高樂氏 (CLX) 2012 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to The Clorox Company's fourth-quarter, fiscal year 2012 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 Austinfeld, Vice President of Investor Relations for The Clorox Company. Mr. Austinfeld, you may begin your conference.

Great, thank you.

Welcome, everyone, and thank you for joining Clorox's fourth-quarter conference call. On the call with me today are Don Knauss, Clorox's Chairman and CEO; Larry Peiros, our Executive Vice President and Chief Operating Officer; and Steve Robb, 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. 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 and economic profit. Management believes that providing insights on these measures enables investors to better understand and analyze our ongoing results of operations.

Reconciliation with the most directly comparable financial measures determined in accordance with GAAP can found on today's press release, this webcast, prepared remarks or in 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-Q 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. Today, Larry will start with a discussion of our volume and sales results. Steve will follow with a review of our financial performance for the quarter and fiscal year, as well as discuss our current outlook for fiscal year '13. Finally, before turning to Q&A, Don will close commenting on some areas of strategic focus for the new fiscal year.

With that, let me turn it over to Larry.

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

Overall our fourth-quarter, top line performance was strong and we finished fiscal '12 in good fashion. We delivered sales growth of 4% on top of 4% sales growth in the year-ago quarter. Even without the recent acquisitions, sales grew about 2.5% and sales were up in all four of our business segments.

Turning to volume, Q4 volume was up 2%, about 0.5 the rate of sales growth due to the benefit of price increases across most of the portfolio. Our new product innovation program delivered record levels in fiscal '12 with over 3 points of incremental sales growth, and our integrating marketing plans continue to drive strong market share results. We feel great about the quarter and the progress we are making in driving top line growth in a tough economic climate.

In our US business, our all-outlet retail market share reached a record high. We were up about 0.5 a share point over the past 52 weeks to a 28.1% share. Moreover, we gained our health share in every one of our US categories. These share results are particularly encouraging given recent price increases on almost every US brand.

The other good news is that our US categories are getting healthier as pricing takes hold and the economy recovers. Overall category consumption on an all-outlet basis was up about 0.5 point for the past 52 weeks. This is the first consumption growth we have seen in our US categories in the past three years. Our cleaning segment delivered a very strong quarter with volume up 5% and sales up 7% behind volume gains and pricing. Home Care volume increased behind double-digit increases in our portfolio of Clorox-branded cleaning products, including strong gains in Clorox Disinfecting Wipes due to strong merchandising, and solid innovation like our new Clorox bleach foamer spray.

Gains in Home Care were partially offset by volume declines in Pine-Sol, due to the substantial price increase driven by escalating pine oil costs. Our overall Home Care market share was up almost a full point, achieving a record, all-outlet market share in the past 52 weeks.

Our Laundry business saw volume declines primarily due to the impact of price increases taken last August of both Clorox bleach and Clorox 2 products. Dollar share was flat for the past 52 weeks and the category stabilizing after a couple years of significant decline. This month we will begin the rollout of our new concentrated Clorox bleach. Retail reaction has been very positive and we expect a smooth transition and strong merchandising support.

On our Professional Products business, we saw another strong quarter. Volume was up by over 50% driven by the recent acquisitions and a double-digit increase on the base business. In our Household segment, volume declined 2%, but sales grew 3%. Glad saw volume and sales declines driven primarily by losses on Glad food storage products, behind recent price increases and some distribution losses. Glad regular trash bags were also down in the quarter, but premium trash bags were up mid-single digits behind continued growth on Glad Odorshield with Febreeze.

On Charcoal, volume was equal to the year-ago quarter, and sales were up high-single digits driven by pricing and favorable mix. Cat litter volume and sales were down in Q4 due to a recent price increase and lower merchandising. On an all-outlet basis, cat litter continued to grow share over the past 52 weeks behind share gains on Fresh Step. In our Lifestyle segment, volume grew 2% and sales grew 3%. Volume and sales were up strongly in our US Burt's Bees business behind category growth and innovation, including gud, our new natural personal care brand.

Brita grew sales and volume at high, single-digit rates behind the continued success of the Brita bottle. We've already launched a variety of new bottles in different colors, and we recently launched a lot of the smaller bottles designed for kids. Sales in Dressings and Sauces were about flat with the benefit of price offsetting the negative volume impact of price increases.

In our International segment, both volume and sales were up 3%. In Latin America, our largest international region, volume was up and sales grew mid-single digits. Solid performance, despite some losses in our non-strategic Export business and double-digit volume declines in Venezuela, resulting from the government's recently-implemented price control law.

We also grew volume in sales in the rest of the world. Our market share was up in Latin America, but down in Canada and Australia. Category sales growth remains quite strong in Latin America, with slower growth in the more developed international markets.

Let me take a minute to provide perspective in our advertising spending in the quarter. Our advertising rate was about 8% of sales, down about 1 point from our normal spending rate. Trade spending was up about 1 point, resulting in total brand building spending equal to the year-ago quarter. About half of the advertising reduction was in international, reflecting the continuing challenging [additions] in both Venezuela and Argentina given the combination of high inflation and government imposed price controls.

For the full fiscal '12, our US advertising was above the 9% rate, and we continue to see improvement in our advertising ROI, reflecting the fact that both our sales growth and share results continue to be strong. We also retain a high share voice in each of our categories often by a wide margin. In fiscal '13, we are targeting a 9% rate of spending for the total Company consistent where we have been over the last several years. We will ebb and flow a bit versus that target on a quarterly basis.

Overall we feel very good about our Q4 top line results, as well as the 5% sales growth we delivered in fiscal '12. Our record US share results reinforce that we are doing the right things to build our brands in a tough environment. Looking forward, our sales dollar for fiscal '13 remains 2% to 4%, reflecting continued momentum supported by innovation across our brands, but moderated by uncertainty in some international markets and a tougher comparison to a strong fiscal '12. We are looking forward to another year of solid top line performance.

With that, I will turn it over to Steve.

Thanks, Larry, and hello, everyone.

I'm going to review our fourth-quarter and fiscal-year results and discuss our outlook for fiscal '13. Starting with the fourth quarter, sales grew 4%. We have gains in all four reportable segments. Excluding the impact of the Aplicare and HealthLink acquisitions, sales were up more than 2%, driven by benefits of pricing and base volume growth. These benefits were partially offset by unfavorable foreign exchange rates and higher trade spending, both of which impacted sales by nearly 1 point.

As expected, our fourth-quarter gross margin decreased 80 basis points to 42.7%, versus 43.5% in the year-ago quarter. While pricing and cost savings more than offset higher commodity costs, increased costs for compensation, manufacturing and logistics had a material impact on margin. Mix also had a negative impact on margin of about 80 basis points, but less than we saw in the third quarter when we had particularly strong merchandising events.

Turning to selling and administrative expense, the rate of spending came in pretty much as we expected, at about 14% of sales. The year-over-year increase reflected higher compensation expenses, and our investments in IT systems and new R&D facilities. Out of all of these factors, we delivered earnings from continuing operations of $174 million, or $1.32 of diluted earnings per share. This compares with $169 million, or $1.26 in the year-ago quarter, an increase of 5% diluted EPS.

Next, I'll turn to our results for the full-fiscal year. Sales were up a strong 5% for the fiscal year with gains in all four segments. This reflects improving US categories, strong results on our base business, a very successful pricing execution and the benefits of the recent acquisitions. Excluding the impact of acquisitions, sales grew a healthy 4%. Fiscal '12 gross margin decreased 140 basis points to 42.1% compared with 43.5% in fiscal '11.

As we've discussed before, the biggest factors were higher commodity costs and inflation in manufacturing and logistics partially offset by pricing as well as another year of very strong cost savings exceeding $100 million. Turning to selling and administrative expense. The rate of spending came in at about 15% of sales as expected. This is about 1 point higher than we have historically seen primarily due to our investments in IT systems and new R&D facilities.

Our tax rate for the fiscal year was about 31%. This is lower than our typical range of 34% to 35% due primarily to lower tax on foreign earnings. For fiscal '13 we continue to expect an effective tax rate of approximately 34%. Net of all of these factors, we delivered earnings from continuing operations of $543 million or $4.10 diluted earnings per share. This is a 4% increase in diluted EPS versus last year, excluding the fiscal '11, non-cash goodwill impairment charge on Burt's Bees.

Free cash flow from continuing operations in fiscal '12 was $428 million, or about 8% of sales, versus $462 million or about 9% in fiscal '11. The decrease was driven mainly by lower tax payments in fiscal '11, resulting from favorable tax depreciation rules and the timing of tax payments in fiscal '12. We continue to expect free cash flow to improve in fiscal '13 and beyond, as we rebuild our margins and complete our infrastructure investments.

As a reminder, we define free cash flow as cash provided by operations less capital expenditures. We ended the year with a debt-to-EBITDA ratio of 2.5 to 1. At the upper end of our targeted range of 2 to 2.5. We anticipate further reducing our leveraging in fiscal '13 to about the midpoint of our targeted range.

Next, I will turn to our outlook for fiscal '13 which does reflect some updated assumptions. We continue to anticipate sales growth in the range of 2% to 4% behind moderate category improvement and strong innovation. Since our last update in May, foreign currencies are slightly more negative and planned pricing is being reduced in light of the current softening commodity environment. We anticipate a majority of our fiscal '13 pricing will be in International, to help off set foreign exchange and higher inflationary costs. Net of these factors, we are still comfortable with our outlook for sales growth in the range of 2% to 4%.

We now expect EBIT margin to be up 25 to 50 basis points for the full fiscal year, reflecting recent softness in commodity prices, partially offset by more moderate pricing assumptions and decreasing foreign currencies. Our assumptions for higher global manufacturing and logistics costs, strong cost savings and reduced impact from mix remain unchanged. International is the one area that we continue to closely monitor, both from a sales and margin standpoint. Although we are executing well in most markets, two of our larger businesses in Latin America are Argentina and Venezuela, both of which have some form of price controls in place and challenging economic environments.

Turning to selling and administrative expense, we continue to anticipate expenses for systems and facilities investments as well as other infrastructure related investments to be in the range of $50 million to $55 million or about equal to fiscal '12. Both the SAP implementation in Latin America and the move to a new innovation center in Pleasanton are on track and expected to be completed by the end of fiscal '13.

Finally, as noted in today's press release, we are continuing with plans to optimize our real estate portfolio, including selling our former R&D facility in Pleasanton, California. Although we continue to anticipate a net gain on real estate transactions, it is no longer expected in fiscal '13, and we are still refining the timing and other assumptions. For this reason, our updated outlook no longer includes a one-time gain of $0.05 to $0.07 diluted earnings per share. Net of all of these factors, we continue to anticipate fiscal '13 diluted earnings per share from continuing operations in the range of $4.20 to $4.35 per share.

Looking closer in, we expect sales in the first half of fiscal '13 to be generally in the range of our full-year outlook of 2% to 4%. We anticipate gross margin to begin improving in the first half, but EBIT margin will decline in the first half for two reasons. First, we are still completing our remaining IT and facilities investments. Second, we continue to expect inflationary pressures and worsening currencies have also become a concern. EBIT margin is expected to grow in the back half of the fiscal year, supporting the full-year increase of 25 to 50 basis points.

We also continue to anticipate free cash flow of about 9% of sales in fiscal '13. Our priorities for the use of cash remain unchanged. These include investing in organic and inorganic growth, supporting the dividend, maintaining our targeted debt leverage ratio, and returning any remaining excess cash to shareholders. For fiscal '13, we project capital spending in the range of $230 million to $240 million, which includes the investments in systems and facilities. We continue to expect capital spending to decline after fiscal '13 to roughly $200 million to $210 million per year.

In closing, I am very pleased with our results in the fourth quarter and the fiscal year. Looking ahead, we are confident about our plans for fiscal '13 and beyond.

With that, I'll turn it over to Don to recap and we will open it up for questions.

Okay, thanks, Steve, and hello, everyone.

I, too, certainly felt great about the strong finish to the fiscal year. As we've talked, as Larry and Steve have talked, we grew sales 4% on top of a 4% sales growth we had in the prior-year quarter, and also grew earnings per share 5%. And that was on top of 20% growth in earnings per share last year in the same quarter. So I think those results are a good testimony to the strength of our brands and our innovation and really our people's excellent execution of the strategy we talked to you about in late May.

I think it's pretty impressive when you consider the challenges I know you are all aware of, that every company is facing in this tough economy. So, looking forward, we are going to continue to execute against the strategic initiatives we outlined at the analyst meeting in late May. First, we are focused on those three growth pillars. Recall, US retail which represents about 75% of our portfolio, Professional Products, and then the International side of our Business.

In our US retail business, it's all about this continuing excellent execution of our 3 D demand driving programs with breakthrough advertising, collaborating with our retail customers to win at the shelf, and then of course continuing to accelerate innovation to build our brands and categories. And, as Larry noted, we've got a strong pipeline for fiscal '13 in innovation, as well as we had in fiscal '12. In Professional Products, our plan is to leverage our brands and technologies to grow our Healthcare business organically, and expand inorganically through bolt-on acquisitions like we did with Aplicare and HealthLink.

And finally in International, we're focused on growing in the current markets where we have significant scale and capability as we outlined at the analyst meeting. We will complete our SAP implementation in Latin America this year, and certainly look forward to the business building and the cost savings benefits that it will provide over the longer-term.

Now, as we also mentioned at the meeting, rebuilding our margins is a clear priority, and this will be done certainly by continuing our strong track record of cost savings, taking pricing where appropriate and where cost-justified and when necessary, obviously offsetting the commodity and other inflationary pressures we see. And working to improve mix with a focus on higher-margin categories, margin accretive innovation and of course more efficient trade spending. I think the new innovation center in Pleasanton will certainly be occupied by the end of this year and it's going to be a real boost to both our innovation and cost-savings efforts.

Finally, as Steve discussed, we expect to continue to generate a high level of cash and utilize it as we have in the past in a shareholder-friendly manner. All said, as we enter our centennial year, I continue to feel very optimistic about our plans to drive profitable growth. And with that, let's open it up for your questions.

Thank you, Mr. Knauss.

(Operator Instructions)

Alice Longley, Buckingham Research.

I'm just trying to look at the performance of the US alone in the quarter. I am backing out that maybe volume here was down 2 and price mix was a positive 3; is that right? Or could you correct that?

To be honest, I don't have those numbers off the top of my head, because we don't look at the US business independently. It sounds about right, but I think we have to get back to you on the specifics.

That's all I had. Thank you.

Linda Bolton-Weiser with Caris.

Hi, just on the mix issue, you did mention very specifically that the 80 basis point gross margin impact was better than last quarter, but I don't recall actually getting a specific quantification last quarter. Could you just give us that? And also, the mix impact on sales, I guess this order, was negative 2%, and what was that in the March quarter as well?

And then related to that, mix, still the 80 basis point impact, even though it's improved it's still pretty negative. And, how should we just think about this over the very long term? Is this a real, secular issue that's just going to be a drag on your gross margin kind of on a real long-term basis? Or, maybe could you just talk about the whole issue a little bit more? Thank you.

This is Steve Robb. I can provide some color on this. I believe we did provide the mix impact in the third quarter, but as a reminder it was 140 basis point drag on our third-quarter gross margins. And just as a reminder, part of the reason that was larger than we have historically seen, because we had some unusually strong merchandising events that went on during the quarter, which increased it. As we had previously communicated, we expected mix to continue to be a drag, but not to the same extent that we had seen in the third quarter. So, for the fourth quarter of this fiscal year, fiscal '12, what we saw is that mix was an impact of about 80 basis points.

Now, looking forward, a couple of things. First, we do continue to anticipate that mix will be unfavorable. But we don't expect that it will be unfavorable at the same level that we've see in fiscal '12, in part because some of that negative mix is already in the base, and in part because we are starting to anniversary some of the particularly strong merchandising events that we saw in fiscal '12.

But this long-term trend where consumers are trading up to larger, more value-oriented sizes is going to continue, which is why, as we shared in May, we're going to continue to focus on taking a sharp eye to price curves to make sure that we take pricing where appropriate, continue to drive hard against our cost savings, and then finally focus on margin accretive innovation. And we think those things over time will help us mitigate some of the negative impact on mix.

Great. And can I ask just one other one on the gross margin? You quantified the other piece of the mix, other impact; and the increase in incentive comp was a pretty big impact. I think it was something like 100 basis points. Why is there so much of that in gross margin? Usually I would expect to see that in SG&A.

Yes, so keep in mind that the incentive based compensation is actually split between SG&A, but also gross margin. It gets into the accounting and where the people reside and how it gets classified in the P&L, so that's not unusual. But let me step back and provide a perspective on incentive compensation. So, just stepping back, our short-term incentive compensation program really has two metrics. The first is sales growth and the second is economic profit growth.

Now, in fiscal '11, the base year, that was the year where we established goals for ourselves and we simply did not achieve all of our goals. And as a result, we are a pay-for-performance company, so we simply did not pay out at 100% against those objectives. Fiscal '12 by contrast has been a much stronger year. And we have met and in many instances exceeded the goals that we set for ourselves. So really what you're looking at is a low base period in fiscal '11, a higher number in fiscal '12. I think as you start to go to fiscal '13, we would expect you will have more of a normalized look.

I think the other thing you should note is that our product supply organization where we have over 50% of our employees, everyone on the manufacturing side of our Business now is eligible for an annual incentive. And we've shifted funds around from other buckets, for example, pension to give people more of a potential to earn cash in the current year, so you're seeing what Steve said which was a depressed year ago, obviously better performance in FY '12 against targets. But you're also seeing now a much larger swath of people in manufacturing eligible for a cash incentive, which we think drives cost savings long-term.

Thank you. That's all I had.

Ali Dibadj, Bernstein.

Just wanted to get underneath your decision around advertising versus trade spend a little bit. So, what categories specifically was the shift happening? You initially mentioned advertising in Latin America, but was that aligned with trade spend? Or, are there other things at play? So for example, in competition was that trying to take advantage of some of the anticipated commodity relief? And moreover, the trade spend, if it was in the US, a North American business, it didn't really drive a lot of volume, I guess. So I'm trying to understand the almost trade spending elasticity in some sense, as well.

There are two big buckets. I think we talked about the International bucket which is about half of the reduction-year over-year. And that's just because of the very difficult situation with price controls, bad economies, just doesn't make sense to spend a lot of money in those kinds of environments. In fact in some cases we're supply constrained on those environments. So, that's a fairly clear decision for all the right reasons.

On the trade spending side in the US, I would say there's one business that did have a material impact, in terms of the shift between advertising and trade; and that was the Glad business; and so what we are starting to see is that as resin has come down fairly significantly, competitors are starting to spend back, starting with private label and it's migrating to some of the branded competitors. And so, we are starting to spend back on Glad a little bit to essentially kind of maintain reasonable price gap versus competition. So I would say that's the one category, and that was a fairly material part of the numbers. So those two buckets I think explain probably about three-fourths of the change.

The other thing I would add, Ali -- this is Don -- is that when you look at the US advertising spending for the year, it's right in the middle of our 9% to 10% range. So I wouldn't get too fixated on one quarter given that obviously these things will move around quarter to quarter, but we are committed hanking into that range as we go into fiscal '13.

I think the other thing is, I think Larry mentioned, our ROI on marketing spend is up significantly. We're getting better and getting more impactful advertising. Our advanced analytic models are working very well, and I think the proof is in the pudding in the sense that we're gaining share. And our shares, being at an all-time high, we think we're reinvesting at the appropriate level and with the right mechanisms.

Okay. That's helpful in terms of how you think about it. So, if you take that and roll it forward, in the 2% to 4% topline for the next fiscal year, how does that break out in terms of volume and price, as best you can tell right now? It sounds like that's different in the different halves of the year or quarters of the year. If you could give us some clarity there, that would be helpful.

Let me start, Ali, and then I'll let Steve and Larry jump in. If you think about how we've built that algorithm, basically we've got about 3 points of growth from new items, new innovation from our pipeline. We've got about a point of acquisitions and we've got about a point of pricing, most of that being in international markets and high inflation markets, so you've got about 5 points of growth there. But, we've got about 2 points of foreign exchange headwind, so you strip it out and we're right in the middle of our 2% to 4% range.

Okay, and I don't know if Steve wants to add, but cadence around the quarters or halves?

I think it fairly aligns with, as Steve said, the first half we look at, it's fairly consistent with the 2% to 4% outlook for the full year. We don't see a lot of volatility quarter to quarter on the topline.

Okay, cool. My last one is around free cash flow. Steve mentioned it's going to continue to improve going forward. Can you give us a sense of that? I mean is that in line with EPS growth in some sense? Are there things you are doing to improve working capital space, that gives it a little bit of a boost? And of that spend, how do you think about, as you mentioned returning it to shareholders, so dividends, obviously, share buybacks, but also how much should we think about it driving that one point of acquisition that you are expecting to drive the topline?

So, let me just step back on your first comment on free cash flow, and then we can talk about the uses of cash. So, the free cash flow, the outlook for fiscal '13, as I mentioned a few minutes ago in my opening comments, we anticipate it should be about 9% of sales. Now, that is a little bit lower than we've historically seen where free cash flow has historically been around 10% on north of 10%.

The reason it is just a little bit lower than the historical average is because of these infrastructure investments that we talked about, and the fact that margins have come down and we're still in the process now of rebuilding margins. I think as we look to fiscal '14 and beyond, Ali, we fully expect that free cash flow as a percentage of sales should be about 10%, maybe better than that, as we anniversary the infrastructure investments, and as we continue to take the actions that we've talked about to improve our margins.

Now in terms of how we deploy that cash, we're really not changing the algorithm that we have for the Company. We'll continue to support organic growth and inorganic, bolt-on acquisitions. We'll continue to support the dividend which I think as we've talked before has increased for a number of years, and it generally increases at the rate of growth in operating profit over time. And we'll continue to pay down our debt. Our debt to EBITDA, as I mentioned is about 2.5 right now to 1, and we'd like to see that get closer to the middle of our range.

Now, as we go through the year, if after having done those three things, we have excess cash that's starting to pool up on our balance sheet, I think consistent with what we've done in the past, we will work in partnership with our Board, and we will look for efficient ways to get that back to our shareholders, and that could include buying back some additional shares, either to offset stock option dilution or just to do some discretionary share purchases. But I think at this point we need to get further in the year before we make any more assumptions around that.

Ali, just one other point clarification, when Don talked about 1 point of benefit next year to the topline from acquisitions, that isn't presuming at this point any new acquisitions. Just the carryover benefit from the acquisitions we made mid last year, Aplicare and HealthLink. So there's no presumed funding required for those businesses that have already been purchased.

Make sense. Thanks very much.

This is Larry. I want to come back to Alice's, the first question around performance in the US, with a little help from some of my colleagues here. So from a US perspective, volume was up just above 1%. And sales were up 4%, reflecting the difference in pricing, essentially.

Next question, please.

Next, John Faucher with JPMorgan.

Yes, hi. Thanks. Two questions here. So the first one is a little bit of a push back following Ali's question, which related to the advertising which is you would expect that the shift from advertising to trade promotion would improve market shares in the short-term. So, I guess can you talk a little bit about how closely you can monitor share of voice and things like that? So we can felt comfortable that you're really not sort of using the seed corn here. And secondly could you just sort of clarify your first-half guidance because I think margin expectations may be a little bit high potentially for the first quarter so if you could just give us a little more color there? Thanks.

John, let me start on the advertising and then I will turn it over to Larry. I think you can take some real comfort as our investors should from the fact that if you look back over the last four full years, we've gained 1.9 share points. Private label has gained 1.2, and our branded competitors have lost over 3 share points combined. So, I think we've done a really good job of over the long-term of gaining the share; it wasn't like it was episodic from one quarter to the next, so I feel very confident about the advanced analytic models we use. We obviously monitor this month to month in terms of our share of voice. We're looking at it constantly.

We're also looking at, obviously, the price gaps. And given the economic environment and we obviously look at this by category, but when you get into the trash bag category for example, it's obviously highly sensitive to price gaps. So, I think you should take comfort in the fact that these share gains, which reached an all-time high for the last 52 weeks, have been on a real roll for the last four years.

I think I would just build on that and say there's absolutely no indication that either our sales or share results have been hurt by what is a fairly modest amount of spending reduction.

The other thing I would add, John, is if you look at the full fiscal year '12 for the US business, it was right smack in the middle of our 9% to 10% range. So the International thing, it really added a little bit of complexity the last quarter. But given the volatility in Argentina and Venezuela, the price control situation, which was ambiguous, we didn't think it was a prudent spend of our investors' money to go in there and spend advertising when the consumer is sitting on the sideline.

John, this is Steve. Let me take the second half of your question, which really talks to margins and see if I can clarify. So, for the full year, there's a couple things that we believe at this point based on the recent softness we are seeing in commodities, first and foremost is that gross margins are going to begin to stabilize and improve. And in fact, we are looking for modest gross margin expansion over the year and we fully expect that gross margins will begin to show some consecutive improvement, even as we go into the first half of fiscal '13.

Now, EBIT margin is expected to expand about 25 to 50 basis points for the full-year, kind of consistent with our long-term aspirations, but we do expect it to be down somewhat in the first half. The reason for that is because the infrastructure investments, those $50 million to $55 million that we've talked about, a disproportionate amount of that is going to fall to the first half, because we are completing our implementation of SAP in Latin America in the first half of this calendar year. And we've got significant investments as we rebuild our R&D facilities in the first half.

So, we should be looking for gross margins showing some improvement, but that is going to be offset by higher SG&A and other expenses which is why we think EBIT margin will be down. Now importantly as we get to the second half of the fiscal year, we would anticipate that EBIT margins will be coming up and that for the full year we'll be up this 25 to 50 basis points.

Okay. So not to belabor this point, there is a lot of volatility sort of in the operating margin comps sort of Q1, Q2, Q3, Q4. Probably pay less attention to that and a little bit more to the cadence of the spending that you talked about; is that fair?

I think that's right.

Okay, cool. Thanks.

Wendy Nicholson, Citi Research.

Hi, I just want to try and be crystal clear so there isn't any confusion. If you are looking for that much margin contraction in the first half, and the 2% to 4% on the topline, should we be modeling earnings down in both the first and the second quarter bottom-line EPS?

I would say that we have a negative EBIT margin in the first half, yes, that certainly the operating results are going to be challenged in the first half.

Got it. Okay, thank you. My second question is with regard to the higher level of promotional spending on the Glad business. Is there a point at which the resin prices have come down so much that you would expect to see negative pricing there, or a change in the count per box, or anything like that?

So, if you look at Glad over time, we've taken pricing up pretty recently. We've also taken some price declines. I don't think we're at this point close to where you would consider to take a price rollback. So, it's more likely to come in the form of trade spending increases versus actual rollbacks because of truckload price, but over the long-term you might expect ups and downs on a category like Glad.

Got it. And then the second question I had just on the advertising and promo, you've given us guidance I think on the advertising line for next year. But, since promo has ticked up, would you assume that the aggregate level or the absolute level of promo spending stays flat or will there be an offset and that will come down as advertising goes up? So net-net total marketing reinvestment, does that go up next year? Or is it just the flip back into advertising, if you will?

Our trade spending will probably be about flat versus this year. And advertising will be up just a bit. (Multiple speakers)

Okay.

It's kind of a modest increase, Wendy, in total demand spending.

Okay. Terrific. Sounds great. Thank you.

Javier Escalante with Consumer Edge Research.

Hi, good afternoon, everyone. I would like to understand your forecast for commodities. You had talked about that they are deflating. Could you give us a sense of whether there is a scenario where you're going to have a benefit, that commodities could be a benefit in the gross margin? Number two, if commodities are deflating due to significant amount of pricing in the fourth quarter, at least the Pine-Sol 17%, and all that; and that led to about 230 basis points, favored impact in the gross margin line.

Shouldn't you have a very significant gross margin expansion in the first two quarters, taking into account the kinds of commodities and all these extra pricing that you took in May, between May and July?

Okay, Javier, this is Steve. Let me take that in part. So, let's start with outlook for commodities. I think the good news is, and we started talking to this in May, two things needed to be true for the rate of increase for commodities to slow. We need to see energy prices come down and stay down. We've actually seen that over the last few months, which is very good news.

In addition to that, and this is probably more important, in some commodity groups, particularly resin, we've seen a softening in demand and inventories are up a bit. So the combination of lower energy prices and softening demand, in particular to resin, is actually causing the price to be down. And in fact on a year-over-year basis at this point we do anticipate that resins costs are expected to be modestly lower.

That said, when we look at the balance of the commodities, we're not seeing deflation. What we are seeing is the commodities are likely flat to up slightly. So when you just step back and look at our outlook for commodities in total, again we would say that it's not a deflationary scenario. Commodity costs will probably still go up modestly, but certainly at a much slower rate than we saw in fiscal '12. I would also just point out that other inflationary pressures on wages, benefits and other supply-chain costs continue to go up. So in total, we're still anticipating some headwinds.

As it relates to pricing, as I mentioned a few minutes ago, I think we do believe that the benefit of cost savings and pricing will help gross margins in the first half of the fiscal, because we expect that that will overcome the commodity costs, which are expected to be -- and other inflation pressures, which are a lot less than what we saw in the year-ago period.

Javier, I would just add one thing, [Larry] mentioned that none of the brands which we have taken pricing on right now, doesn't suggest we need to reverse those prices at this point. You'd pointed out Pine-Sol. You're right, we're taking a pretty significant increase, so we did back in April.

But one of the commodities that's causing our commodity picture still to look unfavorable for next year, maybe flat to unfavorable, is pine oil, which is the primary ingredient in Pine-Sol. And that's still up dramatically. So, again, these increases have been cost or priced justified, either commodity related or inflationary related, and even on that Pine-Sol increase, it's not something where we think we're going to reverse it at this point.

And the other thing, Javier, that we want to be mindful of as we go into the year, and when you look at what's happening with corn pricing and obviously we use cornstarch in Kingsford, and you look at soybean oil, which we use in Hidden Valley Ranch salad dressing, those commodities are up significantly. So, we want to be mindful, we've got certainly some good news on resin, but as Steve and Steve have said, we've got some pressure on these other ones, so -- (multiple speakers)

Understood. And I have another question because it had been alluded before in the call and it has to do with this advertising spending and whether there was, this quarter is a bad quality quarter or not. Could you talk about the IT spending, how much the IT spending was in the quarter? So, to help people understand to what extent this was a high-quality quarter or is not a high-quality quarter.

Well, let me just say this before I turn it to Steve. In terms of a high-quality quarter, I think when your demand spending is basically flat, because again we look at total demand spending, not just advertising or trade promotion. So, we look at the whole bucket. We looked at it as flat. And the fact that we've gained share I think says to me it's a pretty high-quality quarter. But, with that, I'll turn it to Steve.

Javier, just stepping back on fiscal '12, what we had previously communicated is we thought that infrastructure and other related costs would be in this range of $50 million to $55 million. We ended the year at about $50 million, and certainly, a significant portion of that did flow through the fourth quarter and is reflected in the numbers. We don't typically break it out by quarter, but I would just say that we did see about $50 million in costs associated with these projects.

But, when you say a significant amount, could be significant meaning a quarter of it? 30% of it? 50% of it? Could you be a little bit more specific, because the whole undertone of certain questions has been that you cut advertising spending to beat the number. So, if you can clarify that, that would be very helpful.

Javier, of the $50 million, which again includes not only the IT projects, implementing SAP and International, but also includes incremental spending for the R&D facility and a few other smaller projects, of the $50 million, more than a quarter of it did get expensed in the fourth quarter.

Okay, thank you.

Again, it's not all in one line item; it's across a few lines of the P&L, but it was more than one quarter, the $50 million spend. (multiple speakers)

Thanks, Javier, but I just want to reiterate though, we did not cut demand spending. So, I think you do have to look at the total bucket, not just the advertising.

No, that was clear in the release. I just wanted to make sure that we understood the other IT spending issue, okay.

Got it, thank you.

Thank you.

Tim Conder, Wells Fargo Securities.

Thank you. Just to stay on the commodity side, you've given some good details so far, and thank you very much. But, gentlemen, any thoughts or just kind of give us a little bit of updated color, or if you've looked at hedging any of those commodities that have come down or your exposure to those commodities that have come down? Have you looked at taking that pullback and maybe locking that in at this point? And if so, just some details on that.

Yes, we talked of this before and we do do some financial hedging of our commodities. We've got some fairly modest hedge positions in place that were put in a little while ago on some agricultural commodities. But one of the challenges that we have, and I don't think we are alone in this, is that one of the largest buys that we have is in resins and certain packaging materials, and there just really isn't a market to put financial hedges in place for that.

And, if you were to do private party transactions, it would be very expensive because of the underlining volatility of those commodities. So what we tend to do is partner with our suppliers and we sometimes have contractual terms that allows us to lag a little bit on price movements, either up or down. But we don't have significant financial hedging positions in place against the commodity exposure. It is just too expensive to do it.

And I would think you'd have those same types of flexibility clauses in your contracts with your logistics providers?

I don't want to get into that. I would just say that I think what we've consistently said is, as you see day to day and month to month movements in energy prices and commodities, that doesn't immediately translate into changes in our P&L. It can take a quarter or two before that will come through.

Okay. And maybe just a little bit broader question here. Given the way the current tax laws are looked to, just the tax rates increase, and granted it's an issue primarily for more individual shareholders, but has there been any preliminary discussions at the Board level as far as looking at the way you will return capital going forward, if some of the allocations may change a little bit in the weightings of those different buckets?

We are always working in partnership with our Board and the finance committee to look at what is the most efficient way to return cash back to our shareholders, and I think again what we have continued to commit to is continuing to support the dividend in a strong way, and then over time continue to reevaluate different options for returning cash back to our shareholders if we have excess cash that's building up.

I think we've got to go look at what's really going to happen with the fiscal cliff and what's going to happen with the tax reform. I think there's a lot of uncertainty at this point so it's probably premature to speculate, but I would say that we are always having active discussions with our Board and looking to do the things in the best interest of our shareholders.

I think, Tim, once we get past the election obviously, in our November and/or February Board meetings, that will obviously be a topic for discussion. But, as Steve said it's all always about how do we get the cash back to the shareholders in the most efficient way.

Okay, great. Thank you, gentlemen.

Nik Modi with UBS.

Don, I would love to get your viewpoint on the consumer. I mean, no offense to Clorox, but your categories have not been known to be the fastest growing out there yet. Yet, you seem to be doing pretty well with the categories, so I'm just trying to get an understanding, is this partly a function of the way Clorox is actually addressing the categories in which they compete, i.e., you guys are actually helping grow the categories? Or is there some kind of consumer dynamic out there that doesn't match up to what we see on CNN?

Yes. I think we still have a very fragile consumer out there, Nik. It's interesting, we're now seeing about slightly over 80% of the shopping trips are what we define as fill-in shopping trips, where people are buying less than 15 items. It is still slightly less than 50% of the total spend. Obviously, people are still doing pantry-loading trips, but it's interesting how many people now are flipping between channels and using this fill-in trips to modulate their cash outlays.

So, if you look at our categories, when we hit the low point in December of '10 at negative 2%, we've seen that steady climb back. In the last three months we have hung in very tightly at a plus 0.5. Now that difference between that negative 2% to plus 0.5% in our categories is about $500 million of increased consumption. So, it's modest, but again, you can get lost in the averages, too.

We've got the trash category up plus 2% now, the food category up plus 2%. Charcoal is starting to improve, but relatively flat. Home Care is down 1.5%, but it's really diluteables that are driving that down. Spray cleaners are up 4%, where we're strong. So, there's a lot -- you can get lost in the averages there, but net-net we're seeing a fragile consumer, they're shopping with these fill-in trips more frequently. As gasoline spikes -- and it had the highest spike last month in 12 years, on a monthly basis. We tend to see our categories do a bit better because people stay home more. And we're a stay-at-home company. So we'll see how it plays out, but the good news for us is I think there is real stabilization in these categories.

And Don, just quickly as you viewed the business as the quarter progressed, did you see any significant changes in consumer behavior? I don't know if your analyst can pick that up that quickly, but it's just, as I look at what's been going on out there, it seems like there was something that happened at some point in the midpoint of the quarter. I was just curious if you saw something similar.

We didn't see -- and I'll let Larry opine on this as well. We didn't see anything in our categories or our particular brands that there was any step function change. We are continuing to see people move into value channels. Clearly the dollar segment continues to be pretty robust. We are continuing to see people where they do pantry-load, go into the club channel. So nothing dramatic for our categories or our browns, Nik, in the middle of the quarter.

Same thing, no big verbals one way or the other.

Great. Thanks.

Bill Schmitz, Deutsche Bank.

Did you say what Hidden Valley Ranch did in the quarter?

Hidden Valley was up mid-singles.

Okay, I guess it wasn't in the written commentary, so I didn't know if there was problem there. So the S&A costs, broadly speaking if you look back historically, they kind of hovered in at sort of a 12% of sales range. And now it looks like they're permanently at 14%, ex the R&D and the SAP spending. Is there an opportunity to get that ratio down? Or has something changed in your philosophy on that line item?

I think that historically it's been in, call it the range of -- well, 12% to 13.5%. 12% is probably the low-water mark. We absolutely believe as we anniversary this infrastructure spending in fiscal '13, that as we get to fiscal '14 and beyond, there's clearly opportunity to lower that. And I think what we've said pretty consistently is we'd like to get it to 14% or less. And ideally we'd like to get that less.

The fact that it is up is in part because of infrastructure; and also, remember, that when we sold the auto business, we had some dissynergies and some stranded overhead that was there. So over the long run, our expectation is that growth anniversarying the infrastructure investments, and even bolt-on acquisitions that give us growth that we can extract synergies from, all of that should help us get the SG&A back to levels that we think it belongs in.

Okay, great. And the year-over-year change and the other expense line, it went from income to expense year over year, what drove that? And is it going to be an expense next year, or do you have any color on that?

On a full-year basis, the biggest driver -- there's really two. One is we had some asset sales. You're talking fiscal '11 versus '12. We had some assets sales in fiscal '11 that didn't repeat, and threw off over $10 million. We also had some TSA income; this is Transition Services income from the Auto business that's been slowly winding down so that's the biggest change. I think, as you look to next year, it should get to more of a historical normal level.

So the $4.25 million is kind of the right number?

You know, Bill, it's really hard to project because hence its name other income and expenses. It's just a myriad of things that go through at every quarter. It's really hard to predict. Probably if you want to peg it at about flat, but recognizing it could be plus or minus [$5.25] million, that's probably the best we can guide you to at this point.

Okay, great. Thanks. And kind of as you look at the split between volume and sales as next year progresses, is it fair to say the back half is going to be much more volume weighted? Because I think most of the big price increases roll off next quarter, at least in the year-over-year basis. I mean there's some (inaudible) Pine-Sol stuff, but is that a fair assumption?

Bill, at this point we really don't see -- and I believe this comment was made earlier as well in relation to sales -- but I would say the same is true in volume, in that we are not really expecting to see dramatic variances quarter to quarter. Part of it may be that -- we do have some pricing still planned for this next year, which may have a moderating effect on volume in some volumes where we take it. As we noted, it's not going to be as high or extensive as it was in fiscal '12, at least as we see it right now. But that may be causing some of the moderation as well. And, the fiscal year has got a long way to go. I think the best we could say at this point is each quarter's volume is going to be roughly within the same range as the full year.

Got you. Why wouldn't volumes snap back if the pricing was rolling off, because these are big pricings that's lapping.

In some categories we're expecting that it will. But in others, you may not see that. And again, International is one right now, particularly some of the Latin American economies that may be at a slower growth rate than what we've seen recently because of some of their economic challenges.

Okay, got you. And one last one, if I can. Now that we get sort of the multichannel data from Nielsen and IRI, have you guys taken a stab at what percentage of your US business will now be tracked? I know you used to say it was below 40% or something. But do you know what the new number is now?

I hadn't seen all the data. I'm actually scheduled to see it next week, but it should be about probably 70% to 75%. So the places that it would be excluded would be places like home hardware, like Home Depot and Lowe's, I think it may be a portion of the dollar channel, and Costco would probably be the big misses.

Okay. And the reason I ask is there was actually -- so we got the data for the quarter and it actually showed much weaker sales than you reported. So is there a little difference between selling and sell-through in the quarter?

Nope.

[Everything is gone.] So I don't understand that, Bill, but -- (multiple speakers)

Maybe the data, they're still working through it, so it's -- (multiple speakers)

We're still cleaning the data, and what we always find when you go to a different data source, you always have SKUs and things that are mis-categorized, so we will have better information on the next call in terms of what we look like and probably be able to give you some comparisons in terms of coverage and difference in trends. Overall based on what we know the trends are relatively the same. Can't speak to a single quarter, but over the long term, they're relatively the same.

Okay, great. Thank you very much.

Bill, just to clarify your question on Hidden Valley. I want to make sure we're clear. The business did grow mid-singles for the full year. It was flattish in the quarter.

Okay, great, that's helpful, thank you.

Connie Maneaty, BMO Capital Markets.

My questions have been answered. Thank you.

Chris Ferrara, Bank of America.

Guys, can you talk a little bit more about International? I know we have a number of different issues going on, but can you just talk about some of the big ones and put a little more color around them, I guess? Talk about is there any need for more structural change in any of these markets?

So, I think we talked about the overall international strategy when we had the analyst meeting. I think overall we feel good about the past growth trends on the topline. And we feel good about what looks like good top line growth over the long-term future, but we do have a margin challenge. And really probably ties mostly to the fact that we have two big businesses in Latin America that just have a difficult kind of economic situation, the combination of very high inflation, usually double digits, often more than 20%, and some form of price controls within those countries that affect our ability to price, as well as [sometimes] affect our supply chain.

So that's really the issue, so our International folks are incredibly focused on trying to build sustainable structural margin. Obviously the SAP implementation we are going through today will be a key enabler to that over the long-term. We're in the go-live phase this year, but as that system comes on stream, it will give us a lot more visibility, and a lot more capability to go after the cost side of the business.

But that's essentially what's going on. The good news is the consumer demand is still there, the category particular in Latin America are still pretty healthy. From a dollar sales standpoint, the volume is not quite as strong but still it's increasing. So kind of the consumer fundamentals are good. It's the difficult government policies and economic factors are getting in our way.

I think what we feel good about, Chris, is the fact that as Larry said, the categories are still fairly robust growing in the mid-singles. Our Home sales numbers, despite Venezuela, are in the mid-high singles, so we still feel good about that, and we've gained almost a full share point in Latin America in the last year.

And that's two-thirds of our International business as you know. I think we still think feel very good about that. I think to Larry's point, once we get our SAP implementation done, and that will be done by the end of this calendar year, we'll feel very good about the value capture we can get out of that. Does that answer your question?

Thank you. Yes, that's good, I appreciate the color. And on the manufacturing logistics line, obviously diesel is a big piece of that, right, and we saw it tick down in Q4. It looks like it's running with diesel prices. Is there a reason why that line of diesel does what it's been doing? Why, as we flatten out at least, not that the deal is going down, but as it flattens, that it wouldn't look more like the fiscal '11 kind of rate of change in manufacturing logistics?

Well, if diesel prices in fact start to soften and continue to soften, you'll get some relief on that line and we might start getting back to the numbers we saw a year or two ago. I would also just mention though in that line, it includes a lot of inflationary pressures, a big portion of which is coming from International. And as Larry commented, we're looking at a lot of countries we operate in with double digit inflation. So we fully expect that you're going to see costs on that line continue to march up, driven primarily by inflation and then we'll have to see how the diesel plays through.

Got it. Thanks, guys.

Lauren Lieberman, Barclays.

I'll just keep it brief. I was curious about why there was mention of lower merchandising in both bleach and cat litter in the quarter. I am guessing bleach was maybe ahead of, holding back the spending until you move forward with the concentrated launch? So wonder if that is correct. And then pacing for that launch, how much of the country can you cover in one or two quarters, and then merchandising and cat litter? Thanks.

So the merchandising shifts are what I would call kind of the normal ebb and flow. And it may be because you had a particularly good event in the base period. You're not replicating that, but I would not describe it as anything fundamental, nor would I describe it as preparation for moving to the concentrated formulated bleach or anything like that.

It is just the typical normal ebb and flow that we get with different customers, just based on the merchandising plans or competitive plans, or whatever it might be. Specific to the conversion on Clorox liquid bleach, I think we laid out all the detail on that in the analyst meeting, but it is a four-wave kind of rollout over the course of this year, so the first wave is going out essentially as we speak to the Midwest and then the last wave goes out in March. So, by the end of the year we will be fully converted, but the nature of the supply chain and the difficulty in changing shelf sets and things like that basically necessitates that we do this over four waves versus all at once.

I think, Lauren, just to add some more color to that, I think the trade reaction we talked a little bit about has been very supportive of this. Obviously we're getting about 25% more pack-out on the shelf with the reduction in the package size. But the new plan-o-grams are integrating new items, as well and I think this will eliminate one of the big issues we've always talked about, which is weekend out of stocks on bleach. So, the trade is very supportive, and we're seeing everybody else move as well, so which is a good thing.

We go to the northeast in January, so you'll be able to see it in January on the shelf.

Good. Wait, just one thing that surprised me was, Don, you said you see others moving, as well. Do others have the technology, like does private label have the technology?

They don't have the technology that we have, but they can offer a bleach which is similar to ours. It just won't have the stability on the shelf over time that ours does. So we will have advantage, particularly as the product ages, but they can produce a product that's a little bit more concentrated in a smaller bottle.

Okay, great. Thank you.

Ian Gordon, S&P Capital IQ.

Just on the bleach rollout, so are you physically losing shelf space? You kind of alluded to putting more stuff in there and how might the consumer perceive some of that? And then I just wanted to ask on Venezuela, if you could help us understand why it's still down double digits? I think one of your oral care competitors saw that phenomenon in the March quarter when the retailers were holding back their orders in advance of -- they didn't know what the prices were going to be, but then it seemed to have normalized in the June quarter. So I'm wondering if you can just give us a little clarity on that? Thanks.

So what we're seeing in terms of the bleach shelf sets, and obviously we're just rolling out, but what we're seeing essentially is the shelf set is maintained, in other words the bleach section hasn't changed in size, but their ability to get packed out on the shelves, the number of bottles on the shelf has obviously increased by about a third, which is the concentration rate. And bleach is one of those -- our 96-ounce current Clorox bleach is one of the fastest selling unit items in grocery stores, so out of stock issues over weekends can be a problem, so this is going to be a big boom, just in terms of reducing out of stock. So what we're seeing is we typically have as much, and sometimes more shelf space, and the overall set is about the same.

In terms of Venezuela, I was there just last week; it's a fun place to visit. Essentially what we're seeing is the consumer demand is not robust at this point. Consumers are under a lot of economic pressure. We also had some supply constraints, particularly one part of our business that was imported from another Latin American country, which the government no longer allowed, so there was some issue with some supply shortages which we fixed; that's part of the equation, as well.

But I would say that the underlying consumption by consumers is pretty flattish at best. So, what we haven't seen is the reduced pricing generated incremental sales in the country as yet. And that's, I think because the overall economic picture with respect to consumers is not that positive.

I think the other thing I would say is that the price control implementation was staggered by category. It wasn't all done at the same time, so it depends on what category you are competing in whether it was implemented in March, April, May, so there was some variability too. So I think by the time we get into this quarter, we will start to see what the impact on consumption is.

Just building on that for clarity. So, while the business was down substantially on a full-year, the fourth quarter it was down, but it was down a lot less than what we saw in the third quarter, so I would say that the trends are improving. But still a long way to go.

Thank you.

Jason Gere, RBC Capital Markets.

Okay, thanks. Just a follow-up I guess on the laundry category. I know you talked about the bleach and the merchandising as part of the shortfall in the volumes there. But on Clorox 2, you did talk about the price impacts and how that's still affecting the category. And I guess I was just wondering how much Clorox 2 was actually down, compare that to last quarter, is sequentially the category getting better? Or is this one of those categories where you're really just seeing the economic environment pushing people away from the category, and, obviously, the pricing that you took a year ago, kind of led people on that path?

Category volume is soft and our business is soft on Clorox 2. It's soft from a volume standpoint, but we're up from a sales standpoint. And so essentially what you're saying there is just the typical profile of a price increase, where you do see some volume declines. There is some sensitivity to price increases, but you're making up for it in your pricing.

Okay. Are there other categories within the portfolio that are having the same type of impact as with Clorox 2? This is really kind of an isolated incident where you've seen typically when you take price, volume obviously suffers near term, but usually it's after a quarter or two that the volumes start to come back. People adjust to the pricing. This one obviously, you've said that it's taken a little bit longer, but is this really kind of an isolated incident? Or is there any other category that you want to call out that still going through some of the pains, as well?

No, actually I wouldn't say that it ends in a quarter, or even two on almost all of our brands. Typically, we'd linger for a year as the pricing takes effect, and it's only year two where we typically kind of see a full recovery.

Okay. Maybe your innovation is that good that it just disguises it in my mind.

I think you know in both the topical stain remover category and bleach, these categories really hit a low phase in about late 2010 when they were both down in the 8%, 10%, 12% range. Now they're both -- bleach for example has been up about flattish to up 1% to 2%. Now this is in sales dollars, the last couple of months. And the stain removers have been from negative almost 12% a year and a half ago to about negative 2%. So we are seeing quite a bit of improvement and stabilization in the category but to Larry's point, I think it takes a lot to sort it out.

Okay. Thanks for the color.

Why don't we take one more call?

We'll take a follow-up from Alice Longley, Buckingham Research.

I guess I am beginning and ending this call, and I apologize. I have just a follow-up to your follow-up. I am a little confused about your saying that volume in the US was up 1. Did that include the acquisitions?

Yes.

And without the acquisitions, would it have been negative 1?

It would've been I think 0.5 a point down, something like that.

Okay. Thank you. And then, the other question -- and I don't think you commented on this. Have you seen any deterioration in your business, starting in June or into July, in terms of weakening at the consumer level or increased promotional activity? Just any change recently?

Actually nothing fundamental. I think the only thing that's been changing a little bit as we talked about the Glad category, we've seen a little bit more trade dealing. But no big fundamental consumer change at least based on what we can see in our category.

All right. Thank you very much.

Okay, well, thanks, everyone, for joining the call today. As I said earlier, we obviously feel very good about the close to the fiscal year, and we certainly are confident about the plans we have for fiscal '13, and we'll look forward to updating everyone later this fall. Take care.

And that does conclude today's call. Again, thank you for your participation, have a good day.