高樂氏 (CLX) 2009 Q4 法說會逐字稿

Good day, and welcome to today's Clorox fourth quarter and FY 2009 conference call. As a reminder, today's conference is being recorded. At this time, I would like to turn the conference over to your host, Mr. Steve Austenfeld. Please go ahead, sir.

Great. Thank you. Welcome, everyone, for joining Clorox's fourth quarter conference call. On the call with me today are Don Knauss, Clorox' Chairman and CEO; Larry Peiros, Executive Vice President and Chief Operating Officer of Clorox North America; and Dan Heinrich, our Chief Financial Officer.

We're broadcasting this call over the Internet and a replay of the call will be available for seven days at our Web site, thecloroxcompany.com. On today's call, Larry will start with comments on business unit performance as well as perspective on the current commodity and retail environment. Dan will then follow with a review of the quarter's financial performance as well as comment on our fiscal year 2010 outlook.

Finally, Don will close with perspective on our recently completed fiscal year 2009 as well as our plans for fiscal year 2010. After that we will open the call up 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 free cash flow, EBIT margin, debt to EBITDA, economic profit, and ROIC. 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, prepared remarks or supplemental information available in the Financial Results area of our Web site 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 Larry.

Thanks, Steve, and welcome to those of you on the call. As you saw in the press release we had a very good quarter and completed a very strong fiscal year. We delivered modest sales growth, returned our margin expansion, grew earnings and maintained investment in the long-term health of our brands. All in all, we are very pleased with our performance in this very tough economic climate.

I'm going to focus my comments on market share, volume and sales, and provide perspective on what drove our top line results. Starting with our categories, consumer consumption remains relatively stable despite the economic downturn. Versus a year ago, consumer take away in U.S.-tracked channels was up about 1.6% for the quarter, and .5% for the full year.

In fact, Q4 was the strongest quarter of the fiscal year for our categories in tracked channels and our sales growth in the untracked customer base continues to outpace sales in the tracked universe. In the eight categories we measure in the U.S., we grew or held share in five and lost share in three during the quarter. Our overall share was down slightly.

Share declines were primarily due to pricing actions we have taken and the growth in private-label shares given the economic environment. For the full fiscal year, we maintained overall Company market share on an all outlet basis despite price increases across nearly two-thirds of our portfolio, and the growth in private label.

Market share continues to be one of our top priorities and we plan to increase our investment in demand creation activities in fiscal 2010 to keep our brand strong. Volume was down about 2% for the quarter, and 1% for the fiscal year, in line with our forecast. Volume declines were primarily due to the impact of price increases and our exit from the private-label food bags business.

Sales for the quarter were stable, on top of very strong 11% sales growth in the year ago quarter. Base sales were up 3%, on top of 7% growth year ago. For the full fiscal year overall sales grew 3%, on top of 9% growth in fiscal 2008. As usual, results varied across our categories. Here are some highlights by business with the focus on Q4.

In our largest category, homecare, we grew share and maintained our number one overall share position. Homecare sales were up due to the very strong growth on Clorox disinfecting wipes and Green Works. Disinfecting wipes benefited from the H1N1 flu outbreak driving double-digit shipment growth. Green Works sales were up behind our expansion in dishwashing and cleaning wipes.

While growth in the natural cleaning category has slowed as we lap our initial launch, the category still grew 19% and our Green Works share for the quarter in tracked channels was up. We started shipping Green Works natural detergent and stain remover last month and we remain confident in our ability to establish a super-premium niche of natural detergents.

Turning to Brita, this brand continues to benefit from the sustainability megatrend and consumers' focus on value given the significant savings Brita provides versus bottled water. The brand delivered another quarter of strong volume and sales growth behind Earth Month merchandising support. We grew share across all segments and water filtration remains one of our fastest growing categories.

In food, we continue to win with our Ranch dressing in the salad dressing category. Despite a significant premium to the competition, Hidden Valley dressings again delivered strong volume and sales results and continued to grow share. Our brand strength is due to great tasting products and strong and effective advertising support.

On Burt's Bees, consumption was positive, but sales were down slightly reflecting the impact of inventory destocking and an extremely strong year ago quarter. While Burt's Bees has been more impacted by the current economic conditions we remain confident about the fundamentals of this business and the long-term prospects.

Natural personal care continues to grow faster than traditional personal care and Burt's Bees has a very loyal consumer following. We are laying a strong foundation for more robust growth as the economic conditions improve. We continue to expand distribution and we have a strong innovation pipeline. We anticipate solid sales growth in fiscal 2010 with most of it coming in the second half.

In charcoal, we delivered record shipments of Kingsford charcoal despite four consecutive years of price increases. We are gearing up for the January launch of our new Kingsford charcoal product innovation, an improved briquet that lights even more easily than the current product.

Glad remains our most dynamic business. In Q4, the top line was down due to the prior year exit of private-label food bags and the impact of two price rollbacks taken in the fiscal year to align our pricing with the decline in resin costs. Additionally, mix was unfavorable as consumption shifted from high value ForceFlex trash bags to lower cost regular trash bags.

We are continuing to invest heavily in Glad advertising including a strong new value-oriented message. This month we will begin shipping a new product innovation with an improved Glad ForceFlex trash bag that grips the top of the trash can and stays in place. This improvement is being offered to consumers without a price increase, a great example of how we are focused on giving consumers greater value.

In laundry, we are executing well and seeing positive momentum. Laundry sales increased in Q4 driven by more effective advertising and incremental merchandising events. Shipments of Clorox 2 were up substantially for the fourth consecutive quarter behind the new concentrated formula and the shift in positioning to stain fighter and color booster. Notably, the bleach category was up for the second consecutive quarter, the first time we have seen this since 2006.

Although Clorox' bleach shipments and share declined in the quarter we believe our marketing initiatives highlighting the benefits of using bleach for both laundry and non-laundry uses are starting to turn around the business. In international, volume is up 1%, with growth primarily driven by shipments of disinfecting products in Latin America in response to increased demand from the H1N1 flu outbreak. Sales were up about 1%, despite a negative impact of 12 percentage points due to unfavorable exchange rates.

Overall our categories in international markets are healthy. We held leadership positions in most categories, and continue to see strong share gains into [Limpido] cleaners across Latin America.

Now let me briefly touch on commodities and pricing. Despite a year-over-year benefit in commodity costs, we are starting to see cost pressures in a few areas. For example, prices for the waste wood uses of raw material In Kingsford charcoal are rising as less lumber is used for housing.

Other commodities seeing higher prices versus last year include pine oil, silicone and clay. Also resin prices have increased since the beginning of calendar year 2009. Given the situation, we do not foresee any price rollbacks across our portfolio at this time. In select categories we are maintaining competitiveness on shelf through incremental trade merchandising and are prepared to defend further as necessary.

There has also been a lot of questions recently about the efforts of retailers to simplify shelf assortment. We continue to believe that shelf simplification and SKU rationalization are likely to have an overall positive benefit for Clorox. More than 80% of our portfolio is made up of leading brands.

In our experience, when retailers make these kinds of changes they maintain the consumer preferred number one and strong number two brands. Those that are investing in advertising and innovation. Given the improved shopping experience at shelf simplification rates for consumers we view as a positive for our overall business and the categories in which we compete.

Wrapping up, we are pleased with our Q4 and full year results, especially given the economic environment and market volatility. Now I will turn it over to Dan to take you through the financial results.

Thank you, Larry. In May, 2008, we provided our initial financial outlook for fiscal year 2009. Our initial diluted EPS outlook range was $3.75 to $3.90. Shortly thereafter, we saw the price of oil increase to more than $147 per barrel, commodities and energy prices spike, financial markets seize up, foreign currencies collapse, and the start of one of the worst economic recessions in memory.

We saw fundamental consumer spending habits shift, retail customers under significant economic pressure, suppliers curtailing production or going out of business, and a surge in interest rates. Frankly, the outlook for the fiscal year was becoming extremely difficult. Given these conditions, we adapted our plans and tactics to address the rapidly changing environment.

In doing so, we remained focused on those things within our control, we created greater flexibility in our operations, we implemented mitigation plans to help offset significant cost pressures, and remained true to our strategic direction.

I'm particularly proud of the fact that we weathered through this period and still delivered incredibly strong earnings and cash flow in fiscal 2009, with diluted EPS solidly within the original $3.75 to $3.90 outlook range. While economic and financial conditions remain far from ideal, and significant volatility remains I believe Clorox is well positioned for fiscal 2010. I would like to highlight some of the key trends and themes we experienced in fiscal 2009.

First, we delivered strong results. We grew full fiscal year diluted EPS 18%, from $3.24 in 2008 to $3.81 in 2009. For the fourth quarter, we delivered diluted earnings per share of $1.20, a 6% increase from $1.13 diluted EPS in the year ago period.

Included in this quarter's EPS result is a $0.10 impact from foreign currency transaction losses and a $0.05 impact from restructuring related charges. Excluding the impacts of foreign exchange and restructuring in both years diluted EPS growth for the fourth quarter was even greater. On the top line, we delivered full year sales growth of more than 3%.

This result was on top of 9% sales growth in fiscal 2008. Fiscal 2009 was our eighth consecutive fiscal year of organic sales growth within or above our long-term annual target of 3% to 5% growth.

The second point is that we are back to growing our margins. Q4 was our second consecutive quarter of significant EBIT margin expansion, increasing to 19.7%. For the full fiscal year, EBIT margin increased to 17.8% and is our highest EBIT margin since fiscal year 2005. Disciplined spending, significant cost savings, positive business mix, the benefit of pricing, and reduced commodities cost pressure in the second half of the fiscal year drove this margin expansion.

Our fourth quarter gross margin increased about 370 basis points to 45.8% of sales compared with 42.1% in the year ago quarter, again, driven by the benefit of price increases, cost savings and lower commodity costs. For the first time in nine quarters, commodities costs were actually lower than the year ago period.

The third key trend I would like to highlight is that we are continuing to strongly invest in the business. We have increased our level of investment in the long-term health of our business. This includes investing in demand building, innovation and infrastructure. In fiscal 2009, we increased second half advertising spending.

For the fourth quarter, advertising spending was 9.9% of sales, at the upper end of our target range. We anticipate fiscal 2010 advertising spending will likely be at the higher end of our 9% to 10% of sales target range. We have a solid innovation plan for fiscal 2010. We are also making investments to drive future cost savings and efficiency and further develop our process and information systems capabilities.

Finally, I'm particularly pleased with our continued strong cash flow and progress in building long-term shareholder value. Q4 cash flow from operations increased 24% to $315 million compared with $254 million in the year ago quarter. Free cash flow for the quarter was $253 million or about 17% of sales compared with $187 million or about 13% of sales in the year ago period.

Cash flow from operations for fiscal year 2009 was $738 million, compared with $730 million a year ago. Our fourth quarter and full year cash flow from operations include the impact of a $30 million voluntary contribution to our pension plans. Free cash flow for the year was $541 million, within our target range.

For the fiscal year, we converted more than 100% of our after tax net earnings into free cash flow which is a very strong result. We used our free cash flow to pay down debt and increased our dividend. As announced in June, we have increased our annual dividend by 9%. Over the past two years we have increased our dividend by 25%.

Before I turn to our financial outlook, there are a few other fourth quarter and full year numbers worth mentioning. Restructuring related costs for the fourth quarter were $11 million which is pretty consistent with what we had estimated. Of the $11 million in total restructuring charges, about $6 million are reflected in gross margin, $4 million on the restructuring line, and about $1 million in other lines of the income statement.

Full year restructuring related charges came in at $39 million with $17 million of the charges reflected in gross margin, $20 million reflected on the restructuring line and about $2 million in other lines of the income statement. Interest expense for the fourth quarter and full year declined versus year ago as we continued to pay down debt. At June 30, 2009, our debt to EBITDA ratio was 2.7 to 1.

Other expense in the fourth quarter was $20 million compared with other income of $9 million in the year ago quarter or a net $29 million unfavorable swing. While this line item contains a number of smaller items, the largest impact in the quarter was due to net foreign currency transaction losses of about $21 million primarily related to Venezuela.

For the full fiscal year, net foreign currency transaction losses were approximately $28 million compared with a $2 million net loss in fiscal 2008. Our effective tax rate for the fourth quarter was about 35% compared with 34% in the year ago quarter. For the full fiscal year our effective tax rate was about 20 basis points higher than the prior year.

Our full year results reflect $118 million of cost savings in cost of goods sold well ahead of our annual targeted cost savings range of $90 million to $100 million. For the full fiscal year, commodity and energy related cost increases were about $110 million.

With that, I will turn to our fiscal year 2010 financial outlook which we confirmed in today's press release, and remains unchanged from what we discussed with the investment community during our May earnings call and our analyst day in June. It is worth reminding everyone about a few key points.

Our outlook assumes we will continue to be negatively impacted by weaker foreign currencies with more significant negative currency impacts in the first half of the fiscal year until we lap the currency declines of fiscal 2009. We will continue to closely monitor our market share and price gaps versus competition, and we will take appropriate actions as needed.

We anticipate an increase in fiscal 2010 trade merchandising spending to support new product launches and address any price gap issues that may arise. I would also like to provide some perspective on our fiscal 2010 commodities outlook. Our 2010 financial outlook assumes gradually rising oil and resin costs throughout the fiscal year. The recent run-up in oil and resin prices is greater than we'd previously forecasted for the first half of the fiscal year.

We have also seen the current market prices for a number of the commodities that we use such as charwood, silicone, clay, pine oil and others rising from the recent market lows, even more than we had previously forecasted. We continue to anticipate that commodity and energy costs will be very favorable for the fiscal year, but less so than previously forecasted for the first half of the fiscal year.

We previously projected a $90 million to $110 million net benefit from lower commodity costs in fiscal 2010. Give the recent run-up in prices we have seen, we may now see less benefit particularly in the first half of the year. Having said that, we are still maintaining our EPS outlook range for the fiscal year. If really significant run-ups in oil and resin prices occur, branded and private-label players will be under pressure to consider additional price increases.

On the other hand, some of the recent commodity cost increases we have seen should also relieve any remaining pressure for shelf price rollbacks. With that, let me recap our financial outlook for you. Again, this is unchanged from the outlook we provided in May and June. We still anticipate total company sales growth will be in the range of 1% to 2%.

Recall that in the first quarter, we will be comparing against 12% sales growth in the year ago quarter, and we anticipate a significant negative impact from foreign currencies. Based on our current view of commodities, we continue to anticipate the Company's gross margin will increase in the range of 50 to 100 basis points on top of the 180-basis-point improvement we achieved in fiscal 2009.

For fiscal 2010, we continue to anticipate about $20 million to $30 million in restructuring related charges. We estimate free cash flow will continue to be in our target range of 10% to 12% of sales. This estimate includes the impact of an additional pension plan contribution in the range of $25 million to $30 million that we anticipate making in the first half of fiscal 2010. Our priorities for using free cash flow continue to be supporting our dividend and paying down debt.

Our outlook does not currently assume any share buybacks in fiscal 2010. We still anticipate fiscal year 2010 earnings per diluted share in the range of $4 to $4.15. The fiscal 2010 EPS outlook range represents very solid growth on top of the strong double-digit growth we delivered for fiscal 2009.

Summing up, we had a very strong quarter and year. We are looking ahead to a fiscal year where we anticipate returning to volume growth, growing sales, increasing margins and growing EPS and cash flow in a difficult economic environment. While we are seeing some signs of an economic recovery may be on the horizon, we anticipate a slow recovery with only modest benefits in fiscal 2010.

Overall, we feel good about our plans and projections to deliver another solid year of financial performance. With that, let me turn it over to Don.

Thank you, Dan. Good afternoon, everybody. I feel very good about the results we delivered in FY 2009. We grew sales despite the difficult economy we have talked about and certainly some negative foreign currency impacts.

Contributing to that growth was nearly 3 points from innovation in fiscal year 2009. That exceeds our annual 2-point target we have often talked to you all about. We have a very solid new product pipeline for FY 2010 based on several planned new introductions that we covered at the analysts meeting, including Green Works natural laundry detergent that started shipping last month.

We significantly increased our percent of sales from products with 60/40 [blind winds] with consumers on the internal benchmarks to 44% of sales. That was versus our 35% that we achieved in fiscal year 2008. And according to the American Customer Satisfaction Index, Clorox remains the industry leader in consumer satisfaction for personal care and cleaning products.

We also maintained market share, as Larry noted, in an intensely competitive environment despite price increases across near two-thirds of our portfolio and some private-label growth due to the recession. As we've said before, we manage our business for the long term and we manage toward annual financial targets. We achieved the EPS target range we announced more than a year ago, in May 2008, despite the commodity costs increases, negative foreign currency impacts and the deep recession that Dan noted.

We feel we have executed very well against those factors that we can control. Let me take a moment to recap our annual performance against economic profits because it is the measure we believe most closely aligns with generating shareholder return and value creation. Economic profit for the year came in at $376 million compared with $363 million for the prior year. Now we delivered that increase despite the impacts of the commodity cost increases, negative foreign currencies and the remaining effect of the Burt's Bees acquisition.

As we discussed at our analyst day in June, I continue to feel very good about our approach to resource allocation based on economic profit. We are continuing to refine the portfolio by focusing on higher margin businesses behind the megatrends. Additionally, at 21.8% for FY 2009 our return on invested capital performance remains very high in our peer group, and our free cash flow remains strong in the range of 10% to 12% of net customer sales, as Dan noted.

Now our fiscal 2009 results demonstrate, I think, the fundamental soundness of our strategy which I believe has proven to be in right one in any economic environment. I also feel good about the plans we have in place for fiscal year 2010.

We are going to continue to focus on outstanding execution against our Centennial Strategy, staying focused on achieving 60/40 product wins with consumers against the internal benchmarks I had noted, we're continuing to capitalize on key consumer trends including health and wellness, sustainability and the ethnic shifts going on not only across this country but the developing world with a real emphasis on affordability and reinforcing the value of our products to consumers in the current economic environment.

We are continuing to work closely with our retail partners to provide services that they value that drive consumer benefits and build our categories. And with more than 80% of our portfolio now consisting of number one and number two brands, we believe we are very well positioned as retailers seek to simplify assortments across our categories.

Our cost savings pipeline, which has been one of our hallmarks, is certainly robust, and we remain committed to our long-term financial targets and will continue driving toward 20% or higher EBIT margins, double-digit annual economic profit growth, free cash flow in the range of 10% to 12% of sales and continuing to return cash to our shareholders.

So to reiterate, I think we really have the right strategy in place and feel very good about our plans for fiscal 2010. Thanks, again, for joining us today and with that, I'll ask the operator to open the lines up for your questions.

Thank you. (Operator Instructions). Our first question will come from Doug Lane with Jefferies and Company.

Hi. Good morning, everybody. I am curious about the impact to the wipes business from the H1N1 virus. How did that play out during the quarter and how do yo anticipate that playing out next fall and winter should that recommence here in the States?

We did see a pretty strong response on our wipes business during the quarter. We were up double digits just above -- between 10% and 15% in terms of shipment volume. Also saw a similar kind of response in the international markets, overall probably less than a point of growth on the quarter. But a pretty significant increase in those businesses. Obviously, we are preparing for the potential of H1N1 or other flus expanding during the traditional flu season. We are actually working very closely with our retail partners to try and take advantage of opportunities that may accrue to us. Obviously, that may benefit consumers as we go through another wave of H1N1 expansion.

Doug, if I can, just add a point to that. I think as we work with retailers on this issue, I think one of the things we are seeing is that retailers are starting to redefine health and wellness to a broader definition to include disinfecting and cleaning the home, not just nutrition, what goes in your body but what you're around. I think that's a significant trend that, obviously, plays to the strength of our portfolio.

Now, this is just response to consumers wanting, demand through your traditional outlets or is there a B-to-B opportunity with industrial or health care customers?

There is some institutional opportunity. I think most of the traditional health care folks already address these kinds of issues with disinfecting protocols. There is some opportunity in the kind of the [gen-sen] segment, which is just a smaller part of our business. But there was an uptick there as well. What we saw on the retail side.

I think we are seeing some increased heightened awareness, too, Doug, in places where people mass together like airports and other things where we are starting to see some opportunities for providing what I would call immediate consumption disinfecting products, if you will.

Okay. Thank you.

We will now hear from Bill Pecoriello with Consumer Edge Research.

Good morning, everybody.

Good morning, Bill.

You had mentioned that your overall category growth was improving nicely sequentially in the measured data and then even on an all-channel basis the bleach category turned up. How do you see that playing out as we're going through sequentially now? You have the tough lap in Q1.

Q2 you had talked about clearing some inventory off the shelf, and in front of that innovation. So will it be until Q3 when we start to see that volume turn positive? Because there's a number of underlying positive things happening here, but you have got some things going on with the laps and what you are doing with the timing of your innovation?

So I would hope we would see some volume growth in the first half of the year, obviously, it should be more robust in the second half of the year. We are now largely behind a lot of the pricing actions. So I would expect that our sales growth will be more in line with our volume growth, as it has been historically. Probably the one notable exception to that would be Glad where we have been taking down price and should see a bit of a mismatch there. But we do expect more volume growth, we expect expositive volume growth in fiscal 2010.

Great. And then I had a question on the foreign currency, the $21 million hit in the fourth quarter was a little bit higher than you had guided to. You mentioned it was mostly Venezuela. For 2010, that 2% top line hit, is that mostly Venezuela again and do you still see it being about a point drag in terms of quantifying how that translates into the profit side?

So the $21 million in the quarter was primarily related to Venezuela. It was somewhat higher. We thought we would see around $15 million, maybe $16 million. We incurred $21 million and most of that did come from Venezuela.

Our outlook for next year includes substantially less impact from transaction losses although we still anticipate we will see a little bit from Venezuela. On the top line, again, we are looking at about a two-point drag on the top line from currencies, mostly in the first half of the fiscal year, and that is a broader basket of currencies than just Venezuela.

We haven't anniversaried in currencies like the Canadian currency, Australia, New Zealand, Mexico, Argentina, some of the others. So, Bill, that's a broader basket but certainly there is some impact from Venezuela as well.

Okay. Thanks.

We will take our next question from Wendy Nicholson with Citi Investment Research.

Hi. My first question just to follow up, I think, on Bill's is the sequential growth or improvement in earnings as we go through the year. Can you give us a sense of direction first half versus second half, number one, how restructuring charges are going be weighted?

And then if there's anything else that, it sounds like second half is going to be much stronger than the first, but help us with an order of magnitude, please?

So on the restructuring side we will see more of our charges in the first half of the year than the second half. If you recall this year we took operating model charges in the second half. We we will not repeat those again next year. So most of what we will see are, a large percentage of it will be in the first half of the year.

In terms of overall earnings growth, you still think for both the first and the second quarter earnings growth is going to be positive year-over-year?

Yes. We would anticipate that. Again it is relatively modest in the first half of the year given that we still have to anniversary some pretty strong top line growth numbers. We will see some nice margin expansion in the first half of the year, probably see more margin expansion in the first half than we will in the second half although we're expecting second half still to be positive expansion.

And again I will remind everybody that in the pattern of our earnings as we said at our analyst day we generally see about 40% of our EPS in the first half of the fiscal and about 60% in the second half given the seasonality that we have.

Okay. And then my last question is on your advertising spending, and I think the investment community usually prefers it when advertising spending goes up and it looks like you are reinvesting in the portfolio.

But in a funny sort of way because advertising rates have come down so much and because it sounds like you have got a relatively robust new product pipeline to come but a little less than the June quarter than we just saw, I'm almost surprised you spent as much on advertising as you did and I wonder if in this environment more promotional spending wouldn't have made more sense.

Can you kind of help me understand how you choose whether it is promotional spending or advertising spending and whether you feel like you have got the right balance right now?

This is absolutely not a perfect science particularly by quarter, but we do think that 9% to 10% target range is about the right kind of range. I think for the year we have had some quarters where we are in the low end of that and I think we feel good about being in the higher end of that.

The fact is we are getting a little bit more efficient given the current media marketplace and we are essentially using that to get more impressions, more advertising out there and we think that's a good thing. I will say that there was also a tick up on the trade spending this quarter and that was essentially to address some pricing issues on a couple of brands where it didn't make sense to take a price rollback but there was some competitive activity that necessitated that we do some things on the trade spending side.

So, in terms of demand building there was a, I won't call it a substantial increase, but an increase in demand building activity on both the trade line as well as the advertising line.

Okay. Fair enough. Thank you.

Our next question comes from Chris Ferrara with Banc of America-Merrill Lynch.

I think, Larry, maybe you said that the impact of the flu virus is maybe all together was a little less than one point of sales, and can you talk a little bit about what the impact of the seasonal businesses were? I am not sure from your perspective how weather played out, but can you talk about those businesses overall and what you think the impact of weather might have been year-on-year?

We didn't see any negative impact from weather, at least one analyst reported about weather and that was news to us. We had a good quarter on charcoal. We actually had record volume on charcoal. Overall, the volume was kind of flattish but the sales were up in our pricing. We were up despite pricing and not a lot of negative impact from weather.

Great, that helps. You just cited a couple of some defensive maneuvers with respect to trade trouble. I know on analysts' day when you talked about promo you guys said an extra point of sales because things come up. There could be places where you need to get a little bit more competitive and it sounds like you did see that in the quarter.

Is the overall outlook on where that might look, not withstanding your comment on, on raw materials maybe running higher. Are you thinking a little bit more like you may see more need for defensive maneuvers than you did maybe a couple of months ago?

So, I think we have talked about the fact that trade spending should be up in fiscal 2010 and one of the key drivers of that is not around kind of pricing competitiveness, it is around some hard conversions. So there's also some reduced revenue associated with hard conversions, we have three planned for the year. Overall there may be a bit of a tick up in terms of pricing issues that we need to address, but I wouldn't call it dramatic on the year.

Chris, we will see more of that in the first half of the year versus the second half of the year particularly as we're going through the hard conversions.

Great. I'm sorry to get back to this sort of question again. I am trying to understand the underlying.

If you look at the $0.20 incremental in FX transaction exposure, you guys had talked about this year, and that substantially going away next year, if you take that out of next year it looks your fiscal 2010 EPS guidance is more like 2% to 6% overall.

I am just trying to understand. I understand there's a lot of moving parts and it is difficult to forecast. I just want to make sure from your perspective it is not some underlying drag that maybe we are not thinking of that would have caused the underlying growth rate to be something like that as opposed to the typical run rate you guys have been posting over the last few years?

Chris, I am glad you asked that question. Let me try to clarify a little bit. We saw about $21 million of transaction losses in the fourth quarter. We saw a total of about $28 million for the full year. We don't completely get relief on that next year.

There will be on a flow basis some level of transaction losses that we will take next year particularly Venezuela but also a few other countries. So it is not like we are getting full relief from that. We do have on our outlook for next year some level of impact from transaction losses not at the size we saw this year.

In essence, in Venezuela, we had about two to three years worth of cash that we needed to repatriate back. We had been trying to get as much of our cash back through the official conversion process, but over the course of the last six months, as Venezuela's oil revenues have gone down, the official translation mechanism we were able to take advantage of it less and less as they narrowed what they would convert. We then elected to take our cash out.

So on a flow basis to be clear there is going to be some impact next year, range is probably maybe about -- it's kind of tough to know because these are volatile but call it maybe another $10 million to $12 million probably sitting in next year's outlook associated with transaction-related losses.

Okay. So $10 million to $12 million versus the $28 million you put up this year. Is that about --?

Yes, that is correct.

Great. Thanks, guys. Appreciate it.

We will now hear from Andrew Sawyer with Goldman Sachs.

Yes. Thanks, guys. I was hoping you could us square up your gross margin guidance. If you look at the second half of this year, you reported around 45.5%, and your guidance for next year is 43.5% to 44%.

I recognize there's some seasonality impacts that your second half gross margin tends to be about 60, 70 basis points above the full year average, but on the other side you said pricing is holding up pretty well and you should see some sequential deflation just in your P&L perspective, I would think, just because of the lag effect between the spot prices and what you see on a realized basis. So I was wondering if you could help us square up directionally why it is that gross margins should get 150 to 200 basis points on what you just reported over the last two quarters?

Let me talk about first half second half of fiscal 2010. As I look at the first half of fiscal 2010 we should see fairly strong gross margin expansion, although right now as I indicated in my remarks, we are probably seeing a little bit less so than we had in our original outlook.

We still expect decent expansion in the first half, a little bit less because of the recent run up. And then as we get into the second half, we are, obviously, going to be comping against some pretty sizable increases in gross margin. So we would expect in the second half of the fiscal we will see more modest growth in our gross margin.

We also have a much bigger impact in the first half of the year from foreign currencies flowing through. As we get into the second half of the year we will start to lap some of those things. So hopefully that gives you a little perspective on how we're thinking about margins.

Taken a different way at it. If you just put up 45.5% in the last two quarters and the second half tends to be a little stronger than the first half sequentially, I would think your guidance would imply that the first half gross margin could be just as low as 43%, and I guess we don't really understand what it is that is driving that large a sequential deterioration?

I guess I am trying to understand the question. We do have seasonality in our numbers. We will see --

But seasonality's average, call it 60 basis points through the second half versus full year. I am saying that if on average your second half gross margin is 60 basis points above the full year average, then your annualized run rate in the second half is consistent with about a 45% gross margin, and your guidance is 100 to 150 basis points below that?

Well, keep in mind we have currency impacts in there. So you need to make sure you are factoring that in. I also want to point out we have about a full point of trade merchandising spending which is an increase year-over-year, primarily as it relates to hard conversions and, again, having some dry powder for any competitive activity that we need to respond to. So, you need to make sure that that extra point from trade merchandising is factored into your outlook.

That would probably explain a good chunk of it. Thanks so much for the help there.

Okay.

We will now hear from Ali Dibadj with Sanford Bernstein.

Hi, guys.

Hello.

Want to get some clarification on a couple things, if I could, please. One is the, continuing on this first half/second half of the year it sounds like we are still at this 40%, 60% split. Can you help clarify that?

It sounds like in the first half some things are worse than you had anticipated, for example, maybe commodities, sounds like maybe foreign exchange, at least if Venezuela carries through a little bit of a worse surprise in the first half, perhaps. Maybe even trade spend and some competitive action.

So I am trying to get a sense of, is that 40/60 still for real because without you having set it down I would have suspected it was actually a little bit low in the first half of this year?

Again, the 40/60 is sort of a rule of thumb. If you look at our performance over long periods of time, obviously there's going to be volatility. As I look at the first half of the year, there's no surprises at this point in terms of what we had in the outlook for Venezuela.

There's no changes in our outlook as it relates to how we're going to be spending trade merchandising in the first half. The main view that's changing somewhat is because of the recent run-up in resin and oils we are anticipating we will have a little bit lower benefit in the first half of the fiscal year as it relates to our commodities, still expect to be pretty favorable but we are seeing a little bit less so.

Now, obviously, in our outlook we try to provide for a range of possible outcomes, and create flexibility in our planning. So, even though we are seeing a little bit lower potential benefit from commodities in the first half of the year we are not at the point where we are going to say we need to our full year outlook.

In terms of exactly when that hits there are some lags, we have some hedges, there are some lags in our contracts. So, it will come through at different points of time in the P&L.

But at this point we would, we are not coming off of our EPS outlook and I think 40/60 is kind of a good rule of thumb, understanding that there will be some variability.

Okay. That's helpful. One area to drill down on a little bit if you could is trade spend. I guess I was keyed in on that saying it sounded a little bit more heavy this quarter than you anticipated because you are taking some action for some competitive measures in some categories. I guess first part of the question, I'm just trying to understand what categories those were? I think Larry was talking about that.

I would say there's a few categories where we have taken a little more trade spending. I don't know that for competitive reasons I don't want to talk about all of them, but Glad would be one area, for example, where we have taken some, a little bit, where we have been a little bit more aggressive on trade spending.

As you know, we have taken some price rollbacks in the area and we've found that the key competitors still have been spending pretty heavily in trade spending despite the price rollbacks. I would say that's probably the key place where you are seeing incremental trade spending but we are doing it a couple of other places as well.

What about laundry care?

I would say a bit given the competitive activity in anticipation of the new competition in that segment which you are probably familiar with.

Just to add into that, Ali. I think some of that trade spending is more oriented in the laundry area to increased merchandising events more than it is deeper pricing on the current events that we have. So we're seeing some customers getting more aggressive with adding events.

Okay. Thanks very much, guys.

Our next question will come from Joe Altobello with Oppenheimer.

Thanks. Good morning, guys. First question, just wanted to go back to the fiscal 2010 outlook in terms of volumes, obviously, you guys are implying a volume growth next year, actually this year now of 3% to 4%. And your volume has been down three quarters in a row. I was wondering if you could give us, obviously you guys are lapping the pricing increases you took the last 12 to 18 months. You also have some innovation in the pipeline but just give us a little more comfort that we are going to see a reacceleration in volumes to that level.

I think you just said it basically. A lot of our volume losses in the past have been because of pricing and we have talked in the past about how we modeled the impact of pricing, and we typically do see volume losses and often, or usually the sales line does much better because of obviously because of the pricing.

But with most of that pricing activity behind us, in fact, some of it going the other way, to the point we are offering price rollbacks we expect to see volume growth. Looking at Glad trash specifically, we have seen a pretty dramatic change in trend on volume behind our price rollbacks.

So look at the second quarter we were down something like double digits in volume, down about 5% in volume in the third quarter and we are actually up in volume in the fourth quarter reflecting the price rollbacks. So we do expect, largely because of the pricing component as well as other things that we are doing in terms of innovation, to see volume growth in the fiscal year.

We also had a drag in fiscal 2009 from the exit of private label. So as we anniversary that which we will do in the second half we will no longer have that level of drag. We have a little bit coming in the early first part of the year but after that we won't have that drag.

Okay. That's a good point. Secondly, you talked about SKU rationalization and retailer simplification to that. You also mentioned it at the analyst day and you also, I think, cited a couple of examples where you are gaining shelf space already. Is that still ongoing? Have you gotten additional wins since the analysts day or is that still on the come?

I would say it is largely still to come. There are some interesting tests going out there with retailers that were pretty optimistic about but none of those have been fully realized as yet. We continue to feel good about the fact that we're number one or number two brand with a lot of good innovation and advertising support that at the end of the day, retailers would choose us versus the competitive set. But no big news to spread at this point.

Okay. Then one last one if I can, the Green Works laundry launch, are you happy with the distribution you are getting?

We have gotten very good support and we are launching in both U.S. and Canada. There is one notable exception to that. We do not have distribution at Wal-Mart in the U.S. at this point. I think you know there's a lot going on and if you've heard the category right now and Wal-Mart has chosen not to take Green Works natural detergent on at least in the initial phase.

Ironically, we are being well supported by Wal-Mart Canada and we are being sometimes exceptionally well supported by other retailers in the U.S. environment. So we have tailored back our plans to be a little bit more retailer specific, and it is still a good expansion for us, a good launch for us, it still represents a positive MPV and we hope that over time we can grow the brand to the point Wal-Mart wants to take us on.

I would think the only thing I would add to it, Joe, this is Don, is that of our largest retailers, all of whom are taking it with the exception that Larry just noted with Wal-Mart, the initial orders look very strong. So we feel good about that. Obviously, it is still in the pipeline but we feel very good about the consumer support we have behind the plan with those retailers. So, so far so good.

Okay. Great. Thank you.

We will now hear from Connie Maneaty with BMO Capital.

Good morning.

Morning.

Could you talk a little bit about the timing of advertising given the launches and the products you are choosing to support this year?

Yes. You will probably see a little heavier weight of advertising in the first half of the fiscal year. As you know, we ramped up some of our ad spending in here in the fourth quarter. We will continue to see that.

We also have advertising support behind the laundry launch and so you will probably see a little heavier weighting of our advertising in the first half of the year versus the second half. Also in the second half, we will obviously be comping against higher levels.

Okay. I know you don't talk about the quarters specifically, but given FX and the tough comp from last year and the shipments of new products, and now the information that Wal-Mart hasn't taken the detergent, are first quarter sales going to be up or down?

We try to stay away, as you noted, Connie, from specific quarters. I think for the factors you cite, however, one could anticipate that our sales in the first quarter will be down.

Okay. Great. That's helpful for modeling purposes. On Venezuela, the fact that it is going to continue into 2010, does that suggest that you did not get the full amount of the cash that had been building out of the country and is there about a third left to go?

I'm not sure if I fully understand your question. Obviously, when we are converting, we are, we are taking losses from local currency to U.S. currency. We were taking those at the parallel rate which is in the low 7 range versus the official rate around the low 2s. So we are taking losses in converting out of the Bolivar into U.S. dollars. What we have in our outlook for next year is the estimated impact on a flow basis of converting our earnings stream out of Venezuela back to U.S. dollars.

Okay. And one final question, of the 20% of your sales that are not ranked number one or number two, are you seeing or being asked to discontinue any items as retailers simplify their store shelves? What kind of sales impact if any would that have?

I would say over time we see pressure on those brands more than we see on the number one and two brands. I wouldn't say it has a huge impact, but Glad food bags is one example where for the last several years now, we have been seeing distribution losses. So I don't see a dramatic spike this year, but, obviously, we will be pressured where we have third, fourth or fifth brands that are not being well supported with advertising and innovation.

Okay. Very helpful. Thank you.

Lauren Lieberman with Barclays has our next question.

Hi.

Hi.

Just a question about logistics inflation, I was just surprised to see such a magnitude of logistics inflation in the quarter. Is it, I know diesel is a component of it. Is it mostly shipping or is it negative variances on lower volume or what's really driving that line item within gross margin?

So, Lauren, on logistics, we report the gross impact of logistics not net of cost savings. So we tend to gross up the impact a little bit. Most of it is just normal inflationary pressures that we typically see in our logistics network. So we report a gross but there's a chunk of our cost savings that if we were to net it down you would probably see on the net logistics line much less of an impact.

Okay. So that gross number, though, I always, as a line item I always get a little bit confused about the magnitude always surprises me year-over-year over year. Is this sort of 150 basis points the right way to think about it going through fiscal 2010? Is this a good run rate for the normal inflation in the business?

I think the inflation has been higher the last couple of years for a lot of reasons. Obviously, we have seen fuel prices go up. We have seen some pressure in the trucking industry. I think there's been a lot of dynamics there. I guess as we look out over the next couple of years, we would expect the gross impact to be a little bit less than probably what we have been tracking over the last couple of years.

Okay. And then just, I know everyone has been really focused on sort of the pacing of revenue growth through the year but I just, the conversion, there's no hard conversion in Q1, right, it starts in Q2? Is that correct?

Yes. There's just a tiny bit in Q1, but it's not really material. On our litter business we are converting from pails to boxes. Most of that will actually take place in the second half.

The real impact on Q1 sales is foreign exchange. That's by far the biggest impact plus the fact we are lapping 12% growth a year ago is probably the steepest mountain we've had to climb in five years in any quarter.

Right. Okay, but the volume comp, at least in North America, is not difficult, and your expectation based on elasticity modeling is that the absence of so much pricing we should see volume growth resume in North America in Q1?

I guess the way I would answer that would be we do expect volume growth in the first half. We may not see volume growth in the first quarter.

Because we are not going to anniversary those price increases, Lauren, until we get deep into the quarter.

All right. That makes sense. Thank you.

We will now hear from Linda Bolton-Weiser with Caris.

Hi. Thank you. We were looking at some data on the trash bag pricing over the last couple of years and it looks like the premium of the branded, of the brands, Hefty and Glad, are the premiums bigger versus private label now than in, like say, a couple of years ago? Is that accurate? Can you comment on that?

My guess is it would be higher mostly because of growth of ForceFlex as well as Odor Shield, both of which are premium to the premium bags. Because of the growth in those segments, overall Glad would be at higher price on average than the competitive private labels. Does that make sense? It's so much more of a mix thing than a pricing thing.

Yes, except we were looking at non-ForceFlex SKUs. We were looking at all of the SKUs, so even on the basic SKUs it seemed like it was a bigger premium than in the past.

Yes, depending on which period you are looking at, I would say the gap has maybe widened a bit on what we would term our base trash items versus private label.

Okay. Do you think there's some need to correct that in order to regain volume growth or not?

Again, we feel we have taken two price rollbacks. We think right now we reflect accurately what the resin prices are, private labels have been up and down but generally in line with us in terms of their movements.

As I said earlier, we are starting to see volume growth on trash again in the quarter which is after a couple of quarters of some significant decline. So we are already starting to see a return to volume growth and we are optimistic that will continue into next year.

Did the trash volume growth continue in July?

I don't even have final numbers on July. I can't tell you.

Okay. Thanks very much.

Uh-huh.

We will now hear from Nik Modi with UBS.

Yes. Hey, guys, most of my questions have been answered, but, Dan, you mentioned during your comments that you are seeing early signs of a recovery or somewhere along those lines. I was curious what was driving that statement?

Looking at the stability in some of the markets, looking, we have been observing, obviously, our retail customers and a lot our vendors and suppliers who have been under pretty significant pressure. As we look at their numbers as we are in conversations with them, we are feeling like there's some more stability in the market.

So there are some signs that maybe we're bouncing along the bottom here. I don't know that we can point to anything that would say that we're starting to climb up. But it doesn't feel like it is getting any worse. We are hopeful as we work with these customers and suppliers over the coming quarters we will see a little bit of an upturn.

I think just to add to that, Nik, what Larry talked about was when we looked at our categories and tracked channels they were up 1.6% for the quarter and just 0.05% for the year. So sequentially, and I think Bill noted this earlier, too, that these things are starting to improve. We are seeing a little bit more robustness where we compete.

And that is more of a comment on what you are seeing with retailers and suppliers, but from a consumer standpoint, it would be helpful if you can share any insights work that you've done. Is the consumer permanently impaired post this last kind of tough eight months or do you think they're going to resume their old purchasing habits or is it just too early to tell?

It is too early to tell, but you know that overall our categories are more like staples and they have been far less impacted than many other categories. If anything, as Don said, we are seeing a bit of a tick up versus a tick down. So --

Excellent. Thank you very much.

We will now hear from Bill Schmitz with Deutsche Bank.

Good morning.

Hey, Bill.

The difference between the higher commodity costs versus, obviously, the dollar weakening from here and the expected pension expense because of the market rally, do you have numbers on how those have changed in connection with each other?

You mean looking at the correlations, the movement in oil to dollar weakness?

No, no, just the dollar magnitude of the currency weakness and probably less of a pension P&L hit next year versus what you think might happen with commodities versus your previous guidance?

I don't know if we've tried to look for the trade-offs there. On the pension side, we did see some strong returns to the assets in the quarter. We are hopeful we will continue to see some returns there. We will make the contribution, the estimated contribution, $25 million to $30 million. We think that will be fine.

We are in the process of going through the annual evaluation on that. On the commodity side, obviously, whenever the dollar weakens we see an uptick in oil as a hedge against the U.S. dollar.

But they're all interrelated in the P&L. When the U.S. dollar is weaker then our foreign currencies are stronger, but then you have an offset on commodities and then interrelated with that is pricing actions we may take in our international businesses. So it is hard to thrift out any easy relationships or rules of thumb except there's a lot of moving parts.

The reason I asked the question, I mean weren't you at least a little bit tempted to raise guidance for fiscal 2010 just because trends seem like they are a little bit better than you expected before?

You're not expecting (inaudible) to be added to the question?

(laughter) I kind of was. I thought I would catch you in a bad moment.

How about distribution-wise, obviously, the new product pipeline and all this innovation, are there opportunities to expand your ACV? I know there is a notable drug retailer where you don't have any distribution. I mean is there a chance for you to get into some of those accounts?

Probably pretty limited opportunities on most of the U.S. portfolio. Obviously, Burt's is still expanding distribution. There's still remains opportunity there. Certainly, internationally there's opportunity on Burt's and probably elsewhere.

Okay. Great. Thanks very much.

Thanks, Bill.

Next question comes from Jason Gere with RBC Capital Markets.

Sorry. Good afternoon. A question on some cost savings, I was just thinking about as you are talking about oil and other commodities running up and certainly in the past you guys have turned toward cost savings rather than initially right onto pricing. So I was just wondering about the flexibility you have with some of the projects in place, the cost savings seem to be more normalized this year as maybe versus last year.

I was just wondering about the pipeline of projects out there that if need be you can bring some projects forward and raise cost saving opportunities?

We are always looking at the flow of cost savings initiatives. Most of these things are multiyear in nature, and so a fair bit of them, there's not a lot of ability to change their timing. As we said in the past, we will take the cost savings when they hit. So given the fact you have to invest behind these over a substantial period of time and there's certain actions you need to take to be able to realize them. There isn't a great deal of flexibility to change the timing of them.

What we have been pretty good at though, Jason, over the last couple of years is we've been executing really well against our cost savings. So where normally you come into a year and you may haircut your estimate a little bit because you're just uncertain about whether you'll fully execute against it. We feel really good about our execution in fiscal 2009 and as we look into fiscal 2010, the range of cost savings that we have out there the vast, vast majority of that is already identified and underway.

So we are feeling pretty solid on the range we have got. But similar to this year, over the course of the year, fiscal 2009, over the course of that year we slowly as we were executing and we identified some more we were taking up our outlook for that. And so we will look for any opportunity to increase the absolute level, and, in fact, given the potential impact that we see from perhaps some slightly higher oil and resin prices, particularly in the first half of the year, we will be looking for a lot of different ways to see if we can find some offsets to that impact.

Okay. Great. Just a second question on Burt's Bees. You said that the consumption was healthy, the shipments. though, were weak. Can you compare like, I guess, the, and part of that is destocking the gap between consumption and shipment this quarter versus last quarter and when do you think that should get back to a more normal period, i.e., when are you comfortable with the inventory levels that you have at retail?

We actually saw about a 1% increase in volume and a slight decline like about 1% in sales in the quarter. The data sources in that business are not nearly as detailed and robust as we have in other businesses in particular because Target stopped giving their data to the IRIs and Nielsen's of the world.

So we don't have that covered. But based on our best estimates we think we are seeing probably mid-single-digit kind of consumption growth in the quarter which is at least a few points ahead of what our sales growth was. We think most of this stocking probably occurred in Q4 and is probably behind us. So we don't think there's going to be a lot of destocking going forward. So, again, this is a business where we think that the consumption and sales will be more in line with what we see in terms of a volume standpoint.

We are also starting to see, Jason, some more vitality in the drug channel which has been the channel that was hit the hardest in terms of destocking last holiday season. We are starting to see some return to normalcy there as well.

Great. Thanks a lot, guys.

We will now hear from Alec Patterson with RCM.

Yes, Dan, just wanted to clarify the run rate on interest expense going forward, is that going to hold?

For full year you are referring to?

Yes, please.

Yes, the range for next year is probably in the 140 to 150 range. Be down somewhat, obviously, from this year as we continue to pay down debt.

Okay. Then I just want to clarify on your break down of the gross margins, the all other category you highlighted was trade spend and transactional. I was trying to get a sense of how much that was, trade spend versus transactional from FX and does that imply there's no transactional hit to the commodity impact on gross margin, that that's just a pure commodity read?

There's nothing sitting in commodities that relates to the foreign currency transaction fees. So just to be clear on that. The other does include trade spending.

I don't have the break down, Alec, between exactly how much was trade spending and how much was some of the foreign currency transaction that flowed through COGS. My recollection is the transaction piece is relatively small sitting in cost of goods sold. But you do have other FX translation impacts that will sit in there.

Right. Okay. Thanks.

Our next question comes from John Faucher with JPMorgan.

Yes. Thanks. Guys, I am looking at your currency guidance at least on the top line for next year you had one positive quarter and three negative quarters this year and you delivered minus 2 from currency, and your guidance for 2010 basically says the same thing, minus 2. So, are we looking at just an absolutely brutal first quarter or is there something you are seeing in currency in terms of where this is going to play out in the second quarter as well? Can you just give me a little bit of help there?

Yes. What is sitting in our outlook today, John, as we talked in June at analysts day is we are, the official outlook still had some negative impacts from other currencies in the back half of the year. The vast majority of the impact is going to be in the first half of the year, and it will be a pretty tough first quarter because we haven't anniversaried the significant drops a year ago.

But our original outlook did have some further declines in currencies. We are seeing in a few countries a little bit of improvement. We see the U.S. dollar starting to weaken. As we go forward in the year we're going to need to look at our currency assumption on what's sitting in there. I wouldn't touch it in the first half of the year, but maybe in the second half we can look at it.

I will also advise that our pricing decisions internationally are also partially based on what's happening with currency. So if we see a little better foreign currency environment next year we may need to take a little off of our pricing assumption. So the two may balance each other a little bit.

Okay.

We will now hear from Shannon Joseph with Wells Fargo Securities.

Hi. I was wondering if you could talk about your plans for the debt maturing in January and whether you plan to repay that with cash from operations or just refinance it in the debt market?

We will have some level of refunding that we will probably do later in the fall. I don't think we will refund the full $575 million maturity. We will have cash flow in the first half of the year. We will continue to pay down commercial paper and I don't -- we haven't really finalized our plans yet, but I think what we will refund or refinance will be only part of the $575 million maturity.

Okay. Thanks.

(Operator Instructions). We will take a follow-up from Ali Dibadj.

Hey, guys. Just wanted to follow up on something you had mentioned kind of finally voluntarily talked about Wal-Mart and the Green Works laundry, was that in your plan for them not to take it when you talked to us back in June or is this a new outcome or how should we think about what transpired?

So to be straight forward, it was not in our plan. And, obviously, we would love to get distribution there as soon as we can get it. It was not part of our original plan nor was it the initial indication we got from Wal-Mart at that point in time.

And just to give us a sense, how can that change going forward? Is there a timing to it? Can you get distribution there? How does that work?

Obviously, not within our control, but I think Wal-Mart will continue to look at the opportunity and what's going on with their category as well as how we are performing in the other retailers where we are.

So I think there's always an opportunity for them to change their minds, and we obviously will be there to help change their minds over time.

I think, Ali, given what's going on in terms of the resetting of that category in Wal-Mart and what they're doing in terms of looking at the assortment across all of the brands in that category, and the sizes, this is one of those things over the next 30 to 90 days we would hope they would revisit that based on what goes on in the market.

In that much of a short time. Okay. And then, I thought it was, and correct me if I'm wrong, I apologize, I'm doing this is from memory. I thought it was going to be, laundry was going to be about 1 point of your top line growth next year.

Is that roughly the right number? I am trying to get a sense of how much now to pull out given this new information?

I think we did say it was going to be about 1 point of our sales growth for the year. Again, we're feeling good about what we have going on with other retailers, so we will see a bit less of a sales behind that launch but we think it is going to be healthy sales growth. And we still overall think that we need to lever that at least two points of sales growth for the year behind innovation on detergent as well as on some of the other things we are doing.

Okay. And then just to follow up on FX, one last thing, thanks for taking this time. Dan, my reading of what you said is you have not updated since June the FX negative 2%?

We have not updated. We are still with our 2-point drag for the full year from currencies on the top line.

Does that give you some wiggle room for Wal-Mart's finally take it or I mean is there a, is it a (inaudible) for some wiggle room or is it just purely you haven't updated it because it's volatility in FX particularly?

It is volatility in FX and, again, it is, our pricing plans in international are tied to what currencies do. So, I wouldn't view it as some sort of cushion or offset for any other issues that may arise over the course of the year in our top line.

Okay, thanks for the time again.

With that, why don't we move to Don's close.

Okay. Well, we just want to thank everybody for joining us, and we'll look forward to speaking with you next quarter when we'll share the Q1 results. So take care, everybody.

Once again that does conclude today's conference. We appreciate your participation.