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Executives

Martin Franklin - Executive Chairman

Jim Lillie - Chief Executive Officer

Ian Ashken - Vice Chairman & Chief Financial Officer

Rachel Schacter - ICR

Analysts

William Chappell - SunTrust Robinson Humphrey

Joseph Altobello - Oppenheimer & Co.

Charles Strauzer - CJS Securities

Greg Badishkanian - Citigroup

Lauren Lieberman - Barclays Capital

Andrew Burns - D.A. Davidson & Co.

Jason Gere - RBC Capital Markets

Reza Vahabzadeh - Barclays Capital

Karru Martinson - Deutsche Bank

Carla Casella – JP Morgan

John Anderson – William Blair

Jarden Corporation (JAH) Q2 2012 Earnings Conference Call July 24, 2012 8:30 AM ET

Operator

Good day ladies and gentlemen and welcome to the Jarden Corporation Conference Call. We will begin with management’s formal remarks followed by a question-and-answer session. (Operator Instructions). Today’s event is being recorded.

I will turn the call over to Rachel Schacter of ICR.

Rachel Schacter

Good morning and thank you for joining us for Jarden’s second quarter fiscal 2012 results conference call. In accordance with Regulation FD or Fair Disclosure, we are webcasting this conference call. Any redistribution, retransmission, or rebroadcast of this call in any form without the expressed written consent of Jarden is strictly prohibited.

Before we begin, please take note of our cautionary statement regarding forward-looking statements at the end of our earnings press release issued today. While forward-looking statements made during this conference call are based on currently available information, our actual results could differ materially from those predicted. However, we undertake no obligation to update any such statements, whether as a result of new information, future events or otherwise. For more information please also refer to the risk factors discussed in Jarden’s Form 10-K.

Please note that the company has posted supplemental financial data slides, as well as reconciliations of certain non-GAAP to comparable GAAP financial measures to its website. The presentation can be downloaded in the section For Investors on Jarden’s website under the Presentations heading.

And now, I would like to turn the call over to Executive Chairman, Martin Franklin. Martin, please go ahead.

Martin Franklin

Thank you, Rachel. Good morning and thank you for joining us to discuss our second quarter and first half fiscal 2012 results. Hopefully, you have had a chance to review our second quarter earnings release issued earlier this morning. With me on the call today are Ian Ashken, our Vice Chairman and Chief Financial Officer; and Jim Lillie, our Chief Executive Officer.

We are pleased to report another record sales and earnings quarter, which continued our positive momentum from the first quarter of the year. Our consistent ability to achieve and many times exceed expectations clearly demonstrates the strength of our diversified business model. The seasonal staple, or consumable nature of many of our products that we offer and most importantly the loyalty consumers have to our brands. These factors combined with our operating businesses, ability to continue to execute from both our targeted growth initiatives, as well as our cooperation, allowed us to successfully navigate the continuing economic challenges and deliver a solid performance during the quarter.

Ian and Jim will discuss the specifics of our operational performance, but I wanted to comment on how pleased I am that Jarden continues to deliver on its financial goals while maintaining a strong balance sheet. Our focus on working capital management resulted in Jarden reporting a second highest cash flow from operations for any second quarter only exceeded by the exceptional cash flow we produced in 2009. The driver of our consistent profitable growth in the quarter was our continued ability to optimize the performance of our existing businesses, as we did not complete any acquisitions or undertake any meaningful capital markets activity.

Retailers and consumers continued to recognize our brand for innovation and performance. This has led to study market share gains as we grow our sales within existing doors and execute on opportunities to expand the products we offer to increase our channel and geographic reach. As an illustration of the success many of our businesses are enjoying, I would like to highlight the strong performance in the couple of our businesses during this quarter.

As we celebrate the 125th anniversary of the Rawlings brand in 2012. We are also proud to have earned two weeks in industry awards, which recognize our capabilities.

First, we have received the National Sporting Goods Association, All-Star Catalyst Award, for our efforts in co-founding the National Sports Concussion Cooperative, an organization which is committed to helping protect athletes from concussions in sports. We believe this award is a reflection of our leadership and in research and developing protective technologies, as well as the tremendous trust, the consumers, professional athletes, and retailers have in our brands and our products.

Second, we received the highest possible best available 5-star rank for Rawlings New NRG Quantum Plus Football Helmet and either 4 or 5-star ratings for all three of the adult-sized helmets introduced in the last year. These nationally recognized rankings issued by the Virginia Polytechnic Institute follow extensive product testing and take it for a multi-year period and represent a consistent standard used by consumers to make better informed decisions regarding their purchases. This recognition also confirms our ability to execute on the transfer of Rawlings technological advances from baseball to football. These accolades received by Rawlings are illustrations of the success we are having at many of our business units, based on our commitments to investing behind our products and brands.

The first-half of 2012 saw another record level of investment to help drive future new product developments and growth. We are also proud to have recognized during the second quarter by Fortune magazine and balance [ph].

Our Fortune 500 ranking increased to 371, up significantly from 492 just five years ago. We were also named to balance top 500 companies at number 256. Both of these rankings confirm that our strategies are producing the intended results of profitable growth.

As the world prepares for the start of the Olympics this week in London, I wanted to highlight one of Jarden’s connections to the games. As many of you know, three years ago we established a goal of doubling the size of our Marmot brand by 2013. Marmot is tracking ahead of that plan and one of the reasons is the launch of several branded flagship stores in key global locations. In May, we unveiled our newest Marmot store near the Olympic venues in London. The location is a terrific way to showcase Marmot’s technical performance offerings, while meeting our stringent ROI criteria. We also expect to benefit from increased brand recognition as an estimated 7 million spectators will walk by the store while visiting the Olympic games over the next several weeks. Beyond Marmot and an example of the crossed emotional opportunities between our brands, there will be a Zoot display of the Ultra Kiawe running shoe in the Marmot store in London. Zoot is one the world’s premier authentic triathlon brand. Five Zoot athletes including the men’s triathlon Olympic gold medal contender Javier Gomez will be racing in the Ultra Kiawe shoe, which is the focus of the display in the Marmot store.

Our aspirations for the Zoot brand are high and the business has its own program in place to double sales within the next four years. With that I would like to turn the call over to Ian to review our financial results in more detail.

Ian Ashken

Thank you, Martin. As a reminder, consistent with our quarterly practice, we have posted a more detailed financial presentation of our performance during Q1 on our website. We’ve also continue to disclose both as reported and as adjusted results separately in our press release. Although, both Q2 and the first half of the 2012 are clean in the sense that they only contain our standard adjustments in tangible amortization and the effective tax rate.

For the second quarter of 2012 sales grew 3.7% on an organic basis, adjusting for foreign exchange movements and exited businesses. As you could see from our supplementary slides, we reported organic growth in each of our segments during the second quarter. Our strong sales performance in the quarter reflects the advantages of Jarden’s diversified business model with the inevitable unfavorable weather or other negative impacts in certain businesses in any particular quarter, can typically be mitigated by the general positive momentum across the majority of our businesses. This built-in diversification is a powerful tool in our ability to deliver consistent profitable growth.

Gross margins increased 110 basis points compared to the second quarter last year. Our gross margin continues to benefit from the introduction of new products which command higher price point and from the various ongoing continuous improvement programs throughout the company. These programs include lien initiatives, kaizen or six sigma in our manufacturing facilities, as well as projects to increase capacity utilization of our warehouse and distribution facility. The strong margin expansion was held by year-over-year declines in certain commodities and distribution costs, although we anticipate these exceptional benefits would stop dissipating the second half. We remain on-track to achieve at least 50 basis points of gross margin improvements in 2012.

Adjusted EBITDA margins for the quarter increased 30 basis points compared to the prior year period. Our SG&A increased 50 basis points on an adjusted basis compared to second quarter last year primarily due to some incremental brand investments and marked to market losses on hedges, somewhat offset by foreign exchange movements.

Approximately $10 million of the increase in corporate expenses and increase in Outdoor Solutions SG&A expense on a year-over-year basis in Q2 was due to one-time license in Q2 of 2011. Much of the additional reduction in Outdoor Solutions year-over-year operating profit is attributable to lower sales and margins at the ski businesses and Coleman. Offset by increased sales and margins at our Fishing businesses.

As the year progresses, we anticipate that our year-over-year EBITDA margins will continue to show improvement as the gross margin expansion is not fully absorbed by SG&A increases.

Cash flow from operations in Q2 was 167 million compared to 143 million in the second quarter of 2011. Improvement in our cash flow compared to 2011 is primarily due to our focus on reducing and leveraging our working capital through various initiatives throughout Jarden.

The success of these program is evidenced by the $129 million or approximately 8% decline in inventory balances between Q2 2012 and 2011. We achieved this reduction without incurring risks to the continued growth of our businesses and we remain committed to our stated goal of reducing working capital by approximately 50 to 100 million for the year.

We continue to expect cash flow from operations to be at least 430 million in 2012. Our bank leverage ratio was approximately 3 times at the end of Q2 which compared to 3.2 at the end of the first quarter. We’ve already achieved our goal of bringing this ratio back to our target of 3 to 1 or less during the course of the year.

Interest expense of $45 million was down $1 million in the course compared to the prior period. Our lower interest expenses after including the extra indebtedness incurred in Q1 to fund our 12.1 million share buyback program. With lower rates adding to the accretiveness of our buyback strategy. Our weighted average interest rate for the quarter was 5.2% versus 5.4% in the prior year.

Our current ratio of fixed and floating debt remains conservative with approximately two-thirds fixed to one-thirds floating. As mentioned on our last conference call, we had anticipated taking a charge in 2012 to repatriate cash from Venezuela, not held for permanent reinvestment and restructure certain of our international manufacturing operations. No significant charges were taken in the first half related to these items. I will comment further on the next conference call our latest thoughts on the expected target on these items.

Our reported 2012 sales will continue to be reduced by the year-over-year fluctuations in the euro and other currencies and based on current projected rates we now anticipate that we will experience some net reduction in sales in the range of $125 to $150 million in 2012 versus our expectations in Q1 of this year of a net reduction in the sales with the range of 80 to 90 million and versus a benefit of 102 million in 2011.

As we stated during our first quarter conference call, we believe our average cost of borrowing will be fairly flat in 2012 compared to 2011 and the capital expenditures will be in the range of 2 to 2.5% in sales. We anticipate our effective tax rate to continue at 35% in 2012 compared to 35.5% in 2011.

We are pleased with our results for the first half of 2012 and our forecast of fiscal 2012 remains at adjusted earnings per diluted share will be in the range of $4.04 to $4.14. Our longer-term goal of nearly doubling our 2009 EPS to $5.00 of adjusted earnings per share by the end of 2014 remains a key target for the management team.

I would now like to pass the call over to Jim.

Jim Lillie

Good morning and thank you. As both Martin and Ian mentioned, our business performed well in the second quarter reflecting balanced growth across our business segments and brands. During the quarter, we continued to make progress toward our annual growth objectives and we are pleased to communicate to you that with the half year gone we would remain on-track to achieve our financial goals.

As I previously shared with you our growth objectives for 2012 include growing organic net sales on an average by 3% to 5%, but as noted on our year-end conference call we expect most of this growth to be in Q2 and Q4, expand the gross margins by approximately 50 basis points, increase the adjusted earnings per share by at least 10%, and increasing cash flow from operation through continual improvements in working capital management, as well as the increases in our operating profits.

Before discussing our results for the quarter I’d like to share with you some observations from our recent 3 days of strategic global planning meetings with approximately 100 of our top business managers from around the world. It’s evident that our management teams from each of our businesses are aligned and driving their businesses to achieve our stated goals. Each of them is focused on developing new innovative products designed to the like consumers, leveraging the brand equity, and driving cost efficiencies and synergies with such companies, all key components of our growth objectives.

With respect to the second quarter results, we achieved our organic net sales goal making our 11th consecutive quarter of achieving organic growth. For each quarter since Q3 2010, measured on a 12-month trailing basis, we achieved organic growth within or above our long term average range target of 3% to 5% while continuing to outpace GDP.

For the second quarter, all of our segments reported organic growth with both Jarden brand of consumables and Jarden Consumer Solutions growing by approximately 6%. For Jarden brand consumables, the second quarter reflects the continued favorable trends we reported for these businesses on our Q1 call. Specifically, our fresh preserving business maintained momentum from the first quarter delivering double-digit sales increases for Q2. We continue to be pleased with the new product launch of our first fresh preserving kitchen appliance, designed incorporation with the sister segment, Jarden Consumer Solutions. As we previously discussed, this product was conceived to response with the growing trend of home and local community gardening, including in many urban locations throughout the United States and is designed to simplify the process of preserving fresh foods.

Our First Alert business continues to benefit from carbon monoxide legislation in California and New York, as well as strong initial sell-in of new security camera products in the home improvement and electronic channels. We believe our strong new product pipeline will continue this momentum.

Within our Outdoor Solutions segments, organic growth of approximately 1% was attributable to the following factors. For Rawlings, we reported growth in several categories, fuelled by our ongoing ability to satisfy our customers’ needs for high performance products with brands they can trust. We saw particular strength in our new line of BBCOR baseball bat and our S100 baseball helmets, as well as Slowpitch bats under the Worth and Miken brands.

Following a strong Q1, our Fishing business reported another strong quarter in Q2. Pure Fishing was also recently honored with six ICAST industry awards across multiple categories, including fishing reels and line. These awards are highly relevant to consumers and the decisions consumers make regarding product and brand preferences and they recognize once again the passion and commitments to new products as the hallmark of our business seems.

Jardon Technical apparel also delivered a strong top line performance in the quarter in line with our expectation of doubling sales from 2010 levels through 2013. In addition to the flagship retail rollout highlighted by Martin, product innovation, broadening our product offerings into new categories and increasing our spring summer product selection under the Marmot brand have us pulley to achieve our growth goals at which time we will set new targets to double the double.

As we have mentioned previously, we have also established aggressive targeted growth goals for ExOfficio brand of primarily travel apparel products. The organic growth for the segment was partially offset by our common results as they had a difficult comp versus last year in offsetting the Tsunami related sales in Japan, coupled with lower sales in Europe as a result of the poor summer weather and weak economy, as well as some lackluster sales in the US from the generally weaker retail environment in the second half of the quarter.

As Q3 signals the end of the season for the northern hemisphere countries, we do not expect this trend to reverse in the second half of 2012, but excited by the process for 2013 with positive reaction from retailers for a strong pipeline of new products and expectation of more normal weather patterns.

Within our Consumer Solutions business, organic net sales grew by 6%. This growth was realized across product and geographies with particular strength in the food saver products, machine and consumable bags, as well as growth in Latin America. Also note that the strong early sell in of our new Mr. Coffee single cup brewing system, which we discussed on our Q1 conference all. This product as you might recall is the first Mr. Coffee single cup with a water reserve which eliminates the need for frequent water reserve refills.

Across geographies, our business has generally performed at or above our expectations only in parts to appropriately conservative budgeting in certain countries with known economic weaknesses. As we have indicated in the past, we believe that the seasonal stable and replenishment nature of our products is a great advantage to have in a difficult economic environment.

Finally, on the commodity front, as Ian mentioned, we did experience less in the way of headwinds versus our expectations, helping the gross margin expansion during the second quarter. As I said on our last call, we expect that commodity fluctuations will not be a major factor in our results for the balance of the year.

With respect to Q3, we are excited about several new product initiatives including Rawlings football helmet, which Martin discussed, and (inaudible) products among many others. Offsetting these positive trends, and as a reminder, we continue to expect a full year sales impact from reduced ski order to approximately $50 million, of which approximately $25 million was absorbed in the first half of the year.

We also continue to monitor weather conditions globally, including the particularly dry conditions in the United States to assess any potential impact on our businesses. In line with our expectations, and supported by a great productive three-year strategic planning meeting this past week, while return we remain optimistic about our growth potential and confident about achieving our stated goals with several exciting new opportunities to add to our growth in 2013 and beyond.

With that update, I would now like to turn the call back over to Martin for some final comments.

Martin Franklin

Thank you, Jim. As we begin the second half of the year we remain confident in our ability to achieve our long-term financial objectives. The visibility into our seasonal product orders received early in the year, we expect and plan for a less robust ski season. And while weather can always be related upon to be unpredictable and economic conditions in Europe remain tenuous, we believe this is appropriately factored into our earnings outlook.

Our optimism remains rooted in the strength that our brand and businesses have in the marketplace. The considerable wide space opportunity we have in newer geographies and the innovation we bring to the market that is leading to brand product and category growth.

I would now like to open the call to any questions. Thank you very much.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from Bill Chappell of SunTrust.

William Chappell - SunTrust Robinson Humphrey

Good morning.

Martin Franklin

Good morning, Bill.

William Chappell - SunTrust Robinson Humphrey

This is just more of a general question. Can you talk about just consumer takeaway trends, inter-quarter both from the US and Europe and if you saw any real change during the quarter?

Martin Franklin

I think, as we entered Q2 we continue the momentum that we had in Q1. I think that there was a definite slowdown in our business in June, the later part of Q2, particularly as it related to the Common products line and that was really on a global basis. Fishing remained strong and I think that if you look at the consumer around the world, obviously it continues to be a struggle in Europe unless it was strong in the United States.

William Chappell - SunTrust Robinson Humphrey

And then, just switching to the gross margin, I guess – I think on the start of the year the original guidance or belief was doing at least 50 basis points in gross margin expansion but majority of that coming in the second half and now you have kind of exceeded expectations for both through the first two quarters. So, I am trying to understand, can we get a 100 basis points of gross margin expansion. Are you seeing some offset that were missing in terms of commodities?

James Lillie

Hi, Bill, it’s Jim. I think that as I commented in the prepared remarks, just as in the past as Jarden basically had the 6 to 9 months lag and when we had the headwind of commodities we were always catch-up whether it would be through pricing or mitigating factors. At the moment, certainly in Q2 we definitely had a benefit of it not only being the normal mix benefits etcetera, but commodities being upfront. Our view is that that’s still very volatile and that’s why we are cautious. My guess is, we’ll end up somewhere between 50 and 100 basis points for the year. But getting into the crystal ball of where oil is going, where you have got people saying that it could be $50 and some people saying its $150, obviously for us we just want to remain a little bit cautious as we are coming to the second half. But we are off to a very good start for this year.

William Chappell - SunTrust Robinson Humphrey

Okay. And then last one and I will turn it over. Just seeing on interest expense this year, should I assume that you are just going to sit on the cash till year end and so, maybe a $180 million in interest expense for full year, is that a good number?

Ian Ashken

Yes, I think, somewhere in $180 million to $185 million, I think that’s a good number.

William Chappell - SunTrust Robinson Humphrey

Okay. Thanks so much.

Martin Franklin

Thanks, Bill.

Operator

Next we’ll go to Joe Altobello of Oppenheimer & Co.

Joseph Altobello - Oppenheimer & Co.

Hi, guys, good morning. I guess the first question -- I will just follow-up of what Bill was talking about in terms of Common, you mentioned the Tsunami last year obviously, creating a very tough comp, but what else is driving the slowdown there that you saw in June?

James Lillie

The consumer takeaway slowed during the month of June. We had good weather in May. We saw some retailers increased prices, I think taking advantage of some of the momentum that we have in the products and that tended to slow down some of the POS as well.

Joseph Altobello - Oppenheimer & Co.

Got it, okay. Any evidence of pull forward from 2Q to 1Q given the warm weather we saw?

James Lillie

No. The pull forward comment that I made last year in Q3 relative to skies was because when knew an absolute shipping phenomena was occurring and if you look at Q3 this year and remember, we talked about growth in Q2 and Q4, beyond being a tough winter, we also had the benefit in Q3 last year of the pull forward of the ski shipments. And so, we continue to look for a relatively flat Q3, while looking for incremental growth in Q4.

Joseph Altobello - Oppenheimer & Co.

Got it, okay. Just one last one, in terms of the ski business you mentioned, Jim that you still expect about $50 million reduction this year given the warm winter. Are you guys confident that that can all be burned off this year, or will there also be an impact in 2013?

Martin Franklin

This is Martin. I would say that from our perspective, as you know, our approach to the ski business is we build products to what we think the demand looks like. This is a one-year lag because of the ski conditions of last year. We don’t know today what the ski conditions will be for this year, but there will be obviously some conservatism in our forecast if the snow is very strong there will be maybe a little more pickup than we are projecting. If the weather continues to be – if you have two back to back bad ski season it will have an impact going forward. This is why we say consistently that we are more vulnerable to weather than we are to economy. Nobody knows what the ski season -- what the forecast is for snow. But if we have a good ski season, obviously a lot of that gets alleviated.

Joseph Altobello - Oppenheimer & Co.

Okay, great. Thank you.

Operator

We’ll go next to Charles Strauzer of CJS Securities.

Charles Strauzer - CJS Securities

Hi, good morning.

Martin Franklin

Good morning.

Charles Strauzer - CJS Securities

How are you? A couple of questions here on the Marmot front and maybe Martin if you can talk a little bit more longer term here, kind of your goals for what you want to do with the retail aspect of this and how you want to kind of grow that, maybe from the number of units at stores, etcetera?

Martin Franklin

We have a real sort of flagship strategy in the US, not similar to some other major brands that you see in the marketplace. Internationally we have a lot of store within a store concepts and joint venture stores with other distributors. We have about 200 retail locations overall, a fraction of which are sort of flagship stores in the US, the rest of the store within a stores and joint venture relationships stores in places like Korea and various other countries. But the reality is we think that brand can be significantly larger and has the authenticity and the product range to be significantly larger than it is. We basically doubled the business in the last three years and expect to double that business again over the next four years. So, we are continuing to make those investments. It’s obviously as you can imagine at the sacrifice of some margin we would get if we chose to slow the growth down. But what we have inside our portfolio of brands, 120 brands we take, certain brands that we think are the targets of an accelerate to growth potential and we back those with a capital and the resources behind our business, which is one of our core strategies to drive organic growth.

Charles Strauzer - CJS Securities

Excellent. Ian, just a quick question, a few on SG&A and current marketing spend, how should we think about that in the back half of the year, kind of same kind of piece of increase or are there any big programs coming that we should know off?

Ian Ashken

There is nothing that’s going to change significantly. As I commented in the prepared remarks, that the foreign exchange movement you can see lowers the SG&A. So you can see that in Q2 that was offset by – we did spend more on brand investment and some of our hedges with a loss position, obviously our hedges were used in basically insurance. So, as commodity costs go down, that’s a good news, but the hedge is out there that will become underwater. So I don’t think there is anything new or different that you should do in your model for the second half.

Charles Strauzer - CJS Securities

Great, thank you very much.

Ian Ashken

Thanks, Charlie.

Operator

We will go next to Greg Badishkanian of Citigroup.

Greg Badishkanian - Citigroup

Great, thanks. Hey, guys, so organic sales saw a nice acceleration, I am just wondering versus second quarter, would you say that takeaway was pretty consistent or a little bit lower than that or how would you categorize retail takeaway?

Martin Franklin

I think it’s fairly consistent with the organic growth number, Greg. There weren’t any real pockets of, where one business was carrying the load for another. We saw the takeaway match these sales growth across all of the businesses.

Greg Badishkanian - Citigroup

I think you mentioned commencing of the slowdown, maybe that’s due to price hikes at retail. Is there any other major brands that you either saw in acceleration or slowdown at retail over the last one or two months?

Martin Franklin

No, each of the brands delivered exactly what we thought they were going to do on a budgeted basis.

Greg Badishkanian - Citigroup

Okay. So you are not seeing any kind of slowdown from macro environment?

Martin Franklin

I wouldn’t say it’s the common experience of the macro, but again, I think if you look at our growth and our comments on growth we see more growth in Q4 than in Q3.

James Lillie

Greg, it’s Jim. I think that and you know is that Europe is very slow, but then we expected it to be very slow. So the good thing is that we have these targeted growth initiatives throughout Jarden and you are seeing the quarter is not long enough to go through them all, but whether it would be on the new baby products or highlighted, or Marmot or some of the other Jarden home family, so that’s what you are seeing, which is why the organic growth was good despite some of the macro concerns impacting in general terms.

Greg Badishkanian - Citigroup

Alright. Great, thank you very much.

James Lillie

Thank you.

Operator

We will go next to Lauren Lieberman of Barclays.

Lauren Lieberman - Barclays Capital

Thank you, good morning.

James Lillie

Hi, Lauren.

Lauren Lieberman - Barclays Capital

Just on Coleman, just want to check if we should be thinking about any kind of hangover in the third quarter since takeaway slowed in June, excess inventory or retail any kind of risk to that number in Q3?

James Lillie

I would say, no. That’s the short answer. But the main reason is as I have said this in the past, Coleman is predominantly a Q1, Q2 business and really the impact is on the reorder activity that is really generated on reorders straight off the POS. So that is very much not a factor in Q3, in fact we stopped building inventories in Q4 for the programs that we have for 2013. I want to make a comment that wasn’t enough for (inaudible) but something that I think is important. We did a three-day strategic planning session where we really talked a lot about product with them, between our management teams, and I think the feedback – one of the things that I would highlight here is the new product development and the new products that are being introduced into the market for 2013 in the Coleman portfolio are about the best we have ever seen in the history of this company. And so, a lot of the things we talked about are really unique to what we have just experienced in Q2, I think the prospects for 2013 on the back of the new introductions that are going on in Coleman are have been very well received by retailers and the presentations that we have already made, because as you know, we are already – Coleman is already in the process of setting up its planner grams for 2013, 2012 is past for them.

Lauren Lieberman - Barclays Capital

Okay.

James Lillie

So, we are not concerned, we are actually very optimistic about where Coleman is going and what its prospects are for next year.

Lauren Lieberman - Barclays Capital

Okay. So near term just to paraphrase it, you normally wouldn’t be shipping much Coleman product in Q3 anyways, so what is outer retailers, retailers to work through within the non-issue?

James Lillie

That’s correct.

Lauren Lieberman - Barclays Capital

Okay. And then you guys had mentioned that monitoring the dry weather, particularly in the US, so as we think about Q3 through the tail end of the season here, what it is that we should be thinking about potentially being impacted by that dry weather?

Martin Franklin

Well, as we look at it, you would look at the home canning business with the obvious impact, think back at Q2 of last year where you had draught conditions early in the planting side of the equation. And now, home gardens have been planted and so we are just monitoring on the geographical basis by zip code quite honestly, where we think that we might be impacted or not impacted and look out into August and October of this year and all the forecast say for equivalent weather patterns that we have last year. So, it’s really a yield question for the agricultural crops, Lauren. If it actually yield then there will be less canning.

Lauren Lieberman - Barclays Capital

Okay. So that wanted to be conservative, I would say well, whatever I had built in for a home canning for recovery in the third quarter, I would probably want to – if I am thinking I want to be conservative assuming that it continue to be dry I want to bring that down? Because the weather is similar year-over-year rather than normalized?

Martin Franklin

And just sticking with weather, if you look at the fire is out west, and you look at the (inaudible) that went into the streams, that impacted fishing in the mountain ranges. And to the extent that you have extreme drought conditions, which I don’t think anybody is predicting, you would have streams drying up, which would also impact fishing. And so, not that we heightened concerned, but these are things are on our radars as we look to the diversification of all of our business that stepped in and helped mitigate any problem that might occur with those two areas.

James Lillie

Yes. Lauren, when you add up those dots, you look at the JTS business and think, well, they have got a very big fan business, so the hotter it is the more fans they sell. So, that’s why overall, you can look at, we have to juggle, but typically we have these natural hedges in the businesses and what you may see it’s a different margin, because maybe you get more margin of the bull job than you doing it for fans. But in terms of the sales, we should be reasonably protected.

Lauren Lieberman - Barclays Capital

Okay. And then with JCS, I think Martin had just said that all your brands in general align with plan versus budget. But for me the consumer solutions was actually a very big positive surprise in the quarter. You guys mentioned that selling of Mr. Coffee, is that through the big event and that’s kind of more normalized rate from here, because if I recall, the bulk of growth and consumer solutions in the last several quarters have been more international with the US kind of flat to slightly down? Was there any changing in terms of consumer interest or takeaway or demand or is this really more a matter of the selling of a great new product?

James Lillie

The selling of good products certainly supported the growth in that business, but if you look at it on a half-year basis, you have to remember that they had very little growth in Q1, but we are expecting a slightly higher amount of growth in Q1. So, if we look at our six-month basis it lines up with our planning cycle, with some timing between Q1 and Q2.

Martin Franklin

But it isn’t one product, Lauren. I mean FoodSaver was strong. The Patton business was strong. So, again, I always said, no silver bullets, no (inaudible) and it was really was a strong performer throughout the whole portfolio that they have got.

Lauren Lieberman - Barclays Capital

Okay. Alright, great. Thank you.

James Lillie

Thank you.

Operator

We will go next to Andrew Burns of D.A. Davidson.

Andrew Burns - D.A. Davidson & Co.

Thanks and good morning.

James Lillie

Good morning.

Andrew Burns - D.A. Davidson & Co.

Two questions for you. In terms of the 25 million impact from the ski business in the second half of the year, is it fair to assume that the vast majority of that is going to be felt in the third quarter of selling period? I am just trying to get a sense of – for the fourth quarter, are the comparisons favorable given the weather impact was occurring?

James Lillie

You will see the biggest impact in Q3 and then depending on how the weather is around Thanksgiving then into December that will really determine what the sales performance is ultimately going to be in the fourth quarter?

Andrew Burns - D.A. Davidson & Co.

Alright. But the fourth quarter of ’11 was negatively impacted?

James Lillie

The fourth quarter of ’11 was not terrible, because if you go back to the early shipments of products in Q3, our products were on the shelf for labor day and we are selling through and so by the time December 15th rolled around we had fairly good revenue and ski. It is really Q1 that was most impact by the lack of snow.

Martin Franklin

But the reality is we will show obviously, as Jim mentioned, Q4 we expected to be much strong organic growth overall than Q3.

Andrew Burns - D.A. Davidson & Co.

Okay, thanks. And then, could you spend a little more time on the margin side for outdoor solutions? I know there was some onetime items in the quarter, but walk us through the pace of margin recovery and some of the drivers that will enable that margin stabilization or improvement as we go forward?

Ian Ashken

Yes, this is Ian. I mean, obviously the margin in JOS is significantly down Q2 over Q2. When we look to the more detail, apart from the one-time items, the majority is actually in our manufacturing on the ski side. And it has nothing to do with sales or anything, this is the absorption of Q2 with major production period of skies that we are selling Q3 and Q4. And so, we just got a lot little volume that we are – and that’s the primary impact of margins than Q2, is that the absorption of the facility. And as you know, (inaudible) we are actually looking at our international manufacturing revamping some of that and we will talk about that on probably later on in the year. But the single biggest item impacting margins in Q2 and JOS with the lack of absorption in our ski manufacturing.

Andrew Burns - D.A. Davidson & Co.

Okay. Thanks and good luck in the back half.

Ian Ashken

Thank you.

Operator

We will go next to Jason Gere of RBC Capital Markets.

Jason Gere - RBC Capital Markets

Okay, good morning. A lot of the questions have been done, some of this be kind of like speed round, just in question. You guys, I guess, confirmed three to five organic for the year? Is that correct?

Ian Ashken

Correct.

Jason Gere - RBC Capital Markets

It’s going to be brand to consumable and consumer solutions than – obviously the fourth quarter will be better for outdoor solutions, just want to ensure (inaudible)?

James Lillie

That’s exactly right.

Jason Gere - RBC Capital Markets

Okay. Overall, if you look across the three segments, at retail you are comfortable with the inventory levels there, are there any discussions with retail? I know you were saying that selling and sell through kind of run on part with each other, but anything coming out that you were expecting the retailers to kind of scale back a little bit on inventory levels, or right now you feel very comfortable with were you are?

James Lillie

We commented in Q1 that we actually saw for the first time that we thought that retailers were going to be a little bit bullish and going to take a bit more risk on inventory. That then disappeared off the June experience, I think they have gone back to their – I don’t want to say, bunker mentality but they are very cautious about even having reordered to the level of POS. So our view is now that they are not going to do anything dramatic to cut down but we are not looking for the flood gates to open either. So inventory is appropriate, I think there is more upside than downside on where because I think there is more room on the shelf for more inventory rather than other way around. But until we get probably to the back to school and retailers see maybe things picking up, who knows, but at the moment I think we are back to where we were in 2011 which is by being more cautious on reordering against POS.

Ian Ashken

And Jason, just a (inaudible). The only macro inventory issue is the amount of winter products out in the marketplace. Not necessarily our inventory, but because inventory exists in Specialty Sports and mass e-stores impacts the opportunity to move forward in incremental sales.

Jason Gere - RBC Capital Markets

Okay. Not bad, I totally understand. And then just two last questions. I guess, overall, what are you seeing – I know you talked about Europe and the U.S. Can you talk maybe a little bit about Latin America, any change there from a consumer perspective?

Jim Lillie

It continues to be healthy for us

Jason Gere - RBC Capital Markets

Okay, great and then shares outstanding is 79, alright, now reduced for the year. I know at one point it was 80, but then I think it came in a little bit over this quarter.

Jim Lillie

Yes I think 79 is good for the year.

Jason Gere - RBC Capital Markets

Okay, and then the last question, should the present divestitures affect the P&L anymore going forward or we kind of done with that, at least…

Ian Ashken

There’ll be a small amount in Q3 and then that’s it.

Jason Gere - RBC Capital Markets

Okay, and which segment is that and is that…

Jim Lillie

All in other solution.

Jason Gere - RBC Capital Markets

Okay, great, thanks a lot guys.

Jim Lillie

Thanks you.

Operator

We’ve got Reza Vahabzadeh of Barclays Capital.

Reza Vahabzadeh - Barclays Capital

Good morning.

Jim Lillie

Good morning Reza

Reza Vahabzadeh - Barclays Capital

Just going back to consumer solutions, obviously 6% organic growth, nothing to be ashamed of, but going forward are the retailers supportive of this category and do you have same amount of listings or even more listings than in prior year to be order to gain share, as in prior years?

Jim Lillie

You’re talking about for the consumer solutions?

Reza Vahabzadeh - Barclays Capital

Yes

Jim Lillie

Yes, and the short answer is we are a key player in a core category that has as far we can see, full supply from our retail bay. I don’t if I’d want to be in the gum business right now, but I don’t think anybody is too worried about selling the sort of appliances that consumer seem to want it.

Reza Vahabzadeh - Barclays Capital

And do you have enough pricing or cost savings to offset some of the higher sourcing cost from Asia in that business?

Jim Lillie

Well, first of all if you look across the platform of input cost, Ian’s already talked about a little bit of about commodities. You want to just clarify on the commodity front. The commodity is still up on a year-over-year basis and typically we have approximately $25 million on year-over-year increases. This year we planned approximately $15 million year-over-year increases, so as an improvement, theoretically a $10 million and we’re tracking favorable to that, but commodities are still up on a year-over-year basis. As far as transportation cost coming out of China, they are relatively flat and as far as OEM’s costs on where we have third party manufacture our products, we aren’t seeing the type of wage inflation that you’ve seen historically in China, as China experiences some GDP slow down. So, things are relatively calm across all the input costs around the world.

Reza Vahabzadeh - Barclays Capital

Got it and then can you bring us up-to-date on your latest thoughts around acquisitions, anything out there? Do you have interest in it, or are you de-prefer go the share buyback ground?

Martin Franklin

Look, we from an acquisitions perspective I’ve said and I’ll take the same things I’ve said, I think for 10 years, which is where our professional opportunists for our companies. We see something that we think is important and can create real value for us and shareholders. You know, we’re not afraid to executive on it and I think we’ve proven over time that we’re very prudent on how we look at these things. But we are more focused on (inaudible) than anything else. That’s not to say then occasionally interesting opportunities come along which we’ll take a hard look at, if we think that they can create more value than buyback could. We obviously like the buyback approach, I think these evidence sort of speaks for itself.

Reza Vahabzadeh - Barclays Capital

Got it, thank you.

Martin Franklin

Okay Reza.

Operator

We’ll go to Karru Martinson of Deutsche Bank.

Karru Martinson - Deutsche Bank

Good morning. If taking a step back on that big picture hitting into the recession last, our morality, even if does has a good read on it and certainly coming out of that recession, you were kind of first with the orders. And when you look how past kind of the two quarters here, you’re looking in a new product pipeline and then what you’re getting from retailers from next year. I mean, how are you guys approaching it from a big picture perspective?

Martin Franklin

I would tell you, same way as we’ve done in the for the last God knows how many years. We have a very, I would say methodical stringent approach to our budgeting process and how we look into our businesses I can tell you, as part of our, if you like our strategic planning that we go through is building a plan that is a multi-year plan and from the outlook that we see, we see no reason unless there is a dramatic change in the world that we don’t see today as we see no reason why we shouldn’t hit all of our goals which as you know, the 3% to 5% organic growth in the top line, which I think by any measures is a healthy performance when you’re dealing with the company that’s close to 7 billion in revenue. Growing up gross margin by 50 bps a year and growing our earnings by more than 10%. If we continue, there’s no reason why we can’t do that next year, but we seen our own internal forecasts and as we drive our businesses and make our investments with our resources. We continue to believe that those things are achievable in this current macro environment.

Karru Martinson - Deutsche Bank

And when we look at the fishing category, honestly the drought has been getting worse. Is this laid enough in the season that those purchases are essentially done, or you think that there could be potential drag on it, as we finish up the summer?

Martin Franklin

The interesting thing about the fishing category is people go and fish when the weather allows them to fish. And so if you look at the weather patterns today, you look at the current forecast. I am not expecting any negative impact on a global basest relative to fishing, based on what we see from the weather coming up for the balance of the year.

Karru Martinson - Deutsche Bank

And then just lastly, in process solutions, I know it’s the smaller part of the business. But certainly a strong quarter, apologies if I missed, there were earnings come one time in those numbers in terms of sales and segment earnings.

Martin Franklin

I’m glad you pointed out, because you really don’t talk about per situation, it’s (inaudible) our other business, but they had a very good solid quarter, but no one time. This just happened to be firing on all four cylinders as opposed to three cylinders which is our minimum expectations for a business. So, it was a very good quarter for them.

Karru Martinson - Deutsche Bank

Thank you very much guys. Appreciate it.

Martin Franklin

Thank you.

Operator

We’ll go next to Carla Casella of JP Morgan.

Carla Casella – JP Morgan

Hi. I have a question specific to you I guess, the supporting the category and I’m wondering if you’re seeing any change in trends as we’re kind of in that peak season there between performance at the supporting specific stores versus mass merchants? Is the consumer favoring one over another, are you seeing any differences in trends?

Martin Franklin

With regards to the supporting goods category, if you look at it on a year-over-year basis, specially Sports, small independent people have a little more wind in their sales they’ve had historically the best not to say math is not performing well either. I think that if you look at how the consumers have behaved over the past 18 months to 24 months when the economy was much tougher, people intended to go to the mass stores for all types of purchases. And as the economy has improved they have begun drifting back towards specialty retailers.

Carla Casella – JP Morgan

Okay great, thanks a lot.

Martin Franklin

Great, thank you. We have one more question?

Operator

Yes we have time for one more. We will go to John Anderson of William Blair

John Anderson – William Blair

Hi guys, thank you for squeezing me and I appreciate it.

Martin Franklin

Hi John, sorry we don’t mean to squeeze you. I’ve got to run down because I’m doing CNBC Downtown and I have got to shoot out of here in a second.

John Anderson – William Blair

No problem, I’ll keep it real brief. I know you noticed, you called out new product the line up coming out of your strategic planning meeting, just was wondering if you could characterize, and how this kind of be the pipeline work, for 2013 relative to the past couple of years and where are you seeing particular pockets of strengths? Thanks.

Martin Franklin

Thanks for that. That’s the last question I’d really like to answer. Look, we do the strategic planning sessions and they are very important and it’s almost like a show and tell for our business leaders. And I have to tell you, I have never been more pleased, excited, impressed that we’ve really built. And it’s not something that sort of suddenly happened in 2012. It is every year the product pipeline and the development processes and the – if you like the maturation of the product development cycle, get better and better. And I think as result, what you’ll see for 2013 is you know, the advancements that we’ve made and the passion I think that exists inside the businesses to produce them are worthy of the leadership positions that they have in that businesses. And you have to understand the combination of having the strongest brand in a particular market, and a leadership team that really understand what it takes to maintain that leadership position results in extraordinary assets to build great products. And I think you’ll see some very sort of – I wouldn’t say necessarily or destructive but you will gain changes in a lot of our markets where we raise the bar onto products out there, whether it be on the common side or on the first alert side or on variety of other parts of our business, where we really are raising the bar and what is out there. So yeah we’re excited.

John Anderson – William Blair

Okay, I appreciate it guys, thanks a lot.

Martin Franklin

Thank you everybody.

Jim Lillie

And thank you everyone and we’ll look forward on reporting on Q3, take care bye.

Operator

Ladies and gentlemen, this concludes today’s conference call. Thank you for participating, you may now disconnect.

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