高樂氏 (CLX) 2009 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Clorox Company's second quarter fiscal year 2009 earnings release conference call. At this time, all participants are in a listen-only mode. At the conclusion of our prepared remarks, we will conduct a question-and-answer session. (Operator Instructions). As a reminder, this call is being recorded.

I would now like to introduce your host for today's conference call, Mr. Steve Austenfeld, Vice President of Investor Relations for the Clorox Company. Mr. Austenfeld, you may begin.

Great. Thank you. Welcome everyone, and thank you for joining Clorox's second quarter conference call. On the call with me today are Don Knauss, Clorox's Chairman and CEO, Larry Peiros, Executive Vice President and Chief Operating Officer, Clorox North America, and Dan Heinrich, our Chief Financial Officer. We are broadcasting this call over the Internet, and a replay of the call will be available for seven days at our website, thecloroxcompany.com.

On today's call, Don will start with his perspective on both our current quarter results, and changes to our operating model, as noted in our press release this morning. Larry will then follow with specific comments on business unit performance, including perspective on the current consumer and retail environment. Dan will close with a review of the quarter's financial performance, as well as additional details supporting our updated FY '09 outlook, as communicated in our press release this morning. Included in Dan's comments will also be details on commodity costs, and the impact of foreign currencies, before we then open up the call for your questions.

Let me remind you that on today's call we will refer to certain non-GAAP financial measures including but not limited to, the cash flow, EBIT margin, debt to EBITDA, and economic profit. Management believes that providing insights on these measures, enables investors to better understand and analyze our ongoing results of operations. Reconciliation with the most directly comparable financial measures determined in accordance with GAAP can be found in today's press release, this Webcast's prepared remarks, or supplemental information available in the financial results area of our website, as well as in our filings with the SEC. In particular, it may be helpful to refer to tables located at the end of today's earnings release.

Lastly, please recognize that today's discussion contains forward-looking statements. Actual results could differ materially from management's expectations. Please review our most recent 10-K filing with the SEC, and our other SEC filings, for a description of important factors that could cause results to differ materially from management's expectations.

With that, let me turn it over to Don.

Thanks, Steve and welcome everyone. As we reported in our press release this morning, Clorox delivered solid results in the midst of I guess what we could all call, a very dynamic and difficult environment out there, and our performance was in many ways we believe, consistent with the outlook we provided to you on our last call. Specifically we anticipated and were impacted by foreign currency devaluations, and increased commodity costs for the quarter.

Also as anticipated, the global economic slowdown continued to pressure consumers around the world. Now during Q2, retailers responded to this dynamic environment by tightly managing their inventories, particularly in November, as they made adjustments prior to the holiday season. We certainly saw differences between our shipment volume and consumer consumption at several major accounts.

While tight inventory management is certainly to be expected in times like these, the inventory actions taken in November were particularly steep, and while our business recovered in December, and we continued to see positive trends in January, the impact of mid-quarter destocking at retail, negatively impacted our overall topline results for the second quarter. While we believe modest retailer inventory reductions will continue in a few categories through Q3, we certainly don't expect that impact to be nearly as severe as Q2. Now overall I believe we delivered solid second quarter results given this environment. Now as always, we remain focused on the long-term and leveraging our strengths.

Let me just remind you for a second, about some of the strengths of Clorox and our portfolio. First, we do have premium value added brands, that we certainly believe consumers trust. Second, we have a very strong 3D demand creation and brand building set of capabilities. Third, we continue to support innovation, which I think is incredibly important during times like these, and with a strong set of initiatives in the third quarter, focused on the same consumer megatrends we have been talking about for the last two years. This certainly includes our Green Works line extensions into liquid dish soap and biodegradable wipes, which were just launched last month.

Fourth, our ability to drive strong cost savings to help offset the cost pressures we see, and provide resources to invest back in the business. For those reasons, despite the current market, we certainly are cautiously optimistic about our business going forward. I have given that context.

Let me address two specific topics with all of you, pricing and share. Now as you know, we have implemented more than 40 price increases over the past three years. Given the dramatic the and unprecedented run-up in commodity cost increases on our business, that was certainly the right thing to do, and it has I would say, played out largely as we anticipated.

Importantly, I think we continue to expect that the majority of these price increases will stick. In fact, of those 40 plus increases, we have rolled back just one, and that is the December action we took on Glad Trash bags. While we have seen impacts to our share results in certain categories, generally these impacts were anticipated in our models.

At the same time, in a few categories we have seen a bit more tradedown in share, and Larry's going to talk to that in just a few minutes. Despite this tough environment, I feel good about the second quarter results and the fundamental health of our business, and I certainly believe we are well-positioned for the second half of this fiscal year.

Now before I turn it over to Larry, I thought I would give you some additional perspective, and that is to spend a few minutes talking about the context for the incremental charges we announced in today's press release. Now consistent with our Centennial strategy, which was work we began almost two years ago, we have been refining the Company's operating model, and that is how we are structured, our core processes, our systems, and our management routines. This operating model is certainly designed to enable better and faster execution of our strategy choices, to build brand and gain market share profitably.

In the coming weeks and months, we begin a critically-important phase in our operating model, which includes reducing the cost of services to support our business, so we can put more effort and resources towards things that really drive shareholder value. During the past year we significantly slowed hiring across the Company, primarily to help address the cost pressures we have faced. But also, to help us leverage attrition, and minimize as much the impact of people as possible, from implementing our operating model changes.

Now that said, as you saw in today's press release, we do anticipate reducing headcount by about 170 people over the next 18 months. That is about 2% of our global workforce. We anticipate that further positions will be reduced through attrition, as we continue to tightly manage hiring.

Now I think as you can all imagine, this is a difficult decision because of the impact on Clorox employees, but making these changes to implement our operating model is essential, and allows us to more effectively and efficiently drive our Centennial Strategy, and accelerate growth for the future years. Now as Dan will discuss and give you some more detail, we anticipate realizing net savings in fiscal year 2010 from the charges we are taking to implement these changes.

So with that, let me turn it over to Larry, and he will give you some additional perspective on the business. Larry?

Thanks, Don. Let me start with a view of our categories and consumer demand. Overall, consumption in our categories remains relatively stable despite the economic downturn. Although consumer take-away in US tracked channels declined about 1% versus the year ago quarter, our sales growth in the untracked customer base, retailers like Wal-Mart, Costco, and Dollar General, is significantly outpacing sales in the tracked universe. While our categories are not immune to economic pressures, we are generally far less impacted than many other businesses.

We did see some mixed results in our market shares. In the eight categories we measure in the US, we grew share in five, and lost share in three. Our total share across all of the categories was down slightly. Share declines are generally attributable to pricing actions, and some limited growth in private label shares, given the economic environment. We are never happy about share declines, and this continues to be a performance area that is at the top of our priority list. As is typically the case, results vary across categories, and the stories are different at a more granular level.

In our largest category, home care, we grew share and tracked channels versus the year ago quarter, and maintained our #1 share position. Home care sales growth was driven by Green Works natural cleaners, and price increases on many of our cleaning brands. Green Works continues to perform well, supporting our focus on the sustainability, consumer megatrend.

We have not seen a meaningful slowdown in consumption growth in our green cleaning products, despite the challenging environment. The natural cleaning category grew more than 80% in Q2, and we still offer consumers a strong value proposition. Green Works remains a category leader, and has driven the bulk of the category growth.

Brita is another brand that continues to benefit from the sustainability megatrend. This business is also increasingly compelling from a consumer value perspective, with filtered water a far less expensive alternative to bottled water. Greater consumption in tracked channels grew in Q2, although shipments declined due to retailer inventory reductions. Water filtration remains one of our fastest growing categories.

In food, we continue to win with Hidden Valley, and the salad dressing category. Hidden Valley dressings grew volume and share in Q2, despite a significant price premium to the competition. We have a great tasting product consumers love, and a very strong marketing program.

Turning to Burt's Bees, while consumption remained solid in Q2, we did see some slowing in sales growth, due to retail inventory reductions and weaker holiday sales, stemming from the weak economy. We anticipate some further inventory reductions the back half of the fiscal year, but based on our solid consumption data, we remain very excited about the fundamentals of the business, and the long-term prospects. The natural personal care category remains profitable, and continues to grow faster than traditional personal care, and most of our other categories. Burt's Bees remains a sure leader in the natural personal care category by a significant margin.

In our international businesses, currencies declined versus the US dollar in many of our markets. Category growth also slowed due to weakening global economic conditions. The global economy is likely to impact this business through the next few quarters, with the potential for some categories to show declines. We continue to hold leadership position in many of our international categories, and are well-positioned to weather the storm.

Next I would like to address concerns about our exposure to private label, particularly in categories where we have taken pricing, namely trash bags, bleach, and charcoal, which represent about 30% of our global revenues. Glad was our most dynamic business in Q2. Effective December 1st, we rolled back the 10% price increase we had taken on Glad Trash bags in October.

This quick shift in direction was based on an equally quick change in the resin market. We will continue to monitor this category closely, and will take appropriate action to maintain the right value equation on shelf. This is the one category we are most likely to have pricing driven by commodities. We still believe that we can help restore margins on this business over time, through trade-up to ForceFlex, and aggressive cost savings.

In our laundry business, Clorox's bleach shipments and share was soft in Q2, partly as a result of our last price increase. However, our volume declines were in-line with what our pricing models predicted, and we met our Q2 sales forecast. Private label bleach has generally followed our pricing actions. Since our last price increase, our price gap versus private label has actually decreased by 1 percentage point in tracked channels.

We did see some shift to private label during the quarter. However, our biggest focus is on driving category growth, given our very strong share position. We are investing heavily behind new marketing initiatives, highlighting the benefits of bleach versus detergent alone, as well as cost effective, non-laundry uses. We are very pleased with the early results.

Finally, turning to charcoal, our only competitor is private label. Kingsford grew share in Q2, and remains the share leader by a significant margin. Kingsford is a good example of a business where commodity costs are not tracking with the declines in oil and other commodities. In response to higher input costs we increased prices effective January 2009.

Company-wide as Don said, we continue to find our pricing models are very predictive. That said, we have modified our fiscal 2009 pricing plans based on the dramatic declines in costs of some raw materials. Not all businesses have been impacted the same, and some commodity costs are continuing to increase, as I mentioned with charcoal.

In addition, many of our product lines are still in catch-up mode, as reflected in our gross margin decline over the last several years. What I hope this illustrates for you, is that sometimes too broad a brush is used to paint the picture of our portfolio. Reality is that each of our businesses are subject to different demands, some with increasing prices, some not, some seeing declining costs, some higher costs, some where we have lost a little share, and others where we are gaining share. On balance though, the portfolio is well-positioned to compete in this economy.

Before I wrap up, I would like to take a moment to talk about advertising spending. When adjusted for the impact of declining foreign currencies, we were about flat versus the year-ago quarter on a dollar spend basis. Our ad spending reflects an ongoing effort to shift more from ad production development and support costs, to direct media to drive efficiency and increase our ROI.

Fiscal year-to-date we have decreased non-working advertising, and a greater proportion of our advertising spend is now being spent on working media. We believe our annual target percentage range for advertising support is still appropriate. Despite the challenging economy, we remain committed to building our brands, and will adjust spending levels by business where appropriate. In the back half, we also expect to benefit from lower media prices, as the result of a weak economy.

Looking forward, we will likely continue to see modestly reduced consumer demand and tradedown, due to the challenging consumer environment. However, we do not believe our categories will be dramatically impacted. We also believe that in this environment, strong leading brands such as ours will end up winning with retail customers and consumers. Given the challenges and volatility in the marketplace, we will remain agile and quickly respond to opportunities to build our brands, while also building our bottom line.

With that I will turn it over to Dan.

Thank you, Larry. In our press release and on our website this morning, we provided details regarding our Q2 financial performance. That information includes reconciliations of sales, gross margin and EPS performance versus the year-ago period. Don and Larry have provided some additional commentary related to our volume and sales performance, and what we are seeing in the businesses with retailers and the consumer.

I would like to provide some further perspective on our financial performance for the quarter, and our updated financial outlook for fiscal year 2009. In all respects this was truly an unprecedented quarter. We saw deteriorating global financial and consumer markets, very steep declines in foreign currency values, and extremely volatile interest rates. The holiday shopping season was one of the weakest on record, and the significant pullback by retailers on inventory levels was quite stark.

Retailers are under severe pressure. Vendors and suppliers are under significant financial stress, and a global recession is well under way. No one could have possibly foreseen the depth and breadth of the conditions we have experienced over the last quarter. As a Company of strong leading brands, we are reasonably positioned tower this downturn, but we are not immune to the economic and consumer pressures. We have seen higher interest costs, declines in the value of pension assets, higher bad debt reserves, and some incremental costs to replace bankrupt suppliers.

On the good news side we have seen sharply lower commodity and diesel costs, which will benefit us going forward. All things considered, we feel pretty good about our second quarter financial performance. While we didn't forecast the extent of the retailer inventory pullback, our quarterly financial results were reasonably in-line with our forecast. Let me add some perspective on our sales growth.

The negative impact on volume from price increases was pretty consistent with what our price elasticity models projected. The topline benefit from pricing came in about as expected. Foreign currency substantially weakened during the quarter, but the impact on sales was close to what we had assumed in our outlook. We had forecasted lower category growth in our international markets, and saw that slowing during the quarter, but international sales growth was still 11% before the impact of currencies.

The one area that didn't come in as anticipated, was the greater impact from retailer inventory adjustments during the quarter. If you adjust for the impact of foreign currencies, acquisitions and exiting the private label food bag business, we saw total Company sales growth of 3.2%, versus 3.5% in the year-ago quarter. Given current market conditions, we consider this a pretty solid sales growth quarter.

Our gross margin performance for the quarter was generally in-line with our forecast. During the last two quarters, we have experienced the most significant commodity and diesel cost increases in the Company's history. On last quarter's earnings call, we projected about $60 million of commodity and diesel cost increases in Q2. During the second quarter, we incurred about $57 million of commodity and diesel cost increases, compared with $60 million in the first quarter of this fiscal year, and $20 million in the year-ago period.

We have now cycled through the peak of the commodity cost increases over the last 3.5 years, and are anticipating substantially lower commodity costs in the second half of the fiscal year, and into fiscal 2010. Our margins also benefited from $24 million of cost savings in cost of goods sold, and another $6 million in cost savings in other parts of the P&L. The positive impact from pricing and gross margin was consistent with our projections.

Net of all these factors, we were able to hold our gross margin at about 40% of sales, compared with 40.6% in the first quarter, and 40.4% in the year-ago quarter. We have been able to weather through these significant cost increases, and essentially hold gross margins flat over the last two quarters, and versus the year-ago period. We now anticipate expansion of margins in the second half of the fiscal year, as we begin to rebuild our margins back towards historical levels.

Other aspects of our second quarter performance were also in-line with our expectations. Our effective tax rate was higher in the current quarter, due to the impact of favorable tax settlements in the year-ago period. Our selling and administrative expenses after adjusting for the impact of acquisitions were down versus the year-ago quarter, as we tightly controlled spending in this environment, including a hiring freeze, and other actions.

Selling and admin expenses also reflect lower incentive compensation accruals. Our annual incentive compensation program is based on two equally weighted targets, sales growth and economic profit growth. Due to the impact of declining foreign currencies on our top line growth projections, we anticipate lower incentive compensation accruals for the fiscal year, which is reflected in our Q2 results, and our financial outlook for the full fiscal year.

Importantly we are continuing to strongly support our brands. Despite the cost pressures, we are maintaining our healthy levels of brand building support, and are absolutely committed to doing so. Our cash flow from operations for the quarter was $98 million, compared with $148 million in the year-ago quarter. Operating cash flow was down primarily due to the timing of tax and interest payments. We continue to use cash on hand and free cash flow to pay down debt during the quarter, and at December 31 our debt to EBITDA ratio was 3.1:1.

We updated our fiscal year 2009 outlook in today's press release. We are maintaining our diluted EPS outlook range for the fiscal year, but lowering our sales growth outlook range. We now project sales growth for the fiscal year in the range of 3 to 5%. This reflects the full year impact of retailer inventory reductions, the effect of the weakening economic environment on consumers, and our updated view of foreign currencies and international sales growth. The 3 to 5% sales growth range is consistent with our long range sales growth target.

Our second half and full year gross margins, will benefit from significant price declines in some of our key commodities, especially resin. We now anticipate full year commodity and diesel cost increases of about 140 to $150 million, versus our previous outlook of about 150 to $170 million. Since we have already incurred about $117 million of commodity and diesel cost increases during the first half of the fiscal year, the remaining impact from cost increases in the back half will be substantially lower.

Additionally, we now anticipate slightly higher cost savings of 105 to $110 million. With lower commodity cost increases, higher cost savings, lower incentive compensation accruals, and the benefit from price increases, the vast majority of which are anticipated to stick, we now anticipate about 50 to 100 basis points of gross margin expansion for the full fiscal year. Despite our slightly lower top line projections, we are maintaining our diluted EPS outlook range at $3.60 to $3.75.

We are maintaining our range, even though we now plan to take higher restructuring charges this fiscal year. Previously, we were planning to take about 20 million to $25 million of restructuring charges in the current fiscal year, primarily related to our manufacturing consolidation. We are now anticipating about 35 million to $37 million of total restructuring charges for the fiscal year. This range includes about 15 million to $17 million of incremental charges, primarily for severance costs, resulting from the operating model changes Don discussed earlier.

We estimate operating model savings of about 3 to $4 million in fiscal year 2009, which will be incremental to the 105 million to $110 million in savings we are already projecting. We anticipate about 8 million to $10 million of incremental operating model related charges in fiscal year 2010. We normally plan for about 20 million to $30 million in annual charges for restructuring actions. For fiscal year 2010, we anticipate the 20 million to $30 million annual restructuring budget will absorb the additional operating model charges. We estimate additional operating model savings of about 25 million to $30 million in fiscal 2010.

The fiscal 2010 operating model savings will be incremental to the preliminary 80 million to $90 million in cost savings we are projecting for fiscal year 2010. As Don said, we have leveraged attrition to minimize the impact of these changes on Clorox people. Affecting even one person during times like these makes a decision like this extremely difficult, but we must ensure the Company remains competitive, during these extreme economic conditions. The changes will give us a more balanced and nimble operating model, while enhancing our competitiveness.

Due to the incremental restructuring charges and revised pension funding estimates, we now anticipate that free cash flow for fiscal year 2009, will be in the range of 9 to 10% of sales. While current pension funding rules do not require us to make a cash contribution to the pension plan this fiscal year, we are planning a voluntary cash contribution of about 20 million to $25 million in our fiscal fourth quarter. To help fund this investment we are also trimming our fiscal year 2009 capital spending down to about $185 million, continuing our hiring freeze, and trimming other areas of spending. We will continue to use free cash flow to support our dividend and pay down debt, and project that the Company will be at or below 3.0:1 debt to EBITDA by the end of the current fiscal year.

Before we open up for your questions I would like to provide you with some preliminary thoughts as you think about our fiscal year 2010 which will begin in July. We will provide our initial financial outlook for fiscal year 2010 on our third quarter earnings call in May.

On the positive side, the Company is expected to benefit from substantially lower commodity and diesel costs. Anticipated cost savings will remain strong, and the Company will benefit from incremental cost savings, due to the operating model changes being announced today. Incremental restructuring charges should return to our normal budgeting range of 20 million to $30 million, including the additional charges from the operating model.

We anticipate the vast majority of the recent price increases will stick, providing some continuing pricing benefits into fiscal 2010. The near term impact from pricing on volume should subside with a return to volume growth in fiscal 2010. We have now fully anniversaried the Burt's Bees acquisition, and the volume, sales, and profits from this business will be in our base growth. As we continue to pay down debt, our interest expense should decline further.

Four areas will partially moderate the positive earnings momentum from above. Based on today's currency exchange rates, the Company will continue to be impacted by lower foreign currencies, until we anniversary the current low levels in the first half of fiscal year 2010. We anticipate further slowing in category growth rates in our international markets.

While fiscal year 2009 results will reflect lower incentive compensation accruals, we would anticipate a return to more normal levels of annual incentive compensation in fiscal year '10. We are also likely to see higher pension expense next fiscal year. Due to declining pension asset values over the last several quarters, we are preliminarily estimating a 15 million to $20 million increase in fiscal year 2010 pension expense. We also anticipate funding an additional 25 million to $35 million into the pension fund next fiscal year.

While the current turmoil many in the global markets makes forecasting a challenge, we are cautiously optimistic about fiscal 2010, and again we will provide our initial fiscal 2010 financial outlook in May.

In closing, I would like to leave you with three key messages. First, this past quarter was a pretty wild ride, but under the circumstances we are pleased with our results. Second, we are lowering our sales growth outlook for the fiscal year, but believe we have taken the appropriate actions to achieve our existing EPS outlook. Finally, we are taking the right actions to maintain the strength of our brands, drive our Centennial Strategies, strengthen our balance sheet, maintain the financial health of the business, and emerge from this downturn even stronger.

We will now open it up for your questions.

Thank you. (Operator Instructions). Our first question comes from Chris Ferrara at Banc of America Merrill Lynch.

Hey, guys.

Good morning, Chris.

Just wanted to ask about the top line guidance. So you are saying 3 to 5 for this current year. You only lowered it by about a point. It seems like inventory destocking is close to that amount anyway. You are saying international, well some categories internationally could actually swing negative.

So I guess why are you still going to be able to do a plus 3 to 5 this year? Why wouldn't that guidance prove to be too high, as we go through a tougher economic environment?

Chris, I would say the top line outlook that we have factors in our current views on all of those impacts. The slowing in international, the impact of currencies, and certainly the inventory reductions that we have seen in the first half of the year, and probably some additional that we will see, although fairly modest, in the third quarter. Based on what we have delivered in the first half of the year, and our outlook for the back half, we feel reasonably good with the 3 to 5% outlook.

The only thing I would add, Chris, when you look at the first half of the year, we are a little bit north of 7% sales growth already in the bank. Then when you look at how we paced innovation out, the innovation comes in two ways. In the first quarter of the fiscal, and the third quarter of the fiscal. So we have got our new wave of innovation hitting the marketplace now as well. So we feel pretty good about what is coming down the pike.

Got it. Thanks. And I guess on SG&A also, how much of the change in incentive comp was,how big a piece of the SG&A improvement was that, I guess and is that sort of a one-time adjustment to an accrual, or is that something that we would expect to be ongoing over time?

If you are talking specific to second quarter SG&A, we had two primary drivers in the change in SG&A. First of all, we still had incremental SG&A coming in from Burt's Bees, and that was probably 6 million to $7 million in the quarter. And then the incentive compensation adjustment that we talked about is about $7 million for the quarter. So we will have lower incentive accruals in the back half of the year, and as a reminder, we pay those out generally in the September/October timeframe, so these represent accrual adjustments in the quarter, and then we will pay out in the September/October timeframe.

Great. And then just finally, I guess, on the bleach business, can you talk about what the bleach volume declines were in the quarter, I guess if you didn't already and if you did I missed it I guess, and can you also elaborate on what you are seeing that gets you excited about the new campaign? I guess it rolled out in September, so presumably you have seen some data look a little bit better? Is that right on a category basis?

So volume was soft as was share. Overall we see this as more of a category issue than a competitive issue, although private label has picked up a bit of share in the category. We feel very good about what I would say really two new advertising messages we have out there. One is this idea that detergent alone is not enough, and that you need the power of a Clorox bleach, whether that be Clorox Liquid Bleach or Clorox 2.

And the second one which is more recent, is this versatility message which is using bleach for non-laundry uses. As you know bleach is a terrific product, a very good value, and does lots of great things, from killing germs, to removing stains in sinks and toilet bowls. We think it is absolute appropriate message for this kind of economy. The versatility advertising has been on the air a short time. But we are seeing some very positive results. We saw very positive results in the testing of the ad, and we are starting to see some very positive results in the marketplace as well.

So we are optimistic that we will begin to turn the bleach business in the second half. Clorox 2 shipments are doing well. We still have a share issue, although Clorox 2 has a lot of volume in the untracked universe. But we did see a double-digit gain in shipments on the Clorox 2 business behind our 2X conversion.

Thanks a lot, that is really helpful.

Next we will move to Ali Dibadj at Sanford Bernstein.

I wanted to deep dive a little bit, in terms of volumes, purely in North America. It looks like including Green Works it is probably down about 5%, excluding Green Works probably down about 6% or so. How much of that if you could disaggregate it, is destocking, is the price elasticity that you mentioned, or is just the general consumer malaise, let's call it for the time being?

Obviously hard to dissect this precisely, but I will talk to destocking. What we have done is looked at the sales growth as projected by IRI in the 40% where they track, and compared that to our shipments in those same channels, and there is a significant difference, and quite frankly most of it fell in November, where we kind of hit a wall. So our best guess is that overall we saw probably about a point of growth lost in the quarter, as a result of inventory destocking.

Total Company.

Total Company.

Okay. So then the rest is some combination of price elasticity, and just consumer trading down, or what have you?

Yes.

And then I guess as you look at that piece, the volume piece, and then you skip over to pricing a little bit, clearly this was the biggest benefit that you had on your top line, certainly on your gross margin, 350 basis points, so more than it has been before. That is all in an environment where many of the commodities, again, I want to be mindful of your comment, don't paint everything with one brush, but many of your commodities are rolling over. Clearly resins are, certainly some of the Clorox wipe products are not yet. What would it have to take for you to start having to give back in other categories? What would have to take, in terms of commodity costs for the retailers to start saying, you know what, guys, let's start giving a little bit back to our consumer here?

It has obviously been impossible for us to predict commodities, particularly resin. But generally speaking, the cost structure of most of our product lines are such that the raw materials are not as huge as they are in the Glad business. Glad is unusual in both the fact that commodities are such a large part of the cost structure, and are so volatile, we don't typically see that as much in our other categories.

Having said that, we are living in a very unpredictable world, and never say never. I would tell you that in many cases, we are catching up to margin declines we have experienced over the last several years. We are very open and transparent with our customers about the cost of commodities, and the impact on our various businesses. We obviously have gotten questions.

We have a very data driven story around each of our categories, and what is going on, and as I said and as you noted, categories do behave differently. We do see some commodity pressure in some select categories, while many others are going the other way. So we feel pretty good at this point that we think our current pricing will hold up. As we did say, we took resin, or we took Glad down because of resin, because of the sharp decline in resin, and that is a category we will continue to watch.

There were some planned price increases in the second half that we have cancelled. Those were price increases that never went out there into the marketplace, just in our forecast plans but we pulled back on those, and we are generally feeling pretty comfortable. So I would say we would have to see a pretty dramatic change in commodities outside of Glad, and probably a fairly monstrous change for us to change our pricing practices at this point.

The only thing I would add to that is regardless of where commodities are, the other thing we are doing, given the environment and the focus around price/value, obviously with consumers as well as our retail partners, is we have a good understanding from our model what our price gaps, from an absolute price point and price gap standpoint need to be versus our key competitors, whether private label or other branded competitors. we are really looking hard at those gaps and absolute price points, as we go into the second half of the year, and orienting our merchandising program around that price value equation. So despite where, or regardless of where commodities go, we are being very mindful of that equation.

I guess just to give us a sense of what percentage of Glad's costs for example are resins, versus bleach?

I don't think we want to share that specific information. But --

2X, is it? I mean 2X one versus the other, just to give us a sense? You did mention that it is a much bigger piece of the Glad business than the bleach business, for example?

I think if you think about the makeup of the products, Glad is essentially from a broad packaging trail cost, going to be resin, and the liner board or cardboard for the packaging. Bleach obviously you have got the bottle, but you have also the costs associated with Clorox whitener as well, which are pretty substantial. Again without being too specific, the resin component on Glad is going to be a bit higher.

That is what I am heading toward. On resins we know prices have come down. Big piece of Glad, you have taken down the pricing. Caustic, soda ash, prices were still up year on year. If those were to come down, trying to get a sense of those prices might have to come down as well. Absolutely the commodities are not reacting the same way across the different businesses. But wouldn't that have to happen as well?

I would just remind everybody that we did not price anywhere near the peak of any of these commodities, including and especially resin. We are really thrilled that we have seen these prices come down, and candidly we are hoping they continue to come down. The reality is is even though we have seen some pretty substantial drops in these, you are still not down at the the level in many of our categories where we have priced to.

So certainly we could have a hypothesis that if you see further major declines in resin and other commodities, that we would need to look at our pricing structure, but we feel pretty good about where we are today. We have lost a lot of margin over the last two to three years and again, as we monitor price gaps, as we monitor competitors, and as we monitor what the consumer is doing, all of those factors are going to go into our pricing equation.

And that is how we manage it. We have to manage the total picture. As it stands right now, we anticipate most of our pricing is going to stick, and we will see where commodities go, and these other factors go over time.

And in the short-term, we will manage that much more I think effectively with temporary fund increases and price rollbacks on list.

Okay. Thanks for the clarity, guys.

Okay.

We will go next to Nik Modi at UBS.

Good morning, guys.

Good morning, Nik.

Couple questions. First, have you noticed any dislocation within the competitive environment given the current macroeconomic environment, the credit environment, meaning some of your smaller competitors, you are seeing any of those folks struggling?

The second question is on the private label side, do you envision some of your key private label competitors dropping pricing, as they probably buy more on the spot market in some of your categories, and the third question, is just some perspective on the buyback program, just curious how you are thinking about that?

Unfortunately, we don't know of any competitors that have gone out of business. I will say that as retailers are pressured on the cost side and the balance sheet side, and look at inventories, they continue to focus on assortment, and we are quite frankly happy to partner with them on assortment, because generally that means that the #1 and strong #2 brands stay on the shelf, and some of the smaller brands drop off the shelf.

But thus far we haven't seen anybody go out of business. In terms of private label, we have not seen any private label reduction on the part of our competitive set, outside of Glad as yet. In bleach, private label folks have followed us, basically followed our August pricing, we have actually seen that tick up in the course of the Q2 quarter. Haven't seen any activity in charcoal, and don't expect any.

And Nik, on your question on buybacks, as you know, we have been using our free cash flow to support the dividend and to pay down debt, and the focus remains, at least for the balance of calendar year 2009, to use our free cash flow to again for dividends and paying down debt. So we are not currently buying back any stock. If you do recall though, about a year ago we did an accelerated share repurchase, which really represented about 1.5 years of normal stock buybacks. So we front ended that about a year, a little over a year ago.

Much appreciated. Thanks, guys.

Next we will go to Bill Schmitz at Deutsche Bank.

Good morning, guys.

Hello, Bill.

Could we just get a better sense for sort of the fixed overhead component of the cost structure? As volume declines what is the magnitude percentage-wise of fixed versus variable costs?

I don't have those specifics. It does vary quite a bit by business. But what I would say is even though we have seen a little bit of softness in volume, it is more on the margin and any absorption issues, or things like that, there could be some of it, but it would be relatively modest, and I don't think it is going to be a significant driver one way or the other.

If you look at the scanned versus reported numbers, you look at categories like charcoal in scan channels, your shares are down 2.5 points, even in wipes it was down pretty considerably. Were there any big one-off Costco or club promotions, or anything like that in the quarter?

I think as I said in my remarks, we are definitely seeing a difference in the tracked channel growth versus the untracked channel growth, something like a 6 point swing in the growth rates between those channels. Tracked channels account for about 40% roughly of the total portfolio. These are obviously all US numbers. And I always have trouble reconciling what is in the analyst reports versus what we have. I think you said wipes was declining in share, we are not seeing that decline. I think you mentioned one other one.

Charcoal.

I am not seeing it on charcoal. Our FDKT shares, we are seeing share growth.

We should call IRI and ask them what the real numbers are.

We are not seeing what you are seeing.

But there were no one-off sort of promotions, or big merchandising events at club in the quarter?

Nothing unusual. We are seeing a general pull toward value channel kinds of customers, Wal-Marts and the dollars, that is reflected in the untracked versus tracked. There is always ongoing merchandising in one channel versus another in the brands. Overall I would say there is not a material big change across the portfolio that would have changed our shares.

Okay. Great. Thanks. Just one more, if I can. On the working capital front, I mean, if my math is right aren't you at 3 times debt to EBITDA right now? So is it not going to go down from here? Is there something that is going to happen with working capital, that is going to somehow not have you generate cash to pay down more debt?

We are sitting at the end of December, we are at 3.1 debt to EBITDA, and we certainly project by the end of the fiscal we will be below 3.0, so we do anticipate further debt paydown over the course of the next six months. We feel pretty good about that.

On working capital, what I would tell you on working capital is it is a bit high right now, it is about 3% of sales as we define it. I think there are a couple of dynamics in there, that should start to change as we look out. First of all, obviously the input costs are going down, and we have had a lot of those costs sitting in inventory so as that cycles through, we should see lower value sitting in inventory.

We also had obviously we now have anniversaried Burt's Bees, which did add to our receivables, so that will start to even out here as we go forward. So we feel okay about working capital. I think there are some improvements we can make, and we feel okay about our cash flow over the balance of the year, and we should be below 3.0, and it just depends on other factors, on how far below we are.

On the inventory front was there any prebuying ahead of the price increases? I know there was some destocking also. Will there be any sort of negative manufacturing variances at least in the March quarter because of the restocking, and maybe some pre-buy ahead of the price increases?

No, again, there is going to be very little impact from that.

Okay.

Price increases were largely in August.

It has cycled through now.

Okay. Great, thanks so much.

Bill, just to be specific on the share issues, you can follow up with Steve on this, we show in our data that our Kingsford share was up 1.6 share points in FDKT in the quarter ending December, and private label up 0.5 a share point.

Okay. I am looking at versus 2007. So I have you at 72.7 now, at the end of 2007 it was 74.4. So maybe it is just a time period difference.

We are saying versus year ago, so you can follow up with Steve on that.

We have the same numbers year-over-year. Okay. Thanks so much.

Next we will move to Joe Altobello with Oppenheimer.

Thanks, good morning guys. A few quick ones here. In terms of the inventory destock was that concentrated in any particular category, or channel I should say, whether it is grocery or mass, for example? Second, in terms of the overall level of competitive spend, obviously ad spend was down, but what does that look like above the line, in terms of the sales line, in terms of the overall level of competitive spend versus a year ago? And third, more of a modeling question for Dan, the restructuring costs in the back half of this year, is that more 3Q or 4Q weighted? Thanks.

I think I talked about we kind of hit a wall in November in terms of shipments, and it was across every single category. And I would say that based on was we know, and some of it is anecdotal, the destocking took place pretty much across the board.

We know some of our strategic customers were heavily engaged in destocking programs, but I think we definitely saw it in the grocery channel, and smaller customers. It was clearly pretty broad, and again it was very deep in November, and we kind of down bounced back to normal shipment levels in both December as well as January.

And let me take the next few questions. In terms of the demand building spending, no significant changes in the totals. On a dollar basis, we are about flat on advertising spend, and fairly consistent on trade and promotions. So no significant changes or deltas there.

On restructuring, let me give you a sense of that Q3/Q4. The existing manufacturing restructuring that has been under way for a while, will probably see about 5 million to $6 million of those costs coming through cost of goods sold in Q3. And another 5 million to $6 million coming through costs of goods sold in Q4. And of the 15 million to $17 million incremental charges associated with the operating model, probably see call it 13 million to $14 million of those in Q3, and call it 4 million to $5 million or so in Q4. The Q3 will mostly be on the restructuring line. Q4, some of that will be probably in costs of goods sold, with some in selling and admin. But roughly that should give you the parameters on how that is going to calendarize.

Got it, that is great. Thanks a lot.

Next we will go to Lauren Lieberman at Barclays Capital.

Thanks, good afternoon. Just questions actually on international, because your comments on both expecting the categories to slow and that you did in fact see it, and I know, I can't remember which one of you actually mentioned that, yes, the business was up this quarter, but you did see the slowing. So can you just help us understand sort of was it an end of the quarter slowing? Which markets? Which categories? And how to think about it as you are for the rest of the year?

I think generally the categories in our international markets have remained pretty healthy, although the level of growth has slowed versus what we have seen historically. I am not talking dollar sales which obviously are a little different versus volume. Seeing a bit more slowdown in volume, because the sales are reflective of pricing that has taken place in a lot of the markets.

So going forward we do think that categories may slow down as a result of the global depression. And that there is potential for even seeing some category declines in some of our countries.

So is it best to think about it then, that the pricing you have taken, though, which I am assuming is to offset some of the--

lousy costs, yes.

Right. That the pricing sticks, so really as we think about it just to focus more on seeing the slowdown via volume?

Yes, I think this is more of an economically driven kind of slowdown than a pricing kind of issue, and obviously you have the FX thing, so we actually have pretty strong double-digit sales growth, if you looked at local currencies, but when they get translated back it is about flat.

I would say, Lauren, just to add to that, that the trend in the quarter was not unlike the US where we saw November very slow, and then December sales were stronger, much stronger than November again. So as Larry said, in local currencies, we felt pretty good about it, but the pattern wasn't very different from the US, in terms of November down, December back more solid.

Okay. Questions on Burt's Bees, you said still growth but slower rate of growth, and I wanted to know, in your forecasts are you assuming that growth potentially goes negative in that business? It would be consistent with what we are seeing from other personal care competitors, and given the breadth of the distribution build-out you have had, I would think that should be part of the thought process?

I think we are definitely not saying negative growth for Burt's. The consumption in the quarter was very, very strong. So we are continuing on a very strong growth trajectory in natural personal care. Our sales were not as strong as our consumption, and that was clearly due to some inventory destocking, particularly in the drug channel. But we feel very positive about the consumption trends, and this is still a very good value equation to consumers, that are concerned about not just the environment but putting petrochemicals on their bodies.

And this is a business that over the last couple, three years have enjoyed very strong north of 20% kind of growth rates. We certainly had very good growth rates since we have acquired the Company. Still positive growth in the quarter, and as we look at the back half of the year kind of full year, we are probably talking mid-to high single digit sales growth, and certainly as we look out into fiscal '10, we are certainly seeing a nice return to their sales growth trends, and the other thing to keep in mind, is we did have a lot if you think about Q3, we did have a lot of pipeline fill a year ago, as we launched into particularly Wal-Mart, so we will anniversary in the back half some of that pipeline fill.

The only other thing I would add to this, Lauren, is when we talked to all of you over a year ago when we bought this business, we talked a lot about the natural personal care category, which we said was in the $6 billion range, and we talked about roughly 8 to 10% growth in that natural personal care category. When your narrow the scope of that category into the segments that Burt's competes in, we are still seeing, as Dan noted, growth in those segments consumption-wise in the high teens to low 20s. We certainly don't see negative growth going forward.

Okay. Great. Just a reminder, I am sorry, last thing, have you brought Burt's Bees, have you done much with it internationally yet to broaden that? I am not including Canada, I am sorry, or is that part of the plan for the second half?

Absolutely. Part of the distribution build is in fact in our international businesses, and we continue to add countries there. We are in Taiwan, we are in Australia, and there are selected other countries that we will be launching into in the second half of this year, and into fiscal 2010, so adding those distribution points in those countries is certainly part of the game plan for Burt's.

Okay, thanks so much.

Next we will go to Connie Maneaty at BMO Capital.

Good morning. It seems to me that there was a reversal of something for Burt's Bees in the gross profit line, because the gross margin X charges of 39.4, is lower than the gross margin with charges of 40%. What was going on there?

I am not aware of much going on with Burt's. The only change in Burt's is we have a step-up in the inventory level in the year-ago quarter, which was about, Connie, I want to say like a $5 million write-up in inventory. As you know when you acquire a Company you have to write up the inventory to fair value, so when you sell those units they come across with very little margin. We didn't repeat that obviously.

We have some benefit margin this quarter versus year-ago, because we didn't have the step-up, and I think there's another 14 million to $15 million of that step-up that was in the year-ago third quarter, that will benefit our upcoming Q3. Is that what you are referring to?

Maybe we have made a mistake on our modeling, but it seems as though the gross margin excluding charges ought to be higher than the gross margin with charges, and it is coming out the other way? Is there something else going on?

If it is specific to Burt's, as far as I know their gross margin is pretty much consistent with where it has been, excluding the step-up in inventory. We can follow up with Steve afterwards, and see if we can work it out.

That would be fine. That is all I had. Thanks.

Okay.

We will go next to Alice Longley of Buckingham Research.

I really just have a clarification. When you said Burt's Bees sales in the second half would be up mid-to high single digits, is that the shipments or sales at retail?

Those are dollar sales.

Our dollar sales.

Our dollar sales.

Your shipments okay. And that is just the US, that is not including shipments overseas.

That would be total for Burt's.

So in the US, maybe your shipments are growing low-single digits in the second half?

I wouldn't say that, Alice. Because the US is still about 88 to 90%.

It is the vast majority of their sales.

Okay.

And again, just to be clear, that is our sales, not retail dollars.

Right. And retail dollars you think are growing faster than that, right?

Absolutely.

Okay. And then a question on your categories at retail, just doing the math, putting together tracked and untracked channels, and you said there was a 6 point differential. That it looks to me like your categories were up about 2.5% at retail, all-in in the quarter. Rather than that down 1% you said for the tracked channel? Is that true? How much of that would be pricing, so we can back out how much your categories were up or down in volume in the quarter at retail?

So again, because the untracked is untracked, we don't really have a good category read. My best guess is the categories are flattish in terms of retail dollar sales, and my best guess is there are 2 to 3 points in pricing captured in most of the categories. That would be pricing by us and pricing by others. I don't have that complete picture for the quarter.

So the point is, I guess, in terms of consumer consumption or purchasing, consumer purchasing for your categories down 2 to 3% in unit terms?

I think there definitely is some volume loss. Obviously attributable to the economy, probably attributable in some categories to pricing, but dollar sales I would call about flat for our categories across all outlets.

Perfect. Thank you.

We will go next to Alec Patterson at RCM.

Yes, good morning.

Good morning.

Just curious on the foreign exchange, can you give a breakdown the impact on North America versus international?

Let's see. I don't know, Alec, if I have that. What I can tell you is Canada would be in the North American results, and then the rest of it obviously would be in the international categories. Steve, do you have those numbers?

Yes, Alec. Foreign currency hurt us by just under 300 basis points on the sales line. As was said earlier in our comments, it was about an 11 point drag on international, and about a 100 basis point drag for North America.

I am sorry. I missed that. Thank you. And just the total debt levels were down a bit, I think cash was also down a bit. Dan, interest expense was up. Most other companies I have seen have benefited from a lower interest rate environment. Is there something going on there I am missing on why your interest expense ticked up?

No, I mean, there wasn't a large change in our debt balances over the quarter. What we did have is as you recall, back in the September through November timeframe, with the disruption in the CP markets, there were and LIBOR, there were some spikes in interest rates.

That impact for us for a period of time almost doubled our CP rates for about a, call it an 8 to 10 week period, from high 2.5 to 3s, into at its peak over 6. So we did suffer some higher interest costs, and that is probably in the 3 million to $4 million range for us. But we are back to historical issuance levels today, and we are using as much of our cash on hand, obviously, to pay down debt.

Okay, so going forward it is more of a $40 million run rate per quarter, something like that?

Well, again, as our debt to EBITDA goes down, our interest is going to go down as well.

Okay. Okay. And then lastly, just there has been a lot of talk about the destocking going on by the consumer and the retailer for their balance sheets, et cetera, and not much mentioned about what vendors such as yourselves may be doing in that regard, and I am just wondering if there was a comment along the lines of what you are doing to so-to-speak destock, and how that is working out with your vendors?

Our inventory levels on a unit basis are fairly consistent. We run pretty short cycles on our inventory. You take bleach which is relatively short, and our other categories, are 10 days to two weeks. The inventory turns on them are pretty quick, so I think on a unit basis we are not materially different. We obviously work in each business unit to manage our working capital. Most of the pressure on working capital has been the dollar cost per input, not inventory levels. So we manage it fairly tightly, and we haven't seen a need where we need to really pull back on that.

Okay. So that would be a no. Okay. Thank you.

Okay.

We will move next to Doug Lane with Jefferies.

Hi, good morning, everybody.

Good morning.

Just a couple quick questions. You mentioned a couple times the gap between measured and non-measured channels. Can you give us sort of a trend there? Has that been widening or staying the same, or narrowing over the last 6 to 12 months? Could you just give us an update now that we have anniversaried the Burt's Bees acquisition, what your attitude is on M&A these days?

Let me handle the tracked versus untracked, if you went back two or three years ago, you would have seen pretty healthy double-digit differences between 10 and 15 points in each quarter, where the tracked channels were growing much less than the untracked channels. It has narrowed over the last year or so, more in the mid-single digit range typically in any given quarter, sometimes as near as a couple of points.

On the M&A front, again, our focus near term is on the paydown of our debt. So while we always look at things, no real appetite right now to do anything near term. We will continue to look. If we do anything it would be on a very small basis, at least for the next year to 18 months.

So it sounds like that approach is more internal than external? At what sort of internal leverage ratios, or whatever you want to use as a metric, would you then be more interested or more aggressive in looking at acquisitions?

We have said we are trying to target to be in the 2.5 to 3 times debt to EBITDA. We will obviously be below the 3 by the end of June. But we would like to live inside that 2.5 to 3 even with acquisitions. So whatever we would do, we would try to fit inside that type of leverage structure. So that obviously would limit the size of what we would look at, or what we would do.

Okay. I got it. Thank you.

We will go next to Wendy Nicholson of Citi Investment Research.

A quick follow-up from other questions. First, on Burt's Bees, can you kind of articulate, I know distribution expansion has been a huge part of the story so far, but kind of what inning are you in as you think about the US marketplace? Are you in the seventh inning, eighth inning, in terms of total distribution you hope to get for that business?

I would say we are probably in the sixth or seventh inning. As we look at the growth on this business, including the international growth, we still think 50% of the growth over the next couple of years could come from expanding distribution, probably about 30% from new innovation, and then about 20% from continued growth in the base business.

Given sort of apart from the destocking that you have seen, just given the economic environment, has the pace of the expansion, or the interest on the part of the retailers accepting more, or the product at all changed at all? Has the timing of new distribution been pushed out at all?

I met with a number of retailers at FMI Midwinter just a couple of weeks ago, and I would say the appetite for this category is as strong as ever, not only because of the growth rate in the category, particularly the segment that Burt is in, but also the margin structure of the business. This is a 50 margin to retailers. So they really like this category, and like the growth prospects, so I didn't hear any of that when I talked to them recently.

Okay. And then two more questions. Just quick ones. On the private label manufacturing that you have been doing on the Glad business, does the fact that private label has actually been gaining market share, change your view at all in terms of your exiting of the private label business or say, oh, gosh let's slow that down and continue to absorb some overhead capacity by doing more private label? Can you comment on Latin America, how much pricing you have taken to offset the devaluation? Has there been a lag, or are you actively raising prices?

The answer on the private label business is pretty easy. The answer is no. That is not a business that we think we can do well in, and we are very happy with the choice that we made some time back to get out of the business.

There was some volume in Q2, but essentially as of January 1st we are out of the business, obviously will be indexing off of volume on the base, but we will be out of the business essentially effective the start of this calendar year.

And on international pricing, we have been increasing our prices to, we have been consistently over time to help offset the commodity cost pressure that we have seen, and we are looking at what we can do on pricing, to help moderate some of the devaluation, but that is going to be a local market call on how much we can do in each market.

And you haven't taken that yet?

Our pricing impact I believe in the second quarter international was about 9%. So we have been consistently taking a lot of pricing, and it would be more the going forward Wendy, that we would take a look at from the devaluation.

Got it. Thank you so much.

Okay.

Next we will move to Andrew Sawyer of Goldman Sachs.

Hey, guys.

Hello, Andrew.

There was a comment in your prepared remarks about moving back to more normalized margin levels, and I know if you look back four or five years prior to the commodity spike, you guys had gross margins into the mid-40s. Just give us some context about whether that is an achievable goal over a multi-year horizon, and what it might take to get back to that type of a level?

We certainly think those mid-40 levels may be a bit higher, certainly achievable over the next couple of years, particularly with the projections of where we think that commodity costs are going to go, the fact that we think a lot of pricing we have taken will in fact stick. Plus the changes in the mix in our business, when you look at the profitability of a Burt's Bees, you look at Green Works, our Brita business is doing really well, so the business mix certainly would indicate that we would add some margin there. So certainly mid-40s, and we would certainly be working to be even higher than that.

And I guess obviously people are worried about the potential for price givebacks that would keep you from getting there. Is there anything else on the horizon that would potentially hamper your ability to drive that kind of improvement?

I think the other big question is obviously on the commodity side, so we are feeling great about the direction of commodities right now, but obviously hard for us to predict the future.

Just to build on Dan's point, the innovation that we have got, and the mix of our business, continues to help us point in that direction to the mid-40s, or even higher. We feel pretty good about as we look out at the innovation pipeline over the next 18 to 36 months, that is where we are oriented to those higher margin items.

And then just one quick follow-up question. On the gross margin build this quarter, you had a 90 basis point other item. Is that the some giveback on the pricing on promotions?

No, it is just a lot of little small things, 10 to 15 basis points here and there, just sort of the collective all other that is in there. There is a little bit of I think for the quarter, we had a little bit of negative business mix, probably the biggest component that sits in there. But other than that, it is just a lot of little small details.

Okay. Thanks a lot, guys.

Okay.

We will go next to Linda Bolton-Weiser at Caris.

Thank you. You mentioned that your innovation is going to pick up in the second half. Did you mention the timing of launches without being specific, but is it more heavily weighted to the fourth fiscal quarter or third quarter? Can you comment on that?

We typically have a window in the first quarter and third quarter. I think we have already talked about the launches that we will have in the third quarter. The biggest ones would be the Green Works biodegradable wipes. We also have a new designer canister on our Clorox disinfecting wipes.

We have a new premium charcoal product called Kingsford Competition Briquettes. We have a new scent on our Glad OdorShield product, a lemon scent, which is terrific. We have a flavor on Hidden Valley Garden Vegetable, and few other items across our lines. Burt's has a large number of items.

Okay. And then did you say, can you make a comment in terms of how your inventory ended the quarter at retail? I mean was it still up, or was it actually down at retail, do you think?

Again hard for us to get a very specific answer, but I think our judgment is based on our shipment flow, that we took pretty much a significant one-time hit in November, and essentially that was more of a one-time hit. I am sure there are ongoing activities in inventory, but we didn't see a big impact in our shipment volume, and we were kind of at what I would call normalized shipment volume in December, as well as January. So at this point in time, we feel pretty good that this is more of a one-time adjustment.

It feels like it was taken down in the November timeframe, and our volume has then been consistent, so we would assume that those inventory levels, whatever they were adjusted to in November, have been fairly static.

Okay. And then just a question on the Color Safe bleach category. I moon, we saw a product t at Wal-Mart, maybe it is just a one-off type thing, but a Vivid Ultra that was on the shelf. It looks like Reckitt was the marketer of it, looked like it was about half the price of your color safe bleach. Is that just an anomaly or a mistake, or can you just comment on that competition?

Vivid has been around for 30 years. I don't know what the market share is, which is an indication of how much we worry about it. It is a pretty small little player. I can't tell you what the relative price point is at this point in time. I don't know if that is a mispricing situation or not.

It is a relatively small player in that color safe bleach category. We have a large share in that category. We feel good about our share position. Again, the focus in bleach land is more around, how do we drive category growth. And how do we convince people they need to add a bleach to their detergent, less around kind of share issues at this point.

Okay. Thank you very much.

Why don't we take one more question.

Actually at this time, we have no further questions.

Well thank you everyone for your interest in our business. And we will look forward to giving you an update, as Dan talked about, in the May quarter we will give you our initial outlook for FY 2010. Thanks for your interest in our Company. We look forward to talking to you in a few months.

That does conclude today's conference call. Again, thank you for your participation. You may now disconnect.