Newell Brands Inc. (NWL) Q4 2013 Earnings Report, Transcript and Summary

Good morning, and welcome to Newell Rubbermaid's Fourth 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 & 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 fourth quarter earnings conference call. Joining me today on the call are Mike Polk, our President and CEO; and Doug Martin, Chief Financial Officer. During today's call, we will be making forward-looking statements, which reflect our current views with respect to future events. These statements are not guarantees of future performance. Actual results may differ materially due to many factors discussed in our latest 10-Q, as well as in the appendix to our press release. Also during the call, we will refer to non-GAAP financial measures, which differ from our results prepared in accordance with GAAP. The reconciliation to the most directly comparable GAAP results may be found in the press release and on our website. And with that, let me turn the call over to Mike Polk.

Thank you, Nancy. Good morning, everyone, and thanks for joining our call. This morning, we reported a strong set of Q4 results that represent our 10th consecutive quarter of consistent delivery. Core sales grew 4.4%, the highest quarterly sales growth in years. Growth acceleration was due to new distribution wins, a substantial increase in advertising support and improving innovation, particularly on Baby, Tools and Commercial Products. The increased investment in advertising was funded primarily by overhead reductions related to Project Renewal, resulting in normalized operating income of 12.2%, equal to the prior year period. Normalized earnings per share was $0.47, up 9.3% versus prior year and $0.01 ahead of consensus. Operating cash flow was $304 million, up 16% versus prior year. Growth in the fourth quarter was broad based, with all 4 geographic regions delivering increased core sales. The U.S. grew 3.5%, ahead of market growth, suggesting continued market share momentum. Importantly, our strategy of extending our geographic footprint into the faster-growing emerging markets continued to take hold, as Latin America once again delivered strong double-digit growth with core sales up 32%. 4 of our 5 business segments grew core sales in the fourth quarter, with Tools, Commercial Products and Baby delivering very strong growth. Tools core sales increased 8.1%, driven by new distribution and strong innovation in Latin America. We're off to a very good start with our extended Tool portfolio in Brazil, which has gotten excellent distributor response. Commercial Products increased core sales 8.2%, as a result of broadened selling coverage in North America and Latin America and the global launch of our new Executive Series hospitality cleaning lines for luxury hotels. Baby delivered outstanding core sales growth of 15%, driven by stabilization of our business in EMEA and strong share gains and double-digit core sales growth in North America, as a result of new distribution and new premium innovations. These results are very promising and reflect the power of our brands and our new business model. When we get innovation, marketing and execution right, we can build our categories and build our share. Importantly, Writing returned to growth, delivering just over 2% core sales growth in the fourth quarter, with good results on Sharpie and Paper Mate, partially offset by the expected contraction in the North American office superstore channel. Home Solutions core sales declined 1.2%, as distribution gains on Calphalon and Goody were more than offset by a decline in Rubbermaid Consumer sales, driven by timing of Black Friday shipments and increased customer programming costs. So on balance, a very strong quarter: 4.4% core sales growth; normalized EPS growth of over 9%, $0.01 ahead of consensus; strong operating cash flow of $304 million, up 16% versus last year; and nearly $400 million allocated to dividends and share repurchases. All in are pretty good outcome and one we are very proud to have delivered. Fourth quarter capped off a very good set of full year results. We delivered sequential improvement in performance in 2012 -- 2013 versus 2012, meeting or beating the midpoint of all 4 full year guidance metrics. Core sales grew 3.2%, above the midpoint of our 2% to 4% guidance range despite beginning to exit parts of our EMEA business. Normalized operating income margin increased 30 basis points to 13.3%, above the top of our guidance range. We were able to deliver this outcome while investing substantially in advertising and insights in the second half of the year. Normalized EPS increased 9.6% to $1.83, near the top of our initial $1.78 to $1.84 guidance range and above the midpoint of our revised $1.80 to $1.84 guidance range. Normalized EPS of $1.83 represents an all-time record high for Newell Rubbermaid. Operating cash flow was $605 million, above the midpoint of our guidance range of $575 million to $625 million, despite making an incremental $50 million voluntary pension contribution in 2013. Importantly, our strong cash generative business, coupled with the Hardware and Teach Platform disposal proceeds, enabled us to allocate $644 million to dividends and share repurchases. 2013 has been a year of great progress for Newell. We've established a consistent cadence of delivery, while simultaneously executing a very big change agenda as we drive the Growth Game Plan into action. In 2013, we deployed a new operating model, which reorganized the company around its 2 core activity systems: brand development and commercial delivery. Within the development pillar, we established a global R&D, design, insights and marketing organization that is focused exclusively on building the strategic growth agenda for each of our brands and categories. Within the delivery pillar, we consolidated 9 global business units and 2 business groups to 5 operating segments, established a global supply chain function and we began to roll out our one-company Customer Development Organization, or CDO, to countries outside the U.S. Our ambition with the CDO is to elevate our work with customers, from transactional negotiations about distribution and merchandising to more strategic joint customer business plans that increase shopper involvement with our categories, while collaboratively improving profitability for both Newell and our customers. This new operating model has changed the nature of Newell Rubbermaid from a holding company of 9 individual businesses to an operating company, where our 5 business segments leverage a strong set of functional capabilities, organized and led across the company as a whole. Our new marketing insight and design organizations are now working to drive a more robust innovation pipeline and bigger, more impactful brand growth ideas as a result of significantly increased investments in consumer insights, design, marketing and e-commerce. Our new global supply chain organization is strengthening our productivity funnel, unlocking costs in sourcing and establishing a focused agenda to reduce our working capital, while simultaneously strengthening our capabilities across all 5 supply chain disciplines of plan, source, make, deliver and serve. Our Customer Development Organization is broadening and deepening customer and channel reach through a one-company approach to customer and channel leadership, using the resulting renewal savings to invest in increased retailer and distributor coverage and new capabilities in category management, shopper insight and shopper marketing. At the same time, as we are changing the way we work as part of the new operating model, we've begun to execute the next phase of the transformation of our EMEA business, simplifying our footprint and reducing complexity in Europe, with a goal of increasing profitability and focusing resources for growth against our most attractive country category sells. We also successfully disposed about $300 million of revenue related to our former Hardware and Teach Platform businesses and began the process of recovering the retained costs associated with that sale. Through this intense year of change, people have stayed focused on delivering new growth ideas to market, like Irwin's new expanded line of tools in Brazil; or Hilmor, our new brand of HVAC tools and accessories in the U.S.; or Rubbermaid Commercial Products Executive Series line of cleaning products for luxury hotels around the world; like new Sharpie Neon markers; or year-2 support on Sharpie Metallic markers; or new breakthrough advertising on Paper Mate InkJoy; and new advertising on Irwin as part of the strengthened National Tradesmen Day; like new distribution on Calphalon in multiple retailers and a big new distribution win on Goody; or the tremendous execution around the Furious Five, our first-ever set of corporate-scale merchandising events in the U.S. Like the extensions of Rubbermaid LunchBlox food containers and the new line of beverage containers; or new Graco innovations like FastAction Fold Jogger and Modes 3-in-1 strollers. These have been great wins in the marketplace, delivered in the context of significant change. So a very good 2013, one that we can all be proud of having delivered. With that as an opening, let me pass the call over to Doug for some more details on Q4 and the full year. And then I'll return to provide perspective on 2014, after which we'll open the call for questions. Doug?

Thanks, Mike, and good morning, everyone. I'm going to briefly walk you through our Q4 results, update you on our progress with Project Renewal and then take a minute to talk about cash flow and the balance sheet. Newell's Q4 reported net sales were $1.49 billion, which represents a 2.9% increase over the prior year. Core sales, which exclude the impact of unfavorable foreign exchange, increased 4.4%. Gross margin was 37.4%. Pricing and productivity were offset by inflation and unfavorable mix in the quarter, as a portion of our core sales growth was driven by businesses and regions with lower than fleet average gross margins. Normalized SG&A expense was $375 million or 25.2% of sales. The composition of our expense continues to change. We increased advertising and promotion expense by more than 20%, including about $10 million for our InkJoy TV ad campaign, which ran in the U.S., Canada, Mexico and Australia, with very good POS results. Product development expense, which includes marketing, R&D and consumer insights, was up almost 10%. These significant increases behind brand support were funded through cost savings from Project Renewal and more disciplined overhead spend control. Normalized operating margin was 12.2%, unchanged from the prior year. Reported operating margin was 10.7% compared with 10.5% in the prior year. Interest expense was $15 million, down nearly 14% versus prior year. And our normalized tax rate was 19.4% compared with 20.5% a year ago. Normalized earnings per share, which excludes restructuring and restructuring-related costs, were $0.47, a 9.3% increase from a year ago. The increase was primarily attributable to the acceleration in core sales growth, complemented by lower interest and tax expense this quarter and a lower share count. Fourth quarter reported earnings per share were $0.41 compared with $0.35 last year. We generated strong operating cash flow of $304.2 million during the quarter compared with $261.3 million in the prior year. The increase over last year was driven primarily by improvements in net working capital. We committed to returning $392.8 million to shareholders during the quarter, including $42 million in dividends and $350.8 million for the repurchase of shares mostly under the accelerated share repurchase program announced in October. The EPS impact of the share repurchase in the quarter was about $0.01. Recall that under the $350 million ASP, approximately 80% of the estimated total shares were delivered at the outset, with the remainder to be delivered upon completion of the program in the first half of 2014. Our $300 million open market share repurchase plan was suspended during Q4 and will return to active status this year. We have $43 million available under that authorization, which we intend to use by the middle of the year. Turning now to our segments. In our Writing segment, reported net sales grew 0.5% to $433 million. Core sales increased 2.1%. Our Latin America Writing business continued to deliver strong growth, more than 25% this quarter, fueled by increased pricing and a strong back-to-school performance. North America had good results outside of the office superstore channel with overall sales down slightly and EMEA trends were unchanged, down mid-single digits. Fourth quarter normalized operating margin in the Writing segment was 21.8%, a 340 basis point improvement over year-ago results, driven by pricing, productivity and Project Renewal-related cost savings, offset by increased advertising spend behind the InkJoy advertising campaign. The Home Solutions segment fourth quarter net sales declined 1.9% to $423.9 million. Core sales were down 1.2%. Calphalon had another strong quarter, driven by distribution gains, as did Goody. Rubbermaid Consumer sales were down modestly, a portion of which was timing related. As we mentioned last quarter, we shipped some Black Friday merchandise earlier in the season than we did a year ago. Home Solutions normalized operating margin was 13.7%, an 80 basis point decline versus the prior year, reflecting input cost inflation and increased customer programming costs, partially offset by renewal savings. The Tools segment delivered a second consecutive strong quarter, with reported net sales growth of 5.3%. Core sales growth was a very robust 8.1%, largely attributable to our success in Brazil with our expanded product offering. Both our innovative double-sided hacksaw launch and the expansion of the tool belt initiative have driven share and distribution gains in Brazil. Normalized operating margin in Tools segment was 8.6%, down versus last year's 11.4%. This represents sequential margin improvement from Q3, as the initial launch costs of our Brazil expansion are behind us. The decline versus a year ago was due to ongoing marketing and promotional expenses to support the growth initiative and increased selling and systems in Latin America and APAC. We expect to realize further operating margin leverage in 2014 as we continue to drive top line growth, the investment picking behind our Irwin brand. Reported net sales in the Commercial Product segment gained 7.6% and core sales increased 8.2%. I guess, an easier comparison from a year ago, we generated strong volume growth in both North America and Latin America this quarter, driven by a favorable programming, pricing and new innovation like the Executive Series and HYGEN Disposable Microfiber. Operating margin for this segment was 7.6%, down versus last year's 11.7%, due to higher input cost inflation and advertising and promotional expense, partially offset by pricing. Our Baby segment had another stellar quarter, its best this year. Reported sales growth was 12.4% and core sales growth was 15%. In North America, we are winning against our competition and growing the category with distribution gains, pricing and innovative new products across virtually all of our Graco platforms. Q3 normalized operating margin was 9.4%, up 250 basis points to last year, largely the benefit of renewal cost savings and increased leverage, partially offset by mix and transactional FX. Looking at Q4 sales by geography. North America grew 2.8%, primarily as a result of strong performances from Baby and Commercial Products. In EMEA, core sales increased 1.1%, attributable to sales growth from Tools, Commercial Products and stabilization of the Baby business. In Latin America, core sales grew 32%, driven by very strong results from all of our Win Bigger businesses. And in Asia, core sales increased 2.3%, as we saw modest growth in Writing and Tools. Developed world core sales grew approximately 2%, driven primarily by a solid U.S. growth rate of 3.5%. Our emerging markets business grew approximately 17.3%, attributable to very robust growth trends from Writing and Tools in Latin America. Moving now to cost programs. We continue to make good progress on Project Renewal. And through the end of Q4, we are on plan, having realized approximately $200 million in cumulative savings. These cost savings enabled the branding capability investments this quarter and will enable more investment in 2014. We expect these investments will drive accelerated core sales growth in our priority businesses and markets. And lastly, I want to take a moment to discuss cash flow and the balance sheet. We generated $605 million in operating cash flow in 2013. We generated another $190 million in proceeds principally from the sale of our Hardware and Teach businesses. We spent $138 million on CapEx, which was down about $40 million year-over-year, partially driven by a smaller SAP investment. We made an incremental $50 million voluntary contribution to our pension plans. And we paid out $174 million in cash dividends and committed $470 million to repurchase shares through the combination of our ongoing open market authorization and the $350 million accelerated buyback plan. That's a total of $644 million committed to shareholders in 2013. At the same time, we reduced our outstanding debt by $82 million and increased cash by $43 million. As we exit the year, our balance sheet is in a strong position. We have $226 million in cash on hand and close to $1 billion in liquidity. We have no long-term debt maturities until 2015. And our debt-to-equity EBITDA multiple and interest coverage ratios are all very strong. With that, I'll turn it back to Mike for additional comments.

Thanks, Doug. While pleased with 2013, these are very early days. We've not yet hit our full stride. We are encouraged that our performance has accelerated at roughly the same time our change program has peaked. I would not have predicted the degree to which this acceleration occurred in Q4 '13. And while not ready to declare our ability to consistently deliver core growth at or above 4%, we are all quite intrigued by what our Q4 results might imply about our ability to do so in the future. As we emerge from this intense period of change, our people can see the promise of the Growth Game Plan starting to come into focus. And the energy this provides has started to build within the organization. In this context, we're well positioned to deliver another year of sequential improvement in performance in 2014. The insights and research investments we've made through to 2013 are beginning to yield results. Our development teams are placing over 50 unique concepts per month into tests, and these concept test results are hitting positive strike rates of 70% to 80%, which are way above our ingoing expectation and external norms. These results confirm the strength of our brands, that our categories are ready for innovation and that strength in innovation will unlock growth acceleration at Newell Rubbermaid. Our 2014 growth plans pivot on fast-tracking innovation, creating much stronger brand advertising, driving continued distribution expansion and portfolio deployment and investing significantly more in advertising and promotion. As we compare our 2014 plans to 2013, we begin to see real opportunity from the combined power of development and delivery. In this context, we have established the following full year guidance for 2014: core sales growth in the range of 3% to 4%, despite the product line and geographic exits planned in EMEA and continued contraction of the office superstore channel in North America; normalized operating income margin expansion of up to 40 basis points, despite a significant increase in brand spending; normalized EPS of $1.94 to $2 or 6% to 9% growth, about 1 percentage point above the long-term guidance for the strategic phase of the Growth Game Plan; and operating cash flow of $600 million to $650 million. Our geographic priorities remain the same in 2014: share growth in North America, strong share and revenue growth in emerging markets with primary focus on Latin America, growth in line with our markets in EMEA on our continuing businesses. There are 2 dynamics that could influence our full year results. The first is the speed with which we're able to increase advertising and promotion investment, fueled by Project Renewal savings and gross margin improvement. We are well on our way to deliver the savings promised as part of Project Renewal, and 2014 will yield another big tranche. We have a clear line of sight to savings related to the rollover of 2013 cost initiatives, the EMEA transformation and 2014 plans to streamline our business partnering functions. We should also take a step forward on gross margin. To do so will require our execution on gross margin initiatives to improve in 2014. We were not satisfied with the 2013 full year outcome. Increasing traction from the global supply chain teams and the business segments on productivity and sourcing savings, increased growth yield on customer programming connected to new joint business plans at our top customers and progress on price realization should result in gross margin increases for the overall company. Project Renewal savings and gross margin increases will fuel a significant step-up in advertising and promotion investment. When coupled with the strengthening innovation and brand marketing plans, the increased investment in brand support should drive a sequential improvement in growth despite the growth headwinds connected to the product line and geographic exits in EMEA and expected contraction in the North American office superstore channel. The second dynamic that could impact the results is the macro environment in emerging markets. We continue to believe our momentum in the emerging markets is more dependent on our actions rather than the macros, and our guidance does not contemplate any big disruptions in our emerging markets in 2014. We believe this is the right assumption to make given our limited exposure to the most volatile markets. Our largest exposure is in Venezuela on our Writing business. I want to take a quick moment to comment on phasing through the year. There are 3 factors that could influence the quarterly flow of our growth in earnings in 2014: First is the impact of the prior year SAP conversion in Brazil, which resulted in just over $5 million of sales being pulled forward from Q2 2013 into Q1 2013, primarily on our Tools business. This SAP-related timing shift will depress total Newell Q1 core sales growth by about 40 basis points. This shift in revenue and gross profit into Q1 from Q2, when coupled with a $0.03 EPS onetime tax benefit in Q1 2013, creates a year-ago EPS headwind of about $0.035 in Q1 2014. The second factor to impact quarterly phasing will occur between Q3 and Q4 2014 and is also SAP-conversion related. We plan to go live with SAP in Mexico and Venezuela on October 1, 2014. This will result in a larger shift of revenue and earnings from Q4 to Q3 2014 than was experienced in the Brazil launch of SAP. The third factor that will impact the quarterly flow of results is the pacing of EMEA product line and geographic exits in 2014. As you recall, we said we plan to exit about $25 million of business in EMEA this year. The majority of the year-over-year negative core growth impact will likely occur in the first half of 2014. While these exits will impact our growth rates in 2014, we do not expect a material EPS impact given the very low profitability of these exits and the release of structural costs these exits enable. While we do not provide quarterly guidance, the net effect of these shifts will put pressure on growth rates in Q1 and Q4, with core growth rates in both quarters likely towards the lower end of our full year guidance range; and growth rates in Q2 and Q3, in the top half of the full year guidance range. Our quarterly EPS growth rates will generally flow with top line growth, with the toughest quarter for EPS growth in Q1 2014 as a result of the $0.035 headwind related to both the impact of SAP timing and the onetime tax benefit from prior year. I often talk about the difficulty of driving delivery while simultaneously driving change. In 2013, our people did a terrific job of doing just that. They delivered sequential improvement in performance, and our results were at or above the midpoint of all of our full year guidance ranges. Doing what we said we were going to do in the face of tremendous change makes us all very proud. The Growth Game Plan is a strategic road map designed to unlock the true potential of our business, our leading brands and our people. And this past year demonstrates there's great opportunity for both -- for Newell, both in the short and longer term. Our growth acceleration will always come from the strength of our brand plans and the quality of our execution. We've achieved strong developed world growth, ahead of many peers. With a U.S. 2-year compound annual growth rate of 3.2%, we're proving we can win share consistently and grow our categories. We've begun to more strategically deploy our portfolio to the faster-growing emerging markets: first south to Latin America; and over time, east to Asia. On the heels of nearly 15% core growth in Latin America in 2012, we accelerated core sales growth to over 25% in 2013. What's more exciting than any of the numbers is the knowledge of what is still to come. My entire executive leadership team is either new to the company or new in role in the last 18 months, and they're focused on building the long-term full potential of our company. Our people have signed up to the Growth Game Plan and are driving change on the core activity systems of the business, which means we now work on the most important things in more focused ways with materially greater resources on our key priorities. Whether I look at the building innovation pipeline, establishing a global supply chain, deepening customer partnerships or building new businesses like e-commerce, we have many, many activities and projects in place today that simply did not exist a year ago. And importantly, we haven't begun to capture the commercial value of these initiatives. My confidence in a stronger 2014 and further improvement in 2015 is based on this: Of course, it won't be easy; of course, it will require everything our people have to give; and of course, there are all kinds of challenges that will get in the way. That said, our people have proven they can drive delivery, while simultaneously driving change. I'm proud of what they've achieved in the last 10 quarters and I'm excited by what I see ahead. The Growth Game Plan is our road map. Its promise is increasingly becoming a reality. And with that, I'd like to open up the line for questions.

[Operator Instructions] And your first question comes from John Faucher with JP Morgan. John A. Faucher - JP Morgan Chase & Co, Research Division: I want to talk a little bit about the Baby care business, and obviously phenomenal performance here. And I guess, as we look out at the impact on this -- of this business on the margins, is there something you guys can do within the cost saves program to make this less of a drag? Or is it something that you can do from a regional mix standpoint? Or is this just one of those things whenever you gain kind of share within these categories, it's going to drag the overall gross margin down?

John, great question. This business is a really interesting one and it's different from our others in that the vast majority of the finished goods are sourced. And with that becomes a gross margin penalty you pay, but also comes a benefit in the lack of fixed assets. And so if you look at this business on the 3 dimensions that I like to think about businesses, whether it's growth potential, margin potential or the ability to create value, this is a very interesting business now that we've attacked the structural costs associated with it. We can create a lot of value if we grow this business because of the high -- relatively high return on net assets or return on invested capital we have because we don't have the fixed assets of the working capital. So it's a very interesting business in this sense. Of course, to do that, we have to accept the mix negative that comes with gross margin. Interestingly enough, if you look at the P&L all the way down to operating income margin, which you guys have visibility to now, and you look back a couple of years at the progress we've made, you see tremendous progress in operating income margin. And we're getting close to where we think we can be to not have it be dilutive long term if we grow. Now there are some geographic mix benefits if we have those -- if we can grow Japan, we get a mix benefit. But we have to accept some gross margin dilution when we deliver these kind of growth rates to the total company. Now the key for any one of our businesses is for each one of those segments to deliver gross margin improvement year-over-year. We have to accept the mix negative if one of -- at the corporate level if one of those businesses is going to disproportionately grow. But each business should be able to drive their gross margin up year-on-year every year, and that's the discipline we need to build into our company. John, I would say that it's a work in progress with respect to gross margin delivery. I think we're not yet there in terms of our ability to kind of consistently deliver steady increases, and we're working on it. The supply chain -- the global supply chain will help a lot, better discipline around pricing will help a lot and active mix management will help a lot. But this is an opportunity that's still in front of us.

Your next question comes from Connie Maneaty with BMO Capital.

I was really encouraged by the core growth of most of the segments -- core sales growth, but we're really not used to seeing this from Newell, as I know you know. So the question is do you think the company's capabilities are such that you can now grow year-over-year on such strong results? Or do you need a little bit more time? And the strong core sales growth in this year's fourth quarter is next year's tough comp?

I think my comments in the conversation about not yet being ready to deliver consistently around 4% growth are right. I think the way I think about 2014 is we're driving our new operating model to speed, and part of that is about accelerating impact of the 4 winning capabilities that we're investing in, whether it's design, whether it's marketing and insights, whether it's customer development or supply chain. And so as those capabilities strengthen, and they will progressively through the year, and as we get a greater yield on the investment, the output starts to strengthen. Then I think we have -- it's certainly within reach to believe that we can grow on growth. Do I think Q4 will be a difficult quarter next year? Yes. But every quarter is a difficult quarter. So I'm not willing to concede that we can't deliver solid growth in Q4 in our guidance range against a tough comp. We've got plenty of time to kind of figure that out. And while we will be impacting Q4 '14 by the SAP pull-forward into Q3, if we adjust for that, I think we ought to be able to deliver in the range. And I think it would be premature to kind of aim off. I think the way to think about our business in general is that we're making sequential improvements, and that we should see increasingly -- you should see increasing visibility to the impact of the capability investments we're making. And to the degree that we're able to continue to attack the structural costs and get those costs out and manage gross margins for increases, you see a convergence between better ideas and capabilities and their impact on the business with better affordability in the P&L to invest behind our brands. And that's the thing that will drive the acceleration phase of the Growth Game Plan. I don't want to get too far ahead of ourselves. Because as you recall, we just put this organization in place this year, and we're -- it's a new way of working, and we're bringing that new operating model to speed. But you can sense the opportunity in the framework that I just laid out. And it will all come down to execution and great leadership and our people understanding the opportunity for the upside.

That's helpful. Can I ask a question on Latin America?

Sure.

The 32% increase, how much of that was attributable to Venezuela where you have pricing power? I know it's a small business, but that is a factor. And if the currency devalues, what do you think the impact on you is at 50%?

I'll handle one part of that, Connie, and then I'll pass it to Doug. So pricing, certainly, was a factor on our Writing business. We -- I don't -- I'm reluctant to kind of call out a specific number, but it's a material number for both Writing and for the overall company. Although the big driver of growth in Latin America this year was our Tools business and Commercial Products business. As you recall, we strengthened the selling system on Commercial Products. And then Tools, we've made big innovation and selling investments in Brazil, and we're extending those investments to other markets. So pricing, for sure, was a factor, but -- and a meaningful one. So I don't want to discount the observation, but there are other things that play as well.

Connie, on Venezuela, we've got about $87 million of cash on the balance sheet in Venezuela at the end of the year. So a 10% movement there is about $9 million, either up or down. And we haven't, at this point, built anything into our plan from a devaluation perspective. We've been listening to the President's speeches and trying to get as much clarity as we can around what the next steps may be, but we're holding course right now there. So I would look for a 10% devaluation would move revenue by somewhere in the neighborhood of $8 million and income somewhere in the neighborhood of $4 million.

Your next question comes from Joe Altobello with Oppenheimer. Joseph Altobello - Oppenheimer & Co. Inc., Research Division: I guess, the first question, I want to start off with the OfficeMax-Office Depot merger. You guys alluded to it a couple times this morning, but didn't give any specifics. So I assume you're still comfortable with the impact you laid out a couple of quarters ago, which is about a 30 to 50 basis point drag on the top line -- I'm sorry, on EPS, about $0.02 to $0.04?

Yes, and that's built into our guidance, Joe. Joseph Altobello - Oppenheimer & Co. Inc., Research Division: Okay, perfect. And then in terms of Project Renewal, is the incremental savings there peaking in '14? Or did you see the peak in '13?

No, Joe. I would say that '13 and '14 overall are -- '13 was a little bit heavier than '14 will be. So we'll begin a bit of a decline and then finish it out in 2015. Joseph Altobello - Oppenheimer & Co. Inc., Research Division: Okay, got you. One last one in terms of mix. Do you expect mix to be positive for gross margin in 2014 or less of a drag in '13?

It depends on how our Baby business plays out. We've assumed a little bit of a positive mix in our gross margin. But because we see a stronger Writing business in 2014 than we had in 2013, which will mix us up. But if Baby delivers another year like this year, which we have not planned, we believe Baby is probably sort of mid-single digits because it will be difficult to replicate double-digit growth on the full year. But if it does, if it surprises us on the upside, we'll have that continuing pressure on mix. But we have not built that into our plan. Because Writing strengthens in '14 versus '13, we see a slight mix benefit in gross margin.

Next question comes from Olivia Tong with Bank of America.

First one, one quick question on Asia and then my real question. On Asia, you mentioned that you're up on some growth in Writing now. Have you turned the quarter in terms of Asia Fine Writing? Or is this just a lapping of the previous losses? And then on my second question, I wanted to ask a little bit about the thoughts on the macro environment. And given what looks to be a little bit of a tougher backdrop, can you talk a little bit about your innovation plans for 2014, as well as your spending flexibility? Because it sounds like you're pretty excited about your innovation pipeline for next year, and I assume it wasn't an accident that you didn't name any specific new products. But how do the price points and margins on the new products range relative to your existing product portfolio? And then on top of that, can you talk about the flexibility to turn on and off spending should conditions worsen and you actually need some of that flex?

So our Writing -- our business in general responded pretty well in Asia in the fourth quarter. It's actually driven more by back-to-school programming in Australia, New Zealand than by a recovery of our Writing business in China. Quite frankly, I think the luxury goods market is going to be -- continue to be sluggish there. And while our basic issues on route to market are behind us, the overall market conditions aren't great at the moment. And by the way, we're leaning into investments there. Our focus on investments today are in Latin America. In the future, we'll lean into Asia. So just to be clear on Asia Pacific. Good job by our team in Australia and New Zealand around back-to-school. Remember, it's kind of seasonal there. Back-to-school is in December in Australia and New Zealand. On our Writing business in general, I'm -- I think we've got a stronger set of plans in 2014, both from an innovation and brand support perspective. We've got innovation and brand support planned on Paper Mate, Sharpie, Expo, Waterman, Parker and rOtring. So we've got a full lineup. And even Mr. Sketch, our sort of long-neglected scented jewel of a kids brand has growth plans in place. So we expect our Writing business to deliver better growth in '14 than in '13. But our growth is going to continue to be tempered by this contraction in the office superstore channel in North America. Remember, we're exiting our Fine Writing marketing and gifting business in Europe. And the slower recovery in our luxury goods -- in the luxury goods market in China will temper the upside on Fine Writing in China, despite the fact that we have a stronger innovation pipeline. Olivia, I'm going to hold off on giving you specifics on innovation. We're going to talk about some of this and bring -- shine a bright light on it when I'm with you all at CAGNY. But it’s a -- I would characterize our innovation funnel as a stronger funnel. I wouldn't characterize it as a funnel that's up to its full potential yet. I think it takes us through '14 to '15 before we see the full value of the investments we're making in new capabilities, in innovation, in design and marketing to hit the marketplace. So 2014 should be a stronger year, a year of sequential improvement with respect to the strategic ideas we're bringing to market, but 2015 and beyond is where you'll really see us hit our stride.

On your final question, Olivia, on spending flexibility, yes, we do continue to increase spending flexibility across the P&L, which is exactly what Renewal was designed to do. So we have less fixed cost overall and more variable cost across the P&L.

Your next question comes from Nik Modi with RBC Capital Markets.

All right. So just following up on Olivia's questions, just on the consumer, it seems like Newell bucked the trend this quarter relative to most companies out there in terms of top line. So I'm just curious, Mike, if you could talk about the underlying category growth rates? Or are you seeing any tailwinds from any recovery in construction or what have you in just the general economies around the world? And then how much is really driven by just innovation and distribution gains? So if you could just help us tease out the 2, that would be really helpful.

Yes, Nik, I really believe that our ideas will always trump the macros. So I do think that it's -- whether it's in the brand work or in the innovation work or the work we're doing -- Bill Burke leads with his delivery organization to strengthen execution. Those things are going to create more traction and more upside for us than sort of either macro tailwinds or headwinds. Now that said, I do think that our Tools business and our Commercial Products business are benefiting a bit from the North American recovery. Some of the things you see out of the home retailers, I think, certainly are benefiting us. We've seen stabilization in our Décor business. I think that could be connected, although we can't draw a direct link to the housing market. And so I think that our attitude about the markets is -- our concern about markets are moderating. Our assumptions on market growth rates are basically the same as they were this year. And where is the opportunity and the risk? The risk is in emerging markets. But again, there, I'm quite clear that it's what we do as opposed to what the macros do that will define our trajectory. In North America, we haven't planned for any more of a recovery than what we've seen in the second half of the year. So if there is an upside to the economy, that could help. And in Europe, we've assumed a more-of-the-same outlook. Despite all the headlines I read, I just don't see that playing through in our businesses right now. And we're not investing to create a catalyst yet, to cause that to occur. So our outlook for market growth is more of the same. It's not market acceleration. And while there's a lot of news around emerging markets these days, it's actually much more about what initiative we take as opposed to what the market growth rates look like. Witness our results in Brazil over the last 2 years, despite a really choppy economic environment. And so, I guess that's how I'd answer that question. We don't really typically provide market growth data, Nik, because unlike fast-moving consumer goods, where syndicated data is clean and clear, in consumer durables it's a little bit tougher to get a read on that. You have to piece it together. And I'm not sure it's as useful as our growth rates in terms of getting a sense for how things are going. I look at GDP growth. We're growing ahead of GDP in the fourth quarter, which is great. Same thing in the second -- in the third quarter in the U.S. and I think those are positive indicators.

Great. And just, Mike, following up on your comment about Europe. I'm suspecting that the Fine Writing business in Europe continues to be under pressure. I just want to confirm that.

Yes. I think that more of the same is the right outlook for it, but we're doing a lot of work on our brands now on Parker and on Waterman and on rOtring. And while 2014 may not be the year where we turn the corner in Europe on Fine Writing, the kind of ideas that I see coming that are in early development are really exciting and promising. And so I take a very long view on all these businesses. I can get into the quarterly and monthly and daily numbers like anybody else. But when it comes to our brands, I've got to take sort of a longer view. And I like what I'm seeing on Fine Writing. And that has to transpose into growth in Europe at some point in the future, probably not until '15.

Your next question comes from Jason Gere with KeyBanc.

I just want to delve a little bit deeper into Project Renewal. And obviously, when you set this out years ago, it provided you the flexibility to make the right investments, especially as you expand into some of the new emerging markets. Can you talk about where you've actually seen the cost of doing business maybe a little bit greater than you've anticipated? And then on the same point, with some of the A&P spending as you're starting to hit your stride, where do you feel that you're getting the right returns on some of that spending now? Because I guess the question is, is that the next couple of years we'll still see a little bit of margin expansion come through, but I'm just wondering at what point do you start to see that you've got the right level of investments or spending in these markets that a lot of the additional cost savings that should come through from Project Renewal, especially probably as it gets its next legs of growth, will kind of flow through to the bottom line? So I was just wondering if you could provide a little bit of context on what's kind of changed over the last 2 years?

Look, we -- I think we've shown over the last couple of years that we've struck a balance between investing for accelerated performance on the top line and delivering steady margin improvement -- operating income margin improvement. And you should hold us accountable for continuing to do both. That's why we've guided the way we have. And in fact, we've taken the operating income margin, the top end of the operating income margin guidance range up, from 20 basis points in '13 to 40 basis points in '14. So we want to have that discipline, that governor on the choices we're making because we want to build a sustainable and profitable -- increasingly profitable business. So you should expect us and hold us accountable for that. There are things that have surprised us on the upside over the last 2.5 years. Baby would be a great example of it, where we've both been able to get cost out in a profound way -- look at the operating income margin progression on that business -- while significantly accelerating the growth rate and scaling the business. So creating a ton of value on that business over 2.5 years. That's been a pleasant and positive surprise. There have been challenges in other businesses. We've got a tough business in Rubbermaid Consumer, where there's very limited market growth. And quite frankly, we haven't brought the right kind of innovation to market to value up that category. And as a result, there's always competitive intensity there. The cost of growth in Rubbermaid Consumer is high. And we referenced that when we talked about customer programming costs. So we've got to pull different levers in that business for the kind of outcomes we seek, which is strategic growth, sustainable growth, differentiated product propositions, better innovation. Things that will allow us to create more value and strengthen the Rubbermaid brand. That's going to be -- that is a lot of work. And it's a challenge. And it's going to take time for us to -- probably a little bit more time than we originally thought to really crack the code there. We love Rubbermaid. We love that brand. It's powerful. Its positioning is very strong. When life's in order, you're free to live it. It's a promise of organization and helping you deal with the more mundane things in life, so you're free to do the more important things. And so that's a very powerful brand and we can unlock that. But it's going to require real innovation that's differentiated. We're working on that. But that's a longer -- that's going to take a little bit longer, I think, than we anticipated and may cost us a little bit more than we originally contemplated in human capital and in research investment. So I think there's movements in both directions. I think the -- both positive surprises and then some more challenging situations. We have to be very disciplined in how we extend our footprint into the emerging markets because there's a cost of growth that hits you in structural cost, selling expense, research expense. And you have to make those investments in order to build a sustainable extended footprint. That's not a surprise. But we need to retain the discipline associated with doing that and not opening up too many fronts at once. Because otherwise, we would compromise our commitment on margin expansion as we grow. And so that's a discipline that needs to stay in place, has been in place, needs to stay in place, so that we're not intoxicated by the upside in growth, but at a cost to margin. So Jason, I don't know if that really answers your question. I'm sort of avoiding giving you too many specifics, but kind of giving you 3 different examples of things that require us to be thoughtful as we think about resource deployment.

No, no, it definitely gives good context. And I guess just a follow-up. As you think about your cash flow, and I think 2015 when you start to feel a lot of that cash flow build, and I know there is like, I think, $1.5 billion of unallocated cash flow that you guys have talked about in the past. So as you talk about some of the -- having the discipline, I guess the question is, will -- should we expect to see you make more investments into the emerging markets with some of that unallocated cash flow? Or should we look at the things like -- that you have been kind of doing along the way, which is the buyback and the dividends and maybe even thinking about acquisitions? So just wondering about the operating versus kind of, what I would call, the nonoperating side of things and the use of the cash flow as you kind of move forward over the next couple of years?

Yes. The chart you're referring to is the chart we presented at CAGNY 2012. And we'll update that in a couple of weeks when we're together to give you kind of a forward-looking view through -- what did we say Doug, through 2018? And obviously, a big chunk of our use of cash over the last few years has been restructuring-related. And that starts to come down over this timeframe. I think that chart also was a little bit too loose on the amount of CapEx that we were planning on spending. I think that chart had us -- that model had us spending about $200 million a year. We don't think we're going to need to do that. But we're working on the next version of that, that gives you another 5-year view forward. And it's very exciting. So this is a -- and it doesn't presume major progress on working capital in what we'll present. So it gives us lots of options. So your question on capital allocation, we're going to have lots of optionality around that. And of course, once we get through this change program, we're going to want to think about growth, not just organically, but also about complementing that organic agenda with an external development agenda kind of focused in the 5 businesses we have.

In terms, Jason, of whether we would begin or increase investing over plans in markets in some of our emerging markets, I think you need to link the accumulation of cash on the balance sheet or generation of cash over time with the strategic growth objectives that we set out on the bottom line. So the P&L will continue to govern what we invest, so that we continue to increase and deliver operating income to the shareholders.

Your next question comes from Lauren Lieberman with Barclays.

A couple of things, so 2 kind of housekeeping things. One was, were there any exits in EMEA in the quarter that depressed core sales or not? And then the second was just expectations for the tax rate in 2014.

Yes. So Lauren, on EMEA, we made -- we started to exit businesses in Q3. So obviously, there's a flow-forward effect of those choices. And we will continue to exit businesses in Q1 and Q2. So there'll be incremental choices that will begin to be affected. But yes, there was an impact in Q4. We haven't called it out specifically as to what it is. I think we have to figure out how to deal with our choices to exit businesses in the context of our core sales commitments. So it's not really that. I gave you a headline number of $25 million. We got to figure out how to cover that in our numbers. That's our philosophy about it. And so we haven't -- we're not going to call them out by quarter. But yes, there was the rollover effect of Q3 exits into Q4. And there'll be new exits in Q1 and new exits in Q2 that will roll forward through '14.

The tax rate, Lauren, was -- you should model between 24% and 25%.

Okay, great. And then just curious about the mention of the customer -- I guess, 2 things. One was the kind of increase in customer programming costs in the fourth quarter for Home Solutions. Is that something that persists? Was it a seasonal issue? Was it a specific retailer? That was one. And the second thing was just, any impact from the further J.C. Penney closures? And then that would be the negative or the positive of the home section reset again that they have coming?

On customer programming cost, it's our most competitive. Rubbermaid Consumer is our most competitive category, and particularly in a couple of the product lines. And we have yet to figure out how to crack the code. And it's going to take innovation to break the cycle. So we've got to cover those costs with productivity, with an attempt at mix management through the more profitable product lines within that portfolio. The fact that we shipped volume that was consumed in Q4 in Q3, but we spent money to drive that consumption in Q4, is in part contributing to the comment that we've made. But this is a strategic issue for us. We just have not invested enough in differentiating, in particular, the storage portion of our Rubbermaid Consumer brand. We've got great differentiation in food and beverage containers. We've got it in garage organization. We've got it in a lot of places, but not in that big center of that brand. And we've got to work on that. And until we solve that and figure out how to get more of a growth yield for the investments we're making through our customers, we're going to always be tight on that particular piece of our business.

Okay. So that sounds like, though, the particular call out in the quarter, notwithstanding that it's just a tough spot was -- some of it was related to the timing shift of spending versus shipping?

The volume was in Q3. The spending was in Q4. You get a penalty.

Okay, perfect. It wasn't a change in what customers were asking for or something like that in a particular quarter?

There's always -- on that business, it's always a battle. Did you win the merchandising or did you lose the merchandising to your key competitor? But not -- that wasn't the big issue. The big issue was the linkage of the revenue stream and then the overlay of cost in the drive period.

Okay, great. And then just the J.C. Penney question.

On J.C. Penney, actually, last year was a good year for us at J.C. Penney. I mean, Calphalon responded. Décor stabilized. Calphalon had a phenomenal year at J.C. Penney. So I think they've got different issues that they're wrestling with. The home reset was a positive for us. So we had a good year at J.C. Penney from a growth perspective. And they're wrestling with all their other issues. But in the context of that, they've been good partners on the merchandising side in the...

Okay. So not a worry from the -- is it material or not, I guess, if they're closing doors in 2014 and resetting home again?

It took such a step back in 2011 and early 2012, that it -- that we'll be able to work through that.

Your next question comes from Bill Schmitz with Deutsche Bank.

A couple of housekeeping items. What do you think the share count is going to be for the full year next year? And does it vary quarter-by-quarter?

It should be about 285 million, Bill, and it will be relatively stable throughout the year. As you know, on the ASP that we launched in the fourth quarter, we got about 80% of those shares in at that time. So that -- about 2/3 of that is reflected in the share count at year end. We'll get the remaining shares in through the first half of the year and we'll settle those out with the -- we'll settle those out at a weighted average cost of buying those. So we don't know exactly how many shares we're going to get in. But once that settles in, we'll be pretty flat.

Got you. And then just in terms of operating cash flow. Based on your guidance and what you did in the last couple of years, it seems like it's been flat. And I know there are some pension contributions. And obviously, there's an overhang from the cash restructuring that's already been accrued that comes out later. But is it conservative for next year? I don't know if you need another pension step up or what?

We don't have another pension contribution in there, but we do have $50 million to $60 million of cash taxes that are likely to fall into next year, which is why you don't see a more significant step up.

So they pulled forward from '13 and then move into '14?

It's not pull forward. It's just timing of when payments are made.

Okay, got you. And then just as you look at the P&L, I mean, shouldn't you have that sort of big onetime step up in SAP benefits coming in 2014? That was always the promise, but we kind of never talk about it anymore. So then in addition to that, the year-over-year pension costs, the P&L-realized pension costs, shouldn't those also come down in 2014?

On the first one, we should be peaking on the amortization line in '14 on SAP. Remember, we continued -- we did EMEA and then we continued on to Brazil, and we'll finish out Latin America. And the cost of each of those implementations goes down. So you will see a benefit over time. It won't be in '14 though. And then -- I'm sorry, Bill, what was the second one?

The second one was just the...

Pension cost.

The pension cost on the P&L, the period ended cost?

We're a little over 90% funded now on our U.S. pension plans. And the mix of our investments at that trigger point is changing to a slightly more conservative allocation across the asset base given where our funding levels are and what our population of retirees look like and when they'll retire. So that we've shifted the mix a little bit there. So I wouldn't expect a big improvement in pension cost this year.

Bill, one build on the SAP comment because Doug's talking about the IT costs associated with SAP and the impact of lessening depreciation and amortization expense over time starting '15 forward. That's all true. And that's good. And that gives us flexibility in our structural cost. The real upside is still in front of us, though, in terms of mining SAP to unlock -- and I think the benefit will come in working capital. But we see good value coming out already in sourcing, in direct sourcing as a result of visibility. But the real value over time will come out in a better appreciation of the cost of complexity in our business model. And we're going to learn very quickly as we continue the analysis that we have a whole bunch of hidden costs. In marrying the supply chain, they're going to get their arms around that. Again, I don't think it's a '14 benefit. I think working capital becomes a big -- we do all the analytics. We roadmap. We game plan in '14 for '15 progress. But yes, I think there is upside in what we've been able to glean out of the investments we've made there. And we're going to go after it.

Got you. And then just a strategic question. Can you just tell us a sort of sneak peak of the 10-K and tell us how much Wal-Mart sales were up year-over-year and kind of what drove that? And then if there's been any competitive response because obviously the category growth rates are still pretty dire. So it's almost all market share and distribution gains. So can you just talk about any sort of...

Yes. I mean, I'll give you a headline. I won't give you their growth contribution to our total company, but you'll see that shortly. Our growth at Wal-Mart was ahead of their market growth last year. We just -- we just had a big top-to-top in November there. And so we had a good year with Wal-Mart based on broadened distribution and good shopper marketing implementation, just overall better execution across the footprint. So it was a stronger year in 2013 versus 2012. And you should probably see their contribution to our overall results go up a bit, although we won't see the final, final numbers for a bit.

Got you. And then it's kind of zero-sum there. So have you seen any sort of competitive response to some of the distribution gains? Because it's not like they're expanding your categories on the shelf?

So our market -- I think that some of the things we're doing is expanding some of our market growth rate. Certainly, on Baby, that's true. And so we're not just share shifting, I don't think. Our commitment is to collaborate, to expand the relevance of these categories and consumer involvement with them. So things like Sharpie Neon and Sharpie Metallic, which are premium offerings, that drives value into the category. Of course, we get share gains from it, but it drives value into the category. Same thing with what we're doing on Graco in North America. We're not doing it consistently well across everyone of our businesses, but that's the opportunity. Clearly, there are landscape shifts that are happening across the retail world. We've talked a lot about the contraction in the office superstore channel, particularly on the retail side of their business, not the commercial side of their business. And that's market share that's up for grab. And people are grabbing for it as the office superstore guys pull back from that direct-to-consumer selling. So there's clearly shifting going on. And there's shifting going on with respect to e-commerce procurement. So consumers are shopping online more and more every year. And our commitment is to reach them where they shop. Now all of our partners are building out their platforms to capture that and hold that within their box, but there is some dynamics underway there as well.

Got you. And then just one last one. Promotional spending efficiency, it hasn't been a priority yet, I guess. And it seems like there's a lot more trade spending right now, almost in response to some of the weakness on the Rubbermaid home side. But when does that start getting looked at and coming through?

Well, I think we're looking at it, big time now. And we've just changed a couple of elements of our go-to-market program as of 1/1/14. It simplifies our trade terms. And we're going to continue to work on this as part of our -- what we call Collaborative Growth Plus, which is the program that we will bring to market through the new CDO. And we have got to strengthen the growth yield for the investments we're making there. And we're making up -- we can spend a lot of money between our invoice price and our net price. And we want to work together with our retailers to put -- our retail partners to put that money to work to drive category expansion, and not just have it -- subsidized tactics that don't yield the kind of trial and repeat we're hoping to generate in our businesses. It's going to take time to do that. Part of that is in the design of the program. Part of that is in the behaviors of our selling teams and the kind of joint customer business planning that gets done. We've -- I've been at 2 top-to-tops over the last 2 months at some of our biggest customers. And we got 30 people in the room, and they've got 30 people in the room. And then we break off into breakout rooms where people are getting into that type of conversation. Are we promising a great yield on that in any of the numbers yet? No, but should we -- should you expect us to over time? Yes.

I mean, I don't want to put you on the spot here, but couldn't that be as efficacious as the Project Renewal savings, just given the magnitude of the trade spending that you guys throw out there?

Possibly.

Your next question comes from Chris Ferrara with Wells Fargo.

I guess, Mike, a couple of things. So you're saying categories now are ready for innovation. You're saying a factor on the top line now is how fast you can get money into advertising. It's a little -- it's a lot different than what you'd said before. And I think it's an evolution, right? And so you clearly -- you seem to believe more that innovation and marketing matter in these categories. And I know you've believed it before too, but seemingly more so. So I guess the question is, if that 4.4% core that you guys did this quarter that intrigued you, right, for the forward look isn't necessarily sustainable right now, why would that be? What would cause it to kind of come back down? Like where are there things that aren't sustainable? And I guess Baby is a start?

Well, I mean, we're going to be growing on growth on a couple of our big categories. So the question, can you sustain the growth rates as you do that? Baby could surprise us again. I don't know. We've got a good plan. We're actually working on '15 innovation on Baby now. So their plan is set. It's set to be executed. The question is, do we get the consumption yield on it? And time will tell. We were able to invest a lot of money in the fourth quarter on the back of some onetime benefits that we saw -- had modest sight to once we got into the quarter and on the basis of some momentum in the top line that we didn't expect to see in October and November. So we fueled sort of a virtuous cycle. If you get that top line going and you're able to do it with decent margins, it fuels investment firepower. And we had that working for us in Q4. What will keep us from sustaining that level of support? There are 3 things really. It's gross margin, ensuring we generate the gross margin improvement. And the -- I think we're quite confident on Renewal savings, but gross margin delivery, the step-up that we would like to see, that's something we got to manage and watch and see how that progresses because that will fuel a significant portion of the investment, whereas that wasn't necessarily the big driver in Q4. So we need that to happen. And then we have to accept the fact that we're making choices for the sake of the overall financial health of the company, to exit some businesses in Europe, which will be a drag on growth. And we have the reality of the office superstore contraction which will -- and specifically, the Depot-Max consolidation, which has really not yet begun in earnest. I think that's still in front of us. So those are the things that we steer into that give us some concern. We will continue to work hard to manage growth and profitability in Home Solutions. So we delivered good growth in Home Solutions on the full year, but I wasn't thrilled with the kind of margin delivery in that business, in particular, within Rubbermaid Consumer. And so we've got to strike the right balance between both growth and profitability there. We've got to find the means to do that, and even if that causes us to back down on growth rates coming into this year. Now that doesn't explain why Q4 comes off, but it is a variable that's going to be out there, and it's going to influence our thinking on choices we make.

And just I guess switching gears just real quick to the tax rate. So a couple of things, I guess. Doug, what's going on? It's very low. Obviously, it was low this quarter. What's the right sustainable rate? And that 24%, 25%, 2014, I mean, is that before any potential sort of goodies that you end up running through there, right? So it -- because right now it would be a $0.05 year-on-year drag on '13 to '14. And do you think you will have to offset that $0.05 drag? Or do you think there's sort of a -- by the time you end up reporting the year, the tax rate ends up being actually lower than that range?

Yes, Chris, I think, we'll clearly have to offset that drag, but more likely in other parts of the business than in the tax line. And it's, as you know, very difficult to predict when resolution of tax issues occur. So to the extent that we have reserves on the balance sheet that are favorably resolved during the year, you're going to see period tax benefits. And to the extent that they're unfavorably resolved, you'll see a period tax hit. So I think 24% to 25% is a good range over time to manage to for the business, given the planning we have in place. In Q4 specifically, Chris, we had -- as we got into the fourth quarter, we've been negotiating with -- to resolve a number of state tax issues throughout the back half of the year. And we got those resolved in Q4. And they were resolved in a way that was more favorable than we had previously expected. So the benefit in Q4 was really the release of some state tax contingencies.

And why is 24%, 25% right for a business that's as domestic as yours is?

Well, we are -- we have a very -- we're domestic, but we have a lot of international complexity and a very active tax planning function that is there to maximize the tax benefits across the entire globe for us. So things like the EPC, for example, drives benefits for us. And we consciously structured into that when we were thinking about a reorganization in Europe. And as we went live with SAP in Brazil, we consciously organized into a similar structure that will drive tax benefits above and below the line for us. So we think much more broadly than a pure domestic planning company would.

Next question comes from Bill Chappell with SunTrust.

I wanted to follow up on Bill Schmitz's either ninth or 10th question on gross margin. And just trying to understand, you said you were unhappy with the gross margin in the quarter and I understand some of it was mix. But I mean, are you looking at goals internally? Do you see multiple 100 basis points potential? I mean, is there something tangible that we might see this year or it's just we got to do better?

No, we're all over it. And we're going to sharpen the teeth in our comp systems around gross margin for employees. We have a proposal into the board to do that. We have visibility into all the different components of gross margin. So we can look at things very clearly. When I said I was disappointed, I was really commenting on the full year numbers. We did see progress in Q4. We had positive price realization for the first time in a -- first material time. We saw a little bit of it in Q3, but we saw the progression through the year. That's good. Mary and team have to work productivity harder. And we are. That the whole value of setting up the global supply chain is to build the funnel on cost ideas in the same way you build a funnel on growth ideas. And we have visibility into that now in a dashboard that tells us where we are by business. So we're really -- we know that as we come through Project Renewal, the key lubricant for growth is going to be gross margin increases. We'll always manage overhead with a very tight fist, but the real growth driver and the portability driver will come through gross margin increases. So we're all over it. It's not easy to drive price realization in a flat market, which most of our developed world is. So that's a challenge, but we have to do it. We're going to figure out how to do it. And I told you the levers we're looking to -- we're looking to pull, but this is the conversation piece for almost every engagement I have with the segments, this and their growth. So we've got to make progress. We're going to put some comp teeth into it, assuming the board is supportive. And we'll see how that all plays out next year.

And your next question comes from Budd Bugatch with Raymond James.

This is Bobby filling in for Budd. A quick question for me. I was just wondering if you could give us some additional color on some of the market share gains in Commercial Products in North America, kind of what you're seeing there or what your attributing that to, and kind of how you expect that to continue to play out?

We've had a good run on Commercial Products. We continue to be challenged by the health care portion of that business. And that will be with us until the uncertainty clears on that vertical, but we had good results in Q4. We're benefiting in Q4 from a change in our selling structure in North America as part of the work we did over the summer to strengthen the CDO and realign resources. We collapsed the leadership structure of our Customer Development Organization, but that enabled us to fund increased retail coverage amongst the distributive trade. And that certainly has helped us in Q4 to have traction in this business. So you're seeing core growth occurring on Commercial Products as a result of better frequency of calls on some of the smaller distributors that we call on and some of the hardware chains. And so that's good news and that should sustain forward. And then we have good innovation. And we've got strong innovation coming in 2014. So whether it's the launch of Executive Series into luxury hotels, which is a new cleaning cart system into a cleaning products line into luxury hotels around the world or whether it's some of the other innovations we're bringing forward that leverage our microfiber technology on cloths and mops. There's a lot of interesting things coming to market on that business, which should more than compensate for the challenges we will continue to have, we think, on health care.

Your last question comes from Connie Maneaty with BMO Capital.

Was the HVAC trade show recently held? I think I saw something about it at the Javits Center in New York, and I'm wondering what the outlook coming out from that or for Hilmor is?

Yes. So we were there, the whole contingent. I wasn't because I was in another meeting. But Mark and Bill and the Tools team were in the Javits Center for that event. Look, we've got a great -- we're pleased with where we are, but we have more opportunity on Hilmor. And we're confident that we're going to continue to build this business in the U.S. and that this platform can serve us well around the world as we build out our emerging markets footprint. We've got a superior range of tools and products. We're launching a new line as we come into -- a new extension line as we come into 2014. So that was a good forum for us. As you know, the HVAC season sort of kicks in over the next couple of months. That's when the selling volume really sort of starts to kick in. And so we'll see how that all plays out, but the team was really energized by what they saw. And we're committed to continuing to build that business.

Because I think last year on the timing of the launch, you captured only a small potential of what could have been the year's sales of Hilmor. Do you think this year, you'll capture much more of it?

We think we have upside this year versus last year, in large part because of timing. You're right, Connie, we sort of missed. We were -- I won't describe it as missed. We pushed ourselves to get to market as quickly as we could in the first quarter. But as you recall, we weren't out selling until sort of late January or early February. And so we missed the big trade shows, which were earlier in the season. So we didn't get the yield we would have gotten had we been out there earlier, but there was just absolutely no way to fast track that initiative any more than we did. And so we have more opportunity than we captured in 2013 to be had in 2014. And the teams are working to get it done.

And then just one final, I promise. On Venezuela and all the weird stuff that you're absorbing with Project Renewal savings, you're being able to absorb the consolidation of the office superstores. Do you think in the devaluation in Venezuela, those savings will offset that? Or does such an event represent a little bit of downside to earnings?

I think it may be somewhere in between, Connie. I think we'll manage the earnings piece, first of all. But we have -- during our experience in the last couple of years as we've seen the currency devaluations occur is that we have been successful in at least partially offsetting some of that loss with pricing. So that we've been able to use -- come back that way. And then if we need to use some other spending cuts to manage the rest, we will.

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

Well, all I would say is, thank you very much, and thank you for your patience in sticking with us through the end of the call. And again, thank you for your support and your counsel and advice. And we look to continue to deliver in the consistent rhythm we've been delivering. Stay well, and we'll see you at CAGNY.

Today's call will be available on the web at newellrubbermaid.com and on digital replay at 1 (800) 585-8367 with an access code of 31362513, starting 2 hours following the end of today's call. And this concludes today's conference call. You may now disconnect.