Good morning, and welcome to Newell Brands’ Third Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After a brief discussion by management, we will then open up the call for questions. In order to stay within the time scheduled for the call, please limit yourself to one question during the Q&A. As a reminder, today’s conference is being recorded. A live webcast of this call is available at ir.newellbrands.com. I will now turn the call over to Nancy O’Donnell, Senior Vice President of Investor Relations. Ms. O’Donnell, you may begin.

Thank you. Good morning, everyone. Welcome to Newell Brands’ third quarter earnings call. On the line with me today are Ravi Saligram, our President and CEO; and Chris Peterson, our CFO and President, Business Operations. Before we begin, I’d like to inform you that during the course of today’s call, we will be making forward-looking statements, which involve risks and uncertainties. Actual results and outcomes may differ materially. I refer you to the cautionary language and risk factors available in our press release and our forms 10-K and 10-Q for a further discussion of factors affecting forward-looking statements. Please also recognize that today’s remarks will refer to certain non-GAAP financial measures, including those we refer to as normalized measures. We believe these non-GAAP measures are useful to investors, although they should not be considered superior to the measures presented in accordance with GAAP. Explanations of these non-GAAP measures and reconciliations between GAAP and non-GAAP measures can be found in today’s earnings release and tables as well as on Newell’s Investor Relations website. Thank you, and now I’ll turn the call over to Ravi.

Thank you, Nancy. Good morning, everyone, and welcome to today’s call. I want to start by expressing my sincere hope that you and your families are remaining safe and well. I also want to mention with mixed emotions that Nancy, after 12 stellar years, has decided to retire at the end of the year. The Board, Chris and I, and all of her teammates thank her for doing an excellent job. This is her last call, and what a way to retire in a stellar quarter. Thank you, Nancy. Sofya Tsinis, whom you all know very well, will be taking over from Nancy as the Head of IR for now. I have the pleasure this morning of discussing an extraordinary quarter for Newell Brands, a quarter in which we were ahead of expectations on all fronts. We delivered very strong financial results, including broad-based core sales growth of 7.2%, driven by strong consumer consumption across most of our categories. We also generated significant improvement in operating margin and in cash flow generation as the organization took decisive actions behind a clear set of objectives. I'm extremely proud of the team's resilience and perseverance as everyone rallied around delivering against our strategic priorities while simultaneously ensuring that we successfully navigated the constantly evolving macro environment we find ourselves in. During the third quarter, we pivoted to accelerate the turnaround plan. Strengthening execution and accelerating e-commerce growth, which enabled much better-than-anticipated results. Through a rigorous operation rhythm and decisive actions, we are making significant progress in building an organization that delivers on our long-term goals, including consistent sales growth, core sales growth, margin expansion, and cash conversion cycle improvement. Our business units are 100% committed to reducing complexity and are laser-focused on significant SKU reduction and delivering savings through both productivity and efficiency initiatives. I'm proud of the Q3 results generated by this team. I'm proud not just because the growth was so strong, but also because this is the first quarter since 2017 that Newell Brands has delivered positive core sales growth, representing an important milestone for our company. We believe we are starting to turn the corner and reigniting consistent top line growth. Many of our categories are well-positioned to capitalize on the stay-at-home lifestyle, with consumers spending more time in their kitchens and with their families. We are leveraging insights from evolving consumer purchase patterns to fortify our innovation funnel and continuously rejuvenate our brands for today's consumers. In fact, we are developing a new and unique framework to drive breakthrough innovation and design thinking and breaking down organizational barriers to become more nimble and agile. This should result in a stream of innovations over the next several years. At the same time, we are making headway out closing distribution gaps in food, dollar, and drug channels and migrating our business towards winning channels and customers. We saw very strong consumption growth in the U.S. across the majority of our portfolio throughout the third quarter and thus far in October. Our third quarter momentum was broad-based with seven out of eight business units posting core sales growth and six posting consumption growth. All eight business units saw a sequential improvement in top line trends versus Q2. Gross sales grew in all geographies with our international businesses accelerating more sharply in the U.S., especially in Latin America. The standouts in the third quarter were our food, appliance, cookware, and commercial business units. All of it generated impressive double-digit core sales growth. And it's not just sales growth. Over the quarter, we drove market share gains in food, outdoor camping gear, baby, and home fragrance. As expected, writing was challenged in the quarter, although we did see sequential improvement in consumption in the U.S. during the quarter due to the timing of school openings varying across different regions. Third quarter served as a good reminder as to why the breadth of our portfolio is an advantage, even though one of our strongest businesses in writing took an outsized hit from the COVID pandemic. Broad-based trends in other business units were more than enough to not only offset that headwind but deliver extremely strong growth for the company as a whole. To capitalize on the accelerating shift of consumers to online purchasing, we continue to proactively leverage our e-commerce capabilities and marketing investments while bringing a deliberate focus to omni-channel execution. Online sales maintained a very strong double-digit growth trajectory. During the third quarter, online penetration as a percent of net sales was 21% versus 16% last year. Year-to-date, e-commerce penetration sales was also 21%, almost double year-to-date 2018 levels. Penetration improved meaningfully across our portfolio with the most noticeable acceleration in home fragrance, where it nearly doubled year-to-date. Our presence in e-commerce is further evidenced by the fact that our online sales have grown about 40% in the third quarter and year-to-date. We also continued to gain market share in the third quarter in many of our segments across Amazon. More recently in October, we achieved excellent double-digit growth on Prime Day. Our key e-commerce team is doing an outstanding job in capitalizing on and leveraging evolving consumer behavior. At the same time, we are building the digital IQ and digital marketing capabilities of our business units and proactively evolving from a brick-and-mortar focus to a true omnichannel focus, so that we can create consistent and amazing brand experiences for our consumer, no matter which channel they shop, how they shop, when they shop, and where they shop. Omnichannel will become a competitive advantage for Newell in an age of click and collect, pickup at curbside, browsing online, purchase at store, and whatnot. We're also successfully migrating our business to faster-growing channels, which puts the company in a much stronger position long term. During Q3, our two largest channels, digital and mass, each grew double-digits, more than offsetting declines in the specialty and office channels, which are becoming an increasingly smaller part of our overall business. Our food business continued to be a powerhouse this quarter, with core sales and consumption increasing at very strong double-digit rates, with core sales growth and market share gains across all major food brands, including Rubbermaid, FoodSaver, and Elmer. During Q3, FoodSaver was one of the largest contributors to the company's growth and the June launch of the latest vacuum device BS 3000 is off to a strong start. The Ball Canning business is also on fire. Year-to-date sales are up 60% with a significant increase in millennial purchases. We're not just riding the wave of current category tailwinds. We're also leveraging consumer insights on our new product lineup. A prime example is the launch of Rubbermaid Brilliance Glass, which launched in August. The biggest challenge in food recently has been keeping up with demand from a supply chain perspective. And we expect to change demand for the rest of the year. We are working hard to increase capacity across all four of our growth brands. Home fragrance rebounded during the quarter and grew sales in both North America and EMEA, with the reopening of many specialty retailers as well as our own retail stores contributing to this outcome. Consumption has remained quite strong in the U.S., driving share gains in the tracked channels. We were particularly pleased to see double-digit comps at our Yankee Candle retail stores once they reopened, demonstrating pent-up demand for our home fragrance products. In fact, the retail comps we saw in our stores are the highest since 2000. We also saw a significant increase in new consumers accessing our yankeecandle.com platform for the first time, driving robust growth. Our home fragrance business has gone through an interesting journey this year. Our Massachusetts production facilities and DCs were closed down in the second quarter due to COVID lockdowns, which prevented us from pre-building inventories for Q3 and Q4. We opened up our plant in Q3 and started ramping up supply while we encountered a significant increase in demand and surge in consumption in all channels, which is continuing in Q4. So we have continued to change demand and are going all out trying to increase capacity. Our appliance business grew core sales a whopping 17%, with positive sales trends in all geographies, most notably in Latin America. We saw heightened consumption across most key categories, as consumers continue to enjoy increased cooking at home, benefiting our stay-at-home usage products. This team, under the leadership of new business unit Head, Chris Robbins, is working hard to build a consumer-relevant innovation pipeline to position our appliance brand for sustained growth longer term. We're seeing some green shoots. We're quite pleased with the initial success of Mr. Coffee, an iced coffee maker, which we launched at a major mass retailer in September, and it's been flying off the shelves with sell-out significantly ahead of expectations. We're encouraged by these strong results and excited for the opportunity ahead. Throughout the pandemic, we have experienced strong consumption in blenders and have recently launched a new series, Oster Texture Select Blenders, which takes the guesswork out of getting a just right smoothie or salsa. I'm not suggesting that our appliance business has magically resolved all its issues, but it's certainly helpful to our category tailwinds that enable investment behind innovation and brand support in order to drive share gains over the long-term. Outdoor recreation also returned to core sales growth of 8% in Q3. The rebound in outdoor activity we started to see at the end of Q2 has continued, especially in camping gear, including tents, stoves, grills, and shelters, both in America and internationally. We are pleased to see that Coleman in its 120th year is beginning to return to its rightful place as a brand leader in the outdoor segment as we rejuvenate the offerings. Intense, we have driven great success in Marmot Super Alloy Chain, an award-winning, premium, lightweight backpacking tent, which was launched in Summer 2020 and has been a top performer. Under new business unit CEO, Jim Pisani's leadership, the team is focused on capitalizing on these consumption trends and building our plans for 2021 and beyond. Our commercial business, the real gem, turned in its third consecutive quarter of core sales growth, benefiting from heightened focus on cleaning and sanitation and increased consumer traffic at home centers. Q3 results accelerated significantly driven by strength in water home solutions, refuse, material handling, hand protection, and outdoor and garage organization. This business is showing good momentum in product innovation, distribution gains, and strengthening customer relationships. Recently, we launched PPE disposable solutions, which are utility and decorative refuse containers with a dedicated PPE waste stream to help patients and employees effectively dispose of masks and gloves. We're also first-to-market with the Rubbermaid 7x7 storage ship that can be assembled by one person. We're confident that commercial will remain a growth driver for the company going forward. Connected home and security rebounded to core sales growth in the quarter as well. After the temporary supply chain disruption experienced last quarter, given the lockdowns and fires where our main plant is located. The team has worked hard to replenish inventories and fulfill customer and consumer demands for our security products. Baby bounced back to core sales growth in the third quarter after experiencing temporary pressure in the second quarter, largely as a result of lockdowns. We saw strong consumption in the U.S., and our Graco brand grew market share gains in baby gear, particularly the casting category. New baby innovations included the Graco Cradle Me four-in-one carrier, Graco's first entry in the soft carrier category, and NUK's temperature control bottle. This bottle innovation has captured the leading market share spot in Germany. Writing, as expected, was the most challenged business this quarter. The back-to-school season was negatively impacted by uncertainty surrounding the timing of school and college reopenings, which has weighed on replenishment orders. On a positive note, POS trends in the U.S. improved as we progressed through the quarter, rebounding to growth in September. Newell gained share in pens during the quarter driven in large part by over 900 basis point share gain in gel pens due to the success of our new Sharpie S-Gel Pens. We have new innovations that will be available in the fourth quarter, including the Sharpie S-Gel metal barrel pen, a new range of S-Gel designs and colors, and a new lineup of Paper Mate Scented Felt Tip Pens. Although consumption of the core writing categories has remained positive thus far in October, due to an elongated back-to-school season, we expect the business to remain under pressure through the remainder of this year. We continue to feel good about writing long term and have kicked off a major innovation initiative that takes into account the new normal of hybrid models of schooling and working. We expect to come out of the pandemic with an even stronger market position for this important business. It's been exactly one year since I joined Newell Brands and what an interesting year it's been. Despite all the change and challenges, I'm really proud of the progress the organization has made in restoring the growth momentum of the business in the third quarter and then aggressively going after costs and working capital opportunities. I am equally proud of the excellent improvement in employee engagement and culture and focus on diversity, inclusion, and belonging. The pandemic is not yet behind us and much uncertainty remains regarding its magnitude and duration. As such, we remain vigilant in our focus on ensuring the safety and well-being of our employees, keeping our manufacturing and distribution facilities operating safely, while we ramp up capacity and sustaining business continuity and the company's financial vitality. We remain equally focused on accelerating the progress of the turnaround journey. Looking into the fourth quarter and beyond, we're executing on five key strategic priorities: first, driving consistent top line growth. I suspect we may see choppiness from quarter-to-quarter in the near-term as each business is at a different stage of the journey; we face demand surges in select growth categories; and the effect of the pandemic is varying based on categories. I truly believe we are beginning to turn the corner as a company. Secondly, we continue to drive and invest behind consumer-relevant, customer-supported innovation with an eye on market share gains across our key brands. Third, our e-commerce will continue to be our big bet, and I'm confident Newell will build a strong reputation with consumers and customers for omnichannel prowess. Fourth, we will accelerate our efforts to drive out complexity while maintaining tight control of our costs, fueling productivity and reducing SKUs. We're proactively working on optimizing our supply chain network to deliver excellent service for our customers and improve OTIF. And last but not least, we will continue to make cash flow a hallmark of our company. In 2019, we generated over $1 billion in operating cash flow. In 2020, we hope to give an encore performance. In fact, we aim to do even better and exceed $1 billion. Chris, for whom I formerly called the $1 billion man, will fill you in shortly on the details. The credit for our strong Q3 results goes to our leaders, our brand and marketing and sales teams, and our supply chain professionals. Most importantly, a real thank you and shout out to our frontline employees in the factories, DCs, retail stores, and R&D labs for their dedication. You keep us going and you're our heroes. And to all our receivable collectors, thank you for bringing in the cash. I am so thrilled to see the teamwork, dedication, and engagement of our people. With all the foundational work done to-date, we not only enabled us to overcome the challenges posed by COVID-19 but also positioned Newell Brands for sustainable, long-term success. I truly believe the best days for Newell are ahead of us, onwards and upwards. And at this point, over to you, Chris.

Thanks, Ravi, and good morning, everyone. Before going through the details of the quarter, I want to provide some operational highlights. When we put our turnaround plan together 1.5 years ago, we created an integrated set of strategies and initiatives designed to strengthen the company and accelerate financial performance. We have made very strong progress on each area of the plan, and taken together, the strategies are playing out in a very powerful way. In fact, the momentum is accelerating. Ravi shared a number of the improvements we have made to strengthen the organization and return the company to core sales growth. In addition, we have made significant improvements in operating margins, cash generation, and reducing complexity. On complexity reduction, for example, we eliminated about 10,000 SKUs during this quarter, which is a year-to-date reduction of 23%, or more than 40% reduction since we began the program about two years ago. We've now put in place a systemic monthly process to drive SKU reduction and efficiency on an ongoing basis. We are quite encouraged by both the progress we have made and the opportunity still ahead of us, including the efficiencies it unlocks across the organization. Every business unit has plans in place to take more aggressive actions on SKU rationalization as we move into 2021. We also made a significant dent in reducing excess and obsolete inventory during the third quarter, taking advantage of strong consumer demand dynamics. As a result, the quality of our inventory is in the best shape the company has been in recent history. Operating margin expansion was another highlight of the quarter. We are laser-focused on optimizing our cost structure and unlocking the full margin potential of the business. Fuel productivity momentum continued to build on the success from the first half of the year. We drove savings from productivity that were more than 50% ahead of the year-ago level, which in combination with overhead savings helped to mitigate the impact of unfavorable mix due to the writing business decline. For the full year, similar to Q3, we expect gross fuel savings to contribute roughly a 4% reduction to our cost of goods sold base, which is the best annual result the company has delivered since we started tracking the measure. We have significantly strengthened our productivity performance over the past few years with visibility to a very robust funnel of projects for next year. We have come a long way in establishing and embracing a culture of productivity throughout the organization as everyone aligns around our common goal of driving efficiencies and simplification. We also made very strong progress on overhead cost reduction. We successfully converted the Coleman North America business to SAP on October 1st, continuing our rationalization of ERP systems. We further simplified our IT footprint and have now reduced the number of IT applications from about 6,000 a few years ago to less than 800 today. We largely completed the headcount portion of the restructuring program that we implemented during the second quarter, which impacted about 4% of the company's professional employees. And we implemented a new technology to consolidate and better control the company's indirect overhead spending, which we expect to drive significant savings going forward. We reported outstanding quarterly and year-to-date results in cash flow generation, driven by strong working capital progress. In Q3, we actually generated slightly more operating cash flow than we did during all of 2018. I'll now recap some of the financial result details. Third quarter net sales increased 5.1% year-over-year to $2.7 billion as core sales grew 7.2%, and currency was unfavorable by about one point. Growth was broad-based as seven out of eight business units grew core sales, as did all four geographic regions. Normalized gross margin was 33.9%, a 90 basis point contraction versus the prior year, as strong productivity savings were more than offset by business unit mix, COVID-related costs, and inflation. Normalized operating margin of 14.9% was an improvement of more than 200 basis points versus last year, driven largely by overhead cost savings. Net interest expense declined by $4 million versus last year, reflecting progress on debt reduction. We recorded a normalized tax benefit of 7% as compared to a benefit of 22% a year ago as we realized discrete tax benefits in both periods. Normalized diluted earnings per share were $0.84. Core sales for the Appliance & Cookware segment grew 17%, reflecting strong consumption across all regions, particularly in Latin America. Core sales for the Commercial Solutions segment grew 13.3%, driven by strong demand for sanitizing, washroom, hand protection, and organization products. Core sales for the Home Solutions segment grew 19.5%. The Food business continued its impressive momentum as the increase in at-home consumption of meals translated into heightened demand for food storage, vacuum sealing, and fresh preserving products. Home Fragrance core sales returned to strong growth this quarter as well with our factory closure behind us and the reopening of most specialty retailers, including our own Yankee Candle retail stores. The Outdoor & Rec segment generated core sales growth of 8.1% as the outdoor categories benefited from consumers' preference for vacation close to home and spending time outdoors. The strong Q3 result also benefited from an acceleration of sales related to the implementation of SAP at Coleman North America on October 1. This impact will reverse and become a drag on top-line growth for the Outdoor & Recreation segment in Q4. The Learning and Development segment was the only one that experienced top line softness in Q3 as core sales declined 9.5%, reflecting expected challenges in the writing business as a result of delayed reopening of schools and offices. Baby rebounded back to core sales growth driven by healthy consumption. We continued to drive very strong momentum in operating cash flow during Q3. Year-to-date cash flow from operations of $820 million almost doubled versus last year, as the cash conversion cycle improved by about 30 days as the organization rallied behind initiatives to reduce complexity and free up cash from working capital. While we are making progress across every facet of working capital, the biggest driver of year-to-date improvement is accounts payable, driven by more favorable payment terms following our negotiations with suppliers. We ended Q3 in a lower than anticipated inventory position as SKU rationalization, stronger than anticipated sales in Q3, and a more efficient demand planning process drove our inventories down. And we continue to make progress on receivable collections through operational improvements. We remain in a very strong liquidity position. As a result of very strong operating cash flow generation, we ended Q3 with cash and cash equivalents of $858 million. We repaid a $305 million bond maturity in August, bringing the company's net debt balance down to $5.0 billion, a $500 million reduction compared with the end of the second quarter. Our credit revolver and AR securitization facilities are currently undrawn and fully available. We delivered a significant improvement in the company's net debt to normalized EBITDA leverage ratio in Q3, driven by both net debt reduction and EBITDA growth. Specifically, Newell ended Q3 with a ratio of 3.9x as compared with 4.6x at the end of the second quarter. Now let me turn to guidance. To help improve financial transparency, we are reinstituting the practice of providing guidance as forecast visibility has improved in recent months. Our guidance ranges will be wider than what we have historically provided, given the dynamic environment and uncertainty around the pandemic. We expect to deliver flat to low single-digit core sales growth in Q4. Thus far, in October, consumption has remained strong. We expect sustained progress on productivity and overhead savings to be more than offset by unfavorable business unit mix and higher A&P investment so that normalized operating margin will contract 80 to 140 basis points year-over-year to a range of 9.9% to 10.5%. Our guidance implies that the second half of the year will be much stronger than the first half, both in terms of top line growth and margin delivery. The tax rate is projected to be about 0 in Q4 due to the expected tax benefits, discrete tax benefits. And we are guiding to normalized EPS in Q4 in the range of $0.40 to $0.46, and this brings our guidance for normalized EPS for the full year to a range of $1.60 to $1.69. We expect to generate full year operating cash flow of $1.1 billion to $1.2 billion, which will mark 2020 as the second year when the company's free cash flow productivity will exceed 100%. This compares favorably to the initial cash flow outlook we shared with our Q4, 2019 results despite the fact that the world has changed dramatically. It is a testament to the meaningful progress we are making on our turnaround agenda and the resilience of our people who have come together to overcome the challenges presented by the pandemic. Turning to 2021, while we are just starting the planning process, I want to share some preliminary perspective on how we are viewing next year. We expect to continue to make strong progress against each of our strategic priorities. We expect sustained efforts behind productivity and cost optimization to drive margin improvement, a portion of which is expected to be reinvested behind brand support, and we expect to continue to reduce the cash conversion cycle next year. While we are not providing quantitative guidance for 2021 at this time, our long-term model calls for low single-digit core sales growth, 50 basis points of annual operating margin expansion, and free cash flow productivity in excess of 100%. We will share more perspective surrounding 2021 during our normal schedule for the Q4 earnings call in February. In closing, we are very encouraged by the progress we are driving through the turnaround plan. We will remain agile and nimble so that we can quickly adapt to the dynamic environment we're operating in, while simultaneously propelling the organization forward on its turnaround journey.

We'll take our first question from Steve Powers from Deutsche Bank.

Hey thanks so much guys. And Ravi, I feel like you're so animated. I feel like I wanted to jump on to the phone and give you a hug. So congratulations on the call.

I'll give you a virtual hug, Steve.

Perfect. Perfect. I guess as I think about the pivot to the fourth quarter and the outlook, Chris, that you just talked through, I guess, how are you thinking about holiday consumption and the potential that some of your categories, some of the at-home demand might have been pulled forward earlier – at-home demand that you might see at the holidays gets pulled forward earlier just because people are spending so much time at home. You mentioned strong October consumption, but I'm wondering if you built in allowances for some of that consumption waning as the quarter progresses. And if you could make some commentary on what you expect at Yankee, specifically this holiday season because that's just such an important category in the fourth quarter for you guys. I'm just curious, given the channel dynamics, how you expect that to play out? Thanks so much.

So let me kick it off quickly, and then I think Chris can also add some perspectives. A lot of our production was closed in Q2, so we opened it up, and we've been chasing demand. The good news is consumption has been leading sales, which is a very positive thing. And so I think that – as I mentioned, for Yankee Candle, in particular, we didn't even get a chance to do much prebuilding because we were closed in our factory. And that's been chasing. So far in October, consumption looks pretty positive. And just got this week to just today. And it looks positive. So our – what we guided for Q4 is a holistic view when we look at everything. Look, we've got some increased A&P spend in Q4. E-commerce is continuing to do great. Amazon, we had a great Prime Day in October. So – and Yankee Candle, I think the big issue there is just chasing demand. Overall, I think we've given our best view of where Q4 is on a holistic basis. And so Chris, do you want to add anything to that?

I think you've said it very well, Ravi. The only thing I would add is that the underlying fundamentals that are driving consumer demand, we think are likely to continue and sustain for some time because we don't see a slowdown in at-home behavior or increased focus on sanitization and cleaning. Those trends are driving consumer demand across a broad section of the company's categories, which we think are likely to sustain for some period of time.

That's great. I'm sure there are a lot of questions in the queue, so I'll pass it on. But I will say, Nancy, thanks for all your help and congratulations on your next phase. And Sofya, congratulations to you as well. Thanks so much.

Thanks, Steve.

Thanks, Steve.

Thank you. Our next question will be from Lauren Lieberman from Barclays.

Hi. I wanted to go first. I don't think Steve attended to get at it. But I'm still just a little bit perplexed on why you guys are seem to be expecting or forecasting so much deceleration sequentially. The commentary that October remains strong. At our conference, when you spoke to core sales growth performance in the majority of your businesses, there was no sense that it was up that much, but it was up. So I'm just curious what your kind of speaking in or thinking about in terms of November and December, that there's such a significant implied deceleration in sales growth? Thanks.

Thank you, Lauren. I appreciate the opportunity to clarify. We are indeed very pleased to see the company returning to core sales growth and believe we have made progress toward sustaining that growth. In the third quarter, there were three specific factors that contributed to our core sales performance that are not expected to recur in the fourth quarter. First, we had pre-shipped inventory for the SAP implementation in Coleman North America, which boosted our Q3 numbers but will negatively impact Q4. Second, the rescheduling of Prime Day from June to October led to increased shipments in the third quarter. Finally, we saw a replenishment of retail inventories as our supply chain improved significantly in Q3 compared to Q2. We estimate these factors contributed a couple of points to our performance in Q3, which we do not anticipate will continue into Q4. However, consumption trends remain strong across most of our businesses, which is why we are projecting growth at the levels we have indicated for Q4.

I'll just add a couple of quick things there, Lauren. If we can maintain those rates, that's our long-term goal. People tend to forget that this company has been in decline for a long time. Therefore, we believe that our ability to continue growing is a positive development. There are a few specific points I want to mention. We are gaining market share. In previous quarters, I focused on food, but now we're also seeing growth in other areas like outdoor camping. It's important to note that as we move into Q4, seasonality will play a role since outdoor activities tend to slow down. In Q3, there was a significant increase in camping for reasons Chris mentioned, but the tech apparel segment is still facing challenges, as is our beverage business, including Contigo, mainly because people aren't on the go as much. While the Coleman business helped offset some issues in Q3, we won’t have the same support as we head into Q4. Seasonality should be considered in this context. Additionally, we are responding to demand, which is a positive aspect, particularly for Home Fragrance. Overall, we believe that if we can achieve growth each quarter, it will significantly change the company's outlook.

Yes, that's very helpful. I definitely remember how long it's been since we've seen this kind of growth. I have another question that I'm quite curious about. In addition to all the initiatives mentioned earlier, such as enhancing our e-commerce capabilities, improving content quality, and exploring distribution opportunities, I’m interested in what's been happening behind the scenes. Initially, this was meant to be the core reset year, which suggested more work to reconnect with consumers, focusing not only on the innovation process but also on the tangible outcomes of that innovation. What can you tell us about the status of that as we look forward to 2021? I'd appreciate any insights regarding the innovation pipeline, whether that information is qualitative or broad. I'm eager to hear about the progress made in that area this year.

Yes. I'll quickly address that, Lauren. The most significant development, in my opinion, is that we have formed a leadership team. My leadership team is now complete, except for the e-commerce expert that Chris and I are trying to recruit, and we have some outstanding leaders. Chris laid out a solid turnaround plan upon joining, and when I came on board, we needed the right people to execute it. We now have individuals who are both consumer-oriented and efficiency-driven, and they are beginning to implement our strategies. Regarding innovation, we recognize that this is a long-term process. It won't be a situation where breakthroughs happen overnight. However, we are seeing small wins that boost the organization’s confidence, such as the iced coffee maker, which unexpectedly generated excitement. The consumer trends stemming from COVID have also benefited us, as people have embraced these innovations. We also made progress with our sanitizer initiative and restroom products, selling 1 million dispensers in the commercial sector in the third quarter, which is remarkable. Additionally, we are collaborating with two prominent firms to strengthen our innovation capabilities. What's crucial is that our leaders are committed to understanding consumer trends and ensuring our offerings are sustainable. I am quite optimistic that you will continue to see this stream of innovation over time. It won't all happen at once, as these developments need time to pass through line reviews, and we need to ensure profitability. However, in the long run, I am very confident. My vision for this company is to bring it back to 1994 when Rubbermaid was recognized as number one on Fortune's Most Admired list because they consistently introduced new innovations. That's the level I want us to achieve.

Thank you so much, very helpful.

Our next question will be from Bill Chappell with Truist Securities.

Thanks good morning.

Good morning, Bill.

Congratulations, Nancy and Sofia. Nancy, your decade of dedication has been remarkable. As you close this chapter, I hope you can take some time to rest. Now, regarding the fourth quarter, what insights do you have from Amazon Prime Day in terms of sustained demand for home products? I know Amazon Prime Days usually highlight various categories, so any information you can share about what this might indicate for the upcoming holiday season would be appreciated.

I think we got a terrific lift and it's really across many of the categories that are growing, but also we're continuing to see those trends. I think a lot of some of the trends that we saw in that quarter were also reflected on Amazon Prime Day. But Chris, are there any other specifics you want to add?

I would just like to add a few more thoughts. We experienced significant growth on Prime Day this year compared to last year, despite it taking place at a different time. We gained market share during Prime Day and are generally expanding our share on Amazon. After Prime Day, we have continued to observe strong consumption trends. The consumption trends we've reported for the weeks in October saw a notable increase due to Prime Day, and we did not experience any slowdown afterward.

Got it. Yes, that helps. As I look at the learning category, it's certainly impressive with all the kids going virtually. However, what is your outlook as we approach the fourth quarter and the beginning of next year? Have you seen this category reach its lowest point in the third quarter? Will it continue to be weak for the next few months? I'm trying to understand what you're experiencing in terms of sell-through.

Let me quickly touch on a few key points. As mentioned in the prepared remarks, we anticipate ongoing challenges in Q4, and the season has been extended. We expect trade inventories to see less replenishment, so we need to exercise caution in that area. The good news is that consumption continues to show growth, although it’s challenging due to hybrid models, with much of it happening online. However, we do see some areas of strength. For instance, in the Sharpie S-Gel category, we've seen a 900 basis points market share increase and a three-percentage-point rise in pen sales overall. Our DYMO business is performing well both in the U.S. and internationally. The current outlook suggests that conditions will remain similar. A critical factor is that the pandemic needs to come to an end. We are preparing for the possibility of continuing hybrid trends and are focusing on reimagining some of our products. We have a strong drive for innovation in this area. Overall, I believe this is a solid business that will continue to thrive once we emerge from the pandemic.

Let me just add one other point, which is we've made a decision to proactively pull back on shipments into the trade on the writing category during Q4 because we want to end Q4 with our retail inventories in a good position. And so our guidance does reflect a pullback in writing sell into the trade. And what we're seeing, as Ravi mentioned, from heightened consumption, we expect to get our retail inventories in a good position heading into next year.

That's great color. Thanks so much.

Thank you. Our next question will be from Joe Altobello from Raymond James.

Thanks guys. Good morning. Just want to follow-up on that last point. You guys made about replenishment. I think it was a nine-point delta if memory serves between POS and core sales in the first half and while there was, as you mentioned, some replenishment that happened in Q3. I would think you didn't completely close that gap, so why wouldn't there be the potential for more inventory replenishment going forward outside of the writing category?

Yes. During July and August, we experienced a significant decline in point-of-sale trends because the back-to-school season was not as fully realized this year as it was last year. However, in September and October, we have seen point-of-sale trends that are actually improving compared to a year ago. Still, the volume in September and October is not enough to make up for the decline we saw in July and August. As a result, retail inventories remain higher than usual for this time of year. This is why, in response to Bill's question, I mentioned that we have decided to reduce proactive shipments into the market in the fourth quarter, which is fully factored into our guidance, allowing us to conclude the year with retail inventories in a solid position.

Got it. Okay. That's very helpful, Chris. And just second question. As we think about our models for 2021, your normalized tax rate this year, I think was about zero or it's going to be about zero. So what tax rate should we be using for next year?

Yes. So, the way I think about our tax rate, and, obviously, I'm not going to comment on any outcome related to the election that could change that. But in a stable environment, our going tax rate is probably close to 20% at this point, excluding discrete tax items. We, as a company, still have a significant opportunity ahead of us on discrete tax items. Because of the number of legal entities, and because of the M&A activity that's happened historically, we're not going to provide specific color, but I would say, a 20% rate is sort of a going rate, but I expect that in every year for the foreseeable future, we're going to have discrete items that would take that number down from there, and we'll provide more specificity on that on the next call.

Okay, great. Thank you, guys.

Thank you. Our next question will be from Wendy Nicholson from Citi.

Hi. Good morning. My question actually has to do with the margin. And specifically, the operating margin improvement in the quarter was so much better than I was expecting. And, I guess, there are two components I want to ask about. First, Home Solutions, the margin expansion was fantastic. And I'm wondering how much of that is structural, maybe to some of the changes you're making in the Yankee model versus just favorable operating leverage on the food side. So, number one, how much of that is kind of here to stay? And then, just as I think about the negative mix in the business, your highest-margin business, the Learning business was so weak in the quarter. That has to have been a huge margin headwind. So as I look out towards next year, assuming that business normalizes, you've got an incredibly easy comp, it's hard for me not to get really excited about what kind of margin you could put up potentially in the back half of next year. Is that fair in terms of how much I'm thinking about margin expansion being a real part of the story now, or am I getting too excited, like Ravi?

Let me provide some insights on both subjects. Regarding Home Solutions, it's clear that food significantly contributed to the margin increase, more so than the home fragrance business, although that segment also experienced margin improvements. We believe this change is structural. While we don't expect to see such a large annual margin jump again, we do think that the higher margins are sustainable going forward. Various factors are helping us achieve this, including strong top-line growth that provides volume leverage, productivity savings, and overhead leverage. Now, on the subject of margin dynamics, let me give you a bit more detail about this year before addressing next year. This year, the productivity savings on gross margins are effectively counteracting costs from COVID and inflation, which is a commendable outcome. The decline in gross margins is primarily due to the mix of business units. When the writing business rebounds, we expect to see a favorable mix that will allow us to recover those margins. We remain optimistic about this as the pandemic subsides and offices and schools reopen. Another factor affecting margins is the overhead cost savings. We believe the structural improvements we are making will continue to positively impact margins. Therefore, we are hopeful about the long-term margin outlook for this business. While we can't provide specific guidance for 2021 at this moment, we plan to do so during the Q4 call.

Fair enough. Yes?

Wendy, just a quick thing. And I'd love to be as excited as you. But I think, look, that's why we've provided this evergreen or longer-term aspirational model of 50 bps improvement, and it gives us confidence. I think keep in mind, we also took out a big chunk of overhead this year, so that we'll be lapping some of that. So it's not going to be continuous. But the long-term model is the one. And the most important takeaway for me actually is what Q3 showed is we can withstand the shock of the writing business because a lot of people are very concerned. And I think that portfolio strength is the one that one should get excited about.

Great. Okay, thanks so much. Congratulations.

Thanks.

Your next question will be from Andrea Teixeira from JPMorgan.

Thank you, good morning. Congratulations to Nancy and Sofia. Thanks, Nancy, for all your help, and I wish you well. I wanted to ask more about working capital control, which has clearly been a key highlight. Regarding Chris's comments on reducing retail inventory, does this relate to the consolidation of retail and the shift toward online sales? I assume you are keeping your receivables tight at this point, so I wanted to know if this was something you considered in your Q4 guidance. Additionally, could I get clarification on your comments about price/mix and reinvestment? I'm assuming the mix has been positive, despite the challenges in the writing segment. With Prime Day and accretive innovation, what kind of investments are you planning? Is it more focused on digital advertising, or does it also include couponing to support innovation?

Let me begin by discussing working capital. The changes we're observing in retail dynamics are actually beneficial for our portfolio. As Ravi mentioned earlier, our e-commerce and mass channels are expanding at double-digit rates, while our department and specialty channels are experiencing a decline. This shift increases the share of our business in performing retailers, which we believe positions us for stronger growth ahead. However, this dynamic does not significantly affect our working capital, as it is not primarily influenced by retail consolidation. The main factors impacting our working capital are our efforts to negotiate longer payment terms with suppliers. Accounts payable has been the largest contributor to our working capital so far this year. Additionally, our reduction in SKU count and the demand forecasting process have enabled us to lower inventory levels substantially. These are the two key factors driving our working capital changes. Regarding our advertising strategy, we plan to increase our advertising spend in Q4 compared to last year, partly due to Prime Day occurring in Q4. Most of this increase will focus on digital advertising and e-commerce efforts.

That's helpful. No coupon, you would think, right? No major kind of pricing reinvestment.

Yes. We're not seeing a big change in the promotional environment of significance to talk about.

Great, Chris. Thank you.

Thank you. Our next question will be from Kevin Grundy with Jefferies.

Great. Thanks. Good morning, everyone. And just to echo the sentiment, Nancy, Sofya, congrats and Ravi, Chris, congrats on your team with continued progress. Two quick ones. Actually, the first one is a quick one. Just a housekeeping one for Chris, and I apologize if I missed this. You mentioned POS remains very positive. What was the POS in the quarter? What's it trending in October? I think it'd be sort of helpful to compare that to the flat to low single-digit core sales guidance for 4Q. And then, Ravi, just to pick up on the writing piece. So you commented on, obviously, the near-term uncertainty related to the pandemic. My question is sort of broader so you said you feel good about it. Chris, you mentioned you expected to bounce back. I think folks would agree with that given the easy comp. But my question is really beyond 2021, can you address, Ravi, the longer-term debate around the ability to grow that business, given the wider adoption in schools, the Chromebooks, the laptops, I see it in my own household, et cetera. What would you say to the skeptics that have been calling for the demise of the pen? Why doesn't this industry go the way of greeting cards? Maybe you can frame that in sort of the building blocks here to get people comfortable around household penetration, frequency of use, et cetera, particularly with the latter likely under pressure even beyond the pandemic? So, thanks for that.

We haven't disclosed specific numbers on consumption, but we can say that we are actively pursuing it, which indicates that our consumption levels have been higher than our sales. In October, consumption remains on the rise, and I believe it will be a crucial aspect of our business in the coming years. I have complete confidence in this and in our excellent management team. We feel positive about our long-term plans and have launched a significant innovation initiative that considers the new normal of hybrid schooling and working. We anticipate emerging from the pandemic with an even stronger market position in this important sector.

Okay. Very good. Thanks, Ravi. I’ll leave it there. Good luck.

Thank you. I think we’ll have our last question.

Yes. Our last question will be from Olivia Tong from Bank of America.

Great. Thanks. Good morning. Congrats on the results and congrats on your respective roles. I wanted to ask a little bit about your expectations on the growth trajectory for your at-home category. So now lo and behold, we have to think about comping some of these growth rates next year. So I'm curious how you think about the future, because obviously, household penetration is up dramatically, but presumably, you see there's more opportunities. And given new management and presumably steadier stewardship of these businesses going forward, should we expect growth in your at-home categories to continue, because of initiatives now in development? And how does that step-up in household penetration across at-home categories influence your view on how you think about these categories and what they can grow longer term? Thanks.

Let me start with a brief overview, and then Chris can share some insights. For example, in the food category, we have introduced many innovations, including the Rubbermaid Brilliance Glass. There are numerous areas within specific product categories where we will continue to innovate. It will certainly be a challenging comparison to the prior year, especially in the first half. However, we believe this is a growth business. To highlight, our e-commerce penetration in this segment is lower than in others, and we have a very skilled e-commerce CEO, Chris Makowski. Since her arrival, the e-commerce team has worked on increasing our penetration significantly this year, but there is still substantial room for improvement. In home fragrance, we are expanding beyond candles into new products like diffusers, outdoor candles, and car air fresheners, which presents growth opportunities. Chris Robbins is also addressing the underlying challenges in the appliances division to drive it forward. While we face tough comparisons, we do not want to overstate our expectations, but our commitment to addressing the fundamentals remains strong. Chris, would you like to add anything?

Yes. The only other thing I would add is that we have some other businesses that are going to have easy comps next year. And so I think what you're going to see is that the results are going to be a little bit choppy by quarter and by business. But as we mentioned, from an overall company standpoint, that's one of the strengths of the portfolio. And we're excited that we're back to core sales growth. And we think we've got the opportunity to really deliver against our long-term model. So, and the last thing I would say is we don't anticipate the underlying consumer demand trends to change radically in the near term. So, we do expect that from everything we're hearing and everything we're seeing, that the at-home consumption trends are likely to be with us for some time. As Ravi mentioned, some of those businesses will comp. We'll face higher comps as we get into the back half of next year, but there are other businesses of ours, notably writing that will face easier comps and that's the benefit of the portfolio.

Well, thank you very much to everybody. Stay safe, wear your masks. Appreciate your support, onwards and upwards. That's a wrap. Thank you.

Thank you, ladies and gentlemen. This concludes today's teleconference. You may now disconnect.