高樂氏 (CLX) 2011 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Clorox Company second-quarter fiscal year 2011 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, Mr. Steve Austenfeld, Vice President of Investor Relations for The Clorox Company. Mr. Austenfeld, you may begin your conference.

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 of 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, Larry will start with comments on business unit performance, as well as a perspective on our current category, market share and overall top-line results. Dan will then comment on our second-quarter results and our updated fiscal year '11 financial outlook. Finally, Don will share some closing thoughts before we open it 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 and debt to EBITDA. 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.

Please recognize that today's discussion contains forward-looking statements. Actual results or outcomes could differ materially from management's expectations and plans. 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 or outcomes to differ materially from management's expectations and plans. The Company undertakes no obligation to publicly update or revise any forward-looking statements.

With that, let me turn it over to Larry.

Thanks, Steve, and welcome to everybody on the call.

Consistent with our preannouncement on January 3, we had a challenging second quarter. Q2 volume was down 2% due to comparison against high H1N1-related sales in the year-ago quarter, as well as weak trends across several of our US categories. These factors were partially offset by higher shipments in Latin America behind [new home] care products; growth on Burt's Bees due to new products and a healthier natural personal care category; and higher shipments of Pine-Sol cleaners and Glad trash bags behind product innovation.

Sales were down 3% due to the volume decline, the impact of the Venezuela currency devaluation, and higher trade promotion spending. Excluding the impact of the Venezuela devaluation, sales were about flat.

Overall, we had a tough first half, but we have reason to believe results will improve in the second half of the year.

As usual, I'm going to focus my detailed comments on volume and sales and let Dan provide the details on our financial results.

Starting with our US business, tracked channel consumption in our categories was down just over 1% in both Q2 and over the past 52 weeks. On an all-outlet basis, category consumption was down over 2%. While our share was down slightly in tracked channels, we continue to see share gains on an all-outlet basis, reflecting the continued strength of our products in value-oriented retail channels like Dollar and Club. In fact, for the past 52 weeks, we gained or held share in all but one of our reported categories.

In International, our market share results were not quite as positive, with share up slightly in Canada, down slightly in Latin America, and down moderately in Australia and New Zealand.

In our Clean segment, which includes our homecare, laundry and away-from-home businesses, volume declined 6%. The decrease was primarily driven by lower shipments of Clorox Disinfecting Wipes and other disinfecting products due to comparison with high H1N1-related volume in the year-ago quarter. Many retailers had stocked up on flu-related products like Disinfecting Wipes in our first quarter in anticipation of another bad flu season, which has not yet materialized.

Pine-Sol had another great quarter, delivering strong volume and share growth.

Laundry volume was down, primarily due to category softness. Some of this laundry category softness is due to higher growth from the base period driven by new competition and some H1N1 impact on Clorox liquid bleach.

Our Q2 tracked channel share was up on Clorox liquid bleach and down only slightly on Clorox 2. Clorox 2 share results are much improved versus previous quarters.

Sales for the Cleaning segment decreased 6%, in line with volume.

In our Household segment, which includes Glad, charcoal and cat litter, volume decreased 1%, reflecting strong growth in Glad trash bags, offset by lower shipment of Glad food storage products. We continue to see positive results on the trash side of the Glad business, which represent about two-thirds of total Glad. Shipments of trash bags were up in the mid-single digits, with particularly strong volume and share results on premium, higher-margin ForceFlex and Odor Shield trash bags.

Our Glad food storage products declined in the quarter, but we expect to stabilize this business as we have now lapped some key distribution [voids].

On cat litter, our share declined as we worked to get our value equation right in the face of intensified competitive activity. The price rollback taken last year is now reflected at most retailers, so we expect to see improvement in the second half of the fiscal year.

Our Kingsford business has stabilized following the high volume in Q4 fiscal 2010 that resulted in excess inventories in Q1.

Sales in the Household segment were down 4%, more than the 1% decline due to increased trade spending.

In our Lifestyle segment, which includes food products, water filtration and global natural personal care, we grew volume 3%. This was driven by higher shipments of Burt's Bees products and Hidden Valley salad dressings, partially offset by lower shipments on Brita. The decline on Brita is largely due to a year-ago base that was up strong double digits.

Despite the recent noncash charge on Burt's Bees, it remains our fastest-growing business unit and continues to perform well in the US and abroad. In Q2, Burt's grew volume and sales in the low double digits behind renewed category growth and innovation, with gains in the drug and grocery channels and international markets. The brand is now in a total of 30 countries.

Our Hidden Valley business returned to strong growth after a soft Q1 due to excess retail inventories. Consumption on this business is healthy, and new product offerings continue to perform well.

Sales for the Lifestyle segment were up 3%, in line with our volume.

In our International segment, volume grew 3%, primarily due to category growth and new homecare products in Latin America. These results were partially offset by lower shipments of Glad products in Australia behind distribution losses. International sales declined 1% as the benefit of price increases was more than offset by the impact of the Venezuela currency devaluation. Excluding the impact of the Venezuela devaluation, International sales grew 11%.

We have now lapped the impact of the devaluation and expect foreign currency to be modestly favorable in the second half of the year.

And now I want to turn to our sales outlook, which remains unchanged from our January 3 press release at flat to plus 1% growth for the full fiscal year. That implies that we will need to grow about 3% in the second half, after declining 3% in the first half.

Let me provide some [reasons to believe]. First, several factors which drove our first-half declines are now behind us. The currency devaluation in Venezuela, H1N1 comparisons and the first-half impact of fiscal 2010 Q4 shipments on food and charcoal all had a substantial negative impact on the first half of the year. These factors are all largely behind us.

While we continue to anticipate category softness, we are starting to see some signs of category stabilization. Trends in trash bags are improving, and growth in natural personal care is outpacing the traditional personal care category.

We are also focusing in higher-growth consumer segments like Hispanic and higher-growth retail channels. As our categories begin to get stronger, as we believe they will in calendar year 2011, we are well positioned to benefit from our recent market share gains.

Second, we are confident that we can continue to be competitive in the marketplace and at least maintain, if not grow, our market shares. We remain committed to investing in the long-term health of our brands, with strong consumer communications and innovation.

Our long-standing focus on brand-building and improving value in our brands is paying off with higher market shares. For perspective, in December of 2007, our US dollar share on an all-outlet basis was 26.5%. In December 2010, we were up 1.4 share points to 27.9%. So we have materially grown share on our portfolio of premium products despite the worst recession most of us have lived through.

The third reason to believe is that we have a very solid innovation pipeline in the second half, with a multitude of new products and product improvements across our categories and countries.

In the Cleaning segment, we are bringing the power of bleach in more effective forms to the bathroom. New products include Clorox Bleach gel toilet bowl cleaner, Clorox Bleach foaming spray, and Tilex tile and grout cleaner in a new pen form.

We're also relaunching Pine-Sol with new fragrances and packaging and offering new fragrances on Clorox liquid bleach.

In the Household segment, we continue to benefit from the Febreze product improvement and our Odor Shield trash bags. We also launched a new Extreme Odor line extension on our Fresh Step cat litter in January.

In our Lifestyle segment, the food business will launch new flavors of Hidden Valley [Farmer's Original] salad dressing and KC Masterpiece barbecue sauce and marinade. We also plan to launch three new Brita pitcher designs and an on-the-go Brita water bottle.

Finally, in the International segment, we are launching products in both the disinfecting space and in fragrance cleaners.

In summary, we believe there are solid reasons to believe we can deliver our forecast, and we are confident we will see growth in the second half of the year. With that, I will turn it over to Dan.

Thank you, Larry, and hello, everyone. In today's press release and in the one issued on January 3, we provided updates on the goodwill impairment and the gain on sale of our auto business. So I'm going to focus my remarks today on our second-quarter results from continuing operations, as well as our updated financial outlook.

As you evaluate our results and our updated financial outlook, there are three key messages that I'd like you to consider. First, as expected, we faced a challenging first half and second quarter and feel we are managing well through a difficult environment. Many of the top-line headwinds we faced are abating, and we expect stronger top-line, margin and bottom-line performance in the second half.

Second, while we did see some gross margin compression in Q2 and the first half of the fiscal year, we believe we will see second-half gross margin expansion. We have a strong cost savings pipeline and are positioned to take price increases, when costs justify, to support our margins.

Third, our full-year financial outlook is based on a plan that appropriately balances the near-term impacts of soft categories and commodity inflation with the longer-term investments we're making to strengthen our brands, drive new product innovation, and build a strong foundation for future growth and cost savings. Let me take each of these themes in turn.

We faced a challenging first half and second quarter as we lapped most of last year's significant H1N1-related growth and the impact from the Venezuela currency devaluation. We also experienced continued softness in our US categories, and we had to work through some specific category issues.

Overall, we believe we are managing well in this challenging environment, and our demand-building investments continue to pay off in increased market shares, giving us confidence that we will benefit as our categories return to growth.

In the second quarter, we saw about $18 million of commodity cost increases. Commodity cost increases in the quarter were offset by about $22 million of cost savings in cost of goods sold. Total cost savings in the quarter were about $27 million.

Overall, we did see an expected decline in our Q2 gross margin as we compared against the year-ago quarter, and gross margin expanded by nearly 350 basis points.

Contributing to the margin decline were the impacts of business and channel mix; increased trade spending and unfavorable foreign exchange, almost entirely from Venezuela; and normal inflationary pressures in our supply chain, partially offset by the benefit from pricing. Cost savings in the quarter more than offset commodity cost increases.

Looking ahead, we continue to believe gross margins will improve in the second half. While trade spending in the second half of the year will be somewhat higher than our previous estimates, this spending will be about equal to our spending in the second half of last fiscal year. And at today's spot rates, foreign exchange should turn slightly positive with the Venezuela devaluation now behind us.

We delivered about $60 million in first-half cost savings, and we feel confident about delivering cost savings at or slightly above the upper end of our $90 million to $100 million target range.

The key to our margin performance in the second half of the fiscal year and fiscal 2012 will depend on how we manage commodity cost increases. We anticipated total commodity cost increases for this fiscal year in the range of $50 million to $60 million. With recent increases in various commodity prices, we now we now expect total commodity cost increases in the range of $65 million to $70 million, with most of the increase coming from resin costs.

As we've discussed, our margin expansion model can absorb about $50 million to $60 million in annual commodity cost increases before we need to take pricing. With expected commodity cost increases above this range, we are evaluating further price increases, particularly on our products impacted by resin costs. We took a 5% increase in August on Glad trash bags to reflect higher resin costs.

Despite some soft categories and muted consumer spending, we believe it's appropriate to consider additional price increases where costs justify. We've successfully taken many price increases over the last four years, and we've demonstrated that our market-leading brands have pricing power and price elasticities that allow us to take cost-justified price increases. We've been able to increase our market shares even with the price increases we've taken.

In the second half of the fiscal year, we will see most of the incremental commodity cost increases in the third quarter, with a much smaller impact in the fourth quarter. We now expect our gross margin to be flat to slightly down for the full fiscal year, but we are essentially keeping our full-year gross margin outlook nearer our recent historical high for this metric.

For the full fiscal year, we now anticipate fully diluted EPS from continuing operations, excluding the goodwill impairment charge, in the range of $3.85 to $4. This updated range reflects our current expectations for the top line and margins. This range compares with $3.69 in fiscal 2010 diluted EPS from continuing operations.

I believe we have a very balanced and achievable plan for the fiscal year. The plan balances increased demand-building investments in our brands and key investments in our facilities and information systems with strong cost savings to deliver solid results. We believe our performance in the second half of the fiscal year will be better than our first-half performance.

We feel much better about our pricing competitiveness in cat litter. Our charcoal and food businesses have stabilized and returned to growth after the first-quarter trough due to excess retail inventories. Other businesses such as Brita, Away From Home, International and Burt's Bees continue to perform well. Our plans for the second half of the fiscal year include broad innovation, solid trade spending and healthy advertising investments.

Overall, we believe we are taking the right steps to drive volume and sales growth in the second half and maintain the long-term health of our brands.

Before I turn the call over to Don, I want to reconfirm our planned use of cash from the sale of the Auto Businesses to repurchase shares this fiscal year.

On January 3, we announced updated timing for share repurchases. During the balance of this fiscal year, we intend to use the net after-tax cash proceeds from the Auto sale of about $680 million to repurchase shares. Depending on the share repurchase prices, we expect to repurchase 10 million to 11 million shares of our stock. This is in addition to the 2.1 million shares we purchased in the first half of the fiscal year to offset stock option dilution.

Given the later timing for share repurchases, our fiscal year diluted EPS will be reduced by about $0.05. This impact is fully reflected in our updated EPS outlook range.

With that, let me turn the call over to Don.

Thank you, Dan, and hello, everyone. We've mentioned several times today why we anticipated a challenging first half and why we believe we will see stronger results in the second half. And I think if you'll recall, back in May, we actually outlined the challenges we'd see in the first half.

That said, I want you to know that I'm certainly not -- and neither is the team -- satisfied with declining sales and margins we've seen during this time. And while we can't control things such as the timing of global pandemics like H1N1 or the overall health of the economy, there certainly are a number of things that we can impact.

So rest assured that we are not losing our focus on what it takes to grow our categories and market shares over time, and particularly a focus on market-leading innovation. And in fact, I believe Clorox is in a stronger position now than ever to innovate.

So before we open it up for Q&A, I'd like to spend just a couple of minutes broadly discussing our innovation strategy with you and why we believe innovation will drive growth for us not only in the back half of the fiscal year, but next year and beyond.

We feel very good about our product innovation track record, and we've reviewed this with most of you over time, but we have delivered 2 or more points of top-line growth for Clorox consistently for the past eight years. That's a pretty stringent measure as it only accounts for growth above and beyond the effects of cannibalization. So it's really a true measure of incremental growth.

Now, looking over the next two years, I'm confident we can meet or exceed this goal as we continue to build our innovation capabilities with a focus on three areas -- where to play, how to win, and how to configure. So let me give you a little bit of insight into each one of these.

First, where to play -- we've taken a strategy-led approach to identify where to play spaces such as our "stop the spread of infection" growth platform that we believe are fueled by strong tail winds with large unmet consumer needs to support growth and where certainly we have a right to win. And by focusing our discovery efforts globally now, we will more than double the ideas and projects in our pipeline and increase their scale as well.

The second area of focus in building our innovation capability is how to win. We've maintained our focus on using integrated consumer shopper and user insights as the drivers of innovation. We've combined these insights with several proprietary technologies such as plant-based cleaning agents to create innovation platforms in key areas. Now, the combination of our deep insights and differentiated technology results in, we believe, competitive advantage and increases our confidence in the success of innovation going forward.

We've also maintained our focus on 60/40 blind wins, and we fully anticipate achieving our goal of greater than 50% of volume from superior consumer-preferred products ahead of schedule.

And lastly, on how to configure -- about 18 months ago, we redesigned our approach to innovation to increase our ability to generate and collect ideas from inside the Company globally and also outside the Company, which has contributed to the doubling of ideas and projects I noted a moment ago.

Now, a recent idea generated internally is "dual disinfecte," which was launched in Q1 in five Latin American countries under the Clorox and Ayudin brand names. Now, this product is the only disinfecting spray that kills germs on both surfaces and in the air. So it's really a great product in our "stop the spread of infection" platform.

And from outside the Company, probably the most recent obvious example as we continue to drive value from our Glad products' joint venture with Procter & Gamble is having recently introduced Glad Odor Shield trash bags with Febreze. In fact, if you look at our premium trash bags segment in the last quarter, that segment was up in volume over 10%.

So as Larry noted, we are seeing strong volume and share gains on our trash business, in part behind this innovation. And we're also focused on flexibility and past learning to accelerate discovery and development, and we believe we can get new products to market faster.

So as the market leader, clearly it's our responsibility to bring innovation to drive growth, not only for Clorox but for our categories overall. With the innovation we're launching and the strong capability we've built to innovate, I really do believe we will see improvement and build momentum throughout the second half of this fiscal and beyond.

So with that, let me ask the operator to open the lines up for questions.

(Operator Instructions). Ali Dibadj, Bernstein Investment Company.

A couple questions, a few questions. One is I'm just kind of relaying something that I've been hearing from some investors. We have heard certainly from you guys optimism before, and whether it be a year ago, whether it even be more recently than that. And sometimes, very respectfully, that hasn't always panned out to be as optimistic as you lay out. Not always your fault, but we've heard things around H1N1 for a very, very long time right now, and Venezuela, and finally lapping that.

We've heard things about innovation, and we've heard things about -- we have pricing power, etc. And they always haven't necessarily played into kind of the way you have described it at the time.

And listening intensely, I'm trying to figure out if you guys are seeing data points in the environment, in the marketplace, that actually gives you confidence that these things this time around may actually work out and builds your confidence to try to I guess help us build our confidence in particularly the back half, but even beyond that.

So let me start, Ali. Then I will turn it over to Larry and Dan.

I guess it depends on how you judge this optimism. I guess I would look at it as, over the last 10 quarters, we've exceeded expectation I believe on nine of them. So I think we've pretty well delivered what we said or done a little bit better.

I think particularly in this -- as we move into the second half of this fiscal year, these headwinds that we've talked about -- H1N1 and Venezuela -- those cost us almost 4 points of growth in the first half of this fiscal year, and those are largely behind us. So if you just take that out, Ali, I think you get back to instead of negative 3 sales into the plus 1 area.

The other thing I would say, as we look at FDKT or tracked channel data -- and you obviously have access to that data as well -- as we look at categories like trash going from negative 2 the last 52 weeks, or negative 2.5 or in that range, to plus 2, we look at litter starting to grow, we look at charcoal going from almost 3% growth last 52 weeks to almost 7% growth, and we look at our food business, the salad dressing business also continuing to show positive growth, we are seeing those categories stabilize.

And I guess the other thing I would add, just to give you some confidence is, Larry talked about the innovation pipeline. I think I can safely say that the amount of innovation you'll see coming out starting in the last few weeks is better than we've seen in the last eight quarters. So we feel pretty good about that.

So let me pull out there and ask Larry or Dan to add any insight.

So I think Don has covered most of the key themes, but we are seeing some uptick in at least a couple of our categories, particularly natural personal care and, as Don said, the trash category.

We are obviously going to start indexing off of some low bases in terms of category growth, so we should see some improvement there. And we think we are doing things that will affect us positively in the marketplace, the number one thing being, in the second half, innovation. But certainly, we continue to support our brands at what we think is a strong level with respect to advertising. And that advertising gets more targeted and more efficient over time as we get into new ways of approaching our consumers through social media and other avenues.

Okay.

Ali, the only other comment I would add is, all negative 3% sales declines are not created equal. If you look at the negative 3% in the first quarter, we were lapping negative 1% from prior year. If you look at the negative 3% we just put out there, that was lapping 5% growth in the prior-year quarter. That was probably the strongest organic growth we've seen in the last two years.

So I think even though it's still minus 3%, it's lapping a heck of a more difficult comp. And with those headwinds behind us, I think you should have some confidence we will get to those numbers.

So this is interesting. So, parlaying that into a comment you'd made before around commodities or, Dan, I guess, maybe for around commodities and the belief that we may be able to take some pricing and we have some pricing power, I mean, do you -- what do you guys see in terms of the consumer being ready to take pricing and not run away, i.e., not give a lot of negative volume today? What have you seen that's different? That's an interesting inflection point if you've seen something from an elasticity perspective.

Yes, let me start, Ali. Here's what I think we are seeing different. If you look at our most premium-priced brands and products, they are the ones growing most aggressively. So I'm looking at the consumer now as kind of a -- it's a two-sided coin, for sure, but those people with higher incomes are clearly back spending money.

If you look at the Burt's Bees business, up double digits in volume and sales this quarter, the category is up in the mid-single digits. If you look at Hidden Valley Ranch, volume grew about 5%; if you look at our premium trash business, up in double digits while our base trash business declined 1.5%.

What we are seeing is, those brands and products that are premium-priced, we are seeing some pretty robust growth in those. I think what that says to us, there are still a lot of people out there obviously struggling, and we are going to have to be real sure that on the rest of our businesses that our price gaps are sharp and that we maintain this 25% to 35% premium.

But, to Larry's point, our share positions ending December of '10 are the strongest they've been in three years. So I think that indicates that the brands are pretty healthy, and with the innovation pipeline we've got now, I think we are pretty well poised.

I guess that confuses me, because when I look at your gross margin drivers chart, the footnote says about 100 basis points, negative 100 basis points of business and channel mix. So if it's your more expensive things that are growing faster, how are you facing still this business and channel mix? And how is this going to change going forward, I guess?

You know, on the business and channel mix, let me take that one on. Again, that's just for the one quarter, comparing to 5% growth in the year-ago quarter.

The businesses that were soft in the quarter that contributed that, obviously our laundry business has been down. It's a higher-margin business for us. Our home-cleaning business was down, again lapping H1N1. That's a higher-margin business for us. And then we have Brita that had incredibly high comps in the year-ago period. So while that brand is still very healthy and growing, on a comp basis, we are down a bit there.

On the channel side, we certainly see slightly higher growth in our value channels, which is Club and Dollar. And those tend to have slightly different margins for us, still very profitable, but slightly different margins.

And then in International, the markets that have been down are some of our higher-margin markets like Australia and New Zealand, with the faster-growing ones being slightly lower margin. So that all kind of contributes in the quarter to the mix, but that doesn't get to the basic health of each individual category.

Okay, I will leave it there. Thanks.

Chris Ferrara, Bank of America-Merrill Lynch.

So, this may be a bit premature, but it seems like the market is looking for above-trend growth in 2012. I know the Auto-related buyback is going to drive a much lower share count that's going to accrue disproportionately to that year. So you really don't need much in the way of EBIT growth next year to drive much stronger EPS. But I guess in the past, it has usually been wrong to expect big growth here off of a depressed comp.

So I guess the question is, what's your appetite to let that lower share count flow to EPS rather than find some other reinvestment rate and use it as a cushion? So, what's the appetite to grow above trend for 2012?

Well, Chris, we are still putting our plans together for fiscal '12. And we will come out with our initial outlook in May. We are obviously trying to balance all those investment choices. Obviously, we're going to continue to invest in innovation. We're going to continue to invest in our IT infrastructure and our facilities and things like that. So you are going to see higher expense rates from us in '11, and some of those will continue into '12.

Having said that, fiscal '12 will benefit from a lower weighted average share count, as you point out. Consensus estimates on weighted average shares for us in fiscal '11 are somewhere between 137 million to 137.5 million shares. Using that as the base and our plans to buy back shares in the second half of the fiscal year, we should see about a 7% reduction going into fiscal '12 on our weighted average shares.

So, I think you start from a base of somewhere around that number lower shares, and then we will have to build the operating plans for fiscal '12, and we will come out with those numbers in May.

Yes, thanks. And I guess it's just -- I only ask because conceptually, the lower share count is tied to something that you did in fiscal '11, right? So if those two, if the Auto sale dilution and the share counts were matched up, you would have continued to try to commit to a double-digit earnings growth every year, right?

So I'm just thinking in terms of your appetite conceptually more because you do have that one split from one year to the next, right? You're getting hit with all the dilution this year, but next year you should get the offset to that. And if you don't do that, then it kind of feels like the shareholders will have felt all of the bad from the earnings side of the divestiture, but none of the good in the share repurchase if you don't let that buyback flow through to earnings growth. So, conceptually, is that how you're thinking about it as well?

Well, I think you can say that the share buyback benefit is going to flow through the EPS. I mean, we are not planning to take that and spend it anywhere, so if that's your question, that should flow through.

The real question is, from an operating basis, which is what we are really focused on, from an operating basis, where will we come out without outlook for fiscal '12? Are we thinking mid-single digits? Are we thinking higher? Those are the plans that we are still putting together. And I would say that would be added on, at least from an EPS perspective, that would be added on to the 7% that will benefit from the share count.

So I think, Chris, you can safely assume that the shareowners should be fairly well taken care of, given that.

Great. Thanks for the color, guys.

Bill Schmitz, Deutsche Bank.

Just on bleach, is there like a task force out there that's trying to figure out what the heck is going on? Because obviously your market shares are up, but for some bizarro reason, both in the end channels and if you look at the panel data, it looks pretty awful out there. So is there an explanation, or is there anything you guys can do to kind of stop the bleeding?

So we're working hard, particularly on the liquid bleach side, to see -- to shore up the business, stabilize it and grow it. We do have some innovation going out on our scented line, which is a significant improvement on the premium part of that business, which has been well received by consumers and we think will help things. And we continue to focus on kind of two messages with the consumer. One is the better whites in your laundry load, and the second message is around germ kill. So we do hope for some improvement in the longer term behind those efforts.

Bill, the only thing I would add, too, is when you look at those bleach numbers, again, we are lapping numbers from last year of almost 5% growth in the category due to H1N1 and other concerns about the pandemic. And I think that that was the strongest growth in the year-ago quarter we've seen in a long time. So we are lapping an extraordinary comp.

The other thing is, I think we've surrounded the problem in the sense that we know one of the fundamental issues we have on that business is dosing, where people don't quite know how to handle HE washing machines. We think we've got a fairly simple packaging change that can help in that as we go into the next year or so.

So we think we understand the issue. And I think the innovation Larry spoke of will help stem it. But we know we are lapping an unusual comp. We've got good innovation coming on the basic side in terms of fragrances. And then we will have more news to come to address this dosing issue.

Okay, great. And then just one quick one, if I could. I don't know if this -- the all-outlet panel data from IRI is right or wrong, but, you know, I pulled a bunch of the Wal-Mart stuff -- not just your categories, but broadly across the industry -- and it looks like a disaster. I mean, like, losing massive amounts of market share, some categories down in the high teens. Is that consistent with what you guys are seeing, and if so, how long do you think that lasts?

Our results are definitely softer in Wal-Mart than the rest of our customer portfolio. There definitely have been some executional issues among the partnership at Wal-Mart. A lot of that is their switching strategy away from some of the things they did over the last several years around both pricing as well as assortment and shelf.

That's all changing as we speak. We are, quite frankly, excited about their new direction, which is essentially going back to their core of offering branded products at an everyday low price. We think that will advantage us. But the road to get there has clearly been a little bumpy for us and many others.

Okay. And aren't they also talking about smaller pack sizes, so shouldn't that in theory help your margin per unit also?

Haven't heard particularly smaller pack sizes. They do have an approach to opening price points in categories to address the very-low-income consumers. And sometimes that translates to a lower pack size, but it doesn't always translate that way.

Okay, great. Thanks, guys.

Lauren Lieberman, Barclays Capital.

I was hoping to talk a little bit about profitability in the Lifestyle segment. I know you put a little note about it in the press release, but it was sort of striking that it was the one business with positive sales growth, but enormous margin degradation and profits down some 15% or something. So can you talk a little bit about what's going on in that business?

You know, we did make some choices around advertising, so we did increase our advertising in that segment in the quarter, having to do with various timings of new product launches and other things.

There are some higher admin, some higher manufacturing costs for a variety of reasons, and they are kind of numerous. There's not like one big element that's driving our cost structure up. But there are some kind of one-time things in the manufacturing and logistics area that cost us quite a bit in the quarter.

Overall cost savings did offset commodities, so it wasn't an issue of commodities. And I think that probably the quarter is a bit of an aberration versus the average. And I don't think we would necessarily see that kind of earnings decline play out over a longer period.

So the majority of it really, then, it sounds like was the admin and manufacturing, not the advertising, like more one-time type of items?

Yes, that's right.

The other thing, Lauren, in there, just to realize, on the admin side of this is, Burt's Bees when we bought it was in five countries. We are now in 30 countries. So there is some investment, obviously, in building out the international footprint on Burt's that manifested itself in that quarter. But as Larry said, I would consider that an aberration, and I would consider it a lot of one-time things hitting in that quarter.

Okay, great. And then another thing on cost structure, and it was just on SG&A, and I know the last couple of years you guys have opted to absorb restructuring costs and the IT investments and so on. But you now, I think, SG&A, or selling and admin, really, is up 150-plus basis over the last couple of years, yet this quarter it was down.

So when do we start to see that trend reverse? I mean, can selling and admin come back down to prior levels? I know everyone spends a lot of time talking about your gross margins being at, quote, peak levels, but selling and admin has crept up at the same time. So how do you see those two playing against each other as we move forward?

I think the short answer is, over time, we would expect to see some declines in our admin as a percent of sales. To your point, we have been investing in a number of things over the last four to six quarters. We are down a little bit in the quarter, but that has to do more with timing of the spin than anything else.

My sense is, Lauren, we're going to be elevated on our SG&A spending, certainly in the back half of fiscal '11 and into probably the front half of fiscal '12. And that's primarily related to the peak of our spending on our IT, particularly our international IT project, which we start our first wave of go-lives in August and then the rest of the waves are phased in. And then our move of our R&D facilities from our old campus in Pleasanton to the new campus happens in the fall. So we are going to have some peaks there.

We do need to acknowledge that we have some stranded costs associated with the sale of the Auto business. So I don't know that we will able to get all of those out. We are certainly working against getting some of those out. But I don't know that we will fully return to some of the lower levels that you saw in admin call it 18 to 24 months ago.

But we think these investments are really going to pay off. Certainly on the IT front, getting our International businesses on our SAP platform presents lots of future cost-savings ideas that will keep that pipeline healthy. And we will certainly be operating at lower overhead costs associated with our R&D activities with the new campus.

So with the future cost-saves ideas, I mean, then do we get in, let's call it 12 months from now, more of a discussion where, I don't know if they call it [CCEN] anymore, but is more of an ongoing cost-savings program where you're not needing to absorb charges in the P&L to deliver those savings?

It's possible, depending on the mix of projects that we are going after. We are making investments.

As we've talked about in the past, we always provide for $20 million to $30 million of pretax money, whether that's charges for asset impairment or higher SG&A or other things that we need to invest in, to be able to keep our pipeline healthy. My guess is we will continue to provide this $20 million to $30 million a year, because that's the seed money for driving these this cost-savings pipeline in this $90 million to $100 million level.

So we've come out of the investments over the last couple of years, like consolidating our home-cleaning manufacturing into our Atlanta hub, closing some of our other plants. You know, those are all coming online, and we are seeing the benefits of those investments in this $90 million to $100 million that we are delivering this year. We are now making the advanced investments in our IT in infrastructure and the International, which will drive a pipeline of savings over the next several years, and similarly our R&D facilities.

So I think it's just prudent to have the $20 million to $30 million a year. It's in our base. I don't see it needing to go up at this point. But it's just in our base, and it's the seed money that keeps our cost-savings pipeline healthy.

Okay, great. And just if I can follow up, one last thing, which is maybe a little off-color, but you beat your preannouncement pretty handily. Can you just comment maybe on how that happened? Should you have waited a week to kind of finish going through closing the books process? Because in certain respects, it was much ado about nothing.

You know, we came out -- I assume you are referring to EPS continuing ops before the charge?

That's right.

Yes, we were out with I think a $0.57 to $0.63 range on the January 3 release. We could have always waited, I guess, for a while, but we felt it necessary to get the announcement out related to the impairment charge. So that was really the primary driver of the timing of the announcement.

We ended up probably up about $8 million to $10 million on a pretax basis versus where we thought we would be. It's just a lot of little things, frankly. Our administrative spending, until we get done fully closing the books and closing off the accruals, you don't know quite where you're going to come out, but we were slightly favorable in admin.

On our TSA -- our transition services arrangement with selling the Auto business to Avista -- we were a little bit higher than our forecast there. When we closed out our ad spending for the quarter, we ended up being slightly favorable there.

We did see sales come in slightly at the lower end of the 3% to 4% range that we were projecting. And we had a little bit of higher gains on some asset sales that we were doing in the quarter.

So all of that kind of adds up, kind of onesies-twosies all over the place, and added up to about the $8 million to $10 million. But I would not have wanted to wait any longer in getting the announcement out on the impairment.

Okay, thank you so much for that detail. I appreciate it.

John Faucher, JPMorgan.

To follow up on Lauren's question, I get the impression that as you guys preannounced the second quarter that what you were expecting was pretty notably below where consensus had settled out. And so aside from the $0.05 from the lower buyback, can you talk about the rest of the change in your guidance? Because it seems as though the business is getting a little bit better. You probably came in a little bit ahead of where you thought you were going to come in ahead for the second quarter. So can you talk about what the rest of that delta is as we look at the back half? Thanks.

You know, as I look at our back-half outlook, think about front half/back half, I guess, we had an EPS range of $4.05 to $4.20 prior to coming out with the announcement. There was about a $0.05 impact on the EPS related to the timing of share repurchases. Again, that's just a fiscal '11 back-half impact. We'll get the full benefit in fiscal '12. So you've got about $0.05 there.

The other primary driver is the fact that we are coming off slightly off our margins, at least for the full year. And that's really reflective of the impact that we've seen in the first half of the year and slightly more commodity cost pressure in the second half.

So we were originally thinking we would be up slightly -- call it 25 to 50 basis points on margin. We're now saying that's going to be about flat to down 50 basis points.

And then obviously we lowered -- on the January 3 announcement, we lowered the top-line outlook by -- call it about 1 point if you're using the midpoint of the ranges. So, bringing down, tucking down a little bit the outlook for sales growth in the year, combined with a little bit on the margin line, that kind of adds up to -- call it the other $0.15 that we took the outlook down.

And how much of that do you think is the timing-related things that you talked about sort of as you closed off the quarter? Is that a big chunk of it?

No. Again, I've kind of looked through the $0.04 or $0.05 extra that we delivered in the quarter. I mean, they do drop to the full year, but --

That's what I'm saying; so I'm trying to figure out sort of exactly how much you are changing the back half versus what happened in the first half. So do we take some of that upside versus your guidance range in this quarter and say, okay, that's expenses that maybe would have hit in the back half otherwise?

You know, there's not much of expenses that hit in the front half or any sort of pull-ahead into the first half. So, I mean, the extra $0.04 to $0.05 is obviously in our outlook. That drops to the full year, but it's more operating that we're looking at in the second half, and I think that all adds up to the $0.15.

The trends that we are looking at -- again, they're versus our previous expectations -- again, slightly down on our margins and slightly down on the top line. And those are the two biggest drivers at least in the second half. But we do anticipate better performance in the second half.

Okay, thank you.

Linda Bolton-Weiser, Caris.

Sorry if you explained this, but in the quarter, there was a $12 million other income item. And I realize that in the prior year, the other expense is related to Venezuela, but what was the $12 million other income in the second quarter?

Linda, a lot of that is just kind of the miscellaneous things that you would normally expect to see in income. Specifically, if you look at the swing, it's about I guess a $30 million swing quarter over quarter. Call it about $19 million to $20 million of that was Venezuela, so that explains a big chunk of it.

The other things that we record in here would be things like mark-to-market changes on derivative contracts that don't qualify for hedge accounting. That probably was a benefit of call it $2 million in the quarter. We sold some fixed assets during the quarter that's kind of on a normal flow basis. We had closed a couple plants over the last several years, and some of those properties were sold. That probably benefited us about $2 million.

We have some interest income in here. We also record our equity and income of joint ventures, which probably contributed an extra $1 million there.

We have some low-income housing projects that have run their course on tax benefits, and we are starting to dispose of them, and that created some revenue for us.

And then finally, we have the TSA, the transitional services revenue from Avista that flows through that line.

So you add all that up, it kind of adds up to the change. And so it's lots of little stuff that flowed through there. I would say if you're trying to model this for the second half, we certainly won't expect to see that big of an other income line in the second half. Probably you ought to assume that second half of fiscal '11 on this line will look an awful lot like the second half of fiscal '10.

Okay, thanks. That's helpful. And can I also ask you about just more on the gross margin? It seems to me that, I mean, the gross margin that you reported in the quarter was weaker than when you communicated earlier in January. I mean, did it come out weaker than expected because of the commodity cost increase that really escalated, or was it the trade promotional aspect or the mix? Or what made it come out worse than you kind of had expected?

Yes, I would say, Linda, most things were pretty close to our forecast. I guess the one area I would point to that was probably a little bit worse than what we had thought would be in the mix, the business and channel mix. You never quite know where you're going to come out until you fully close the books on it. But I would point to that as being slightly more negative than we had in our outlook. But I wouldn't say it was a huge mover of it, but, yes, we were down just a touch from where we thought we would be, and I would attribute that to business and channel mix.

Okay, thanks very much.

Jason Gere, RBC Capital Markets.

I guess just the first question, and I know you've given us some breadcrumbs here, but as we look out to the next two quarters, and just so we don't have another instance with the second quarter where the expectations get too high, can you kind of just piece in terms of from a bottom-line perspective for modeling purposes, the earnings growth -- should it be a lot stronger in the fourth quarter than in the third quarter? I know you are saying gross margin in the third quarter will probably see the brunt of the commodity costs and maybe the fourth quarter sees more of the innovation. I was just wondering if you could conceptualize that for us. And then I have another question.

Yes, I'm probably not going to -- you may not like it -- I may not help you much on the Q3/Q4. I would probably talk more second half and full year.

So, certainly, we are projecting more margin improvement in the second half versus the year-ago period. I would say margins will be a little tighter in Q3 because, as we pointed out, we will probably see more of the commodity pressure sitting there. Trade will probably be call it flat in the second half to what we spent in the year-ago period.

So the positives that we will see in the second half is, certainly, we are projecting volume and sales growth in the second half. We think our business mix, which did impact our margins in the first half of the year, we expect that to get somewhat better. We expect foreign exchange to be -- if you look at spot rates today and project those out, since Venezuela is behind us, we expect some favorability there.

We will be up somewhat in our selling and admin spending because of IT and facilities. However, that's always been in our outlook, so I don't know that that's going to be a significant mover.

So that's kind of how we are looking at the second half.

Okay. And then just a second question, really, on the innovation. I know you're saying it's the strongest innovation maybe in eight quarters, but can you talk about how much of the innovation is really going to be behavioral changes that the consumer is willing to take right now? Is there any price that's related to some of this innovation? And will there be any, I guess -- I guess any changes in inventory levels just between third and the fourth quarters, just for any buy-ins for the new innovation? Thanks.

So I would categorize this innovation as what we would term core growth kinds of innovation. So, very solid improvements on existing brands or incremental line extensions, so nothing here which we would term in the old days a game-changer that requires a whole new consumer habit, which means the risks around them and our ability to project what they will deliver is a lot more accurate than it would be in a more game-changing kind of situation.

And the good news is it's a fairly broad portfolio. So really every segment and almost every business has some type of innovation going out in the second half. And a lot of it is pretty exciting new kinds of things within our categories and a few in adjacencies like the tinted lip balms on the Burt's business.

And on the inventory question, just to address that, most of the start of ships on a lot of this product is in January and February. So most of the inventory builds associated with that are reflected really what you see in the inventories in second quarter. So we shouldn't see a material move in inventories associated with new products.

We do have a little bit of inventory build related to a change in our information systems that will happen in the fourth quarter. We are replacing some of our production planning systems, and so we are building a little bit of safety stock associated with that cutover, but most of that should bleed out by end of the fourth quarter.

Jason, the only thing I would add is, one of items I think that we are particularly excited about and interested in is the Brita on-the-go bottle. And while it's not asking the consumer to change his or her behavior, it certainly takes advantage of changing behavior out there as people move away from bottled water. You know, for the first time, we can get a Brita on-the-go bottle with a filter built in so that you don't have to carry bottled water around. So that one looks particularly exciting to us.

So this is a portable water bottle with a Brita filter included.

Okay, thanks a lot.

Tim Condor, Wells Fargo.

Just a couple of questions, mostly surrounding margins and promotions going forward. If we look at litter, garbage and lawn bags, and bleach in general, we've kind of seen the promotions sort of trough in September, in many cases period end, but they've really accelerated, both for the category and yourselves, into the data through the end of January.

And just kind of wanted to get a little more color or explanation -- are you saying that the promotions on a year-over-year basis in the back half of FY '11 will mirror what you saw in the back half of '10? And if so, is that incorporating the sort of accelerating trend that we are seeing here of late in these key categories for you?

I'd say if anything, overall promotion spending is kind of coming down across our categories, particularly driven by lapping some of the new innovation that occurred in the laundry category. And we expect that our trade spending will be about flat to where it was a year ago in the second half. It kind of remains at some elevated levels versus historical trends, but versus year ago we expect to be flat, and we expect that will meet the needs of the business in the second half.

So if anything, we are seeing a deceleration in terms of promotion.

Okay, so a decelerating rate of increase and then flat you're looking for in the back half of '11 versus '10?

Correct.

Okay, okay. And then just again to clarify, on a go-forward basis, your annual anticipated cost savings from ongoing various restructurings, I think that you talked about the cost of those restructurings would kind of hold in the $20 million to $30 million per year range, but then the anticipated benefits that you'll have going forward to offset commodities and other issues -- just to revisit that number, if you could?

Certainly. And again, for fiscal '11, we are anticipating -- the official range is $90 million to $100 million. I think we're on track to be towards the higher end of that range, if not slightly above for the year. So we feel good about it this year. And the $20 million to $30 million spend that we have in the system this year to support cost savings is probably around the middle of that range.

As we look forward, our pipeline of cost-savings ideas and future investments that we will make, we feel pretty comfortable about continuing our $90 million to $100 million in annual cost savings, certainly as we look out in fiscal '12 and also beyond.

Great. Thank you, gentlemen.

John San Marco, Janney Capital Markets.

Does the zero to 1% sales growth, does that include the normal 2% net lift you talked about from innovation, or are you assuming something higher in your budget?

No, the innovation is built into our numbers.

Okay, thank you. And then, I know you've spent a lot of time on the call today addressing your cause for confidence on the top line, including what sounds like a much more robust second-half innovation program. I was hoping you could sort of deliver the same color about your gross margin progress in the second half, which is dramatically better than the second quarter.

Can you just crystallize why you are so confident, and then also maybe where the variance in that budget comes from and what could go wrong?

Let me try to address first half/second half. So in first half, obviously, we got hit by some pretty negative foreign exchange, primarily Venezuela. So that is behind us. And we, again, at spot rates today, we would expect foreign exchange to be a slight positive for us as we look into the second half.

We continue to have a strong cost-savings pipeline. And if we are able to be at the high end of our range or slightly above it, that will be a slight positive for us on margins in the second half.

We will continue to get the benefit of pricing. Glad took a pricing action in August. We will continue to get that benefit.

International has been taking pricing as well. Those benefits will continue into the second half. And we are already starting to anniversary price rollback that we took in the year-ago period, so that drag will go away from us.

On logistics and manufacturing, I think the inflationary rates are about the same in the first half/second half. And as I mentioned a little bit earlier, we are anticipating more favorable business and channel mix as we enter the second half.

So the wildcard on margins is obviously commodities. We are showing that that's going to tick up a bit from our previous expectation. We will continue to look at pricing, but for now, we are going to be a little bit higher on margins.

So taking our outlook from call it up 25 to 50 basis points to flat to down 50 really is reflective of -- primarily reflective of the performance we had in the first half of the year, and then just slightly higher commodities expectation in the second half. But we still expect to finish the full year at an average gross margin that's pretty close to our historic high.

And then the question will become, as we develop our outlook for fiscal '12, what is our outlook for commodities as we enter that year, and what might we need to do on pricing?

Great. Well, that's very helpful. Thank you for the color.

Connie Maneaty, BMO Capital.

Could you describe for us how much resins now account for the -- how much of the cost of goods resins are now versus what they were before you sold the Auto Care business, and if you believe you are more or less exposed to the resins cycle?

Connie, the total exposure to resin is minimally impacted by the auto business. So there's really no material change there. You know, we've talked about these kind of key commodities being about 15% to 20% of our cost of goods sold. And depending on where the price of resin is, it moves within that range.

So you mean all of your commodities are 15% to 20% of cost of goods, not just resin, right?

No, it's primarily the resin components. The energy resin component sits in the 15% to 20% range.

Oh, okay, great.

Connie, as we have said in the past, all commodities and all lawn packaging materials, the great part of which are commodity-driven, probably represent around 55% to maybe 60% of our cost of goods.

Okay. And could you give us an update on what's going on with Green Works? Is it a key focus these days? Is it being deemphasized? How is it doing?

So we are actually pleased because where Green Works has established itself, we're starting to see some positive trends. So we continue to have passion for the opportunity. It obviously suffered quite a bit in the economic downturn. But we are seeing some positive results, and we are encouraged by that.

I wouldn't say that we are heavily spending behind it; it's more of a targeted effort, particularly in social media channels and word-of-mouth to the right target audience. It's a much more targeted approach than we took initially, but we are encouraged by some of the positive signs we are seeing.

Yes, Connie, I would add that one of the key drivers I think in this business going forward is we are working very hard to get our price premiums on Green Works down into the 5% to 10% range versus the 20% to 25% range when we first launched. I think if we can get our price points down in that range, as the economy improves, we will really start to see some resurgence in that brand.

I mean, it still is the number one natural household cleaning brand, so we feel very good about that. And if we get this pricing down where people can buy a natural alternative at near the price of a traditional cleaner, we feel very good about the long-term prospects for the brand.

How far along are you in that process?

Well, we are getting it down on the sprayable cleaners. We are certainly getting it down in the laundry detergent area. And the dilutable piece has basically gone away. So in spray cleaners, which are the bulk of the Household side, we are getting it into that range.

Into the light-duty liquid dishwashing soaps, it's still more in the 15% to 25% range. And laundry is getting down into the 5% to 10% premium versus other premium detergents.

So it sounds like most of the work has been done in those pricing changes.

We are getting it down there fairly close, we've got more work to do. But we are getting smarter at how to reformulate these products and still keep the natural component to it.

Okay. And just one final question. On the new cat litter, what kind of premium price is it going out at?

It is part of our Fresh Step line, which is premium, but it is parity to the rest of the line.

Okay, great. That's all for me, thanks.

Andrew Sawyer, Goldman Sachs.

A quick question on the Burt's write-down, and I'm just wondering if that in any way changes your approach to market or approach to M&A strategy, and also if there are any learnings to take away from that. Thanks.

Yes, I think we are still very bullish on that business, Andrew. I just think in the, obviously, in the context of the recession, we paid too much for the business. And the first year we owned it, we were actually ahead of our valuation model. When the recession hit, we went from over 20% top-line growth to low single digit. And that growth rate held for about 15-plus months, which simply got us off the track on our 10-year valuation model. We just couldn't make up the ground.

Having said that, the last six months, we are back to double-digit growth on that business. The brand is gaining share. And as I said, I think to Lauren, we are now in 30 countries. Now, a lot of those are small flags being planted, but we feel very good about the prospects. I mean, the international side of Burt's grew over 40% in the last quarter.

So the business -- it's our fastest growing business. We still feel great about the category and really great about the brand. And it's just getting caught up in the recession, we paid too much for it.

And Andrew, from a perspective of how to think about M&A, we knew when we acquired Burt's that it was mostly a revenue synergy play. And those tend to have higher risks because, as you know, many acquisitions, you're able to pay for a large part of the premium through cost savings. That wasn't the case here.

We were willing to step out that extra ring for this brand because of the nature of the brand, the nature and growth of the category, and the ability to take this brand global. So, obviously, none of us had foretold two years of the worst recession in 75 years, which put a dent in the business. But as Don said, we still feel very good about this particular brand. But from an M&A perspective, certainly we would like to do transactions where more of the premium would be based on cost savings versus relying as heavily on revenue synergies.

All right. And then just a quick one on a different topic. This channel mix impact -- I had never really heard that from you guys before. Are you structurally lower gross margin in Dollar and Club stores, and is that a function of what products you sell in? Or are there lower operating expenses that offsets that? Could you just give a -- frame that up a little bit for us?

So I would say we are not materially different in the Dollar channel versus the rest. And even within Club, you would have to look at the specific item that we are offering in Club to see if there's a difference. But generally speaking, margins are little bit lower in Club because of value sizing, higher -- bigger sizes at value prices.

Okay. So when you guys break out channel and product mix, most of it was product mix, then?

Well, the impact in Q2 was business mix as well, because our higher-margin businesses were lapping H1N1, and those categories have been weak.

But I'm just saying the channel component of that was small?

Smaller than the category component, yes, yes.

Okay. Thanks so much, guys.

Alice Longley, Buckingham Research.

My question is partly housekeeping, just to try to do the weighted average here. I'm assuming that your sales in the US overall were down about 4%, with volume down 3% and price/mix negative 1% -- is that correct, putting the three segments together?

I'm sorry, Alice, can you repeat the question?

I'm trying to figure out how much your sales in the US all together -- putting those three segments together -- were down in the quarter. And I'm guessing they were down about 4%, with price/mix negative 1% and volume negative 3%?

Down 4% is about right. Probably have to follow up with you on the specific drivers within the overall US versus International business. I can do that after the call.

Okay. And if it was negative 4% and you said your categories, all retailers included, were down 2%, why are you saying that you gained share?

Sorry, Alice, we are just looking at the data.

Yes, I think we're looking at -- I don't have the sales number.

Well, you just said your US sales were down 4%, and your categories were down 2%, you said earlier. So that sounds like you lost share. Maybe you mean you're just gaining share on a 12-month basis or something like that.

No, well, the share gains are 52-week basis, all-outlet. We actually did lose a little bit of share in terms of the quarter and track channels. Unfortunately, we don't have an all-outlet number. But based on what we know, we think we've also gained share on an all-outlet basis in the quarter.

Well, plus the difference is, our sales number versus consumption that's going through those retail channels, which is what the shares are judged on. So the consumption was a little bit higher than our sales decline.

I thought you said at the beginning of the call that your categories all-outlet together were down 2%, not just tracked channels. You said your categories were down 1% tracked-channel basis and then down 2% all retailers included.

No, Alice, as Larry said, we only have all that data on a 52-week basis, so it may be mixing the 52-week discussion versus a quarter discussion.

You're comparing retail sales --

Oh, I thought that was -- you said Q2.

You're comparing retail sales with our sales, so the -- and there's an inventory impact, so it's a little hard to translate all those numbers in a quarter. But we are happy to get back with you and try and work through those mechanics.

Yes, that would be great. Okay, thank you.

Chris Ferrara, Bank of America-Merrill Lynch.

I will keep it quick. Can you give the EPS impact of Venezuela in fiscal '11? If you can include translation and transaction -- do you guys have that for '11, what you think it will be, anyway?

I don't know if I have it on a forecast basis handy. I think the Venezuela impact, what was the Q2 -- Q2 impact was probably about $0.08 to $0.09, I think, and probably a similar number in the first quarter. So we would not expect to see that in the second half.

Yes, Chris, as Dan noted, probably $0.08 to $0.09 in each of the first two quarters, so you are approaching $0.20. You would've seen a similar impact in the last half of last year. And then last year we also, and at least in Q2, we had the FX exchange losses as well. (multiple speakers) For fiscal '11, you're probably at about $0.18 to $0.20 impact, with all that happening in the first half of the year.

And that is translation and the transaction drag that you feel as you try and bring money in there? Is that right?

It's both impacts, yes.

It would be both combined, Chris.

Great, thanks a lot.

This concludes the question-and-answer session. Mr. Knauss, I would now like to turn the program back to you.

Thank you. Well, folks, as you note during the last hour of Q&A and the presentations by us, the economy obviously remains pretty challenging. But I do think, just to reiterate, I think a lot of these headwinds we faced are, as we noted, beginning to abate. And we do feel good about the second half, and not just the innovation pipeline that we have for the top line, but we also feel very good about the cost-savings pipeline. And we will continue to build that out as we talk about FY '12 in the May call.

So we look forward to speaking with all of you again in May, and we will discuss the third-quarter results and then give you the initial outlook for FY '12. So, thanks, everyone.

That does conclude today's conference. We thank you for your participation.