Polk for his comments.

Thank you, Nancy. Good morning, everyone and thank you for joining the call. We have 2 objectives for today, the first and most obvious is to share a solid set of results for Q3 and certainly a step up in our performance from the first half of 2011. The second is to tell you about some changes we're making to simplify our organization for growth. First, let's get into the results. Our third quarter results represent a step up in our sequential sales trend and good business performance across most of our portfolio. Reported net revenue growth was up 5.8%, core sales rose 3.3%. These are competitive levels of growth and represent solid progress over the 0.2% core sales growth we delivered in the first half. Q3 actuals bring our year-to-date core sales into the full year guidance range of 1% to 3%. Q3 normalized EPS was $0.45, up 7.1% versus 2010 and $0.03 above consensus despite $0.01 negative impact in the quarter from the BernzOmatic disposal. Operating income margin was 13.7%, up 20 basis points versus prior year and 40 basis points versus prior quarter. Importantly, we generated strong operating cash flow of $295 million and strengthened our balance sheet by paying down about $229 million worth of debt. Our debt is now the lowest it's been since 2007. Also during the third quarter, we allocated a little over $24 million to repurchase 1.9 million shares under our 3-year, $300 million share buyback program. Those repurchased shares represent about 0.6% of the total shares outstanding. The 20 basis point improvement in operating margin was achieved despite gross margins being below our expectation at 37.4%, 100 basis points below prior year. Our gross margin shortfall was mainly due to resin and source goods inflation and our choice to maintain price competitiveness through targeted promotions in a couple of categories, most notably Rubbermaid Commercial Products, Rubbermaid Consumer products and Everyday Writing instruments. Maintaining price competitiveness and driving profitable market share growth is essential to unlocking the full growth and value potential in our business. We intend to do that smartly, while being very tough on costs and even more aggressive on productivity. In Q3, productivity mix and pricing were not significant enough to cover what was the peak inflation period in the year. Input cost inflation had a negative 270 basis point impact on gross margin. We've actively managed Q3 SG&A to more than offset the gross margin headwinds, clamping down on structural SG&A while continuing to invest in strategic SG&A for growth. Strategic SG&A, as a percentage of sales, was up 80 basis points in the quarter. We expect fourth quarter gross margins to sequentially improve as a result of increased productivity, continued flow through of pricing and lower levels of inflation. However, we now anticipate that gross margins on the full year will be flat to down 30 basis points. On the full year, we expect total SG&A as a percentage of sales to be in line with 2010, but strategic SG&A to be up 50 to 75 basis points. All 3 operating groups delivered accelerated year-over-year growth in Q3 versus their first half performance. Tools, Hardware & Commercial Products had another strong quarter, with reported sales up 10.3% and core sales up 7.5%. Office Products delivered reported sales growth of 5.5%, with core sales up 2.2%. Home & Family delivered reported sales growth of 2.9%, with core sales up 1.1%. Five of our global business units delivered core sales growth greater than 5%, with 2 of those 5 growing core sales more than 10%. About 85% of our sales are generated in the developed markets, where our core sales grew about 2%. About 15% of sales are generated in the emerging markets. Core sales grew over 18% in Latin America and nearly 6% in Asia Pacific. Our top 14 brands generate nearly 85% of our revenue. 10 of those top 14 brands grew reported sales over 5% and of these 10, 5 grew over 10%. As I hope you can tell from the numbers, we're building momentum across most of our portfolio. For our businesses which are primarily professional facing, we have a strong set of results supported by a number of breakout initiatives. For the seventh consecutive quarter, our Industrial Products & Services business grew core sales greater than 10% behind our powerhouse Lenox expand. Our Irwin brand continues to perform well, delivering high single-digit core sales growth behind the tremendous brand-building ultimate Tradesman challenging and this year's Inaugural National Tradesman Day, which recognized and celebrated America's professional tradesmen. Our Rubbermaid Medical Solutions business delivered strong double-digit Core Growth as it continues to build share as the innovation leader in mobile medical parts and mobile electronic medical record solutions for healthcare facilities. Rubbermaid Medical is on track to nearly double its revenue in 2011. In our DYMO office technology unit, our Endicia Internet postage business delivered strong core sales growth of over 25% and gained market share. Endicia processes well over $1 billion of postage annually on behalf of the U.S. Postal Service. For our businesses which are primarily consumer facing, we have some great stories as well. Paper Mate launched a new subline called Ink Joy into Latin America in late Q3 and we're getting great results at sell-in as well as sell-through. This innovation will roll out globally over the next 3 to 6 months. Since joining Newell Rubbermaid, I've told all the writing folks that my favorite Paper Mate pen is Paper Mate profile but today, I can report that I have a new favorite in its Ink Joy. Ink Joy has the smoothest, easiest write of any everyday pen I've ever used. They leverage a new ultralow viscosity ink technology and nip configuration. On Fine Writing, we continue to build our presence in the emerging markets such as China and Russia with luxury shop-in-shops. In Q4, the Fine Writing team will introduce their most significant innovation in decades, Parker Ingenuity, featuring Parker's proprietary Parker fit technology, which provides an exceptionally smooth and fluid writing experience that actually adjusts to your personal style of writing. You can google Parker Ingenuity and order these new extraordinary pens today. I bought one online for my wife, Trisha [ph] last week and she is New Jersey tough, as I've told you previously, so I've got to be careful what I bring home as a gift and she absolutely loved it, thankfully. In our strong North American markets, our Calphalon brand delivered their highest U.S. sales quarter ever, with double-digit core sales growth. We shipped our big distribution win in the quarter with JCPenney, and Calphalon also won share with new products, such as our refreshed contemporary nonstick line, our new contemporary bronze nonstick line and our expanded kitchen electrics offerings. And the Sharpie brand in North America continues to roll, with a 1.6 share point gain in Q3 to about an 82 share of the Markers & Highlighters market behind the start with Sharpie campaign and great merchandising results at back-to-school. So some exciting momentum across our portfolio. We're also making good progress against most of the challenges we've called out in our late July earnings call. Let me first focus you on the North American back-to-school drive period. As you recall, we had strong sell in at back-to-school, with some benefit from the retailer-driven June timing shift into July. Our sellout was also very good in total, with particularly strong performance on Sharpie and Expo. In aggregate, we executed really well and grew share nicely through the back-to-school drive period. Bottom line, we're motoring on Sharpie and Expo, and with the Q4 launch of Paper Mate Ink Joy, we should see a strengthening profile across the portfolio as we exit the year. Rubbermaid Consumer performed largely on plan this quarter, although competition remains intense. As I said in July, we priced, but we will remain competitive and make the choices necessary to maintain our strategic price gaps versus competition. We will not lead pricing down, but we will stay on pricing principle, irrespective of the pressure this could create on gross margins. Building market share in our targeted Rubbermaid Consumer priority segments is the best path to value creation on this business. At the same time, we're looking at every aspect of the business system to further drive out costs, to increase gross margins so that we can support the brand more strategically with value-added innovations like Rubbermaid Reveal Spray Mops, Rubbermaid Easy Find Lids and Rubbermaid Easy Find Glass Containers. This same priority exists on Rubbermaid Commercial Products. That said, for the second consecutive quarter, sales growth on Rubbermaid Commercial Products was strong and a great set of innovations are moving rapidly to market. This is particularly nice to see given the hard work that Neil Eibeler and his new management team have done to reverse the late 2010 operational issues this business faced. While there are still some execution challenges which have hampered productivity and put pressure on gross margins, he and the team are moving fast to accelerate the growth even further while simultaneously driving gross margin improvement. Juan and I were at our Cachoeirinha factory outside Porto Alegre in Brazil and in Mexico City with the Rubbermaid Commercial Latin American leadership team last month. This is a top class team, with a very clear vision of how to build our business in these important markets and I have no doubt that Rubbermaid commercial products will feature strongly in our global strategy going forward. Baby & Parenting continues to present challenges. That said, there is some good news here, core sales in Q3 were down only 1%, which is an important step forward from the 12% core sales decline in the first half of 2011. Our North American new products, including Century from Graco, the broadened Graco Signature Series and the new Aprica launch at Babies R' Us have all shipped. And the Aprica business in Japan appears to have turned the corner over the last 4 months, delivering strong double-digit growth behind our new innovations, including the Karoon ultra lightweight stroller and the new Fladea car seat. While this is clearly helpful and a positive development, what I don't like about the current situation is that our 1% core sales decline is flattered by the positive Japan results and the North American pipeline benefit of new products. I would like to see more sellout data on the North American new products and more positive evidence of our strength in second half merchandising before declaring we've stabilized the business. Longer term, we need to address the strategic issues in the business by becoming more of an innovation leader than we are today, by more broadly deploying our unique 3 brand portfolio and by partnering more collaboratively with our key retail partners to develop the market. Of course, this will take investment and we will need to work with our key sourcing partner to release the investment capacity for growth that is currently trapped across the total enterprise. This will be key if we're going to unlock the full potential and value of this business. Baby & Parenting should be one of the most exciting businesses we have in the portfolio given the population growth in the world, the strength of our 3 brand portfolio and our global leadership position. We obviously have not been able to crack the code and unlock a compelling value creation story over a number of years. As a result of the sustained challenges on Baby & Parenting, I'm going to make a leadership change in this global business unit, placing one of our strongest leaders on the business while also bringing Baby & Parenting much closer to me. More on this in a few minutes when I discuss Project Renewal. So, for Q3. Positive results for the quarter in a very challenging economic environment. Core growth of over 3%, operating margin income expansion of 20 basis points, earnings per share growth of 7.1% and strong operating cash flow of $295 million. So what does all this mean for guidance? We've created some good momentum and our underlying performance has the potential to steadily improve. Our ability to deliver on our guidance will likely be influenced more by the macro environment than anything else at the moment. While we're becoming pretty adept at delivering results in the current environment, we're looking forward to the day when our category growth tailwinds finally reappear behind our businesses. I doubt that day is likely to come anytime soon, and we are building our plans assuming that we have to deal with another very tough year in 2012. We're going to have to continue to deliver growth in the context of slow to no growth markets. This could very well increase the cost of delivering growth, which is something we'll have to deal with as we manage the business over the next 12 to 15 months. For 2011, we are reaffirming our previously articulated guidance of 1% to 3% core sales growth, operating cash flow in the range of $520 million to $560 million and normalized EPS in the range from $1.55 to $1.62 despite the $0.04 negative impact of the BernzOmatic disposal, which was not incorporated into our previous guidance assumptions. We now expect gross margin to finish out the year flat to down 30 basis points. We will balance gross margin risk by being very tough on structural SG&A costs, while continuing to increase strategic SG&A, as we invest to strengthen our brands and build our capabilities. We grew value market shares in most of our businesses in Q3 and delivered 3.3% core sales growth and grew EPS 7.1%. Unless there's some positive external event or something changes substantially in our own algorithm, these results offer a pretty good reference point for our business potential over the near term. In this context, we are once again reaffirming guidance for 2011. We will not provide 2012 guidance until we report full year results on January 27, 2012. However, given all the [ph] factors I've mentioned, what is likely to be a higher cost of growth in slow to no growth markets over the foreseeable future, I think it'll be very difficult for us to get our core sales growth consistently into the middle or higher end of the long-term core sales guidance range of 3% to 5%. Let me turn it over to Juan, who'll provide additional details on the Q3 numbers and the impairment charge we took today.

Thanks, Mike, and good morning to everyone on the call. In the interest of time, I will refer you to our press release for most of the details so that I can focus on just a few areas of our improving financial results on a normalized basis. But first, let me summarize the salient points of our performance this quarter. First, we generated core sales growth of 3.3%. Second, operating cash flow of $295 million was strong and improved 52% year-over-year. And third, although our gross margin came in short of our expectations, we continued to invest in strategic SG&A to drive demand. In fact, our strategic SG&A increased $22 million, an increase of 11.2% or 7.9%, excluding ForEx, as compared to the year-ago quarter. Structural SG&A decreased $20 million, a decrease of 11.9% versus a year ago or 14.8% excluding ForEx. In North America, net sales grew 3.8%, which represents 3.1% core sales growth, led by the strength of our Tools, Hardware & Commercial Products segment. Sales outside North America grew 11.8% or 3.5% on a constant-currency basis, with Latin America delivering Core Growth of 18.4% and Asia-Pacific 5.5% or 15% adjusted for a onetime Rubbermaid Consumer promotional order last year. Gross margin was a challenge for us this quarter, contracting 100 basis points to 37.4%. We faced 270 basis points of headwinds from input costs and source goods inflation, while productivity contributed a lower-than-expected 80 basis points, due in part to the SAP ramp-up in the core GBU and to volume-driven under-absorption in our hardware business. And although pricing went through as expected, adding 120 basis points, higher promotional activity and a more price-sensitive consumer environment in the U.S. adversely impacted product mix. This was particularly true in our Everyday Writing Rubbermaid Consumer and Rubbermaid Commercial Products business. For the fourth quarter, we should see both sequential and year-over-year gross margin improvement as we anticipate lower input costs pressure and the full impact of previously implemented pricing actions. Despite the gross margin pressure, we continued to invest in demand-creation initiatives in focused growth areas. Parts of the Tools, Hardware & Commercial Products segment, where we are showing the strongest growth trends, was one of those focus areas and support for back-to-school and geographic expansion in the Office Products segment was another. The company operating margin was up slightly, about 20 basis points to 13.7%. Interest expense for the quarter was $21.8 million, representing a decrease from the previous year of $8.5 million. This improvement was driven by lower overall debt levels and the higher mix of lower-cost short-term borrowings. Our normalized tax rate in the third quarter was 28.2% compared to 30.5% in the prior-year quarter. The change in the normalized year-over-year tax rate was primarily driven by the geographic mix of earnings and the timing of certain discreet items. Also, during the quarter, we recognized approximately $28.2 million of previously unrecognized tax benefits driven by the expiration of various worldwide statutes of limitation. That favorable impact is not included in the aforementioned normalized continuing tax rate. We're now projecting our full-year tax rate to be approximately 28%. As previously communicated, during the quarter, we divested the BernzOmatic hand torch and solder business, and therefore, we have accounted for the financial results of this business as discontinued operations in both 2010 and 2011. Restated quarterly results for 2010 and 2011 have been posted on the company's website. On a 2010 full year basis, the divestiture of this business reduced sales by $101 million and had a dilutive impact of $0.02 on earnings per share. In 2011, on a full year basis, it is expected to reduce sales by approximately $110 million. During the third quarter, our GAAP results included a negative impact of $0.04 per diluted share or $11.2 million net of tax, representing the net loss from discontinued operations, which has been excluded from our normalized EPS. Relative to our normalized EPS guidance, think about it this way, as you know, our July guidance did not contemplate the impact of the BernzOmatic divestiture. Bernzo would have contributed $0.04 of earnings to the full year, but as a result of the divestiture, we will no longer generate those $0.04. To be clear, we are reaffirming our guidance for full year normalized EPS in a range from $1.55 to $1.62. We have not changed our guidance despite the negative impact of the Bernzo divestiture or the impact of the lower-than-originally forecasted gross margin expansion, although neither were originally contemplated when the guidance was provided during our July earnings call. During the quarter, we conducted our annual impairment tax of goodwill and indefinite live intangible assets as this timing coincides with the company's annual strategic planning process. That test resulted in impairment of goodwill for the Baby & Parenting and hardware business units and therefore, the company recorded noncash impairment charges totaling $383 million or $1.05 per share in the third quarter. These impairment charges are not included in normalized earnings. Now, let's take a look at the balance sheet. During the quarter, we generated $295 million in operating cash flow. We used $229 million to pay down debt and returned $47.9 million to shareholders in the form of $23.5 million in dividends and $24.4 million paid for the repurchase of 1,869,000 shares. The share repurchases during the quarter had less than $0.01 impact on normalized EPS. We have another $250 million in debt maturities scheduled for March of next year, which we intend to pay from operating cash flow. We believe our balance sheet will continue to get stronger and towards the second half of next year, we should be coming close to our desired comfort range of 2.5x debt to adjusted EBITDA. We plan to continue to repurchase shares at a measured pace over the course of our recently announced $300 million 3-year share repurchase plan period. The board gave management discretion to be more opportunistic or more conservative, depending on the attractiveness of share repurchase versus other competing options. Those other options include investing back into the business to fuel organic growth, dividend payment and potential small bolt-on acquisitions. We continue to make steady progress improving our working capital, notably we'll reduce inventory by a little over 4 days from Q2 levels to essentially flat year-on-year days. We expect to record between $90 million and $100 million of restructuring charges to implement Project Renewal, with between $30 million and $40 million expected in 2011. We believe the planned initiatives will be completed by the end of Q1 2013 and will require a cash use of approximately $75 million to $90 million. This is a realignment of spending priorities, not a cost reduction plan. Therefore, the savings of approximately $90 million to $100 million will be reinvested in the business to accelerate growth. Mike will provide more details in his closing remarks. Operating cash flow guidance is unchanged at between $520 million, $560 million for the full year and includes between $85 million and $95 million of restructuring and restructure-related cash payments, approximately $10 million of which relate to Project Renewal. We anticipate spending approximately $200 million on capital expenditures in 2011. We still have work to do in a number of areas but overall, our results are trending in the right direction, with sequential core sales improvement and modestly improved operating income despite a very challenging macro environment. In summary, we're pleased with our third quarter performance and believe we're making solid progress. Now, I'd like to turn the call back over to Mike. Mike?

Thanks, Juan. Now, I'd like to turn to Project Renewal. I told you on the last call that our mission is to write the next chapter of the Newell Rubbermaid story and that our ambition is to build a bigger, faster growing, more global, more profitable company. I said we'd do this in 3 stages. We first get the business back into a cadence of doing what we say we are going to do, essentially reestablishing our cadence of delivery. Q3 is the first proof point with respect to what I'd point the delivery stage and we, of course, know we need to string together a number of quarters before we'll be able to credibly put a checkmark in this box. The second stage involves making a series of strategic choices that will enable us to unlock the full growth and value creation potential of our portfolio. At a recent investor conference, I referred to this as the strategic stage. Project Renewal represents an important first step in the strategic development of the next chapter of our story. It's a step designed to liberate the trapped capacity for growth and margin in the business, one also designed to enable us to deal with the higher cost of growth, given the slow to no growth market environment we will inevitably have to face into over at least the next 12 to 15 months. While I will not cover in a detailed way how and where we intend to invest the funds we released through Project Renewal today, I will walk through the changes we intend to make to simplify the organization for growth to essentially set up the third stage, the acceleration stage. Of course, the payoff over time is in this third stage, the stage where we consistently deliver in the long-term guidance range. While I will not put a timeframe on the quarter or the year where we will emerge into this range of delivery given the macro environment, I'm certain the funds released through Project Renewal, when coupled with a set of sharpened strategic investment choices and strengthened capabilities, will deliver that outcome faster than we would've otherwise gotten there. Since starting in July, I've had the opportunity to meet with employees in 8 of our top 10 countries, reviewed each of our businesses multiple times, been to 5 of our most important factories, met with many of our customers and customer teams and spent time with many of you in person or on the phone. I've listened, learned, asked questions and developed a pretty comprehensive understanding of our business. This engagement has helped me shape my perspective on how to play our portfolio to win, how to redeploy our resources to the best business opportunities we have and how to simplify our structures, so that we're sharp -- we're making sharper, more decisive choices, the choices we need to make. Today, I'd like to discuss the first steps in the process of unlocking our full growth and value creation potential, steps that will simplify the organization design and release trapped capacity for growth and profits, by reducing the complexity of our group, global business unit and corporate structures. I've also taken a hard look at our manufacturing and distribution network and the work that has previously been done to strip out excess capacity. I was really reluctant to open this door given everyone's desire to close the book on the transformation program, thinking that any further choices in this area would be small and could be funded out of normal operations. I'm sure many of you on this call would've preferred me to leave that door closed, but there are a couple of important choices we should make that have a quick return and will drive up capacity utilization and improve gross margins on 2 strategically important businesses. While we're still finalizing some elements of the changes we plan to make, I can share the broad outlines with you today. Effective January 1, 2012, we will reorganize our company structure to more closely mirror our go-to-market strategy with 2, rather than 3, operating groups, one that comprises our consumer facing businesses and the other that comprises our professional facing businesses. These 2 groups will be called Newell Consumer and Newell professional. The Newell Consumer businesses will be run by Penny McIntyre, current group President, Office Products and the Newell Professional business will be run by Bill Burke, currently group president, Tools, Hardware & Commercial Products. Jay Gould, currently Group President at Home and Family will be leaving the company effective January 1, 2012. I want to recognize Jay for his leadership and service at Newell Rubbermaid. Jay is one of the key thought leaders in our business and was instrumental in shaping the brand-led growth agenda that is so critical to our overall program today. I would also like to thank Jay for staying with the company during my transition into the CEO role. He has been very helpful to me and I know the whole team wishes him the best of luck as he leaves to seek a new senior leadership position outside Newell Rubbermaid. Coincident with the group consolidation, we will also rationalize our GBU architecture with the total number of GBUs contracting from 13 to 9. The details of these changes will be announced over the coming weeks, once the final appointments have been made. Given the challenges on our Baby & Parenting business, I've made the decision to make a leadership change on that business. Christie Juster, currently President of the Decor GBU, will assume responsibility for the Baby & Parenting business effective November 15. I plan on personally working directly with Christie and the Baby & Parenting GBU to ensure a smooth transition and perhaps, more importantly, ensure that we unlock the value and growth opportunities in this business. In addition to the redesign of the operating groups and the realignment of the GBUs, we will invest to strengthen the cost of [ph] our development capabilities in our new Newell consumer group. Paul Bointman, currently President Global Sales Operations, will be appointed Chief Customer Development Officer, leading our customer development function globally, reporting to me. Paul will also serve as a key member of the Newell consumer group Executive leadership team, with accountability for the North American customer development organization. In this role, he will report to Penny McIntyre and have specific accountability for all of the North American Newell consumer group customer development teams. This is one of the key areas where we will have opportunity to invest to strengthen our capabilities. The goal will be to build a capability of equal stature to our North American marketing and innovation teams. Additionally, consistent with my desire to deploy resources primarily against ideas that drive organic growth, we will scale back our corporate development organization. While there will be an important role for mergers and acquisitions, in the near term, M&A will not feature as highly on the agenda as it has in the past. Of course, we will seek bolt-on acquisitions that support our business strategies, but these choices will have to compete for capital with other very clear value creation options. In that context, we will scale back the current team and integrate key members of the corporate development organization into the finance organization. Buddy Blaha, currently President, Corporate Development, will be leaving the company effective January 1, 2012. I want to thank Buddy for his significant service to Newell Rubbermaid. We will complete Project Renewal by the end of 2012 with the organization redesign of our groups and GBUs completed over the next few months. As we communicated in our press release, we will incur restructuring charges of approximately $90 million to $100 million and generate savings of like amount. We expect to generate all of the savings no later than the end of Q1 2013. Most of the costs that we take out of the organization will be invested back into the business in 2012 for accelerated performance into 2013. This new operating alignment will better enable resource deployment against our most strategic businesses and geographies and ultimately result in accelerated growth, improved profitability and strengthened capabilities. I'm very cognizant of the potential distractions that a changed agenda like this can create. I've executed programs like this multiple times in my career and I never take the challenges lightly. I will stay personally very involved in the execution that will lead the organization through this period of change, being true to our values, and treating those impacted in a professional and fair manner. I'm convinced that this is something we need to do now in order to set the stage for accelerated performance in the near future. I'm confident that we'll generate the savings quickly, and in turn, invest the majority of those savings back into the business for profitable, sustainable growth. We will emerge better positioned to effectively commercialize our products and innovation. More completely deploy our portfolio across our existing geographic footprint and more aggressively expand into the faster growing emerging markets. We're building a more focused, stronger and nimbler organization that will be better built for profitable growth. With that, we're happy to answer any questions you might have.

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

My question has to do with Project Renewal and the fact that it's happening concurrently at -- or at the tail end of the Western European restructuring. Does that make for more opportunity? Is there a risk that it sort of conflates challenges or problems? And how do we know that there isn't going to be sort of the Project Renewal version 2.0 come 2013? Or how committed are you to getting out of the restructuring mentality?

Well, hopefully -- Wendy, first of all, thanks for the question, I think it's an excellent question. There's 2 things I'd like to say in response. First of all, one of the things that I wanted to make sure we didn't do with this -- with Project Renewal is potentially burden anything that's going on in Europe with another change agenda overlaid on top of it. So there's virtually no interception between renewal and the European transformation program and acted -- and our folks in Europe need to be focused on execution as we move towards that April cut over date, SAP cut over date. So this program really doesn't touch Europe. There's no real intersection. There's a couple of exceptions to that but, in principle, that's true. So one of the things that I was looking at when I was thinking about this is whether there's any executional risks that this could create and I don't feel that, that risk exists. With respect to your other question, which is really certainly something that's come up and I know there's a point of view out there about us as a serial restructurer. And I accept that, that's one of the potential headlines that'll flow from this choice. It's the same old Newell restructuring its way to success. That's, in my mind -- look, I can't look backwards, I can only look forward. And as the guy looking at this business right now, I can tell you that the structural SG&A costs are too high, and given our ambition to accelerate the growth performance of this company and given our ambition to build out the geographic footprint of this business over time, we need to do this. Am I going to sit here today and tell you we'll never have a restructuring program again? No, I'm not going to say that. Do I envision when we need to do one anytime soon? Gosh, no. I want to get this done, get it reset and get the organization focused on executing our agenda and building this business. I hope you feel, from my comments, whether it's been in our first call in July or whether it's been some of the external conversations I've had, that you understand that we're moving from the phase of transformation into the phase that's grounded in a growth story. This is simply a set of actions that are designed to unlock that growth potential. We've got trapped capacity for growth in our structural SG&A costs. And I've said this externally, I'll say it again. My point of view coming into the job, and I've had this view from the board seat I had is that we were too complex an organization for the size of company that we are. And so I'm simply coming in, making the choices that I think need to be made, liberating that trapped capacity for growth, which I think we're really going to need in the short term. Because we're operating in slow to no growth markets. And in that environment when people have to build share in order to grow their business, the cost of growth has risks going up. I think we really need this money in order to deliver even our short-term commitments but certainly our long-term ambition to accelerate it to the long-term guidance range. So I can't rewrite history. I can only look forward and I can tell you this is an important choice to make now. I won't stand in front of you and say never. I won't take that bait. But it's certainly not in my frame of reference. I've tried to go as broad and as comprehensively and as fast as possible, to sort of rip off the Band-Aid and get this done so that we can get on with focusing on delivery.

Well, it sounds fantastic to me but I just had a quick follow-up for Juan. I think you said you'd reach your target capital structure by the end of next year, but is there a chance we could see a bump in the dividend before then or would you wait till back half of next year for news on that front?

Well, we're feeling very comfortable, really, with the way we're progressing, strengthening the balance sheet. As you know I said it's the board's discretion to increase the dividend. We increased it 60% this year and there should be room, because we said we have a goal of reaching 30% to 35% payout in ratio. We still have plenty of room to increase dividends.

The next question comes from Lauren Lieberman of Barclays Capital.

I Just wanted to follow-up on the restructuring dollars being reinvested, both to support long-term growth, but also to kind of enable delivery in a tough environment next year. Is your thought process that the reinvestment will keep pace with the savings? Or is there a chance that reinvestment runs faster than the savings come through?

No. I mean, I'm just -- I'm more conservative than that, so I wouldn't put the money down until I was really clear I had it in my pocket. So I think I'm going to be very careful about that. I'm not going to lean into the spending. I think we also have to make sure we're really decisive and sharp in the choices we make. So we're not going to sort of spread that money out, like you would a peanut butter and jelly sandwiches. No way, we're going to take a knife and spread it democratically. So I want to put it into very specific things that I think are both offer near-term opportunities but also set the stage for the future. And we'll find the right balance, Lauren. I mean, I'm not going to get into the details today because I really want to bring the organization through the change that we're making. It's a pretty impactful one. It affects a lot of people, both in this building and in other buildings around it, in the U.S., primarily. I want to get through that phase before I disclose how we want to spend the money back, and with what cadence? But we're going to be very careful about how we do this. We have to watch the gross margins. Obviously, the inflation was higher than we thought it would be and we're going to have to make sure we're getting the right productivity against that and the right pricing. And until we make sure we got a very locked in and locked down perspective on that, I'd be reluctant to pull too much money in.

The next question comes from Jason Gere at RBC Capital Markets.

Just sticking to the gross margin topic, I guess one, just with some of the manufacturing consolidation, I just wanted to make sure, talk about your comfort level because I know you're still doing the SAP rollout globally. So that's just the first question.

Yes. Let me just give you some perspective on geographic reach on this program. While there are some things that we're doing outside the U.S. as it relates to Project Renewal, most of, if not, the vast majority of the changes we're talking about are going to be North American focused. And so in North America, we've rolled out SAP. That's behind us with the Decor transition which occurred in August of this year. So I don't think there's a risk associated with the SAP cut over and Project Renewal. We've been very careful to make sure that we kept this program away from any other change work we're doing. Because as you know, you don't get the value out unless you execute it brilliantly. So execution's everything with these programs. And so we've created the right space and breaks between the 2 initiatives.

Okay great. And just thinking about the gross margins, and Juan, talking about the fourth quarter seeing a nice step up obviously to kind of fall into the range. As we think about next year, it seems like SG&A will probably be more in line with this year's levels and some of the savings that comes through to Project Renewal reinvested. But if I look at all the kind of the puts and takes, we should see stronger gross margin next year, productivity pricing, the European savings. I was just wondering if, and I know you guys are still in the budgetary process, but I was just wondering, is the thinking right that gross margin, it should be pretty meaningful and more or less in line with maybe some of the historical levels to kind of drive some of that reinvestment that you need on the SG&A side?

Yes. That's right, Jason. It is fair to assume that our gross margins should continue to expand next year. Part of Project Renewal involves some manufacturing. There's a bit of supply chain that will have a positive impact on gross margin. And we should continue to benefit from pricing take in on the second half of this year and a fairly robust list of productivity projects that we're going into the year with.

Yes. Jason, this is Mike. I mean, the one thing I'd say is we really need to make sure that we continue to drive gross margin forward. I won't get into the details or any of the moving parts in the very near term. But strategically, it's critical that we move gross margin forward. It's the lifeblood of any consumer goods business, year in, year out. At the same time, work hard to get those SG&A rebalanced, so that the SG&A is focused on the things that create demand and less on the administrative side. And those 2 drivers within the P&L are the things that are going to create the upward momentum in our growth rates. And so we have to have the same energy that we've always had with respect to gross margin improvement. It'll become tougher to do that overtime than it has historically been, historically been the last 5 years, because once we get through these last bits of manufacturing and distribution system, the stripping out the excess capacity and therefore, removing the burden of that fixed cost on the gross margins. We'll have to improve gross margin the old-fashioned way, which is through productivity and through strategic pricing through mix and through margin accretive innovation it will have the benefit of some of the structural changes. But it has to be front and center. Every one of our business leaders knows that, and we're going to -- even in tough times like we're in now with the kind of inflation we've got and with high unemployment, limited pricing capability in a flat markets, competitive situations, we still have to remain vigilant and committed to driving that number forward. And I don't see any barriers to us being able to do that. It just may be that the type of gross margin progression we get year in and year out is different from what we saw over the prior 5 years. And we'll have to deal with that by doing some of the other things we're suggesting we need to do.

The next question comes from Mark Rupe at Longbow Research.

Michael, on the 13 to 9 in the GBUs, is it fair to assume that you're happy with the current kind of brand portfolio you have now? Does it roll out any potential rationalization of any business unit?

Look, we have the portfolio we have and I'm happy with the brands we've got. If you listen to the conversation about the brand growth rates, we've got some nice momentum. That said, we've said publicly and I'll say it again here, there's probably 1 or 2 pieces of the puzzle that somebody else might be able to create better value with than we will be able to. But we're talking small pieces of the puzzle, $100 million type of pieces. Just like the Bernzo disposal, there's 1 or 2 of those that we might consider doing. But it's not the most pressing issue we've got out there.

Okay. Then just I would assume that you have more GBUs on the consumer facing stuff. So should we expect that, and so more, I guess, work will be done there?

Well, look, here's where we are and we'll be clear as we can be. As soon as we work through the people side of this, we're talking about a very significant change within the company and in the structure of our GBUs. So in fairness to the folks that are impacted, I didn't want to go as far as I'll be able to go in a couple of weeks with you in terms of describing what that architecture looks like because I want to help people through the change. But once we get that done and we reset those leadership teams, we'll be able to expose to you what that new structure looks like, who the leaders are and why we think that the new architecture makes sense strategically.

Okay and just lastly. One, on the goodwill impairment, can you remind me what the drivers behind that again?

Yes, the way it works is you -- every year, we do an impairment test and basically it's a BCS or the business units where we think there's less cushion. When you run the BCS, you compare that with all the assets, both tangible and intangible, and if it falls short, then if there's an impairment, you have an implied goodwill. And if it's different from what you have in the books, you take the write off. That's basically how it works. So in the case of the baby business, the underperformance kind of quarter after quarter was eating into our cushion. When we got to this quarter, it had -- the goodwill had all impaired by then. Does that answer your question? Is that what you were looking for? [Technical Difficulty]

It does answer.

The next question comes from Chris Ferrara Bank of America.

So the content of reinvestment again, right? So it looks like that the restructuring savings you're talking about would be something in the order of a 25% increase to strategic SG&A overtime. If you just take the basic math and assuming to your point right, you're not going to spread it evenly. It's going to be spread democratically. I mean, you're talking about some real sizable increases in investment behind some businesses, right? And I guess what's your confidence level in the potential returns on that stuff, like, do you feel like you have a good line of sight into how responsive sales and profits will be to that sort of investment?

Well, we're not going to redeploy it until we do. So let me make sure that, that's perfectly clear. We've just come through our planning cycle, at least the bottoms up portion of our planning cycle. What I asked everybody to provide me with was their tops lists, their top initiatives, their top productivity initiatives and also their top unfunded initiatives. And the next phase for us will be to look at all of that in the context of a piece of strategic work we're doing to understand which portions of the portfolio we believe we should bet on most aggressively over the near term. And it's the intersection of both the tactical opportunities in the short term and the strategic perspective that, that work drives that'll inform the choices we make. And I think you have to take a long view on some of these bets. I think most folks wouldn't suggest that you can get a financial return in a very short window on any of these choices. But overtime, you do. And I've said this before. I think we have 2 jobs to be done with respect to accelerating our performance. One is to get more where we are and the second job to be done is to extend beyond and broaden our geographic footprint in select businesses into the faster growing emerging markets. Job one is job one, because it's our first priority. And also because I think those choices will generate a better return because you don't have to add too much fixed costs into the markets where you are today. So if you can accelerate growth in the markets where you are, you get the flow-through of gross profits last year, your strategic SG&A, to flow to the bottom line. And assuming that they're not tactics, that these choices are investing and creating a strategic relationship, a more structural relationship between the brand and consumers, you get an ongoing annuity that comes from those choices, which is the repurchase of the brand overtime. The first purchase, the trial, the induction period, you tend not to get a return on. The annuity over time, is where the money comes in. Now, I would think that we would be able to get a flow-through of benefit to the bottom line that then could be reinvested into emerging markets or flow-through back to shareholders. But I'm not going to suggest that there's a short-term payback for any stepped-up plussed-up investment. But overtime, certainly there is in my experience. And as long as you're not investing in tactics, that you're investing in strategic opportunities, and that's the work that still needs to be done. Now I said that I wasn't going to get into the details of those choices today, but I will early next year. Once we've tied off those choices with the board and satisfied ourselves that we're getting a payback in the broadest sense, a payback for the money that we've plussed into those either businesses or capabilities. So Chris, I know I'm sort of doing the kabuki dance on you a bit, but it's because first of all, I don't have all the answers yet for where the money will go. And secondly, I don't think there is a short-term return from a traditional sense, return on investment, ROI type of financial return on investment that you can ever justify from an investment in the quarter or in the 6-month window into a choice we might invest behind. But overtime, there certainly is. And we'll lay that out as best as we can without disclosing things that would create competitive issues for us. But we're not going to do that probably until sometime in the first quarter.

My question was, what I was really trying to get at also is what the potential is for some of this to drop down, because you just don't have room yet to reinvest at this sort of rate.

Look, the interesting thing now is as you put money into strategic SG&A as opposed to have it tied up in structural costs, if it doesn't work, you can always flow back, right? You can always just pull it out. So you have way more flexibility with your money and strategic SG&A than you do having it tied up from structural SG&A. So I think we have just so much more -- so many more options with respect to how we use this money in this context than we did just a few days ago. And we're going to be really smart about how we manage this. You have to be rigorous in the analysis, so I hear you guys loud and clear. That's what you're asking us. We don't just throw money at it. We'll make the right choices and we'll bring you along as we do that in the appropriate way.

The next question comes from Connie Maneaty at BMO Capital Markets.

A couple of quick questions. Just to put some dimension on a couple of the changes, what percentage of your SG&A is structural versus strategic? And then as you split, reorganize the company into consumer and professional, could you give us a split on sales and operating profit and margin on the new configuration?

We're not going to do the second part of your question today, I don't think. But we'll have that shortly so you get a sense for that. But on the first part of your question, Connie, it's roughly -- a good rule of thumb is about 40%, 45% is strategic today. And I'm not going to tell you what it will be tomorrow, because we haven't really worked through all of that.

I have a follow-up question on why the cost of delivering growth should be rising? It just seems that the environment has been rough for maybe the last 3 or 4 years, not just right now. So what has changed, especially if the gross margin should be expanding next year? I mean, for many of Newell's category growth has come primarily from gaining market share. So what's really changed?

Well, I think the market dynamics are a little bit worse today than they were a year ago, for sure. And you've got 2 consecutive years of flat to no growth markets. So what happens is in that environment, you've got the intensity of competition picks up and people who don't have strategic things to bring to market have to fight on price. You saw a bit of that in the back-to-school window, particularly in the Everyday Writing business, where some of our competitors really had to push the price points down. And so we're -- and Connie, it increases the importance of whatever you're bringing strategically to market. You have to make sure you're supporting that properly. And then occasionally, you need to protect your flank from a pricing perspective. So that would be my answer to your question.

How do you think of the balance of market share gains at -- would you rather gain market share at lower margins or is profitability overall more important?

I want to grow our business profitably, I guess, is how I would answer that question. It's not one or the other, I want both. And I certainly don't want short-term growth that doesn't stick. That's not useful. So I think -- I said this the last time we talked. What our marketers need to be thinking about is about developing their markets. They, of course, want to do that through our -- and we will do that through our branded assets. And so what I want them thinking about is expanding the size of the pie and leveraging our brands to do it. Now, we should build market share when we do that. If you do that, you have a good chance of both expanding gross margin and accelerating growth. If you don't do that, then it's tough to expand gross margin and deliver the growth. And so market development becomes the mandate for our marketers. I'm not interested in share shifting between us and the competitors. That's a road to nowhere. What I'm interested in is bringing more strategic initiatives to market that expand the relevance of the categories. That's what our retailers want anyway. They want us to build their business, not simply steal the other guys' market share, so that they get more revenue per linear inch and they get a return on invested capital. And that's what we should want, because if we expand our markets, we end up not having to apply tactics to grow. And it's those tactics that end up compressing gross margin. So market development's the key to avoiding the trap that you described upfront in your question. Connie, I sort of fumbled a number with you. You asked a question on SG&A, the balance of strategic SG&A to total SG&A and I had it inverted. So it's about 60% as opposed to 40% to 45%. It's the other way around. It's 55% to 60%.

55% to 60% is what you think...

Yes, yes.

The next question comes from Ann Gilpin at Jefferies. Ann Gilpin - Jefferies & Company, Inc., Research Division: I kind of wanted to follow-up a little bit on the gross margin question. What really surprised you on the gross margin line this quarter? Was it the inflation or did you decide to do more promotions than you initially planned? And can you also talk about that in the context of your Q4 expectations?

Well, look, I mean, the headline on gross margin -- I'll give you the facts on gross margin. We had inflation built into our gross margin forecast. Not quite as much has actually occurred. So we got more than we thought we were going to get in a couple of areas. And one of them, I think, is just a timing issue where markets will break. But because we don't buy the primary commodity, the commodity we've got or the input -- the raw material we have is a derivative of that commodity. It's simply a timing issue. So we anticipate it getting in more of a benefit faster into the P&L than we did. The other is that, as I mentioned in my comments, we had 3 businesses where things were a little bit more heated in terms of promotional requirements, and again, the way to really get yourself in trouble from a gross margin perspective long term is to not win those competitive battles. So in Everyday Writing and Rubbermaid Consumer and Rubbermaid Commercial, we had to deploy a little bit more promotional investment than we really thought we would have to in the quarter in order to deliver the outcomes we wanted. I don't love it and I wouldn't lead it, but if that's what it's going to take to hold your share position, then you have to do it, because market share is critical to the success of our business. And if I have to play defense in order to preserve the right to go on offense at a later date, that's what I'll do. And that's what I said in my comments, and I know you guys don't probably like it that much, but it is what it is and that's what you have to do when you're running a business. Market share is the key thing. Now, Connie's question just a second ago is at the heart of it. If we have to use tactics too often to hold the share, that's not a good thing. So it puts more pressure into the marketing community, deliver ideas that are going to expand the market because there are better ideas that either bring a new benefit or a strategic point of difference or they connect to consumers emotionally in a more compelling way than others have in the past and therefore, consumers get more involved with the category. It puts more pressure into the system that way. And that's why I say, we have 2 towering capabilities of equal stature we're trying to build in this company. One is a fantastic marketing and innovation machine and I got to give credit to Mark and the prior team. They've done a good job of building that and we can do more. But we're off to the races there. And we need to strengthen our executional capabilities so that the powerhouse operational capability is strengthened, such that when those ideas flow through the funnel, they're received and amplified with customers and consumers in a really compelling way. It's the combination of those 2 capabilities that ensures that you get an outcome that doesn't cause you to go down that dangerous path that Connie and you, Ann, have described where you tactic your way to success. Ann Gilpin - Jefferies & Company, Inc., Research Division: And if I could just ask kind of a high-level question, Mike, I think you've commented that the long-term 3% to 5% core sales growth target might not be reached in 2012 given some of the macro headwinds. You're guiding 1% to 3% this year and looking at the past couple of years, 2010 and '09, combined looks to be maybe negative. Does the 3% to 5% long-term target still hold water or do you think that maybe needs to come down given the macro environment and sort of the slow, elongated recovery here? How should we kind of think about the long-term core sales growth number?

It's an excellent question, Ann. The work that we're doing now to that I referred to earlier about strategic choices and the disciplined approach to resource allocation will inform the answer to your question. I don't think -- I hope there's a path right into our strategic guidance range, but I just don't know yet our long-term guidance range. My instincts tell me there are in the short term. I've said what I said at the Barclays conference and I said what I said today, which is our core growth of 3.3% in the third quarter and our EPS growth of 7.1% are good reference points. I think those are, and I'm not saying I'm not guiding to those numbers, because there's always going to be a range around them. But I think they're good reference points for now. We had good share results in Q3 and that enabled that outcome. It'll take some help from a category growth perspective so the tailwinds that I referred to and obviously Project Renewal to get us into that -- to free up the resources to be able to invest to get us into that range. But I'd rather not declare at this point my perspective on long-term guidance. I think we need to do the work the right way, which we're doing, we're talking to the board about it on the week after next and we have another board meeting in February. And we'll probably -- it's a work in progress. We'll probably engage with the board in both meetings on that subject and then we'll talk to you roughly around that timeframe, both the strategic path forward and our view on long-term guidance. Ann Gilpin - Jefferies & Company, Inc., Research Division: And if I could just ask a clarification question, obviously Baby & Parenting improved nicely and sequentially. It sounds like some of that was shipment. Did you say that sell-through also improved sequentially or is that still -- has that improved or not?

We're getting the sell-through we expected on these things. I would love to get more. And what I said was that we have a strengthened promotional plan in the back half of the year. I want to see how that impacts the trial on these products. Look, I'm not sitting here and telling you that we've got these things stabilized yet. Our results, our business in Japan is on fire. So the Aprica business in Japan is something to get very excited about. But it's a small portion of the overall Baby & Parenting businesses. The business was flattered in the third quarter by the pipeline, the sell-in of new products. And it's just a little premature to know whether those guys have all got the traction we want them to have. But even if they did, that's not the answer for us. I think we have a more fundamental sort of strategic questions that need to be answered on this business, which I laid out. And I can tell you, Christie Juster, whose coming to lead this business, is an excellent leader. And I'm really certain that she, with my direct involvement and with the support of a number of people that have Baby & Parenting experience in the organization at senior levels, will be able to figure this out. There are some really sticky issues in there that I also spoke to that could govern the rate with which we're able to turn this thing around. But strategically, this should be one of our most interesting businesses. 7 billion people in the world going to 9 billion. If you look at the demographic profile of people in the emerging markets, they're all young, they're all having kids and governments are getting involved to ensure that children are taken care of in the proper way. For example, there's no car seat legislation in China yet. So there's no requirement for kids to be in car seats there. So figuring out how to participate in what is bound to be terrific category expansion over the next decade, and this category is really important, but we have to be able to create value while we participate, and that's -- obviously, we haven't over the last period of time. That's why we took the impairment charge we did on Baby & Parenting. And so we can stabilize this. We can probably get it back to growth, but we have a set of strategic answers that need to be articulated about what we want to do over the next decade in this business and how we do it. And that's where I need to be involved. That's where Christie will play a critical role. And that's where I'll tap into all the expertise that sits in around my table to help answer those questions.

The next question comes from Bill Schmitz at Deutsche Bank.

I think we talked about a lot of those sort of long-term structural stuff. Did you guys decide on what you think the right dividend payout ratio is for this business?

Yes, we want to have a competitive dividend payout ratio. How we get there from here is a question mark. And actually, the board is the one that is going to make that call. But we simply want to try to get our dividend payout ratio closer to 30%.

Okay, I get it. I think the competitors are closer to like 40% to 45% though.

That's okay. That's their choice.

You said competitive.

Yes. I am competitive on multiple fronts [indiscernible].

How about hedging going into next year? Because I'm sure it's not loss on you guys, but the first quarter gross margin comp is obviously pretty difficult. Is there anything we should be mindful of, just as we kind of build the models for next year?

Hedging. We typically buy forward metals. In the case of resin, we go a little shorter because there's really no ability to hedge. About 3 months is about the best you can do. So we have some visibility there. In terms of the Q1, you're right about the comps. Remember that the year before, we had unusual overhead absorption in Q1.

Okay, got you. That's helpful. Just on the European front, is Europe going to make money this year? Because I know there's kind of a qualitative 10%, but are you guys making progress on that front?

We're actually making very good progress, Bill. We feel -- remember that when we talked about the Europe transformation, there were 2 big buckets. There were the operating income improvements and we said our goal was to get to 10%. And then there's the tax benefits from the EPC structure. On the OI benefits, they have been coming in. But the end of -- year-to-date Q3, Our OI in Europe will be 10%. That compares with 8% in the previous year and less than 2% in 2009. So the benefits are coming through there. Once we get the EPC and the SAP system implemented in Europe in April of next year, then the tax benefits also begin to accrue. So I think we're making very good progress there.

Okay, great. And then I know you don't want to talk about customers, but I think it's going to be in the 10-Q. Can you just talk about what Wal-Mart was as a percentage of the sales of this year versus last year?

Yes. It was 12.5%, Bill. And it was down a point versus prior year. So 13.5% in the year-ago period.

Okay, but that's getting sequentially better. I mean, just broadly speaking, did you have relationships getting better, it was never really impaired?

No. Gosh, no. I mean, we -- look, Wal-Mart's absolutely a critical customer as are all our other customers. One of the things, Bill, that I talked about when I was mentioning capabilities, was we need to strengthen this area in our North American business. And I've always had a philosophy that you need to collaborate your way to great performance. And I believe that's right. And you need to look at value creation across the total enterprise, not just where our business system stops. And it's through those types of partnerships that you get the differential treatment in the relationship. And we've got a ways to go to build that, but I'm confident we will. And having had experience doing that in other roles, I'm pretty convinced that we've got a path forward there that will strengthen our connections.

Great. And then just one last one, if I could. Have you shared with the category captains at the -- I'm sorry, the buyers, the various retailers, the plan to invest more money into the categories yet? Or is that still on to come?

No. We have not shared that in part, because we haven't made the choices about where we're going to deploy it. But that's all in front of us.

The next question comes from Bill Chappell at SunTrust.

Just want to parse through the revenue guidance comment you made of saying the mid-to-high end of your long-term range is probably going to be more of a challenge for next year. Is that just an easier way to say 1% to 3% is kind of our goal?

Well, I'd be disappointed on 1% to 3%. So we just delivered -- what I said though, was a good reference point is what we've just delivered in Q3. And so, again, I haven't given specific guidance. But, yes, if we were at 1% core sales growth, we'd be having pizza for dinner every night.

With that -- I mean, as you look at the Baby & Parenting, I mean, I know you're doing a lot to kind of change that business, but as you look to next year, do you think the category can rebound or is it one where we're kind of flatlining for a while?

Look, it depends on the macros. I mean, I think that's the biggest issue. You look at birth rates in Europe. You look at birth rates here. It's just they just haven't recovered. Do we see the negative impacts if birth rate declines further? At this point, no. But we don't see some major recovery. And I think that has to do with the macro environment we're in. It's just going to be tough for a while. And it's good to see what's going on in Europe. I think that averts a crisis, but actually doesn't deal with the fundamental issue of jobs and economic growth and neither have we here in the U.S. And until we turn that corner, I think the structural headwinds we've got are going to be with us. That's why I say that we're going to be living with slow to no growth markets next year. I think that's the right planning assumption to make, because I don't see the catalyst to change. And that puts an increased burden on our marketing and selling capabilities, and that's what we're trying to address through renewal.

Okay. And then just one last one. Just trying to understand kind of the SG&A going into next year. I mean, with a lot of the projects costs or savings being headcount reduction, I would imagine by kind of January 1, you're going to see a fair amount of savings. So should we see SG&A kind of as a -- be lower than average in the first half of the year and then ramp up as you finally reinvest that business? Or should it be steady? And I would think it's a big drop until you really decide where you're going to redeploy it.

Give us the chance to work through the numbers, Bill, because we're still trying to figure out where are the right investments, what is the timing? But you're right about 70% of the savings are people related. So they should come in fairly fast. But just give us time to work through our budget.

You're not going to give me a...

We've got some interesting things we're doing in the first quarter that I think will benefit from some increased support. But I can't remember who asked the question about making sure you're disciplined about getting a return on it. I want to go through that before I declare, Bill. And that's -- we've been working hard to get to this point, to make the choices on the design of the organization, to make the choices on who to put in the key roles and we got another week of communication and appointment work to go on. And then we're going to -- I want the new leaders in those jobs to make their pitches and choices. And we'll -- so we have a month to work here. I've said we're going to be a little bit more interventionist from the corporate perspective and not just let this company be the sum of the parts and the motivation being trying to make the whole greater than sum of the parts. So there are clearly some things that I think we should put money behind in the first quarter. But will we go for broke? No, I really want to see how the gross margin story plays out.

The next question comes from Joe Altobello at Oppenheimer. Joseph Altobello - Oppenheimer & Co. Inc., Research Division: We've covered a lot of ground here this morning, so I'll just keep it brief, maybe a couple of one’s here. First, on Baby & Parenting, if you put aside the pipeline sale given what you've seen over the last 3 months with Century, by Graco, with Aprica, are you more or less hopeful that, that business could actually grow next year?

Well, Joe, I mean, we certainly have easy comps in the first part of next year. But if we were to grow in the first part of next year, I wouldn't be all flush and proud. We should grow in the first part of next year. I really am more concerned about strategically how we build this business over time. And I think it is a little bit longer to get our European business moving in the right direction. We've got some innovations that are flowing in to the business at the end of 2012 that will participate in some really important growth opportunities there. The challenge here is that it's an awful long lead time to do real breakout innovation in this category, from concept to market is a fairly long period of time. So I'm not going to tell you what we're going to do next year in this business. We should be able to grow this business unless something else dramatically happens. But again, I wouldn't -- I think we're going to be talking about Baby & Parenting, virtually every one of our calls for the next number of quarters, probably into 2013. Joseph Altobello - Oppenheimer & Co. Inc., Research Division: Okay, that's helpful. And then just secondly, on some background on Project Renewal, is there something that was in the works prior to your arrival, Mike? Or is this something that came about the last 3 months? And I guess, the reason I'm asking is because this has been something that has been an issue at Newell for years now in terms of the whole structural SG&A and trying to eat away at that. So did you guys feel like the organization had to be at a certain place to do this?

Look, I'm glad we have the growth and we've gotten back into this cadence of delivering Q3, because we had confidence that the organization understands what we need to do and can deal with -- change management is always a challenge. So it gave me the -- when I saw that coming in, it gave me the confidence that we could move fast. Obviously, I just finished my third month, so obviously, these choices are occurring very fast. The thing you got to remember is I had the benefit of sitting on the board for 2 years from November 2009 before becoming the CEO. So it's not all new to me. And some of these things were things that I've been thinking about before coming into the role. So it's not -- I think this is a very well thought through set of choices and it's obvious to me that we need to attack the structural costs because we're not going to get the 100, 200 basis point gross margin improvement year in and year out that we got through the 2005 to 2010 period that came through stripping out excess capacity in the manufacturing and distribution network. We have this one last bit of work to do there. And then, like I said, we've got to deliver gross margin the old-fashioned way, and that's tougher. And so you can't expect that going forward, you'd get 200 basis points here in gross margin improvement. So if you don't believe you're going to get that, then you have to go after the structural SG&A in order to have the strategic SG&A you think you need to accelerate performance. And that was the framework and the logic for the choices we've made, the business case for the choices we've made. The design itself and the people choices, Jay's decision to pursue a big job on the outside. Jay's choice is an enabler to this and the specific design is something that's come together over the last 3 months. That was not something I walked in with a point of view on.

The next question comes from Dara Mohsenian at Morgan Stanley.

Juan, I wanted to get some more clarity on the pricing you took in the quarter. It sounded like promotion was heavier than you expected. But I was hoping for commentary on if list pricing was implemented as you expected and where the consumer demand, the elasticity, the higher pricing came in versus what you had forecast.

I'll talk to the numbers and then I'll let Mike jump in with the qualitative aspects. In terms of the pricing, we actually got a little bit more pricing than we were expecting. Pricing read through in the quarter. Actually on the gross margin side, it added 120 basis points. Now, when we talk about promotion, it's not necessarily price soft, so it's not necessarily pricing. It's also how you feature what you feature. So promotion has an impact on mix. In the case of back-to-school, a lot of the pressure that we're talking about really came through mix as consumers made and retailers also chose to display the products that had the lower price points and consumer gravitated towards those.

On the question regarding price volume mix, and I think that the specific category that we talked about in Q3 is Rubbermaid Consumer. We're just getting into that window now where we'd start to see repeat purchase. This is a different purchase cycle than the businesses I've come from, where you get a purchase every 5 -- 4 or 5 weeks. They're high velocity categories. This one is not so much. You maybe get 2 purchases annually, 2 to 3 purchases annually. So you don't get as quick a read on the volume price impact. We'll get that in the fourth quarter on Rubbermaid Consumer. But where we see competitors moving their price, we're dealing with that. And we deal with it through tactics or we deal with it through better display programs. As Juan was suggesting, it's not always price. But it's a little early to declare whether we've got the price volume numbers called right. That said, Rubbermaid Consumer came in right where we thought they would in the quarter in aggregate.

And Juan, can you give us your full year tax rate expectation also?

It should be 28% normalized tax rate for the full year.

Our next question comes from Linda Bolton-Weiser at Caris. Linda Bolton-Weiser - Caris & Company, Inc., Research Division: Can I just ask -- I noticed there's been a lot of questions about the Baby & Parenting business, but I also follow Mattel and they have a baby gear business, which actually has been posting pretty decent growth lately. But they don't do strollers and car seats, they do like high chairs and playpens and swings, I think. So can you, like within the whole category, is there something that's structurally unattractive or problematic about car seats and strollers that makes that more unattractive than some of the other areas? Because Mattel made a very specific decision at some point in time to not do car seats and strollers. So can you just like share some of your knowledge about that, if you can?

Yes. Look, I think obviously, our biggest businesses are Graco business. And Graco sits right in the heart of the market from a positioning standpoint. And this is the most economically-stressed consumer out there. And when you're talking about car seats and strollers, you're talking about big-ticket items. And so unlike apparel or some of the gear, other gears that others might sell, these are big outlays. And in that environment, in the environment we are in, with the brand positioned where it is in the market, we have the full force of that headwind that we're having to deal with. We're in the car seat in the stroller market. That's our business and we're also obviously -- we've got a great playpen business. That's where we're going to stay and develop from, our path forward from. So whether there are structural issues there or not, I mean, that is who we are and we're going to have to face into them. But I'm surprised that others are optimistic given the dynamics we see and we look very closely at the category dynamics. And while things will improve as we lap the really, really tough periods. The market trends will improve because you're up against easier comparisons. I don't think structurally, that much has changed. Linda Bolton-Weiser - Caris & Company, Inc., Research Division: Okay. And then can I just ask you also, sometimes I get the question about your company, about why cash flow, like the operating cash flow level is about $500 million or so these days, whereas a couple of years ago, in '06, '07, operating cash flow was more like $650 million? Like, what is going on there in terms of your business is about the same size as it was in '06, '07 and yet it does seem like the operating cash flow level has significantly shrunk.

Yes. Well, the business is not the same size actually. The top line is smaller than it was in '06. When you look at cash flow as a percentage of sales, you can see that it's either steady or increasing. Actually, last year was one of our higher cash flow delivery years, around 10%. It is improving. Remember that we are investing still significant behind SAP, for example. So our cash flow delivery is strong today and I see it getting stronger in the future. Linda Bolton-Weiser - Caris & Company, Inc., Research Division: Okay. And can I just ask, I missed the very beginning of the call but did you give the gross margin performance and did you say if there was an impact from inventory reduction that was reflected in the gross margin?

No. We didn't comment on inventory reductions in the gross margin. Linda Bolton-Weiser - Caris & Company, Inc., Research Division: But commodities were clearly still a negative impact...

If you look at the commodities, where the impact of commodity -- of the input cost, not commodities, of input cost because we have sourced business in there as well. The impact of input cost in the quarter was negative 270 basis points on gross margin. Linda Bolton-Weiser - Caris & Company, Inc., Research Division: Well, I guess, what I'm asking was inventory reduction a negative impact on the gross margin in the quarter?

Not materially. The reason that's true is because you have inventory reduction every third quarter. So it's the change and the change in inventory reduction that would make an impact on gross margin.

Your final question comes from Budd Bugatch at Raymond James. Budd Bugatch - Raymond James & Associates, Inc., Research Division: Congratulations on the quarter. The performance in the quarter and keeping the guidance in the face of the macro. And I do have other questions, but I'll address them off-line because the call has lasted too long.

This concludes today's question-and-answer session. I would like to turn the conference back over to management for closing remarks.

Thanks again for joining us today. Let me close by reiterating that we're very pleased with the progress we're making and the sequential improvement in the financial results during the quarter and excited -- I remain very excited about and energized by the opportunities we have. We talked a lot today about what we've got to do and I'm certain there will be bumps along the way. But I'm clear that there's a path towards a bigger, faster growing, more global, more profitable company. And I'm committed to getting us there. So look forward to keeping you updated along the way. Thanks, everybody and thanks for the questions. Talk soon.

If we were unable to get to your questions during this call, please call Newell Rubbermaid Investor Relations at (770) 418-7075. Today's call will be available on the web at newellrubbermaid.com and on digital replay at (412) 317-0088 with an access code of 10005541 starting 2 hours following the conclusion of today's call and ending November 13. This concludes today's conference. You may now disconnect.