Newell Brands Inc. (NWL) Q4 2016 Earnings Report, Transcript and Summary

Good morning and welcome to the Newell Brands fourth quarter 2016 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 this call is available at the newellbrands.com on the Investor Relations home page 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.

Good morning. Thank you for joining us. During our call today, we'll discuss fourth quarter and full year 2016 results and provide an update to our full-year outlook for 2017. On the call, we have Mike Polk, Chief Executive Officer; and Ralph Nicoletti, our Chief Financial Officer. Before we begin, I'd like to point out that we will make certain forward-looking statements about our expectations for future plans and performance. Actual results may differ materially due to a number of risks and uncertainties which are described in our press release and in the Risk Factors section of our SEC filings. We do not assume any obligation to update or revise any of these forward-looking statements to reflect new events or circumstances. We will also refer to certain non-GAAP financial measures. We provide a reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures in our press release and in the slide presentation on the Investor Relations section of our website. And finally, I'd like to ask that you help us stay within the time schedule for the call by limiting yourself to one question during our Q&A section. Thank you. And now, I'll turn it over to Mike.

Thank you, Nancy. Good morning, everyone, and thanks for joining our call. I'm very pleased to have the opportunity to update you today on our work to transform Newell Brands into one of the leading consumer goods companies in the world. We've made great progress in 2016 and have very good momentum on a number of different fronts as we enter 2017. We achieved solid fourth quarter and strong full-year results. Full-year core sales growth of 3.7% was at the high end of our original 2016 full-year guidance range of 3% to 4% with excellent results on our Writing, Baby, food, beverages, appliances, and Waddington businesses. We delivered nearly 4% core sales growth in both North America and EMEA and over 10% core sales growth in Latin America for the full year. Full-year normalized earnings per share was $2.89, also at the high end of our original 2016 full-year guidance range of $2.75 to $2.90; an increase of nearly 33% compared to prior year. We have aggressively deleveraged the balance sheet, paying down over $2 billion of debt in the nine months since the creation of Newell Brands. Importantly, over the summer, we completed a comprehensive strategic assessment of the company and have driven into action a new corporate strategy that strengthens the portfolio through both acquisitions and divestitures; focuses resources on the categories with the greatest right to win; invest in broadened growth capabilities like insights, design, and innovation; and creates an enterprise-wide ecommerce division that will have responsibility for our ecomm growth across our total portfolio. The flexibility to invest in these new capabilities and behind our brands is enabled by our commitment to drive down the cost structure of the company. In 2016, we delivered over $210 million of incremental cost savings through synergies and Project Renewal, driving procurement synergies through the scaling of the company, consolidating 32 business units to 16 divisions, reshaping our selling teams in the U.S. to enterprise-wide customer development teams at our top-20 U.S. retailers, and creating global functions in IT, legal, and the key corporate disciplines in finance and human resources. We exit 2016 with tremendous momentum on our savings programs and with a clear line of sight to more than $300 million in incremental savings for 2017. Importantly, the speed with which we are identifying and actioning new projects is accelerating. Clearly, we're making very good progress and, as you know, we will not stop at $500 million. Delivering more than $500 million in cost synergies is the key to increasing spending behind our newly-acquired brands in 2018, as our broadened and strengthened innovation funnel begins to yield projects to market on brands like Yankee Candle, Coleman, Sunbeam, and Oster. These are great brands with tremendous potential, and our 2016 research confirms our preconceived positive views with a number of product concepts evaluated yielding very strong concept test results. In the fourth quarter alone, we tested 71 new product concepts on legacy Jarden brands and the results were very strong. When coupled with the strength in commercial capabilities we're building, we expect this pipeline to yield an acceleration in core growth rates to the 3% to 5% in 2018 and beyond. As you all know, the macro environment has not been the most favorable over the last few years with slow GDP growth compounded by foreign exchange headwinds. While we may soon reach an inflection point where we begin to see more favorable GDP growth, our plans do not count on that happening this year. We take confidence in the fact that we've always handled macro and other challenges in stride, and you can count on us to do our best to do the same this year. We are fully engaged with our retail partners as they and we adapt to the changing shopping behaviors and the accelerating bricks-to-clicks migration. We're leaning in on ecommerce investment, and because we have scale advantage of an enterprise-wide capability, we are very well-positioned to win with consumers and customers. As we exit 2016, our ecommerce business has revenue of over $1 billion, has grown over 30% compounded over the last three years, and we expect will more than double and grow by over $1 billion by 2020 as we extend our capabilities across our categories and around the world. 2016 has been the most transformative year in our history, and we're very pleased with the scope, speed, and impact of the transformation. In the context of unprecedented change, we believe our 2016 results were outstanding. And we have a proven track record of delivering the outcomes we commit to and fully expect to deliver transformative value creation and sequential growth acceleration through 2017 and into 2018 and beyond. With that as a preview, let me hand the call over to Ralph to discuss Q4 results, and then I'll return to provide prospective on our view of 2017. Ralph, over to you.

Thanks, Mike, and good morning, everyone. As Mike noted, we made significant progress throughout 2016 in transforming our organization. We achieved 3.7% core sales growth while delivering over $210 million in synergies and Project Renewal savings and progressed deleveraging the balance sheet. We also refined our portfolio with some strategic divestitures and acquisitions. Our fourth quarter results were solid and in line with guidance. Fourth quarter reported net sales were $4.14 billion, a 165% increase versus last year, which was largely attributable to the Jarden transaction. Core sales increased 2.5%, driven by strong results from the Writing, Baby, Home Solutions, and Outdoor Solutions businesses. For the full year, core top line increased 3.7%. The year-over-year improvement in operating results down the income statement was driven by a number of overarching themes: strong operating income growth on the legacy business, the profit contribution from the Jarden and Elmer's acquisitions, and Project Renewal savings and synergies on the positive side. Partially offsetting those positives were the impact of increased advertising and promotion investment, negative foreign currency, increased amortization of intangibles, and higher interest expense, tax rate, and share count. Reported gross margin was 36.8% compared with 38.3% last year. Normalized gross margin was 37.2% compared with 38.5% last year. The declines in reported and normalized gross margins were driven by the negative mix effect related to the Jarden transaction, the deconsolidation of Venezuela, and the unfavorable effect of foreign currency, which more than offset the benefits of synergies, productivity, and pricing. We reported SG&A expense of $976 million, or 23.6% of sales, a 710-basis-point decline versus last year despite higher acquisition and integration costs. Normalized SG&A expense was $861 million, or 20.8% of sales, a 400-basis-point decline. The improvement in SG&A to sales ratios both on a reported and normalized basis is driven by the mix effect from the Jarden legacy businesses, which have historically carried a lower SG&A spend rate, as well as benefits from Project Renewal savings and transaction-related synergies, which more than offset the impact of incremental advertising and promotion investment in the quarter. During the fourth quarter, we increased our A&P investment by $40 million from the third quarter levels. Reported operating margin was 12.4% of sales compared with 6.5% in the prior year. Normalized operating margin increased 260 basis points to 16.3% of sales when compared to the prior year. Interest expense of $124 million rose $99 million year-over-year reflecting higher borrowings used to finance the Jarden and Elmer's acquisitions. We anticipate 2017 interest expense of around $475 million. Our reported tax rate was 57.7% compared with last year's reported rate of 14.1%, reflecting a $164 million onetime deferred tax charge related to the planned Tools divestiture, partially offset by $40 million deferred tax benefit related to foreign statutory rate changes primarily affecting Jarden-acquired intangibles. The normalized tax rate was 29.8% compared with 23.2% in the previous year, with the increase driven by the unfavorable mix impact of the Jarden acquisition and the absence of certain discrete tax benefits compared with the prior year. For the full year, our normalized tax rate was 27.3%, in line with our guidance. We now expect the 2017 tax rate to be about 23%, reflecting anticipated discrete tax benefits. We ended the quarter with 485.9 million diluted shares outstanding, up from 268.1 million shares in the prior year, with the year-over-year increase reflecting shares issued for the Jarden acquisition. For modeling purposes, we are now assuming weighted average diluted share count to be approximately 492 million shares in 2017. Reported EPS was $0.34 compared with $0.05 last year which was affected by charges associated with our deconsolidation of Venezuela. Normalized EPS, which excludes the transaction-related expenses and certain other charges, was $0.80, a nearly 43% increase versus last year. Now turning to our segment results, fourth quarter net sales in Writing declined 0.8% due to the negative impact of foreign currency and the deconsolidation of Venezuelan operations. Core sales in Writing increased 4.3%, reflecting strong results in the Writing & Creative Expressions, Dymo Office, and Elmer's businesses, partially offset by planned complexity reduction initiatives. Elmer's is included in core sales as of October 23. For the full year, core sales in Writing increased 8%. Net sales in Home Solutions declined 11.5% for the quarter, due primarily to the divestiture of the Decor business. Core sales, which exclude the Rubbermaid consumer storage totes business that is held for sale, increased 5.7%, largely driven by results from the beverage business and the launch of Rubbermaid Brilliance food storage containers in Food. For the full year, core sales in Home Solutions grew 2.6%. Net sales in Tools declined 4.6% due to the negative impact of foreign currency and ongoing macro-driven slowdown in Brazil. Core sales were less than $8 million since the vast majority of that business is held for sale. Net sales in Commercial Products grew 0.9% and core sales increased 0.8%, reflecting stabilization in North American distributive trade channel despite ongoing planned complexity reduction activity. For the full year, core sales in Commercial Products declined 0.4%. Net sales in Baby increased 1.6%, despite the impact of a planned transition from a distributor-led model to a direct selling model in Canada. Core sales, which exclude the Teutonia business that is held for sale, grew 3.6%, reflecting continued strong sales momentum in the U.S. from Graco and Baby Jogger. For the year, core sales in Baby increased 8.5%. Now turning to legacy Jarden segments, I will refer to net and core sales as compared with pro forma results for the same period in 2015. Full-year comments refer to results from April 16 through the end of the year compared with pro forma performance for the same period in 2015. Net sales in Branded Consumables declined 0.1% due to the negative impact from foreign currency. Core sales, which exclude the businesses that are held for sale, including Lehigh, Pine Mountain, and part of Diamond brands, increased 2.3%. Strong growth at Waddington, Yankee Candle International, and Yankee Candle eCommerce was partially offset by weaker performance in Yankee Candle's mall-based retail stores, related largely to lower holiday retail mall foot traffic. For the full year, core sales in Branded Consumables increased 2.9%. Net sales in Consumer Solutions were essentially flat, reflecting the negative impact of foreign currency. Core sales, which exclude the U.S. Heaters, Humidifiers and Fans business that is held for sale, grew 0.3%. as certain U.S. retailers adjusted their post-Black Friday replenishment orders despite high single-digit U.S. POS growth for our businesses. For the full year, core sales in Consumer Solutions grew 5.2%. Net sales in Outdoor Solutions increased 3.8%. Core sales, which exclude the Winter Sports business that is held for sale, grew 2.9%, reflecting strong performance in the Fishing, Marmot, and Rawlings, partially offset by declines on Coleman related to early 2016 distribution losses. For the entire year, core sales in Outdoor Solutions were flat. Net sales in Process Solutions decreased 0.6%. Core sales grew 0.8% compared with prior year due to increases in the plastics and zinc businesses. For the full year, core sales in Process Solutions increased 4.7%. During the quarter, we generated $991.5 million in operating cash flow compared with $278 million in the prior year. The significant increase reflects the contribution from the Jarden acquisition and improved working capital results. For the full year, our operating cash flow came in at $1.8 billion, up from almost $566 million in 2015. During the quarter, we distributed $92 million in dividends to shareholders, and for the entire year we returned $329 million. We ended the year with a gross debt balance of $11.89 billion, as we paid down over $800 million in debt during the quarter. We are right on track with our deleveraging plans. Since the Jarden transaction closed, we have repaid over $2 billion in debt and we continue to make steady progress towards our 3 to 3.5 times leverage goal ahead of the initial plan. We expect the Tools divestiture to be completed in the first quarter and we'll use the U.S.-based proceeds to delever further. In summary, we are pleased with the continued progress we have made during the quarter and we delivered on our commitments during a time of significant transition. At this point, I'll turn the call back to Mike.

Thanks, Ralph. Let's now turn to a discussion on 2017 guidance and the outlook for the year. This morning, we updated our 2017 full-year guidance for core sales growth and normalized EPS and provided guidance for the first time on full-year net sales. We've added a net sales guidance range in 2017 given the scope of mergers and acquisitions activity and the continued volatility of foreign exchange. Our outlook for 2017 net sales is $14.52 billion to $14.72 billion, which represents 9.5% to 11% net sales growth compared to prior year. The guidance reflects our current expectations for the timing of acquisitions and divestitures, the latest view of foreign exchange which has worsened from our prior guidance, and our latest view of core sales growth. The company has adjusted its 2017 full-year guidance range for core sales growth to 2.5% to 4%, lowering the bottom of the range from the original guidance of 3%. This revised outlook reflects our expectation of continued bricks-to-clicks shopper migration, causing some retailers to rebalance store count, reduce inventories, and reconfigure ordering patterns as some retailers did after Black Friday this past quarter. The 25 basis point reduction in the midpoint of the core sales growth range is necessary to accommodate recently announced store count reductions and our new expectations for inventory rebalancing. We expect this rebalancing to be more pronounced in the first half of 2017 and to lessen in the second half of 2017 as we lap this past year's changes. In this context, we believe core sales growth will sequentially accelerate, with the core growth in the first half of the year in the lower half of the full-year guidance range. We expect first quarter growth rate to be roughly in line with the fourth quarter of 2016 as we start up our new organization. We are raising our normalized EPS guidance range by $0.10 to a new full-year range of $2.95 to $3.15. This revised guidance reflects the positive impact of accretion related to Sistema and the WoodWick acquisitions, strong incremental cost reduction and margin development activity not related to restructuring or synergy programs, the impact of the new tax planning-driven benefits which we expect to realize in the third quarter of 2017 that are not synergy related, partially offset by further negative foreign exchange and increased A&P levels relative to those assumed in our original guidance. The timing shifts of held-for-sale divestitures announced prior to our original guidance has had a neutral impact on normalized EPS. We now expect to deliver double-digit normalized EPS growth in each of the last three quarters of 2017, partially offset by dilution in the first quarter related to higher share count and interest expense associated with the Jarden transaction. There are two key factors that could influence where we fall in the full-year guidance ranges. First is the delivery of the cost transformation agenda and over $300 million of incremental savings we've built in to our guidance. We have a clear line of sight to this outcome, having now actioned projects with cumulative cost synergies totaling over $400 million, some of which will not be fully reflected in the P&L until the first half of 2018. We've implemented the vast majority of the organization changes to occur in the U.S. and are in the midst of the second wave of procurement savings. The Transformation Office is in full stride and more projects will be actioned through 2017, so the synergy savings will continue to build towards our first milestone of $500 million of savings. We now expect to cross the $500 million cumulative cost synergy threshold by Q3 2018, well ahead of the three- to four-year original commitment. The second factor influencing our results will be how effectively we adapt to the changing U.S. retail landscape. The primary force reshaping the retailer landscape is the bricks-to-click shopper migration happening across many categories. These changes are creating pressure in certain retailer formats that are leading some to restructure their networks, reset their inventory algorithms, and rethink merchandising approaches. Anticipating these shifts and adapting our plans to the emerging buying patterns is often the key to consistent delivery and growth. In 2017, we expect these retail trends to influence order timing, resulting in revenue shifts from June to July related to back to school, and September to October related to Black Friday. We've captured these timing shifts in our first half and back half core sales growth outlook. Winning companies adapt to changes like these and leverage them for competitive advantage, as we have in Writing where, over the last four years, we've grown high single-digits compounded and built our retail market share in the U.S. by nearly 400 basis points, despite the significant contraction of the office superstore channel. This experience and outcome highlights the opportunity. Toward this end, we have redesigned our U.S. selling structures to disproportionately resource ecommerce and focus our traditional format teams on our top-20 U.S. customers, placing a real premium on those teams for customer intimacy, planning, analytics, and collaboration. The investments we're making in ecommerce talent, capabilities, and infrastructure will further strengthen our already-advantaged position. Once fully populated, our new global ecommerce division will be over 300 people strong. And as I said before, today we have over $1 billion in ecommerce revenue and expect to more than double that by 2020, delivering over $1 billion of growth over the next four years. We're already leading and innovating with both our brick-and-mortar dot-com and pure-play dot-com retail partners. For example, two weeks ago, we became one of the first suppliers to ever do a corporate branded deal page takeover that featured over 500 Newell Brand products at the largest pure-play e-tailer. So, we're making good progress and we're well-positioned to deliver in the context of the changing retailer landscape. So 2016, it's been the most transformative year in our history. We've more than doubled the size of the company. We've set in motion a new corporate strategy that makes sharp choices and strengthens our capabilities for accelerated growth. And we've delivered very strong results in the context of profound change in a challenging environment. We'll build on that progress in 2017, investing to broaden our core growth capabilities in insights, design, and innovation, opening new design hubs in Chicago and Hoboken, strengthening the pipeline of new products for 2018 launch while creating our new, scaled, industry-leading ecommerce division. We'll do this while simultaneously increasing gross margins and reducing overheads, fundamentally changing the cost structure of the company through our work on synergies and Project Renewal. This will give us the flexibility to increase advertising and promotion for the fourth consecutive year in 2017 while also delivering strong, normalized operating margin expansion to well over 16% of revenue. Growth coupled with margin development will generate strong cash flow, and we will use the operating cash and some of the proceeds from divestitures to pay down well over $1.5 billion of debt in 2017, exiting 2017 close to our 3 times to 3.5 times leverage ratio target of full-year earlier than planned. This is a powerful financial algorithm that only accelerates from here as we drive forward to transform Newell Brands. We're well on our way to building one of the most transformative consumer goods companies in the world. When this chapter of Newell Brands story is written, it'll be one of strong competitive levels of growth and disruptive value creation. I'm proud of our people for driving delivery through unprecedented change, and I'm excited to be working for a company that makes life better for hundreds of millions of consumers every day where they live, learn, work, and play. This is the power of the Growth Game Plan into action. This is the power of Newell Brands. With that, let me now pass the line back for questions.

Thank you. Your first question comes from Bill Chappell with SunTrust.

Thanks. Good morning.

Hey, Bill.

Hey. Just first question, Mike, kind of looking at the commentary on the fourth quarter and the department store type businesses that were weak, I mean, that's been something that's been going on for several years. I guess, help us understand how this is different and then maybe how acute it is in terms of Yankee Candle and Calphalon versus how it could affect other parts of the business.

Sure, great question. There were two spaces where we saw pressure as a result of the bricks-to-clicks migration. One is in mall-based formats, and there's two different scenarios there, I'll explain in a second, the other is more broadly across the retailer landscape, and we saw different activities than we've experienced up until now in a broader sense. First, in retail-based formats, there are two dynamics. We have a couple of businesses that have presence in retailers that are anchor retailers to your typical mall, Calphalon and Yankee, and some other businesses as well. And clearly, you saw the reporting that went on there in the fall – or in the holiday season, and that clearly had an impact. The other thing that you may or may not see given your coverage universe is mall-based foot traffic was down high single-digits during the holiday season, and that was very different than prior holiday seasons. So for us, that has an impact on our Yankee retail footprint. The good news on Yankee is that we had really strong international growth, really strong eCommerce growth, and as we gear up our North American activity with respect to wholesale presence and as we enter Canada, we will be able to, kind of, offset some of these structural issues that are going on in mall formats. But the issue that we dealt with was broader than that in that we saw a lot of changes going on, and particularly in the way people were managing inventories post Black Friday, and I suspect this has a lot to do with foot traffic and comp store dynamics in those retailers. And specifically on the appliance business, you would typically get a reorder after Black Friday, just like we do on the Writing business after the back to school sellout period in September, and they just weren't coming this year. And so, that was material. Both the mall-based issue and the dynamics on reorder patterns post drive periods, combined it was about 200 basis points of core growth that we had to absorb. So, in that context, the outcome is pretty darn good. I think the inventory thing, we'll continue to feel some of those dynamics through the first half of the year, but I think that once we get through that window, this reset of the inventory algorithms that retailers have will be behind us. And then on Yankee, our strategic plan on Yankee was always to pivot the brand to wholesale, reaching consumers through our traditional model. In fact, when we presented the strat plan to the board, we assumed a pretty profound downturn in the retail contribution to the overall Yankee franchise, but we didn't expect the foot traffic numbers to be as negative as they were this holiday. So that's sort of the unanticipated news. And I think we're in a better position than most to deal with this given the bet we made starting in 2012, and the bet Jarden made on direct-to-consumer back in the same timeframe. So we come into this moment really well prepared to deal with it. It's just that in any 90-day cycle when you don't anticipate that kind of foot traffic shift or the inventory behavior shift, there's no way to absorb it.

Got it. That's helpful. Thanks.

So that's the context. That's the specifics around those dynamics.

No, that helps a lot. And, Ralph, one question on the interest expense. So, what you'd said, I think $475 million for 2017, kind of implies a $20 million decline versus kind of the fourth quarter run rate. But if I'm looking post the Tools divestiture plus cash on hand, you've probably got close to $2 billion in cash, plus I would assume you get some from Winter Sports. So are you assuming that there's very little incremental debt paydown? I'm just trying to couple that. It would seem like that interest expense number is pretty high.

Bill, the run rate of interest expense going into the year is over $100 million. And then, we are planning to use the U.S.-based proceeds from the Tools divestiture to delever further. So, what you're seeing is basically the step-up from the full-year run rate because we pick up another three-and-a-half months of interest expense versus this year in terms of where we are in leverage, but then we'll be using the proceeds to delever during the year. So, you net out to the $475 million.

Okay.

And, Bill, don't forget, we're going to use the offshore component of the Tools proceeds to pay for Sistema.

Right. Okay.

Which is a New Zealand-based company.

But the plan is to immediately kind of take the proceeds and pay down debt? The net proceeds after the...

Yeah. The U.S. proceeds, that's correct.

Okay. Thanks so much.

Your next question comes from Dara Mohsenian with Morgan Stanley. Please go ahead. Dara W. Mohsenian - Morgan Stanley & Co. LLC: Hey. Good morning.

Hey, Dara. Dara W. Mohsenian - Morgan Stanley & Co. LLC: Maybe just a follow-up on the question. As you look forward at your 2017 core sales growth guidance, obviously, you lowered the low-end of the full-year range to 2.5%. It sounds like that's where you expect Q1 to be, but you did talk about an acceleration in the balance of the year. So, it doesn't really seem like 2.5% at the low-end is what you're expecting, so I guess just can you parse through that? Could Q1 actually be worse than 2.5%? What's your level of visibility on Q1 given the retail environment? And then on the balance of the year, what gives you confidence in an acceleration, and are you expecting also a tangible benefit from putting heritage Newell practices to work on the Jarden side?

Great question, Dara. This year will be an execution-led year because the innovation impact from the investments we're making now and extending the capabilities will yield, innovation-led growth on the legacy Jarden businesses in 2018 and beyond. And as we've have said previously, Q1 is the period where this new organization is going to start up. It's sort of like an SAP start-up. You go from crawling to walking to running, and that's the way I'm thinking about Q1, although we had a very brief and prodigious childhood, so we didn't have much of a crawl phase. But we're walking and we expect to be running by the end of the first quarter. So, that certainly is a factor in influencing how things play out. I think what I said in the script was that Q4 was a good – was roughly a good number to kind of benchmark for Q1, and then you should expect acceleration from that forward. It's false precision to say that I can say it's going to be 2.5%, 2.6%, 2.7% or 2.4%, 2.3%, 2.5%. The first quarter every $3 million of revenue is a tenth of a point of core sales. So, we're doing now $35 million a day, so that's just a couple of trucks that don't show up and you're down a tenth or you're up a tenth. And we don't manage it that precisely. But I think that's a good benchmark to use. And the month of January was pretty close to where we thought it was going to be. There's no big surprises there. Some of the inventory issues we had in December reversed as a positive, and some of the structural issues continue. So, I think the way I articulated it is the way I'd book your plan, that we see Q1 as Q4, and then we see acceleration sequentially from that point forward. And I think a good place to target is the middle of the range on the full year, which is why we guided that way. I did make some comments in the script there about June to July shifts. I think that's going to happen, so that tempers the upside in Q2, but Q3 will get the benefit of that. And there will be – while it's a smaller spike, there will be a September to October shift, and it's the same dynamic; retailers just don't want to hold inventory as long as they used to. They've figured out ways to more efficiently move product through their supply chain to stores. And increasingly, for the big retailers, an increasing proportion of their revenue is dot-com based, which those order patterns and fulfillment patterns are really different than when you're staging merchandising for a retail store. So, that pushes the sell-in closer to the point of demand. And so, those shifts are going to continue to unfold, but we've got good confidence. We feel great about the start-up of the new organization. We got to get into a rhythm of working together, and that's happening. And the change in the U.S. is largely behind us. There's a few more things to do, but nothing material. We came through an intense period of change in the fourth quarter. So we're excited about the year and about getting into it and seeing what we can do with it. Obviously, we're going to stretch ourselves to beat the midpoints of these ranges as we always do. But it's too early to declare at this point whether that's plausible or not. Dara W. Mohsenian - Morgan Stanley & Co. LLC: Okay, thanks.

Your next question comes from Lauren Lieberman with Barclays.

Thanks, good morning.

Hey, Lauren.

I was just curious. On the Yankee conversation. So it was in June when you said in your strategic plan you already assumed some of these retail shifts and the shift to wholesale. So to what degree have you built in maybe store closures to your 2017 plan for Yankee? And have you already assumed that – I'm splitting the difference on your comments on inventory issues and mall traffic, but did you sort of anticipate there being this kind of magnitude like 100 basis point drag to core sales growth for 2017, or is that materially worse? Because it sounds like the core sales growth ex-macro factors, if you will, that things are in a pretty good spot and that there was minimal disruption from sales force changes and organizational changes this quarter. Thanks.

I feel terrific about executing through the change. That obviously – as I talked about the transformation, that was the big risk. And I don't feel like that issue is going to be a problem for us. So we've come through that period. There is a startup curve, like anything as big as what we've just done. Remember, we reorganized our entire sales force. We consolidated business units from 32 to 16. Those are big, big changes. But those changes are set. The teams are in place. We were just together last week with the top 100 in the company, and it was a really constructive, good, engaged dynamic. So I was really very pleased with that. I think your comment about the 200 basis points of core that I referred to, I think there's one aspect of that that's right that's just a timing-related thing, which I don't think in all cases we'll get back, which is the inventory timing and order pattern shift. The more structural issue on bricks-to-clicks and the speed with which we can ramp our ecommerce capability, I think the marrying up of those two opposing trends is really the dynamic we're trying to manage where we want the e-commerce scale-up to more than compensate for the bricks-to-clicks issues for traditional formats. And that's particularly an issue in the retail mall sector or that format. And I think we'll get pretty close to getting ourselves in a position where the e-commerce scaling happens and quickly surpasses the contraction on the other side. That said, our plans always had us taking a hard look at stores, store counts, restructuring that network. That's all baked into the strategic plan and the Growth Game Plan. The timing of our thinking through that was a little bit further out. We didn't expect high single-digit foot traffic issues in the holiday season. I do think, Lauren, that you don't want to take the 100 basis point impact in Q4 and extrapolate that on a full-year basis because you have to understand the seasonality of that business. So the trends that were happening in Q4 on foot traffic are not the trends that are happening today in malls on foot traffic. So it's in that peak seasonality where there was real pressure as people went online to do their holiday shopping. So I don't think that repeats at that level, and that's in part why we didn't adjust guidance any further. And we're doing things to try to invigorate our mall-based retail performance. We learned a lot in the fourth quarter. We spent about $5 million in advertising on personalization and on thematic campaigns for Yankee. We had three different pieces of copy that we tested and rotated in, and the personalization copy really worked. And we are in the midst of trying to bring that whole platform to the point of choice in store, which I think would be really exciting. Imagine if you could bring your PDF like you do to a CVS to do your pictures, bring it into a Yankee Candle store and get your customized candle right at the retail counter. That's what we're – those types of innovations, I call them commercial innovations, offer tremendous opportunity, and we know that consumers responded very nicely to the communication around personalization but they have to go online to fulfill, and imagine if they could go every day to fulfill. So those types of innovations can invigorate our retail formats, but I think the answer on retail, we're going to take a comprehensive look at the Yankee network. There likely will be stores that we exit because I've looked at the comp store sales numbers with Ralph and with Mark and with Bill store by store in the fourth quarter, and there's quite a different profile depending on quality of the mall, anchor tenant in the mall, all that type of stuff. So there's probably some combination of work to be done on the retail side that's a little bit more accelerated than we originally envisioned that gets us to a better place. And of course, the whole plan was not contingent on retail contributing, but I think retail can contribute. Our focus is going to be about deploying this brand in every retailer we can in the U.S. and then extending the footprint to Canada and then extending the footprint with our Czech factory up and running into continental Europe more broadly and building a multi-brand strategy. Remember, we now have three brands. We have Yankee Candle. We have Millefiori at the top, and we have WoodWick. So we're building out a portfolio of brands that will play in different spaces in home fragrance, and we're going to leverage that through our traditional retailer relationships, primarily to sustain what has been an incredible track record of growth for Yankee Candle. And so I'm not fazed in any dramatic way by what's happened here. It just catalyzes us to action a little bit earlier in the sequence of things we were going to choose to do than we otherwise would have been.

Great, thanks so much.

Your next question comes from Bill Schmitz with Deutsche Bank.

Hey, Mike. Good morning.

Hey, Bill.

Hey. Can you just tell us what the program to date, the 2016 and then the 2017 outlook, is for both Project Renewal and then the deal synergies? Because I think you just gave us an aggregate number of $300 million.

Let me break it down a little bit for you. First of all, neither the $210 million that I quoted for 2016 or the over $300 million that I quoted for 2017 include any of the tax synergies, just to be clear. So the $210 million excludes about $12 million of tax synergies that we delivered in 2016. And we expect to deliver around $20 million of tax synergies in 2017 on top of the over $300 million of cumulative – of incremental, I'm sorry, Renewal and cost synergy programs. So that's how you have to think about it. And we'll be more disciplined in providing you those two sets of numbers because obviously one is pre-tax and the other is after-tax impacts. As I said in the script, we have actioned over $400 million of cost synergies. So that excludes...

Taxes.

Yes, it excludes taxes. And when we say actioned, that means there's a formal project underway with a clear line of sight to delivering a cost benefit into the P&L. Now the reason that we haven't taken the synergy number up or the savings number up for 2017 is that some of that is baked in. Some of those $400 million in cumulative savings is baked into 2017, and some of that flows out of 2017 into 2018. But we did give you a bit of news today, which is $500 million – we clear $500 million banked in the P&L by Q3 2018, which is well ahead of where we said we were going to be, and it's just another bit of news regarding accelerations of savings delivery. We have not raised 2017 guidance at this point with respect to synergy delivery because we don't expect now, for any of those 18 synergies, to flow back into 2017, although that is a possibility going forward. So how far over $300 million will it be, which I think is what your question is, it could be materially over $300 million. And right now, our plan assumes modestly over $300 million.

Thanks, guys. And what's the breakdown between the Renewal savings and the synergies from the deal, though, on that $300 million?

The synergies from the deal start to become the vast majority of the savings in 2017. So you're talking $60 million – $70 million roughly of Renewal savings in 2017. And the balance will be cost synergies, and that lessens in 2018 further. So the thing on Renewal that we have to do is because we're selling the Tools business, there was a bunch of Renewal savings connected to things we've disposed, so you can't count on those anymore. So the number is going to be more and more cost synergy driven.

Okay, that's helpful. And then if I look at the Jarden two-year stacks and they're really rough numbers, so the data is not perfect, but I think it went from like 8% in the September quarter to 4% this quarter. And if you back in guidance, it looks like 2% in the March quarter. So do you think the entirety of that slowdown is the destocking in the appliance business and then the Yankee retail struggles?

No, I think part of it is Yankee loss distribution, things like Yankee and Coleman loss distribution. So I think that's primarily what's going on here. I mean, if I look at the Q4 numbers, we had some really good numbers on legacy Jarden businesses. It was nice to see Outdoor Solutions start to respond. And within that, you saw high single-digit growth on Pure Fishing. You saw Technical Apparel rebound with double-digit growth. You saw Team Sports, after The World Series, up in high single-digit type of growth. Waddington delivered mid-level growth. Jostens grew nicely and was accretive to growth in the fourth quarter. The only issue out there was Coleman. And then within Branded Consumables, Yankee International and Yankee eCommerce grew really nicely in the fourth quarter and had the challenge of North American retail as an issue, but still Branded Consumables grew. So I think in the appliance business, as I said – did I quote a specific number on appliances in terms of the loss? No. I mean, it was over $20 million; $25 million of orders that we would have expected from the middle of December through the end of the year that didn't come. So if you back that out and look at the appliance performance in 2016, appliances grew close – well, actually without even backing it out, taking the hit in Q4, appliances grew 5%, close to 5%. So that's a really good number. So I think the issues that we've had on Jarden related to the bad winter last year or the first half of Marmot sales, that's now recovering nicely, it dealt with the loss distribution on Coleman which was a huge number, it dealt with the Yankee loss distribution in Target, and it dealt with having to lap and it shows up in our Asia numbers the – what was roughly in our core sales numbers $35 million related to Sprue, which is the U.K.-based first-alert business, where in 2015 there was a huge spike related to new legislation in France and Germany that never was actioned and enforced and therefore all this inventory was stuck at our distributor and we had to lap that this year and by Q1 2017 we're beyond that. So I think those are the underlying issues. I don't think there's any structural issue here. The research that I was referencing, Bill, confirms that. These are great brands with great potential. The concept test results that we've gotten on the 71 concepts that we put into testing in Q4, a good number of those have come back very, very strongly. And in fact, the relevance is even higher than the cumulative results on Newell Rubbermaid legacy brands. The opportunity score is roughly the same but the relevance was actually higher on the Jarden legacy businesses which suggest that there's an opportunity out there for somebody in these categories to really go out and innovate. So I've lost not even a wink of sleep on whether these brands have the potential we expected them to have. It's going to be really exciting. We just need to go through the same cycle we went through on Newell Rubbermaid where you have to go from concept to product to market, and it takes – the gestation period on new items is 18 to 24 months. So you're probably tired of hearing me say that. But that means these ideas don't come to market until 2018. And so 2017 will be an execution-led year. We've got tremendous innovation coming on legacy Newell businesses and good innovation – It's not the cupboard is bare – good innovation on some of the Jarden businesses, but we have the potential to deliver great innovations on the Jarden brands, and that happens just in sequence, the natural sequence, which will not be until 2018.

Okay. Great. Thanks so much.

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

Thanks. Good morning, everyone.

Hey, Nik.

Hey, Mike. So I just wanted to kind of follow up on some of the commentary you had on Bill's question. If you benchmark Jarden today kind of from where you were with Newell when you came in to take over the company, can you just give us some analogies, compare/contrast? What's going better, what's going the same, what's maybe not hitting your expectations? Because I think a lot of us that are supporting the story, kind of, go back to the analogy of Newell and what you did there and how that story progressed over several years. And so that would be helpful just to kind of provide some context on how you see the Jarden business within that landscape.

Yeah, I think this is déjà vu all over again. The reason we bought this and combined with this company is because we saw the potential of these products to benefit in the same way – in these categories to benefit in the same way that the Newell Rubbermaid portfolio did through the application of the brand development model that we deployed across the top of those legacy Newell businesses. And so what we're doing is taking that playbook and extending it to a broader cross-section of categories, as I've said before. And what we're doing – what's different this time, expectations were quite low on Newell Rubbermaid. The company was not performing. Whereas as these two companies come together, expectations are higher because both companies were performing. We're moving with much greater speed to get the transformation work done. We did – in the fourth quarter, it took us about a year-and-a-half to do at Newell Rubbermaid, organizationally. So we consolidated the sales organization. We consolidated the business units. We installed the new brand development model. We centralized IT and legal. We created corporate disciplines around some of the centers of excellence in HR and finance. Those things took us multiple quarters to do at Newell Rubbermaid. We did it in the U.S. in the first quarter. And so that's behind us. So what took us – we had a longer ramp period on core growth acceleration in 2011, 2012, 2013 than we expect to have in this chapter of the story. And so we've said we should see sequential acceleration in our core growth rate from the transition quarters of Q4 2016, Q1 2017 to acceleration starting in Q2, Q3, Q4 and then really ramping in 2018 as the ammunition arrives, the new product ideas and the money. Hopefully, we can get beyond the $500 million in synergies so that we have a big step-up in A&P that complements the arrival of these new ideas to market. So that phasing of activity is broadly same as what we did on Newell Rubbermaid. What's different here is the speed with which we've changed the organization and the fact that we actually have a third to 40% of the organization that's very familiar with the model. At Newell Rubbermaid, it was a new construct, a new operating model for everybody. In this context, it's not. And so a Jarden leader can turn to a peer to get advice. Whereas, in the past, you had to count on a handful of people that had a point of view about the model, and you had to trust that those folks' view was credible. Now, you've got a story supporting facts. You can go back and look at the track record and see the acceleration in growth and the simultaneous margin development, the complementary M&A to – that sits next to a strengthening organic agenda. You can go hold a mirror up to that and see a reflection of what we're trying to create going forward. And so it's not as dependent on me at the bully pulpit selling an operating model or Mark Tarchetti at the bully pulpit or Richard Davies telling a story about what brand development can do and why innovation can work this way. You've got a track record and you've got proof points, as do investors. So I think we get there faster in this chapter but expectations are higher. So any little wobbles can create discontinuities that in the past, they wouldn't have. And we have to accept that as a leadership team. Obviously, try to drive to deliver exactly what we say we're going to do and hopefully put up a string of consistent delivery in the context of the strategic and management guidance we provide. And so that's how I'm thinking about the moment we're in.

Great. And, Mike, just quickly, any areas where you're not happy with kind of market share progression? I mean, retail environment is put aside, just trying to get a sense if there's any issues and any businesses that kind of are surprising you or where you're losing share?

Yeah, I'm never satisfied. I mean, that's a character flaw. So it's – we don't do a lot of celebrating. We have a lot of opportunity. I always bring – I look at our Writing business which has a market value shares in the U.S. now around 48%, 49%. That's huge progress from where we were, but I remind people that Frito-Lay in the 1990s went from a 40% to a 60%. And we are driven by this algorithm of trying to get to a 40% share and relative market share advantage of 2-to-1. That's when in my experience in multiple categories over almost 34 years now when you get that algorithm right, you profit through scale. So I'm not happy that we really have that set anywhere other than a couple of key sells. So the exciting thing about what we're trying to do is the opportunity is all in front of us. We can look at that 49% share, 48% share in the U.S. and look at the relative share to BIC, for example, and be very pleased with ourselves. But that's one country. So we need a string of eight countries that have that kind of relative relationship. And you can only imagine how much growth comes if you're successful at creating a repeatable model in these categories that can deliver that outcome. So that's the framework for success for me. So I'm generally not happy with where we are. It's not acute to one particular – or specific to one particular category because I understand the upside that's possible. And we're not up against very – we're up against easier competition than people I've competed against in the past. And that's not to be disrespectful, but I just don't think, given our scale, they have the potential to create the capability suite that we're creating, and therefore, we should win virtually any battle we engage in. And so I can't get distracted by the here and now and the progress we've made. I only want us focused on the destination, and that's 40% share in every country that matters to us, a relative market share of 2-to-1 in every category that matters to us. And that won't happen in my lifetime, just to be clear, but that ought to be the destination.

Okay, thanks a lot.

Your next question comes from Wendy Nicholson with Citi.

Hi. Not to belabor the point, but I just wanted to go back to Yankee for a minute. Can you remind us what the distribution split is in the U.S. business right now, how much are the company-owned doors and how much are through Walmart and whatnot?

Are you talking – let me give you a sense of where we are and where we're not. We're not in distribution in Target. We're in distribution in Walmart with American Home, but not across the full network. We're not in distribution in Amazon, but we are today now with distribution in Amazon, and we're building our presence and assortment in that channel. We're in bits of the Kroger network, but not all the Kroger network. We're not in the Ahold network, but we could be in the Ahold network as we get to that. We're not broadly distributed in drug, but we could be broadly distributed in drug. And we're not present at all in Canada. And when I say at all, there's probably some business that bleeds over. So we have tremendous opportunity there. We've got a $500 million-plus retail business in the U.S., so that's a big bit of the portfolio. We've got a very big European business that's growing double-digits, close to $300 million probably this year, and with the Prague factory, we'll be able to drive that harder and further. So in broad terms, that's how we're structured.

Because my question is trying to figure out – I know you've said in the past that you know that business, you served on the board, you like that business, and I hear, obviously, there are big opportunities to expand distribution, and it sounds like you've got ideas about how to innovate in that category.

Yes.

But I mean, just looking at the Nielsen numbers in the U.S., and maybe this is just transitional data, but the Nielsen numbers are terrible, even though the level of promotional spending went up year-over-year in the fourth quarter. So it's not just that I'm having a hard time sharing your enthusiasm for that business, but I'm wondering, the timing on when that business – I mean, clearly, there's the retail mall traffic stuff, but when do you think that we're going to see year-over-year growth in that business in those channels that Newell already sells, getting into Kroger, getting into drug, whatever it is but also making the core business better on a year-over-year basis that we can see in Neilson?

You're not going to see it in Nielsen as broadly as you'd like to see it in Nielsen because in the very near term, you've got the effect of losing Target distribution, which is going to show up and disproportionately skew your read through Nielsen. We don't use Nielsen to track the business here. IRI is our partner and we've got a custom panel that covers the footprint. But you're right that in broad terms, because of the Target dynamic, you see a decline in the wholesale side of the business, and you don't pick up other types of formats in those numbers as I recall them. Nielsen was a Kraft and Unilever partner and we had to supplement Nielsen to get a full view of landscape. But your fundamental question is when do you see the North American business flip positive. And I think it's dependent on how quickly we get the distribution broadened. We want to fill out the store count at Walmart. We'll think about what brands to leverage. We have the additional leverage of WoodWick now in our portfolio, which can play a role. We've got a footprint. We've got a big business at Bed Bath & Beyond. And so you're just missing a whole bunch of our universe. We can – offline, we'll try to get you what the coverage – what we think the Neilson coverage looks like on the U.S. footprint. That might be helpful for you. Now that said, I don't think it happens in the first half of the year that we pivot the wholesale business. But from about mid-year onward, we should start to get some wins at big places. And I'm not just speculating there, I know we've got stuff going. So that will help. I think retail will take longer. We're taking a strategic look at that whole network starting the next couple of weeks. And we'll come to you as we make changes if we choose to make changes as a result of that work. I'm optimistic the U.S. retail business can make a contribution, but the future of our home fragrance business is not retail-based. It's leveraging our core route to market around the world. So don't expect us to be opening stores in Europe or anywhere else in the world that we don't have them today; we won't be. We'll be building out our ecommerce platform. We'll be building out our traditional retail relationships and scaling the category in that way.

And when you think about that business with the changing distribution mix, that business should be structurally higher operating margin than the fleet average. Is that fair to say?

It is, except for the tail of the retail format.

Yes, okay, thank you very much.

It's very accretive. It's very accretive at both gross margin and operating margin.

Got it.

And your next question comes from Steve Powers with UBS.

Hey, Steve.

Hey, good morning. So I've got two questions and I'll ask them together just in the interest of time, if I could. The first one relates to cash flow. And at least versus our expectations, the cash flow was really strong this quarter, as was debt reduction. I was just curious how the cash flow compared to your expectations coming into the quarter. And then looking ahead, if you're not in a position yet to call where you expect cash earnings to land in 2017, can you confirm that you still plan to devote some time to that in a few weeks at CAGNY? And then second and separately, I guess could you help clarify why the tax benefit you've called out in Q3 2017 isn't being treated as a one-time item? I guess my thought is the implication that those benefits continue in some form in the future perhaps spread throughout the year in future periods. Thanks.

Steve, it's Ralph. Let me take your second question first. On the tax benefit, which is new information versus the last time we all communicated, that's from some work we've been doing on tax planning. and we've got a very good line of sight and confidence level in that. And just the nature of the tax planning that we're doing is it is one-time in nature, and we expect it to hit, as we look at it today, in the third quarter, as Mike said in his remarks. It is something, though, that is one-time in nature, but nonetheless a benefit. So we'll plan out the tax rate beyond 2017. I wouldn't expect us to be, though, in the rate of 23% ongoing. I think more back into the range that we had previously. Then as it relates to cash flow, I feel very good about the cash flow in the fourth quarter. It came in pretty much right where we expected it to, and we deleveraged the balance sheet as we expected. I'll give more insight on 2017 at CAGNY as we progress through. And maybe just a couple of comments I'd say underneath the results on cash flow, one is on working capital. We made probably more progress on payables than we did on inventory and receivables. So more opportunity there over time, but we did make good progress on payables, particularly as it relates to some of the procurement initiatives that we've been driving for on the synergy program. We've been able to make progress on the payables side there, and that should continue in the future. The longer-term benefits on working capital will come as we begin to look closer at our distribution network and our systems implementations, which are really further out on the timeline, which we've talked about before.

Okay, thank you very much.

And your next question comes from Jason Gere with KeyBanc Capital Markets.

Okay, thanks. Good morning. I'll make these quick also. I guess the first question really on the A&P spending, so you talked about stepping up in the fourth quarter. But the sales obviously stepped back in December just on some of the structural stuff that you talked about, the inventory. So as you think about 2017 and another step-up coming through, can you talk about the ROI or the efficiency that you're getting on it, how maybe you're looking at it a little bit differently? And what's the right algorithm as some of the retail landscape shifts to alternative channels, how you should be deploying your cost savings towards that A&P spending to get the best return?

So we increased A&P in 2016; we'll do it again in 2017. We adjust our spending as we go depending on whether the things we're doing work. So nobody ever gets to keep their A&P budgets, promotion a little bit different than advertising. But advertising budgets tend to go and are spent on new ideas, whether it's an innovation or whether it's a commercial innovation, spent on new ideas. And so we've learned that anthematic investment or general continuity spend in consumer durables isn't a great use of A&P. We continue to believe we've got lots of opportunity to grow through building our brands, equity and household penetration and awareness. And so we will continue to invest, Jason. I think the thing to hold us accountable for is whether the POS growth responds to those investments. And where we spent and what we spent on, we measure everything. We're data junkies, so we measure everything. And we'll find a forum to show you what worked and what didn't and the relative responsiveness. So I think you can count on us to be really scrupulous with our money. We don't want to waste it, and we have incentive to let it flow through the margin if in fact it's not going to yield the growth we expect.

Okay. And then the last question, if you think about the sales range you have for 2017 versus where Street numbers were probably above $15 billion, so now you're saying $14.5 billion to $14.7 billion, so you've got about $0.5 billion reduction. I think you've done a really good job talking about the core sales and some of the dynamics there. But unless I missed it, can you talk how we should be thinking about the timing of some of these divestitures now? Before, I think you were saying January 1 to plate it. And, obviously, I know everything is very loose, but that and then currency as well, you're calling for a bigger impact coming through. And if I just look like three months ago, the euro, the British pound really hasn't changed all that much. You're not going to be in Brazil going forward, which I guess would be a benefit. But I'm just trying to think about what's changed on the FX side so those two underlying points secondary to the core sales changes.

Jason, on the FX side, what's really shifted in particular over the last several months has been the peso and the Canadian dollar in particular, and a little bit more so as we take the outlook on the pound on average. Those are the three big moves, but more on the peso and the Canadian dollar versus the last time we talked.

Which works against us on sourcing. So I think that's on ForEx. Your question on M&A timing, obviously we haven't closed the Tools deal yet, but we're waiting to clear one more hurdle that's outside of the U.S. And hopefully over the next couple of weeks, into late February, we find our way over the finish line there. The ski auction is in full stride now, and we've said Q2 is the likely window for that to occur. So those two offset each other a little bit longer with Tools in our P&L as a positive; a little bit longer with skis in our P&L is actually a negative because skis loses money in the first half of the year. So the net effect of those things have effectively washed out, and everything else is just too small to make that material a difference.

Okay. Great. Thanks, guys.

Your next question comes from Joe Altobello with Raymond James. Joseph Nicholas Altobello - Raymond James & Associates, Inc.: Thanks. Hey, guys. Good morning.

Good morning. Joseph Nicholas Altobello - Raymond James & Associates, Inc.: I guess the first question on the Coleman repositioning, maybe get an update there. How should we think about Coleman in 2017 versus what you guys saw in 2016? And then I guess a related question to that is how much of getting back some of that loss distribution at Coleman as well as Yankee is baked in to the 2.5% to 4% core sales growth?

Coleman gets back to growth in 2017, so that's a nice recovery. It's not accretive to growth but it gets back to growth in 2017 as we broaden the distribution of the core items. And we regain some loss distribution at Walmart. So that's important and positive. Although Coleman – just to be clear, Coleman doesn't hit its stride until the brand work that we're doing brings bigger, better innovation to market in 2018. That won't happen this year. This year will be a year that's more commercially led, and it'll be the presence of some positives, which is broadened distribution footprint in the absence of negatives, which is the absence of the loss distribution impacting revenue streams. So I think that's how I would characterize this year. We're optimistic about our outdoor and rec business. We've got tremendous momentum in beverages. Marmot seems to have turned the corner. We've got a leadership team there that seems to be really jazzed and energized about driving the agenda. And it's going to be interesting to see how we're able – when we're able to sustain the momentum on Team Sports. We've had a nice run since the Cubs-Indians World Series on Team Sports, and that looks like it's going to continue into 2017. Joseph Nicholas Altobello - Raymond James & Associates, Inc.: And how much of that is baked in to the core sales number for next year with Yankee?

All baked in. Joseph Nicholas Altobello - Raymond James & Associates, Inc.: Okay. Great. Thanks

And your next question comes from Kevin Grundy with Jefferies.

Good morning, guys. Ralph, I wanted to pick up on some of the tax commentary. Can you revisit for us or touch on the risk of a potential border adjustment tax, discuss what the company's doing to plan for that potential; any conversations you've had with representatives or lobbyists down in Washington? Then, unrelated to that, Mike, perhaps you can touch on what the appetite is for M&A. Should we expect further tuck-in M&A? There's obviously a lot going on with the company at this point. Core sales is a bit softer, I guess, than folks had anticipated. So given sort of the risk around that, what's the company's appetite to continue to pursue M&A in this environment? Thanks for the questions.

Yeah. Kevin, maybe I'll just start on the M&A side of it. Our capital priorities haven't changed. We need to continue to deleverage the balance sheet as we promised and committed to and supporting the dividend and the payout ratios that we've talked about. Those are our capital priorities. We look at M&A in this window of time for things that are bolt-on in nature in our core categories. And that was Sistema and with WoodWick are good examples of that. So we're always looking at those kinds of opportunities and things, but the priorities are what I mentioned earlier. As it relates to border adjustment tax reform and all those things, obviously, we are looking at our entire network and where there are different opportunities and risks and given the variety of different proposals, we're assessing that, but aren't taking any action because there's lack of clarity as to where all that will play out.

Like any other big change in landscape, when there are big changes, there's opportunity. Remember, we have 55 factories in the U.S., over 55 factories in the U.S., 55 held-for-sale. We have over 15,000 manufacturing jobs, supply chain jobs in the U.S. We have a very big manufacturing footprint in this country. And look at our competitive landscape. Look at our Writing competitors. Look at some of our other competitors and ask yourself where their factories are? People think about these issues in too superficial a way and at too high a level. There's opportunity in some of the things that are being discussed for share consolidation on our part as a result of some of the competitive dynamics. And so it's never as simple as the headlines. And you should expect us, though, just like with any other major inflection like ecommerce, to be on the front foot when the time comes and to have a point of view and a plan on what we're going to do to deal with it. And, again, don't get distracted by the press headlines. Think about – dive deeper like we have to into our networks and ask yourself the question whether there's more leverage or less leverage with the scope of manufacturing we have in the U.S. relative to our competitive set. And I think you'll conclude the same thing we conclude, which is make sure you look at it from both angles because there's as much opportunity as there is risk in some of these scenarios.

Okay. Thank you.

Ladies and gentlemen, that is all the time we have for questions today. I would now like to turn the conference back over to Mr. Michael Polk for closing remarks.

So look, this has been an exciting time for Newell Brands. It's been the most transformative year in our history. I know there are a number of other questions that were out there. To the degree you pick up the phone and give Nancy a holler, I'm sure she'll take your calls. And to the degree we can help you understand the underlying dynamics within our results and help you shape your thinking on the company, we're delighted to engage in whatever format and forum you might suggest. Thank you again for your support, and we'll talk to you soon.

Ladies and gentlemen, a replay of today's call will be available later today on our website, newellbrands.com. This does conclude our conference. You may now disconnect.