切遲杜威 (CHD) 2013 Q4 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Church & Dwight fourth-quarter and full-year 2013 earnings conference call. Before we begin, I have been asked to remind you that on this call the Company's management may make forward-looking statements regarding, among other things, the Company's financial objectives and forecasts. These statements are subject to risks and uncertainties and other factors that are described in detail in the Company's SEC filings.

I would now like to introduce your host for today's conference, Mr. Jim Craigie, Chairman and Chief Executive Officer of Church & Dwight. Please go ahead, sir.

Good morning. I want to welcome all of you took the time, thankfully, to come visit us today in the boardroom of the New York Stock Exchange. I want to thank those listening to our call.

I am so excited today I can't tell you. I have been waiting six months for this day. For six months I've had to listen to chatter from our competitors about what they are going to do in 2014, and for six months I have had to bite my tongue, because I didn't want to tip off my competitors. I come from a world where you don't tip off your competitors even for 30 seconds. You don't give any advance notice.

Well, today is D-Day for Church & Dwight. Today we are going to announce the onslaught of new products that we are going to launch this year. It is the greatest launch of new products in the history of our Company. I know you have heard somebody say before, every year is great. Well, this year is truly the greatest. We have never before launched a great new product across every one of our major categories.

So today we get the joy of telling you and telling the world about these great new products. So let me start our presentation today. Safe Harbor statement: a lot of words; basically, it says if you go ahead and buy the stock based on what we say today, which includes forward-looking statements, proceed at your own risk. I think you would be very smart to proceed.

Opening remarks: let me give you in a New York minute about what you are going to hear today and capsulize it. Number one, you are going to hear we had very solid Q4 results. We are exiting the year with great momentum.

Two, that capped off a great year, our 13th consecutive year of double-digit EPS growth. I think 2013 was awesome, gang. 9% revenue growth; 80 basis point increase in gross margin; 30 basis point increase in higher marketing spending; 30 basis point decline in our overhead costs; 80 basis point increase in operating margin; 14% increase in EPS; 6 of our 9 power brands grew share.

Gang, that is seven for seven. That is hitting it out of the park. A great 2013. And again, Matt will give you the details, but we exited the year with great momentum.

The Avid acquisition is exceeding all of our expectations. Another great acquisition by our Company. So we have stepped back and said, okay, great history; a lot of stuff going on in 2014 from our competition. We could crawl into a shell and just play prevent defense -- we didn't believe that.

We are playing to win. We have come up to win with a very aggressive but achievable plan. Our numbers -- some companies would step back and say well, pull back; invest, invest. Well, we are investing, but we're also delivering 6% to 10% EPS growth, which, based on the rest of the competitors in this industry is top-quartile results. So we are playing to win. We are investing. We are still delivering great results.

I said to you before, it is the largest new product pipeline ever in our Company. And we are evolving it to -- on our marketing side, we have always had our 8 power brands, 9 with vitamins; we are evolving it to 4 megabrands. Slight evolution. Not revolution, evolution of spending more money on our 4 biggest brands, which will deliver great results.

We're off to a good start; it is early. We have strong retail acceptance of all of our great products, but we don't know final shelving. We don't know final pricing; we don't know final consumer takeaway. So there is a lot to be known.

That is why we have a range right now. We are doing a massive onslaught, but there's a lot we don't know yet out there, which makes us put the range out on the year.

And we're not foregoing acquisitions. We are aggressively pursuing additional acquisitions. A pretty hot pipeline out there, and that's all I can say on that today.

So with that, let me bring Matt up here to tell how we finished 2013. Here's Matt.

Okay, Jim. Thank you for that bouncy introduction. I'm going to cover Q4 and full-year 2013, just from the top.

You probably remember from our third-quarter call that we expected 1% to 2% organic growth for the fourth quarter. We came in at 2.3%. And for the last two quarters of the year, Q3 and Q4, we had approximately 5% volume growth, so very strong volume. But you also probably know in Q3 and Q4 there was a lot of price competition, so that continued in Q4.

Gross margins are also a little better than expected, came in at 90 basis points, up year over year, resulting in 100 basis points of operating margin expansion. So EPS up 14% in the fourth quarter.

Some things I didn't talk about -- so you look at the top, you will see the reported sales, about 1.6%. The marketing at 14.3% was the highest of the year. I will show you that in a second.

We got nice leverage on SG&A; you see that was down 100 basis points. Some of that is because we had some Avid costs in last year's fourth quarter. And you see effective tax rate for the quarter was 33.8%. We expected 34% for the year and 34% for the quarter, so it came in about right.

Here is the volume/price mix equation. So you see 5.2% was the volume for the quarter. You see the breakdown by the divisions, and you see it was a heavy quarter for price/mix of negative 2.9%, bending down to 2.3%.

You can see on the international line what happens when you take price; it has an impact on your volume. They were up only 30 basis points for the fourth quarter.

This is the sixth consecutive quarter of gross margin expansion, so very proud of that record. And it was the highest quarter of the year for marketing -- 14.3%.

So now let's take a look at the full year; look back on this. So we had 1.9% top-line growth. On a full-year basis the volume was 3.8%.

Gross margin up 80 basis points. You may recall that we expected about 75 basis points on a full-year basis, so a little bit higher than expected. And the operating margin up 80 basis points.

Turning to free cash flow, you know our definition of free cash flow is cash from operations minus CapEx. And the reason this is adjusted is because, you may recall, we had a fourth-quarter 2012 federal tax payment that was deferred because of Hurricane Sandy. We paid it in the first quarter of 2013.

But apples to apples, free cash flow is up 14%, the same as EPS, up 14%. So that is a real high-quality year. And then free cash flow conversion, of course, is very important. So it is the relationship of free cash flow to your net income. And we were up 119%.

The other thing that I want to point out, if I go back to a previous slide, is -- if you are following along at home, we are on Slide 13. What I point out here is if you look at the effective tax rate, you will say, okay, 2012 we had a 35.5% rate, and this year we had a 34% rate. So you'd say, wow, you got a lot of benefit year over year from the effective tax rate.

Not true. It was actually all offset on the JV and interest and other line. So our operating income was up 14% in 2013, year over year, same as our EPS. So that is why we call this the high-quality year.

Here is the organic growth by quarter. You can see we ended the year at 2.3%. That is the highest quarter of the year. Obviously, it was helped by Avid, because Avid became organic in the fourth quarter.

And here is the share story. So of our 9 power brands, we had 6 that grew share year over year; one ARM & HAMMER. That is all variance. So it was about flat year over year share-wise. And Spinbrush and Orajel were down.

The gummy acquisition: so net sales up 28%-plus year over year on an apples-to-apples basis. This is a business that we acquired October 1 of 2012. Well on our way with respect to the synergies. And you probably saw the announcement that we are expanding capacity by 75% in 2015. So that is a $55 million investment, and it is over a two-year period.

So this is our 13th consecutive year of double-digit EPS growth. You can see on the far right, up 14%; came in at $2.79, which was our expectations for the full year.

And here is there cash conversion cycle story. So we are a very metric-driven company. So we think that working capital management is a function of discipline within a corporation. You can see that in 2011 we had a heroic year. We had 28 days there for a cash conversion cycle. But if you do the math on this, you will see that if you take receivables inventory less payables, which we call operating working capital, it is about 10% of our net sales.

Here is the free cash flow story. We mentioned that before. $469 million. It was up 14% year over year. And we're not a capital-intensive company. So you can see, we had 2.1% CapEx as a percentage of sales.

You often hear us talk about we bang around 2.5% in general. By the way, the expectation for 2014 is $85 million of CapEx, of which $40 million of that is the investment in the vitamin expansion.

And here is the balance sheet. So you can see we are levered 1.2 times debt to EBITDA, so we've got a lot of firepower there. And I will do the math for you. If you look at this slide, you can see what our borrowing capacity is: about $2.1 million (sic - see Slide 22, $2.1 billion), assuming we did an acquisition and we levered up to 3.25 times EBITDA. So a lot of ability there to go shopping.

And you also read that we announced a dividend increase yesterday of 11%. And we have been steadily increasing our dividends over a number of years. We have a target payout of 40% of net income.

And here are the prioritized uses of free cash flow. This should be a very familiar slide to a lot of people. Where I want to start out, as you probably saw on the release, that we expect to generate $1.5 billion of free cash flow over the next three years. We generate lots of cash.

So remember, we saw on an earlier slide we'd have $500 million of cash on the balance sheet. If you generate $470 million on an annual basis, and your dividend that we just declared is $170 million, that is another $300 million. So you have got cash on hand; you generate at least $300 million even after dividends, and you have significant borrowing capacity.

The other thing you saw on the release is that we announced a couple of share repurchase programs. One is called an Evergreen. The Evergreen program is simply there to enable us to eliminate share creep as options are exercised. And the other one is a $500 million share repurchase program. You probably have some questions about, well, how much of that is going to get spent in 2014 versus 2015?

The way to think about that is a multi-year program. Historically -- this past year we bought $50 million of shares in the first quarter. The most we have acquired in any one year is $250 million. But this does give us a lot of flexibility with respect to destinations for our cash.

And with that, I'm going to go to Jim.

Thanks, Matt. So great quarter; capped off a great year. But now let's look forward.

First of all, I want to tell you: look at the total shareholder return of this Company over the past 10 years, which is my tenure as Chairman and CEO. I just might want to stop on this slide for the next hour.

But just look at this -- 394% return since July of 2004. Blows away anybody else in this industry. About 6 times the S&P 500.

And we did it largely through -- the blue part there is the stock price appreciation; the gold part is dividend. You can see we have been very driven by driving the stock price. We paid a nice dividend on top of it. Some of our competitors are more like bonds; they pay a dividend. But terrific results.

So you sit there and say: great job, Jim and your team. My team is in the room here today. But what about the future? And I am going to give you 10 reasons today why I believe we can continue to deliver superior total shareholder return.

First of all, you have heard me talk about this a lot, but it is evolving a little bit. We have a recession-resistant product portfolio. If you have seen this chart in the past, you will notice it has been slightly tweaked. It used to be a 60% premium, 40% value. Now we are 55% premium, 45% value. And I will show you why in a second. But it is great to have a value part of your portfolio during a rough time in the economy.

I showed this slide before about proving the value part of our portfolio. Our laundry detergents have been half the price of the premium brands; same for fabric softener sheets; toothpaste at half the price of the leading brands; some points in cleaners.

What is new is vitamins. Many of you don't realize our vitamins businesses are only about -- about 45% lower than One-A-Day. So even on the vitamin side, where we have got great brand products, they offer great value to consumers.

Hey, it is a recession. And we can honestly show people consumers have been switching constantly from the premium- and mid-priced categories into the value and extreme value categories. In laundry detergent, now more households buy a value laundry detergent than premium or mid-tier products.

You will see here now the value-priced segment of the category has now increased past the mid-tier category, with almost 30% of people buying value detergents. Church & Dwight, of course, is the king of that category. We have gained almost 7 share points in value, and we are now bigger than the number 2, 3, and 4 players combined, with over half the share of the value segment.

Dollar-wise, Church & Dwight is the only Company that has grown share in the dollar -- in the laundry detergent category since 2009. Significant share growth. Everybody else has lost share.

We are second in total washloads because we offer great value. Look at washloads -- where people actually used. In terms of washloads, we are creeping in very closely to the king of the category and showing terrific growth in our brand. So more and people are actually using Church & Dwight laundry products.

Now, you have all heard the big news, which one of my competitors has been talking about for six months. Procter & Gamble is coming out with a lower-priced version of Tide. You want to ask questions about that? Call Cincinnati, okay? I don't run that brand.

But I ask you two questions to think about I have no answers to. The two things we're going to watch the next few months: will this further accelerate the growth of the value segment, which has already been growing phenomenally, as I have shown you?

And two, where is the volume going to come from? Is it going to come out of their brand, premium Tide? Or non-Tide users? We don't know. It will be the big question going forward here. But a major initiative on their part.

We don't sit back and say, hey -- just pull the covers over our head and defend our business. We believe a great defense -- or the best defense is a great offense. And what we're doing is we're responding in a big way. We are launching three major new products in the laundry category in 2014.

We are launching a new version of ARM & HAMMER. We are launching the OxiClean brand into the laundry detergent category. And we are launching OxiClean brand also into the bleach category. Three major initiatives.

Now, you want to know the details? You've got to wait 10 minutes. Because I'm going to bring up my two geniuses who drive all that: my head of new products, Steve Cugine; and my head of marketing, Bruce Fleming, are going to come up here and tell you about the details about that in about 10 minutes when I stop talking. So stay tuned. Keep your seatbelts on.

The second big thing which drives future total shareholder return is we have the lead in building megabrand -- new word for us, megabrand. You saw about power brands; we're now talking about megabrands. In the past we have had 8 power brands. You see the great brands we have.

Those were 80% of our revenues and profits. Those are the great 8 brands -- all number one or two in their categories. Show you a chart, too. They're not just important to us, they are important to retailers. You see the top 10 SKUs in the category? Our brands are all part of the top 10 sum, all 10 of 10 in the case of condoms. So our brands are very important to retailers.

What is our share growth formula for those? Very consistent formula. We have innovative new products. We put increased marketing spending behind that. That gets you increased distribution. Add them all together, you get share growth on your power brands.

You can see we have had terrific track record of innovation on these things. Steve Cugine and his gang have done a great job. Today 32% of our business in 2013 was from new products we launched starting back in 2007. So we flipped a third of our portfolio in that timeframe, all driven by innovation.

If you look forward to how'd we do on the advertising spending, here is some new data. This may shock you.

Church & Dwight as a company is the 13th largest advertiser in the United States -- more than many of the companies who are much bigger than us in revenue. Look at that chart. Look at the companies -- we, little Church & Dwight, spend more on advertising dollars in the United States than those big names.

That tells you how big we are in advertising and how much we have increased our advertising over the year. Later on, Bruce Fleming is going to talk to you about some of our individual brands. It may shock you how much we spend on some of our brands, some of the big players.

And our products have taken that because of those great new innovations, because of our increased marketing spending. Here is a chart that shows you -- if you look at our distribution, based back in 2009, how much distribution we have gained on an index basis versus that for all of our brands. Very impressive out there.

Of course, you add that all together, and you get share growth. And over the last five or six years -- because 75% of the time we have grown share in categories. I challenge any other manufacturer to show that chart. I doubt they have grown share 75% of the time.

Now is an evolution time. We focused on 8 power brands in the past, and 9 for the new vitamin business. We are putting more of our focus going forward on the 4 big megabrands: ARM & HAMMER, Trojan, OxiClean, and our vitamin business.

Why? Because those four megabrands represent 60% of our sales and profits. Those four megabrands have had tremendous growth in the past.

What is a megabrand, you will say. Well, a megabrand is -- a great example is ARM & HAMMER. Here is a brand that covers all sorts of categories. It is found in more aisles in the grocery store than any other brand in America. It is in both the premium and value segments. And we have supported a very powerful holistic advertising campaign. Very important.

It is the right brand at the right time at the right value. Terrific business for us.

Now, how do you drive a megabrand? It is these same formula as a power brand: innovative new products, increased marketing spending, increased distribution. That all leads to share growth. But here is the difference. Here is why megabrands are different than power brands, for four reasons. One, you get a bigger bang for your buck on your R&D investments; you don't have to spend as much supporting all the forms.

You also get a bigger bang for your buck on marketing investment. There's also greater licensing potential and lower organizational costs -- four big advantages for a megabrand over a power brand. Let me show you what that means.

With ARM & HAMMER, ARM & HAMMER is baking soda. Baking soda has a lot of properties, so you can take those properties and spread them across all sorts of forms, across all sorts of categories, versus being just a one-category business.

Marketing-wise, $1 spent smartly on any form of megabrand helps all forms of megabrand. And Bruce Fleming and his team has done a great job the way they do our advertising -- that a $1 spent, whether it is a laundry detergent, cat litter, anything, helps the whole business. If you are just a one-category business, $1 spent just helps you in that one category. Here, $1 spent gets a much bigger bang for the buck.

Our four megabrands -- we're actually going to spend 74% of our advertising next year on those four brands. Remember, they're 60% of our revenue and profits. We're going to spend 74% of our advertising dollars because we will get a bigger bang for the buck on those.

Licensing-wise, hey, megabrands -- other players want it. There are categories we don't want to launch indirectly. We do over -- which does it say? -- over $185 million of retail sales, over 400 licenses on the ARM & HAMMER brand alone. That generates licensing fees for us which are very powerful. 100% gross margin. Think about that.

And organizationally, hey, when you have a megabrand, you can have one team driving a megabrand versus separate teams driving individual brands. So organizational costs are lower on a megabrand. So you have got those four advantages. All of them help you drive bigger profits to the bottom line by putting more support behind your megabrands. So Bruce and Steve are going to talk about that shortly.

Our 2014 plan reflects that focus. We're going to increase the ad spending, as I told you moment ago. We're doing do more major product launches on every megabrand, and we're going to be entering the whitespace -- side categories in these brands, even make them an even bigger megabrand going out there.

Five minutes -- wait till you see those details. Stephen Bruce will show you that, so hang on to your seats.

Let me tell you number 3 reason of the 10 why we're going to keep growing our total shareholder return. We are very good at ferociously defending our brands. A good example of that is OxiClean.

When we bought that business in 2006 it was the 27th share of the laundry additive category. We grew that to over a 40% share in a couple of years. How did we do that? We had great new products, great new claims for that business as we have entered new parts of the category. We increased the marketing support tremendously.

But then we had a big attack -- recognize that guy? Sound familiar? They like to attack us. Back in mid-2009 they came into the category with their big brand name attacking our products. What did we do? Did we just crawl into a hole and say oh, well? Give up share, give up profits? Hell, no.

We launched out with all great new forms of OxiClean. We co-branded it with other businesses to give even greater marketing power for the business. We increased the ad spending. It is the second-most advertised brand in the fabric care category.

And what happened? Four years later, through 2013, we not only held our share, we grew our share. And we are bigger now than the three other players in this category. And they are not little guys. Look at the names on that chart. It is the -- who we grew share against with OxiClean. Pretty big players in the overall world. We beat them back all. We grew the most share. And today, again, we are bigger than all three of them together.

So when you think about us being attacked, as we are being right now by a competitor in another part of the laundry category, think about how we have done in the past.

Fourth-biggest reason is, hey, we're not a big international company. It's about 17% of our business these days, but we are a good player there. We are invested largely in six countries with the bulk of our business. We have had great results across those franchises, with mid- to high single-digit growth in most of them. Great track record. How did we do that?

Some of those markets have we call little power brands. Those markets we don't talk about. RUB·A535 is a great product up in Canada. SnoBol is a great product there.

We have also expanded our corporate power brands, or now megabrands, into some of those countries. We have also integrated with acquisitions. There is the product on the table back there today called Batiste, which is a dry shampoo. We bought that. Largely a UK product when we bought it. It has been growing fabulously in the UK. We are now expanding it in other countries. Terrific growth.

And leveraging our one-Company strengths. We only have one R&D team worldwide. We do the marketing worldwide. Everything to keep our organizational costs down, to take the great news in every country and spread it to the rest.

Number five, expanding gross margin. We love gross margin. Very important to us. Have a huge focus on that. We have grown gross margin tremendously over the last 10 years -- 1,600 basis points. More than any other company category. Look at that chart. Look at the other major players. We have grown almost 600 basis points since 2007. Nobody is even a third of that out there.

Four big parts to that. We have a Good to Great program. It is the name we take from the great book by Jim Collins and that. But it is our cost optimization program. That is reformulation, resizing, reducing SKUs and that.

The second thing: supply chain restructuring. We built brand new plants, much more efficient for us. Acquisition synergies -- when we acquire a business, we drive the costs out of it to help the gross margins. And price mix: we are always about launching new products with a higher price, a higher margin than the products it replaces.

Number six: acquisitions. We have had a great track record on acquisitions. Why? Because we are very careful about what we buy. We will only by a number-one or -two share brand. We want higher-growth, higher-margin brands. We want asset-light businesses, meaning we don't like to pick up businesses with lots of headquarters and lots of plants.

We have to leverage our capital base. We have to leverage our strength in manufacturing, logistics, and purchasing. And we want to business we believe can deliver competitive, long-term sustainable advantages.

Here is our track record. Look at that -- tremendous number over -- we don't just walk the walk; we talk the talk out there. That is why investment bankers come to us constantly. We don't just talk about acquisitions; we do them.

Of the 9 power brands I talked about before, 8 of those we have acquired through acquisition. The only one who was the inherent brand was ARM & HAMMER, back 160 years ago. But 8 of our 9 power brands we call today came through acquisitions.

And we don't just buy them and milk them; we buy them and we grow them. We drive the share price up with better marketing power, better sales force power. Then we cut the costs out of them to drive greater profits for the Company. So a great track record on acquisitions. And we're actively looking for new acquisitions.

We have got $2.6 billion of dry powder, as Matt showed you. We're actively out there looking for it, and we hope to continue to turn those acquisitions into gold for our Company.

Number seven Matt alluded to earlier. We are best in class. Not just good at free cash flow. Best in class. We have increased the free cash flow over 500% since 2002. And if you look at the statistics, this free cash flow as a percent of net income, nobody is better than us. And we just had another great year of performance.

Number eight, overhead management. We don't let any line of the P&L go by. Overhead management we are great at. We have increased revenues 113% since 2014 and only increased headcount 11%. Think about that: doubling the revenues in the Company and barely having the overhead go up at all.

And that results in the highest revenue per employee of any major CPG company -- little Church & Dwight. $3 billion. Shouldn't be able to do that against guys in that chart as big as $80 billion, but we do it.

Highest revenue per employee. And we know a lot about that because we the walk on tight overhead controls. I don't have a company car. Nobody has a company car. Nobody has golf club memberships. No corporate planes. We don't believe in that. That is not good for our shareholders. It is not good for us, because we are major shareholders, too.

And you say, well, how can you get better? We will. We're doing things with the new healthcare plans, new information systems, leveraging headcount to go forward. You will see our overhead go down going forward.

Number nine, one of our little favorite secrets I have talked about: expert management team. We believe in expertise. My top team of 40 people, they are lifers in their job. My 8 business unit managers -- I tell them, you are in that job for life. And so some say, well, who would want to do that? Well, you want to do that when you become experts and drive the great results we do. And those people that have over 20 years of experience.

How does that pay off? Well, first of all, you saw the share chart earlier. 75% of the time we beat shares because we know our businesses cold. Where competitors change people around, they don't know their businesses, we don't make mistakes.

Secondly, that enables us to minimize headcount growth. You don't need extra bodies to help you run a business when you know it cold.

Execution, third thing. When you know you're working with the same people for 20 years, you can believe me, the execution is great -- versus not knowing who is running what function, doing what.

And last thing is we bring acquisitions in -- well, my people, they know their business so well they don't need a full day to run their business. They love new acquisitions; that is what is new to them. They love new things, so we give them new acquisitions, keep the headcount down.

The last one -- if you add those 9 factors up, you get a bunch of total shareholder return junkies. We love our business. Look at those statistics of how we have grown revenue; gross margin; increased the advertising; cut the overhead; driven the cash flow; driven the EPS. It all pays off. If you bought my stock 10 years ago, you'd have an average return of 16.3%. That blows away anybody else in this industry. That blows away the S&P 500.

I've got a great team of junkies. They are all here today. You are going to see us ring the closing bell today. We love it. We are great team. We are total shareholder-return driven. And believe me, we are 100% in the game.

We are right with you, as far as people either recommending stocks or buying stocks. Our bonuses are tied 100% to business results. 25% of our bonus is based on hitting a net revenue growth goal; 25% is hitting the gross margin goal; 25% EPS; 25% free cash flow. I have got to believe those four factors are the most important four factors in any models you do about companies growing stock.

Secondly, we only have stock options. We are not one of these games -- we've got restricted stock, or we've got some sort of phantom stock. We are based -- our equity compensation is 100% stock option. That stock price doesn't go up, we don't win.

Believe me, I was very (expletive) about yesterday. I can't believe what happened yesterday. I mean, I watch that stock price probably every two hours every day. We care about the stock price as much as you do. And we are required to be heavily invested in the Company's stock.

So that is it. Jim is going to take a seat. And I'm going to have another cup of coffee.

And now it is time to bring up my two geniuses. They are going to tell you about next year. Steve Cugine -- Steve is my head of new products. And also just took on the additional responsibility, typical Church & Dwight, of run the international business, as our head of international retired after a great career.

And Bruce Fleming is my head of marketing, Chief Marketing Officer. These guys work hand-in-hand. They are attached at the hip. Steve develops the great new products with his team and then works with Bruce's team to launch the great new products, the great results we have. So Jim, take a seat. And Steve and Bruce, come on down.

Thank you, Jim. Bruce and I are very excited to be here today. And we're going to talk about our 2014 new product innovation portfolio.

There are four key takeaways from this presentation. One, Church & Dwight has built a corporate competency for new product innovation. Two, new product innovation has been and will continue to be a critical driver of organic growth. Three, innovation supports our megabrand growth drivers. And four, 2014 represents the most significant portfolio of new products in the Company's history.

So our primary driver of growth is new product innovation. Church & Dwight defines innovation success as new products that drive sustainable organic growth at accretive gross margins, with a focus on our megabrands.

CHD has a track record for successful new product innovation. The dedicated new products team was started in 2006. In 2013 new products launched by this team will account for $1.1 billion in gross sales and represents over 32% of CHD's consumer domestic sales. Our new products are very sticky and thrive in market over time.

We have created a fundamental capability for innovation at Church & Dwight. We started by separating new product development from brand management and future business from current. We added structure and governance by adding a stage gate management process and executive portfolio reviews, just to name a few.

We linked our business strategy and innovation strategies with technology strategies, further aligning new product marketing and R&D. We expanded our skills and innovation process knowledge with significant front-end training.

The result: we have strong capabilities in both commercializing powerful line extensions and in qualifying significant future opportunities for growth by expanding our megabrands into adjacent categories.

We believe that great innovation requires seven critical success factors. One: focus. As Jim mentioned already, we focus on our nine power brands, with our sharpest focus on our four megabrands.

Number two: strategic alignment. We link business strategy to innovation strategy and to technical strategy, so we understand where to play and how to win.

Number three: compelling consumer insights. Everything starts with the consumer. We strive to understand their pain points, needs, and desires.

Number four: disciplined financial modeling. Unlike many consumer products companies, we manage innovation like it has its own P&L. We are responsible for incremental net sales growth and for accretive gross margins. This helps us to keep it real, improve forecasting accuracy, and get rewarded for in-market financial performance.

Corporate teamwork, number five. Creating new products requires the expertise of every single function in the Company. We lead product teams for each project we deliver.

Number six: development of winning products. R&D and consumer research tools are both used extensively at Church & Dwight to validate and optimize our launches. We have a great R&D team that develops products that exceed our concept expectations and wows consumers.

Seven: superb execution in market. Sales and marketing come together to deliver incremental SKUs on-shelf and great advertising to drive trial. We know that when we drive trial on these great products, consumers, in fact, love them.

Following these seven critical success factors, we have enjoyed great success and innovation at Church & Dwight. Before moving on to our 2014 innovation, however, I am going to turn the presentation over to my partner in crime here, Bruce Fleming, our Chief Marketing Officer.

Okay, thanks, Steve. I see that Jim is drinking water. And coffee is not a good idea, Jim. I think you should stick to water.

I have the pleasure to talk about our brands, particularly ARM & HAMMER. It all began 150 years ago. And those of us who have been here over the last eight, nine years have just had great pleasure in taking what we thought was a wonderful ship that just needed a little bit of polish.

But 150 years of focus and the renewed eight to nine years of focus have resulted in a very powerful brand. Today ARM & HAMMER is over $1 billion in sales, and we think there's a lot of runway ahead.

If you look, since 2008 we have grown 44% or about 7.6% compounded annual growth rate. You don't find many 150-year-old brands with that type of growth. In fact, you don't find many 150-year-old brands. But I think that speaks to the longevity and the staying power of this great equity.

When we first started looking at the brand, about eight, nine years ago as marketers rather than mere consumers, it was clear to us we had a fairly fragmented presentation to the consumer, and that we needed to harmonize it. You have probably seen some of these slides before. But it is fairly obvious.

And what we did is we returned to the heritage color of the 1860s. So we really looked to the past to develop our future, and it was a good move. It has really grown the business, making it easy for consumers to see our products in every aisle of the store.

We did the same thing with advertising. One of the first things I know Steve and I did is we talked to retirees and said, how did you build this great Company? It was really quite a legacy that we have inherited. And everyone's answer kept going back to 1972. 1972? What did you do in 1972?

Well, we advertised that people should put baking soda in the refrigerator. Steve and I looked at each other, and we just sort of said, well, that is a novel idea. I don't think any amount of modern consumer research would have said that that was a good idea. But it was.

It grew the business. And within about four or five months, I think about 80% of American homes had a box of baking soda in the refrigerator. And I went back and said, well, how did you get that idea?

And they said, we found a pamphlet from the early 1900s that said: put a saucer with water and a teaspoon of baking soda on top of the ice in your ice chest, and it will extend the life of the ice in your ice box. I think it was 1907.

They said, we really didn't come up with the idea; we just went back to the past in order to grow the future. And that is exactly what we are doing today, and we continue to do, is that we have built a business based on the insights of the past. And the strongest insights are those that are written in history.

I think that if you look at our advertising over the last six, eight years, it has been pretty workman-like. It is pretty much -- it is hard-working, blue-collar, like many of us, like many of our consumers. And what was particularly interesting is that we went back to the original baking soda in the refrigerator; and yet we created enough freedom of expression to advertise all the individual variants of the ARM & HAMMER brand.

And you've seen that over the years, and you're going to continue to see that in the future. And over that time we tripled our media investment.

Jim alluded -- it's not only advertising. As you can see, we have a holistic campaign across all the important touchpoints that a true megabrand must touch: TV advertising, of course; print; radio. Public relations plays a big role -- mouth-to-mouth, person-to-person type of accolades about our product are really very important.

Digital and social have been extremely important over the last few years. It is a problem/solution type of business. And people who have an issue and they need a solution -- they are online. And that is where ARM & HAMMER has been.

You see a lot of YouTube videos. In fact, I think we probably set a record for the most number of views for the smallest number of videos as we benchmark ourselves versus competitors. Our merchandising has been really off the charts in terms of its impact, with the renovation of our packaging line, back to the old 1860s color.

From an advertising perspective -- Jim alluded to this -- but on a brand basis, it is probably little known that we are the 24th largest advertiser in the United States. We looked at the megabrands that all exist in the United States, added up all the reported media that they spend across all their variants. And there is a rating of 1 to 100 in terms of the rankings.

And you can see we have a lot of good company, a lot of venerable brands that we respect that are both above and below us. But little ARM & HAMMER, little Church & Dwight, who competes against people much bigger than us, are able to create scale for our voice by focusing our efforts. And that is what Jim has talked about; that is what he has preached; and that is what we have done.

Thanks, Bruce.

Steve is going to talk a little bit about the new product innovations.

So we're going to take you through two examples of bringing this to life. One is -- the first example is ARM & HAMMER Plus OxiClean.

The consumer need we identified is for superior stain removal for the value consumer. Our answer? We joined two powerful equities in one product: ARM & HAMMER and OxiClean.

The result: ARM & HAMMER Plus OxiClean represents a 3% dollar share of liquid laundry detergents. It is bigger than Cheer, Era, or Wisk. So successful, it spawned an entire Plus Oxi segment in detergents.

A second example comes from the litter category. Consumers had a problem that we identified, which was the cat owners needed to control both urine and feces odors. Consumers and manufacturers were primarily focused on urine odor. Our answer? ARM & HAMMER Double Duty.

At the time of launch, it was the only product to eliminate both feces and urine odors. The result: ARM & HAMMER Double Duty alone has achieved a 7.6% share of the clumping cat litter and is the number 4 variant in the entire category. ARM & HAMMER has led innovation in this category, generating a 14% compounded annual growth rate since 1998.

Now we are going to show you how we intend to carry our innovation momentum into 2014, starting with exciting news on ARM & HAMMER. We're going to begin with the cat litter category.

Odor control is the number-one concern of consumers, which is why our answer to this problem is ARM & HAMMER Clump & Seal cat litter with a guaranteed seven-day odor-free home. This is an outstanding new product. It achieves 100% odor satisfaction; delivers superior clumping, no dust and no tracking; and commands a premium price point in the $2 billion litter category.

Bruce?

Okay, Steve. So it is easier to develop very persuasive advertising when you have got great a product like the one that Steve and our team has put together, with the help of R&D and everybody else.

The problems are big problems. We provided a real solution. And if you have a cat, and you haven't tried this product, I think we have some coupons. I can give them to you as you leave. But it's a great product.

And Steve's focus groups -- we had tapes of the focus groups. The people were just so compelling that we decided that the best way to advertise this product would be to show real consumer reactions to this wonderful product.

So we have tested this advertising, like we test all our advertising. I think I told Jim, we have had more advertising tests in the field in the last six months than I have seen anywhere in my career from the number of brands that I've had responsibility for. And this -- the advertising you are about to see is going to be -- I will let you judge for yourself, and I will tell you the results.

If we could roll the tape, please.

(video playing)

Okay, so if you don't have a buy on our stock, if you look under the table, there is a litter box right there. (laughter) But no doubt you didn't smell it.

The testing of this was really great; it was gratifying. It was the top 20% of commercials in the industry database that most of our competitors use and we use. It is wonderful that all the hard work is able to be presented to the consumer in a persuasive way. So we are expecting big things this year in cat litter.

Now Steve is going to talk about laundry detergent.

So we're going to focus on a category that has been an engine of growth for Church & Dwight for some time. In laundry detergent, nothing delights consumers like the fresh smell of just-washed clothes.

In fact, freshness is just about as important as value in the consumer purchase decision. Delivering freshness is what makes our new line of detergents stand out. Our answer to delivering freshness is ARM & HAMMER Clean Sensations.

This great new line is designed to deliver noticeably cleaner, whiter, and vibrantly fresher laundry, inspired by America's national parks. This line expands our portfolio into the highly fragrant segment, but does it in the ARM & HAMMER way.

Bruce, over to you for the advertising.

Okay, so our challenge was pretty clear. We needed to dial up the freshness, especially because that is a consumer driver for some of our competitive brands; less so for ARM & HAMMER, but we certainly developed a product that delivers.

So the advertising you are going to see does communicate that message. And as Steve said, in an ARM & HAMMER way. We actually donating royalties to America's national parks as a percentage of sales. And there is no better way to celebrate an iconic American brand than to support our national parks.

And the scents, actually, as Steve said, were inspired by them. And I will let you judge for yourself. And like all the products this year, it is guaranteed or your money back. So we are really stressing performance and also putting our money where our mouth is. So if you could roll the tape on this one?

(video playing)

This advertising also ranked in the top 20% of the database for the industry for all laundry detergents. So we've got some powerful advertising to support all the good work Lou Tursi and his team have done in getting this distribution.

Now I will hand it over to Steve to talk about oral care at this point.

Great. Thanks, Bruce. Oral care is powered by innovation, so we conducted extensive research to identify what consumers are really looking for in their oral care regime. We found that whitening, enamel strengthening, and overall health are really important; yet consumers want to go beyond just whitening. They want to look truly radiant. Specialty whitening toothpastes do a great job of whitening, but you need more than whitening for a radiant smile.

Our answer: ARM & HAMMER Truly Radiant, a premium toothpaste that has patented liquid calcium technology and delivers superb whitening, excellent cleaning, while it repairs and strengthens enamel and delights consumers with its outstanding taste.

We paired this innovation with ARM & HAMMER Truly Radiant Spinbrush toothbrushes. These brushes are designed with Access Bristles to reach deeper in between teeth and remove 100% more plaque than a manual toothbrush.

Bruce?

Yes, I am really pleased to announce that we are teaming up with Alison Sweeney, the host of the TV show The Biggest Loser, to promote and market this product. Strength and beauty is a key component of the product, and this embodies Alison.

As we speak, the advertising is being filmed. I look forward to you seeing it on TV and online. I sound like a broken record, but this too was in the top 20% of toothpaste advertising in the industry database that we and all our competitors use. It is the highest-scoring advertising that we have ever tested on toothpaste. So we're looking forward to making an impression with this product.

Now I have the pleasure to talk about our second megabrand, which truly has become our second megabrand, which is OxiClean. Since we bought it in 2006, it has just proven to me that it is one of the most powerful and resilient end brands that I have ever worked on, and I think of any brand in America.

We lived through some incredibly fierce competitive situations, competitive launches that happened, coincidentally, with the death of our friend and pitchman, Billy Mays. He was a very good friend of mine.

And you know, it was a hard time back when -- really, from a personal perspective, when Billy passed. But we were in the middle of a competitive situation, and I think that we have emerged with a lot of strength. And it is as much to the great teamwork at Church & Dwight as it is to the strength of this brand.

If you look, since 2006 when we bought the business, it has grown 51%; compounded annual growth rate of 6.1%. But there is certainly a lot of opportunity to move beyond stain fighters and wash additives.

Like with ARM & HAMMER, it was a brand that just needed a little bit of polishing. The packaging was a little bit fragmented, not as much as ARM & HAMMER. It was only a 10-year-old brand, but a marketing person can't help but include the packaging. And of course, we did.

And as you can see, the iconic OxiClean blue helps consumers find our product throughout the supermarket, throughout the retailers. And you see the effervescent clean bubbles, which are a signature part of our logo.

When we went to look at our advertising, we were blessed. We had, as I mentioned, a friend -- I still get a little choked up when I talk about Billy. Grew to love him. OxiClean took care of big problems with a big solution. He believed in the business passionately.

He was taken from us far too early. But I think this event actually made us stronger. We didn't know exactly how to replace Billy. How do you replace a member of your family? And we went off-air for, I think, about four to six weeks. Thought about it; studied every salesperson, pitch person who had ever endorsed the brand, from Orville Redenbacher to Dave Thomas to Colonel Sanders.

And we decided that we needed to continue in Billy's tradition and find somebody bigger than life to take care of this bigger-than-life brand. And who better than Billy's real-life best friend, Anthony Sullivan.

Sully has become a very close friend of all of ours. He was a little reluctant at first to step into Billy's shoes. He said nobody can fill Billy's shoes. But he has done so, and he has done so admirably. I remember the discussion we had with him. And we said, Sully, I think what we want to do is honor the man and advance the brand. And that has been our mantra. If you get Sully at a quiet moment, he will tell you that that has been his impetus.

So anyway, we have had big demos, bigger-them-life spokespeople cut from the same cloth -- Billy pitching on the boardwalk in New Jersey; Sully pitching in the streets of London. And we have developed some compelling advertising that is thematically similar over the years. And again, with the products that we have this year, we're going to guarantee them or your money back.

What is little known is that when you look at just fabric care advertising -- again, we looked at reported spending across all fabric care brands -- slowly but surely, OxiClean has become the number-two advertised brand in the fabric care category.

These numbers are indexed to the spending of the market leader over the last year. And you can see that OxiClean and ARM & HAMMER are able to compete despite our relative size versus our major corporate competitors. But we are big in the consumer's minds, and we are big in the advertising arena.

But it's not just advertising. You have seen this before on our other brands. We have graduated from selling at county fairs and the boardwalk, but you will find a lot of our efforts online, especially because they are severe problems and solutions that people want to -- say, they want to save that christening dress; they want to save that favorite garment. And today, no matter your age, you are going online looking for how to solve that issue. We have done a lot of wonderful things digitally in that business as well as the traditional public relations and merchandising activity.

So I'm happy to say that we finished the year with great momentum. It's all-time high share in the fourth quarter. It is a great platform to grow. And so since our purchase in 2006 of this wonderful company, the brand has had some competitive situations. But the trend line has always been up. And it is, as I say, a very resilient and powerful brand.

I'm going to turn it over to Steve to talk about our current innovation.

I couldn't be more excited to talk about OxiClean's growth. We're going to take OxiClean into three major categories -- the $7 billion laundry detergent category; the $1 billion auto-dishwashing category, and the $800 million bleach category.

So first, we will turn our attention back to the dynamic laundry category. The number-one consumer frustration in laundry detergent performance is getting the tough stains out. Consumers want to be able to remove all types of stains the first time.

Well, our answer is OxiClean laundry detergent. This great new product is especially formulated to lift out even tough, dried-on stains the very first time. For blazing whites and brilliant brights at a meaningful value to the leading brand.

Bruce will show you the advertising.

Okay, I would like to talk about the advertising. And I think we have a demonstration that we wanted to show, as well.

Okay, so as I begin to tell you little bit about the advertising, I can't help but --

It's Sully again with big news from America's favorite stain fighter!

Sully, I am in the middle of --

OxiClean! Powered by the air you breathe and activated by the water you and I drink. Boy, am I excited to be out of the laundry room and in the Board room. It is Mother Nature approved.

Look at that -- it makes your whites whiter and your brights brighter. And if you think that's good, I've got some big news for you here today.

OxiClean is introducing OxiClean laundry detergent -- 4 times more powerful. It gets your whites whiter, your brights brighter. Takes out grass stains, clay stains, ketchup stains, mustard stains. It will take the Chief Marketing Officer's stains out. It will even take Steve's stains out. Coming to you this year only from OxiClean.

That's about all I've got for you right now, Bruce.

Sully, you are incorrigible. Could we show the real advertising right now, please?

(video playing)

We're very excited about this launch, and as you can see, Sully is, as well. We are going to now talk about dishwashing.

Thanks, Bruce. The second new category we're going to talk about is auto dish. When phosphate was removed from auto dish detergents, it created a situation where consumers became dissatisfied. Category and performance declined, and consumers could no longer get the cleaning performance they wanted.

OxiClean, with its strong heritage of getting tough stains out, is coming to consumers' rescue to tackle the toughest dishwashing jobs. Today nearly 7 in 10 consumers still experience significant problems with existing auto dish solutions. Dried-on foods that don't come off; filming on classes; and baked-on stains are the top issues.

This is why we created our new OxiClean detergent, with cleaning so powerful it eliminates the toughest stains, stuck-on foods, powdery films, and odors -- for crystal clear and clean dishes every time.

Over to Bruce.

I am hoping I can get through this presentation. But I'm not entirely sure that I will be able to, with Sully sitting there.

Wait, there's more. If your dishes that are coming out kind of clean, barely clean, or sort of clean, guess what you need? OxiClean Extreme Power Crystals. This is a glass done with the old stuff. This is a glass done with new OxiClean Extreme Power Crystals.

You can get it in liquid or packs. It is coming to a grocery store near you. So don't do your dishes without using brand-new Extreme Power Crystals from OxiClean. We're not just taking over the laundry room; we are taking over the dishwasher, as well!

I'm pretty excited about this whole thing.

I wasn't sure this was a good idea. Okay, let's run the advertising.

(video playing)

I think 74% of the consumers who saw that ad said they definitely or probably would buy it. So it has a very high rating. Again, very high persuasion stores, in the top 20% of the dishwashing database. Very excited about it. Talk about bleach now.

Yes, and it is an outstanding product. So moving to bleach alternatives, chlorine bleach can make consumers worry. Many consumers want an alternative to bleach with less risk of ruining their clothes and without the harsh smell.

This is why we're introducing OxiClean White Revive. It powers out tough laundry stains and delivers bleach-like whitening to revive whites without the chlorine smell, yellowing, or color damage -- so your clothes look newer, longer.

Bruce?

Who has the mic? There is more! It's no secret that bleach can ruin your clothes. It will damage your socks. It will leave your socks yellow and dingy. We actually had to use coffee today from the ballroom to make sure it worked.

And if you have got ink stains on your shirts on Wall Street, turn to the power of -- where is it -- new OxiClean White Revive. It cleans like bleach without the damaging effects of chlorine. In fact, I'm so convinced that it's so good that I can guarantee Mr. Bruce Fleming, Steve Cugine, and even our CEO, Mr. Craigie -- please show me how white your socks are, please, gentlemen.

Powered by the air you breathe and activated by the water you and I drink. This is probably the only time I'm ever going to get to do this, so I'm going to soak it in. OxiClean, the stain specialist. It gets the tough stains out. And it is not clean unless it is -- OxiClean.

All right! Say it one more time! It's not clean unless it is -- OxiClean!

Okay. He is just an obstreperous guy. I can't really say much about him.

Human Resources and Legal -- Jackie Brova and Patrick, can you please help me out here? I want to get through the presentation. Thank you.

I was just getting started here.

Can we run the advertising now, please?

(video playing)

Yes, that is an important point. We're very fortunate that we are able to get placement now of OxiClean in the bleach aisle. And I think it is going to be a positive win for both consumers and retailers.

In 2014 across all of our OxiClean variants, we can expect to see our advertising increase by 53%. And that is a pretty big number when you consider that we are the number-two laundry advertiser in the United States. It is what you do. It is what you have to do when you are small, and what you have to do when you have a wonderful equity like OxiClean.

I am privileged to talk about our third megabrand, which is Trojan. For 90 years it has been known for trusted protection. And over the last five years you have seen us introduce a lot more elements to the brand equity, especially those revolving around pleasure.

So it's not only a product for protection, it is a product for enhancing people's sexual health and sexual lives. We have added products in that manner. We have also added communication that reinforces both those points.

If you looked over the last five years or so, there's going to be some growth. But I believe we can do better. And that is why we're introducing products into the other segments.

Steve is going to talk about innovation right now.

Thanks, Bruce. We did indeed experience strong success with the launch of our new Trojan lubricants line in 2013.

The insight behind this launch is that lubricants don't have to be about solving a problem, but can be all about making good sex great. As we developed the launch, every product, package, and communication decision was grounded in consumer research. And with the combination of a great concept, great packaging, and outstanding product performance, Trojan Lubricants was created. The result: Trojan is helping make good sex even better.

We introduced this line of lubricants in early 2013 and consumers love it. We achieved a 7.4% dollar share of the lubricants market in Q4 of 2013, and we are poised for more growth with the launch of three new items.

Two items in the premium tier and one item in the value tier. Arouses & Releases -- motion-activated, super intensifier that heightens the whole experience. Simple Pleasure -- two simple, preservative-free ingredients providing long-lasting lubrication.

We're also launching one new product in the large value segment of the category called Trojan Explore, a gel lubricant that delivers excellent lubrication.

Bruce, I will turn it back to you for advertising.

Okay. So this year's tagline, Trojan: Real. Good. Sex. I guess that is pretty simple. Clearly, it has been an evolution for us. We're going to continue to experiment with our communication, as I have said.

What we are trying to do is normalize the discussion about something that happens every day. And it's often about things people don't want to talk about. But we want to try to shape the discussion so it is in a positive manner.

So what you're going to see -- I'm going to show you the ad campaign across the three different products in our line. Some of you may really like it; some of you may say, it makes me uncomfortable. But that's exactly what we want to do. We want to be provocative. And that is what Trojan will always try to do in order to build the business.

Could you roll the tape, please?

(video playing)

Okay, let me talk about our fourth megabrand, which is our vitamin business. This has been a fantastic acquisition. It has been great to work on, great to understand.

I think when the day is done sometime in the future, it's going to be a case study for incredibly wonderful success in building a category and building segments of the category.

We bought this business; it has already been growing rapidly. The L'il Critters business -- parents grew up loving L'il Critters and their kids loving L'il Critters, because some vitamins are hard to take and some vitamins are easy to take. And L'il Critters and Vitafusion are easy to take.

They had an insight into the gummy form, and within 10 years became market leader in the kids segment. It is our job to make that success happen in the adult segment, as well. All those parents that grew up loving L'il Critters for their kids.

And since 2008 there has been some very wonderful growth -- 31%, 32% compounded annual growth rate. You don't see this type of growth often. So when we had the opportunity to buy it, we jumped on it.

I'd like to talk a little bit about packaging, because as a marketer you always have to take care of that packaging. But in this case, there's strategic intent here. When we bought the business, we saw that they had a trademark tagline they really had never used, which was: we make nutrition taste good. And it really was a unique selling proposition for these businesses.

So how were we going to try over the next couple of years to link these businesses, the L'il Critters and Vitafusion businesses, so that they could build upon one another? One way is in a very small way, but in a very prominent way -- right on the package every day, when they open the jars and they recognize that this is just not something that they do routinely. They look forward to their vitamins, because it tastes good.

So Steve is now going to talk about the innovation that we have for this year.

Thanks, Bruce. We learned that 84% of adult vitamin, mineral, and supplement users take a multivitamin plus at least one another product. Our answer to this insight is the introduction of Vitafusion Multi Plus Line of gummy vitamins. These great-tasting gummy multivitamins contain all of the essential vitamins and minerals you need, plus extra nutrition at the level recommended by the Institute of Medicine to support specific health needs.

We're also introducing this Multi Plus approach to kids' vitamins, as you can see here. L'il Critters, Gummy Vites, plus additional benefits of bone support, immune support, and omega-3 DHA support.

Now back to you, Bruce, for the advertising.

Okay. We've got a great product with great taste. We just have to make people know about it and try it. Once they try it, we know they love it.

So our targeting exercise here is really relatively easy. We have got an incredibly loyal amount of parents who have gone up with this brand over the last 10, 12 years. And they are now reaching the age where they need to think about their own health. In fact, they are not only giving care to their kids, but they have to start giving care to themselves -- maybe giving care to their parents. So as caregivers, they start thinking, what else can I do to make my life a better, healthier life?

And Vitafusion should be the answer if we do our job well. I would like to show the advertising. Could you roll the advertising, please?

(video playing)

So as you can see, we're beginning to try to tie the businesses together in a way that makes sense logically and can hopefully build upon one another. They are great products, which -- we are convinced that if we get the adults who have cared for their kids to use it, they will be successful.

Here is an opportunity for adults to love the product for their own good health for the same reason they love the product for their kids' health. Nothing fancy about that advertising; very straightforward; very database, but tested very well, and we know that it is communicating well.

And as a result, we are putting our money where our mouth is. Jim has told you about our focus. Our focus has been relentless. We're going to spend 37% more on our vitamin advertising to drive that growth, which is already extraordinary.

Go ahead, Steve.

So for 2014, we couldn't be more excited about our portfolio of innovation. We have, for the first time, major news and new products in each one of our four megabrand categories -- ARM & HAMMER, OxiClean, Trojan, and vitamins. However, we don't have time here to go through all of our new products. But rest assured that we have great new news on Nair, First Response, and Orajel and XTRA.

We're very excited today as we have this analyst call to talk about how much our retailers appreciate and love our new products. And they have voted with their feet. We have strong trade acceptance of all of our new product items for 2014.

So in summary, I think you can see why we believe that Church & Dwight has built a corporate competency for new product innovation. The new product innovation has been and will continue to be a critical driver of our organic growth. Innovation supports our megabrand growth drivers.

2014 represents the most significant portfolio of new products in the Company's history. This portfolio of exciting new products represents platforms for growth and innovation that will extend multiple years into the future.

With that, I will turn it over to Matt.

You couldn't have sat through that presentation and not feel like there's something different about this year for Church & Dwight.

So right, the numbers. Okay. So let's start with the 2014 outlook. So 3% to 4% is a very familiar target for us and for top-line organic growth. That excludes acquisitions; it excludes foreign currency.

Gross margins we see as flattish. As you heard Jim say, we do have a robust continuous improvement program called Good to Great. It is functioning well within the Company. So absent the sliding that we talked about in the release, we would expect gross margin to have been up in 2014.

Marketing is going to be flat, so it is going to be around 12.5%. That is where we ended 2013. Expecting a lot of leverage from SG&A. And we see the operating margin up 80 basis points.

Now, between operating margin and EPS, you've got taxes, interest, JV, and other. So tax rate is expected to be higher in 2014, 34.5%. So that is a bit of a drag.

On the other hand, the interest is going to be flat. But the JV income and other expected to be up year over year. So it is all baked into that range of $2.96 to $3.07. And as a result of raising the dividend, you can see we are at a 1.9% yield approximately right now.

Okay, here is the history for organic sales: 3% to 4% is what we are targeting for 2014. And you can see we had 2% for 2013. We're not necessarily happy with that result. And you can see innovation is going to drive the return to 3% to 4% in 2014.

Here is the range. It's $2.96 to $3.07. And just -- I want to spend a minute or two on that. You saw on the release that we have a $12 million year-over-year investment in slotting. So that alone is a 2% drag on EPS.

The second thing is we talk about currency. And we are different than lots of other CPG companies. We are more US-centric; but we do have a drag, and a bigger drag in 2014 versus 2013. So that is about a 1.5% drag on our EPS. So those two are both baked in there.

And then you can see at the bottom of the slide -- I don't know if you can read it -- the range is influenced by retailer distribution and a consumer acceptance of the new products. So retailers are jazzed about the new products, but what is unclear, obviously, is going to be the plan-o-grams, and then, of course, consumer acceptance. So that is going to be the wildcard. And that is going to become clear as we move through the first quarter, and by the time we talk to you at the end of the first quarter.

11% increase in dividends, we announced today; and it is going to ramp on what we heard. So we had a solid fourth quarter. We had a 13th consecutive year of double-digit growth. The Avid acquisition is just raging. We are up 20% net sales in 2013, and we expect double-digit growth again in 2014.

We plan to win, as Jim said. We have an aggressive but an achievable plan. And we have our largest new product pipeline ever. And as opposed to the past, we talked about the power brands a lot, Jim here is talking about the four megabrands now going forward.

And like I say, we're off to a good start with the retailers. We will find out more about the plan-o-grams as we move through the quarter. And we have a lot of firepower, as we described earlier, generating lots and lots of cash. And we're always on the hunt for new acquisitions.

And with that, we will take your questions.

So back here. Let me just recap myself. I see all these hands in the crowd.

We could have easily folded the tent this year. We had a lot of headwinds. More competition than we have ever seen in the past. The categories, and the economy was still sluggish.

Foreign exchange has popped its ugly head up in the past month or two. We could have easily walked up here and said, hey, we're going to fold back. But we didn't. We came out with the greatest product launches in history.

We're still holding to a 6% to 10% range in EPS. We could tighten that range if we knew more. We just need to know more right now about actual shelving out there by retailers; what the competition is doing; what pricing is; merchandising; consumer acceptance, and that.

So give us another couple of months to understand all those facts. We don't have them right now with all these new product launches going on there. So we're very excited. I am very excited about this and taking a full assault out there.

So, all right. Questions?

Bill?

(inaudible) The first question was share count for 2014. Second is maybe a little more decision to move from eight power brands to mega in power? When I say that, like what does it mean internally? Does it mean you're going to pull back on advertising and R&D and stuff on some of the other power brands, or the remaining power brands? And structurally how should we look at it going forward? Should we expect faster growth out of the mega-brands versus -- how should we think about that?

Let me deal with the mega-brand question first. We are driven by share of voice for the share of market. We always look at -- let's just (inaudible) it all depends, it's just been relative to competition. So if you look out there, the power brands that are staying as power brands, mega-brands, we sold a very strong share of voice going into 2014 to support the new product music. And we have it; it's on the table here in front of you. But Steve and Bruce want to spend their time focusing on mega-brands, so we have great new products there. And with the marketing spending we're doing on those brands, we expect it was still drive good share growth gains there.

The mega-brand thing, it's just purely a very smart move. It's a very good efficient move of how to best spend our money out there. We will do get a bigger bang for the buck for the money in all aspects. The marketing will drive more share growth, and it will spend on the smaller brand. The organizational costs are less. So it's just, again, it's not a revolution. It's an evolution of our strategy. It makes total sense. I think you'll see some of our big competitors out there. Colgate is a great mega-brand around the world as well. We see these four brands as the key driver of our future, not the total, the key driver. The other power brands we have we are spending the appropriate the money, we are doing the appropriate new products to keep Velcade delivering that. So we feel very good about that. This is a tweak of our strategy that's very smart to drive good strong growth going forward.

Matt, on the share?

I'm going to disappoint you, Bill, with respect to the share count, so the respectability in the amount of the shares and the timing which we would actually buy shares back. We haven't bought any shares so far for the first month of the year, but we do intend to buy some. But it is a multi-year program. We will update everybody by the end of the first quarter.

(Inaudible) Could you discuss the dynamics of the household products (inaudible) because it looks as though price mix was much more negative in Q4 than Q3. So I guess I want to know what's going on in the business? Where you selling out older inventory to ship in new products? So, if you would discuss that along with the shelf space gains you're expecting or have got commitments from retail for the new product.

At midpoint of the year, you may recall we had a 3% to 4% target for full year and we took it down to 2%. And when we did that, we made plans to put a lot more trade promotion out in the second half. So that wasn't a knee-jerk in the fourth quarter. That's something we made a decision in the middle do you.

If you went back and looked at the first couple of quarters, you would see that actually price mix was pretty tepid in Q1 and Q2 and was big in Q3 and Q4. And that's because we were disadvantaged on shelf, particularly in the litter category, and we had to correct that in the second half.

There's been tremendous pricing in the laundry category. We are not leading it. A couple of our competitors have pulled down their promotion prices, and so we had to deal with that. So it did hurt the gross margin a bit. We are not going to start a price war, but we are not going to be left uncompetitive. So we do have to spend more on the promotional side in laundry to stay competitive in the category. It still drives share growth. Arm & Hammer Liquid just had its 16th consecutive quarter of share growth, four years of share growth. So we didn't want competitors who some of them have nothing but price to deal with right now, they don't have innovations, and they tried to pull the price lever. And we made sure we were not price uncompetitive, so it did cost us some gross margin in the back half of the year.

So, in your guidance for the first quarter for 1% organic sales growth, what in that is volume and price mix? Because I'm assuming volume is up quite a bit in there. And then for the year, could you break that out as well? And then I have a question about pricing.

If you look at we (inaudible) what was the fourth quarter, we saw about a 5% volume and about 3% negative price mix. We would expect to see something like that in the first quarter. That's number one.

Number two, it's 1% organic growth is what you saw in the release for the Q1. There's a 200 basis points drag from trade coupons and slotting in that number. So we've got a big boat anchor around the topline number.

And if you look at the gross margin, which is we are projecting it to be down 100 basis points, it's more -- there is more than 100 basis points I've heard from the three items I just mentioned -- slotting, trade and coupons. So and you would expect that. The little innovation we talked about today, you would expect it to be a big investment in the front half of the year. And that's why some people wrote that we have a back-end loaded year from an EPS standpoint. We are not at all concerned about that because we are putting investment in upfront.

Also, we will only get a partial quarter benefit of volume from new products that is beginning to ship. But we take a full shot on slotting in the first quarter, so that's saying that's having a drag on the organic number. But the second quarter, we will have the full benefit of a quarter's worth of volume from that. And actually at reversal, you only have a slighter drag in the second quarter from continued slotting for the accounts that are later getting out there.

Your second question, and then I'll ask Mr. Schmitz.

Okay. So you gave some indication of the price on the shelf of the new OxiClean detergent. I think you said it could be about a 20% discount to what I guess is Tide. Could you give us the price of OxiClean detergent on a per-wash basis versus Basic Tide? Because Tide has a huge range of prices. So is it going to be priced at a discount to Basic Tide on a price per wash basis? That's my question.

It's a tough one. Our objective on Oxy laundry detergent is the (inaudible) performance of the leading brand at about a 20% discount. And again you are right, they have different forms. And in the end we don't control pricing. The trade makes final pricing decisions. Proctor has announced kind of an implicit price increase. They have taken ounces out of their Tide line, and held the price. So that's going on also in the marketplace. So, right now, that's all just beginning to happen on shelf. So I honestly can't give you at this point in time an exact price per load answer like that. We need to see what happens on the shelf and how the retailers price the product, and what happens.

But our goal was to be about 20% lower on price with equal performance. So that's kind of the target. That's what Church & Dwight is all about, great performance at a great value. So we think we have a great new laundry detergent. We want a piece of that premium tier, so offering that great performance but at a better value.

When are we going to see it on the shelf? When are going to see it on the shelf?

Literally probably late February, early March, out there. It will be happening soon. Bill Schmitz?

Do you think the laundry category will grow in 2014? Because the crazy pricing you've seen in the last couple of months, all it's done is shrunk the category. Right? So, price mix is down and volume is still down.

Yes, it's a tough question because the category is starting to show a little improvement. It was as bad as 4% down in the first half of 2013; it was down to about 2.5% down in the back half of 2013, the fourth quarter.

There's pluses and minuses going on. I think the launch of OxiClean could be a plus in the category, more of a premium price. You would probably assume that Tide Simply will pull pricing down because, as Tide user switch, and I think I heard Proctor say they thought as much as 40% of the users of Tide Simply would come from Basic Tide. So that's about a 40% price decline from the base. So that would be a drag on the category. But honestly, we don't know yet. It's one of those questions I said before where's the source of volume for the brand? What happens to the category?

We are trying to grow the category. We're trying to get bring innovation to the category both with we are doing in Arm & Hammer and especially innovation on OxiClean out there on that. So we are trying to grow the category and we are not the ones driving the price down. So, we want to see that category grow again. So, it would be good for everybody, good for the retailers and good for us.

If I could just follow up on the advertising spending? Obviously, when you have a hit to your net sales from your gross sales, the denominator is lower. So your advertising rates should come up anyway. And then you look in the back half of the year, is there enough flexibility in the earnings? Because you have these great launches coming out, and you're spending all the slotting and all this trade money. But you're going to have to support it obviously once it kind of gets shelf space. So I thought it was a little bit odd that you said the ratio was going to be flat for the full year.

The ratio was about flat to the year, but we are going to hit our revenues going up, so the amount of money will go up. But part of the reason we will leave in a range too in the 6% to 10% is to leave us some flexibility on marketing spending for good news or bad news. If we see some of these businesses take off, we're going to put more marketing money behind them. If we see some competitive actions, we're going to put some more to defend our business. So part of it again, there is a lot going out there in the category across all categories, leaving us just a little room to wiggle right now until we see more of the whites of the eyes of competition, what the trade doesn't have. So it's part of the reason why this year -- last year we called 14% boom. From day one we delivered 14%. Boom. Because we knew what competition was doing, we had more stability out there in the marketplace. This year, a lot of things are up in the air going around, so we need a little room right now, especially with the greatest product launches we've ever done in our history in that. So stay tuned. We will try to refine things a little bit more as we get into the year and we see what is actually happening. But at this point in time we just need to have more of a range than we have had in the past.

Yes sir?

Good morning. So a couple of things. With the mega brands now then sort of having the amount of new product, it seems as though this year, relative to prior years, it really hits earlier in the year in aggregate. Is that a fair way to characterize it?

No. It's just more. It's just more. We've never launched this many new products in a year to start with, so it's just the magnitude of the number of launches we are doing versus past years. That's it. It's not earlier. It's just more.

Okay. And secondly, so now with a greater focus there and the timeline that you set out as far as the new product innovation, would it be reasonable to assume -- actually let me take a step back. One of the other things that was mentioned was the use of money back guarantees on some of the products. I just wonder if you could sort of take us through -- there seems to be a lot of confidence in these products, but it seems to be something relatively new for you as a company. So, I wanted to get some thoughts on that.

No, we've got a lot of experience with that. We've had guarantees on our products in the past, so we have a good history of what the redemption rates on that are. We feel very comfortable with that and we feel very comfortable about how great our products are. So we are not concerned about that. That's just really putting your money where your mouth is, and I love this slide. If you're a cat lover, you've got to try this cat litter. It is by far the best I've heard -- I've given samples out to friends, and they would tell me the truth. And it's unbelievable. The laundry detergent, the same way, unbelievable. So we feel very comfortable. We're trying to convey to consumers, try this. We are so confident you will love this, we will give you your money back. And we've done that in the past with some brands, and we know what the redemption rates are. We feel very comfortable with that. Is that your whole question or was there part --?

One last part. As far as the -- I noticed that a couple of the products, while you have some of the branding, particularly with Arm & Hammer, sort of the yellow and what have you, a couple the products, carbon seal and the -- I believe sort of had the black -- is that more of sort of a call out to something more premium, or was there kind of a thought process?

That was exactly that. The color black in packaging has conveyed premium in a lot of different categories out there, and we wanted to these products to stand out on the shelves. So that's why we went that way. But you will still see it still has the famous Arm & Hammer logo on it and that, so it is still very identifiable as Arm & Hammer. But these are premium products out there with premium performance, and we want to understand. We looked at both honestly. It was very close. I'll say the final testing was very close between the orange and the black colored package. And we decided in the end to go with the black. And we will see what happens with the shelf, but I think it will make these new products really stand out in the shelf while still not losing the identity of the Arm & Hammer brand on them.

Back to this side?

On the full-year organic sales outlook, you adjusted it down just a tiny bit, at least at the midpoint. So can you talk about what changed in that? Is it a function of increased promo or are there different expectations in terms of volume?

And then just to follow-up on vitamins, you had mentioned in your presentation that vitamins were up 20% in 2013, but growth has slowed somewhat in the channel. So first is the track channels indicative of what you guys are seeing across the board? And it looks like competition has picked up, so can you talk a little bit about vitamins overall in terms of the competitive set? Thank you.

Okay. I Think I heard the first part of that dealt with the 3% to 4%, why we have a range on that. And what could affect that range?

Yes.

A lot of stuff. The categories to start with, I will tell you our category growth assumptions overall next year in total across all of our 13 categories we are in, we are assuming anywhere from flat to 1% growth. (inaudible) category growth. So if that gets better or worse, that will do it.

How well our new products do in the marketplace, we all think they will do great. Maybe some will be greater than we think, some less. Competition, what is going to happen out there, pricing. So there's a lot more variability in the marketplace right now. And 3% 4% to us is still a pretty tight range. I think most of our competitors have a 2 or 3 point range organic growth. So, we feel pretty tight on that. Obviously, we hope we can beat it, but I think that historically we've kind of been in that band overall, so we feel good.

You talk about the vitamin category. Part of it is the law of numbers as we get bigger. We had over 20% growth in the business last year. A lot of that business is on unmeasured channels. Well over I think (inaudible) I think well over half of the business to us is unmeasured channels to large customers such as club stores and that. So probably the Nielsen you will see on that is not a true representation of what category growth is.

I'll be honest. The category has taken a little hit just recently. You saw there's some negative press out there about the benefits of a certain kind of vitamins. The category has had a little bit. But I would tell you historically, and we've studied this very hard when we got into this business, that has its ups and downs. News comes out, good news, bad news and that, but overall I think people are very smart. What it costs you to take a vitamin, it's a very low-cost. And there are people who don't believe in it, but I think most people believe you can't lose in taking vitamins, especially as you get older.

I could also sit here and tell you we studied hard the basis of those negative PR stuff came out there, and if you studied the group of people they sampled, it was not representative of the overall population. But that's the problem with these studies. They come out on (inaudible) points of view, and I don't want to get into that today. But the vitamin category, with the aging population, the desire for greater health, has been one of the best long-term growth categories out there. It goes through little blips up and down, but we feel great. The business is growing.

Don't forget too, on the adult side, only 3% of adults take a gummy vitamin. 97% of adults take a hard pill. So we have a -- and that's a $6 billion business out there, category. So we feel we have tremendous runway on just -- even if the category stays flat, we've still get 97% of people out there taking a hard pill. Every time we give them a chance to take a gummy versus a hard pill, they are blown away by the great taste difference on it. That's what Bruce tried to show you in the advertising. Even in a worst-case, the category was flat, we still have tremendous runway on the adult side of the business, which today is a bigger business than the kids side of the business. The kid category is only 1/6 the size of the adult category. So with already half of all kids taking gummies, that category is pretty well penetrated and is much smaller. There are huge opportunities on the adult side with tremendous 97% of the business out there to be had just convert people from pills to gummies. And we feel that's the huge runway in that business. That's why it's growing so quickly these days.

Matt, could you talk a little bit about the SG&A leverage? Because what's implied in the guidance is -- I mean you always do a good job on leveraging your SG&A dollars, but this is bigger than I think we've seen ever, maybe.

You know that we make a good big deal about sales per employee. And overhead control is a hallmark of Church & Dwight. And Jim had a slide, he had a few examples up there of some things that are going on within the company. So for example, you saw a new healthcare program.

We are probably one of the few large corporations that have moved to private exchanges immediately in 2014. The amount of people just kind of looking at it. We've always been very aggressive with respect to how we manage our healthcare costs. A couple years ago, we went to a conference consumer directed healthcare costs where the first $1500 is paid for entirely by the company. So you are incenting employee not to actually get to the threshold. So, it's a little bit about how you spend your money.

Information Systems are up there, so the AVID business that we brought on, we went live midyear in July for that entire business without a hitch. And we carried more people than we needed in the first half of the year and that kind of peeled off in the back, have a full-year benefit next year. We also have no headcount planned for 2014. So that 4200 number you saw out there for headcount is what I am looking for for the end of 2014. And you know, if you go back to last year when I was up here talking about 2013, we actually were calling, at the time, gross margin flat. It turned out to be up 80 basis points, and then we spent 30 back on marketing. And at the time, we were thinking we were going to get the entire operating margin expansion from SG&A. It turned out that we needed that. But this year, that's where focus is, is on SG&A.

Good morning folks. Thanks for the question. Lots of exciting innovation here today. One thing that we haven't seen has been liquid Pods. Unidose appears like it's here to stay. The consumer, based on market share data, would suggest that they voted for liquid as the preference. So looking forward, do you think you have a material portfolio disadvantage without liquid pods? And if so, what's preventing you from going down that path?

I would dispute your numbers. The pod category, or unit dose as we call it, has leveled off at about 9%. I would expect it to go up a little bit with the launch of Gain's new pod product out there, but still probably end up around 10% to 11% of the category. We are a player in that.

We are a powder pod. We have seen no issue with consumers accepting the powder side of it. And then the one thing honestly we have been deficient at is we don't have larger size packages of the pod. You're going to see that (inaudible) next year. We have more than our fair share of the smaller size of the category. We don't have the larger size. So we're going to be launching more of that. But it is here to stay. It's found a niche up in the business place. It's, again, 9% now, maybe 10% or 11% in 2014. Let's not forget liquid is 75% of the laundry category. So, we are going to be competitive in pods, but our focus is getting back and a growing the liquid side of the category again. That's what -- three-quarters of consumers want liquid. That's where we're going to put our focus in the business. So good question, but I think we feel fine on that, and we're going to fix the efficiency we have on larger size pods out there.

(inaudible) to online and whatnot. So what's that $12 million getting you? Because I know you commented you're not sure whether you get incremental shelf space or not for the new products.

It's literally an age-old thing. Still the predominant number of retailers demand a slotting fee to take on a new product. Whether it sells more or less, their attitude is that's your problem.

Even if it's replacing something else in the line?

It could. That's where final shelving is one of the big things we don't know yet. We know -- I could show you a chart. I won't. But I can show you a chart. We've got very good acceptance. They want the product. Whether it takes the place of an art product, whether there's incremental shelving is still to be determined out There. we feel good but we don't know. We don't control that, and the retailers is also dealing with new products from competitors in that. So the next step is what's the shelving on the set. The step after that is how do consumers react to that all.

So two big decisions to come. We literally -- again, because we don't control it, we've made very compelling cases, so they like the product. We feel very good that they have accepted all these new products. We don't know whether it's going to be one in, one out, as they say, or whether we get incremental shelving from these things. We are still waiting to see an answer again. Bottom line, how will the consumer react, still to come.

And then just on the advertising, you talked about huge increases percentage-wise for OxiClean and for AVID I think. I think those were the only two numbers you gave us. But overall, advertising is flat. So where's it coming down? Which brands are feeling (multiple speakers)

That goes back to my share of voice, share of market. We have shaved a few brands where we felt we were spending -- I'll give you one example. On Trojan last year, we spent a tremendous amount on incremental advertising to launch lubricants, and that was purposeful enough, so it was a major massive launch into a new whitespace category. So we are pulling back on that a little bit, because we would have done that anyway. So we are doing that were we have major new news. We put bigger money behind those, and we are able to do that while still maintaining a bigger share of voice in the market than our share of markets on the condom side of the business especially. So we feel confident.

This is why one thing about our company too, Bruce Fleming controls all marketing spending in the company. It's not -- I grew up in another company. There were 12 divisions. All 12 divisions had their separate pots, and they wouldn't exchange money at all. Bruce will move money by the day, by the week, as he sees things happening, whether good news, put more money behind it, or bad news, needs to be defended, or whatever. So he constantly watches that. He constantly pulls the money left and right between all the different businesses we have out there so we get the best bang for the buck. So that's (inaudible).

Right now we've made a decision as of this moment where these brands go. As we see things happen in the marketplace, we'll make assessments on it and shift money as appropriate. But we think it all starts with share of voice and share of market. We feel we have at least as strong and in many cases on the mega brands, our share of voice will be 1.5 times our share of market. We believe you've got kind of be at those levels to grow your share. That's (inaudible) history. So, we study this intently, but I don't want to bore you with details today. But we watch that very closely, that ratio.

Jason?

Thanks. Can you talk about the growth of the personal care segment, excluding AVID? So how you saw -- there was a lot of innovation that came through in 2013 and obviously you're talking a lot about 2014 as well. So, I guess it just seems that, on the premium side of the equation, that is where I think a lot of people are still uncertain about the consumer that's out there. So can you just talk about how much reliance you need on that personal care innovation really to work to kind of come within your implied guidance? (multiple speakers)

We had a very positive year of growth on Trojan for the total brand. We had a good year on actually toothpaste. We were one of the fastest-growing toothpaste businesses out there percentage-wise. We are still a small player, but our toothpaste business did very well.

It was not a good year in Nair. The weather really hurt the Nair business, any kind of a seasonal business. So that business was a step back.

And in the pregnancy kit business, we hit an all-time record share on First Response this time. So overall the personal care business is doing just fine. We're very happy with that.

Then of course we consider vitamins more on that side of the equation too, and so the personal care business is doing fine with some of the lumps in the road caused by seasonal activity. That's why you did see -- Arm & Hammer truly radiant toothpaste, best toothpaste we've launched in a decade. We're launching a toothbrush along with it; that will be big. Then Nair has got a whole argon oil line coming out which is very hot out there, very good trade acceptance on that so far. We didn't even talk about it.

On First Response, we are just launching the first pregnancy kit that has a six day claim on it. We can tell you six days before your missed period if you're pregnant our lot. Nobody else has five days. It took us over three years to get clearance on that through the FDA. We are all the only one in the marketplace with that. Every time there's been a day improvement in that thing, the brand has had it, has delivered tremendous growth. So again, we didn't even talk about that today, but it's the best new pregnancy kit out there that will help that business. So, a lot of great new news across it.

I'll tell you too, you can't -- don't forget one thing about OxiClean we love, the base powder business, they say household business with personal-care margins. The margins on base OxiClean are plus 60% on the business. So it's a category -- it's a household category. It has a personal care type margin structure to it. So brand -- so you can't just categorize stuff. It's just household with "lower margins" of personal care but higher margins. Even some of the household businesses have very high margins to them. So overall I feel good. Overall I feel good on this business.

Joe?

Just going back to marketing for a second, you mentioned that it's supposed to be up this year in terms of dollars, but flat as a percentage of sales. I know it's distorted a little bit by specialty. But given the move to the mega brands, is there a chance you get more efficiency and that number actually trends down over time in terms of a percentage of sales? And then secondly in terms of gross margin, how much is left on good to great? Thanks.

On the marketing side, we honestly, again, flat on dollars -- flat on percentage, up on dollars overall with more I think I said 80-some% of total market, the slide said, on the mega-brands. You could, Joe, fall under that argument that you could reduce spending over time, but we don't see it. We want to just keep increasing our marketing. I hope you were blown away by the chart today. Church & Dwight is the 13th biggest advertiser in the US, bigger than companies that you would never think spend less than we do on that.

What was the other part of the question?

The other question was where is the end of the road for good to great? And in our company, there is no end to that road. So if you look at what happened in 2013, we had somewhat benign commodity inputs, and so the efforts of the good to great folks popped at 80 basis points with margin expansion. And the fact that we've been able to hang on to our margin for the last few years is a tribute to the good to great program.

Now, you can't depend on commodities being benign. In fact, we are expecting some moderate inflation in 2014 versus 2013 more than we saw 2013 versus 2012. And it's also baked into our assumptions. But I would say we always approach good to great over a 36-month period, and you can only debottleneck in a linear fashion. You know, once you get down to one (inaudible) you improve something, something else becomes the next target. But I wouldn't call out a number and say okay, this is the maximum we can get to. I wouldn't underestimate the talents of the people in Church & Dwight. But we approach it every year, and we're going to try to expand gross margin.

I'm going to emphasize a point I mentioned too. 25% of all employee bonus in Church & Dwight is based on hitting the gross margin target. We study incentive comp station structure of all of our competitors. Nobody else has gross margin at specific bonus target. We started that about five or six years ago. It's been a key driver of our good results. So trust me. You have every employee in Church & Dwight focused on gross margin. It's as important a driver as the revenue. It's as important a driver as the EPS, as important a driver as the cash flow. So that's what Matt said. It's an all the time focus on doing it, and the people know. They can help us on gross margin, generate better earnings or we spend more on the marketing side. So I'll tell you my marketing team, I think Bruce would agree with this, probably spent as much time working with operations on how to improve the gross margin as they spend with their advertising agencies on how to improve the advertising (inaudible) with a new product, because we made it equally as important as that. And that's why we've had a great results I showed you on gross margin. It's part of our bonus structure. I'm actually amazed nobody else has it, because gross margin can drive a lot of opportunities in the company. They can be able to spend more money on marketing or drive more earnings in that. Other companies don't want to deal with it but it's very, very -- we watch everything from trade promotion spending to how we cut costs in our products without degrading the quality. Massive effort going on 365 days a year.

Next time we are going to get better acoustics in this room.

Two quick questions. On the gross margin, is the innovation driving any of the flatness in gross margin? Are you innovating up the gross margin value chain, or not?

Again, our policy overall is the new product must have a higher gross margin than the product it replaces. But as Matt said, you get all these new products out, the slotting fees are offsetting some of the margin improvement on the products in that. So sometimes they'll start to (inaudible) some new product which may pull the gross margin down short-term, but in the long-term, they'll have higher gross margins. So that's good news.

It just seems significant that you have had all these years of double-digit earnings growth and this is the year where you are not necessarily expecting that. That just seems like a big change.

I'd still say we say -- we are kind of late announcing our earnings, so is everybody else. 6% to 10% in my eyes still puts us in the top quartile of what people are promising on earnings. And we get the same issues they all do with currency out there, the economy and everything else there. So we still feel very comfortable that, relative to our competition, our goal is always to be in the top quartile of earnings performance. So we feel 6% to 10% still puts us in that top quartile dealing with same issues they are dealing, and then having to support all the launches which we're doing in our eyes more product launches across our portfolio than anybody else. So, we still feel that we're very good. We are top quartile performance, and we did say 6% to 10%. So stay tuned.

Okay, sorry, but also just thinking about 2015 then, if you probably -- this could be a peak innovation year in terms of just the mega brand launches. Do you think 2015, all things being equal, will be back to double-digit?

We won't be able to top it as far as more launches because we are launching every category this year. But don't forget we will only get about three-quarters, maybe 15% of the year benefited from new products. Next year we get the full benefit of the new products.

And one thing Steve has been charged with, we don't want just a one-year wonder out of these projects. He showed a chart earlier that a third of our volume today is from new products we launched in the past five years. That sticky factor. We want these new products to stick and be able to build upon them going forward. So, we'll get a full your benefit of all these product launches next year without the hit of slotting fees that we put behind them out there. And we might launch different versions of these new products that they stick and hit the ground. So the number of new products, no, you can possibly top what we're doing this year in terms of number of new products. Slotting fees should be less next year and hopefully we'll have a full-year benefit these new products going forward because they are just awesome. They should really have some launch with stickiness and be able to grow share out in the marketplace.

Could you please talk about the competitive intensity of the adult gummy vitamins, both for other branded as well as private label? And then secondly, if people see a great advertising, and want to buy your products online, what's the easiest way for them to get it?

Yes, the adult gummy category has certainly picked up with intensity. Products have been launched by major brands like One-A-Day and Centrum. But we welcome that. That's great news because, again, remember my fact. Only 3% of the adult category is gummies. 97% is hard pills. When you see the guys who dominate the hard pill side going to gummy, to me just tells adults hey, gummies are great. As they come to gummies, we still feel we have the best tasting gummy product out there. I taste them myself all the time. The competitive products, some are brittle like skittles. Some are not as chewy as sweet as ours. We really have some proprietary processing knowledge I don't think anybody else has. So we are bringing people in. There's 97% of the business to be had. If there's more competition, it's only great to me because it's just telling everybody gummies are not a kiddie thing, they are for adults too, when you see the big brand names go out there and go into it.

We do have manufacturing advantages. We are the only one that make our own gummy. The other guys go through co-packers. So we have a lot more flexibility as to what we make and keep up with demand out there. Because we were first in the category, we have really strong relationships with the trade. They love us, they love our products, want keep selling them. Our guys are doing a great job coming out with new forms. I think this whole plus Line on both the kid and adult side is a very smart move because people -- Steve said the number was like 84% of people buy a multivitamin and then buy a supplemental vitamin for, again, heart, bone, hair, skin or nails. We put them together. Now you just need to buy one product.

I'll tell you, it's not so easy to make a product that tastes great and still is a gummy form with some of the ingredients that we put in for those, but our guys are just phenomenal. So it's a great testament. But I welcome the competition. I really welcome the competition. I hope to sit here next year and say the gummy is 10% of the category, because that means there is still 90% to go but people are coming over. We are not happy until we see over half of all adult vitamins in gummy form and we still want to be a leader in that, so tremendous growth opportunity.

Way in the back?

So, on capital allocation, my first question is sort of why now with the buyback I guess? The balance sheet is in great shape but it has been in the past. And you guys are generally bit reluctant to pull the trigger on repurchasing of stock.

Jim, for you, I'd be curious to get your though on the M&A pipeline. That would be helpful. And then getting back to gummies for a moment, do you still think you can do double-digit growth this year given some of the slowing that we're seeing in the data? Thank you.

Yes, on the buyback front, just recall we have $0.5 billion of cash on the balance sheet. So that's a high water mark for us. And as we continue to grow the amount of the free cash flow we generate annually, we need outlets for the cash. Right? So a couple of ways to go. Dividends, buybacks and acquisitions. And being BBB+ rated, we have access to the capital markets. The reason it's a $500 million program is we had remaining the $220 million on our existing program, so rather than have another small program, we extinguished that, so it's a one $500 million multi-year.

And the Evergreen program that we announced was, in addition to that, that is still (inaudible) to remove share creep. So last year, the remaining shares were exercised, so we expect about 1 million-plus shares on an annual basis that we would be acquiring under the Evergreen program. The $500 million is there to reduce the total amount of shares outstanding, some of which we will do this year. We just haven't said anything about the timing or the amount.

On the gummy side, we definitely believe we need double-digit growth. Over the course of 2013, we landed a lot of new distribution. That's one of the things on buying a company. This company is a very small company. We bought -- they didn't have our sales muscle out there, so our sales force has done a great job in getting the products they already had in better distribution. Now that we're launching the Plus line, I feel good. We are taking the advertising up 30-some%.

We promised you when we bought this business it was only advertising about 6% of net revenue or 5% in advertising. We are now into double digits on the advertising, having more than doubled the advertising spend in the category. So we feel good.

Let me just end with one comment because you have been very patient and wonderful today. I'll just tell you I mentioned earlier that the M&A market is very active out there today. You can't count on anything until the calorically challenged seller sings. So we are working hard on that, but no promises. But it's more active than I've seen it in prior years, which is good news. We have a lot of money. We have a lot of dry powder out there, but we are very selective. We always know if we find a great acquisition, we can grow it. We are not going to buy junk brands, old dead brands that are not one or two in their category. But I'll just say we have been very, very active out there, but again I can't promise anything that's not built into our numbers. But the good news is we have lots of dry powder.

And also we have the organizational time now. We're through the big absorption process for the gummy business. We (inaudible) integrate into your systems, everything else. We're through that. My team is hungry and ready for the next big acquisition.

So, if you have any more questions, please give us a call later. Again, I thank you for your patience. I thank you for coming today. I thank you on the line who are listening. I can't tell you how I'm excited. I have been waiting for this day for six months because I've been -- you've all been asking questions along the way of what we're going to do, what we're going to do. And I just couldn't tell you because I wanted don't want to tip off the competition. Now the cannon has been fired. We're going to have a great 2014. We are excited. And stay tuned. It will be great. Thank you all.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect. Everyone have a wonderful day.