Please standby, we are about to begin. Good morning. And welcome to Newell Rubbermaid’s First Quarter 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. After a brief discussion by management, we will open up the call for questions. As a reminder today’s conference is being recorded. A live webcast of the 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, everyone. I want to welcome you to Newell Rubbermaid’s first quarter earnings call. With me here in Atlanta are Mike Polk, President and Chief Executive Officer; and John Stipancich, our Chief Financial Officer. I’ll remind you that our discussion today will include forward-looking statements. Such statements are based on assumptions and estimates, which could be inaccurate and are subject to risk. Actual results may differ materially. Newell encourages you to review the explanation of the latest risks and uncertainties provided in our earnings release and in our most recent 10-K filing. In addition, certain information presented and discussed today constitutes non-GAAP financial measures, we have provided in our press release and 8-K filing reconciliations on a GAAP basis for these measures. With that, I will turn it over to Mike.

Thank you, Nancy. Good morning, everyone, and thanks for joining our call. Before we discuss our Q1 results, I'd like to briefly address two new strategic initiatives approved by the Newell Rubbermaid Board of Directors. First, this morning, we announced our decision to expand the third phase of Project Renewal beyond our current supply chain focused initiatives to include the next level of cost out work in our corporate overhead and business partnering functions. This new authorization would utilize $150 million in incremental restructuring and project-related costs to generate $150 million an incremental annualized savings by the end 2017. We’ve made good progress increasing our brand spending through 2014 and we will continue to increase investment this year and beyond. In this context, a significant amount of incremental savings generated from the expansion of Project Renewal will be reinvested in new capabilities and brand support, but with an increasingly higher proportionate of the incremental savings flow to margin and earnings than in the earlier phases of Project Renewal. Secondly, this morning we announced our intention to sell our Rubbermaid medical cart business. This business is not core for Newell. The medical carts business had net sales of roughly $65 million in 2014. In 2015, the Rubbermaid medical cart business will be treated as planned divestiture and therefore excluded from core sales. So with this preambles done, let's get into our results. We have had a very good start to the year. Core sales grew 4.7%, net sales grew 4.1%, with 550 basis point negative impact from foreign currency, largely offset by a net contribution of 490 basis points from acquisitions and planned divestitures. Normalized gross margin increased 50 basis points, driven by input cost deflation, productivity and pricing, partially offset by negative foreign exchange and the mix effect from acquisitions.…

Thanks, Mike, and good morning. First quarter reported net sales were $1.26 billion, a 4.1% increase versus last year. Core sales, which exclude acquisitions, foreign currency and the planned disposal of our Rubbermaid medical cart business increased 4.7%. The net impact of acquisitions and planned divestitures contributed 490 basis points to reported net sales. Foreign currency had a negative impact of 550 basis points. The strong core sales performance was led by Writing, Commercial Products and Tools, our Win Bigger businesses aided by improvements in Baby and Home Solutions. Reported gross margin was 38.6%, with normalized gross margin at 38.8%, up 50 basis points over last year. This improvement was driven by productivity, lower input costs, pricing and favorable business mix, which more than offset unfavorable currency and the negative mix impact from the gross margin structure of our recent acquisitions. Normalized SG&A expense was $337.9 million or 26.7% of sales, down 50 basis points versus prior year. Our 110 basis point reduction of overheads fueled a 50 basis point increase in advertising and promotion with the balance of the overhead savings flowing the offset FX headwinds. We invested incremental A&P across all five segments with the largest year-over-year increases in Baby, Writing and Commercial Products. In Baby, we supported advertising campaign for our Graco Nautilus 3-in-1 Car Seat. Our Writing segment benefited from advertising for Sharpie Clearview Highlighters and investments in e-commerce and incremental in-store merchandising activity. In the Rubbermaid Commercial, we ran numerous concurrent campaigns in North America, China and Brazil, to support BRUTE Containers, HYGEN Microfiber Cleaning, WaveBreak Mop Buckets and our new Maximizer Mops. Normalized operating margin was 12.1%, up 90 basis points, reflecting the benefit of project renewal and other cost-savings initiatives, partially offset by an increase in strategic investment and significant FX headwinds. Reported…

Thanks John. Let’s now turn to the balance of 2015. This morning, we reaffirmed our 2015 full year guidance of 3.5% to 4.5% core sales growth and normalized EPS of $2.10 to $2.18. We’ve had a strong start to the year and I believe we are continuing to track towards the midpoint of both full year guidance ranges. Our latest view of the full year negative foreign currency impact to operating income is $0.35 to $0.37, about $0.04 worse than the impact previously communicated in the full year guidance. We've taken action to cover as much of the new currency impact as possible, with line of sight today to at least half of the incremental currency exposure. We expect to close the balance of the gap over the next few quarters. The expansion of project renewal should help. Our conviction to steadily increase brand support remains strong, given the core growth acceleration we are experiencing. Our plans to increase brand investment remains unchanged despite the incremental currency pressure. We expect to increased A&P investment in 2015 by about 20%. Our 2015 full year guidance assumes we sustain mid single-digit core growth in our Win Bigger businesses of Writing, Tools and Commercial Products, that we recover growth momentum on our baby business with acceleration from Q2 through the balance of the year, that we deliver strong growth on Rubbermaid food storage, offsetting planned declines on the low margin Rubbermaid Consumer Storage business, that we deliver strong year-over-year growth on our newly acquired brands of Contigo, Bubba and Baby Jogger. And that we offset the negative impact of transaction Forex with positive pricing, productivity and input cost deflation. And we continue to reduced overheads, which when is coupled with growth enables us to increase brand support. There are two factors that can…

Thank you. [Operator Instructions] Your first question comes from Dara Mohsenian with Morgan Stanley.

Hi, Dara.

And Dara, your line is open.

Sorry about that, I was on mute. So your guidance this year implies mid-20%s FX neutral EPS growth. Obviously, you’ve got a commodity benefit and you’re pushing hard to offset FX, but that level would still be much higher than your peers and your long-term guidance despite ad spend being up. And you’ve now announced incremental cost savings that will help drive 2016 with half of the Phase 3 savings dropping to the bottom line. So I guess the question is, can you give us some insight on if the strong underlying EPS growth in 2015 is giving you more confidence for 2016 and 2017? Or why we shouldn’t believe that some of the strength from this year is sustainable as you look out longer term and could allow you to beat the previously outlined EPS goals?

Thanks, Dara. Good question. Obviously, we’re pleased with the start to the year. It strengthens our conviction on multiple dimensions. It’s good evidence that the framework that we laid out in the growth game plan is really beginning to work. We certainly will through the new tranche of savings captured in this mornings announcement have more flexibility than we did when we guided the acceleration phase of the growth game plan to greater than 4% core and greater than 10% EPS growth. So I think your challenge on the future upside potential is real. The thing that I would say is that the proof of the puddings in the eating, so we’re one quarter into '15. And we want to make sure we demonstrate consistency in the -- through the acceleration phase before we articulate a different point of view forward. Of course, we will always have the option to think about a more aggressive deployment of our selective portions of our portfolio into, what I would describe is white space markets. We’ve talked about China on Writing for '16, but there's plenty of other white space out there. And any decision to let the savings flow to greater than 10%, EPS delivery would have to be measured against the opportunity to set up a different future by a more aggressive deployment of the portfolio, particularly Writing than what we committed to do at this point. Part of that will be governed by our organizational capacity to be able to handle that. But that will be sort of the -- that will be the opportunity cost of letting it flow to EPS. But we will face -- come to that fork in the road probably sometime in ‘16 second half or ’17.

Okay. And then on the Writing instruments front, obviously, you continue to post exceptional results there. How sustainable is the market share gains behind that business in your mind, as you look out over the next couple of years? What's the competitive response you're seeing and are there learnings from the success in that business you can apply to other businesses?

Well, we are -- the reason Writing is performing so well is because of these capabilities that we’ve built, both on the development side of our agenda the brand development side of our agenda, with a strengthened pipeline of innovation, strengthened advertising, sharpened packaging, really some creative marketing programs, coupled with real focus on getting the right assortment to retail to get the right merchandising frequency at retails. So it’s a combination of the first two pillars of the growth game plan, that its focus on making our brands really matter and that its focused on creating commercial value from the ideas we are driving throughout our selling and our delivery organization more broadly. And so that's working -- beginning to work really well, I’d characterize. I wouldn’t say it’s perfect. I’d say there’s more opportunity to strengthen the algorithm there and we have a stronger pipeline of ideas coming in 2016 than we even have in 15. So I am encouraged. I don’t think we've seen the four competitive response yet, Dara, and we’ll see that in Q3 when we come to that critical merchandising window. We are very, very well staged for that moment in time. But I think we will start to see more competitiveness from the folks we are up against. The thing that they will have a hard time competing against is the capability investments we’ve made. So we’ve gone from a holding company to an operating company, released all these costs that built us at a capabilities to crossover the top of these five segments. That puts us in a position it is competitively advantaged capabilities relative to the folks we are up against. I think that puts us in a sustained advantaged position versus the others. That coupled with the cost out that's enabling us to put money behind the brands sets up a pretty good algorithm that should enable sustained share growth in our home markets and then the more, perhaps, more importantly long-term the deployment of our portfolio around the world. That algorithm, that model is as relevant to Writing as it is to Tools as it is to the core of our Commercial Products portfolio and increasingly to elements within Home Solutions and geographies within Baby. And so when we think about the portion of our Home Solutions portfolio that could benefit from the same principles and same approach Food Storage, our recently acquired Beverages businesses, these offer similar types of opportunities long-term. The challenge to us is to create the P&L capacity to be able to play for all those opportunities. So I think the capabilities are transferable, even though the categories are quite different, that's the model we are building. I think the evidence is building that in fact the theory beyond the model can work and the time will tell how effective we are at driving towards the upside

Great. Thanks.

Your next question comes from Bill Schmitz with Deutsche Bank.

Hey, Bill.

Hi, Mike. Good morning. Hey. Can you just breakdown the contribution of sales volume versus price and then kind of how you think about that going forward, because it looks like, I know you're much less resin exposed than you used to be, but resin's clearly fallen off a cliff? So maybe the puts and takes on the resin deflation versus some of the trucking inflation, and probably, some SG&A inflation as well? Then I have a follow-up if you don't mind?

Yeah. Sure. Bill, unlike other business, I’ve worked in and other people you cover. The ability to tease apart volume from pricing is a little bit modeled here given our systems and the algorithms we’ve got behind those systems. So I’ll give you directional answers, but not as précising answers perhaps one of my peers could provide. Further we have a lot of pricing in the algorithm this year as a result of our need to cover the transaction Forex issues around the world. That's true in Europe. That's true in Latin America. We've even taken pricing on Writing in North America. It’s true in Canada where we’ve got Canadian dollar, U.S. dollar issues, and across parts of Asia Pacific. So we are taking, we are doing the tough slog of pricing to cover transaction for Forex. And that comes with some risk, some volume, although quite frankly, we haven’t see the volume risks materialize at the rate some folks might have expect them too. But I’d say more than 50% of our growth this year is going to be the pricing related. That’s not too dissimilar to where we’ve been in the prior year. So it may skew a little bit further in that direction and we’ll have to watch the volumes, particularly as resin and other input cost fall, our ability to hold the pricing we’ve taken in response to the transaction Forex impacts we’ve had maybe challenged. And that’s one of those things we’ve to watch and we were very vigilant on because we’re in the business of selling more stuff to consumers, not just at a higher price. But we’ve got a rise on that one and I think we’ve got the right balance on what we’ve done to date but we watch it very closely.

And out of the sort of mesh with the massive resin deflation we've seen. I know it's an international situation on the transaction offset, but do you think you can hold pricing in the U.S., given how dramatically resin's declined recently?

Well, the part of our portfolio where that would be the biggest issue is the part of the portfolio we are pulling back from. So while we don’t have to differentiate the propositions, it’s very difficult to hold price, when resin -- when your input costs are falling. And so the Consumer Storage business that we are really pulling back hard on the throttle on is the place where we’re most vulnerable. And in part that's why we’re moving away from that portion of our business. And searching into the place, we can create a point of difference which is food storage. We've said that there are three food storage platforms that we want to develop over time. One is food on the go. One is -- and portion control. One is a better approach to storage in-home and in-fridge and in-pantry and the third is food preservation. All under this umbrella we called food storage. The work we’re doing to build our propositions in our products in this area will allow us to command the premium price, because they will have a product based point of difference and the brand promise will provide the kind of -- the right emotional connection to consumers. That mix of activities is what allows you to hold price. And retailers want us to bring that kind of value proposition to their shelves so they can hold price. It’s in the areas where you can create those points of difference where we will have to be very careful and watch the volume. And we may not be able to hold price in every area where we don't have a differentiated set of propositions. But that’s in fact is why we’re contracting that portion of our portfolio and taking the same manufacturing capacity that supports that business and transferring it to support the differentiated platform and storage that we -- and beverages that we believe it.

Got you. Great. And then just a follow-up is, is there any disconnect between sell-in and sell-through in some of these international markets, because obviously distributors in a lot of other categories have been destocking as they adjust to kind of the macro environment and the currency moves. And then, what would the impact be if you guys had to go to the SIMADI rate in terms of EPS? I'm sure it's in the 10-Q. I just haven't had a chance to read it yet.

Yeah. Those are different questions, Bill. So let me handle the sell-in and sell-out question then I will pass to John on Venezuela. But there is always balancing issues that are going on, either in your developed world of retail partners and in the distributive trade. We had -- we’ve experienced that. We don't intend to call it out because I think it is the normal course of doing business. It's rebalancing that retailers are always doing and trying to drive inventories out, which does constrain your ability to drive sell-in. But that’s for us to deal with. I must say, there is a huge event. I wouldn’t call that out as the reason why we're dealing with revenue growth issues. So, I don’t see that as materially changed, even though there are lot of people focused on inventories right now. And I’m pleased that our results in North America were strong as they were in the context of that. In the distributed trade, this balance issue is a real topic that you have to stay on top of. As you know, we had our own issues in China on fine Writing probably two years ago. And we lived through that transition and rebalancing in that timeframe. And they're always individual distributor issues that you have to wrestle with. We do not see a macro issue that cuts across geographies. There is always individual issues you have to be dealing with specific distributors. We have had some challenges with our distributor base in Russia. Not related to inventory positions, but with related to their ability to accessing enough roubles to buy our dollar-denominated Baby gear. But again that's not inventor related that’s currency related. So John on Simadi?

So, Bill, if we look for example to Simadi. So if you assume we transact and translated Simadi, for example, on today made that switch that that cost to us on EPS basis, would probably be about $0.05 give or take. The big question for us would be whether the government would even let us transact at Simadi, because obviously, the impact in the marketplace for schools supplies goes up dramatically in terms of the pricing. But right now with the partial year behind us is probably about $0.05.

Great. Thank you, guys.

Yeah.

And your next question will come from John Faucher with JPMorgan.

Thank you. Good morning. Two questions here, first off, heading into this year it seemed as though there was some optimism on the consumer coming back and from what we've seen, it doesn't appear that that's happened. So organic core sales growth seems be a little bit better? Can you talk about how much you're seeing, maybe the underlying consumer come through versus where you feel like you're executing? How much of that improvement you're seeing is self-generated versus macro? And then, if we look at the medical cart business, if we excluded in both -- if we included it in both periods, the core sales growth was a little bit lower, but there was a big year-over-year decline there on that medical cart business? Is that the type of decline you were expecting or should we see that moderate, if we try to map that out over the balance of the year? Thanks.

Thanks, John. I would have expected to have seen more consumer momentum in the U.S. than we have to-date. I would have thought that the reduction in energy prices, reduction in gasoline prices would have driven change in trajectory purchasing behavior. We obviously see positive trends in attitude through the consumer confidence data in the U.S. But has that translated to or converted to a difference in actual behavior. I don’t see it yet. So our -- but I am optimistic that overtime that should come into play. We have not assumed in our guidance a macro recovery in the U.S. beyond the conditions we are leaving with today. So if that would occur that would be a positive and we would have to think about the implications for our business and how we manage things. What I have said from the time I have joined is that I think that the -- that ideas trump the macros, that we are in control of our own debt, whether it’s a choice to deploy our portfolio into a new market or whether it’s the opportunity connected to building our share position in these categories. We also have though the obligation as the leaders in most of our categories, if not all, maybe one exception. We have the responsibility to actually lead category development, not just drive share shifting. And so our ideas are designed to expand the size of the pie for us and for our retail partner. And I think we are increasingly doing that well and in some cases doing that better than others and in some cases better than I would have expected us to be able to do at this point in the transformation. So I am encouraged by what we are seeing. I would say, John, our balance is largely, our progress is largely driven by actions we are taking as apposed to some macro tailwinds. So that’s one part of the question. The other question was on the medical carts business. This business declined probably about -- just about 12% in 2014 and we saw further decline in the first quarter with more amplified. This is a spiky business. This isn’t a business where you get continuous replenishment. And if you got an order that -- a new order that comes in and it, sort of a -- it's a lumpy profile for revenue flow. And so we were up against the very strong quarter in the first quarter but then the trends in the business have been with us for a while. And I think, I guess, that’s all I would say because we are in a midst of a sale process, John, at this point.

Okay. So but just to clarify it, it sounds like we should expect excluding that to benefit core sales over the balance of the year but probably not as much as we saw in the first quarter?

Definitely not as much as the first quarter but you should expect that the core sales will be -- will benefit by a bit. It's not a big business. So it’s not a big business. So it’s not -- as I disclosed it was $65 million last year but we should see some benefit.

Okay. Thank you.

We’ll now take our next question from Bill Chappell with SunTrust.

Thanks. Good morning. Just digging into on the Baby side, I'm not sure I fully understood in the first quarter, I think you talked about North America being up high single digits. Is that including or excluding the recall from last year and I guess, it’s including kind of -- can you maybe help us understand how it accelerates from here. I mean in terms of what do we see that really gets it off of where you won't have the benefit from recall for the next two, three quarters?

Yeah. So let me take North America and then I’ll pass to John to talk to you about what's going on in Russia, in Europe on the Baby business because that’s sort of the down elevator we’re facing into at the moment. But we're pleased with both the POS growth in North America and the net sales growth in North America on Baby. We expect that growth rate to accelerate through the balance of the year. We’ve got a stronger innovation platform and we have -- we obviously had pretty easy comps in Q1. We’ll have easy comps at probably April, May as well because if you remember the recall timeframe, it was really for mid-March through mid-May that we were really on our heels. And so we’re going to have some pretty each comps in Baby for that period of time. And we see that -- you may not see that but we see that in our POS daily year-over-year, very strong, stronger than the growth rate that we communicated which is selling based. And so we think that things are setting up for a very good year in North America on Baby. We’re being quite aggressive to defend our flank on the low cost side of the portfolio, but we've got tremendous pipeline of innovation. And we are spending money on the brand through television advertising and we’re getting great partnering with our key customers. So I'm quite optimistic about what Baby will be able to do in North America. In Japan, we’ve turned the corner and we have a good pipeline of innovation and we’ve lapped the -- if you remember the consumption tax issue in Q1 of ‘14. We’ve lapped that tax increase which created our official spike in the first quarter of ‘14 that we have now passed. And so we have again easier comps, but more importantly a stronger program in Japan for the balance of the year than we did last year at this time. We can we can see that all sort of unfolding. Europe is more challenging and let me just -- and there is two pieces to Europe. There is sort of the underlying issues in Western Europe but then there is some challenges in Russia. So John?

So Bill, Russia, as Mike said really did with the decline of the Rouble and the challenges our distributors have in terms of paying us for our goods which are sold in dollars. It’s been unfortunately a drag on the overall segment. So it shouldn’t sour your interest on the overall recovery of the Baby business because as Mike said North America is doing extremely well. The balance of Europe has been soft for us as well. We’ve got a little bit -- we got the last piece of our exits that’s flowing through as well in the quarter of our planned exits. And then some overall softness but we do have new products that should be hitting in Q2. That should give us hopefully a slight bounce back and then help mitigate the further challenges that we expect to see in Russia over the balance of the year.

Got it. And John, while I have you, just on the housekeeping, on the tax rate, as we look forward is there a catch-up in any specific quarter that gets you down to 24% or it should just be slightly below that level for the next three quarters?

Yeah. Right now, I would assume it’s just going to be relatively flat to get us back to 24. We still have bits and pieces that move in and out but nothing necessarily line of sight to overall.

I'd also remind you on the net income mix by quarter, Q1 serves our smallest quarter in absolute terms. So you are getting a mix effect on tax rate that will happen as the topline and bottom line in absolute terms grows to 2Q, 3Q, 4.

Thanks. That’s helpful.

We will now take our next question from Chris Ferrara with Wells Fargo.

Hey, Chris.

Good morning. So, Mike, obviously you guys have increasing advertising pretty substantially. Sales are reacting in different places and I think you started to get into this at the last Analyst Day, but I was wondering if you can I guess kind of step back and explain what you're seeing on the sustainability of POS, following periods where you do advertising. In other words, how sticky is the business? Have you been able to raise the base of business with the advertising, which has been kind of episodic by business? So, is it another way of getting at the returns on that investment question but if you can explain some of that would be really helpful?

This is the big question also, Chris. [Audio Gap] because and we are just beginning to be able to lapse periods where we spent real money. And encouragingly in Writing in particular, we're seeing year-on-year growth. I won't quote POS data but just look at the revenue data. So, 9% net sales growth or core sales growth in Q1 of ‘15, up against 7.9% core sales growth in Q1 of ’14. So you are beginning to get growth on growth and we're seeing really strong POS growth in Writing in the U.S. and so that encourages us to continue to spend. However, the one thing I would say is that Richard and his team, Richard, Martin and the team, Maria are looking at this really, really closely, because we have to decide how much money layer in there, and whether the next dollars spend is wise to be spend in our home markets or whether we ought to be using that money to support the point, the more aggressive deployment of our portfolio into wide space geographies. And so this question is really quite pivotal and we are asking it across every one of our businesses. It’s a little early for us to declare whether we got the balance right or not. Encouragingly, we have very, very strong POS in the business and we are spending in Q1 and we are spending significantly more in Q2 than we did in the year ago period and we'll start to get that REIT. But it is one of the big questions we have to reconcile for ourselves, which is how do you balance where to deploy the money. And then we have questions that we are asking ourselves across categories. So, are we getting the same kind of growth yield for a dollar invested in commercial or dollar invested behind innovation and Tools or dollar invested in Internet advertising on goodie? So the return on the growth yield, not the return. I don’t want a confusion. We are not looking at the financial return. The growth yield for these dollars is something we are looking at very, very closely. The challenge we’ve gotten in our business relative to others that I have worked in is we don’t have as broad a set of syndicated data to be able to marry GRPs right-up to sell out data. But we are building some close proxies for that and we will learn more through the year.

That’s helpful. And I guess this is a follow-up. I mean, if you unpack where the growth is coming from because obviously those Win Bigger businesses are doing really well. If I told you a year and a half ago, you will be putting up these kinds of growth rates and growth on growth in Win Bigger, would you have thought that core would've been pacing even better than it is today? In other words, other than -- the other businesses maybe lagging little more than you thought and I guess if you could explore a little, it would be great?

So what it supported us the ability to do is to pull back harder on the throttle on the portions of the portfolio, we are going to have to come to grips with some other way over time. So there's no way, I thought we would have been enable to pullback on Consumer Storage as aggressively as we did last year. And we've done it again this year as we pivot that injection molding capacity to food storage. It’s the same injection molding process, just different molds. So we are able to shift the capacity within our manufacturing network to the more value accretive portions of the portfolio where we can create differentiation. I know if I look back, I never would've thought we would have been able to pull back as hard as we have. I also wouldn’t have thought that we would have been able to pull back as hard as we have on the less attractive portions of our European business. And so there are two things that we’ve done that have constrained core sales growth today I think are really important strategically for the future and set up perhaps the potential to grow even faster than we originally envisioned on a long-term basis that we have been able to do as a result of the Win Bigger businesses being more responsive to both the new capabilities that we’ve deployed and the investments we put in the business.

Thanks. That’s helpful. Appreciate it.

And we will take our next question from Lauren Lieberman with Barclays.

Hi, Lauren.

Thanks. Hi, good morning. I wanted to talk a little bit about I guess two things. One was a follow-up on baby, I think there was a comment about adjusting some price points at the low end in the U.S. I was hoping you could just further follow up on that. And then secondly was on the Tools business. Just curious your view on kind of market growth in the U.S. and where the soft spots were like was Asia -- was China significantly worse or kind of keeping pace with what we've seen and any kind of slowdown you've seen in Latin America there? Thanks.

Hey, Lauren, it’s John. So with respect to baby, as we talked about before, we see some competitive pressure with some of our guys vertically integrating within the space right now and that obviously put something constraints overall on our core. Thankfully with our brand, with a good supply partner we are able to defend that core. And as Mike mentioned before, we will fight to preserve that volume at some of our key retailers and that’s our plan and that’s in our long-term interest. With respect to Tools, so right now our Tools business does seem to get a nice tie to industrial output certainly on the band saw business. So we are getting some benefit in North America right now, as industrial production seems to be still going fairly well, even though consumer confidence may not be up with respect to Asia. So we are definitely seeing a slowing in China and a little bit in Japan on our band saw business, which overall was a little bit of a drag on the Tools business. And then we are still doing well in Latin America, but certainly starting to see signs of that slowing a little bit. But of course, we are expanding our offerings in Brazil. So we definitely have that benefit, but Latin America we are starting to see a little bit of the signs of weakness, but maybe not as much as some of our competitors there.

So do you think that for this year Tools ends up among the Win Bigger businesses being at the lower end of the growth rate range macro-related?

Yes. No, I don’t think it’s macro-related. I think we are lapping some initiatives from prior year in the first quarter of the launch of the Brazil restage of the business. You had all that pipeline that we had to lap. But second tranches of the Brazil new items, we lapped in the first quarter. But I think Tools is going to be a mid-single-digit type of grower this year, maybe a little stronger. We are taking the portfolio from Brazil and we are in the midst of deploying it into the Philippines. There are other opportunities across Southeast Asia to do the same. So I am more optimistic on Tools to be honest with you. But I don’t think it’s -- our issue is not macro-related. So I don’t think. Our issue is really -- we are not macro-dependent right now. It’s more with the exception of industrial product, as John said. This is more about what we are doing versus what we did year ago and the timing with which we are going to do things we got in the plan for '15, but I do think Tools is the mid-single digits grower for us.

Okay. great. Thank you.

We will now go to Wendy Nicholson with Citi.

Hi, good morning. Just a follow-up, first on the Writing business. I think last year when you put up such strong organic growth in Writing, some of it came from distribution expansion. But I didn't hear you call that out today in terms of contributing to the 9% growth. So do you feel like at least in North America kind of you're distributed where you need or are there still pockets of opportunity? And then second sort of as a follow-up, also on Writing. Can you tell us roughly how that's split between North America and Latin America, if you did, I apologize, I missed it?

Yes. So let me -- I can have Nancy follow up with you on the split of the Writing growth rate.

Okay.

But I don’t have it at my fingertips. Both businesses, we grew Writing strongly in both North America and Latin America and we grew our Writing in Asia as well. So we’ve had a good run on Writing in Europe. We had a choppier first quarter, but in broad terms we had strong growth. More pricing driven growth in Latin America, more volume driven growth in North America and market share driven growth in North America. Your question is a great question. And if I had Joe Cavaliere, who is our head of customer development in the room with me right now and he was sitting across the table, I’d we winking at him. I think, we still have the ton of opportunity left in our home markets to get our brands more broadly distributed with the right assortment in the right channels. And I think, in fact, I think there is more commercial innovation opportunity on our Writing business at the moment than anything else. And so we’ve made very good progress. We see what we call total distribution point, TDPs up and we see our share of TDPs up in the U.S. but I still believe we are nowhere near where we could be. With respect to depth of availability and having the right assortment in different channels, we’re not yet maximizing the revenue per linear inch of the store shelf. So we have a ton of opportunity to get that right. It’s not easy work, it’s collaborative work. It’s work that’s needs to be validated through analytics in partnership with the customer to demonstrate why resetting shelving to the perfect assortment creates value for them and conversely for us. And so it sort of painstaking work. We’ve made good progress but we have a lot more opportunity to get what we described as the perfect store in place with perfect assortment. And it’s true in the U.S., its true in Canada, certainly true in Europe and U.K. and France and in parts of Mexico within our mass channels. So there's a lot of opportunity still in front of us. We’re making good progress that are mean to be too negative about it for our own people but we got more, more we can do.

Terrific. I had a second unrelated question, which is the $150 million of incremental cost savings.

Yeah.

Sounds like that's SG&A and you said overhead-related. But how much of that is related to either stranded overhead for some of the brands that you're selling or incremental synergy opportunities for the brands that you've bought? And how much of it, if you can tease it out, is just kind of the core business? I mean, it surprises me that you've done so much restructuring. I mean, Newell did even before you got there. And it's amazing that you kind of keep peeling back the layers of the onion and finding more opportunity?

Yeah. Hey, Wendy, it’s John. The vast majority of it is basically the core underlying business. There’s not a whole lot that’s left from the stranded dispositions. And your recognition is fair. Although I think the previous projects have been more focused on manufacturing distribution footprint and so forth. Actually, we’ve taken a hard enough look ever at the SG&A structure on the overhead’s piece. And certainly, a lot of our peers are starting to do that. So we recognize that we still have plenty of opportunity overall.

Our overhead ratios are just below 20 right now. So good benchmark that against anybody in our industry and you'll see that that’s quite high. The exception might be a couple of the Tools and Commercial Products industry players. So we have a lot of opportunity. We have to do this in a disciplined way, Wendy, and part of this is a legacy of having operated in a disaggregated structure. We are disciplined because we have to change the way we work to enable the cost to come out. We do a lot of the macro structural work already. But now we need to get into the way we transact our business in order to release these overheads. And then we got to high real estate footprint cost. We’ve got lots of -- we’ve got pretty much every line item that you can look down, you could challenge. And so one of the reason, we’re so happy that John was interested in doing this as he's proven through the European experience, how to go about doing this. And he is the perfect player that kind of lead this charge on behalf of the company, given his experience to date. And we’re going to get this sorted. This is one of the things that will give us the degrees of freedom within the P&L to make some of the choices that Dara was challenging us on earlier.

Terrific. Thanks.

Our next question comes from Joe Altobello with Raymond James.

Thanks. Good morning, guys.

Hi, Joe.

Not to harp too much on Baby, but I just did want to go back and see where the first quarter came in relative to your expectations, number one? Number two, do you think it could accelerate fast enough to get into that 3.5% to 4.5% range for the full year?

Yes.

Okay. And in terms of expectation was it in line or...?

It’s a listen hard for the team to listen. I am sure. Hopefully -- they tell me what they think. But I hope we can get to solid single-digit growth on Baby globally despite the headwinds in Russia, despite the challenges that will persist in Europe through the balance of the year. I would not get too optimistic about what we are going to be able to do in Europe, but we’ve got a great setup planned in North America and in Asia. And then we’ve had all the conversations we need to have about strengthening Europe as we move out of ‘15 into ‘16. We got a better innovation plan coming back. In fact, there were meetings in London this week with our two biggest customers in Europe that went very, very well, designed to setup ‘16 for success. So -- but ‘15 will be muted growth, maybe a slight decline in Europe that we’ll cover through progress in North America and Asia.

Got it. Okay. I was just trying to put the 80 basis points into some context there?

Yes.

And then secondly in terms of the acquisitions, it looked like you are looking for a bigger contribution from than you were previously. Maybe an update on where those stand, Contigo, bubba and Baby Jogger obviously. Are you seeing more growth opportunities or distribution expansion opportunities from them?

We couldn’t -- we couldn’t be happier with these acquisitions. They are just beautiful brands. And we've got great people that we brought into the business with the brands. And so we couldn't be happier, Baby Jogger -- again we are talking 2016 innovation of Baby Jogger now and we’ve got some really interesting things that we are going to be doing then. Contigo and bubba awesome brands with huge distribution opportunities not still in the U.S. and the world to play for with these brands. Again the constraining factor on these will be our P&L capacity to be able to place all these bets. But we’re really pleased with these categories. And they are quite importantly all growth accretive and with new investment that we are going to be able to put behind them, we would expect that to be able to sustain, if not accelerate the growth momentum in these businesses and we are right where we hoped we would be with them at this point in time.

Great. Thank you.

The next question comes from Olivia Tong with Bank of America.

Thanks. Good morning. Want to ask you about gross margin. I know there's lots of puts and takes there. But you obviously had a strong start to the year. Commodities do get better as the year progresses. And I know with the baby commentary, there's probably a little bit of a mix drag as the year progresses. But can you continue to accelerate gross margin from here, to continue fueling even more incremental spending?

Well, we were pleased with the start on gross margin. It was actually a little bit better than we anticipated it being. Part of that was mix related. But a lot of it had to do with how aggressively we dealt with our transaction Forex issues and some progress that we are making on supply chain. The first part -- the first half of project renewal, the $200 million that we had reported previously authorized us to spend is very much focused on gross margin. In fact, most of its in gross margin, a small piece of it is in overhead. And so we should -- if input costs continue to fall and slow at this level and we are able to capture the benefit of the strategic pricing work we are doing through our new go-to market programs, we should be able to deliver in ‘16 and ‘17 gross margin progression, quite nice gross margin progression. ‘15 will be challenged by the mix effect of baby recovery and home solutions recovery. Again, remind you our acquisitions are dilutive with gross margin. And so the growth there will work against us, although we are making great progress within each of those acquisitions on gross margin improvements. So ‘15 will not be as impressive a year in terms of gross margin delivery for all the reasons, including the transaction Forex pressure we have. But as we -- assuming things hold together from a currency perspective and that we deliver the first $200 million of savings in the third phase of renewal, which are almost all gross margin related, we should be able to see some nice movement forward on gross margin in '16 and '17.

Got it. Appreciate that. And then in terms of the U.S. and sort of capturing a little bit of a lift from lower gas prices, lower commodity prices, why do you think you’re not seeing more of a lift, particularly in the U.S.?

I think the industry is not single lift. I’m making that judgment based on the retail comps, I’m seeing not based on our movement, we’re seeing good momentum. I’m just-- I’m reluctant to describe any of that to the macros based on the retail comps I am hearing. There is some exceptions to that. The home centers retailers are doing quite well. But if I look at the mass channel, I don’t see this massive shift that I would have expected from Q3 to Q4 or to Q1 yet. And we don’t see it in the GDP growth either. So I think -- I’m reluctant to call upside in the macros. That said doesn’t seem to be impacting our ability to drive a sequential improvement in our growth rates.

Fair enough. Thanks, Mike.

Yes.

The next question comes from Jason Gere with KeyBanc Capital Markets.

Good morning. I got to be honest. I think every question and topic has been exhausted. So the only thing I guess I will ask is if you could talk maybe a little about the cash flow for the year, just cash flow from operations, how we should see that kind of playing out? Obviously the first quarter was a use of cash. So just wondering if you could kind of talk about the priorities, how you're thinking about the next 12 months?

Sure, Jason. So we anticipated using we always use cash in the first quarter, so nothing new there. And you saw we -- it was a good opportunity for us to put money into our U.S. pension plan, a wise investment for us. So once we back that our, we are almost flat year-over-year on cash in Q1. We will consume cash as well in Q2 and then eventually turn positive in the back half overall. So typical for our business overall. That said, net-net we should land cash, we’re not going to guide to it, but fairly consistent with where we have in the past. But we do know that we have a lot of opportunity still on working capital. So that’s one of the things that, in addition to some of the other projects Mike’s tasked me with that we need to tackle this year is to improve our working capital position. And we’re starting to sketch out the framework for doing that in a comprehensive yet collaboratively way with all the stakeholders including our suppliers.

Okay. And then just in terms of the new cost savings, the update there, is there any change to that five year target on cash flow from operations you guys laid out at one of the of past analyst meetings? I think it was like $4 billion. I know obviously acquisitions have kind of stepped up a little bit earlier than anticipated, but I was just wondering if there was any update to the longer-term cash flow outlook.

We haven’t updated that since, gosh, I think probably back-to-school. I think highlighting at the CAGNY. It’s a good challenge. We should update that -- we will update that for the next big conference that is Deutsche Bank. So we will make sure we provide an update that reflects all the M&A that we’ve done both in and the outs and -- I don’t think it will a make materially huge difference in the overall framework. Our capital allocation strategy is going to remain the same. We will hold our dividend payout ratio in the 30% to 35% range. We’re trying to take it towards the high end of that, so that we’re competitive with the fast moving consumer goods, guys. We’re obviously buying back our stock because we think we’re undervalued. We continue to believe we’re undervalued, given agenda that we’re deploying and the results we’re beginning to put up and the fact that they are competitive with some of the best that are out there. And then obviously, we have an appetite to continue to strengthen each of our five pillars through bolt-on M&A and we will continue to do that. We have lots of opportunity there. So we’ve got -- we should set that up a little bit more clearly than we have in the last couple of big conferences that we’ve done and we will take that on.

Sounds get. Thanks guys.

And your next question comes from Steph Wissink with Piper Jaffray.

Hi. Good morning, everyone.

Hi.

Just a really quick question from us on the A&P increased spend, can you talk a little about the strategies? And are you testing new strategies that you're finding are working better than your expectations? And then Mike, if you could just talk about how widespread those A&P increases are across the globe, or is it concentrated by region?

Good question, Steph. So we’re comfortable putting the money in because we’re validating what we're spending behind in advance of putting money behind it. So every piece of advertising that airs, that we invest behind goes through a battery of tests. And we’ve had very, very strong advertising testing results. And we use the same methodology that all the, sort of the academy consumer goods companies would use, same supplier, same methodology. And we test our advertising against all industry at. So we know how they are performing versus the best. And they’ve done extremely well in pre-testing before we take them to market. So, we have quantitatively validated the ads we’re spending behind. That’s the first threshold before we’ll put any money behind the piece of advertising. The second is driven by portfolio strategy and the where-to-play choices we’re making in the business. And Writing has gotten a disproportionate amounts of investment relative to the rest of the portfolio because of its Win Bigger status and because it is proving to be very, very responsive to the investment. We are increasingly broadening the geographic footprint to that investment. We started that in 2014. We will increase the amount of that money that's being deployed into markets like Mexico, Columbia, Brazil, U.K., France, Italy and our footprint, geographic footprint will continue to broaden within the Writing portfolio. On Tools, we’ve seen good responsiveness when we spend behind advertising that’s new product focused. When we do anthem, what’s called anthematic advertising just on the big brands, we don't see responsiveness. So we pull the money off of the anthematic campaigns on Tools and put it behind new items, both in the U.S. and in Brazil where the biggest investments have been made up until now. We will evaluate whether to continue…

Great. Appreciate the response. Best of luck, guys.

Thank you. And your final question comes from Rupesh Parikh with Oppenheimer.

Good morning, Rupesh.

Good morning. Thanks for taking my questions. So, I just wanted to touch on, I guess go a little further into your core sales growth. So clearly you mentioned in your press release a number of times benefits from the strong innovation. Is there any way to quantify how much more -- maybe how much more growth you're seeing right now from new innovation maybe versus last year?

We don’t quote that number externally but it’s considerably stronger. The number that we talk about is the innovation rate in the business and we’re pressing towards an ambition that to compete with the best in our industry, which typically is measured by this metric, some people call it by tally rate. Other people call it innovation rates. What we’re looking to try to get our innovation rate to having about 30% of our revenue touched by -- or generated by innovations launched in the last three years, that sort of the goal standards that most consumer goods company would point to. And we’re getting close. By ‘16, we’ll be there. We are getting close. We are not quite there yet. But we’re certainly way stronger than we were a year ago. And that will continue to progress as ideas come through the funnel.

Okay. Thank you.

I’m sorry.

This does conclude our question-and-answer session. I’d like to turn the call back to Mr. Polk for closing remarks.

Well, thank you. I think it’s probably us talking to ourselves because I don’t know if there is anybody left on the line. But I wanted to thank everybody for what were a great set of questions. We’re very proud of the start to the year we’ve had. We think it provides good evidence of the progress we’re making as a company. And we’re excited to be able to continue to play forward for the upside in the business. Thank you very much.

Thank you. A replay of today’s call will be available later today on our website newellrubbermaid.com. This concludes our conference. You may now disconnect.