Newell Brands Inc. (NWL) Q3 2013 Earnings Report, Transcript and Summary

Good morning, and welcome to Newell Rubbermaid's Third Quarter 2013 Earnings Conference Call. [Operator Instructions] As a reminder, today's conference is being recorded. A live webcast of this call 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 Nancy O'Donnell, Vice President of Investor Relations. Ms. O'Donnell, you may begin.

Thank you. Good morning. Welcome to our third quarter earnings conference call. On the call with me today are Mike Polk, Newell Rubbermaid's President and CEO; and Doug Martin, our Chief Financial Officer. First, let me remind you that we will be making some forward-looking statements during the call. Such statements are made on the basis of our views and assumptions as of this time and are not guarantees of future performance. Actual events or results may differ materially from the results predicted in our statements. We caution you to consider important factors that could cause results or outcomes to differ from management's expectations, and we direct you to the most -- to the cautionary statements in the 8-K that we filed with our press release and in our most recent SEC filing. And finally, as we normally do, we will include a discussion of non-GAAP financial measures, which differ from our results prepared in accordance with GAAP. The reconciliation with the directly comparable measures determined in accordance with GAAP can be found in the press release and posted in the Investor Relations section of our website at www.newellrubbermaid.com. With that, I would like to turn the presentation over to Mike.

Thank you, Nancy. Good morning, everyone, and thanks for joining our call. We have 2 objectives today. First, Doug and I will review our third quarter results and update you on the progress we're making driving the Growth Game Plan into action. Second, I'll provide some perspective on the balance of 2013 and the factors that could influence delivery as we head towards the new year. This morning, we reported a solid set of Q3 results that represent our ninth consecutive quarter of consistent delivery. Core sales grew 3.3%, driven by strong North America growth of over 4% and very strong Latin America growth of nearly 35%. Normalized operating income margin increased 30 basis points, driven by a significant reduction in overheads as a result of Project Renewal, partially offset by a 50-basis-point increase in advertising and promotion and a 30-basis-point decline in gross margin, largely due to segment mix of our business. Normalized earnings per share was $0.52, up 10.6% and $0.03 ahead of consensus, and operating cash flow was $361 million, up nearly 20%. Our accelerating growth and increased operating margins and strong cash generation enabled us to pass nearly $91 million back to shareholders in dividends and share repurchases, up over 65%. As previously announced, we completed the sale of both our Hardware and Teach Platform businesses in Q3. Proceeds from these disposals will help fund the $350 million accelerated share repurchase program our board authorized and we announced earlier this morning. Importantly, in the third quarter, the transformation agenda in EMEA has moved from planning to execution. We've made a number of changes to simplify our operations for increased profitability and long-term growth, leveling the flow of shipments in Q3 and starting the exit of certain markets and product lines as an enabler to reduce complexity and infrastructure in the region. Specifically, we've begun to exit direct sales in over 50 of the 120 countries and territories that the EMEA region serves. We've begun to exit our unprofitable custom logo Fine Writing business, and we've begun to discontinue the unprofitable parts of our Baby business in about 19 countries. This simplification of our footprint has allowed us to announce the closure of 7 distribution centers, 6 customer service centers, 2 factories and 1 test center, while also simplifying our go-to-market organization in Europe. In Q3, this transition, when coupled with some timing-related year-ago factors, contributed to the step-back from our EMEA underlying core growth rate of about negative 3% to 4%. If one considers this rate of growth as more reflective of our underlying performance, global core sales grew at nearly 4% in Q3. Over the next 18 months, we will execute the phased exit of about $25 million of business in EMEA. These choices will result in increased absolute dollar profitability in the region, and over time, lead to core sales growth in our key countries and categories, as we focus our resources for growth in our most attractive country category sales. We plan to absorb these exits within our global core sales results, as we did in Q3, and our forward-looking guidance will include the effect of these exits. All of the restructuring costs associated with the EMEA transformation are funded as part of Project Renewal. So a solid set of numbers, particularly in the context of the changes we're initiating in Europe. We're starting to see the benefits of the changes we launched earlier this year. Our new operating model is deployed, and we've reorganized the company around its 2 core activity systems: development and delivery. We've restructured marketing and R&D, seeding new processes that will drive a more robust innovation pipeline, as a result of significantly increased investments and insights, and strengthen design, e-commerce and marketing teams. We've restructured our go-to-market capabilities in North America, deploying a customer development model that broadens and deepens customer and channel reach through a one-company approach to customer team and channel leadership, using the resulting leadership savings to invest in increased retailer and distributor coverage. And we've created a global supply chain that is gearing up to unlock costs through strengthened capabilities across all 5 supply-chain disciplines of plan, source, make, deliver and serve. These changes are starting to yield strengthened results. Operating margins in the developed world are increasing as Project Renewal delivers significant cost reductions in North America and Europe. The resulting developed world margin expansion is funding both increased market shares in our home market and the deployment of a select portion of our portfolio into the faster-growing emerging markets: first, south, to Latin America; and in the future, east, to Asia. The reset of our growth and financial algorithm is gaining traction as is evident in our geographic and segment Q3 results. Core sales growth outside Europe was up over 5%, driven by over 6% core sales growth in the Americas. Tools grew global core sales nearly 6%, responding very favorably to increased investment behind new Irwin advertising in North America and a significant expansion of the Irwin portfolio in Brazil. Baby grew global core sales nearly 8% as a result of double-digit growth in North America, driven by strong innovation and customer partnering. Home Solutions grew global core sales growth over 7%, delivering its strongest results in recent years, while flattened slightly by shipment timing, these strong results were driven by new distribution and innovation on Calphalon, strong Back-to-School merchandising on Rubbermaid and new innovation on Levolor. And our Writing segment had a strong Back-to-School performance in most markets. For the second consecutive year, in the U.S., we grew share across all channels in the Back-to-School drive period, with particularly strong share gains on Sharpie as a result of the successful launch of Sharpie Neon. Our Writing segment POS growth did not translate to strong global revenue growth because of the continued office superstore channel contraction in North America and Europe, and the ongoing reset of our Fine Writing business in China, resulting in global core sales growth of only 0.2%. At the same time as driving sequential increase in our global core growth rates, we delivered operating income margin expansion of 30 basis points, while also funding increased advertising and promotion investment of 50 basis points. The 50-basis-point increase in A&P was fueled by a 125-basis-point reduction in SG&A, excluding A&P or overheads, driven by Project Renewal. Our strong progress in structural and discretionary costs allowed us to more than cover the headwinds in gross margin related to negative segment mix, inflation and foreign exchange, and the retained costs associated with our disposals that hit SG&A, excluding A&P or overheads. We entered the fourth quarter with momentum, particularly on Baby, Tools and Home Solutions and across the Americas. While our Commercial Products segment did not grow in Q3, the team was up against a tough year-ago comparator of over 8% growth. Despite very tight health care capital budgets affecting the pace of new purchases of our Rubbermaid medical carts, the Commercial Products segment is positioned for a better Q4 and good full year results. In Writing, we're winning on the fundamentals in most markets and channels, with strong innovation, new advertising and very solid merchandising support. We take a long view on the Writing segment, given its potential, the strength of our portfolio and the opportunity for this category around the world. In that context, our guidance and plans have and will accept that revenue growth will continue to be diluted by the impact of the North American superstore contraction and impending consolidation. All in, I'm pleased with our Q3 results, while recognizing there's plenty of work still to be done. With that, let me hand the call over to Doug to go through a more detailed review, and then I'll return to provide perspective on the balance of the year.

Thanks, Mike, and good morning, everyone. I'm going to step you through our Q3 results, cost programs, and then take a minute to talk about the balance sheet. Newell's Q3 reported net sales were $1.49 billion, which represent a 2.1% increase over the prior year. Core sales, which exclude the impact of unfavorable foreign currency, increased 3.3%. Normalized operating margin was 38.1%, a 30-basis-point decline year-over-year. Improved productivity was more than offset by inflation and unfavorable mix, as some of our lower-margin businesses and regions, such as a Baby in North America and Home Solutions, were our best growing performers during the quarter. Normalized SG&A expense was $349.3 million, or 23.5% of sales, a decline in overall spend of 60 basis points from the prior year. Total SG&A declined slightly by $2 million, and cost savings from Project Renewal enabled us to fund additional strategic advertising and promotional investment. The biggest increase was in our Tools segment, where we invested an incremental $10 million behind the Brazil Tools launch and National Tradesmen Day, with good top line results. Our plans continue to call for another step-up in advertising and promotion behind our brands in the fourth quarter, again, funded by Renewal. Normalized operating margin was 14.6%, a 30-basis-point improvement from the prior year, as Renewal and other savings offset gross margin contraction and brand investment. Reported operating margin was 12%, compared with 12.8% in the prior year. Interest expense was $15.7 million, and our normalized tax rate was 24.3%, compared with 28.6% in the prior year, largely driven by the geographic mix of earnings and discrete items in each period. Normalized earnings per share, excluding restructuring and restructuring-related costs, income tax items and discontinued operations, were $0.52, a 10.6% increase from a year ago. The increase is primarily attributable to the acceleration in core sales growth, complemented by the lower tax rate this quarter and partially offset by about $0.01 of foreign exchange. Third quarter reported earnings per share were $0.66, compared with $0.37 last year. We generated operating cash of $360.8 million during Q3, compared with $301.5 million in the prior year. The increase is primarily driven by a 6-day improvement in net working capital year-over-year. We also returned $90.8 million to shareholders during the quarter, including $44 million in dividends and $46.8 million from the repurchase of 1.8 million shares. Program to date, we have spent $257 million to repurchase 12.9 million shares at an average price of $19.86. This leaves us $43 million available under the current program, which we intend to use by the middle of next year. Turning now to the segments. In our Writing segment, reported net sales declined by 0.9%. Core sales increased 0.2%. Our Latin America Writing business generated strong growth of almost 40%, fueled by pricing and volume increases. We also had solid growth in North America outside of the office superstore channel, which was offset by office superstore channel and European declines. Third quarter normalized operating margin in the Writing segment was 24%. This 550-basis-point improvement was largely due to pricing, productivity and structural SG&A reductions. The Home Solutions segment had strong third quarter results, with net sales growth of 6.8% to $431.4 million. Core sales grew 7.2%. The growth reflected good execution in the U.S. behind Rubbermaid Consumer merchandising, successful new product launches at Levolor against weak year-ago results and robust growth from Calphalon, driven by distribution gains. A portion of the growth was also timing-related, as we shipped some Black Friday merchandise earlier in the season than we did a year ago. Home Solutions' normalized operating margin was 15.4%, a 90-basis-point decline versus prior year, reflecting mix and increased customer promotions to support new product launches and new customers. The Tools segment also delivered a good quarter, reflecting the success of our expanded product offering initiative in Brazil and the impact of National Tradesmen Day around the globe. Reported sales grew 3.4%. Core sales growth was a robust 5.7%. Normalized operating margin in the Tools segment was 5.8%, down versus last year's 13.2%. Most of the decline was due to the increased advertising and promotion to support these 2 big growth initiatives. We made a big bet in this segment that paid off in Q3 top line growth and we believe will drive higher sales for some time to come. We expect to realize operating margin leverage from this -- from these investments in brand support beginning in 2014, as we continue to grow this one bigger business. Reported net sales in the Consumer Products segment were down 4.5% and core sales declined 4.3%. We were up against our strongest year-ago comparisons this quarter versus 8.4% growth last year. In addition, our health care business slowed this quarter due to category dynamics in the health care industry, fueled by uncertainty around health care reform and government budget priorities. Operating margin for this segment was 12%, down versus last year's 15.2% due to higher promotional activity, selling and product marketing expense, partially offset by Renewal savings. Our Baby segment continued its strong performance this quarter with reported sales growth of 4.8% and core sales growth of 7.9%. We continue to win in Baby due to successful innovation and increased presence at our retail partners in North America. This was somewhat offset by weaker results in Asia, where we are comparing against 2 years of very strong growth. Baby's Q3 normalized operating margin was 12.7%, up 280 basis points to last year, largely the benefit of Renewal cost savings and increased sales. Looking at Q3 core sales by geography, North America grew 4.1%, as a result of strong performances from Baby and Home Solutions. In EMEA, core sales declined 9.9%, which reflects ongoing overall market trends, exacerbated by some of the strategic changes we're making to exit unprofitable categories. In Latin America, core sales grew 34.7%, driven by very strong results from the Writing and Tools segments. In Asia, core sales declined 7.4% due to continued pressure from the step-back in the Fine Writing China model and from Aprica, which is experiencing tough comparisons against very robust growth trends in 2011 and 2012. Developed world core sales growth was approximately 2%, driven by solid U.S. growth rate of 4.2%, offset by softer results in Europe and Japan. Our emerging markets business grew approximately 10%, attributable to very robust growth trends across all segments in Latin America. Switching now to cost programs. We continue to make good progress on Project Renewal and our indirect spend initiative. Through the end of Q3, we are on plan, having realized approximately $160 million in cumulative savings. These costs -- these cost savings have enabled the brand investment that you saw from us this quarter, which in turn is beginning to drive accelerated core sales growth in our priority businesses and markets. We intend to continue to invest heavily in the fourth quarter to drive accelerated performance and position ourselves for sustainable growth in 2014. I'm going to finish this morning by taking a few minutes to talk about the balance sheet. We spend a lot of our time communicating the progress against strengthening capabilities to deliver the Growth Game Plan. We have been equally focused on strengthening the balance sheet and managing an efficient capital structure. As Mike mentioned, our board has approved a $350 million accelerated share repurchase program to be entered into this quarter. This program will be funded with current year free cash flow and proceeds from the divestiture of our Hardware business. During the third quarter, we also renegotiated our accounts receivable securitization program, increasing its size from $200 million to $350 million, extending it to 2 years from 1, and on better terms. This, along with our revolving credit facility and absence of long-term maturities until 2015, leave us in a very strong liquidity position. Our debt-to-equity, EBITDA multiple and interest coverage ratios are also very healthy. With that, I'll turn it back over to Mike for some additional comments.

Thanks, Doug. So let's now turn to our 2013 outlook. As communicated this morning, we've reaffirmed our full year guidance of core sales growth of 2% to 4%, normalized operating income margin expansion of up to 20 basis points, normalized EPS of $1.80 to $1.84 and operating cash flow in the range of $575 million to $625 million. Our full year guidance assumes sustained momentum in Tools and Baby, solid growth in Home Solutions, a return to growth in Commercial Products and Writing results roughly in line with the year-to-date performance. Our guidance also assumes we increase advertising and promotion support in Q4, funded in large part by continued reductions in overheads, positive price realization and strengthened productivity. There are 2 factors that could influence where we fall in our 2013 full year guidance range. The first factor relates to the delivery of Renewal savings and other margin-enhancing actions that will enable the planned increase in Q4 brand investment. While we're not satisfied with the gross margin in Q3, due largely to mix, for the first quarter in the last 4, we delivered positive price realization and expect that to accelerate in Q4, given pricing actions we've taken across the portfolio. We're right on track to deliver the planned Project Renewal savings that Doug just said, and we expect to sequentially strengthen our productivity delivery in Q4. As a result, we're on track to step up A&P and investment in our consumer research in Q4 versus prior year by about the same amount as we did in Q3. The second factor influencing where we fall in our full year guidance range is the timing of the Office Depot-OfficeMax merger. Recent press reports suggest their merger will be completed over the next few weeks. As previously discussed, the combination of Office Depot and OfficeMax will result in a retail footprint consolidation in the U.S., and yield a onetime trade-inventory-reduction-driven revenue and earnings hit for Newell as retail inventories are rebalanced. Our 2013 guidance assumes this will not affect 2013 results. While we have no visibility to their actual plan for integration, if the retail consolidation were to be fully completed in 1 year, our best estimate at this time would be that their consolidation would result in a onetime drag on Newell's total company global growth of 30 to 50 basis points and a onetime drag on EPS of $0.02 to $0.04 or 1% to 2%. When we shared our long-term strategic guidance early in 2012 at CAGNY, that guidance excluded any impacts associated with M&A, new below-the-line actions like today's ASR and did not consider big external events like the merger of the 2 of our top 10 global customers. While we'll not discuss 2014 full year guidance until we announce year end results in January, we're developing plans to manage the impact of the Depot-Max transition in 2014 in the context of our long-term guidance for the strategic stage of the Growth Game Plan. Today's announcement of the $350 million accelerated share repurchase will enable us to absorb the onetime EPS impact of the Depot-Max merger and the retained cost impact associated with our 2013 disposals, leaving some room for us to potentially deliver just above the high side of our long-term EPS guidance range for the strategic stage of the Growth Game Plan of 5% to 8% EPS growth. As we build our plans for 2014, we expect to step up advertising and promotion investment, again fueled in part by growth in line with the long-term guidance for the strategic stage of the Growth Game Plan; gross margin increases driven by pricing and productivity ahead of inflation; and continued reductions in SG&A less A&P or overheads, driven by Project Renewal. Again, we'll not issue 2014 guidance until the end of January, given our plans for 2014 are still in development. With respect to this year, we continue to believe the middle of our 2013 full year guidance range is the best estimate for our current year delivery in core sales, normalized EPS and operating cash flow. The middle of our full year normalized EPS guidance would yield full year EPS of $1.82, and imply Q4 normalized EPS of $0.45. To the extent we have visibility to overdeliver against the middle of the full year normalized EPS range, we would instead choose to deploy the earnings back into A&P and consumer research to position ourselves for accelerated performance in 2014 and beyond. Let me close by reminding you that we've now delivered our ninth consecutive quarter of consistent and competitive results. We're delivering these results while simultaneously driving change, change that is transforming our company from a holding company to a highly focused, results-oriented operating company. We're all pleased that the biggest and most disruptive change is now behind us, especially in the demand creation functions of marketing, insight, design and customer development. We've gotten here faster than I thought we would, as a result of the determination and grit of our people. They've driven the new operating model into action and they've begun to make the change count. We're moving quickly now to drive our new capabilities to full throttle. The more research we do, the more convinced and excited we are that we have a very strong set of brands with real upside potential. Project Renewal has and will continue to unlock our capacity for investment, creating new funding for our capability agenda, which will in turn create new possibilities for our brands. We're entering the phase of the Growth Game Plan where we begin to reap the benefits of our transformation. Some of what we've done will have fast impact. We can accelerate plans, add new activity or amplify existing plans and ideas by strengthening investment. Tools, Commercial Products and Writing will continue to be the beneficiaries of these types of choices. We're pacing investments in a disciplined, thoughtful way with funding flowing to the most compelling, attractive ideas that are consistent with our priorities. Our strategic initiatives will take a little longer, but will create more lasting value and have greater impact. Today, we're putting the building blocks in place for what will be a strengthened future growth funnel by doubling our investment in consumer research, by supporting new talent like our new VP of Innovation, Nate Young, who's helping marketing, insight, design and supply chain teams ideate through a process they call Innovation Now; and by consolidating our creative and media relationships to fewer, bigger, world-class partnerships that will help strengthen and develop our brands in innovation. These emerging capabilities and new processes have generated over 1,500 idea fragments since their first inception 3 months ago. And if just 1% of them become $10 million ideas, we'll have generated a new funnel of growth valued at $150 million. Money flows to ideas and people. And we're now building a pipeline of investable ideas. And we have built a group of investable teams. That's the power of our new operating model with focused capabilities in development and delivery. That's the power of our people. And that's the power of the Growth Game Plan in action. With that, let's open up the line for questions.

[Operator Instructions] Your first question comes from the line of Chris Ferrara with Wells Fargo.

So I wanted to get a sense for, I guess, how Q3 margin progressed relative to your expectations. I imagine you didn't necessarily foresee the level of gross margin weakness. And SG&A came down pretty substantially, right? So I just want to get a sense for what kind of short-term trade-offs on growth investments maybe you needed to make in the quarter, if any? And I guess that in the context of the fact that A&P was up 50 basis points, so were there trade-offs you needed to make in the quarter to get to where you wanted to be on the EPS line?

No, actually. And we, our money -- we could've invested more, quite frankly, but we didn't have things ready to invest behind. So we had -- we've been very disciplined, Chris, about not putting money until ideas are ready. We had some -- we have Paper Mate advertisements that's now on-air as of the middle of September. It will be on-air through the balance of the year. But we put that advertising back through another round of change in about the middle of July because it didn't meet our thresholds for performance. As you recall, I've said that we're not going to put money behind things that are not ready to be invested in. And while the advertising was good, it wasn't great. And we needed to put it through another twist. We could've spent more on Paper Mate in Q3 if we had chosen to. We didn't need to beat by $0.03. But the material wasn't ready. So that was a key choice that we made in the quarter. I will say that while I'm pleased that we've gotten to positive price realization in gross margin in the third quarter, and that's the first quarter in the last 4 that we've seen that, I wasn't -- we could've delivered better gross margin had the mix been slightly stronger. And so with Baby growth and with Home Solutions growth at the level that they're at, we mixed to negative, perhaps a little bit more so than we anticipated. But that didn't drive any investment choices, to be quite honest. I mean, we would've -- if the Paper Mate advertising would have been ready, we would've put it on-air earlier. You'll see significant investment in Writing advertising in Q4 as a result of that timing issue.

Got it. And then just quickly on the ASR. So I guess, it's great, by the way. $350 million ASR is great. But it's only, I guess, $180 million over the deal proceeds you guys are getting in. So it still leaves you guys a pretty substantial amount of flexibility on cash. Just can you talk about that in the context of how you're viewing tack-ons and other potential uses?

Yes. So a good question, Chris. I mean, we've been quite clear that we want to get the change agenda bed down. So we don't believe that bolt-ons today are the right idea for the company as we get the change agenda sorted. I think that becomes an increasingly attractive option over time. And as we've said, late 2014 into 2015, we might consider bolt-ons as a way of strengthening our agenda within our core segments. And it won't envision anything that has sort of extended the shoulders of our portfolio. But there's nothing cooking there, but we certainly are open to using cash that strategically. We felt like this was an appropriate and balanced approach to providing value to our investors as we continue to transform the company. And we've said we're going to partner with our investors as we transform. And we've been consistent in doing that in a steady and sequential way. And I think this choice reflects that commitment.

Your next question comes from the line of Bill Chappell with SunTrust.

Mike, I know you said you're not giving guidance for 2014, but I think there are enough metrics thrown out there that I have some kind of idea on 2014. Just to make sure I'm understanding that you're kind of talking about 8% to 9% EPS growth is possible. And the reason I ask that is if we kind of take the ASR and Office Depot-OfficeMax, that's plus 3% already. So I mean are you comfortable with kind of the metrics of if you're growing top line 4%, that you're only growing bottom line core by 6%? Or is -- and does that imply kind of another year of reinvestment is needed to really get this thing going?

So the place I'd start, if you're trying to understand how we think, is to go back to the CAGNY 2012 or even more recently, the Barclays Back-to-School Conference, where we laid out the 3 stages of the Growth Game Plan. And we've put metrics connected to each of those. I think those are the, that's the right starting place for any conversation about our business. And in fact, every time I have a discussion with my team, that's where we start. These are the commitments. We said 2014, at Barclays, is right smack in the middle of the strategic stage of the Growth Game Plan. So the guidance we've communicated there back in 2012, and it's still consistent today, was 3% to 4% core sales growth and 5% to 8% normalized EPS growth. That guidance assumed no M&A activities, either disposals or acquisitions by us. It assumed no incremental below-the-line activity, other than what had been authorized at that point in time, which was the $300 million 2011 open market repurchase. And it assumed no big external events. It sort of assumed the status quo on the external. So the macro's flat. And it certainly didn't anticipate 2 of our top 10 customers consolidating. So the things that are different, as you look to build your view of our results in '14, and certainly influences the way we think, what's different? Well, Depot-Max are consolidating. And I don't view that as a strategic issue for us. I actually view that as a strategic opportunity for us long term, but it creates an event in the moment of their consolidation that we have to deal with. That's new news. So we've got to deal with that. We didn't anticipate at that time disposing our Hardware and Teach platforms, which leaves us with a retained cost issue, which was never in the guidance, which we have to deal with. And then of course, the ASR was not in the equation at that point, which is a positive. And those 3 things, those 3 moving parts, are really the things you've got to calibrate as you build your models and then we have to think through as we sustain our commitment to the underlying assumptions that were -- that underpins the strategic stage of the Growth Game Plan, which were that in the strategic stage, we would take the cost out, the radical restructuring of our overhead structure, and shift that benefit in large part to A&P. And that's what we're in the middle of doing. That's what you see in our Q3 results. You see a 125-basis-point reduction in overheads and a 50-basis-point increase in A&P. And while we'd like to continue to put more in that, we're managing into A&P, we're managing the trade-offs in the current moment. And we're investing as much as we think it's prudent to invest while delivering competitive returns. In 2014, we will step up A&P again substantially. And we need to. We want to, because we want to take that overhead benefit of Renewal restructuring and put it to work for our brands. So as you build your framework and your model for 2014, you should do it in that context. And we're thinking about it in that context. That should enable us, given the size of the ASB, to potentially deliver EPS near or above the high end of the range. And I don't know -- we have to work through the details of that. We're not prepared to give you a specific number. You said 8% to 9%. That's generally in the range. And we need to also work through the core guidance given the product line exits we'll be doing in Europe and the risk associated with the retail inventory liquidation onetime event with Depot-Max. All of that stuff goes into the crucible. We sort of let it simmer for a while as we cook a plan. And we'll come out with guidance at the end of January. But you're right. I've given you all the variables we're thinking about. And I did that purposely so that you could think about it while we're thinking about it.

Great. And Doug, just a couple of other variables. Can you maybe quantify the pull-forward on Home Solutions? And does that impact fourth quarter? And then also on the ASB, don't we, just from accounting standpoint, reflect that for the fourth quarter? I mean, isn't it fully reflected immediately?

It's, to the second point first, yes. There'll be some impact in the fourth quarter, but it's very, very small. It depends on when we actually execute the agreement to go ahead and begin, and then the amount of shares we get at the very beginning. So I would say that's a very, very small impact on the fourth quarter. And to your first question, we're not going to give -- I'm not going to give, I guess, a specific number on what shifted from Q3 to -- Q4 to Q3 on the Black Friday promotions. But it was -- it moved their revenue number a little bit.

Your next question comes from the line of Wendy Nicholson with Citi.

A couple of questions. First, number one, does the ASR change your thinking on the dividend? Or is that still a priority, in terms of growing that in line with cash flow?

Look, Chris asked a good question, don't you have plenty of capacity left? Yes, we do. We will -- we've articulated what our guidance is on dividend payout ratios. And we said 30% to 35% would put us in the competitive zone versus our peer group. It's not quite as high as fast-moving consumer goods, but it's competitive. And we've moved a long ways over the last couple of years. You should expect us to sustain that and to grow and increase our dividend. Of course, this is the board's call, but you should expect us to recommend to the board that we will continue to do that with EPS growth. And I think that's a good assumption to make. And it's an important one for you guys to make in the context of your modeling of free cash flow.

Got it. And then second question, on the consolidation in the office superstores, kind of how should we think about that? Obviously, there's been inventory drawdown as you lead towards the closing. But as you think about 2014, is it your sense that there's going to be sort of this consistent or persistent headwind, either as they move to rationalize stores or further consolidate their inventory? Or how should we think about that? Is this the kind of thing where we get through 2013 and boom, the headwind goes away? Or does it stay with us for some time?

So I think, and I was trying to, I was -- in my commentary, I was suggesting that it stays with us for a while. I think it's through 2014. Of course, it will be all dependent on how they execute their integration plan. And we just don't have a line of sight to that yet. And we won't until they complete their merger. But they're clearly working on it. And as soon as they're through and have approval of the deal, they'll share that with us. They have been -- and there's plenty of press reports out there about the number of store closings that will occur. And I think that's the biggest driver of the retail inventory consolidation, will be the number of stores they close. And if you look at that data, you begin to -- you can triangulate on the numbers that we shared with you. The big question, Wendy, is over what timeframe do they execute this. Is it focused in a 6-month window? Is it spread out over an 18-month window? If it's spread out over an 18-month window, then we'll have a slower impact. And it's more manageable for us. If it's in a very focused window, it will create an event that we'll try to share with you that might impact our ability to deliver sort of a steady flow of EPS and growth. We'll be as transparent as we can with you. I actually view this not as a strategic issue for us. This is something we're going to have to deal with. We need to keep our finger on the pulse of it. And we need to continue to invest in our Writing business for the strategic long term. The worst thing we could do in this environment is pull back investment or think about the category differently than we do. It's a strategically very, very attractive category, on trend, particularly in the emerging markets as people move from the low end of the social pyramid to the middle class. And they tend to access education more actively. Writing is right in the heart, it's an education tool business in those geographies. So it's very, very strategically attractive to us. And we're going to manage through this moment in time, in this disruption connected to the Depot-Max integration with that in mind.

Got it. Okay, that's helpful. And then I just have one final one, which is just in terms of your stated target of expanding or growing your advertising spending, I mean, as you work through your plans and see how much you're spending and the kind of payback you're getting, do you have a number in mind in terms of, hey, we kind of want to migrate to 3.5% of sales, 4% of sales on advertising? Because I'm curious, I mean, you've been very careful not to give us a timeframe for the company to reach the 15% sort of operating margin target. And we're kind of 1.5 years after your analyst meeting. I'm wondering kind of whether you can give us a target for that?

Nice try. Not yet. Look, I'm going to look at the advertising investment without a targeted investment level in mind, because I want to see if it's working. Some of the categories we're investing behind, like Tools, I want to see if we get a yield or we can drive equity perception on the brands and get pricing leverage out of it, or that we drive takeaway with it. So we've put $10 million behind the Tools business. That's the biggest investment we've ever made in Tools in Q3, ever, in strategic marketing funds. And so we're going to -- Richard Davies has research in his bloodstream. He's very objective about this stuff. And he's going to measure it. And we're going to learn from it. And he and Rich Mathews are going to decide whether that's a good thing for us to invest in, or not, to drive profitable growth. So I don't know what the answer is, to be honest with you, with respect to what the A&P level ought to be. I know we have an appetite to spend more. I can tell you that. But we're not going to do it in an undisciplined way, because we've made a commitment to steadily improve operating income margin, which we're on target to do, maybe even do a little bit better than we thought we would at the beginning of the year. And we're going to want to do again next year and the year after and the year after. So if you do the math, eventually, we cross over that 15% threshold. And I'll decide maybe between now and CAGNY whether we want to give you a date. Nancy's kicking me under the table saying, "No, we don't."

Your next question comes from the line of Lauren Lieberman with Barclays.

First, I want to ask about Commercial Products. So 2 things. One is in this healthcare dynamic. And I know you said you know, kind of position for things to be better next quarter. So can you talk a little about why there is or isn't a structural issue in the healthcare market that you're worried about, will be one. And then, two, if you could talk about performance in the balance of the Commercial Products business? I think Executive Series was launching this quarter and just sort of other dynamics across that portfolio there?

Look, we love our Rubbermaid Commercial Products business. This is a great business. And we're investing in it, both on the development side increasingly, and in the selling side. And we have tons of opportunity, both in our home markets and as we extend the footprint into Latin America and into Asia, particular interest in China. There are a lot of local competitors, but there's no strategic competitors in the categories that we work in. There's some in some of the adjacencies, but very few. So if we apply the best capabilities we have against this category, we can build this category quite strategically and do so in a very profitable way. So I remain very, very excited about this. It is the first one on our list of priorities, Commercial Products, Tools and then Writing. And so I'm not at all fussed about the Q3 outcome. We see and have every reason to believe that the core of the portfolio continues to grow quite nicely and on the full year, will deliver good numbers. In the medical carts, or in the healthcare vertical, we're not having an issue with our core business, cleaning, refuse, all of those products are doing just fine. When we talk about our medical carts business, we're talking about high-ticket items. If a hospital's going to buy into our line, they're buying 250 carts. And each cart could be $3,000 to $5,000 because of the technology built into them. So these tend to not be choices made by the buying department. They tend to be made either in the IT group or made by somebody that controls the capital budget for the hospital. And that's where the pressure is in the healthcare vertical, not in the everyday procurement, the more consumable side of our portfolio. And I think this issue is one we have to accept and deal with until there's a little bit more clarity for these health networks in the context of all the changes going on in the U.S. And so it's in that slice of our business where there's going to be some overhang. It's not -- it's less than 10% of the total business in the U.S. So it's not a huge piece of the portfolio. Actually, right around 10% of the total business in the U.S. So it's that piece of the business that might have some overhang on it. The rest of our business, it's off to the races, it's core, and it's profitable and it's interesting.

So Mike, was the decline, though, in this high-ticket cart significant enough this quarter, like it's something we should be thinking about for the next couple of quarters? Because it's tough to imagine there's a ton of visibility on the healthcare environment in the U.S. near term. I'm just surprised that 10% of sales will be this much of a drag? Or if there was something else in the other businesses, just a timing issue or something from the quarter?

I think the way to think about that piece of our Commercial Products business is that you shouldn't expect a lot of growth there. We'll probably be treading water for a while until that clarity occurs. There may be some step-backs. It's not a very profitable portion of our business. That's the other thing to know, because we're -- we have a fairly high SG&A base as we're scaling it. So it doesn't really have any flow-through, huge flow-through negatives to margin. It'd sort of be immaterial on EPS. But on growth, it's sort of an opportunity that we've been leveraging that loses a little leverage for us going forward. But the rest of the portfolio should be unaffected. We should get core growth on the 90% that I was referring to. But I wouldn't worry about it in EPS. It's just sort of -- there's an opportunity cost connected to not being able to grow it as much as we had hoped. And I think that you're right, Lauren. I wouldn't build a plan based on our medical cart system growth in 2000 -- that was dependent on that in 2014.

Okay, great. And then just last, on Tools, because you didn't mention Lenox at all. So just curious or assuming that, that's continued to be soft in China and the U.S. and just the macro [indiscernible]?

It actually -- no, I didn't mention it, but thanks for serving up that pitch to me. Actually, Lenox had a good quarter and is positioned to have a good quarter going into Q4. So we're actually looking better on that business in the second half than we were in the first. So we've got a little bit of momentum rebuilding there. So that isn't an issue.

Is that China and U.S., Mike?

I'm sorry?

Sorry, is that in U.S. and China?

Both.

Your next question comes from the line of Bill Schmitz with Deutsche Bank.

How important is gross margin to the delivery of the Game Plan? Only because it seems like, at least for the time being, there's going to be sort of a natural mix drag given what's going on with Fine Writing and obviously, also with the Writing business broadly and then the outsized growth in the, obviously, in the Baby care business?

I mean, it's obviously very important. And I think gross margin's the lifeblood of any business, it's not just ours. So gross margin percent increases are really quite essential, particularly as we move through '14 into '15, as we lose the leverage in overhead reduction. So it is critical that our activity systems sharpen. And we consistently deliver gross margin percentage increases quarter in and quarter out. There are some mix issues in our business that we should accept willingly, our Baby business, for example. There are 3 factors to -- that you have to look at to determine what a great business is. One is growth potential. One is gross margin mix and operating income margin mix impact. And the other is how much fixed investment you have tied up in the business, what's the return on net assets? Baby happens to be one of those businesses which has a great return on net assets because we have no factories. And we don't take -- we have very, very short supply value chain. So our inventory levels are quite low. So the return on net assets on that business is very high. But in order to get that, you have to accept lower gross margins, because the supply partner takes a piece of the margin. And that's a mix negative I'm perfectly happy, and you should be perfectly happy, for us to accept. And I'll just give you some reference point. If you go back to 2011, we've probably grown EBITDA in that business $50 million. If you think we can get 9x on that business, that's $450 million, $500 million of value creation, despite accepting the mix negative to our total overall performance. So you want us to grow that business. We create a ton of value for your investors, our investors. And we should accept that the negative mix effect to gross margin. Now not all businesses look like that business. And so I don't aim off at all what I said upfront. We need to get gross margin percentage positive. We need to get positive price realization every quarter. I'm pleased that we've gotten positive price realization in the third quarter for the first quarter in the last 4. And we expect that to accelerate as we go into Q4. Meri needs to, through the supply chain that we're building, deliver increased productivity contribution to the overall gross margin delivery. And we need our selling organizations to maximize the mix as they look to drive our growth. And we need to bring margin accretive innovation to the table through Mark Tarchetti's group and the development teams. And so all of those things go into delivering the outcome you're wondering whether we're committed to, which of course we are.

Got you. So will gross margin, it will definitely improve sequentially, but will it be up year-over-year and then maybe will you have gross margin expansion in 2014?

We need gross margin expansion in 2014. And we will deliver gross margin expansion in 2014.

Okay. But the fourth quarter is probably going to be down year-over-year again?

No.

No? Good. And then can we just -- can you get, Doug, can you just walk us through the gross margin bridge? I'm a little bit confused, because I know it was 40 bps negative mix, but what was the balance of that?

Well, there was a little bit of pricing, as Mike mentioned, Bill, in that piece as well, and mix, inflation and productivity largely offset in the quarter.

Okay, great. And then just like lastly, on Europe, can you just take the other restructuring charge there? Because I think the business is still below corporate average or well below corporate average in terms of operating margin. So is the goal in Europe to get that operating margin up to the corporate average or even higher, especially if you want to use that money to fund emerging markets growth?

Yes. We want -- there's no need for another restructuring program. We've got plenty of room in Project Renewal. And it was always oriented towards funding what we need to do in Europe. We want to get our absolute productivity -- our absolute profitability up in Europe. And I'm happy for the operating income margin to go up as well. It's really important for absolute productivity to go up, particularly U.S. GAAP absolute productivity, because remember, we have a tax-efficient model in Europe. And we get a mix positive in Europe if we're able to do that -- so on our tax rate. So you get a flow-through of profitability to EPS at a much higher rate than you would in, for example, in the U.S. So it's really critical that we get our European profitability up. We intend to do that. And we are doing that, quite frankly.

Got you. And then a quick last one. I mean, will you use acquisitions as a way to enhance your gross margins, like anything you buy is going to be gross margin-accretive to the overall business? I know it's a year off, but it's good to look for [indiscernible].

Okay. Yes. So it's a little ways off, Bill, to kind of give you the criteria we would use. It depends on the business, quite frankly, because there's some very high gross margin but high SG&A businesses that would be dilutive at operating income margin. And so I'm reluctant to kind of peg the margin number in the middle of the P&L. What I'm most interested in is whether we get leverage all the way through to operating income margin. And I'd want it to be cash-accretive. And I'd want it to be strategically consistent with gaps we might have in our existing portfolio. Again, I don't envision us going to the shoulders of the portfolio. If we did any M&A, it would be in the core.

Your next question comes from the line of Budd Bugatch with Raymond James. Budd Bugatch - Raymond James & Associates, Inc., Research Division: Really, on Tools, I know Wendy went a little bit over that, but can you talk a little bit about the Tools margin? It's one of the lowest that I've seen. And I know that you put $10 million of investment in there. And I think you said you're going to do the same in the fourth quarter. When will we see the margin enhancement there?

Yes. No, we're going to invest in A&P in the fourth quarter, but it actually is going to shift from Tools to different businesses, so to be more balanced. You'll see operating -- you should see operating income margins step up in Q4 on Tools. And you'll see that continue as we profit from scale. What we're doing, Budd, is we're managing our A&P investment very dynamically. When you change the company from a holding company to an operating company, you have the flexibility to do that dynamic resource management and move money around. So we invested behind the ideas in Q3. And the ideas were big in North America and in Latin America on Tools, the launch of the extended line in Brazil and the commitment to build National Tradesmen Day out as a core platform in September. So you have the convergence of those 2 big bets. And you would -- if we showed you the full P&L for Tools, you'd see A&P pull back in Q4 and us leverage our selling systems as the driver of continued growth. Budd Bugatch - Raymond James & Associates, Inc., Research Division: Okay. And so will the growth actually accelerate in Q4 as well over the 5.7% core? Or -- and how should we think about that for Tools in the fourth quarter and maybe into 2014?

Yes. We haven't given -- we don't guide on growth, Budd, by quarter. We don't guide on anything by quarter, and we don't guide on growth by segment. But one thing to think about with respect to Tools is that given the launch in Brazil of that extended line, there was a pipeline benefit in Q3 that doesn't repeat in Q4. So whether we're able to sustain that growth rate in Q4 is a -- I wouldn't plan on that, but should we have solid growth? Yes. Budd Bugatch - Raymond James & Associates, Inc., Research Division: Okay. And just talk a little bit more about EMEA, what you're planning to do there. I congratulate you on that, but give us maybe a little bit more color, maybe you went over so quickly, I couldn't quite keep up with it.

No problem, Budd. I think you kept up with it, but I'll go back to it and see if you can mine some extra data out of me. We're pulling out of certain country category sales as an enabler to be able to release the infrastructure cost in Europe. And that's particularly true in our HiQ businesses like baby gear, where that ties up a lot of warehouse space. So as you think about what I said, we took out a bunch of distribution centers. We took out a bunch of different customer service centers. And so by focusing on the unprofitable portions of our baby gear business, we obviously improved the margin delivery in Baby, but we also enabled the fixed cost to come out on, connected to the infrastructure. Now the 50-country territory sales that we'll exit are not high-revenue sales for us, but they carry cost with them. There's all kinds of intangible costs with respect to invoice processing, transactional, cost connected to serving those markets in the way we do. And so it makes no economic sense to stay in some of these markets, and because they're not attractive and they're not strategic in the context of the Growth Game Plan, it makes sense to accept the revenue loss and assume that we get administrative benefits out of that through some of the restructuring we're doing on that side of the equation. It's really important for us to do all this for 2 reasons. One, those costs in part will be reinvested into what we describe as the most strategic and attractive sales in Europe. There's probably about 20 to 30 country-category sales that are investable in Europe that we can grow if we put the proper A&P behind these businesses. And we will use some of the proceeds to do that. After having done that, we expect to be able to increase absolute profitability and margin contribution to the total company. So this is a pretty strategic and important set of choices we're making. It will enable a more sustainable European business, while at the same time, contributing to the investment we want to make for market share growth in our home markets and the extension of a select portion of our portfolio into the faster-growing emerging markets. Budd Bugatch - Raymond James & Associates, Inc., Research Division: I congratulate you on that. I've only heard about Europe being attacked like this for, maybe 20 years, from the company. So if you get it done, this is going to be great. So I look forward to learning more about it and seeing the results.

Great. Happy to take you through it in more detail at some point.

Your next question comes from the line of Connie Maneaty with BMO Capital.

I'm wondering if you would discuss a little bit what you learned about the Hilmor launch in 2013, and what kind of rollout that might suggest for next year?

Yes, Connie, things are going right where we -- right on track with where we'd hoped they'd be at this point. This is a pretty seasonal business. So we come into the core season as we enter Q1, core buying season as we enter Q1. The vast majority of these tools are used -- these are HVAC tools. The vast majority of these tools have leverage through the air conditioning season, but the buying season for that is January, February, March. So we come into that season, obviously, having been out there and in distribution for a bit of time, in a very good position to be able to leverage the Hilmor brand through all the trade events that will occur in that window. We're really pleased with the feedback we're getting about the product. At some point, we'll find a forum to share some of the verbatims from some of these technicians on the products themselves. And that's really important to us long term. I do not envision us extending that product line outside of the U.S. in 2014. And I think that was the heart of your question. We expect to kind of keep the business focused and learn, with another year of investment here. There's some innovation work going on to extend the portfolio next year in the U.S., and we'll think about when we extend that footprint beyond the U.S., as we come through next year. But this is a stay-in-the-home market play for the moment, with an ambition to go more broadly over time.

Okay, just 2 more, I think, short questions. On the ASR, should we assume that it will be completed within the course of 2014? Or do you think it would be done over the next few months? And secondly, what kind of return did you see on the Rubbermaid Home Solutions merchandising events? And will you spread that marketing practice to other categories?

So Connie, this is Doug. I'll handle the first part of that, and then Mike will jump in on the Rubbermaid piece. The ASR is -- we expect to execute that in the next week or so and then execute, as in sign on the dotted line with the banks on that. And we expect to have that implemented over the -- in the first part of 2014, before the first half is over.

Connie, on your question with respect to the Furious 5 merchandising events, as we called them, which were 5 drive periods on, largely on Rubbermaid Consumer Products. We were very pleased with the outcome. It obviously contributed to a strong performance, particularly on the food and beverage portions of the Rubbermaid Consumer portfolio. And those are highly attractive businesses to us. Gross margins are positively -- they are accretive, certainly, to Rubbermaid Consumer, and they're strong and in line with the company average, which is unique for that overall portfolio. So this is the attractive portion of their portfolio. It's also the on-trend portion of that portfolio, given some of the issues that are out there regarding disposable storage containers and the concerns that many environmental groups have with them. So this is a very positive space for us. We continue to plan to invest in it. And next year, you'll see continued investment. In this business, we have to be very careful how we manage that. So we've been buying frequency of events, but we have to be very careful on letting price points get away from us on merchandising. So we've set up a framework and sort of guardrails for the selling teams to ensure that they don't, as they increase frequency of merchandising, don't dip price points outside of our pricing principles. And that's really an important thing for our sales leaders to manage. And we are increasingly doing the kind of research you need to do to understand what those thresholds look like through Richard Davies' new consumer insights group.

Your next question comes from the line of John Faucher with JPMorgan. John A. Faucher - JP Morgan Chase & Co, Research Division: Doug, just wanted a clarification there, where you talk about the ASR being executed, you're talking about the banks going in and actually buying the stock back, right? Not when you get credit for it?

That's correct. We expect to have that happen over the first part of next year, first half of next year. John A. Faucher - JP Morgan Chase & Co, Research Division: Great. And then one, what I hope is a quick question here, as we look at you guys making a bigger push in emerging markets, obviously, there's been a lot of volatility, some slowdown, et cetera. Is that anything we need to be worried about? Or is it something where you guys are just building that business up so that sort of the volatility in some of the economic activity really doesn't have much of an impact on the launches?

Yes. There's 2 parts to that answer. One is on the growth side. No, I think given where we start from and what we're building, the GDP data that you see doesn't really -- maybe 10 years from now, when we've scaled in a big way, this will be a variable that somebody's talking to you guys about. But it's not that critical to our overall success from a top line perspective. That said, some of the currency volatility does impact transaction, have a transaction ForEx effect, depending on what our sourcing strategies are in gross margin. And we talked about currency being negative in gross margin. It is, in part, related to that. And this is something we have to actively manage. It doesn't change our strategic intent. It doesn't change our ambition or our inclination to invest to strategically build our brands. We just have to manage it and cover that cost through that process. And that's the kind of expectations we make of our leaders of the segments, that they deliver the growth, they play for the strategic outcome we're looking for, while managing the transaction ForEx impact in their gross margins.

Your next question comes from the line of Olivia Tong with Bank of America.

I wanted to get a little bit more detail on the restructuring. Clearly, the detail that you gave in Europe was very helpful. But can we expand that to total Newell? Can you talk about like what's been done to date, how many distribution centers, service centers, manufacturing facilities you've exited as part of Project Renewal?

We haven't put that together, but I think that's actually a good idea for us to do. And maybe we should get that organized for CAGNY. We don't look at it that way. We look at it by work stream. So if you recall, we talked about Project Renewal, the next phase of Project Renewal having a series of work streams connected to it. And we sort of organized our thinking around that. But I think it's a good idea. I have mentioned publicly some of the impacts on the top leadership tier of our organization. And we've really flattened the structure of the company through this process and come a long way in doing that. There's a little bit more work to do, but the vast majority of that is now behind us. But I think that's a good request. And I think we should think about how to capture that, maybe at CAGNY.

Sounds good. The other question I had is with Baby, now that it's been recharacterized and out of Incubate, has anything changed in terms of the way that you think about the business as far as investment levels?

Okay. Yes, I had talked about investable ideas and investable teams, and given the progress we've made on margin in that business, and I mean operating income margin, so take a look at that segment's profitability, this becomes an interesting business to invest in. And we're growing on growth in the year-ago period. It's an interesting category in that it's product innovation-driven and selling-driven. And while we have an incredibly strong brand in Graco, we haven't put a lot of A&P behind it. We need to think through about -- think through over time, how -- whether the algorithm for growth that we've delivered is one that is -- that we can sustain without putting A&P into the business. And we'll explore that. But our passion for this business has increased over the last couple of years as we've gotten the business sorted, and that we've got a very good leadership team, both in development and delivery on this business. We've got -- we've strengthened our relationship with our supply partners. I had dinner with them just a week ago. And our customer coverage models and our partnering relationships have strengthened as well, substantially under Kristie Juster's leadership. So I talked about investable businesses and investable teams. And this is one of them. And I have some appetite to sustain this, given what I -- given the answer I gave to Bill, because with the low fixed investment in assets and the low working capital on this business, we can create a ton of value if we grow it. So yes, it's interesting. It doesn't change some of the structural issues I've raised in the past with it, with respect to its potential in emerging markets. Those markets are not developing at the speed you might think, because of the fact that you need regulatory catalysts for that to occur. So the emerging market opportunity, while strategically out there, still is probably a little bit further into the distance. So that makes it less strategically attractive in the context of our overall agenda. But because we've demonstrated the ability to capture share in our home markets so aggressively over the last 2 years, there's opportunity to do more of that. And you should expect us to continue to play for that portion of the market, share growth in our home markets.

Got it. Just one quick follow-up on that. Is there opportunity for Baby & Parenting margins to get closer to corporate average? Or is there something inherently specific about Baby & Parenting that will hold its margins down relative to your ability to grow other product segments?

Yes. I think the big issue is that our supply partner takes a portion of those margins, right? So because we don't have the fixed assets and we don't have the inventory, they do. And they charge us for that. They cover that cost in the way that we get billed for the sourced volume we do. And that shows up in gross margin. And you should think of that as probably anywhere from 700 to 1,000 basis points of cost that we absorb in our P&L. So if we had our own fixed asset base, that would be flowing to our P&L directly, but we don't.

There are a portion of those costs, Olivia, too, though that they cover on our behalf that we categorize in SG&A, too.

Yes. So I think there's -- yes, this is an attractive business. Again, I'd look at this one through the lens of return on net assets as opposed to margin accretion. And ideally, I'd love to get more margin into the business, but -- and we should be able to do that steadily, as we have up until now. But it's not mission-critical for this one to be above fleet average, to me, given that grown-up is well above fleet average.

Your next question comes from the line of Joe Altobello with Oppenheimer. Joseph Altobello - Oppenheimer & Co. Inc., Research Division: Just a couple of quick ones. I know this call has been going on for a while here. So I guess I wanted to go back, first, to price realization. I think this is something you guys were looking for in the second quarter and didn't get. And it sounds like you got some this quarter and hoping for a little more in the fourth quarter. Is that a situation where you saw some of your competitors match your list price increases? Or is that easing up some of the merchandising activity that you saw last quarter?

It's a blend of both. I mean, it's different by category. And we end up with a price mix effect that flows through to this, depending on segment contribution quarter in, quarter out. But we're pleased, again, with the fact that we deliver positive price. And when we talk about positive price, we're talking about invoice price net of customer investment, that gets us to our price contribution to gross margin. We expect to accelerate price in Q4 as a result of continued progress on invoice pricing flow-through and us continuing to manage the customer investment as effectively as we possibly can. Joseph Altobello - Oppenheimer & Co. Inc., Research Division: Okay, that's helpful. And just secondly, in terms of the Writing business, obviously, you're going to have a pretty big impact from the Depot-Max merger at some point. If you just put that to the side for a second and just look at the office superstore channel, obviously that's been weak for some time and continues to be weak. Are those sales lost? Or are you recapturing those sales at Wal-Mart or Target or other channels, for example?

Yes. We have very big growth outside of that channel. And you see channel shifting happening. So we've seen very good growth in places that you wouldn't traditionally think of as sources for Writing instruments. And I think that will continue to happen, that channel shifting, as the office superstores sort through their strategic agenda and the balance of how much of their business is focused against commercial selling of writing instruments versus retail selling of writing instruments.

Your final question comes from the line of Taposh Bari with Goldman Sachs.

A lot of detail on the call today. I just wanted to ask you more of a kind of a holistic question on the U.S. retail environment, what you're seeing, if you could comment through October in terms of sell-through, how retailers in the form of your businesses are positioned inventory-wise. That'd be great, just because we've seen a lot of mixed headlines out there, UPS, I think put out some cautious commentary out there today.

No, I haven't seen the UPS. They're right down, literally right down the street from us. We don't see -- right now, other than the dynamics that are playing out in the office superstore channel, which is really related to their business model and changes they're making in their business model, we don't see major dynamics out there in the rest of the portfolio or in the rest of the retail landscape. There are always, and I mean always, issues out there with respect to inventory positions at different customers. But there's nothing out there that I would highlight as being something strategic. There's constant rebalancing that goes on. If an event doesn't yield as much sell-through as you thought it would, somebody's going to pull back. But we don't see any indications of that in our numbers, that there's some holistic strategic shift in inventory management. And we look at it quite closely, obviously, because it has a pretty immediate revenue impact for us, if there were. The exception to that has to do with the office superstores and the challenges they're facing this year.

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

Look, as always, I'd like to thank you for the challenging questions and the involvement in our business. We feel pleased about the progress we're making. And as always, I feel like there's still plenty of work to go do. So with that, we look forward to talking to you at the end of January to provide a perspective on the full year results, and also to provide 2014 guidance.

Today's call will be available on the web at newellrubbermaid.com and on digital replay at (855) 859-2056 domestically and (404) 537-3406 internationally, with an access code of 74470822, starting 2 hours following the end of today's call. This concludes our conference. You may now disconnect.