Newell Rubbermaid (NWL) Earnings Report: Q4 2015 ... · Thank you. Welcome, everyone. Thank you for...

CompanyName:NewellRubbermaidIncCompanyTicker:NWLSector:ConsumerGoodsIndustry:ConsumerDurables

EventDescription:Q42015EarningsCallMarketCapasofEventDate:10.02BPriceasofEventDate:38.78

©2014TheStreet,Inc.Al l R ightsReserved Page1of27

NewellRubbermaid(NWL)EarningsReport:Q42015ConferenceCallTranscriptThefollowingNewellRubbermaidconferencecalltookplaceonJanuary29,2016,08:30AMET.Thisisatranscriptofthatearningscall:

CompanyPart icipants

NancyO'Donnell;NewellRubbermaid;VPofIRMichaelPolk;NewellRubbermaid;President&CEOJohnStipancich;NewellRubbermaid;CFO

OtherPart icipants

ChrisFerrara;WellsFargo;AnalystBillChappell;SunTrustRobinsonHumphrey;AnalystJohnFaucher;JPMorgan;AnalystKevinGrundy;Jefferies;AnalystBillSchmitz;DeutscheBank;AnalystJasonGere;KeyBancCapitalMarkets;AnalystJoeAltobello;RaymondJames;AnalystWendyNicholson;CitiInvestmentResearch;AnalystLaurenWolf;Citigroup;AnalystLindaBoltonWeiser;B.Riley;AnalystStevePowers;UBS;AnalystRupeshParikh;Oppenheimer;Analyst

MANAGEMENTDISCUSSIONSECTION

Operator :

WelcometotheNewellRubbermaid'sfourth-quarter2015earningsconferencecall.

(OperatorInstructions)

Asareminder,today'sconferenceisbeingrecorded.AlivewebcastofthiscallisavailableatNewellRubbermaid.comontheInvestorRelationshomepage,underEventsandPresentations.Aslidepresentationisalsoavailablefordownload.

IwillnowturnthecallovertoNancyO'Donnell,VicePresidentofInvestorRelations.Ms.O 'Donnell,youmaybegin.

NancyO'Donnell(VPofIR):

Thankyou.Welcome,everyone.ThankyouforjoiningNewell'sfourth-quarterresultsconferencecall.

Beforewebegin,pleasetakenoteofNewell'scautionarystatementsregardingforward-lookingstatements,inourmostrecentSECfilings,andinthe8-Kthatwefiledwithourpressreleasethismorning.Suchforward-lookingstatementsarebasedonassumptions,andactualresultscoulddiffermateriallyfrommanagement'spredictions.Newellundertakenoobligationtoupdateanystatementsmadetoday.




Letmealsoremindyouthatontoday'scall,wewillrefertocertainnon-GAAPfinancialmeasures.PleasenotethatNewellhasprovidedreconciliationstocomparableGAAPfinancialmeasuresinourearningsrelease,inourcurrent8-K,andonourwebsite.

OurpresenterstodayareMikePolk,ourPresidentandChiefExecutiveOfficer;andJohnStipancich,ourChiefFinancialOfficer.AndI'llnowturnthecallovertoMike.

MichaelPolk(President&CEO):

Thankyou,Nancy.Goodmorning,everyone,andthanksforjoiningourcall.We'vedeliveredanotherstrongquarterofresults,andhaveterrificmomentumonourbusiness.Inthatcontext,thismorningwe'vereaffirmedthe2016fullyearguidanceweprovidedonourlastearningscall.

Beforewegetintotheresults,letmecommentonthreestrategicinitiatives.First,inlateOctoberwecompletedtheacquisitionofElmer'sProducts.Elmer'sKrazyGlueandX-ACTOrepresentterrificadditionstoourgreatportfolio,andwillprovidedryperiodsynergiesatback-to-school,greatcross-sellpotentialacrossourchannels.Andtogether,withourveryfastgrowingPrismacolor,PaperMateFlairandMr.Sketchbrandsstrengthenourpositionindrawingandcrafts.Elmer'ssaleswillnotcontributetocoresalesuntilthefirstanniversaryofthecompletionoftheacquisition.

Thismorning,wesharedourdecisiontodeconsolidateVenezuela.Wetookthisdecisionaftersignificantdeliberation.We'veconcludedthattheincreasinglyrestrictivenatureofregulationsinVenezuela,andthelimitedandinfrequentaccesstoUSdollarshasresultedinthelossoftheCompany'sabilitytomakekeyoperationaldecisions.

We'vetakenachargetoreportedearningsinQ4.AndstartinginQ1,wewillnolongerconsolidatetheperformanceofourVenezuelanoperations.We'vehavebeendoingbusinessinVenezuelaformanydecades,andweexpecttocontinuetomanufactureandsellourproductstoVenezuelanconsumers,despitethisaccountingchange.

Lastly,inDecember,weannouncedthedefinitiveagreementtocombineNewellRubbermaidandJardenCorporation.We'vesecuredcommittedfinancingtoensuredealclosure,beguntheprocesswiththeregulatoryagencies,andhaveaclearanddeliberatepathtosecurepermanentfinancing.Theprocesswillplayoutoverthenextfewmonths,andweexpectthetransactiontobecompletedinQ2.

We'vetakentheseactionsfromapositionofstrength,havingjustfinishedoneofthebestyearsinourhistory,withoutstandinggrossmarginandearningsdelivery.Sowiththat,let'sgetintoourfourth-quarterandfull-yearresults.

InQ4,coresalesgrew6.2%,thestrongestquarterlycoresalesgrowthinyears.ExcludingVenezuela,coresalesgrew4.4%.Normalizedgrossmarginincreased80basispointsto38.5%,drivenbypricing,productivityandlowerinputcosts,whichwerepartiallyoffsetbythenegativeimpactofforeigncurrency.

Theincreaseingrossmarginenableda70basispointincreaseinadvertisingandpromotioninvestmentto5.5%ofsales.Andwhencoupledwitha10basispointreductioninoverheads,resultedinanormalizedoperatingmarginincreaseof30basispointsto13.7%.NormalizedEPSwas$0.56,14.3%aheadofprioryear,despitehavingtoovercomea$0.06negativeimpactfromforeigncurrency.

Ourfourthquartercoresalesgrowthwasbroad-based,withgrowthinallfivesegments.Combined,ourWinBiggerbusinessesgrewcoresales11.3%.

Ourfullyearresultswerestrongaswell.Coresalesincreased5.5%,andexcludingVenezuela,coresalesgrew3.9%.OurWinBiggerbusinessesgrew9.4%andouracquisitionswhencoupledwiththecoresalesgrowth,haveoffsetthenegativeimpactofcurrencyanddivestiturestoyield3.3%netsalesgrowth.




Despitecurrencypressureoncost,weexpandednormalizedgrossmargin40basispointsto39.2%.Importantly,forthefullyear,weincreasedA&Pinvestmentbyover17%to4.9%ofsales.Andwhilespendingmorebehindourbrands,wesimultaneouslyincreasednormalizedoperatingmargin50basispoints,enabledbyoureffortstomakeNewellleanerandmoreefficientthroughProjectRenewal.Allthistogetheryielded9%normalizedEPSgrowth,despitehavingtoabsorbanegative$0.39impactfromforeigncurrency.

Obviously,we'repleasedwithourresultsin2015,andwehaveclearmomentuminourbusiness,andouroperatingmodelisworking.LetmehandthecallovertoJohntogothroughourresultsinmoredetail.JohnwillalsowalkthroughthenextstepsintheJardentransaction.I'llreturntoprovideperspectiveonourlatestviewof2016,andsomethoughtsonthecreationofNewellBrands.

JohnStipancich (CFO):

Thanks,Mike,andgoodmorning.Fourthquarterreportednetsaleswere$1.56billion,a2.3%increaseversuslastyear.TheBubba,BabyJoggerandElmer'sacquisitionscontributed350basispointstoreportednetsales.Coresales,whichexcludethenetimpactofacquisitionsanddivestituresandthe540basispointnegativeimpactofforeigncurrencyincreased6.2%,andallfiveofoursegmentsgrewinthequarter.

Reportedgrossmarginwas38.3%,up70basispointstolastyear,andnormalizedgrossmarginwas38.5%,up80basispoints.Thisimprovementwasdrivenbypricing,productivityandfavorablecommoditieswhichmorethanoffsetunfavorablecurrency.NormalizedSG&Aexpensewas$387.3millionor24.8%ofsales,up50basispointsversustheprioryear.

Wecontinuedourprogressonoverheads,butsignificantlyincreasedourinvestmentinadvertisingandpromotionby70basispointsasapercentageofsales.Weinvestedinmajorcampaignsforwriting,includingourfinewritingbusinessandMr.Sketch,aswellasCalphalonSharpEndself-sharpeningcutlerysets.Wealsoinvestedinadvertisingforourfoodstoragebusiness,andacrossanumberofcommercialproductsplatforms.It'sworthnotingthatforthefullyear,wereducedoverheadsby70basispointsasapercentageofsales,plowingthosesavingsintothe60basispointincreasedinvestmentinA&P.

Normalizedoperatingmarginwas13.7%,up30basispointsreflectingthebenefitsofProjectRenewalandothercostsavingsinitiatives,pricingandproductivity,partiallyoffsetbyasignificantincreaseinstrategicinvestment,Reportedoperatingmarginwas6.5%,downfrom7.4%intheprioryear,dueinparttohigherrestructuringcharges,andacquisitionandintegrationcosts.Interestexpenseincreased$8.4millionyear-over-year,includingexpensesassociatedwiththeElmer'sandpendingJardentransactions.

Duringthefourthquarter,weissued$600millioninmediumtermnotes,theproceedsofwhichwereusedtoprovidepermanentfinancingforElmer's.Ournormalizedtaxratewas23.2%comparedwith26.5%ayearago,andourfullyearnormalized2015taxratelandedat23.4%,about10basispointsdownfromprioryear.NormalizedEPSwhichexcludesrestructuring,restructuringrelated,andotherprojectcostsandcertainotherone-timeitemswas$0.56,a14.3%increasetolastyear.Onareportedbasis,fourthquarterEPSwas$0.05comparedwith$0.19lastyear,mostlydrivenbythegainonthesaleoftheEndiciabusiness,beingmorethanoffsetbythenon-cashchargeassociatedwithdeconsolidatingVenezuela.

I'llnowmoveontooursegmentresults,andstartingwithwriting,reportedQ4netsaleswere$466.3million,up11.5%withElmer'scontributingabout$37million.Coresaleswereup12.5%.OurNorthAmericanwritingbusinessdeliveredhighsingle-digitgrowthagainfueledbystronginnovation,marketingandmerchandising.

InLatinAmerica,writingcoresalesshowedsignificantgrowth,inpartduetovolumeandpricinginVenezuela.Forthefullyear,coresalesgrew10.9%ledbyagreatback-to-school,pricing,andnew




productlaunches.Coresalesgrowthindrawingandcoloring,whichincludesMr.Sketch,PrismacolorandFlair,wereupover40%in2015.Q4normalizedoperatingmargininourwritingsegmentwas22.7%,a200basispointdeclineversusprioryear,assignificantincreasedA&Pinvestment,andchallengingforeignexchangemorethanoffsetproductivity,pricingandcostmanagement.

Netsalesinourhomesolutionssegmentdeclined3.7%to$441.8million.Coresalesincreased0.1%,drivenprimarilybygrowthinourfoodstorageandbeveragewarebusiness,offsettingourcontinuedexitofsomelowmarginRubbermaidconsumerstoragebusiness,andwellastransitionalproductlinesinculinary.Forthefullyear,homesolutionscoresalesgrew0.8%.Thesegment'snormalizedoperatingmarginwas12.9%forthequarter,a30basispoint[decrease]reflectingsignificantlyincreasedadvertising,fundedinpartbyproductivityandinputcostdeflation.

Ourtoolssegmentdeliverednetsalesof$207.7million,an8.6%decline.Coresalesgrew1.4%.Toolsdeliveredhighsingle-digitgrowthinEMEA,withmodestgrowthinNorthAmerica,whileLatinAmericadeclinedmidsingle-digits,reflectingchallengesinBrazilmacrosandtheimpactonvolumes,asaresultofpricingtocoverforeignexchange.

Forthefullyear,coresalesgrew2.2%inthetoolssegment.Q4normalizedoperatingmargininthesegmentwas9.4%,a10basispointdeclineversuslastyear.ThedeclinewasdrivenbyforeignexchangechallengesinEuropeandinflationinBrazil,morethanoffsettingproductivityanddisciplinedoverheadsmanagement.

Reportednetsalesinourcommercialproductssegmentdeclined2.8%to$207.1million,drivenbyforeignexchangeandthesaleofourmedicalcartsbusinessearlierintheyear.Coresalesincreased5.8%,drivenbypricingandstrongvolumegrowthinNorthAmerica,aswellasgrowthinLatinAmerica.Forthefullyear,commercialproductsgrewcoresales4.8%.Normalizedoperatingmargininthefourthquarterwas13.3%,a190basispointincreasetolastyear,thankstopricing,productivityandinputcostbenefits,partiallyoffsetbyhigherinvestmentinA&P.

Ourbabysegmentreported$237.9millioninnetsales,a13.9%increasecomparedto2014.Coresalesgrewaverystrong10.2%.Double-digitgrowthfromGracoNorthAmerica,drivenbystronginnovation,andpreviousadvertisingandpromotioninvestmentsmorethanoffsetdeclinesinEMEAandAPAC.

Forthefullyear,thesegment'scoresalesgrew6.4%.Baby'sQ4normalizedoperatingmarginwas11.7%,up340basispointstolastyearlargelyduetocontributionsfromBabyJoggerandnewproductdevelopment,aswellasthecomparisonagainsttheA&Pinvestmentwemadelastyeartostimulategrowth.

LookingatQ4salesbygeography,NorthAmericacoresalesgrew5.7%withstrongresultsfromwriting,commercialproductsandbaby.EMEAdeclined0.3%,withgrowthfromintoolsoffsetbymodestdeclinesinourotherEMEAbusinesses.InLatinAmericacoresalesgrew29.7%,withpricingandvolumegainsinwritingandcommercialproducts,morethanoffsettingchallengesintoolsrelatedprimarilytotheBrazilianeconomy.Andfinally,Asia-Pacificcoresalesgrew0.2%withgrowthfromwritingandtools,offsetbydeclinesinbaby.

Operatingcashflowforthefullyear2015cameinat$565.8million,comparedto$634.1millioninprioryear,thoughrecallin2015,wemadea$70millionvoluntarycontributiontoourUSpensionplan,andweincurredhigherrestructuringandProjectRenewalrelatedcashpaymentsin2015.Adjustingforthese,ouroperatingcashflowwasupabout2%year-over-year.You'llnotealsothatwerecognizedasignificantgainassociatedwiththesaleofEndiciainthefourthquarter,andwehaveabout$60millionintaxeswe'llneedtopayonthegain,whichwe'lldointhefirstquarter,andwhichwillbereflectedinourfirstquarteroperatingcashflow.




Wereturned$65milliontoshareholdersinQ4,including$50.9millionindividends,and$14.1milliontorepurchase337,000shares.Forthefullyear2015,wedistributed$206.3millionindividends,and$180.4milliontobuyback4.53millionshares.Wesuspendedtherepurchaseofsharesmidwaythroughthefourthquarter,inlightoftheJardentransaction.

Withrespecttothetransaction,wecontinuetomakegreatprogresstowardtheclosingofthecombination.Thisweek,wefinalizedour$1.5billionthreeyeartermloanwhichwillfundaportionofthepurchaseprice.Wealsofinalizedtheamendmentofourrevolvingcreditfacility,includingincreasingthefacilityfrom$800millionto$1.25billiontoaccommodatetheincreasedseasonalworkingcapitalneedsassociatedwithaddingJardentothefamily.

WecontinuetoworkonthemechanicsforassumingtwotranchesofJardennotes,the3.75%couponnotesandthe5%couponnotes,whichweplantoretainafterthemerger.We'rewellunderway,ontheworkseemstogotothepublicdebtmarketsaswegetclosertotheanticipatedclosing,inordertosecurethebalanceoffundsforthetransaction.Andwedon'tanticipateanychallengesassociatedwiththeupcomingdebtoffer,orwithmaintainingourcommittedinvestmentgraderating.

Overthepastseveralweeks,we'veexecutedTreasuryratelocksforalittleover$2billionoftheanticipateddebtoffering.Andinaddition,recallthatwehaveafullycommittedbridgeloanfacilityinplace,whichisavailableforustoutilizeifweencounteranyunforeseenchallengeswithissuingdebtatattractiverates.

Withthat,I'llturnthecallbackovertoMike.


Thanks,John.Let'snowturntoaquickdiscussionon2016,andthentosomecommentsontheJardencombination.

Thismorning,wereaffirmedour2016fullyearguidanceforcoresalesgrowthandnormalizedEPS,excludingourVenezuelanoperations.Our2016fullyearguidanceisforcoresalesgrowthof4%to5%,andnormalizedEPSof$2.21to$2.30,ourbestestimatefordelivery,asitisatthemidpointsoftheseranges.ExcludingVenezuelaforboth2016and2015results,themidpointofthenormalizedEPSrangerepresentsdouble-digitgrowth.Whilewedonotprovidequarterlyguidance,theexclusionofVenezuelawillnegativelyimpactourQ12016normalizedEPSbyabout$0.03to$0.04.

Therearetwokeyfactorsthatwillinfluencewherewefallinthe2016fullyearguidanceranges,thefirstbeingtheperformanceofourtoolsbusiness,andthesecond,theimpactofforeigncurrency.Ourtoolssegmenthadachallenging2015astheindustrialproductsandservicesbusinessslowedfromhighsingle-digitgrowthin2014toslightgrowthin2015.ThiscontractioninourgrowthratewasmostpronouncedinBrazilandChina.

Our2016outlookassumesbetterperformance,drivenbybuildingIP&SmomentumintheUSandEurope,partiallyoffsetbycontinuedsluggishnessinBrazil.Our2016fullyearcoresalesguidanceassumeslowtomidsingle-digitgrowthinourtoolssegment.

Thesecondfactorinfluencingourresultswillbeforeigncurrency.Our2016fullyearguidanceassumesa$0.26to$0.28negativeimpactofforeignexchange,$0.04to$0.05worsethanourlastestimate,drivenbythelateQ4strengtheningoftheUSdollar.We'vetakenbroadbasedactionstodealwiththeexpectednegativeForEximpact,withthemostpricingactionsalreadyinthemarket.

Weexpectthecombinationofpricing,grosstonetoptimization,productivityandProjectRenewaldrivenoverheadreductionstocovertheForExheadwinds,whilesimultaneouslyenablingincreasedinvestment




incapabilitiesandbrandsupport.In2016,we'replanningtoincreaseA&Pfundingbyabout20%to5.5%ofsales,andcontinuetostrengthenourinsightsande-commercecapabilitieswithfurtherinvestments.

Theseinvestmentsareyieldingstronggrowthdividends.IntheUSin2015,weincreasedvaluemarketsharein10ofthe13productcategoriesthatIRImeasures.Innineofthoseproductcategories,ourIRIdollarsell-outorPOSgrewbyover8%.ThesestrongUSmarketshareincreasesdroveUScoresalesgrowthof4.1%,andwhencoupledwithacquisitions,drovenetsalesgrowthof8.8%.

ThestrategicchoicetorepositiontheCompanyfromaholdingCompanytoanoperatingCompany,releasingcoststhroughProjectRenewalsuchthatweincreasedspendingbehindourbrands,andinvestinanadvancedsetofcapabilitiesisclearlyworking.Ourtrackrecordofdelivery,andthevaluecreationstoryderivedfromouracceleratinggrowthandmargindevelopmentsetsthestageforthenextveryexcitingperiodoftransformation,aswecombineourCompanywithJardentocreateNewellBrands.

Thiscombinationwillcreatea$16billionconsumergoodscompanyofleadingbrandsthatcompeteinlarge,growing,unconsolidatedglobalmarkets.ThecombinationscalestheCompanyinkeygeographies,customers,andchannels,morethandoublingthebusinessintheUS,Canada,UK,France,Germany,Mexico,Brazil,JapanandChina.Thecombinedportfolioiscomplementaryandquitefocused,withover80%ofrevenueconcentratedinjust30brands.AndthereareanumberofintuitivecombinationsofbrandsandcategorieslikeGracoandNook,aswellasRubbermaidFoodStorageandFoodSaverthatwillyieldgreaterconsumerandcustomerimpactforacceleratedgrowthandcategorydevelopment.

Thecombinedportfolioisquiteprofitable,with80%ofthecombinedrevenuehavingagrossmarginover39%,andoperatingmarginover15%beforesynergies.Sothereisplentyofgrossmargintoworkwith,andwithoverheadsfocusedandinsomecasesreorientedtotheactivitiesthatdrivegrowth,therewillbesignificantpotentialformargindevelopmentandgrowthbeyondwhatweexpecttodeliverthroughthesynergiesalreadyidentified.

Ourambitionistobringtogether,andleveragethebesttalentandcapabilitiesfrombothcompanies,todrivestronggrowth,increasedmarginsandincreasedcashflow,throughsuperiorinsightsinproductdesign,leadinginnovationandbranddevelopment,strategiccategorymanagementandselling,deliveryofthecostsynergiestomargin,achievementofsavingsbeyondthoseassumedintheacquisitionmodeltofundincreasedbrandinvestmentandenterprise-widecapabilitiesforgrowth.Andafterpayingdowndebttoourtargetleverageratioof3to3.5times,activeportfoliomanagementthatstrengthensourpositionsinkeycategories.

Wewilldeploythebestaspectsoftheplaybooksfrombothcompaniestodriveahighlycompetitivesetofoutcomes.We'llrespectthedifferencesineachcategory,channel,andbusinessmodel,yetsimultaneouslyestablishasetofenterprise-widecapabilities.Wewillscaleandstrengthenoursellingcapabilitiestoprovidebroadenedaccessandreachforourcategoriesandbrandsintonewchannelsandcustomers.

Wewillquicklyadaptbothcompaniesrapidlydevelopinge-commercestrengthstoestablishaleadingcapabilityindirect-to-consumere-com,whichisadifferentiatedJardencapability,andbricks-and-mortarandpureplaye-com,wherebothcompanieshaveexcellentmomentum.Wewillimmediatelyplayforprocurementsavings,asthecombinedcompaniesbuyover$9billioninsourcedfinishedgoods,commoditiesandotherservices.Wewillleverageourscalefordistributionsavingsinareaslikeoceanfreightwherecombinedweshipover65,00040-footoceancontainersayearfromAsia.

And,ofcourse,we'llquicklyconvertthesavingsassociatedwithbringingtwopubliccompaniestogether,establishingaleanandagilecorporateinfrastructure,verysimilartowhat'sinplacetodayatJarden.So




we'lldelivertheseoutcomesinastructuredway,extendingthescopeoftheNewelltransformationoffice,whichisinplacetosurethedeliveryofProjectRenewalsavingstothetotalenterprise,includingtheworkofintegration.We'reroughly30daysintoplanning,andweexpecttofindfarmoreopportunities,oncethetwoteamsareabletofullyengagewitheachother.

We'vebeenconservativeinourassumptions,butwe'llpursueeveryopportunityweuncover.Wehavenorevenuesynergies,noworkingcapitalbenefits,andnotaxsynergiesinourdealeconomics,andhaveaveryclearlineofsighttoataminimum$500millionofcostsynergies.Thefirst$500millioninsynergiesisexpectedtocreateaCompanywithEBITDAmarginsofover20%,andannualEBITDAofover$3billion,givingusthefirepowertoreducetheleverageratioto3to3.5timeswithintwotothreeyears,andthensubsequentlytodeploycapitaltocreatefurthervaluebeyondourorganicagenda.

AsJohnstatedinhiscomments,we'vesecuredcommittedfinancingtoenabledealclosure,andexpecttomaintainourinvestmentgraderating.We'reintheprocessofseekingthenecessaryregulatoryapprovals,andexpecttosecurepermanentfinancingafterbothcompaniesfiletheir10-Ks.Withthecurrentassumptionsanddespitewidenedcreditspreads,weexpectthedealwilldeliverhighsingle-digitaccretioninyearone,midtohighteensaccretionbyyeartwo,andstrongdouble-digitaccretionbyyearthree.

Soletmeclosenowbyreiteratingthatwe'vehadanoutstanding2015,deliveringstrong,competitiveresults.Growthcontinuestoaccelerate,anddespiteunprecedentedforeigncurrencypressure,we'veincreasedmargins,anddeliveredverystrongnormalizedEPSgrowth.Ourbuildingmomentumisafunctionofthesharpchoiceswe'vemade.

We'reinvestingtocreateadvantagedbranddevelopmentandinnovationcapabilities,andasaresultourinnovationfunnelhasmorethandoubledsince2013,withprojectvalueup160%.Theseinnovationsleverageanewproductdesigncapabilitywe'veinvestedtocreateatourpurpose-builtdesigncenter,andwearebackingourgrowthideaswithindustry-leadingmarketinginvestment.ThisinvestmenthasbeenenabledbyourdeterminationtomakeNewellleanerandmoreefficient,andtounlockthetrappedcapacityforgrowth.

Coupledwiththeactionswe'vetakentostrengthenourportfolio,thesechoicesareyieldingsomeofthestrongestresultsNewellhaseverexperienced.We'reonapathtocompletelytransformNewellRubbermaid,deliveringhighlycompetitiveanddifferentiatedresults.Ouroperatingmodelisextendabletomorecategories,morebrands,andmoregeographies.ThisisthecorelogicthatunderpinstheJardencombination.

ThecreationofNewellBrandswillnowallowthebesttalentatbothcompaniestoapplythebestofwhatisworkingatbothcompanies,acrossabroader,morecompellingandmorediversifiedlandscapeofopportunityandbrands.Wewillbuildoneofthemostexcitingcompaniesinourindustry,adestinationfortalent,whilesimultaneouslyunlockinganincredibleamountofvalueforourshareholders.ThatistheGrowthGamePlanintoaction.ThatisthefutureofNewellBrands.

Letmenowpassthelinetotheoperatorforquestions.

QUESTIONS&ANSWERS

Operator :

(OperatorInstructions)

ChrisFerrarawithWellsFargo.

ChrisFerrara(Analyst-WellsFargo):




Hey.Goodmorning,guys.


Hi,Chris.


Hey,Mike.Iguess,onthetopline,obviouslythe4.4%paceyouguysdidthisquarterexcludingVenezuelaisstrong,right,andit'sinatoughenvironment.Yourguide,andyoutalkedalittlebitaboutit,butyourguideis4%to5%fornextyear,butthecompsgetalittlebittougher.

Obviously,wetalkedaboutBrazilandChinaalittlebit,butcanyoujustgothroughyourconfidenceformaintainingthatgrowthrateinatougherenvironmentontoughercomps?AndIknowpartofitistheincreaseinA&P,butifyoucangothroughthatalittlebitandexpressit,thatwouldbegreat?


Yes.Well,it'sthecombinationoftheincreaseinspending,Chris,butalsowe'vegotthestrongestinnovationplanwe'vehadsinceI'vebeenhere.Soifyouremember,wechangedourwholemodelbackinthemiddleof2013.AndI'vesaidthatthegestationperiodonnewideasthatwerecomingthroughourbranddevelopmentorganizationwas18to24months.Andthewaytheseprojectsworkis,theysortoflayerintothemarket.

Andso,asweprogressthrough2016andinto2017,we'dgetsomeofthestrongestinnovationideaswe'vereallyeverhadhittingthemarketplace.

Anexampleofthat,isinthefirstquarter,we'llhave--we'lllaunchnewPaperMateInkJoygelswiththreetimesfasterdryinginkversustheleadinggelpen,foranadvantagedperformance,lesssmearing.We'lllaunchRubbermaidFRESHWORKS,whichis--whichleveragesourfoodstoragebusiness,butappliesafiltration,amembranetopreventoxidationfromoccurringonfreshfruitsandvegetableswhichshouldextendtheproducelifeby--weexpecttoextendtheproductlifebynearly80%.

Soyou'vegotawholeseriesofinnovations.Johnmentionedthesharpenedknives,whereCalphalon'sgottheseceramicsharpenersinthebutcherblock.Soeverytimeyouwithdrawtheknife,youhavetheperfectlyhonedblade.Andso,thesearetheexamplesofthekindofinnovationthathasstartedtofilterintoourbusinessinlate2015,andreallyhitsitsstridein2016.

Soyou'vegotthecombinationofincreasedspending.We'vereallysequentiallyincreasedspendingsincewe'vebeenhere.Wetripledtheamountofadvertisingwe'respendingonthesebrands.

IfyoulookatthenumberofGRPswe'redelivering,we'veactuallyincreaseditbyfivetimessincewestarted,becausewe'vegottensomuchefficiencyinbuying,bygoingtoonebuyingagency.Sowe'vegotallofthesethingsconverginginthemarketplace.Whichgivesustheofconfidencethatwhencoupledwithwhat'sabuilding,asellingsystemwithrespecttocommercialexecution,andstrengthinsellingexecution,thosethingsallconvergetogiveusconfidencethat4%to5%isdeliverable.AndQ4isgoodevidenceofthat,at4.4%ofgrowthexcludingVenezuela.


Andthen,justIguess,twoquickones.

Numberone,doestheJardenacquisitionatallaffectthetimingoftheplannedwritinglaunchinChina?

Andthen,youtalkedaboutfinancing,doyoustillthinkat4%isadecentwaytolookatfinancingrates,




orhasthatcreptupyouthink?


Yes,letmeanswerthefirstquestion.Theanswerissimplyisno.Butwedidn'thavealotbuiltintoourplansin2016forChina.Remember,we'lllaunchlateinQ4togettomarketinmaybeoneortwobigcities.

Theteamispresentingtheirfinalplanstomeshortly.Butoneortwobigcitiesforback-to-school2017,whichisinFebruary-ishinChina.Sowedon'tgetalotofbenefitintherevenuelinefromChinathisyear.Butwewillgetsomenicegrowthinwritingin2017.Butno,itshouldnotimpactanythingwe'redoingonNewellRubbermaid.

Infact,oneofthemostimportantthingsthatbothcompaniescando,inthetransitionistoexecutetheir2016plansflawlessly.Andwhiletherewillbealotofworkgoingoninthecentertoorganizethedeliveryofthesynergies,andit'sreallycriticalthateachsetofoperatingunitsstaysfocusedontheplansthey'vebuiltfor2016.SoIwouldn'tenvision,reallyanythingmateriallychangingforeitherCompany,intermsoftheircoreplans.

Onfinancing,yes,creditspreadshavewidenedsinceweannouncedthedealinDecember.Butthere'sallkindsofleverswecanpulltomitigatethatissue.Andquitefrankly,theinterestratesensitivityintheoveralldealistheleastmeaningfulvariableaswe'velookedatsensitivities.Sowedon'tknowwhereitallends.

Ithinkitwillcomedowntothedifferenceintenorwecouldchoosetoplaceonthenewdebt,andwe'llmakethatdecisionbasedonthebesteconomicchoicefortheCompany.Andifwehavetoacceptslightlyhigherinterestratesforthesakeofmakingtherighteconomicchoice,we'lldothat.We'llcoveritsomeplaceelseinthealgorithm.Andobviously,oneofthebigleverswehaveisthebalanceoffixedtofloatingratedebtwechoosetodeploy.

Butlook,we'rerelativelyrelaxed.Ofcourse,wewouldhavepreferredtonotseecreditspreadswiden.ThewideningofcreditspreadsforBBB-debtis--ourspreadsdon'tlookanydifferentthanthemarketatthispoint.Sowe'removing--whilewemayhavemovedalittleearlierthanthemarket,we'reinlinewiththemarkettoday.Andwe'lljusthavetoseehowthatplaysout.We'renotgoingtocompromisetherightlong-termchoiceforthesakeofmanagingtoaninterestrateassumption,becausewehavesomanyotherleversintheP&Ltocompensateforthatintheverynear-term.


Thankyou.

Operator :

BillChappellwithSunTrust.

BillChappell(Analyst-SunTrustRobinsonHumphrey):

Thanks,goodmorning.


Hey,Bill.





Goodmorning.Hey,justafirstquestiononSG&Ainthequarter,justtryingtounderstandhowthatcameinversusexpectations.AswhenIsaythat,Imean,typicallyinthepastfewyears,you'vekindofsteppedupadvertisingpromotioninthefourthquarter,justtokindofgetaheadstartonthenextyear,anddidn'tknowifthathappenedagain.Andalso,iftherewassomekindofstepupofincentivecomps,sinceyou--itlookedlikeyououtperformedyourcoreprojections?


Hey,Bill,it'sJohn.You'reabsolutelycorrect.WedidstepupA&P.

Wemadesome--alsosomestep-upsinstrategicSG&Ainvestmentaswell.Soforexample,e-commercewhichhasbeenafantasticresultforus,we'replowingmoreresourcesinto.Andyou'rerightontheincentivecomp,thatalsodroveuptheSG&Anumber,inlightofthestrengthenedperformanceandthegoodfinishtotheyear.


Wealso,John,justtobuildonthat,wealsoplacedamarkerinQ4onshopperinsights.Whilewe'vemadealotofprogress,we'vedoubledtheamountofinsightworkwe'vedone,andactuallythesizeoftheteamisupby50%sincewestartedin2011.Butwherewehaven'tdoneasmuchresearch,isintheareaofshopperinsights,andbecausewewantedtogetthefundamentalconsumerinsightworkdonetosupporttheinnovationandbrandagenda.

InQ4,wemadethefirstinaseriesofinvestments,we'llmakeinshopperinsights,toensurethatwe'redrivingleadinglevelsofcategorymanagement.JoeArcuriandhisteamarereallyfocusedontakingoursellingcapabilitiessortofthenextlevel,bringingthebestofwhatfastmovingconsumergoodshave,andcategorymanagementcapabilitiestotheconsumerdurablespace.Andpartofputtingthefundamentalsinplaceisestablishingagoodfoundationofshopperinsights.SowemadeaninvestmentinQ4inthataswell.

Wehadtheflexibilitytodothat.Andasyouknow,withthe--ontheQ3call,Imentionedthatifwehadtheroomtodomore,wewouldinvestmore.Andthat'sinfact,whatwedid.It'sastrategicinvestmentinA&P.It'sstrategicinvestmentinstructuralcosts,ande-com,andinsights,coupledwithasJohnsaid,wehadareallyterrificyearfromaperformancestandpointintruingupabonus.


That's--no,thanksforthecolor.Andthen,justsecondontheJardentransaction,isthereanywayyoucouldkindofgiveusanideaoraroughguess--notaguess--onhowfourthquarternumberskindofcameinforthem?Andthereseemstobeabitofconsternationabouttheirorganicgrowth.I'massumingitwasprobablythe2%to3%[rate],justwiththeweatherbeingwarm,butmaybesomecolorthere?

AndthenalsoMike,asyoulookforward,anykindofideaofyouhowthisworksintermsofnumberofdivisions?Imean,Jardenhas3divisions,butkindof25differentkeydivisions,andyouhave5.Didn'tknowifyouhavekindanarchitectureofhowitwouldbreakout,andhowyouseeitsplittingup?


LetmefirstcommentonyourquestionregardingQ4.Obviously,I--wedon'townJarden.AndIactuallydon'thaveaccesstotheirperformancedata,asthey--theonesthathavetocommunicatethat.AllIwouldsaythough,isifyoulookedatthenumbersthroughthemiddleof--throughthethirdquarter,theirorganicgrowthwas--year-to-datewas5.9%.Sotheyhaveterrificmomentumintheirbusiness.

Theyhaveanincrediblystrongyear-agoperformanceinQ4thattheyneedtolap.AndIknow--I'msure




youallknowthis,buttheirorganicgrowthinQ4of2014was11.4%.Soabighurdletocross.Nomatterwhatwayyoucutit,with5.9%bankedthroughtheendofQ3,they'regoingtohaveaverygoodyear.

Andifyoulookatthecombinationofthetwocompanies,andlookattheirperformanceonceyougettheirdata,thecombinationisgoingtobeprettydarnstrong,relativetoanybodyelseinourindustry.Withthemhaving5.9%growthbankedthroughQ3,andushavingnow5.5%bankedonthefullyear,that'sastrongsetofnumbers.Andso,Ithinkoureyesaresetonthefuture.

AsI'vesaidbefore,Idon'tgetkindoflockedinonanykindof90dayperformancecycles.Ourviewissetonwhat'sgoingtohappenoverthenextthreeyears,andhowtounlockthevalueinthiscombination.Sohopefully,Iexpressedthatinacompellingwayinmyscript.Butobviously,we'revery,veryexcitedaboutleveragingwhatisterrificmomentumintheirbusiness,andterrificmomentuminours,tobringthebestofbothcompaniestogether,tobuildasetofassetsandbusinessesthatperformbetterthaneitherofuswouldhavebeenabletodoonourown.

WithrespecttothedesignoftheCompany,whatIneedourteamstodo,andwhatIknowJimLillieatJardenisencouraginghisteamtodo,istojustfocusondeliveryin2016.OurenergyandoursynergieswillbefocusedonthethingsIspokeaboutpreviously,andnotonbig,sweepingorgdesignchanges,reallyimportanttokeepoureyeontheball,withrespecttothedemandcreationactivitiesinbothbusinessestopreservethemomentumthatIwasreferringtoearlier.

We'llfigureout--aswegettoknowthebusinessovertime,we'llfigureoutwhattherightmodelisfortheoverallcompany.We'lldothatquickly,aswedidwhenwejoinedNewellRubbermaid.It'simportanttoarticulateasetofportfolioprioritiesandresources.Humancapitalandmoneyneedstoflowtothebusinesseswiththegreatestopportunities.Andso,wewilldoallofthatwork.

Butwe'renotgoingtowalkin,withapreconceivednotionofthat.We'lldothatworkovertime,andthatwillhelpshapeourapproachtohowweorganize.Whatisclear,isthatwewillbuildasetofenterprise-widecapabilitiesthatcutacrossbothbusinesses,thatintheareasofinsightanddesignandinnovationthatourbusinessescantapinto,ine-commerce,forexample.

Sothosearereallyobviousopportunities,andwewillobviouslycombinetwopubliccompaniesintoone,andtherewillbechangesassociatedwiththatreality.Butintheoperatingunits,wewanttohaveeverybody'sheaddown,focusedonexecutionoftheplansthatthey'vegotinplace.Bothcompanieshaveaverycompellingsetofplansfor2016.It'sreallyimportantthatweexecutethosewithexcellence.


Perfect.Thankssomuch.

Operator :

JohnFaucherwithJPMorgan.

JohnFaucher (Analyst-JPMorgan):

Thanks.Goodmorning.


Hey,John.


Yes.Goodmorning,Mike.Canyoutalkalittlebitabout--asidefromBrazil,maybehowsomeofyourmore




economicallysensitivecategoriesaredoingrightnow?Obviously,there'ssomeconcernintermsofdiscretionaryexposure,particularlyaswelookatthecombinationofthetwobusinesses.Soanythoughts,injusttermsofeconomicsensitivity,andhowthat'simpactingthingsrightnow?


Yes,it'sreallyinteresting.Ireadalotaboutit.Isee--Ihearalotaboutit.

IquotedsomenumbersonourUSPOSasmeasuredbyIRI,10of13categories,increasingmarketsharesellout,upover8%,in9ofthose13categories.SoI'vealwayshadthispointofviewthatideastrumpthemacros.Thatitisourresponsibilityasaconsumerbrandcompanytobringtheideastomarket,andleverageourbrandswiththerightkindofsupportbehindthemtotrumpwhateverenvironmentwe'rein.Andourgrowthof4.1%intheUS,and8.8%intheUSincludingacquisitions,shouldbegoodtestimonytothat.

Idon'tseeanyimpactin--fromaconsumerperspective,inthegrowthofourcategories,wherewecanmeasurethatthroughIRI.Ijustdon'tseeanimpactatthispoint.Theonlybusinessinourportfoliothathasbeensensitivetothis,hasbeentheindustrialproductsandservicesbusiness.WhereasIsaid,wewentfromhighsingle-digitgrowthin2014,toessentiallyslightgrowthin2015.AndIpreviouslycommentedthatthattrendbeganinaboutOctoberof2014.

Andso,wesee--that'sprobablytheonlypieceofourportfoliothatiscyclical,asourbusinesshasevolvedoverthelastnumberofyears.Wewerefarlesscyclicalthanwewerewhenwestarted,andwe'remoreconsumer-driventhanwewerethen.Andwehavewaymorebrandsupportbehindourbrandssuchthattheycanabsorbthemacrocyclesalotbetterthantheycouldinthepast.Butatthemoment,Idon'tseetheslowdowninmarketsorinthemacros.AndIdon'tseeourcustomersreallybehavingin,particularlyadefensivewayliketheydidin2009duringtherecession.

Soyoudon'thearustalkingaboutthe--amacroissue,withtheexceptionofBrazil,whereit'sacombinationofGDPslowdown,andthecurrencyimpactonthebusiness.Andtheneedforustopricetoprotectmarginstocoverthetransactionforitseffect,andtheintersectionofthat,withaslowereconomycreatingpressureonvolumes.Sothat'smostimportanttoourtoolsbusiness.It'scertainlyafactorthat'sinfluencedourtoolsperformancein2015.Andthemostsensitiveportionofourtoolsbusinesstothattypeofenvironmentistheindustrialproductsandservicessegmentofthatbusiness.


Great.Andthenjustaquickfollow-up.Youguystweakedthelanguagealittlebitonsynergies,butitdoesn'tappearthatyou'readdingin--likeyousaid,you'renotaddingintherevenuesynergiesetcetera.Sojustanycolorintermsofthelittletweakinthelanguage,intermsofsayingatleast$500million?Andthat'sitfromme.Thanks.


Yes.Imean,thewayI'danswerthatis,whenwelookatProjectRenewal,andwhatthatwillgeneratebytheendof2017,we'llbesomewherearound$700millionofannualizedsavingsfromProjectRenewal.We'vedeliveredthosesavingsonabaserevenuestreamthatstartedat$5.5billion.Sodothemathon$700milliondividedby$5.5billion,andthenaskyourselfwhether$500milliononthebaseof[$10billion],whichistheproformasizeofJarden,isconservativeornotconservative?

Sowe'vemadeacommitmentto$500million.Webelievethereprobablyismore.Ifwefindmore,whichIexpectwewilllikelydoovertime,aswedidwithProjectRenewal--remember,itwasasequentialseriesofunpackingofthecoststructureatNewellRubbermaid.Butifwedofindmore,aportionofthatmoney




willbeinvestedbackintothebusinessforacceleratedperformance,eitherincapabilitiesorinbrandsupportontheJardenbusinesses.Andsomewillflowtomarginbeyondthe$500millioncommittedtoaspartofthedeal.

Thefirst$500millionisgoingtoflowtomargin.Whathappensafterthat,wewillleverageanycostsavingsbeyondthat,thatwecanfind,toputtheworktosetupadifferentstrategicfuturefortheCompany,whilealsopassingsomebacktoinvestors.Sothatyoucomealongfortheride.


Great.Thankyou.

Operator :

KevinGrundywithJefferies.

KevinGrundy(Analyst-Jefferies):

Hey,thanks,goodmorning,guys.


Hey,Kevin.


Goodmorning.First,ifIcouldjuststartwithahousekeepingquestion.OntheProjectRenewal,the$350million,canyougiveusanupdate,wherewearewiththat?Andthen,what'stheexpectationforFY16,intermsofhowmuchflexibilityyouhave?That'sthefirstpart.

Andthen,thesecondpartontheJardentransaction,Mike,itsoundslikeyouseeverylittleriskwithrespecttoregulatoryapproval,shareholderapproval,financing--wanttoknowifthatwasafairsortofcharacterization?Andthen,justasecondpartontheJardenquestion,haveyourconversationswithretailersbeguntochangenowgiventheaddedscale,particularlythatthat'sreallyaUSmassretailersortofcomment?Havethoseconversationsalreadystartedtochange?Doyoufeellikeyou'regoingtoseesomesortofbenefittherefromtheaddedscale?Thanks.


Yes,onyourfirstquestionregardingProjectRenewal,cumulatively,sotheannualizedsavingsthroughtheendof2015is$360million.Sothat'sbanked,andthat'sinthebank.Wehavearticulatedarangeof$625millionto$675millionincumulativesavings.ButIjustsortofsharedwithyou,myambitionandhopeisthatwegetcloserto$700millionwhenit'sallsaidanddone,attheendof2017orintoearly2018.

2016isabigyearofrenewalsavingsdelivery.We'vegotalotofworkthatwasinitiatedlastyear,thatflowsintotheP&Lin2016.Wesetupthetransformationoffice,inordertoreallyestablishasetofverydisciplinedprojectmanagementcapabilities.We'vegotteamsorganizedalong,andacrossmanydifferentworkstreams.Soweexpect2016tobeabanneryear,withrespecttosavings,andit'simportanttotheoverallalgorithm.WithrespecttotheJardentransaction,I'llpassthatovertoJohntoanswer.


Sure.Hey,Kevin.WithrespecttoJarden,wedon'tanticipateanychallengesfromaregulatorystandpointoranythingelse.Wemadegoodprogress.Obviously,bothteamshavebeenworkinghardtogetherwiththeiroutsideadvisors.Sowedon'tanticipateanychallenges.We'restillmarchingtowards




aclosingsometimeinQ2,andnoredflags.Sowe'reingoodshape.


Withrespecttoyourquestiononcustomers,it'salittleearly.We'renotengagingcustomerswithonevoiceatthispoint,becausethatwouldbeinappropriateastwoseparatecompanies.Butthegeneralfeedbackonthedaythedealwasannounced--andIknowMartingotsomeofthisfeedbackaswell,fromcustomersfrom--ontheannouncementdate.Andwe'vesubsequenthadtheminourconversationswithretailers,hasbeenvery,verypositive.

Asyouknow,thecombinationsignificantlyscalesourpresenceinanumberofretailersintheUS.Weputthatintothewebdeckthatweputtogether,whenweannouncedthedeal.We'llhaveover$2billionofrevenueatWal-mart.Ithinkwe'llendupbeingprobablyatop--intheeighthorninthposition,intermsoftheiroverallsuppliers.Andonthegeneralmerchandiseside,we'llbeatthetop,ifnotnearthetop.

Ithinkthat'sveryexciting.Thatwillleadtoareallystrategicsetofconversationswithallofourretailerswherewescale.Andtheotherthingaboutthecomecombinationofthecompaniesis,itopensupaccesstonewchannelsforsomecategories.SoJardenhasrealstrengthinmasssportinggoods,withtheColemanbrand,andwithsomeoftheiractionsportsbusinesses.ThatopensupopportunitiesforbrandslikeContigoandAvex,whereweprobablyneverwouldhavegottentoinvestingtheSG&Aandsellingexpensetoaccessthosemarkets,whichwecannowaccess.

AndthereverseistrueforJarden.Wehavetremendousscaleinhomecentersandhardware,andthedistributedtradeintheUSforcommercialproductsandtools,whichcanprovidetheJardenbusinessesaccesstochannels.Andso,it'sgoingtobeveryexcitingtounlockallthoseopportunities.

Idon'tviewscaleatcustomerasbeingaleveragepointwithrespecttonegotiating.Somepeoplethink,oh,we'regoingtobeaabletoyieldabiggerstickatthesecustomers.That'snothowwethinkaboutengagementwithourretailpartners.Wethinkaboutbuildingourbusinesscollaboratively.

Wehavearesponsibilityasleadersinourcategoriestoownthedevelopmentofthosecategoriesatthoseretailers.And,ofcourse,weleverageourbrandedassetstodothat.Sowebuildsharewhenwedothateffectively.Butweshareaccountabilitywithourretailpartnersfordevelopingthesizeofthepie,thesizeofthecategories.Andthat'showweapproachourrelationships,andweexpectthecombinationtonowbeabletodothatacrossabroaderlandscapeofcategoriesforourretailpartners.Andthroughthat,becomemoreofastrategicsuppliertothem.Sounbelievablesetofopportunitiesconnectedtotheselling,andthepotentialforastrengthenedstrategiccapabilitiesinthatspace.


That'shelpfulcolor.Thanks,guys.Goodluck.


Thanks.

Operator :

BillSchmitzwithDeutscheBank.

BillSchmitz (Analyst-DeutscheBank):

Hey,guys,goodmorning.





Hi,Bill.


CanyoujustfirsttalkaboutJanuarysell-in,sell-throughtrends?Andthen,usuallyyougiveuscoloronthequarterlycadenceofearnings.Isthereanythingfunkytopayattentiontothisyear?Andthen,Ihaveafollow-uponthedeal.


Yes,IgaveyousomecoloronquarterlyflowinQ1,inthatIgaveyoutheVenezuelanimpact.IfwehadnotdeconsolidatedVenezuelain2016,itwouldhavebeenworth$0.03to$0.04inQ1.Sothat'ssomecoloronflow.Ididn'tgiveyouthenumbersforayearago,butthat'sslightlymorethanwhatVenezuelacontributedintheyearagoperiod.Sothere'salittlebitofcolor.

We'reprettybullishonwhatthefirsthalfoftheyearhastooffer,becausealotofournewitemsshipinthefirsthalfoftheyear.SoRubbermaidFRESHWORKSgoes,InkJoygelsgointhefirstquarter.Wehadgoodperformancelastyear,very,verygoodsell-outperformance.Sowedon'tentertheyear--youcanseeitinourreceivablesnumbers.Youdidn'tseeatremendousmovementinourreceivablesnumbersyear-over-year.

Sothat'sagoodsignthatinventorieshavecomedowninthefourthquarter,retailinventorieshavecomedowninthefourthquarter.That'strueinanumberofplaces,Isuspect.AndthekindofPOSandsell-outthatwe'vegotgoingonisreallyencouraging.Weshouldhaveverygood--withgoodsell-through,comesgoodsell-in.Andthat'ssetupwell.

WewillspendmoreinQ1thanwedidyear-ago,fromanA&Pperspectivewithstrongerinnovation.Andso,we'resetupforagoodfirstquarterIthink.Andobviouslytheproofofthepudding'sintheeating,andit'sonlynotevenreallytheendofJanuaryyet.Butthegreenlightisintheengineroom.Sotherearealwaysthingsthatyouhavegotchallenges,thatyou'vegottoovercome.Andundoubtedly,wewillhavethosetodealwiththisyear.


Great.Thanks.Andthen,justontheJardendeal,canyoujust--housekeepingitems,likewhatyourassumptionisontheinterestrateandthedebt?Ithinkbeforeyousaiditwasplusorminus3.5%.Andthen,wouldyou[ever]considerdoinglikeanincrementalequitydealtosortofacceleratethedeleveraging?Howlongyouthinkitisgoingtotaketogetto3.5turnsofleverage?Maybelikethebroadermacroassumption,asyoukindofdidyourdealmath?Andthenlastthing--Iknowthere'salotofquestionshere,butwhatthetaxrateweshouldusefortheproformacompany?


Hey,Bill.It'sJohn.Sowithrespecttothedebt,there'sacoupleofmovingpieces.Butoverall,thetermloanislocked,andthatrateis--roughlyforyourmodeling2%to2.2%.It'savariablerateinstrument.

ThepublicdebtthatMikewastalkingaboutearlier.Rightnow,weoriginallysaidintheS-4,wemodeled4%.Creditspreadshavemoved,butthere'sstillalotofmovingpieces.Sowedon'tknowwherethetenorwillbe,orhowmuchwe'llgowithvariableratedebtoverall.Sothere'sstillalotofworktodone--todo.Butwe'renottooworriedaboutthecreepoff,ofthe4%,onthepublicportionofthedebt.Sothatpartis--againaworkinprocess.Andthere's,asyouknow,alotofmarketvolatilitybetweennowandthetimethatweultimatelygotomarket.





Great.Andthe,howaboutlikethetimingtogetto3.5leverageratio,andthemacroassumptionsunderlyingthedeal?Andthen,justtheproformataxrateifyouhaveit?


Yes,sowegettothatratio,we'recommitted.Sopartofthereasonwhywestructuredthedealwedid,isthetermloanisathreeyearinstrumentthatwehavetopaydown,the$1.5billionthatImentionedearlierinmyscript.

Andso,partofthatisacommitment,sowegetdowntothat3,3.5times,twotothreeyearsrightnow,andwe'vemodeledinanumberofsensitivities.Sowe'reverycomfortablethat2.5yearsfromnowwewillbebackinthatrange,giveortake,absentsomemassivechangeintheunderlyingeconomiccultureoftheworldoverall.Sowehavegoodshape,intermsofthat.

Withrespecttotax,rightnow,obviously,Ithinktheeasiestthingtodoismodeljusttheblendedtaxratebetweenthetwocompanies,butthereisopportunity.NownoneofthatisreflectedasMikesaidinthesynergynumbersthathe'stalkedaboutandsoforth.Andwe'reexcitedaboutbringingJardenintogetherwithus,intermsofwhatwecandowithsomeofourtaxstructuresandsoforth.Sowedefinitelyseeupsideonthat.Butitwilltakesometimeobviouslytogetthetwocompaniestogether,andintoonetaxsystem.


Sowe'regoingtopushtogetthedeleverasquicklyaswecan.Ifyoulookatournumbers,andyouprobablyhaven'thadtimetokindofplowthroughthemall,we'vegotEBITDAaround$900millioninforNewell.AndJardenis--youcanfigureoutwhatJardenis.Withsynergiescomingperhapsalittlebitquickerthanwhatwasmodeled,we'llbeveryquicklyapproaching$3billionofEBITDA.

Andso,we'regoingtohavelotsofflexibilitytopaydownthedebtquickly,andwewillwanttodothat.That'sthecommitmentwemadetogetbackintotherangeof3to3.5timeswithintwotothreeyears.ButI'mhopingwecandothatclosertothetwo,thantothethree.

Withrespecttotheotherissueson--potentialderailersthat'scouldunderminethat.Ireallydon'tseethem,becausewe'vebeensoconservativeintheassumptionswe'vemade,onthetimingofsynergies,thegrowthratethatwebuiltintothemodel.Sothetaxopportunities,theworkingcapitalopportunities,weshouldhavesomequickwinsthere,thatarenotbuiltintothedealeconomics.Andit'sjustgoingtotakealittlebitoftimetogetourarmsaroundthat,oncewe'reabletomoreopenlyengagewitheachother,butnotmuchtime.We'llwanttogoforthattypeofstuffquitequickly.

Andtheotherthingtorecognizeisthattheleverageratioslookhighatthebeginning,inpartbecauseofthetimingoftheyearwe'redoingthisdeal.Right?SoQ1isprobablytheworstmomenttotrytoconvertadeallikethiswith--giventheflowofcashflowforbothcompanies.Sotheopticsofourleverageratiosareprettyhigh,probablyhalfaclickhighin--attheendofthefirstquarter,versuswhattheywillquicklybeoverthenextfewquarters.Sothere'sallthosedynamicsatplay.

We'vemadeacommitmenttogetdownto3to3.5times.We'regoingtodothatinafocusedway.Weareprioritizingcapitalallocationtothatoutcome.AndtheonlyexceptiontothatistheCapExassumptionswe'vegotinthebusiness,whichwehavenotcompromisedonCapExinvestmentoneitherbusiness.

We'veblendedthebaseplans.Andwewon'tpullbackonthatfront.AndyoushouldexpectintheNewellRubbermaidsideforustobespendingaround$200millioninCapExthisyear,maybeslightlyabovethat.Andthenonthedividend,we'veassumedthatwemaintainNewell'scurrentdividendof$0.76pershare.Obviously,acrossahighersharecount,whichmeansmorecashoutforthatinthecombination,butwe




believethat'sanimportantelementofourcapitalallocationstrategythatwillbeandshouldbepreserved.


Okay.Andthen,justontheequityraise,wouldyoumaybethinkaboutraisingequitytoacceleratethedeleveragingprocess?


That'snotinourlineofsightrightnow,anddoinganequitydealnotinourlineofsightrightnow.We'regoingtobereallyfocusedonexecutingbothcompanies'plans.Obviously,ifwegetgoodmomentuminthecoreofthebusiness,wecanthinkofdifferentoptionsaswecomeinto2017.

Butourfocusrightnowwillbeonexecutionofthedeal,executionoftheindividualbusinessplans,deliveryoftheEBITDAprogressionthat'sbuiltintothosetwoplansandintothedealeconomics.AndplayingformoreEBITDAifwecanfindit,eitherthroughaccelerationofthesynergies,orthroughacceleratedgrowthinthebusinesses.Orthroughothermeansofinfluencinggrossmargindevelopmentwhicharealsoavailabletous.


Great.Thankssomuch,guys.

Operator :

JasonGerewithKeyBancCapitalMarkets.

JasonGere (Analyst-KeyBancCapitalMarkets):

Okay.Thanks.Goodmorning,guys.Justacoupleofquestions.One,justinthesixweekssinceyou'veannounceddeal,Mike,maybecanyoutalkalittlebitaboutwhathassurprisedyoumoreontheupsideofthisdeal?

Obviously,Iknowitcametogetheroverthefallkindofquickly,butandwithinthat,whatshouldweanticipatewhenyouguystalkatCAGNY?Willsomeofthemaybetheintegrationteammembersbewithyou,justtogetabettersenseofthedeal,andinvestorsgettingmorecomfortablewithit?That'sthefirstquestion.


Yes,Idon'tthinkyoushouldexpectustogodeepintotheintegrationatCAGNY.Becauseagain,wewillnotown--wewillnotbecombinedatthatpoint,thetwocompanies.Wewilllayoutwhereweseetheopportunities.Andthoseopportunitieswillbearticulatedbasedonthethinkingthatwentoninthefall,andconversationsthathavehappenedwithseniormanagementsincethattime.Buttheplanningstagesareearlyon.It'salittleprematureforustobedoingadeepdiveonexactlywhatwe'regoingtodowhen,inacoupleofweeks.

Thatsaid,I'lllayitout.I'llvisuallypresentwhatIjustdescribedtoyouintheearningscall,inalittlebitmoredetailtogiveyousomeevidenceofwheretheopportunitiesare,andtalkabouttheambitionwehaveforthebusiness.ButIwouldexpectthemoredetaileddiscussiontohappenaftertheshareholdervotes,andafterthetransaction'sconsummated.That'swhenwe'llgetintosomefarmoredetail.

Ourfocusthough,willbeonengagingbothsidesofthehouse,inunderstandingwheretheirbusinessopportunitiesare,learningtheJardenbusinesses.Andthenafteraperiodofworkandthinkingabout




those,bringingthatbacktogetherintoanintegratedapproachandstrategyfortheCompany.Ofcourse,we'llprovideguidancefor2016,revisedguidancefor2016.Andwe'llprovideperspectiveontheoutyears,oncethetransaction'scompleted.


Okay.No,that'sfairenough.Andthen,Iguesstheotherquestion,Iwasjustwonderingifyoucouldtalkalittleaboutthecompetitivelandscape,maybeintheUS,especiallyasIthinktheeconomyisalittlebitmoreskittish.You'reseeingalittlebitofcommoditydeflationcomingthrough.Iknowitmaynotaffectyoudirectly,asitdoesotherstaplecompanies.

SoIwasjustwonderingifyoucouldtalkaboutanycategorieswhereyoumightbeseeingalittlemorepressure,competitorstryingtothwarttheinnovationthatyou'rebringingout?Andwithinthatpoint,Iknowyoukindofgaveustheoutlookfortoolsfor2016,butIwasjustwonderingifmaybeyoucankindofgiveusaframeworkforcoresalesintheothersegmentstoo?Thanks.


Yes,wetypicallydon'tguidecoresalesbysegment,butIthinkyoushouldexpectwritingtohaveanotherverygoodyear,albeitwithoutthebenefitofVenezuela.Youshouldexpectbabytohaveaverygoodyearaswell.We'vegotterrificmomentumthere,withgreatinnovationcoming.Commercialproducts,Ithinkyoushouldexpectanotheryearofgoodprogress.

Andyou'llseeprobablythemostchangeinhomesolutions,whereRubbermaidhasawholeseriesofinnovationsthatarecomingtomarketlikeFRESHWORKS,likeFasten+Gowhichiseffectivelytakingourlunchboxconcept,andexecutinganadultversionofalunchboxforwork.Andso,thatwillcome.

Andtheninthebackhalfoftheyear,we'vegotanotherexcitingfoodstorageinnovationthatIwon'tdisclosenow,thatreallywillbevery,verycool,andfuntoseehowconsumersrespondto.Soyou'vegotthreeinnovationsinRubbermaidcomingthisyear.You'vegotabigyearinbeveragesaswecontinuetodevelopandbuildtheContigo,Avex,bubbaandRubbermaidbrandsinthisspaceso.

AndCalphalonisgoing--CalphalonandGoodywillgothroughcompleterelaunches.WesawsomeweaknessinCalphaloninthefourthquarter,aswe'retransitioningoutofproductlinesandintonewproductlines,whichstartflowinginhereinthemiddleofQ1.Sowe'vegotafullfaceliftgoingonCalphalon.Andwe'vegottheGoodybrandrelaunchwhichsetforthesecondquarterofthisyear.SoIthinkhomesolutionswillprobablytheplacewhereyouseethemostchange.

Wewillcontinueinthe--tocontinueoptimizetheRubbermaidconsumerbusinessbycontinuingtopullbackonconsumerstorage,thelessprofitableendofthatbusiness.SosomeofthepositivesthatIwasjustreferringto,willbepartiallyoffsetbycontinuedcontractioninthatportionofthebusiness,aswelooktorepositiontheRubbermaidbrandtoplayinareaswherethebrandcanbedifferentiated.Andthroughdifferentiationcomeshighergrossmargins,throughmarginscomeshigheraffordabilityandtoinvestinreallycreatetherenaissanceinRubbermaidthatwehopetodeliveroverthenextcoupleofyears.


Okay,great.Thanksfortakingmyquestions.

Operator :

JoeAltobellowithRaymondJames.

JoeAltobello (Analyst-RaymondJames):




Thanks.Hey,guys.


Hey,Joe.


Hey,goodmorning.Justacouplequickones.Iguessfirst,andMikeyousortoftouchedonthisearlier.IntermsoftheneedtoinvestbehindtheJardenbrand,itsoundslikeyoudon'tseeabigcatch-upperiodhere,giventhatthefirst$500millionofcostsaveswilldroptothebottomlineeffectively.ButhowdoyouthinkaboutyourneedtoinvestbehindtheJardenbrands?Andsecondly,howdoestheacquisitionimpactyourgoalofgettingtoA&Pspendofabout7%ofsales?


Yes.Soyes,letmetakethesecondpartofthequestionfirst.TheacquisitionwillnotimpactourdrivetogettheNewellRubbermaidportfolioto7%ofsales.AsIsaidin2016,we'llgetthatratioupto5%,probablyaround5.5%.Andso,wecontinueonthatjourneytothe7%threshold,andwethinkthathappensin2018,maybealittlebitofableedoverinto2019,dependingonhowtherenewalcostsavingsflowthroughtotheP&L.Sowedon'tseeanyinterruptioninthatdrive.

OntheJardenbusinesses,we'rejustgettingtoknowthesebusinesses.Iwilltellyou,allyouhavetodotounderstandtheJardenbusinessesandwhethertheyhavethealgorithmright,islookat5.9%coresalesgrowth,throughtheninemonthperiodin2015.Thatwouldsuggestthattherearealotofthingsgoingrightinthesebusinesses.Ofcourse,webelieveinbrands,andifwecanfindtheflexibilitybeyondthefirst$500milliontofindsavings,we'regoingtowanttoinvestbackintobrands.

Webelievethatourdesigncapability,whichisenablingthestep-upininnovationontheNewellRubbermaidsideofthefamily,isapplicable,morebroadlyacrossmorecategories.Inordertofundthat,we'llhavetoinvestsomemoney,toextendtheshouldersofthatcapability,tobeabletopotentiallyhelpsomeoftheJardenbusinesses.But--andofcourse,ifwecanstrengtheninnovationinthesebusinessesthroughthatdesigncapability,wearegoingtowanttoputadvertisingandpromotionmoneybehindit,tosimulateawarenessandtrialofthenewideas.SoIthinkiftherewasaplacewhereyoucouldorshouldexpectustoexploreinvesting,it'sinthatarea.

Andweofcourse,acrossthetotallandscapearegoingtocontinuetoinvestine-commerce.ForNewellRubbermaid,inthefullyear,oure-commercecontributionintheUStoourPOSgrowthwassomethingcloseto14%.WhichifyougoallthewaybacktoourAnalystDayinMayof2012,youcanlookatwhatwequotedthere,asthecontributiontorevenue.Andyouseethisbigstep-up.That'sinpartafunctionoftheinvestmentswe'vemade.

Weexpecttomakeinvestmentsacrossthetotalenterpriseine-commerce.We'llfundthatthroughanysavingsthatcomesbeyondthe$500million.Now,unlikewhatwedidwithProjectRenewal,wherethefirstcoupleoftranchesofsavingswentfullybackintothebusiness,youshouldnotexpectustodothatwithanythingbeyondthe$500millionthatwefind.Someofthisisgoingtoflowbacktoinvestorsformargindevelopment,beyondwhatwe'vecommittedtowiththefirst$500million.Andsomeofitwillflowbackintothebusiness.

Howthatratiobreaksdown?Yettobedetermined.Wehavealotofworktodotounderstandtheopportunities.IhavetheopportunitytomeetHopeMargala,andherteamupatYankeelastweek,justtosayhello,andgettoknowthem.They'vegotallkindsofreallyinterestingthingsgoingonthere.

Andso,Isuspectaswegetintothesebusinesses,wewillseeandfindallkindsofopportunitiesthatto




hopefullybybringingthecompaniestogether,we'llbeabletoplusup.JustlikeJardenhashistoricallydone,asithasboughtbusinessesandintegratedintothecompany.YoulookattheprogressonYankee.IusedtobeontheBoardtherein2005,2006.

They'vegotabigdynamicbusinessinEuropethatdidn'texistwhenIwasthere.Andthat'shappenedsincetheJardenacquisition.Sothereisplentyofevidencethatthatworkisalreadyunderway.Andthequestionis,canyouoverlaymorefundstoreallyunlocktheupsideinanyofthoseareasthatareparticularlyattractive?Andagain,tooearlytosaywhereyou'dplacethosebets,orwhetheryoucanfindthemoneybeyondthe$500million,althoughourjudgmenttellsusthere'smoretobefoundthere.Andweshouldgogetthatmoney,sowecanputitbackintothebusinessforgrowthacceleration.


Veryhelpful.Thanks,Mike.

Operator :

WendyNicholsonwithCiti.

WendyNicholson (Analyst-CitiInvestmentResearch):

Hi,goodmorning.Socouldyoutalkalittleaboutwritingandtheoperatingmarginsthere?Iknowyoutalkedaboutbothforeignexchangeandthehigherinvestmentspendingpressuringtheopmargininthefourthquarter.Butit'sbeenawhilesincewe'veseenmarginsgodowntothetuneof200bps.SoIknowit'sonlyonequarter,andstillfortheyeartheywereup,butI'mjustwonderingwherewearewithyourcommitmenttohigherspendinggoingforward,withtheChinalaunch,andallthatkindofgoodstuff?Justonthatbusinessspecifically,doyouthink25%iskindoftheright/peakoperatingmargin,ordoyoustillthinkthere'sroomformarginexpansionahead?


Inanygivenquarter,themarginwillfloat,dependinghowmuchinvestmentweputin.WesaidwespentmoremoneyinA&Pthanwewereplanningonspendinginthequarter,andwritingwasthebeneficiaryofthat,whichitisalmostalwaysis.The--butwedon'thaveatargetmarginforbusinesses.

Imean,anythingover[20%]inmyexperienceisareallyexcitingplacetobe,becauseifyougrow,youreallycreateatonofvalueso.ButIdon'tenvisionusdriftingdowntothatlevel.ButIalsodon'twanttotargetandpeg25%operatingincomemarginasatargetmarginforthewritingbusiness,becauseIfeellikewemightconstraintheopportunitiesforgrowth.Aswemovewritingintonewgeographies,there'ssortofanSG&Abubbleyouhavetoacceptinfrontofthe--aheadoftherevenuestream.Andourambitionistodeploythisportfolioasbroadlyasitisrelevanttodeployitoverthenext5to10years.

Sotherewillbeperiodswherethere'sacostofgrowthassociatedwiththatchoice,thatwillbecoveredbysomeotherbusiness.Justlikeyousawsomeofthebusinessescovertoolsinvestmentin2014.Youseeotherbusinessescoveredbabyinvestment,atthebeginningofthisyear.We'llnowseebabymarginscomebacktofundotherinvestmentsinhomesolutions.Andso,wemanagethismoneyverydynamically,andwedon'tletitgettrappedinanyparticularsegment.Theleadershipteamallocatesresource.Andinanygivenperiod,youshouldexpectoperatingincomemarginstoflexupanddown,dependingonwhatinvestmentbetswe'remaking.


Gotit.Gotit.Andtothepointofyourabilityto--Idon'tknow,reallocateresourcesandmanageitall,Ithinkyou'vetalkedinthepast,howSAPhashelpedtoacertainextent,andhowyouexpectSAPwillhelp




moregoingforward.ButspecificallytotheJardentransaction,IthinkoneoftheconcernsthatI'veheardfrominvestors,it'sjustthecomplexityofthatbusiness,andthescope,andthebreadth,andallofthat.Socanyoutellus--aretheyonSAP?Howquicklydoyouthinkitwilltaketobringthemontoyoursystems,sothatyoucanpreservethatgreatsenseofmanagementofthenumbers,andmanagementofthebusiness?

Andthen,justthelastthingonthattransactionspecifically,obviouslyinvestorshavekindofshownthatthere'safairamountofconcernaboutthetransactionandallofthat.Canyouaddress,ifinternallywithinNewell,whattheresponseamongtheemployeeshasbeentothetransaction?Obviously,Tarchettiisexcitedaboutit,butwhatabouteverybodyelse?Dotheyfeellikethey'regoingdownadifferentpaththantheythoughtyouwere?Thanks.


Yes,that'sagreatquestion.Butletmeanswerthatonelast,andmaybeJohncanprovidesomeperspective,sothatit'snotbiasedbyme,becauseI'mobviouslyveryexcitedbyittoo.Ithinkpeopleareveryenergizedbythis,becausethey'veseenwhat'shappenedhere.Andtheynow--mostpeopleareprobablythinking,gosh,there'sallkindsofopportunityformepersonally,togoworkindifferenttypesofbusinessesovertime,andIgetthesensethere'salotofexcitementaboutthis.

Thegroup'sbeenthroughatonofchange,sotheyunderstandhowto--andthey'reresilientasallheck,tobeabletoabsorbtherhythmofchangethatwe'vehadoverthelastnumberofyears.Butthere'salotofexcitement.There'sprideinthefactthatwe'recreatingsomethingbigandspecialthatcouldreallybevery,veryexciting.ButmaybeJohn,youshouldanswerthatlastpart,ratherthanme?


Sure.SoWendy,I'lladdsomecolorinasecond,withrespecttothesystem,sopartofJardenisonaversionofSAP.Butwe'refairlycomfortablethatwe'llbeabletogetthem,andgetourarmsaroundtheirsystemsrelativelyquickly.Obviously,theyhaveagreatbusiness,andthey'veruntheirbusinessextremelywell.Sotheycertainlyunderstandtheirnumbers,andwe'reencouragedcomingin,thatwecankindofgettoacommonnomenclature,andcommonvocabularyrelativelyquickly.OurITguysarereallyexcitedtoworkwiththem.Andcertainly,Ithinkwecangivethemsomeperspectiveonthingsthathaveworkedwellforus.

AndasMikesaid,it'sreallyconsistent,withtakingthebestofbothcompanies.SowealsohavesomethingsI'msurewecanlearnaboutthem,andgetalittlemoreleverageoutofoursystemsoverall.Socomfortable,we'llgetourarmaroundthebusinessfairlyquickly.Andcertainlyinourmeetingswiththem,theyclearly,theyhavearmsaroundtheirbusiness.Sowe'reverycomfortablewiththat.

Intermsoftheexcitement,certainly,it'snotsomethingIthinkthatmanyoftheemployeesexpected,butwe'reexcited.We'reexcitedabouttheprogressthatcertainlyMikeandtheteamhasmadeoverthepastfiveyearstoputusinthisposition,tobeabletorewritethefutureforthisCompany.Andthat'swhatpeoplearemostexcitedaboutyounow.

WelookattheopportunitynowwithJardenandthingsthatwethinkwecando,aswebroadenedoursetofcableabilitiesacrossanumberofdifferentnewcategoriesandnewbrands.AndasMikesaid,aswellasthesynergies,placeswhereJardenhasbeenverysuccessful,andwehaven'tbeenassuccessfulincertainchannels.Sothere'salotofexcitement.Weknowit'sgoingtobealotofwork.

It'sbeenalotofworkforanumberofpeopleforthepastthreeorfourmonths,butit'sgoingtobeagreatcombinationoverall.Soit'sa--we'realittlebitdisappointedmaybesomepeopledon'tseeitthatway.Butforus,weonlyseeupside.





Yes,Ithinkthemarket'sreactionI--I'mnotevengoingtofocusonittobehonestwithyou,becausetheopportunityisinfrontofus.It'snotinthemoment.Andso,theopportunityistobringthiscombinationtogether,andcreatethevaluereleasethatwillnaturallyoccur.Butmoreimportantly,strategicallytocreateoneoftheleadingconsumerbrandedcompaniesintheworld.

Andcertainly,aleaderinthedurablespace,wherenobody'sgoingtobeabletohavethecapabilitieswehave.We'llhavethe[affordability]toinvestinareallyadvantagedsetofbranddevelopmentcapabilities,thatshouldenableustotrumpthecompetition.We'llcompeteincategorycountrysalesagainstlessercompetitionisquitesmall.

Soifwewant--aswesetthiscompanyuptobemanagedthewaywemanagethingstoday,wherewe--aseniorgroupofpeople,leadersfromeachofthebusinessescometogethereveryyeartoallocateresource,asweallocatethoseagainstthebusinesseswiththegreatestrighttowin,weshouldseereallytremendousreleaseofvalueandgrowth.Andthatwillcreateavery,veryexcitingstorygoingforward.We'rearisk-onscenarioandarisk=offenvironmentatthemoment,becauseoftheleveragethatweneedtoraisetobringthesetwocompaniestogether.Andthatisfine.

Wehavetheclarity,thesecurity,andthesenseofwhatwillhappennext,togiveustheconfidence,thatwhatwe'vesaidaboutmaintaininginvestmentgrade,gettingthedealfinanced,gettingthedeal--havingthedealdeliverhighsingle-digitaccretioninyearone,andmid-teenstohighteensinyeartwo,andstrongdouble-digitaccretioninyearthree--wehavetheconfidenceandlineofsight,toallthemovingpartsinthatalgorithm,togiveusthesecuritythattherisk-onincreaseisappropriateforourCompany.

Themarketdoesn'thaveaccesstoeverythingthatwe'vegotaccessto.Andwedon'thavetheopportunitytotalkasexplicitlyaswe'dliketo,tothemarketuntilthetransactionisconsummated.Sowe'reinthatperiodwhere,there'suncertaintyinarisk-offenvironment,andI'msurethat'screatingpressure.Wewillovertime,inaverydeliberatewayarticulateourvisionfortheCompany,whatwebelieveisgoingtobepossiblethroughthecombination.AndIamcertain,wewillfindmoreopportunity,themoretimewehavetoengagewiththepartnersontheJardenside.

Andweintendtobringthebestofbothtogether,tobearonthiscollectionofcategoriesthatarereallyquitestrategic.Theopportunityisquitestrategic.Thesearelarge,growingcategorieswithunconsolidatedmarkets.Andthebrandportfolioispowerful,becausewehaveleadingpositionsinthosecategories.Andso,there'ssomuchroll-uppotential,eitherorganicallyorthroughacombinationoforganicandexternaldevelopmentthatyoujustsortoffeellikeakidinacandystore,intermsofthepotentialopportunitiesahead.

We'regoingtodothisdeliberately.We'regoingtodothiswithputtingthebestpeopleonthefieldthatwecan,tounlocktheupside.Andwecouldn'tbemoreexcitedbywhat'sahead.Butourlineofsightgoesbeyondthenext90or30days,it'sthenextthreeyears.Andit'sputtinginmotionthesetofchoices,thatIthinkwewillilluminateovertimeforthemarket.Butwearecertain,we'llunlockthevaluewehaverepresentedtoyou,ifnotmore.


Terrific.Thankyouverymuch.

Operator :

StephWissinkwithPiperJaffray.




LaurenWolf (Analyst-Citigroup):

Hi,thisisactuallyLaurenWolfcallinginforSteph.Switchinggearsalittlebit,we'veseensomesignificantmomentumoverthepastyearwithinthebabybusiness,inparticular.Doyouthinkthislevelofgrowthissustainableinto2016andbeyond?Andwouldyoubeabletoprovideanyadditionalcolorabouttheinnovationsthatyoumentionedearlier?


Yes,Iwouldn'tcountonthe10%typeofgrowthlevels,asbeingsomethingthat'ssustainableeveryquarter,butwe'vegotalotofinnovationcominginbaby.We'reexcitedaboutbaby.Thecombinationactuallypotentiallybringstogethersomereallyexcitingopportunities,particularlywithNukandBabyJogger.AndthereareacoupleofEuropean[soothing]businessesaswellthatJardenhas.Sowe'vegotsometremendousopportunityhere.

Weloveourbabybusiness.It'sadifferentbusinessthantherest,inthatonoursideofthefamily,we'veoutsourcedthemanufacturingtoastrategicpartner.SoourgrossmarginsaredilutivetothetotalCompanyperformance.Butbecausewedon'towntheassets,ourreturnoninvestedcapitalisquitehigh.It'sjustnexttowriting,intermsofitsvaluecreationpotentialifwegrow.

Sowhenyougrowbaby,youcreateatonofvalueforinvestorstotheROICof[RONA],returnonthatassetissohigh,justshyofwriting'slevels.Andwriting'slevelsaremargin-driven,baby'slevelsaredrivenbytheabsenceoffixedassets,andaveryshortvaluechainbecausemostofourretailpartners--somanyofthem,DI,directimportfromthepointofdepartureinAsia.Sowehaveaveryshortvaluechain,inventorychain.Sothisisagreatbusiness.Weexpecttogrowit.

IthinkifIwerebuildingamodelforthenextnumberofyears,I'dbebuildingsortofmidsingle-digitgrowth.Therewillbeamomentintime,whenChinaopensupasahugemarket.Therearenowcarseatlegislation,thereisnowcarseatlegislationinplace,notyetbeingenforced.Butthatwillcreateacarseatmarketovertime.Andwhenthathappens,wewanttoberightinthemiddleofthegrowththatwillcomewithbabygear.

OurbusinessissourcedfromChina,sowe'vegotgreatpresencethere.Sothatifandwhenthatmarketopens,wewillbeinthepositiontoparticipateinamorematerialwaythanwedotoday.Butthatwill--whenthatmomentcomes,thatwilltriggeradifferentlevelofgrowthfortheCompanyinthatsegment.ButIthinktherightplanningstanceismidsingles.

LaurenWolf (Analyst-Citigroup):

Thanks.That'shelpful.

Operator :

LindaBoltonWeiserwithB.Riley.


Hey,Linda.

LindaBoltonWeiser (Analyst-B.Riley):

Hi.Canyoujustcomment--younamedafewthingsaboutwhycashflow,operatingcashflowwasdownyear-over-year.Canyouremindus,howdoesthe$566milliondorelativetoyouroriginalguidancerange?Andthen,doyouhavesomeguidanceonthatfor2016,excludingJarden?Andtomeetthoseleverageratiotargets,doyouthinkyou'regoingtohavetostepupinitiativeslikeonworkingcapital?Or




doyouthinkyoucanjustgettothoseleverageratioskindofonthestatus,justoperatingcashflowwithoutanyspecialeffortsintheworkingcapitalarea?


Sure.Goodmorning,Linda.Sowegenerallydon'tguidewithrespecttocashflow,operatingcashflowoverall.Sowewon'tgiveyouanyguidancenumbersfor2016or2015.Iwillgiveyou--I'llgiveyouanexplanationwherewelandedfor2015versus2014.Essentially,wewereupabout2%ifyoutakeoutthe$70millionpensionpaymentthatwemadein2015,togetourpensionplanuptoabouta93%fundedstatus.Andthen,wehadalittlemorecashspendonProjectRenewalandsomeotherrestructuringcostsoverall.Intermsoffocusoncashgoingforward,themodelwasbuiltwithoutanyworkingcapitalimprovements.Butthereareplentyofworkingcapitalimprovementsforthetransaction,aswellasonourside.

Aswe'vetalkedaboutbefore,we--ourinventorieswecandoalittlebetterjobon.Overall,webuiltsomeinventoriesthisyearforgrowthandsoforth,butweknowwecandoabetterjobmanaginginventory,aswellasmanagingtheotherpiecesofworkingcapital.Sothatwillbeafocus.Itwillbepartofourincentiveplannextyearwe'vetalkedabout,becauseoftheimportanceofdeliveringoncashoverallforus,intermsofgettingourleverageratiodown,asMikesaidasquicklyaswereasonablycantothe3to3.5timesratio.Butagain,agoodfocusoncash,butwemadegoodprogressinQ4,aswelloninventory.SoI'mrelativelycomfortablethatwehavelineofsighttoanotherstrongyearfor2016.


JusttopunctuatethepointJohnmade,wewill--we'verecommendedtotheBoard,thatour2016,theNewellRubbermaid2016bonusprogram,theshort-termincentiveprogramincludeacomponentonoperatingcashflow.Andso,obviouslycashflowmattersalot,andoperatingcashflowmattersalot,inthecontextofthisdeal.Sowewillputsomeskininthegameforouremployees,withrespecttoreallymovingtheneedleonoperatingcashflow.

LikeJohnsaid,wedon'tguide,butyoucanbeyouassuredit'sgoingtobeafocalpointforus.There'salotofopportunityinworkingcapitalasI'vesaidovertime.Andthisisthetimetogogetit.Wehavenotassumedanybenefit.We'vejustblendedtheprogramsthatexistedfrombothcompaniesinourdealeconomicassumptions.

Soyoucanrestassured,cashiskinginthecomingyears,andreallyoughttobeallthetime.Andyoushouldexpectustoreallymovetheneedleonthisovertime.AndIagain,Ithinkwe'vegotaveryclearlineofsighttobeingabletogetdownintotheleverageratiorangethatwe'vecommittedto.AndI'mhopefulthatwecandothat,closertothetwoyearhorizon,thanthethreeyearhorizon.Butourcommitmentistodothatwithintwotothreeyears.

LindaBoltonWeiser (Analyst-B.Riley):

Great.Thanksverymuch.


Yes.

Operator :

StevePowerswithUBS.





Hey,Steve.

StevePowers (Analyst-UBS):

Hey,great.Thanks.Maybejustcarryonthecashtheme.CanyoutalkalittleabouthowthedeconsolidationofVenezuelaimpactstheoperatingcashflowsourcesandusesoutlookthatyou'dcommunicatedbackinSeptember?

Imean,obviouslyFXhasshiftedaswell.Butyouhadsaidabout$5billionbetween2016and2020,withabout$2.4billionuncommittedafterCapExanddividendsandbaselevelrepurchases.AndI'mjustcurious,obviously,beforeconsideringJarden,iftheoutlookismateriallydifferentnow,withVenezuelacarvedout?


Yes.Sowithrespecttothecashgenerationandthesourcesanduses,it--thecashflowwrite-off,forusgoingforward,thedifferencewillbeabout$50milliononanannualbasis.Soitdoesn'tmateriallychangethenumbersthatweputtogether,intermsofthesourcesandusesofcashoverall.


TheotherthingI'dsayisthatallofthemodelingwedidwiththeratingagencies,allthemodelingwedidonthedealeconomics,assumedVenezuelaout.Soeverythingthatwe'vearticulatedexternallyexcludesVenezuela.


Allright.That'sgreat.Thankyouverymuch.Andthenjust,Iguess,onecleanuponwritingifIcould.SoIthinkgrowthinthesegmentwas6%thisquarterex-Venezuela,andyoucancorrectmeifthat'swrong.Ithinkyousaidhighsingle-digitsinNorthAmerica,whichimpliesthatgrowthinternationallyex-Venezuelawasverymodest.Andjust,anycommentaryonthat,andhowyouexpectsortofNorthAmericaversusinternationaltotrendin2016,thatwouldbehelpful?


Yes.Sowehavethreedifferentwritingbusinesses.Wehaveafinewritingbusiness.WehavetheDymobusiness,whichgetsconsolidatedinourwritingsegment,andthenwhatwecallwritingandcreativeexpression.

Writingandcreativeexpressionisgrowingvery,verywell.ThisiswhereSharpieandPaperMate,andExpoandPrismacolor,theyallliveinthatcluster.Finewritinghasbeenlesspositivetogrowthrate.Andyourobservationisaccurate,growthinEuropewasnotasstrong,aswebelieveitcanbeovertime.Inpartbecause[WACE]growth,orwritingandcreativeexpressiongrowthwasoffsetbyfinewritingdeclines.

Andso,we'reinthemidstofrepositioningourfinewritingportfolioinEurope,pullingbackonsomeofthelowendportionsofthatportfolio,sothatwefocusbrandslikeParkerandWatermanonthehighendportionsofthatportfolio.SothatiswhatcontributedtoEurope'ssortofmodestwritingresults.TerrificgrowthonhewritingandcreativeinvestigationinmarketsliketheUKandinFrance,offsetbyfinewritingcontractioninthesamegeographies.Overtime,youshouldexpectourwritingbusinesstobecomemoredominantandpresentinthecore,whichiswritingandcreativeexpression.

We'vegotaterrificplaninplaceforourwritingbusinessin2016.Ithinkyoushouldplanforlikeperformanceinyourmodelsfor2016,aswedeliveredin2015ex-Venezuela.Andwhilewehaven'tquotedaspecificnumberforwritingex-Venezuela,andyoushouldn'texpectusto,you'reinthegeneral




ballparkwithyouranalysis.


Okay,great.Thankyouverymuch.Helpful.

Operator :

AndyourfinalquestioncomesfromRupeshParikhwithOppenheimer.


Hi,Rupesh.

RupeshParikh (Analyst-Oppenheimer):

Goodmorning.Thanksforfittingmein.Somyfirstquestion,Mike,hastodowithinnovation.Throughoutthecall,youmadealotofcommentaryaboutalltheinnovationyouexpectthisyear.Isthereanywaytoquantifytheimpactofinnovationthisyear,maybeversustheprioryear?Andafollow-upquestion,asconsumerscontinuetomigratemoreonlinetobuytheirproducts,howdoesyourdeliveryofe-commerce--orhowdoesyourdeliveryofinnovationchangewiththatdynamicofconsumersbuyingmoreonline?


Yes.Sogreatquestions.I'llgiveyousomeperspectiveoninnovation.Sowhenweevaluatetheimpactthatinnovationishavingonourbusiness,welookatwhatwecallthevitalityrateortheinnovationrate.Andwemeasureinnovationrate,asthepercentageofourrevenuethat'sbeentouchedbyinnovationlaunchedinthelastthreeyears.

Andwhenwestartedin2013withthenewmodel,ourinnovationrateswerequitelow,inthelowteenstypeoflevel.Andasweenter2016,we'regettingveryclosetowhatwehaveasourlong-termobjectivefortheinnovationrate,whichis30%.Andso,thisisavitalityrateoraninnovationratethatthebestconsumergoodscompanieswouldconsiderthegoldstandard.Andwe'rewellonourwaytogettingthere.Wewillgettherein2016,withthepipelineofideasthatarecomingtomarket.


Okay.Great.Andthen,maybejustonehousekeepingquestion.Isitpossibletogetthe2015grossmarginrateandSG&Amarginrate,excludingVenezuela?


Wedon'ttypicallycommunicatethat.ButI'llletNancyandyouguystrytotriangulatearoundwhatthatwouldbe.Butthewayyoushouldthinkaboutit--it'snotthatbigofadeal,withrespecttoitsimpactonoverallmargins.Itmaybeslightly--mayhurtusabitonoperatingmargin,butnotatgrossmargin.

SoIthinkitactuallymayhelpuswith(inaudible)gross,andhurtusinoperatingincomemargin,becausewedon'tspendatonofmoneyinA&Pthere.Butjustmodestly,notasmuchasyoumightthink.


Okay,great.Thankyou.

Operator :

Thisconcludesourquestion-and-answersession.IwillnowturnthecallbacktoMr.Polkforclosing




remarks.


Well,thankyouverymuch,Leanne.AndthankyoutoallonthecallforyourinterestinourCompany.Andmostimportantly,thankyoutoalltheNewellpeoplewhoworkedtirelesslytomaketheseresultshappen,andtoourfuturecolleaguesatJarden,whohaveworkedtirelesslyaswelloverthelastfewmonthswithourteamtopullthistransactiontogether.Ithinktogether,we'regoingtomakeagreatteam.

Thankyouverymuch.

Operator :

Areplayoftoday'scallwillbeavailablelatertodayonourwebsite,Newellrubbermaid.com.Thisconcludesourconference.

Allrightsreserved(c)2014TheStreet,Inc.

Pleasefeelfreetoquoteupto200wordspertranscript.Anyquoteshouldbeaccompaniedby"ProvidedbyTheStreet"andalinktothecompletetranscriptandwww.thestreet.com.Anyotheruseormethodofdistributionisstrictlyprohibited.

THEINFORMATIONCONTAINEDINEACHWRITTENORAUDIOTRANSCRIPT(the"TRANSCRIPT")ISAREPRODUCTIONOFAPARTICULARCOMPANY'SCONFERENCECALL,CONFERENCEPRESENTATIONOROTHERAUDIOPRESENTATION.THETRANSCRIPTSAREPROVIDED"ASIS"AND"ASAVAILABLE"ANDTHESTREETISNOTRESPONSIBLEINANYWAYNORDOESITMAKEANYREPRESENTATIONORWARRANTYREGARDINGTHEACCURACYORCOMPLETENESSOFTHETRANSCRIPTSASPRODUCED,NORTHESUBSTANCEOFAPARTICULARCOMPANY'SINFORMATION.

THETRANSCRIPTSAREPROVIDEDFORINFORMATIONALPURPOSESONLY.THESTREETISNOTPROVIDINGANYINVESTMENTADVICEORENDORSINGANYPARTICULARCOMPANY.

Newell Rubbermaid (NWL) Earnings Report: Q4 2015 ... · Thank you. Welcome, everyone. Thank you for...

Documents

Transcript of Newell Rubbermaid (NWL) Earnings Report: Q4 2015 ... · Thank you. Welcome, everyone. Thank you for...