Mark Ketchum - Chief Executive Officer, President, Director and Interim Executive Group President of Office Products & Cleaning for Organization & Decor Juan Figuereo - Chief Financial Officer and Executive Vice President Nancy O'Donnell - Vice President of Investor Relations

William Chappell - SunTrust Robinson Humphrey Capital Markets Lauren Lieberman - Barclays Capital Constance Maneaty - BMO Capital Markets U.S. Mark Rupe - Longbow Research LLC John Faucher - JP Morgan Chase & Co Joseph Altobello - Oppenheimer & Co.

Inc. Chad Bolen - Raymond James William Schmitz - Deutsche Bank AG Jason Gere - RBC Capital Markets Corporation Wendy Nicholson - Citigroup Inc Andrew Sawyer - Goldman Sachs Group Inc.

Christopher Ferrara - BofA Merrill Lynch

Thank you. Good morning, everybody.

Welcome to our third quarter earnings call. I'm Nancy O'Donnell, and with me today are Mark Ketchum, our President and Chief Executive Officer; and our Chief Financial Officer, Juan Figuereo.

Before we begin, please note that this conference call includes forward-looking statements. These statements are made on the basis of our views and assumptions as of this time and are not guarantees of future performance.

Actual results may differ materially. If you refer to our most recent 10-K, 10-Q and 8-K reports, you will find cautionary statements and risk factors, which provide a more detailed explanation of the inherent limitations in such forward-looking statements.

We undertake no obligation to update any such statements made today. Also we will refer to non-GAAP financial measures.

Please refer to the non-GAAP to GAAP reconciliation's in our earnings release and on the Investor Relations section of our website. Thank you.

And now I would like to turn the call over to Mark Ketchum.

Thank you, Nancy. Good morning, everyone, and thank you for joining us today.

I'm pleased to report that Newell Rubbermaid delivered very solid results this quarter. We generated core sales growth in the mid-single digits, healthy gross margin expansion and year-over-year normalized EPS growth, all consistent with our year-to-date trends as well.

I wish we were getting a little more help from the economies in North America and Western Europe, but we're not waiting for these economies to turn. We are making our own momentum.

As a result, we are on track to deliver our full year financial targets, and we continue to advance our long-term growth strategies. We also made good progress on the implementation of our European Transformation Program during the quarter, and we completed four out of the five legs of our Capital Optimization plan.

More on this later. Third quarter core sales increased 5.7%, more than a full percentage point higher than our first-half growth rate.

Our growth was broad-based, with virtually all of our business units posting year-over-year core sales growth. We are winning in the marketplace on the strength of compelling new product innovations, impactful advertising and consumer promotions and continuing investments in strategic sales support.

Our constantly improving consumer insights, shopper insights, and targeted marketing are helping us drive more consistent and sustainable sales growth. As expected, our growth was led by our International businesses, which grew 11% in the local currency during the quarter.

We're seeing particular strength in the faster-growing, emerging markets of Asia, Latin America and Eastern Europe, where several of our business units are growing strong double-digits. Increasing our international exposure is a key element of Newell's long-term growth strategy.

And we will continue to invest strategically to expand our business in these higher growth regions. Domestic core sales growth for the quarter was a very respectable 4%.

Gross margin was once again a good story for us, expanding 70 basis points to 38.1%. Our manufacturing and supply chain teams continue to do a good job, driving productivity in our own plants and with our finished goods suppliers.

Operating income margin remained healthy at 13.3% of sales, and normalized EPS rose 11% to $0.42. We continued to deliver on a growth trifecta: top line sales growth, gross margin expansion and bottom line earnings improvement.

These results are a further validation of our business model and our long-term growth strategy. Let me take a few moments now to discuss some of the highlights from our three operating segments.

We were pleased to see our Home & Family segment return to growth this quarter, posting 4% core sales growth. The biggest contributor to this core's improvement was the dramatic growth of our Beauty & Style business.

As we told you on our last call, Goody has substantially expanded distribution in shelf space in the U.S. as well as gaining new distributions in several U.K.

retailers. These gains were driven on the strength of superior shopper understanding and innovation, including the highly successful Simple Styles line of hair accessories.

As a result, Goody turned in a second consecutive quarter of approximately 20% core sales growth. By the way, please take note of the additional pages that we've added to our online earnings presentation deck this quarter.

We've described many of the innovations that are referenced in my remarks, starting with Simple Styles on Page 8. Rubbermaid Consumer GBU generated a mid-single digit core sales increase, driven by increased distribution in the U.S.

and Brazil and the launch of innovative new products, including the premier extension of Easy Find Lids and the Reveal Microfiber Mopping system. Many of you saw the Reveal Mop at our Analyst Day back in May, and will remember the compelling value proposition it offers to consumers namely: better cleaning efficacy, less waste, and a lower cost versus the competitive offerings.

In early days since the launch of Reveal in August, we're seeing strong sell-through at retail, and we've been investing in advertising and promotion to increase awareness and trial. In fact, our current Reveal TV ad was recently rated one of the top 10 most effective ads that was launched in the third quarter by ACE Metrix.

But the core business also turned in mid-single digit core sales growth this quarter. This is a strong showing, particularly in this soft economy.

We made a conscious decision several quarters ago to ramp up our strategic SG&A investment to restart level or growth. We are applying our proven methodology of consumer-driven innovation to deliver style, value and a simplified purchase process.

Our latest new product launch, Accordia Cellular lines, has been a big success by offering the most energy-efficient shades on the market in more than 200 fabric choices. In addition, we are gaining meaningful shelf space with the rollout of our new size and store machines, which facilitate easy custom sizing of off-the-shelf offerings, right there in the store while you wait.

We were also pleased to see the Baby & Parenting business return to growth, delivering low single-digit core sales growth this quarter. This GBU has been challenged for several quarters, but we are now starting to see positive results, particularly overseas.

This international growth reflects the successful rollout of some great new Aprica products, expanded teutonia distribution and selected pricing initiatives on teutonia products in Europe. In addition, we are benefiting from a meaningful expansion of the Graco presence in Brazil as we respond to demand created by the recently enacted Car Seat Legislation in this country.

Meanwhile, the value-conscious North American consumer continues to respond favorably to the Graco Grow With Me platform of convertible car seats and feeding chairs. All in all, a very solid performance from Home & Family.

Our Office Products segment delivered a strong quarter with core sales growth of nearly 8%, reflecting positive contributions from all GBUs. Fine Writing led the way with a double-digit core sales improvement as our investments to accelerate growth in China, Russia and other emerging markets are paying off.

In North America, we had a good back-to-school season. The consumer showed up, albeit a little later than usual.

The back-to-school consumers were more deliberate in their spending, going beyond price in their assessment of value. This validates our assumption that the value equation includes innovation and news in the category.

These are areas where we win. So we had a solid performance at retail and secured market share gains across our key brands.

In Everyday Writing, we generated better than category results, gaining share in the value-added segment, which is the heart of the Paper Mate brand. Our strongest offerings for back-to-school including the Paper Mate design, Paper Mate gel and Paper Mate biodegradable pens.

Our Markers and Highlighters business continued its strong performance in Q3, leading share at back-to-school with Sharpie, Sharpie Accent and Expo. Our top three initiatives this quarter, Expo Washable dry-erase markers, Sharpie Pen Grip, and Sharpie Liquid Pencil, all performed well.

The office technology GBU had a good quarter with high single-digit core sales growth. In mimio interactive teaching platform, our latest generation offering, has had a very positive reception since launching this summer.

Mimio generated 40% plus growth for the quarter, gaining share in this fast-growing category. In fact, mimio classroom was recently rated the number one interactive whiteboard solution by Scholastic Administrator Magazine.

This should help increase purchase consideration by school administrators in the U.S., where we estimate there are 3.5 million classrooms and yet less than 30% have installed interactive teaching technology. The DYMO Labeling business also have generated healthy growth during Q3.

The industrial channel was particularly strong, benefiting from the success of our distribution partnership with 3M. Our Tools, Hardware & Commercial product segment performed well this quarter, turning in 6% core sales growth.

We continued to see robust growth in many of our International businesses where the economies are growing faster than in the U.S. The Construction Tools & Accessories GBU posted double-digit core sales growth this quarter, led by particularly strong growth in Brazil and Australia.

Brazil continues to be a major growth market for our Hand Tools business, and we're investing strategically to advance our global expansion into other emerging markets. The Commercial Products business was a little soft this quarter, as order patterns reflect our Commercial customers' cautious views about the speed of the economic recovery in the U.S.

and Western Europe. On the other hand, the Industrial Products & Services GBU extended its strong 2010 first-half trends with high single-digit core sales growth.

We are gaining traction with new products such as the T2 reciprocating saw blades in developed markets, and the Q88 bandsaw blade in the Asian markets. With patent-protected technology, it ensures longer blade life and faster cutting, we are beating out the competition in gaining market share.

And our investments in more feet on the street are helping to drive top line growth across all of our global markets. Overall, we're very pleased with the results in all three operating segments.

As I indicated upfront, we've also made good progress on two major strategic initiatives announced mid-year. The first is our European Transformation Plan, which was announced in June.

You will recall, this targeted initiative is designed to simplify our business and improve profitability, with the goal of a 10% or greater operating income margin in Europe by the end of 2012. Work has already begun on several of the key profitability enhancing initiatives, including pricing architecture, gross-to-net optimization and organization restructure.

Although we're still early in this three-year project, we already seeing the initial payback from efforts that we jump-started in January. Year-to-date operating margin in EMEA is 8.5%.

And while we don't expect to maintain quite that pace for the full year, we believe we will end 2010 with a 6% to 7% margin in Europe, our best in at least 10 years. We've also identified our new EMEA headquarters location in Geneva, and expect to start relocating key personnel early next year.

All affected employees should be operational in the new site by Q4 of 2011. Once completed in 2012, the European Transformation Plan is expected to generate $50 million to $60 million of annual profitability improvement.

Our second major strategic initiative was our Capital Structure Optimization Plan, announced in August and substantially completed during the third quarter. This plan has already resulted in meaningful improvements to our balance sheet.

Juan will provide more details in his remarks, but here is the executive summary. We have largely eliminated potential future share dilution associated with our convertible notes and have significantly reduced our interest expense.

The end result is a simpler, more shareholder-friendly capital structure that will make it easier for investors to focus on our underlying business and our long-term growth strategy. Now before I turn the call over to Juan, let me briefly review our outlook for the rest of the year.

Since we last updated our outlook in July, we have seen little change in the economic environment. There is still nothing to indicate a material improvement in the near-term macroeconomy of our largest markets: North America and Western Europe.

Economic indicators are mixed at best, and consumers and retailers are still cautious, primarily due to high unemployment levels. Consequently, we continue to expect a flattish economy through the end of the year and likely well into the 2011.

Nonetheless, we remain confident in our full year 2010 outlook. Our strong year-to-date results are proof that we can grow even in the absence of an economic tailwind.

New product innovations are resonating with consumers, and we are gaining additional distribution, shelf space and market share. Strategic marketing in sales investments are driving the sales list that we've seen across our portfolio.

We have built strong momentum across our brands and we believe will drive repeatable core sales growth in the future. Year-to-date, we generated core sales growth of 4.6%, and we continue to expect mid-single-digit core sales growth for the full year 2010.

We're also maintaining our forecast of the 75 to 100 basis points of gross margin expansion for the year, reflecting the positive impact of ongoing productivity and improved mix, partially offset by higher raw material and source goods inflation. And lastly, we're maintaining our full year normalized EPS guidance range of $1.40 to $1.50.

Although based on our strong year-to-date results, we're now confident we will come in closer to the top end of that range. And with that, let me turn the call over to Juan, to walk you through the financial details.

Thank you, Mark. As usual, I'll start with the review of the income statement on a normalized basis.

Net sales for the quarter were $1.5 billion, a 2.6% improvement versus the prior year. Core sales, which excludes the impact of foreign currency and product line exits increased 5.7%.

Foreign currency had a negative impact of 1.1% on sales during the quarter, and the carryover impact of 2009 product line exits reduced sales by approximately 2%. In North America, net sales were up 2%, driven by increased shelf space and share gains in most of our business units.

Core sales increased 4% while product line exits reduced sales 2.6%, and foreign currency had a positive impact of 0.6%. Our International business, led by our APAC region, continued to gain momentum with reported net sales growth of 5% or 11% in local currency.

On a year-to-date basis, we reported net sales of $4.3 billion, a 3.2% increase versus the year-ago period while core sales increased 4.6%. We generated gross margin of $567 million or 38.1% of sales, an increase of 70 basis points compared to the third quarter of 2009.

The biggest contributors to the improvement were productivity gains resulting from a number of initiatives, including Project Acceleration, higher overhead absorption and favorable product mix driven by product innovation. These positive factors offset significant input cost inflation in the quarter.

Year-to-date, we generated gross margin of $1.6 billion or 37.9% of sales, an increase of 130 basis points over the prior year. Although this would appear to be ahead of our guidance, the fact is we are on track to deliver our full year gross margin target improvement of 75 to 100 basis points.

I'll provide more details later. SG&A.

On a normalized basis, SG&A expenses were $370 million or 24.8% of net sales compared with $350 million or 24.2% of net sales last year. Brand building, which increased about $18 million; and other strategic spending, which increased about $7 million accounted for the majority of the increase, which was partially offset by foreign currency impact of $4 million.

Year-to-date, normalized SG&A expenses were $1.1 billion or 24.6% of sales. We anticipate a slightly higher rate of strategic brand building spend in the fourth quarter, aimed at supporting new product launches and seasonal promotions.

Operating income on a normalized basis was $198 million or 13.3% of sales. Gross margin expansion during the quarter was partially offset by brand and volume building SG&A expense.

On a year-to-date basis, our normalized operating income was $570 million or 13.3% of sales versus 12.8% of sales last year. Interest expense for the quarter and year-to-date was $30.3 million and $95.5 million, respectively, representing a decrease versus the previous year of $5.4 million in the quarter and $11.1 million year-to-date.

This improvement was driven by lower average debt levels and a more favorable interest rate environment. During the quarter, we made substantial progress implementing our Capital Optimization Plan, a series of transactions that has given us a simpler, more shareholder-friendly capital structure while also allowing us to take advantage of this historically low interest rate environment.

The plan reduces our interest expense and largely eliminates potential future share dilution associated with our convertible notes. There were five key steps in the plan, four of which we completed during the quarter.

First, we raised $550 million of straight debt at an attractive 4.7% rate. Next, we used the proceeds from the new debt, along with cash on hand and short-term borrowings, to complete a tender offer for our standing 10.6% notes, which eliminated $279 million principal amount of high-coupon debt.

Shortly thereafter, we successfully completed an exchange offer for the convertible notes, taking out $325 million or 94% of the outstanding principal amount, resulting in the issuance of 37.7 million shares. Additionally, we unwound the related call spread we had put in place by settling the underlying warrant and option arrangement, resulting in a net cash inflow of approximately $70 million.

The last step in the optimization plan is the accelerated stock buyback of $500 million in outstanding common stock, which started early in August. That's $500 million.

We received 25.8 million shares on August 10 and expect to receive an as of yet undetermined amount of additional shares at settlement upon completion of the program. We expect the accelerated stock buyback will be wrapped up by early 2011.

Going forward, our expectation is that the interest savings from this plan will more than offset the estimated share count dilution resulting in about $0.03 to $0.05 of EPS accretion in 2011. More importantly, simplifying the capital structure will make it easier for investors to focus on our underlying business and our long-term growth strategy.

As it relates to income taxes, our continuing tax rate in the third quarter was 30.5% compared to 31.9% last year. During the quarter, we reversed approximately $63.6 million in tax accruals in connection with the final resolution of a multiyear tax examination and the related release of claims against our company.

The favorable impact of this item is not included in the aforementioned normalized continuing tax rate. Our full year continuing tax rate is projected to be between 30% and 31%.

Our normalized EPS for the quarter came in at $0.42, an 11% increase over last year. This $0.42 excludes certain positive and negative events that we believe are not indicative of our ongoing results.

They relate to the previously mentioned tax settlement, restructuring charges, dilution related to our convertible notes for the portion of the quarter in which they remain outstanding and the impact of our Capital Structure Optimization Plan. Please allow me a few moments to add a little bit more clarity with regards to the more significant normalized items in the quarter.

As previously mentioned, the company resolved a multiyear income tax examination during the quarter. The final liability was less than have been reserved, resulting in a $63.6 million or $0.21 per share non-recurring tax benefit.

The impact of this benefit has been excluded from our normalized EPS. Normalized EPS also excludes $0.05 per share, reflecting $16 million of Project Acceleration restructuring and related impairment charges and $7 million of restructuring related costs associated with the European Transformation Plan.

Restructuring charges included in the prior-year quarter were $27 million or $0.07 per share. Additionally, $0.04 of GAAP dilution is excluded from normalized EPS related to the convertible notes we issued in 2009.

This represents the dilution impact for approximately two and a half months. Over 90% of these notes were extinguished during the third quarter of 2010 and therefore, will not have a similar effect in future periods.

Please note that due to the call spread feature associated with these notes, the economic dilution would have been only $0.01. In future quarters, the dilution impact from the $20 million stock portion of the notes that remain outstanding is not expected to be material, and as such, will not be excluded from normalized results.

As a result of the Capital Structure Optimization Plan transactions, we took a $219 million charge to earnings this quarter, primarily reflecting the repurchase of outstanding debt at greater than book value. This charge has been excluded from normalized results.

And lastly, due to the stagger timing of the share repurchase and share issuance pieces of the Capital Structure Optimization Plan transaction, our normalized EPS and diluted average shares outstanding have been adjusted to exclude the impact of the transaction. We look forward to the fourth quarter when we will no longer have the convertible debt noise in our reported numbers.

Q4 normalized earnings will not exclude the dilution from the convertible notes nor will it exclude the impact of the Capital Structure Optimization Plan, which together, we believe will be accretive by about $0.01. I know you look forward to that simplification too.

Cash flow. We generated $195 million in operating cash flow during Q3, in line with our expectations and a $133 million decrease versus last year's $328 million.

The prior-year number reflected a significant reduction in working capital that did not repeat this year. CapEx for the quarter was approximately $39 million versus $37 million last year.

During the quarter, we made a $50 million voluntary pension contribution. Now I will turn to our segment information.

Home & Family net sales were $609 million, a 2% increase versus last year. Core sales in this segment increased 4%.

ForEx [ph] contributed a positive 0.5%, and the impact of last year's product exits reduced sales by 2.5%. Home & Family operating income was $76 million or 12.5% of sales, a decrease of 160 basis points in operating income margin as compared to last year.

Most of the decrease was due to the timing of new product launches across the Home & Family portfolio, which as we had previously indicated, was skewed to the back half of the year. Therefore, Q3 SG&A for this segment increased by about $6 million versus last year, driven by the related brand building and strategic spending.

As we look forward, we foresee some margin pressure as a result of the increased input cost in this segment. We will look to offset this cost pressure going forward through a combination of productivity and potential pricing actions.

In our Office Product segment, Q3 net sales were $450 million, a 0.4% increase versus last year. Core sales grew by 7.5%, primarily attributable to strong results across all of the segments business units, with product line exits reducing sales by 3% and a favorable ForEx of 4.1%.

Office Products operating income was $71 million or 15.7% of sales, an increase of 370 basis points in operating margin from a year ago. Most of the increase was driven by better mix and productivity initiatives that expanded gross margins.

Total SG&A for this segment was essentially flat versus the year-ago quarter. Brand building and strategic SG&A spend across the segment increased approximately $26 million, while structural SG&A spend decreased as a result of Project Acceleration.

Tools, Hardware & Commercial products. In this segment, net sales were $428 million, a 6% increase over last year, driven by core sales growth across all GBUs.

Total core growth for the segment was also 6%, as ForEx had a negligible impact in the quarter. International growth, as Mark said earlier, has been the primary driver of growth in this segment, with significant gains of over 16% excluding currency.

Double-digit growth was realized in all regions, again, excluding currency. EMEA was up 15%, Latin America, 18%, APAC, 19%.

Operating income was $71 million or 16.5% of sales, a decrease of 210 basis points in operating margin from a year ago. The decrease was mainly driven by higher SG&A.

Total SG&A for this segment increased $13.7 million. Brand building and strategic SG&A spend across the segment increased approximately $10 million.

Now for the 2010 outlook. As Mark indicated earlier, on the strength of our year-to-date performance and on our continued confidence for the fourth quarter, we are confirming our outlook for full year core sales growth of mid-single digits.

We still anticipate a 1% to 2% decline from the impact of last year's product line exits and a modestly negative impact from ForEx. Our guidance for full year gross margin expansion of 75 to 100 basis points remains unchanged, although we now expect to be closer to the top end of that range.

In the fourth quarter, we expect gross margins to be impacted by the timing of productivity projects, lower overhead absorption due to planned and seasonal reductions in inventory levels and more aggressive disposal of exits and obsolete inventory. As a result, Q4 gross margin expansion will be significantly less than the year-to-date trend.

Again, we are on track to deliver the high side of our gross margin expansion guidance for the full year. SG&A spend for the full year is still expected to be at or around 25% of net sales on a normalized basis.

Interest expense for the year is expected to come in around $120 million, a decline of approximately 15% compared to 2009, reflecting lower debt levels and lower interest rates for the remainder of the year. As stated earlier, our effective tax rate for the year is projected to be between 30% and 31%.

We are re-affirming our outlook for normalized EPS of between $1.40 to $1.50 per share. Again Mark already said it, I'll repeat it, we currently think we will be closer to the high end of that range.

We anticipate 2010 pretax restructuring and related charges of between $75 million to $95 million or $0.20 to $0.30 per share associated with Project Acceleration and the European Transformation Plan. Our normalized EPS outlook of $1.40 to $1.50 excludes these charges.

We are maintaining our expectations for 2010 operating cash flow of more than $500 million. After $70 million to $100 million in restructuring cash payments, capital expenditures are expected to total between $160 million and $170 million, resulting in free cash flow well in excess of $300 million.

In conclusion, we continue to be encouraged by the evidence we're seeing in the marketplace that our strategy is working with customers and consumers. We continue to gain share, increase shelf space, and gain new customers.

While we anticipate some continuing headwinds from the slow pace of recovery in North America and Europe, our businesses are gaining momentum, and we are investing behind that momentum. We're feeling confident about our ability to meet our 2010 target and create value for our shareholders.

With that, I'll turn the call back over to Mark for his final comments. Mark?

Thanks, Juan. Before we open the call to questions, I would like to thank all of our employees for the hard work that is represented by our strong year-to-date results.

Knowing that there would be little help from the economy, I challenged the organization to make our own momentum to grow the top line, and the organization has risen to that challenge. By focusing on the levers that are within our control, we have successfully delivered core sales growth, healthy gross margin expansion and year-over-year EPS growth.

There's still much to do, and we know that there will be challenges to overcome. However, I remain confident that Newell Rubbermaid is better positioned for growth now than it has been at any other point in the company's history.

The progress we have made over the past several years in transforming the portfolio, the business model and the supply chain is becoming evident in our financial results. And with an unwavering focus on consumer-driven innovation, brand building and best cost, I believe we can and will continue to drive profitable growth well into the future.

So with that, I'll ask the operator to open up the line for questions.

My first question is just housekeeping. One, could you actually just give us a share count number to use for the fourth quarter, just to simplify everything?

And then my second question, Mark, is on the European restructuring. I know you said that year-to-date your margins are running 8.5%-ish.

And even though that's going to be a little bit weaker in the fourth quarter, my understanding is that you've kind of just started all of your restructuring initiatives. So to get from sort of an 8% run rate so far, up to double digits, doesn't seem that heroic.

And that's great. What I'm wondering is can the European margins get, not just to double digits, but sort of to low- to mid-teens as you work through all your restructuring?

I'll start with the shares number. You should use to 294.

And to your second question, Wendy, so let me -- a little more background on Europe. Our European business is heavily skewed Office Products.

And as you know, as in the U.S., Office Products always has a margin peak in the second quarter as they build inventory and ship out the back-to-school. And that's why the 8.5% won't be 8.5% for the full year.

It's inflated, if you will, by that effect. But you have 6.5%, 7% or something in that range, it will be the best that we've done in at least in 10 years.

So your question is certainly valid. Now the thing that -- while we announced this transformation plan in June, we had actually started on other elements of the transformation plan.

But we couldn't announce it in June because, as you recall, there was significant work that we had to do with works councils in terms of prior notification and in terms of putting together the plans and intentions and the business case. And therefore, we couldn't announce that even though we were working on some of the elements that I referenced in my call.

Elements like the gross to net and the pricing architecture and those kinds of things. We were actually working on those as early as January.

So we actually did get a jumpstart from January, even though we didn't announce it until June, because of the legal issues I just referenced. So going forward, we're off to a great start on that.

Certainly, our stretch targets are above 10%, and time will tell whether or not we can get there. It will depend on competition, how rapidly we try and expand some into some new businesses, which also usually takes an investment that would dilute the earnings.

But we're quite confident we'll hit the 10%, and we're aspiring to do better.

Mark, I know you've been clear that the economy isn't helping you, and you're not thinking it's going to be even the next year. I guess, taking a step back as we look at the progression of the comps, they definitely get harder.

You've had some pretty massive help from Goody with some pretty good big growth in that business, even I think on a low sales number in total. But I guess, what's your confidence level that you can sustain this level of growth with no economic help and as comps get tempered?

Because the 5.7% core is great right now, but the comps are really, really weak. So as we move forward, I mean is there been an acceleration in the new product pipeline that you're going see that will allow you to do that?

Chris, we are confident, and I think our confidence -- I'll give you two data points that would back up that. One is our fourth quarter.

And the fourth quarter, those comps are not nearly as weak as they were in the first three quarters. Again, in the fourth quarter, we continue to expect our core sales growth to be mid-single digits.

So first, a quarter that won't have the easier comps you just referenced will continue to show that level of growth. And then second, as you implied, we do have a really strong lineup of new products that are hitting the market, both in the second half of this year as well as continued throughout next year.

And I'd remind you of one more thing, which is you've heard me talk about launch it and love it, don't launch it and leave it. Many of our products take two or three years to really fully exploit, in terms of driving awareness and trial with our target consumer.

So even products that have been launched throughout this year will continue to get growth by investing marketing spending behind them in 2011 and beyond.

And then I guess, how do we think about -- you have an SG&A target of 25% of sales. I think it's kind of ongoing, right?

I mean, you're going to see some pretty sizable reinvestment, or sorry, EPS help in savings from the European restructuring from the capital structure savings. How are you thinking about redeploying that?

I mean, is there any reason to think you could take a break from your 25% on SG&A commitment to temporarily take advantage of reinvestment opportunities in the near term with that savings? Or are you not thinking about it that way?

Well, I think on any given quarter -- again, I'm trying to focus on our long-term plans. And so for any given year, I think we'll hit the 25%.

But I think on any given quarter, there might be a quarter with somewhat slightly higher investment. One of the things that we will be doing is as we expand our international footprint, which we've been very public about, desiring to do.

And we've got couple of examples of things that we've launched recently in Brazil, both in our Baby Care business as well as in Rubbermaid Consumer, where we're launching new products for the first time into a region and that's always incremental investments. So where some of that incremental profit that we're generating will be reinvested, will be in growing internationally.

I would add to that Chris, we feel really good about the opportunities that we see, particularly outside of North America where we are gaining penetration and growing. So that's at the base that we have constantly because there are opportunities there.

I hope to find myself in the unusual position for a CFO counseling Mark to be flexible on that one.

Quick question, are you seeing much of a response from a competitive standpoint? As you guys have sort of raised the bar from that standpoint, you're putting new processes in place, et cetera.

Have the competitors picked up on what you're doing, and do they really have the flexibility to respond?

I don't think they have the flexibility, most of them don't have the flexibility to respond in the short term. For the same reason it took us two or three years to kind of build the infrastructure, to build the business processes, to build the pipeline of ideas that eventually turn into initiatives.

It would take most of them that same period of time if they dedicate themselves to doing that. There's always competitors out there that offer new products and offer ideas that we need to respond to.

So it's not like there's no competition. But I do think what we have is an edge.

We have a competitive advantage because of the -- both of the resources and the effort that we've dedicated ourselves to putting against this.

I'd like to talk a little bit about your International businesses. In particular, could you talk about how there was a 30% increase in Asia-Pacific?

That business all year seems to have been growing at really stellar rates. So which product lines, which countries are you distributing on your own?

Have you linked up with someone? And also the same question for Latin America?

Well, for Asia, Asia-Pacific, it's a couple of different businesses in a couple of different regions. It's Fine Writing in China, where we've talked before about expanding our fixturing and store and store concept, and that's been highly successful.

And it's also our IPS business, our Lenox bandsaw business, which is this Q88 blade that we said it was designed specifically for that market. We have nice results in our Tools & Hardware business and our Office Products business in Australia and New Zealand.

And also Graco. Graco also has now started to pickup -- Graco and Aprica, our Total Baby Care business is starting to pick up both in China and Japan.

So those have been the most important drivers. Juan, am I leaving anything out here?

Well, I think they probably would want to know about the recent research we did with Parker in China?

Yes, that's a good example. We've done some extensive research in terms of consumer attitudes and brand equity in China.

And Parker is the overwhelming strongest brand in the fine writing area. I mean the numbers are astonishing, frankly in terms of awareness, consideration, loyalty, preference and so on versus our competition.

So we've really got an inherent gem there, and we're really investing behind that. The other part of your question was Latin America.

In Latin America, our Tools business in Brazil was particularly strong, and we started launching some of these new products in Brazil that I referenced before, which is our Baby & Parenting business, responding to the new Car Seat Legislations, as well as we've just entered a test in the three Southern states of Rubbermaid Consumer at retail, Rubbermaid food storage.

I was hoping you could help size up the way you're thinking about commodity inflation, looking into 2011, and how you're thinking about managing that as part of the budget process?

Well, that something that we watch closely, Andrew. And we feel really proud about what our global sourcing team, they have done, in terms of forward buying and getting predictability on the cost.

Because while we cannot stop inflation, if we're able to predict within enough advance time, we know how much productivity we're working on. And if it's not enough, we know that we can take pricing.

We did that early this year in Q1, really was effective in Q2 when we took pricing in two of our business units because we had, really, the highest commodity inflation of the year in the first half. Q2 was the highest.

So as we look forward, we'll continue with the same approach. We're watching it carefully.

We know that there's pressure, particularly labor and currency from China, and some of the commodities have been -- even with the soft economy, having fairly high increases lately. But again, for us, the biggest increase came in the first half.

Q2 was the highest. We took pricing.

We expanded margin, so we feel good about the approach.

On the pricing side, is there any difference in the receptivity of price increases between your kind of your commercial customers versus the retail customers?

Historically, I'd say we've had a little less resistance, or it's been a little easier to do it with our commercial consumers. I think recently, even our commercial and industrial consumers are seeing the trends to resist price increases.

And so I'd say it's now equally difficult everywhere. And yet having said that, as Juan said, we've got a good track record and we have set up the expectation with them that if we see extraordinary inflation we will have to take pricing and we will take price.

And our brands are strong enough to do that.

And then just a quick housekeeping one. When you say $0.03 to $0.05 accretion from the capital structure changes, is that versus the GAAP number or versus your adjusted numbers?

This is, actually, should work for both. Yes.

So even when you adjust out the convertible dilution? Because it's $0.03 to $0.05 accretive.

I'll take it off-line.

Well, it's versus a normalized. The $0.03 to $0.05 is versus a normalized.

But again, it will be accretive to both for a normalized.

I know it's early in the '11 planning cycle, but is there any reason to believe that you're not going to do sort of the long-term strategic plan next year? Sort of like the 3% to 4% top line and the solid double-digit EPS growth?

No. I don't think there is any.

As you've just referenced, those are long-term aspirations, 3% to 5% organic growth, double-digit EPS growth and continued gross margin expansion and I expect that's the right ballpark for 2011. Although, as you just said, we have not put our budgets together for next year yet.

Do you have a GDP growth assumption for next year?

We basically are, for North America, we're kind of looking at more of the same. It's not our own assumption.

Basically, we take average assumptions from Bloomberg. But basically, more of the same in terms of the overall economy.

Soft economy, North America and Europe; slightly better, the emerging markets.

On the strategic spending, when do you get to like a level you're comfortable with, where it'll kind of growth sales? I mean how far off are we on that?

We're still a couple points away from having the strategic spending as a percent of sales where we wanted to be. Although, again, we told you, through the next couple of years, we expect that, that growth will be able to come by shifting more and more of our structural spending.

And then the other one is on the sales per employee and the profits per employee. I mean, those metrics are still pretty lousy relative to peers, like it exited like sort of from the bottom left corner.

I mean, is it the nature of the business that they kind of come up that way, or is there still a pretty good opportunity to get those ratios up?

We're not using the same peers that you're using because they aren't really peers in terms of their business model. The fact is, I don't think -- I think what you have to do is compare it to a company that is similarly diverse in terms of its channels and customers.

Is there one?

I'm sure you'll find one. So the answer is I don't think your looking at those metrics is going to be appropriate as a benchmark.

Having said that, the other half of your question is any reason to believe we can't and won't improve that? And the answers is no.

We can and will improve that.

And then lastly, just another housekeeping item, how much of the repurchase have done so far? And how much is remaining until you get to the full $500 million?

As soon as we're done when we're settled, Bill, we'll put out a press release. We'll let people know when we're done, average share price, et cetera.

For now, I think you would understand why we would not want to disclose exactly where we are.

Just wanted to deconstruct the gross expansion this year. Just use a round number of 100 basis points.

How much of that -- I imagine most of it is going to come from productivity, but how much of that is coming from pricing, and maybe some leftover benefits from the effect from last year? And what's the headwind from commodities this year?

Is the question for the quarter or for the estimate for the full year?

For the full year.

We're not counting on pricing, as Mark has indicated on several occasions. We're saying excess commodity inflation we'll cover with pricing.

So far, we haven't had, really, except for the pricing we took in the first quarter, we haven't really had to rely on pricing. We have a strong record of productivity.

So we're looking to productivity still on a full year basis to offset most of the inflation in raw materials and import costs. And mix, because the new products that we launched are designed to be margin accretive.

Mix is also -- has a factor that is helping. So between productivity and mix, we expect to cover all of the forecasted inflation in gross margin for the year.

And as we fast forward to 2011, those dynamics should remain in place, I would imagine?

It all depends on the level of commodity increase for the year. The models, the dynamic of the overall model, yes.

You first make some productivity and if that's not enough, pricing. But we don't know the commodity piece, right?

And just for, again, for housekeeping here, the share count for fourth quarter was helpful. What about for next year?

I know it's early, and there are a lot of puts and takes, but what kind of share count should we use for 2011?

I think what we should do is really wait until we're really done with the buy back. The number I gave you is an estimate.

That's my own estimate. I don't know what the final number is going to be.

What I do know is that in every case, this will be EPS accretive.

Quickly, I wanted to kind of check in on retail or really, broadly speaking, customer inventories. So retail inventory levels with the Home & Family and Office Products category, particularly after back-to-school.

And then also in Home & Family, with the selling of a lot of the new product launched this quarter. And then just checking in also on commercial and industrial?

I think the retail inventory levels are pretty stable and what I'd call okay. The other dynamic we are seeing there, Lauren, is they're not building either.

Whereas in the past, they might have been more aggressive in taking in incremental display stock and so on for the holiday season. They're being more conservative on that, and they have been in past years.

But their inventory levels for our categories look to be pretty well-balanced with where they want to be.

To what degree did the growth in Home & Family this quarter -- I don't need a number, more qualitative, but really benefit from selling and shelf-space gains that won't be directly repeated in the fourth quarter, so should we think about some sequential slow down for that business?

Well, I think more of it as being affected by shelf-space gains, which you'll get a full one-year benefit, a full 12-month benefit, more than the initial stocking. So we saw a lot of that initial stocking actually starting to happen in the second quarter.

So the third quarter that we just reported, which is around 20% growth, is no longer impacted by the initial stocking of the incremental shelf space. It's really affected by now that you have more shelf space, you've got more sell-through.

And to be clear, Lauren, almost, I would say the overwhelming majority of the new products that Home & Family has launched, they're still expanding distribution. So there's really...

That's a great point. There's more distribution yet to be had in the next coming quarters, and enrollment really is starting to turn on some of the strong marketing support.

So we're continuing to do a year or three of marketing support behind our Easy Find Lids system, and this year's launch was a revised premier lineup. The Reveal mop has gone into some channels, some customers, but it's not in all the customers that we anticipate it will be.

And we're just starting to turn on the marketing support there. We've got most of the distribution gains from Beauty & Style, but we still have a couple more quarters, at least, of year-over-year, realizing the differential.

So we've got a lot of -- we've got some new, a number of our new Baby & Parenting products, both coming to market as well as, for instance, is Aprica expansion that I've talked about in the past in the U.S. And so we've got a lot of -- still a lot of runway.

A lot of growth runway ahead of us from both distribution and from a marketing support that we're really just starting to do behind many of these.

Although sequentially, just sequentially on this last half, you get your bigger portion distribution when you first introduce. And then you continue, but it's lower.

I guess carrying on with Home & Family, I was just wondering, can you just talk about the margin structure? And obviously, this is the lowest of your three segments.

I know there's some near-term hiccups with commodities, but can you just talk about the opportunity? Is there an opportunity to kind of get them up to the mid-teen level like the other segments?

The short answer is yes, there is an opportunity to mid-teens, and we've got very specific and targeted plans to do that. And it is behind launching more differentiated products.

And the two businesses that have the greatest upside opportunity to deliver on that are both our Rubbermaid Consumer business, as you know, spent the last couple of years exiting a lot of categories that were little margin and not responsive to innovation, and entering new categories such as floor cleaning like we're doing this year. And then our Baby Care business, which is -- we've continued to do structural -- restructuring of the supply chain.

As recently as this year, we've closed three more plants and relocated the production from those plants in the Baby Care business. So we're still actively restructuring the gross margins in that business.

Also, Mark, remember the EMEA transformation? Because that has also helped.

I guess the next question is just kind of a hashing of past questions. But when you look to next year, the 3% to 5%, I guess with some tough comps coming out of the U.S, is just the basic assumption right, were modest U.S.

growth and tougher comps, but really the international core sales continue the momentum accelerating into 2011. Is that the way we should think about it right now?

I think in broad strokes, the way you just framed it is correct. In other words, we'll continue to see higher growth rates on international, especially from developing markets.

And we'll see below average, low or average growth rates for North America and Western Europe.

On the Office Products side, Mark, you said it was a little later than normal season, back-to-school season, but a good one. And does that mean there was any push out of sales from 3Q to 4Q, or was it just kind of from August to September?

More of the latter, more from August to September.

As I'm looking at the kind of the SG&A spend and your target of no lower than 25%, we're kind of running at a run rate where it should be down in this percentage of sales in the fourth quarter to stay at that 25% rate. Are you looking if there's any other near-term initiatives to kind of move past that 25% as you see the opportunities in the fourth quarter kind of like last year?

Our fourth quarter will be heavy investment quarter. We've got a lot of terrific stuff that's in the marketplace that I've already referenced several times on this call.

And for a number of our businesses, the holiday gift-giving season is a big opportunity. It's a good opportunity for parts of Handy Tools business, for our Cookware business.

It's for some Office Products, so a number of our businesses that respond well to the gift-giving season. Fine Writing.

So we are continuing to invest strongly in the fourth quarter.

So we could, for the full year, see SG&A above the 25% range.

I think you'll see it right around the 25% range.

One last housekeeping. One, as I look towards the European consolidation or reorg, could you see an improved tax rate for 2011 or is it more 2012?

It would be 2012 before we see improvement, or I would say significant improvement in tax rates over there.

Mark, just wanted to follow up on the new product conversation headed into next year. Obviously, you had a decent amount of focus on it this year, and it's been a part of the process.

But as we go into next year, on the magnitude of some of the innovation, should we expect it to be similar to what we've seen in 2010?

Yes, you should. And again, I'd remind you that you'll see us continuing to invest behind things that we launched in 2010.

So there's a huge amount of upside from continuing to create awareness and trial in year two and year three on many of these initiatives.

I'll remind you that we included some pictures so you have some idea. But typically, the way it works is with successful innovation is you roll it out, when you get to your target level of distribution, you turn on the media, and then you let it ride for a while.

If it works well, then you give it more. In most cases, everything that's launched in the second half of this year, that should continue well into next year.

This is actually Chad filling in for Budd. I guess, if you could just help me understand something, I certainly appreciate all the detail on the slides and your comments.

But I think, Juan had said that there is a roughly $6 million increase in SG&A investment and brand building in Home & Family, 26 in Office and 10 in Tool & Hardware. But I saw it in his earlier comments, he said that the total was about $25 million.

Did I just hear that wrong or are those different? Is it year-over-year or sequential?

Could you just help clarify that?

Well, I didn't give all of the details, so that's why the numbers maybe are not adding up for you, because I didn't say exactly how much structural decrease. I just gave the color on the ForEx.

And what I was trying to do, and I hope I did that, was just to show, give you evidence that the model of reducing structural and investing behind our brands and our growth is working.

So the 25 is increased investment, net of some structural savings, where the others is just a gross increase of investment?

Yes, that's correct.

And I guess just looking forward to Q4, you did say that you expect increased strategic and brand building spend. Could you quantify that for us either on a year-over-year or sequential basis?

And give us a sense of how that would be allocated by the segments?

Yes. What we can tell you is we're fortunate to have a lot of opportunities to spend in brand building and growth, because we feel good about what we're seeing in, particularly, outside of North America, but even here.

And that's a good position to be in this economy. We can also tell you that Q4 SG&A will be higher.

Sequentially, we are going to be spending more. The breakout by segment, we're not ready to discuss at this point, so we'll provide that information in the next call.