Ron Hardnock - VP of IR Mark Ketchum - President and CEO Pat Robinson - EVP and CFO

Chris Ferrara - Merrill Lynch Joe Herrick - Gutterman Research Bill Schmitz - Deutsche Bank Patrick Trucchio - BMO Capital

Thank you and good morning. Before we begin, I would like to remind you that the statements made in this conference call that are not historical in nature are forward-looking statements.

These statements are not guarantees, and actual results could differ materially from those expressed or implied. For a listing of major factors that could cause actual results to differ materially from those projected, please refer to our most recent quarterly report on form 10-Q, including exhibit 991.

We will also be referring to non-GAAP financial measures on this call. A reconciliation of these financial measures to the most directly comparable financial measures calculated in accordance with GAAP is available under the investor relations section of our website at newellrubbermaid.com.

Let me now turn the call over to our President and CEO, Mark Ketchum.

Thank you, Ron, and good morning everyone. Thank you for joining us on our fourth quarter 2007 earnings call.

I'm pleased to report that our fourth quarter and fiscal year results were in line with our previously related guidance. I've said many times that full year results provide the most useful gauge of how our transformation is progressing.

Looking over the past two fiscal years, we are proud of the success that we have had driving the growth trifecta every quarter, higher top line sales, gross margin expansion and higher operating profit. Since 2005, we have delivered 4% average annual internal sales growth, taking gross margin from 30% to 35%.

We have achieved over $200 million in operating income improvement, increased normalized earnings per share about 46%, and delivered over $600 million in annual operating cash flow. Our significant gross margin expansion is fueling investments that we are making to build our long-term capabilities and achieves sustainable growth.

As we look forward to 2008, we expect to deliver this growth trifecta once again, even in the face of the difficult economic environment. I'll talk more about our outlook later in my remarks.

In 2007, total net sales rose 3.3%, led by significant growth in our Home & Family, Rubbermaid Commercial, Office technology and international tools business. Gross margins for the year expanded 185 basis points to 35.2% sales, driven by continued strong productivity and mix.

We are pleased to note that we have achieved the 35% gross margin milestone in two years, one year ahead of our original schedule. Excluding charges, 2007 earnings per diluted share were $1.97, compared to $1.88 in the prior year.

When we exclude one-time tax benefits from both periods, normalized EPS was $1.82, a 20% improvement over the previous year. Operating income improved 14% to $826 million.

In 2006, we unveiled a vision and strategy to transform the new Rubbermaid into a best-in-class consumer driven branding and marketing company. Since then, we have made considerable progress on several key initiatives that are the driving force behind our multi-year transformation.

As part of our marketing build and transformation initiative, we've created a detailed blueprint and roadmap for achieving brand building excellence over time, complete with annual targets and measures. We have added to our management ranks top executive talent from some of the world's leading consumer products companies.

We developed and launched a comprehensive series of marketing excellence training programs, covering both basic and advanced curriculums. In just two years, we have increased our investment in strategic brand building, almost 60%, which is 6.2% of sales.

This investment includes the key activities that led to better consumer understanding, innovation, and demand creation. We've also made good progress in our efforts to achieve best cost to leverage the power of one new Rubbermaid.

Our Project Acceleration restructuring program remains on track, with only eight facility closures remaining. We've recognized $60 million in cost savings this year, and expect to see another $60 million benefit in 2008.

We have begun consolidating our distribution and transportation activities to achieve greater efficiency. With a recent announcement of our fifth multi-branded distribution facility, we continue to reduce our distribution facility footprint, going from almost a 100 DCs in 2005, just fewer than 80 in 2007.

We expect to drive the number down to approximately 50 by the end of 2009. In October, we successfully launched SAP at our North American office products business.

We have invested more in significant resources than ever, and we are pleased to have had such a smooth transition to the new system. Our next go-live is scheduled for the Home and Family segment in the second quarter of 2008.

Our multiyear implementation of SAP will be a key enabler of best-in-class business processes across the organization. Finally, we are continuing to drive the culture change necessary to become a top tier consumer branding and marketing company.

In 2007, we identified and embraced a common set of company values, centered on consumer focus brand building, collaboration, diversity and people development, and best-in-class results. We co-located into single locations, with our Paris, EMEA headquarters, and in Hong Kong, with our APAC headquarters.

This summer, we will co-locate several of our business units and corporate functions into our new global headquarters building in Atlanta. These moves will enable greater sharing and best practices and make it easier to leverage talent across the organization.

As we move forward in 2008, we will continue to build upon the achievements and the positive momentum over the past two years. For the year, we expect sales growth of 2% to 3%, gross margin expansion of 100 plus basis points and normalized EPS in the range of $1.95 to $2.

We recognize that macroeconomic conditions have deteriorated since we last provided guidance. We face additional headwinds from increased softness in the housing market, and a weaker retail environment in the U.S.

We have taken down our top line expectations to acknowledge this market contraction. Despite these additional challenges, we believe we can still deliver on our previous gross margin and EPS guidance and continue investing in brand building and capability building SG&A.

And by focusing on the many growth levers that are still in our control, we will continue to drive top line increases across all of our operating segments. One key lever is our healthy pipeline of new products.

For example, in our Office Product segment, we have 16 new product launches in Markers & Highlighters and Everyday Writing planned for 2008. This compares to only 5 in 2007, when we actively limited the level of new product introductions in order to concentrate on executing the SAP conversion flawlessly, which we did.

During the course of this year, you will hear more about notable new product launches of several of our brands, including Graco, Rubbermaid Commercial, Sharpie, Goody, LENOX, Parker, Waterman and Rubbermaid Food. Another important growth lever is our ongoing investment in strategic brand building.

In 2008, we will continue to increase spending to develop consumer insight, create meaningful innovations and support, demand, and creation activities. The innovations, which will benefit from this investment, include our Rubbermaid Easy Find Lid, which are easier to see in the store, and Rubbermaid Produce Saver Storage Containers, which keeps products fresher and longer.

Our Sharpie Ultra-Fine Retractable markers allow for precise permanent marking in writing with easy one-handed operation. At Rubbermaid Commercial, we are expanding into yet another new category with a line of high quality and lightweight commercial grade vacuum cleaners that integrate seamlessly with our cleaning cards and non-powered cleaning instruments.

Our Graco sweetpeace Newborn Student Center reinvents the swing category by offering babies a multi-sensory experience that mimics the actual movements mothers use to soothe their infants. In our LENOX Q series and saw blades, we offer 60% longer blade life and faster cutting rates.

To offset some of the rise in our strategic spending, we will make targeted reductions in structural expenses enabled by our shared services and other corporate initiatives. Growth and expansion outside of the U.S.

will also be a significant growth lever. Global penetration by many of our brands is still low, which creates tremendous opportunities to expand internationally.

In 2007, we saw double-digit sales growth outside of the U.S. In 2008, we anticipate continued strong international growth to help offset weakness in the domestic market.

In 2008, we expect to deliver healthy cash flow in line with our performance in recent years. Our priorities for cash continues to be maintaining our current dividend, followed by investing in strategic acquisitions.

These include smaller blot-on as well as larger more significant transactions. Over recent years, success from major acquisitions such as DYMO and LENOX, as well as smaller additions like Teutonia, Endicia, CardScan and United Receptacle have helped us drive innovation and expand into new markets and product categories.

Given the current economic environment, the opportunity for strategic acquisitions continues to improve. We are doing active due diligence on several exciting possibilities and are continually evaluating additional opportunities in our priority growth areas: office technology, Rubbermaid commercial products, industrial tools, and all three categories within Home & Family.

Before I turn the call over to Pat, I would like to thank all of our employees for their hard work and commitment to delivering solid results, especially in light of the challenges we are all facing. We've made great progress in advancing towards our vision of best-in-class, and we will continue to make additional strides in 2008.

As we enter the third year of our multiyear transformation, we remain focused on driving our key strategic initiatives to deliver sustainable top line growth, healthy gross margin expansion, and solid operating income and EPS growth. So, with that, let me turn the call over to Pat, who will walk through the detailed financials and updated guidance before I return to provide some summary comments.

Pat?

Thanks Mark. I'll start with our full year 2007 income statement on a normalized earnings basis.

Net sales for the year were $6.4 billion, up 3.3% last year with foreign currency contributing approximately 2 points of growth for the year. For the second year in a row, all segments delivered positive growth.

This year's sales increase was led by high single-digit growth in our Home & Family segment and mid single-digit growth in Cleaning, Organization & Décor. Domestic sales were up 50 basis points.

Our international businesses grew by 12% for the year. Gross margin for the year was $2.3 billion or 35.2% of net sales, representing 185 basis points expansion versus 2006.

Ongoing productivity initiatives, savings from Project Acceleration and favorable mix drove the improvement, with pricing offsetting raw material inflation for the year. SG&A was $1.4 billion for the full year, up $84 million the last year.

Brand building investments in all of our segments and other corporate initiatives including SAP and shared services drove the increase. Savings from Project Acceleration and other structural overhead reductions partially offset these investments.

Operating income for the year was $826 million or 12.9% of sales, an improvement of $103 million or 14% the last year, driven by higher sales in gross margin improvement, partially offset by the increased investment in SG&A. Interest expense was approximately $28 million lower than 2006, reflecting the reduction in debt year-over-year and slightly lower average borrowing rates.

The company's continuing tax rate was 29% for the year compared to 28.4% last year. In 2007, the company recorded approximately $41 million or $0.15 per share in period tax benefits compared $103 million or $0.36 per share in the prior year.

Normalized EPS for 2007 was $1.82, about 20% higher than last year's normalized EPS of $1.52 a share. The company recorded approximately $86 million or $0.24 per share in restructuring charges related to Project Acceleration during the year, so not included in continuing earnings described previously.

Operating cash flow for the year was $655 million compared to $643 million in the prior year. Capital spending was $157 million for the year compared to $138 million last year with the increase primarily related to our SAP initiative.

And, I shall take a few moments and talk about our full year 2007 segment information. In our Cleaning, Organization & Decor segment, net sales increased 5% or $101 million to $2.1 billion.

This increase was driven by double-digit growth in our Rubbermaid Commercial business and low single-digit growth in the Rubbermaid Consumer and Levolor branded businesses. Operating income for the segment was $273 million or 13% of sales, an improvement of $64 million or 31% versus a year ago.

Sales growth, driven by strategic SG&A investments, productivity gains, and favorable mix drove the improvement. Office Products net sales improved by 0.5% on the year.

Strong growth in our office technology and the international businesses was offset by softness here in the U.S., which was impacted by weaker foot traffic in the North American officer retailers, and the inventory corrections taken within that same channel. Operating income improved 11% to $318 million or 15.6% of sales, up 150 basis points the last year resulting from favorable mix and pricing initiatives, partially offset by increased brand building and SG&A.

In our Tools & Hardware segment, net sales were $1.3 billion, up $27 million or 2.1% versus a year ago. Growth in Europe and Latin America more than offset continued softness in our domestic tool and hardware businesses affected by the U.S.

residential construction market. We continue to see solid growth in our IRWIN and LENOX branded products, which together yielded mid single-digit growth for the year.

Operating income for the segment was $182 million or 14.1% of sales, down $4 million or 2% from last year as topline growth and productivity initiatives were more than offset by investments in brand building. In our Home & Family segment, net sales were $980 million, an improvement of $69 million or 7.5% with all three business units showing mid-to-high single-digit growth.

New product launches and better sell through resulting from demand creation activities drove the majority of the improvement. Topline sales growth supported by increased SG&A investments grew operating income of $136 million or 13.8% of sales, up 15% from $118 million in the prior year.

Turning to our fourth quarter results, net sales were modestly positive to last year at 30 basis points of growth, consistent with our revised guidance communiqué in late November. Cleaning, Organization & Décor grew 5.9%, driven by continued strong performance in our commercial business which was up double digits for the third quarter in row.

Our Home & Family segment was up 5%, with growth in all three business units. Our Tools & Hardware segment was up 60 basis points, with strong international growth offset by softness here in the US.

And, finally, our Office Products segment was down 7.5%, reflecting inventory corrections taking the key office retailers in response to the slower food traffic, and about 3 points of sale shift for this segment from quarter four into quarter three relating to the pre-buy, in advance of the Company's SAP go-live in North America. For the quarter, we delivered operating income of $205 million, a $22 million or 12% improvement over last year, driven by gross margin expansion of 212 basis points, which represents our 11th consecutive quarter of gross margin expansion.

Partial offsetting in the expansion was increased SG&A driven by investments, and demand creation and other strategic corporate initiatives. EPS was $0.47 versus $0.38 last year.

Excluding the impact of pretax events in the fourth quarter of 2006, normalized EPS increased $0.05 or 11% from a year ago. Operating cash flow for the quarter was about $200 million, capital spending of $47 million.

I will now turn to the outlook for 2008. We expect to drive sales growth between 2% and 3% for the year, which includes about 1 point foreign currency benefit.

This revised guidance reflects the worsening economic conditions in North America, which we do not expect to improve during 2008. From a segment standpoint, we expect our Home & Family businesses to grow mid-single digits, again, supported by new product introductions and demand creation activity.

We expect our Cleaning, Organization & Décor segment to grow at/or above the high-end of the company's range, driven by strong performance in the Rubbermaid Commercial business. Tools & Hardware and Office Products segments are expecting to be flat to up low-single digits.

Continued growth in our branded and international tool businesses will be dampened by the softening economic conditions we are now experiencing, particularly in North American housing, where our plans are based upon new housing starts in the 800,000 to 900,000 range. Office technology is expected to contribute growth above the company's range.

However, our plans assume, this improvement will be offset by continued softness in the North American office retail environment. Savings from Project Acceleration, combined with ongoing productivity initiatives and favorable product mix, are expected to drive gross margin expansion in access of 100 basis points.

We expect to see increased pressure on margins, as commodity inflation is expected to double versus 2007, largely due to rising resin cost. We saw our resin costs increased approximately 25% between quarter one and quarter four of 2007.

Our 2008 plans assume the cost will remain at the quarter four 2007 levels throughout the year. Therefore, we expect to see the greatest year-over-year increase from resin inflation in quarter's one and two, with very little impact in the fourth quarter of the year.

We will maintain our strategy to offset raw material inflation with pricing actions, however, the time [ended] to will not match with any given period as our pricing actions are slightly back half weighted during the year. Despite the weakening economy, our schedule remains on track to reinvest about half of our gross margin expansion and brand all the initiatives, including consumer understanding, innovation and demand creation, as well as other strategic corporate initiatives including SAP, current location, and shared services.

The continuing tax rate for 2008 is expected to be between 28% and 29%. We are maintaining our original full-year guidance range on normalized EPS of $1.95 to $2 a share.

Operating income growth will drive approximately 75% of the year-over-year EPS improvement, with reductions in interest expense and continuing tax rate accounting for the remainder. This outlook does not include pretax restructuring charges between $150 million or $160 million, or $0.44 to $0.47 per share.

We anticipate generating cash flow from operations of between $600 million and $650 million, including approximately $100 million of restructuring cash payments. Capital expenditures are estimated in the $160 million to $180 million range, including expenditures for SAP.

For the first quarter of 2008, we expect between 2% and 4% of sales growth for the total company, driven by strong growth in our Home & Family and Rubbermaid Commercial businesses, as well as favorable currency. But, we anticipate EPS to be approximately flat to last year's normalized $0.27 per share as commodity inflation, particularly in resin, where it is the hardest than the first quarter of the year.

SG&A spending will be consistent with the fourth quarter of 2007, which will represent a sizeable increase versus last year's first quarter. Demand creation activities, particularly around Graco sweetpeace, Sharpie Ultra-Fine Retractable, and European technology platforms are all slated for the first quarter.

And, before we open the call for questions, Mark has some final comments.

Thank you, Pat. Before providing my summary comments, I'd like to highlight the recent addition of Domenico De Sole to our Board of Directors.

He is the Chairman, a fashion retailer in Tom Ford International. He was previously the CEO of Gucci group.

Domenico brings extensive global marketing, retailing, and operations experience to the board and will contribute significant expertise as we execute our premium brand strategies worldwide. So, in closing, 2007 marked the second year of our transformation into a best-in-class consumer branding and marketing company.

We are very proud of the progress we have made in developing our brand building capabilities, improving our cost structure, coming together as one company, and creating a culture of excellence, while delivering all the financial commitments that we made. In 2008, we look forward to building upon the foundations laid over the past two years.

We remain confident that the diversity of our portfolio businesses and the growth levers in our control will enable us to continue to deliver on our financial commitments; driving top line sales growth fueled by continued investments in new products and brand building activities, delivering gross margin expansion, the ongoing benefits of higher productivity, improved product and channel mix, and growing operating income and EPS. Lastly, we will continue generating strong cash flow, which will support our dividends and help finance strategic acquisitions.

We faced a more challenging economic environment than anticipated six months ago, or even two months ago, but you should know that we have developed comprehensive contingency plans to enable us to meet our EPS targets. We have flexibility on our investment decisions, and we have implemented certain austerity measures to enable continued earnings growth.

Our disciplined approach to business planning achieved the healthy balance between driving current year results and continuing to invest in the company's long-term success. As always, we thank all of our shareholders for their continued support.

Thank you for joining today's call. And I'll now ask the operator to open up the lines for questions.

Hey, guys, I was wondering if you could talk about the comprehensive contingency plan you just mentioned, and in that context also, can you elaborate a little bit on your plans for strategic SG&A as you get into 2008? I mean, I understand, they are half reinvestment rate, but is that all strategic SG&A and just a little detail on the contingency?

Thanks.

Okay. Well, let me start with the contingency then.

I guess the best way to think about is -- first of all to begin with our previous sales range was 3% to 5%. So, I think that we already had plans to deliver on our EPS numbers, even if we are at the low end of that range of 3%.

So, now we had figured out, how to do that if we will fall close to 2%, and we are able to do that by doing a couple of things. The kinds of our security measures that I talked about are the things you would expect probably any company to be doing things like reducing our travel and entertainment expenses, delaying new hires, and also I got to pay at that certain variable.

SG&A expenses are in fact related to sales. So, sales commissions and bonuses are obviously also down a little bit when our sales numbers go down.

The other thing, you guys know, is we actually had started anticipating this at the end of last year, and so we really had ramped up some of the activities to try and drive down structural SG&A towards the end of last year, and we'll reap some of the benefits of that in the first part of this year. And lastly, our strategic SG&A spending is something, as I said, we have some flexibility on: flexibility on timing to see how the year develops; and flexibility in terms of how much we invest behind any given initiative.

So, we can do a little bit of a pay as you go. And again, that's not something that's news to you.

I have talked to you about that before. On the second half of your question, Chris, which was the reinvestment, the answer is yes.

All that reinvestment will continue to be on either brand building or long-term capability building for the company.

Even more of the increase, if you will, is strategic spend, because we do have some savings really through from Project Acceleration and some of the austerity measures that Mark has mentioned. We even have about $60 million of savings from Project Acceleration for the year.

Anywhere from a quarter to a third of that will be on the SG&A line.

Thanks. And then, just with respect to the two to three you are now talking about, I guess, and the one to two points you had originally said was hitting you from a macro perspective, I guess, just if you can give a little color on how comfortable you are now with the two to three and is that one to two really a pressure or really two to three now?

And then, also, as it relates to sales, I guess the European business in the quarter was down 1.3%, I guess, on a local currency basis. And I just want to understand if that's something that's going to be driving growth internationally?

What does that give you with the decline this quarter, and why does that get better?

Well, let me go to your question. You had asked about 1.5% to 2% drag that we had talked about before.

Yes, that's clearly going up. It's 3% or 4% versus what it would be if we were in a more normal economy.

And so, that's what we've had to accommodate for. The answer is we are still confident of our ability to hit two to three in that environment for a number of reasons.

One, and I gave you the example during my statements on office products, but it's true across the board. We really have an increased level of new product launches.

Second, we are continuing to make investments in strategic SG&A brand during SG&A. We haven't pulled back on our investments in those launches, and, in fact, will continue to reinvest at a higher rate during the year.

Third, there is growth outside of the US. Those continue to be stronger than it is in US.

Again, it's not just economy dependent over there. I make the point, and continue to make the point, that in many cases we are expanding in the new geographies or new product segments for their brands.

So, a lot of the growth is coming from expansion in the new markets, be it a new market, meaning geography or a new market, meaning a new product segment. And, that's why we were confident of our ability to grow internationally at a robust rate last year.

And lastly, 2007 was affected by some of the service issues that we had related to our office products restructuring projects, and those were one time that shouldn't repeat this year. So, we'll get a year-over-year help from that.

Thanks a lot, guys.

Yes, this is actually [Joe Herrick with Gutterman Research]. A couple of things for you guys.

Mark, regarding our operational improvement initiatives for 2008, what are maybe the top initiatives regarding Lean manufacturing, keeping into Six Sigma? What effects do you see benefiting the bottom-line?

Well, our normal pricing initiatives that we have been reading through, yes, roughly we'd get about 3% productivity. We expect that same type of read-through in '08.

There is a little more pressure I will say, though, from your buy-in than it was in the past. For example, growth rates are down a little bit, but we expect it to close at that 3% range.

The other thing that I've mentioned on previous calls has been the effort we're also putting into getting similar kinds of productivity level out of our supply base. So, as we transition from being a manufacturer to more of a source model for a lot of our goods, we are now implementing those same kinds of techniques: Six Sigma, Lean and so on, and teaching our top strategic suppliers those capabilities as well.

So, we can expect that kind of ongoing productivity out of that supply base.

Hi, guys. First, this guy, Joe Gutterman; every conference call this quarter, he logs on with somebody else's name and asks these crazy efficiency questions.

Going forward, keep in mind that you just disconnect him when he dials in; this is like the sixth call in a row he has done that. It's really annoying.

That's the best practice going forward. Why do you think the commercial business is going to be so strong next year if some of your employment numbers aren't so hot?

Well, because again, one, it's a robust innovation. Two, we continue to expand into new categories.

And, I think, it's not just dependent on new constructions, but there is a lot of obviously repeat business and upgrade business. A lot of our products that we have done, they are products that are strong efficiency play, so they allow you to clean a laboratory or an office building or an operating room more efficiently and more effectively.

And those kinds of things play well in this current environment. So, that business just continues to be extremely strong, and we don't see that changing, because we're doing more of the same.

Great. And that business is well above the corporate average in terms of margin, correct?

It is above the average. Yes.

Okay. Great.

And then, can you sort of talk about the composition of sales growth next year. If you'd break it down between volume price mix and currency?

Well, currency is about 1 point given the current rate that they've just put there, or it's assumed that they'll remain there. Pricing is a bit of moving target because the inflation keeps moving on us and gain higher, but you can expect the pricing to contribute close to a point, also pricing for the year.

Okay. So one, one, one to hit the high-end about.

Yeah.

Okay. Great.

And how about the dollar amount of input cost pressure next year?

I am sorry.

The dollar amount of input cost pressure, could you quantify that?

As far as raw material?

Yeah.

Again, it's a bit of moving target. It's about twice what we foresaw in '07 at the current resin cost that we are predicting.

And, so it will be -- it could push a $100 million, if resin costs stay high.

Okay. Great.

And then, I've noticed that Staples are doing this 20% rebate thing, is that being paid by them or the manufacturers kind of subsizing that, or how does that work?

I honesty don't know. I mean, I can't tell you.

As far as I know, we're not paying it.

Okay. All right.

Great. Thanks very much.

First question, what is the level of Newell products at retail?

The level of Newell products at retail?

Yeah.

For the inventory levels

I am sorry, I mean, are there any categories where retailers hold too much inventory that would kick a few quarters to sell-through?

Just to make sure I understand. So you're not asking what's the split between retail and commercial or B2B in our product lineup, you're asking what kind of inventories our retailers holding?

Is that--

Yeah. Exactly.

I guess the best way to say, I mean, that's impossible to answer on an average basis for the company because it varies so much by category and customer. But, I guess the question you are asking is, what do we see on the horizon in terms of inventory changes affecting sales?

And, what we can tell you is that our inventories at key retailers are actually a little more healthily positioned, I mean a little bit lower than they were starting the 2007 year. So, we don't anticipate any sudden moves.

But having said that, we're always aware and, obviously, paying attention to that. So long story short, nothing on the horizon that we would know that we're concerned about.

Okay. Great.

And then, office product sales were a little better than we saw it. What was the balance between US and International growth there?

And is the inventory adjustment in US superstores done or does that have another quarter or two to go?

I'm looking at the breakdown right now as the split between North America and --

Can I have your question again, that's one that we continue to follow closely, but we think the majority of that inventory takedown has been done.

And North America was down about low double digits for the quarter. So international was relatively flat.

Okay. Thanks very much.

Yeah.

Hi. Thanks, guys.

I just wanted to ask about the office products margin right, so, up about 324 basis points, something like that. That's despite a really, really tough sales and volume quarter.

I mean, so how do we think about that going forward, I mean did you just feel the tightening in a really big way or were there really some significant structural changes that would force us to expect that kind of margin going forward?

Well, you know we have done a lot of the work in product sales ratios in office products. So, we are seeing some of that benefit in our gross margin line.

And, they did tighten out in the fourth quarter, given the softness they saw in the sales. So, we do expect their margins to continue to expand in '08; property margins here, despite what we think, are going to be a tough environment especially here in North America.

Can you give me an idea roughly of that 320 or so, how much of that was gross margin, I mean like a third, a half or less than that?

I'll tell you why, if you give me a couple of minutes, I can because I got another to…

Yeah. That's fine.

That's perfect. And next question, this one I think you two will catch on if it's going to help you, but a couple of things related to cash flow, right.

So, I mean the quarterly cash flow was at the low end of what you guys had expected.

Right.

Obviously, inventory is up, like 10.5% or something in the quarter. And, looks like your '08 cash flow guidance calls were probably slightly down cash flow.

What's -- is there something going on there that we should be looking for?

Quarter four was affected by -- our inventory levels were high and that was really related to, again, the takedown in sales that we saw in mid-quarter in office products. Okay.

And, we just couldn't adjust our manufacturing and sourcing enough to get that inventory out of the system. So, it really is a reflection of that.

As far as 2008 is concerned, our spending on restructuring will be double what it was in '07, so we spent roughly $50 million in '07, and we'll spend roughly a $100 million or so in cash restructuring in '08. So that's why it's down slightly year-over-year.

So, we were 50ish in operating cash flow in '07, the midpoint of our guidance is 625, and if you adjust $50 million delta of that. In restructuring cash spend; we are absolutely up about $25 million.

Got it, that's helpful. And since I guess in the last question, I'll beg you guys again, if you don't mind.

On the international top line, I guess you just said Office was flat internationally and again Europe is down 1.3 for the quarter. I mean, what's going on there, are there particular businesses in Europe that are weak right now or are there some that are doing exceedingly well, I know, it was on.

Can you just give a little color on the landscape?

Overall, we expect another good year in Europe in total next year, and I think it will be above the average growth rate for the total company. I kind of look at across the businesses; Rubbermaid Commercial continues to be strong there, our Tools business continues to grow there, and a lot of that is expansion into new geography especially in our Industrial Tool segment.

We are investing continually in growing our technology platform, so we're making continued SG&A investments in building that out across the region. But, Teutonia helping us on our baby and parenting business.

So, we anticipate that it will be an above average grower relative to the company's total growth rate.

Okay. Then I guess, just more specifically why, I guess, what didn't work this quarter, like why was Europe down 1.3 ex currency?

I don't know that -- I don't have -- I can't give you a detailed answer for that.

Okay, thanks.

Hey Chris, about three quarters of the margin expansion is gross margin in Office.

That's huge, okay. So, I mean, that would speak given you probably had some very negative variances on manufacturing this?

Again, where productivity leading through, the mix was favorable as our technology business is actually still doing -- pretty doing well and has great margins compared to our traditional office business. And, they are the main drivers that have mix impact, as well as the productivity.

Got it. Thanks a lot, guys.

Sorry to be such a question on.