Newell Rubbermaid Q4 2009 Earnings Call Transcript

Jan.29.10 | About: Newell Brands (NWL)

Newell Rubbermaid (NYSE:NWL)

Q4 2009 Earnings Call

January 29, 2010 9:00 am ET

Executives

Nancy O’Donnell - Vice President of Investor Relations

Mark Ketchum – President and Chief Executive Officer

Juan R. Figuereo - Chief Financial Officer

Analysts

Wendy Nicholson – Citi Investment Research

Bill Schmitz – Deutsche Bank Securities

John Faucher - J.P. Morgan

Christopher Ferrara – Bank of America

Lauren Lieberman - Barclays Capital

Michael Kelter - Goldman Sachs

Budd Bugatch - Raymond James & Associates  

Analyst for Bill Chapelle – SunTrust Robinson Humphrey

Connie Maneaty – BMO Capital  

Analyst for Jason Gere - RBC Capital Markets

Joe Altobello – Oppenheimer

Operator

Good morning ladies and gentlemen and welcome to and Newell Rubbermaid’s fourth quarter 2009 Earnings Call. At this time all participants are in a listen-only mode. After a brief discussion by management, we will open up the call for questions. Just a reminder, today’s conference will be recorded.

Today’s call is being webcast live at www.newellrubbermaid.com on the Investor Relations homepage under Events and Presentations. A slide presentation is also available for download. A digital replay will be available two hours following the call at 888-203-1112, or 719-457-0820 for international callers. Please provide the conference code 6778854 to access the replay.

I will now turn the call over to Nancy O’Donnell, Vice President of Investor Relations.

Nancy O’Donnell

Thanks very much. I’d like to welcome everybody to the Newell Rubbermaid fourth quarter call. We appreciate your participation today. Joining me on the call will be Mark Ketchum, our President and Chief Executive Officer and the company’s new Chief Financial Officer, Juan R. Figuereo. Our fourth quarter earnings release and a supplementary [dec] are available on our website.

Before turning the call over to Mark, I would like to remind the audience that some of

today’s comments will be forward-looking statements concerning the company's plans, projections, and objectives for the future. These statements are subject to a number of assumptions and uncertainties. Factors which could have a material adverse effect on our financial results and cause our actual results to differ from our forward-looking statements are laid out in our filings with the SEC.

We further caution you that you the company assumes no obligation to update publicly any of these statements in light of future events. Also, our comments today include non-GAAP financial measures. Reconciliations of the most directly comparable GAAP financial measures are included in the earnings release and on our website.

So thank you and I will now turn the call over to Mark Ketchum.

Mark Ketchum

Thank you, Nancy. Good morning everyone and thank you for joining us today. Before we begin our review of the financial results, let me welcome Juan Figuereo to his first quarterly earnings call as Newell Rubbermaid’s Chief Financial Officer. As you’ve seen from our earlier public announcement, Juan has many years of terrific experience in the consumer products industry, having worked with Pepsico, Frito Lay, Wal-Mart, and most recently, Cott Corporation. We’re excited to have him on board and are looking forward to his contributions to the business.

Turning to the numbers, I’m pleased to report that Newell Rubbermaid closed out the year with another solid quarter of financial results. In a tough economy where consumers and purchasing managers have been reluctant to spend, we feel very positive about the progress we are making implementing our strategy.

Our Q4 results are evidence of that progress. We generated net sales of $1.4 billion and normalized EPS of $0.27. Our normalized EPS more than doubled prior year results. Gross margin was a strong 37% and we generated operating cash flow of $187 million higher than forecast.

While Juan will get into more detail on the quarter, let me take a few minutes to recap the year for you. As you recall, at the beginning of 2009 we were facing an extremely difficult and uncertain sales environment. At that time we made a commitment to protect earnings and cash flow generation in the midst of declining revenues. We’ve done just that and more.

We grew normalized earnings this year by 8% to $1.31 and expanded gross margins by almost 400 basis points to an all time high for Newell Rubbermaid. We generated operating cash flow of $600 million, a 33% improvement over 2008. This strong cash flow performance reflects a real emphasis on inventory management in addition to our continued gross margin expansion and cost reduction efforts.

We further optimized our portfolio by exiting low margin commoditized product lines in our office products and Rubbermaid Home businesses. We enter 2010 with a stronger portfolio that is responsive to consumer understanding, product innovation, and brand marketing.

On the SG&A front, we took out almost $130 million in expense in the year, mostly by reducing structural costs. In the first half of 2009 we held back strategic spending as well but as we entered the back half, we began to loosen the reins and selectively invest in key parts of our business.

The investment we protected the most was the innovation pipeline. R&D spending was not cut since these investments are needed to generate sales growth in 2010 and beyond. But even in the challenging environment of 2009 we benefited from our innovation investment. Our core sales declined approximately 7% in 2009. About two-thirds of our businesses achieved market share gains, evidence that our consumer-driven innovation and brand building efforts are working.

During the fourth quarter we saw sequential improvements across the board as we started to lap the economic decline in Q4 of last year. Our largest segment, home and family, was able to grow core sales in the fourth quarter.

Certain parts of our business performed better than others, attributed largely to the diversity of our portfolio. In simple terms, commercial markets have declined more than retail markets and our business reflects this.

In our home and family segment, the primary purchaser and also the end user is the female head of household. With a product portfolio that includes many indispensible items such as car seats, strollers, food preparation products, food storage containers, and hair care accessories, this group is the least discretionary of our portfolio.

It’s no surprise that home and family was the most resilient of our three segments, with a low single digit decline in core sales for the year and modest core sales growth in the fourth quarter.

Our home and family segment has done a commendable job using consumer research and insights to deliver meaningful innovation to its target consumers. We’ve been telling you for several quarters about the strong performance in our culinary lifestyles business. Behind innovative new products such as Calphalon, [Unison], premium footwear, plus expanded distribution in near neighbor categories like small electrics and kitchen prep. This business actually grew sales low single digits for the year and grew share even more.

Another bright spot in this segment is our Rubbermaid consumer business which includes both Rubbermaid food and Rubbermaid home products. This business has done an excellent job in understanding its target consumers and developing unique storage and organization solutions to solve their frustrations. As a result, our Rubbermaid consumer business has gained market share in its key growth categories.

The Rubbermaid brand definitely matters to consumers as evidenced by the fact that Rubbermaid was recently ranked number 1 in a leading industry publication’s consumer survey of favorite home goods brands and our investments and advertising marketing and demand creation are also resonating with consumers.

A commercial for Rubbermaid’s Easy Find Lids was rated the most effective TV spot of 2009. These results demonstrate the advances that we’re making in Newell Rubbermaid’s consumer driven marketing transformation.

Our office products segment serves both retail and commercial consumers in the office and education space. We experienced a mid single digit core sales decline in 2009 in line with the overall company performance. Commercial channels have been more negatively affected by the economy then consumer retail channels.

As we exit 2009 our retail customers are saying that consumer sales have stabilized and even show early indications of growth. However, the commercial contract channels remain week which is largely a reflection of high white collar unemployment levels and reduced corporate spending.

Despite these challenges, I’m proud of the job our office product segment has done staging the business for future growth. We’re making very good progress on an ambitious program of consolidating global platforms, rationalizing the number of SKUs, reducing operating costs, and investing in consumer driven innovation.

By focusing the portfolio on our four leading brands, Papermate, Sharpie, Parker, and Dymo, the office products group is now better able to leverage innovation, branding, marketing, and the supply chain on a global level.

For example, we are successfully migrating our regional everyday writing brands into Papermate and we’ll launch new global Papermate packaging beginning mid-year. Markers and highlighters are Sharpie brand, being shared behind innovative products like the Sharpie pen and integrated marketing campaigns that leverage Sharpies’ impressive brand equity. As a result of our teams’ efforts, Sharpie has gone from being the large permanent marker brand to become the largest writing brand in North America.

In the technology GBU we’re seeing good traction from our Mimio interactive whiteboard and student response systems platform which grew almost 50% in 2009. We’re investing significantly in this business to build out our sales and marketing capabilities to drive further growth in 2010.

Our tools, hardware, and commercial products segment is focused on construction and maintenance of residential and commercial properties. Because of this, it’s the most cyclical piece of our portfolio. Professional tradesmen and industrial end users were heavily impacted by persistent weakness in the housing, commercial real estate, and industrial markets. As a result, this segment experienced a mid-teens percentage core sales decline.

Even in this tough year, however, our businesses outperformed many of their peers and gained market share in key categories. In addition, a diligent focus on streamlining structural costs and improving productivity helped drive 120 basis point improvement in operating margins.

Looking forward, this business is well-positioned to deliver significant sales and income growth as the business cycle improves. Industry leading innovation and a strong new product pipeline combined with a leaner and more efficient operating structure provide competitive advantages we can leverage.

Within our commercial products GBU, the addition of Technical Concepts has given us an entry into the fast-growing and trend forward global hygiene markets. TC experienced high demand for its hand sanitizer and hand cleaner dispensing products this year in the wake of heightened concerns about H1N1 and other communicable illnesses. This business grew 25% in 2009. A comprehensive suite of skin care solutions that offers superior performance and the lowest cost per use, TC is poise to capture additional market share and sales growth going forward.

In our tools segment, the Lenox team is focused on taking market share by investing in new product innovations and spending strategically to generate trial and awareness. In 2009 Lenox launched its T2 technology, reciprocating saw and hacksaw blades, the longest lasting blades on the market. T2’s revolutionary design delivers up to 100% longer blade life and 25% faster cutting performance, creating a new standard of excellence and great value, which is critical in this economy.

Looking forward to 2010 and beyond, we’re excited about Newell Rubbermaid’s growth prospects. 2009 was a challenging year yet we continued to make meaningful progress in our transformation to a best in class consumer branding and marketing company. In a declining economy we demonstrated that we can grow share. By growing share in a mostly flat economy in 2010, we will deliver modest share growth and modest overall growth which will accelerate when the economy begins to improve.

I’m proud of the work our teams have done this past year, better positioning our businesses for growth with a leaner cost structure, significantly improved margins, and lower working capital needs. Our innovation pipeline gives me even more confidence that we will see sequential improvement as the year goes on.

2009 required us to play more defense. In 2010, we get back on offense. We see evidence of market stabilization across most of our portfolio. We are renewing our focus on driving top line sales growth. We expect our consumer retail businesses to lead the recovery, followed later by our commercial businesses, consistent with the lag trends that we saw heading into the downturn.

Let me turn now to our financial outlook for 2010. We are making a change in our guidance practices this year. We believe full year results provide the most useful gauge of how our transformation is progressing. I want my teams focused on the long term growth of their businesses, not on managing the quarters, so with regard to external communications, we are adjusting our guidance practices to focus on our annual outlook rather than on individual quarterly earnings expectations.

We think this approach offers a better reflection of how we are managing the business internally and will provide you with a better gauge of our progress. For the full year 20140 we expect low single digit core sales growth. Core sales exclude the impact of foreign currency and an estimated 2% overhang from the 2009 product exits. Remember, we exited categories gradually through 2009 so there will be some year-over-year drag in 2010.

We anticipate sales growth will be more heavily weighted to the back half of the year as the impact of our increased investment behind our brands begins to build and we benefit from some second half product launches.

Gross margin for the year should expand by 75 to 100 basis points. This improvement will be driven by the positive impact of product line exits, restructuring savings, product mix, and increased productivity, partially offset by higher input costs.

We expect rising input costs to have a bigger negative impact in the first half of 2010 since as you will remember commodity costs were at their lowest levels in the first half of 2009. We will continue to reinvest a portion of our gross margin improvement in strategic brand building activities and other strategic corporate initiatives. In addition to increased A&P and R&D, we will invest in our ongoing global SAP rollout and additional sales resources for office technology and industrial products GBUs.

The year-over-year increase in SG&A will be more pronounced in the first half of 2010 primarily because we significantly curtailed SG&A expenses in the front half of 2009 and then subsequently ramped up spending in the back half.

For the full year 2010 we expect normalized EPS in the range of $1.35 to $1.45. Included in this outlook is an estimated $0.04 to $0.05 negative impact resulting from the devaluation of Venezuela’s currency. Excluding this impact, the midpoint of our 2010 outlook reflects year-over-year normalized EPS growth of approximately 10%.

With that, let me turn the call over to Juan who will walk you through the financials in more detail.

Juan R. Figuereo

Thank you, Mark. Before getting into the numbers, first let me say that I’m really excited to be here and that I am energized by what I’ve seen in the short time since joining Newell Rubbermaid. I also want to acknowledge my predecessor, Pat Robinson, who has been helping me get up to speed on the company and has really helped make my transition easier. I hope Pat is sitting at home listening to this call so Pat, thank you.

Now the numbers. Net sales for the quarter were $1.42 billion, down 2.1% compared to last year. Core sales, which exclude the impact of foreign currency and product line exits, declined 1% in the quarter. Planned product line exits reduced sales by approximately 4% while favorable foreign currency a positive 3%.

Gross margin was $526 million or 37% of sales, an increase of 700 basis points over the fourth quarter of 2008. Among the biggest contributors to this significant improvement were productivity gains from several initiatives including all of the ones that are in project acceleration. Also improved product mix, the positive impact of product line exits, and pricing. Also included in the number is the impact of better overhead absorption compare with last year’s challenging quarter.

SG&A expense was $384 million, an increase of 8.2% or $29 million as compared to last year. This was driven by stepped up support behind some of the key branding, innovation in new product opportunities that I alluded to just a little earlier. You should view this as an early investment on our shift to growth consistent with our motto of reinvesting some of the gross margin improvement and structural SG&A reductions in support of sustainable top line growth.

Our operating income excluding charges for the quarter was $142 million or 10% of sales. That’s an increase of 77% as compared to $80 million or 5.5% of sales last year. Interest expense during the quarter was $33 million, a 3.5% or $1 million decrease compared to the previous year as we continue to pay down debt and improve our credit metrics. Our continuing tax rate in the fourth quarter was 29.3%, compared to 27.9% last year. The increase was driven by changes in the geographic mix of tax earnings.

Moving on to earnings per share, strong gross margin expansion drove a 145% increase in normalized EPS to $0.27. the $0.27 excludes approximately $0.02 of GAAP dilution from the convertible bonds that were issued in the first quarter of 2009. Please note that due to the call spread feature associated with these bonds, the economic dilution is smaller. It’s a little less than $0.01.

We have posted a schedule on our website that demonstrates the GAAP and economic dilution of convertible notes and the associated hedge transactions. On restructuring, normalized EPS also excludes approximately $13 million or $0.04 per share in restructuring and related impairment charges associated with project acceleration. The equivalent amount included in the prior year quarter was $90 million or $0.05 per share.

Shifting to cash flow, operating cash flow exceeded the estimate this quarter. We generated 187 million in cash flow which compares to $212 million in the fourth quarter of last year. Our operating unit did a nice job of managing working capital and a particularly good job reducing inventories. We ended the year with 70 days. That is a full 12 days out of inventories which contributed $243 million to our improved cash flow for the entire year. Our Cap Ex spend was $46 million for the quarter. We repaid $141 million of debt during the quarter consistent with our strategy to use excess cash to pay down debt.

Now, turning to the segment information, home and family net sales were $606 million, a decrease of 1.7% versus last year. However, core sales increased 2.1%, forex contributed a positive 1%, and planned product exits reduced sales by 5.2%. This core sales increase was driven by Rubbermaid home and food, culinary lifestyles, and our North American baby business. As you have probably noticed, this represents our first segment core sales growth in several quarters.

Home and family operating income was $50.1 million or 8.3% of sales, an increase of 260 basis points in operating margin as compared to last year’s $35.1 million or 5.7% of sales. This improvement is attributable to core sales growth, relief from the input cost inflation that we experienced in 2008, and the benefit from product line exits. The improved results include the increased strategic SG&A spend during the quarter that Mark referred to in his earlier remarks.

In office products, Q4 sales were $411 million, down 3.8%. Core sales declined 2% which is a significant improvement from the negative 7% to 9% run rate over the last several quarters. Product line exits reduced sales by 5.7%. These were partially offset by favorable currency impact on sales of 3.9%. Office products operating income was $51 million, an increase of $34.5 million compared to last year. Operating margin was 12.4%, an 850 basis point improvement compared to 3.9% last year. This was driven by productivity, improved product mix, and structural SG&A reductions.

Tools, hardware, and commercial products, net sales were $404 million, down 1.1%. Core sales declined 4.7% another marked improvement over the high teens run rate in the previous quarters. Favorable FX increased sales by 3.6%. Operating income was $64.7 million, an increase of $15.7 million compared to last year. Operating margin improved 400 basis points to 16% of sales, reflecting strong productivity and continued SG&A management.

Now for the full year 2009 results. Sales were $5.58 billion, a 13.8 reduction to a year ago. Core sales declined 7.3%. Product line exits contributed a negative 5.2, and foreign currency resulted in a 2.1% reduction. Acquisition contributed about 1% improvement. Gross margin was 36.7% of sales, a significant improvement of 390 basis points to last year.

This improvement more than offset the gross margin decline over a year ago and puts the company back on track to delivering on our 40% gross margin target over the next few years. SG&A expense declined $128 million for the year as compared to 2008. Acquisitions added $21 million to the base and forex reduced it by $38 million.

As previously noted, the mix of SG&A spend improved as our gross margin expansion allowed us to increase the rate of strategic SG&A spend in the back half of 2009. Full year operating income excluding charges was $675 million or 12.1% of sales compared to $621 million or 9.6% of sales last year, a solid improvement of 250 basis points.

For the full year 2009, interest expense was $140 million. Our effective tax rate was approximately 31%. Normalized EPS for 2009 was $1.31 compared to EPS of $1.21 for 2008. This excludes restructuring charges, non-recurring items, and dilution from the convertible notes. There is a reconciliation to GAAP EPS in the press release.

For the full year 2009 we generated operating cash flow of $603 million, an improvement of $148 million versus the prior year. This reflects our improved P&L flow through and continued working capital discipline across all of our segments. Capital expenditures were $153 million in 2009.

Now turning to the 2010 outlook, we expect to grow core sales in the low single digits range. We expect a 2 point decline from product line exits and we expect foreign currency impact to be slightly positive. We anticipate that the year-over-year core sales growth will be skewed to the back half of the year while product exits will have a bigger impact in the front half. We expect to expand gross margins by 75 to 100 basis points as a result of productivity, product mix, and the impact of last year’s product exits.

Margin expansion should be spread fairly evenly throughout the year. Our SG&A spend will reflect historical patterns of seasonality with Q3 and Q4 the highest absolute dollar spend but the year-over-year increase in a strategic SG&A will be largest in the first half of the year as compared to lower spending levels in Q1 and Q2 of 2009.

We expect interest expense to be relatively flat to 2009 with lower debt levels offset by slightly higher interest rates. Our effective tax rate for the year is expected to be around 30%. We expect normalized EPS to be between $1.35 and $1.45 per share. Now to help you understand how we’re thinking about this outlook, please consider that at the midpoint of this range, our 2010 outlook reflects EPS growth of 10% compared to 2009 normalized EPS when you adjust to exclude the $0.04 to $0.05 full year unfavorable foreign currency impact associated with translating Venezuela’s results.

Said another way, to compare apples to apples, EPS numbers reflecting the devaluation similar in both years normalized EPS of $1.31 in 2009 would become $1.27, a 10% growth rate on top of that gets you to roughly $1.40 in 2010 which is the midpoint of our 2010 outlook range. We anticipate 2010 pre-tax restructuring charges of between $60 million to $80 million or $0.15 to $0.25 per share. Our EPS outlook excludes these charges.

Please note that we expect the year-over-year improvement in EPS to be back half weighted because of the return to historical seasonality of SG&A spend, the year-over-year change in input costs, and the fact that most of our new product launches and customer modular resets should have a full impact on the second half of the year.

We expect to generate approximately $500 million or more in cash from operations in 2010. This outlook includes an estimated $70 million to $80 million in restructuring cash payments for the year. Capital expenditures should be approximately $160 million in 2010 resulting in free cash flow in excess of $300 million which would be available to pay dividends and reduce outstanding debt.

Any incremental cash flow above our estimates will be used to reduce debt. Our working capital investments will be higher earlier in the year because in addition to traditional inventory build for the back to school season, we will build inventories to support new product launches and will increase [extra stock] as we switch over to SAP in some of our business units. Also, incentive payments which are typically paid early in the year were earned and accrued at higher rates in 2009.

It is also important to note that our outlook is based on certain macroeconomic assumptions which include a slightly positive economy and a relatively stable commodity and interest rate environment. If there are significant deviations from these assumptions, we will update you as to the impact, if any, on our outlook.

Finally, and this is important, as you extend your financial models beyond the completion of you SAP implementation, you should note that with the significant shift from self manufacture to source in most of our business units that is project acceleration, our Cap Ex investment rate should be expected to decrease to somewhere around 2% of net sales. In fact, we believe Cap Ex slightly lower than 2% is possible.

So in conclusion, as the new CFO, I am very excited about Newell Rubbermaid’s prospects for 2010 and beyond. With a leaner cost structure, a better balance sheet, and significantly improved cash generation capability, we are fundamentally a stronger company today than we were a year ago. Core sale strengths are starting to improve and we are looking forward to reaping the benefits of our strategic investments across the organization. 2010 should be a year of great opportunity and I look forward to sharing our continued progress with you.

With that, I will hand it back over to Mark for his final comments.

Mark Ketchum

Thanks, Juan. I’d like to conclude by thanking everyone here at Newell Rubbermaid for the hard work and sacrifice that delivered very commendable 2009 results. Our team did an outstanding job of rising to the challenge during a tough year. Our strong operating cash flow, very healthy gross margin expansion, and earnings growth would not have been possible without it.

As we start 2010 we feel very good about our prospects. Our strategic transformation is progressing and our investments in consumer driven innovation brand building and marketing are paying off. We’re taking share and we’re building a strong new product pipeline which will help drive future sales growth. We’re back on offense.

Thanks to our strategic focus when optimizing the portfolio and achieving best cost and efficiency across the organization, our business is more attractive and more profitable than ever. We’re committed to delivering sustainable growth and will continue to invest in Newell Rubbermaid’s long term success.

So at this point I’ll ask the operator to open the line for questions.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from Wendy Nicholson – Citi Investment Research.

Wendy Nicholson – Citi Investment Research

My first question, just to follow up on Juan’s comment about when the Cap Ex percentage of sales is expected to meaningfully come down, is that in 2011 or is that out to 2012?

Juan R. Figuereo

We are rolling out SAPs as you know and we’re really exciting about SAP because that’s improving our capability really to run the business, particularly a lot of improvement in the supply chain. You saw some of that through the 12 days that we took out of inventory. That’s a multiyear project as you know, and we think that most of the spending should be done by 2013.

Wendy Nicholson – Citi Investment Research

So the revision down to 2% of sales is several years away. My bigger question goes back to the gross margin. I know you had made a comment I think it was after the second quarter when you saw really a huge inflection point in the gross margin that your expectation for the year was more like a 36% gross margin and you’ve come in steadily above that and the guidance for the gross margin for next year is terrific, but I was wondering what’s kind of changed in your mind, is it purely a function of the commodity environment, is it that you’ve been able to hold onto more pricing than you would have expected, or is it just the productivity initiatives where you’re kind of feeling whatever, more productive than you would have expected, because the gross margin is clearly doing better than I had expected.

Mark Ketchum

You’re right, we’re a little bit ahead of even where we expected 6 or 8 months ago. You probably already mentioned two other things, commodity environment, a little bit more favorable. We’ve held onto more of the pricing that we took before and the third thing I’d say is our mix continues to drive improvement. We’ve talked about this before but when we introduce new products or product refreshes, we work hard to engineer and build in a supply chain and a pricing strategy that actually helps build increments to our gross margin with each product refresh or new product introduction and that’s paying off as well.

Wendy Nicholson – Citi Investment Research

Recently even though the consumer remains weak and unemployment is a big problem, you haven’t seen any incremental pressure from a pricing perspective?

Mark Ketchum

There’s always pressure and again I think as I’ve talked before, selling value in this economy is paramount, but I think many of the products that we have offer that kind of performance by a value offering and therefore we’re still able to sell the mix that on average is a little bit better

Operator

Your next question comes from Bill Schmitz – Deutsche Bank Securities.

Bill Schmitz – Deutsche Bank Securities

Can you just talk a little bit more about Venezuela and how you get to this sort of $0.04 to $0.05 hit because I thought it was like 1.5% of sales and even if you give it a really high margin, if the entire business went away it would be $0.04 so how do you get to that number?

Juan R. Figuereo

What is happening in Venezuela is that with the devaluation, the government announced a two-tier exchange rate, but there’s still a parallel rate so we’re taking the more conservative approach. We’re assuming that we’re going to translate our financial statement at the parallel rate and that is going from 2 and change to just over 6, so that is a pretty big impact. Just to give you an idea, our prior year sales, 2009, in Venezuela were around $65 million, $70 million range, so when you go from 2 and change to 6, that’s a big impact.

Bill Schmitz – Deutsche Bank Securities

Can you just talk a little about retail ordering patterns, what you’re seeing, what the outlook is for next year?

Mark Ketchum

I think as we referenced, we’ve seen things flatten out and even start to slightly improve in a few of our businesses, so I referenced in my remarks we were starting to see the retail office products business start an upward inflection. So I think that’s what we’re seeing. We’re seeing flat or in a few cases cautiously optimistic and slightly up.

Bill Schmitz – Deutsche Bank Securities

In terms of the product line exits, I imagine there’s some [stranded] overhead associated with closing down all those businesses because it is a big chunk of sales, so how do those costs come out over time? Is there a plan to reduce some of that bloat?

Mark Ketchum

We took the biggest chunk of that out. Some of that as well is, I’ll just use the example of our Lenox business. The Lenox business, you will recall, up until 2007 was growing almost 10% a year and probably the reason they were growing is that we were adding sales people, added a lot of sales capability. That business has been really hard hit, but we made the investment in hiring these people, training these people to become experts in selling bandsaws, and while we reduced the number – we took reductions in that sales organization – we didn’t go all the way down to what it would have taken to match the instantaneous reductions in that business. We just think that’s a bad choice to take that investment if you will, that we invested in people in terms of training and developing them, so some of that, we are betting a little bit on the common terms of the return in the economy.

Then the other thing is that in some parts of our business, including Europe for example, it just takes longer to make the final adjustment to our staffing.

Juan R. Figuereo

I’d like to add to that that as I came new to the company, just trying to understand the strategy that we were doing, and I looked at the product line exits in conjunction with project acceleration which is really focused on the planned closures and downsizing, that absolutely offsets the impact of the product line exits. In this quarter, product line exits added 1 point to our gross margin improvement, so that is working really well. You couple that with the rich pipeline of innovation, and that seems to be a part of the strategy that is working really well.

Bill Schmitz – Deutsche Bank Securities

I know you said those businesses you’re selling average about 3% of the gross margin line. Can you say what it is on a sort of contribution margin type level?

Mark Ketchum

We’ll have to get back to you on that. I can’t give you a number off the top of my head.

Bill Schmitz – Deutsche Bank Securities

Would you maybe guess it’s negative though if it’s a 3% gross?

Mark Ketchum

Again, I think a 3% gross number, that might have been on selected product lines but that wouldn’t have been representative of the entire batch of products that we’re exiting, so rather than respond to your number, let us get back to you with our numbers.

Operator

Your next question comes from John Faucher - J.P. Morgan.

John Faucher - J.P. Morgan

I wanted to just get one point of clarification on the guidance, which is the last time you guys spoke, you gave more specific 10% number. You alluded to that a couple of times, today it’s the midpoint of the range. It doesn’t sound as though anything has changed other than the Venezuela piece. Is that the right way to interpret the guidance, you’re just sort of bracketing it in on both sides?

Mark Ketchum

Yes, I think that’s the right way to interpret it.

John Faucher - J.P. Morgan

Following up on Bill’s question before about Venezuela, I guess I’m still struggling as well to get to the bottom line impact. It looks like if it’s $50 million which is kind of what you were alluding to, that would have to run through at a pretty high incremental gross margin or a pretty high incremental margin. So is your Venezuelan business that much higher in margin that gets you to sort of that $0.04 to $0.05 number?

Mark Ketchum

Yes.

John Faucher - J.P. Morgan

That makes a lot more sense. I apologize, one last question. You’ve had some management changes in Europe. Obviously it seems like there’s some margin opportunities there. Can you talk a little bit about how we should view sequential improvement in Europe going forward?

Mark Ketchum

Sequential improvement in Europe going forward will be faster than the pace in the rest of the company on average and that’s because they’ve got a lower starting point, so those businesses continue to be a focus of our improvement efforts. Several of the restructuring projects that we’ll be doing this year are centered in Europe and therefore will see a significant improvement in gross margin driven by lower cost of goods and so that business is a focus and you ought to expect to see that will be a disproportionate contributor to our [ally] and margin progress going forward.

Operator

Your next question comes from Christopher Ferrara – Bank of America.

Christopher Ferrara – Bank of America

Just following up on Europe, can you talk a little bit about what some of the structural changes are going on in Europe that are going to drive better sequential improvement? Mainly from a cost side I guess, that would be the best way.

Mark Ketchum

I actually can’t get into as much detail as I’m sure you’re wishing by asking that question. The reason why is that as you know, when you’re doing restructuring plans or restocking plans in Europe, you have to involve the works councils and we’re in the middle of that process, so I can’t tell you things that would be in advance of what I work with them. What we will do is report as we go throughout the year on what we’re doing and our progress in delivering on those.

Christopher Ferrara – Bank of America

Can you talk a little bit about I guess the flow of growth? You guys are talking about low single digits growth as you get into 2010 but I guess it’s an obvious question, but does it mean you get to sort of mid single digits growth? Could you be growing 5% or 6% on your budget by the back half of 2010 or by Q4?

Mark Ketchum

I think that’s a possibility but I don’t want to try to get that specific and try to have you start sticking numbers in there now. What we have said and what we do believe is that the sales improvement will be more back half loaded and more back half loaded for a couple of reasons. One is the investments we started making in the fourth quarter and we’ll continue to make in the first two quarters of this year, those are all investments that the benefits of those build over time.

Second is that we’ve got a number of new product launches or new distribution that occurs in March, April, May, June, July and therefore you get a less effect in the first half and more of an effect in the second half. The finally if we get help from the economy, I think it’s going to build over time. I’ve responded before that right now what we still see is a pretty flat economy. We think that if there’s an opportunity for that to grow, it would grow more in the second half.

Lastly, I think there’s pent up demand, that’s what my gut tells me, that I’ll just use the example of our office products business. I think I’ve used this example in our previous discussions. If the consumer has to find a pen at home in their drawer that’s going to write so they can put off the purchase of a pen, they can probably go do that. You can only do that for so long. Eventually all your pens will run out of ink and you’re going to have to go buy some more pens.

Using that example, you’re logic will tell you that as time goes on, the consumer’s ability to postpone or substitute goes down and that also, even without the economy growing, some of our product categories really are what I’d call replacement or replenishment kinds of categories and will benefit from that.

For all those reasons, I think it will be building throughout the year.

Christopher Ferrara – Bank of America

Following up on the SG&A commentary, can you break out a little bit this quarter, I understand strategic SG&A was up, but SG&A was up by a pretty large amount this quarter as a percentage of sales. How much of that can you sort of whittle out into very simple buckets for us to understand, to get a sense for how much of it carries forward?

Mark Ketchum

I’ll put it this way. The line share was strategic marketing investments that we made on or top 5 or 6 businesses, several of which I mentioned in my own comments. I mentioned for instance our Mimeo business and how that was up 50% last year and we’re continuing to invest in that, that was one of the places that we continue to invest.

I mentioned Technical Concepts, our hand sanitizer and hand wash systems, we invested in that. We invested in markers and highlighters behind the Sharpie brand. We invested in Rubbermaid food products. So those are just a few of the businesses that we invested in and the lion’s share of that increase in the fourth quarter was behind those kind of businesses so in a word, I feel really good about the innovation. I think the consumer is starting to at least be more amenable to kind of coming back into the market, and some of that, I always talk about waiting for the economy to improve, and we can help spur that on, in other words, part of what gives consumers confidence is continuing to get prompts and the prompts that we have as I said I many cases are very value branded so we’re going to make those prompts.

Juan R. Figuereo

I would just like to add that there’s basically just a couple of things that Mark has done is where there’s growth already accelerating, he added more fuel to it, and that’s the case with Technical Concepts, or where there’s exciting innovation coming out, he added more support to make sure that the innovation has a better chance. That’s basically kind of the simple criteria.

Christopher Ferrara – Bank of America

Was overhead down in the quarter year-over-year?

Mark Ketchum

I don’t think it was down, no.

Operator

Your next question comes from Lauren Lieberman - Barclays Capital.

Lauren Lieberman - Barclays Capital

Can you talk a little bit about whether or not there’s any sort of replacement cycle to the industrial piece of your business? I would just think that if we get to a point where we’re looking at two years of declining sales, there’s got to be some degree of replacement spending that has to happen at the industrial markets and can you talk a little bit about that, whether you expect to see that, if any of that is sort of built into your expectations?

Mark Ketchum

You’re absolutely right. There is a significant replenishment portion across all of those industrial businesses. I’ve already referenced office products and that’s not industrial business but the commercial side of that will also require replenishment.

Let me give you a couple of examples from the tools, hardware, and commercial products business. A person who is doing construction for a living is using circular saw blades, reciprocating saw blades and so on. Those eventually wear out and have to be replaced. In the Rubbermaid commercial products business, eventually trash cans and mop buckets and serving carts and so on just get old and break down, especially if they were a competitor’s product, and they have to be replaced. And so while you can put those off for a while and operate with a banged up cart or a wobbly cart or a trash can that’s falling apart, again, the purchasing managers know that they have to do that replacement. So there is a significant replacement component throughout all of those industrial businesses. Even if you didn’t see a pick up in the industrial economy, more construction, more commercial construction, a pick up in the industrial output, you’d still expect to see some improvement in that.

Juan R. Figuereo

I just wanted to share some of my initial impressions coming in new, visiting with the business unit. There’s another aspect of it that is often overlooked which is to the extent that we’re applying consumer driven innovation to that segment of our business and we are, there is innovation that is to drive productivity so you don’t really have to wait until the stuff breaks or wears out because there can be a compelling case to replace it because of productivity and there’s some exciting stuff that we have in the pipeline.

Mark Ketchum

That’s a great point.

Lauren Lieberman - Barclays Capital

How much do you now, if at all, have some of that replacement cycle or replenishment cycle built into your expectations of market growth or do you think we still have time?

Mark Ketchum

I think there is certainly some of that built into the expectations of growing core sales this year. But again we believe that the likelihood is that the opportunity and the realization of that opportunity builds throughout the year.

Operator

Your next question comes from Michael Kelter - Goldman Sachs.

Michael Kelter - Goldman Sachs

It seems like a few of us are trying to get at what’s underlying the SG&A expansion in the quarter as a percentage of sales and I know you’re investing behind the brands. Maybe a different way to look at it instead of focusing on the quarter, it seems like A&P as a percentage of sales has been roughly flat, maybe up 50 or 100 basis points over the last 3 or 4 years. But SG&A as a percentage of sales is up about 300 to 500 basis points depending on how you look at it, so quite a bit of it is not strategic investment. What is it and how do we think about it going forward?

Mark Ketchum

Let me take a crack at doing that answer without making this too long winded. When we’ve talked before about our brand building SG&A and sometimes we refer to that as strategic SG&A, we’ve said that includes advertisement and promotion, R&D, advertising consumer promotion, and R&D, and we talked about that going from less than 4% to 6%. I can also tell you that during this year in the earlier quarters of the year it was 4.5% to 5.5% and by the fourth quarter it was back up to 6.5%. So a significant portion of the build this year was also restoring it to that range.

I’d also tell you that there’s another big bucket of SG&A that is business building or capability building SG&A that I would call strategic even though it doesn’t fall into those buckets of advertising, consumer promotion, or R&D.

So for instance, in many of our businesses, selling is the most strategic thing we can do. In our industrial products businesses, in our commercial products businesses, and in some of our technology businesses like Mimeo, calling on the customers and the more customers you can call on, the more trials you can get of your product, that’s how you make the conversation. You make the conversion by calling on a lot of customers, getting a lot of trials set up, converting those trials into sales.

So often times the additions there are sales people, which we’ve referred to in the past as feet on the street. I consider SAP a strategic investment, and guess what, that investment has to continue to go up until we’re finally fully live on SAP. Why is that? We still have a number of people, a number of our businesses, that are on our legacy systems. We still have to maintain the servers and the legacy systems until everybody is off of those. Frankly, even when half of the businesses go off of those, you’re not able to reduce your cost very much on the maintenance of your old servers and your old legacy systems.

Each new business that goes onto SAP picks up an incremental SG&A cost because we’re outsourcing the support for data storage and server capacity for adding those new businesses, so some day when we’re all on SAP, we will shut down the legacy systems and shut down the servers, and do a balloon payment if you will, but until then, it’s a net incremental we’ve had every year frankly and so those would just be examples of other what I’ll call strategic spending that we’re doing in SG&A that’s continuing to drive that increase for at least the short term.

Lastly in this past year, obviously our ability to fully absorb the reduction was a heck of a challenge and in some cases, I referenced this before with our Lenox sales selling organization as an example, that business is down over 20% but I didn’t take 20% out of the sales force because we’ve invested too much money in developing and training those people. If that business stayed down 20% for 5 years I’d take them out but I don’t think it’s going to.

Michael Kelter - Goldman Sachs

On the same topic maybe looking forward, it sounds like for 2010 you’re calling for roughly flat sales with organic up low singles and the product line exits maybe offsetting that. Is there a possibility you could see some SG&A leverage by taking our costs going forward or is it still going to continue to get a little bit worse at least in the near term because you have normal let’s say salary inflation, SAP investments, brand investments. How do we think about that line item next year?

Juan R. Figuereo

We have a strategy that basically says reduce your core, write whatever’s not customer facing, and invest some of that and invest some of the gross margin expansion into what builds the business and we are living by that creed. What you see in the numbers reflects that. So at a higher level, we are moving I think at a decent pace towards the strategy, the P&L that was previously discussed with a 40% gross margin kind of 25% SG&A, so at a high level we’re progressing towards that.

On a short term basis, the business teams need to have the top line as growing, just add a little bit more, take back here, so that’s what you’ll see as the year progresses, but you should see some leverage as the top line returns.

Michael Kelter - Goldman Sachs

One last question on a different topic, on cash. It seems like you guys have done a great job generating cash even through the downturn. You mentioned in your prepared remarks that other than servicing the dividend that really you’d be using excess cash to de-lever the balance sheet. Is that really the only use of cash for the foreseeable future or would you guys entertain let’s say an acquisition if the right one came along or any other use of cash?

Juan R. Figuereo

One of my top priorities was made very clear, that we have a good balance sheet, we need to make it stronger. So our top priority to use excess cash is pay down debt.

Mark Ketchum

You shouldn’t expect to see us doing anything significant in the M&A area until we’ve got those credit metrics restored to where we want them so while we can do a few really small bolt ons, it wouldn’t be anything more than that.

Operator

Your next question comes from Budd Bugatch - Raymond James & Associates.

Budd Bugatch - Raymond James & Associates

I also wanted to get at the SG&A and Mark, thank you very much for that color on what now makes up strategic SG&A. Can you quantify for us at least going forward what that amount is or how do we think about it in terms of that versus overhead, is there a percentage that we can look at for strategic versus ongoing SG&A?

Mark Ketchum

I’m not going to give you a number today but I’ll make this commitment: when we do our Analyst Day in May, we’ll give that more color because I think it’s a subject that deserves a little more time spent on it than what I might be able to provide right now.

Budd Bugatch - Raymond James & Associates

The second question I have kind of relates to overall in the company when you think you will get to that 40%, 25% time frame, and I know that’s kind of nebulous, but what is the track to that now? When do you think you will be --

Mark Ketchum

I think last year when I talked about that and I talked about that in some of the presentations that I did, we said 3 to 5 years and I think that’s still the right time frame. So our stretch objective is to do that in 3 and I think maximally we’d do that in 5.

Budd Bugatch - Raymond James & Associates

Is it still 3 to 5 or has I become 2 to 4?

Mark Ketchum

I think it’s still 3 to 5. I think what we did last year is we were able to go a little bit faster but I think the glide path if you look at where I thought I’d be, because now we’re talking about being in the 37.5-ish range for next year, and that’s about where I thought I’d be if I forecasted it last year so in other words we just did a little bit better, a little bit quicker, in 2009. We haven’t added incrementally I don’t think to our ability to get there yet.

Budd Bugatch - Raymond James & Associates

So 2013 to 2015 kind of time frame is kind of the way to think about that I guess. Then on the Bolivar issue, I guess the way to think about that is versus last year because that’s the year that has to get restated I guess when you call it out as you report. Is it about a penny a quarter or a penny and a quarter per quarter or was there much seasonality to it or is that how it’ll show up when you report the quarters?

Juan R. Figuereo

At this time our best assumption would be spread throughout the year, the 4 to 5 pennies, and we’ll see what happens in the country.

Operator

Your next question comes from Bill Chapelle – SunTrust Robinson Humphrey.

Analyst for Bill Chapelle – SunTrust Robinson Humphrey

This is Mark Schwartz filling in for Bill. Not to beat a dead horse here, but I have another question regarding the strategic brand investment. With how you’ve ramped that up in the second half of 2009, could you quantify or maybe give us a little more color about what kind of impact that had on revenues, if any, in the fourth quarter and how you see that playing out through 2010?

Mark Ketchum

It probably didn’t have a huge impact on the fourth quarter but I think it had a little bit, more than that, it was a build for 2010. The other thing I will add, a new piece of color, so we’re not repeating things that we’ve already said. Some of this investment is for things like building out our core understanding of our businesses. Part of R&D is consumer research, a part of the R in R&D is research. I think we’ve talked before, we are coming from a point where we did very little, almost none in some of our businesses, and as you know, we’re dedicated to really understanding our brand equities, competitors’ brand equities, our product performance, how it performs versus that.

When we are ready to launch new products, we’re doing concept tests, we’re doing volumetric pricing tests. Those tests add up to several million for every single brand and some of those investments are almost invisible in the short term, I shouldn’t say invisible, they will not drive top and bottom line growth in the short term, but they’re fundamental to getting the basics right, to really understand your consumer, understanding if your new innovations are really going to be meaningful, where you can price them, what’s the likely competitive response, and really understand your markets as we enter new geographies. We’re doing more testing than we’ve ever done before. As we enter into new neighbor categories.

There’s tens of millions of investment that we have to ramp up frankly versus where we were a couple years ago and we’re not done ramping that up. So that’s another piece that probably wouldn’t show up with an immediate return but I assure you, it’s the right long term investment.

Juan R. Figuereo

Let me add to that just to remind you that was funded with gross margin expansion and I think part of the good side of the story is that the gross margin was slightly ahead and we had good places to invest the money in behind growth. It would have been a sad story the other way around if we didn’t know where to invest behind growth.

Analyst for Bill Chapelle – SunTrust Robinson Humphrey

With regards to working capital, you guys cut inventory levels by over $200 million in 2009. I think on a prior call you said you see more improvements going into 2010. Can you give us any kind of color on how you quantify that or how that compares to the 2009 improvement?

Juan R. Figuereo

The improvement in 2009 was really great. We took 12 days out of inventory and that reflects what Mark has been talking about when he says we’re adding capability. You can’t take 12 days out of inventory with a knife. That requires just a fine cutting instrument and I hope that makes you feel more comfortable.

As you look forward in 2010 and beyond, we will continue to fine tune but the numbers will be smaller. You can’t take that kind of inventory out every year so probably in the $30 million to $50 million range if we do a good job. The fact is that the capability roll out continues and this business, the flow through goes in the cash flow basis and the P&L basis is improving day by day and that’s very encouraging.

Mark Ketchum

I would say that I expect that annual improvements in inventory reductions should be an annual story for many years to come, frankly. That’s why we’re making the investments that we’re making in SAP. I think I’ve remarked before that the businesses that have made the most progress in inventory reductions this year are the businesses that are on SAP. So that’s proving it to be exactly what we wanted it to be which is a tool that will allow us to do better demand planning and inventory planning and control. Taking out SKUs is an opportunity to get rid of the tail of the slow moving items. So when you look at the investments we’re making in better [S&OP] processes, putting in systems like SAP, reducing SKUs, simplifying and harmonizing our line ups, all those things are things that give you the capability to continue taking some inventory out.

Operator

Your next question comes from Connie Maneaty – BMO Capital.

Connie Maneaty – BMO Capital

I have a question or two on Venezuela and then I’ll follow up. I think in the press release you said you adopted the parallel rate for translation in the fourth quarter of 2009, so you had three quarters at the official rate and one quarter at the parallel rate so that going forward, by the time we get to the fourth quarter of 2010, there should be no year-over-year impact, right? But why did you adopt the parallel right before it devalued?

Juan R. Figuereo

We actually adopted the parallel rate after it devalued. Here’s what was happening. We had been accessing the official rate from time to time for the payment of intra-company royalties. So we were translating that using the official rate because we had the ability to access it. Once the government devalued and instituted the two-tier exchange rate, then we said we are probably not going to be able to access the official rate for the payments of royalty, so we kind of took the conservative approach and what we had on the balance sheet in terms of intra-company royalty receivable we wrote down to the parallel rate. That is the impact that you saw in the fourth quarter.

Connie Maneaty – BMO Capital

That was the other question, I thought there was also a balance sheet impact. So you took the balance sheet impact in Q4 and then the translation in transaction runs all through 2010, right?

Juan R. Figuereo

Yes, that is correct.

Connie Maneaty – BMO Capital

My second question is just on the timing of earnings growth. I think I appreciate all the factors or some of them that are going into this year but it also sounds like with commodity costs being higher at the start of the year with SG&A as a percentage increase being higher at the start with most of the new product sales showing up in the back half of the year, it sounds as though first half EPS will be down year-over-year. Is that the right way to look at it with the ramp up in the second half?

Mark Ketchum

I think directionally that’s the right way to look at it. And again just to be clear, our input costs are not higher in the first half versus the second half, they’re only higher in relationship to 2009 because 2009 was unusually low in the first half on input costs and also was unusually low in the first half on SG&A spending because we had really pulled back on our spending to make sure we could deliver our numbers even if the world continued to collapse.

Operator

Your next question comes from Jason Gere - RBC Capital Markets.

Analyst for Jason Gere - RBC Capital Markets

This is Joe Spack in for Jason. Just a quick one to try to help you guys try to wrap up here. I appreciate all the talk on the strategic spending behind the growth. I was just wondering if there are any areas where you’ve increased any spending defensively. I believe I heard Juan say that spending is up in home and family as well and I was wondering if there were any issues in that segment or across the entire portfolio.

Mark Ketchum

When you say spending is up in home and family, of course home and family has 5 business units and I referenced a couple of them where we had increased spending like our Rubbermaid food business and baby and parenting. So I’m not quite sure what you’re --

Analyst for Jason Gere - RBC Capital Markets

In terms of competition, if any of the increase in spending has been more of a defensive nature as opposed to offensive and trying to fund future growth.

Mark Ketchum

For the most part, no. Everything I referenced there would be more offense than defense. Often times the defense is investments we need to make which would probably show up in lower net sales because they’d be in the form of price give backs or price promotions which we wouldn’t include in SG&A.

Juan R. Figuereo

The best measure of that is the fact that we gained share across most of the businesses and pricing was a net positive.

Operator

Your last question comes from Joe Altobello – Oppenheimer.

Joe Altobello – Oppenheimer

First on the gross margin, obviously very good improvement last year. It was skewed down a little bit in the first quarter. If I look at your guidance this year, it’s only flat to slightly up off of your high water mark of about 37.4 last year. How much is commodities weighing down on that?

Juan R. Figuereo

Commodities is going to be just a slight negative on a full year basis to 2009.

Joe Altobello – Oppenheimer

If that’s the case I would imagine there’s some upside to that number.

Juan R. Figuereo

I hope you’re right. We believe what Mark alluded to, that 75 to 100 basis points is absolutely doable. Frankly if there’s more than that, that’s a decision Mark needs to make, if he wants to expand the margin or if he wants to put a little bit more on growth. So we don’t know how it’s going to play out but we do feel good about the 75 to 100 basis points.

Joe Altobello – Oppenheimer

The dilution from the converts at today’s stock prices is about 9%, is that right?

Juan R. Figuereo

I think that’s about right but we did post, there’s a schedule on the website and on the presentation that should allow you to calculate different prices.

Operator

If you were unable to ask your question during this call, please call Newell Rubbermaid Investor Relations at 770-418-7662. Today’s call will be available on the web at NewellRubbermaid.com and on digital replay at 888-203-1112 or 719-457-0820 for international callers with a conference code of 6778854 starting two hours following the conclusion of today’s call and ending February 13.

This concludes today’s. You may disconnect.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!