高樂氏 (CLX) 2013 Q3 法說會逐字稿

Good day, ladies and gentlemen and welcome to the Clorox Company third quarter fiscal year 2013 earnings release conference call. At this time all participants are in a listen-only mode. At the conclusion of the prepared remarks we will conduct a question-and-answer session.

(Operator Instructions)

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

Great, thank you. Welcome, everyone and thank you for joining Clorox's third quarter conference call. On the call with me today are Don Knauss, Clorox's Chairman and CEO, and Steve Robb, our Chief Financial Officer. We're broadcasting this call over the internet and a replay of the call will be available for seven days at our 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 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 10K 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. So with that said I'm going to cover the highlights of our third quarter business performance by segment and then turn it over to Steve to address our Q3 results, updated outlook for fiscal '13 and our preliminary outlook for fiscal year '14, which begins in July. Don will then close with his perspective on the business followed by a question-and-answer session.

In Q3, volume was flat and sales grew 1% versus the year ago period. Both below expectations we had at the time of our last earnings call. When we announced our second quarter earnings in early February, sales growth through the first half of the year was 5% and that was followed by January shipments that were up nearly 10%. So the trends at that time were very positive. However unusually cold weather conditions in most US regions significantly impacted our charcoal business in the quarter. In particular the month of March, which is usually the kickoff of the grilling season, experienced the coldest weather in the US in over 10 years. The end result was that our charcoal business reduced our Company's third quarter sales by 1.5 percentage points.

Turning to our categories, total Company results in the US were about flat. The bleach category was up strongly in the quarter following our recent transition to concentrated bleach. The cat litter and natural personal care categories were also up nicely, offset by declines in Glad, food, water filtration, and charcoal. Our multi-outlet market share was also about flat for the quarter. While we saw share gains in about half of our businesses with particular strength in home care, Glad, and food, we lost market share in charcoal and Brita, primarily due to past pricing actions which competitors have yet to fully follow. On the laundry side, bleach shares were down, which I'll address in a moment.

Let me turn to our segment results. Our cleaning segment grew volume by 1% and sales by 2%. The home care business saw another quarter of record shipments across multiple brands, including Clorox disinfecting products, increased merchandising events for the flu season, as well as spring cleaning. Our professional products business delivered solid results with another quarter of double digit base business growth due to very strong gains in the cleaning and healthcare channels.

In laundry we successfully completed the rollout of concentrated bleach in the United States. Execution on the transition has been outstanding and we are confident we will realize the cost savings anticipated for the project. Positively, concentrated bleach is also driving category growth, which was up more than 6% on a 52 week basis. Bleach volume was flat, however, due to market share declines which have been impacted by strong merchandising and distribution of private label brands in a few customers. That said, our most recent market share data looking at a four week basis reflects that 15 of our top 20 customers are showing improved results versus the 13 week or quarterly data. So the trend is clearly moving in the right direction.

Clorox 2 volume and sales also declined due to continued weak category trends. Overall for laundry, improving share results is a major focus for us and we're increasing our investments to drive brand and category growth over the long term, including advertising and product innovation on Clorox 2. In our household segment, volume was down 4% and sales declined 1%, both due solely to double digit declines in our charcoal business. Following continued soft consumption through April we now expect charcoal sales to resume their normal pace beginning in May.

Turning to Glad, our trash bag business had another nice quarter with sales and market share up on premium trash bags and cat litter also saw sales growth in the quarter behind healthy category growth. Our lifestyle segment delivered volume growth of 1% and sales growth of 2%. Burt's Bees had another great quarter behind innovation in lip color products. Our food business also delivered another quarter of strong growth behind higher shipments of Hidden Valley dressings and new sandwich spreads which were launched earlier in the year. Brita volume and sales were down compared to a strong volume period a year ago when we launched the Brita Bottle as well as due to increased competitive activity and the impact of pricing that competitors have yet to fully follow. Our focus on Brita is to drive category growth through innovation and we have a number of new products launching later this summer.

In our international segment volume grew 1% with sales up 2%, reflecting the benefit of pricing but offset by foreign currency headwinds. We are delivering double digit growth in many of our international markets including Chile, Peru, and our international Burt's Bees business. These strong results are being driven by healthy category growth, price increases, and investments we're making in our brands at the local level. This is important to recognize as this really strong performance is being masked by the continued economic challenges and currency headwinds in Argentina and Venezuela, which together represent about a third of our international business. Our near term strategy is to take actions locally to minimize the impact of high inflation and price controls in those two markets while continuing to drive innovation and invest in the rest of our international business where growth, as I mentioned, remains quite strong.

Looking at the full fiscal year, we've narrowed our sales outlook to 3% to 4% and expect to come in at the lower end of that range due to the weather impact on charcoal. Our sales outlook continues to reflect a challenging comparison to very strong second half results a year ago as well as the impact of declining foreign currencies and continued uncertainty in Argentina and Venezuela. Although we certainly would have liked to deliver stronger results this quarter we feel good about our plans for the year, including increasing our advertising investment to grow our market shares and our categories. With that, I'll turn it over to Steve Robb.

Thanks, Steve and welcome, everyone. We anticipated the second half of fiscal '13 was going to be more challenging as we faced difficult comparison versus year ago and foreign currency declines. But as Steve mentioned we had unusually cold weather in late March which reduced our charcoal sales by 14% versus a year ago quarter and volume by more than 20% in the month of March alone. This impacted total Company sales by 1.5 percentage points, gross margin by 30 basis points, and earnings per share by $0.06. While we continue to feel good about the long term prospects for our charcoal business, the impact from poor weather will affect the category and our total Company results for the fiscal year.

Now I'll provide more depth on our third quarter results, our financial outlook for fiscal '13, as well as our preliminary outlook for fiscal '14. We delivered 1% sales growth on the quarter on top of a strong 7% sales growth in the year ago period. Our sales results were driven largely by the benefit of price increases offsetting the impact of 1.5 points from lower charcoal volume and nearly a percentage point of unfavorable foreign currencies, particularly in Argentina and Venezuela. As you know, Venezuela devalued its official currency by more than 30% on February 8 and Argentina, our largest business outside of North America, has seen its currency decline significantly for the last several years. Excluding these factors, our results for the quarter were solid with sales increasing 3% and we continue to feel good about our fiscal year to date sales growth of 3.8%.

In the third quarter gross margin declined about 20 basis points from 42.3% of sales in the year ago quarter to 42.1%. Higher manufacturing and logistics costs impacted gross margins about 250 basis points. This was largely due to challenges in our international and charcoal businesses, including inflationary pressures and price controls in Argentina and Venezuela and higher logistics costs associated with lower charcoal shipments. These factors were offset by 150 basis points of cost savings and more than 100 basis points from pricing. As expected, commodity costs were about flat year-over-year and we continued to anticipate an overall flat commodity environment for the fiscal year. For the full year, we continue to anticipate the declining benefit of cost savings of 150 basis points and pricing will enable us to deliver both gross margin and EBIT margin expansion.

Third quarter selling and administrative expense decreased as we lapped significant IT related investments in the year ago quarter and had lower employee incentive compensation accruals in the current quarter. We now anticipate selling and administrative costs to be about 14.5% of sales in fiscal '13 reflecting productivity gains and reduced costs associated with prior infrastructure related investments. Advertising spending in the third quarter was in line with our expectations, increasing to 9.3% of sales. Importantly, our US retail spending came in at 10.3% of sales, reflecting continued strong investment in our domestic brands and categories. Spending was significantly lower in international markets consistent with our approach to invest prudently in countries with challenging market conditions. For the full fiscal year we expect total Company advertising will be about 9% of sales, reflecting a healthy increase in the fourth quarter.

Our effective tax rate of 33.9% on earnings from continuing operations for the third quarter was in line with expectations, but up almost two points versus the year ago quarter. For the full fiscal year, we continued to anticipate our tax rate will be between 33% and 34%. Year-to-date free cash flow increased to $352 million versus $214 million in the same period a year ago. This increase was a result of favorable changes in working capital, the prior year settlement of interest rate forward contracts, and higher earnings. We continue to anticipate free cash flow as a percentage of net sales to be about 10% with capital spending of about $180 million. As a reminder we define free cash flow as cash provided by continuing operations less capital expenditures.

We ended the quarter with a debt to EBITDA ratio of 2.2 to 1, well within our targeted range of 2 to 2.5 times. Net of all of the factors we've discussed today, we delivered diluted net earnings per share from continuing operations of $1 in the third quarter, a decrease of 2% versus the year ago quarter. This reflects a negative impact of $0.06 from lower charcoal sales and $0.05 from unfavorable foreign exchange rates, particularly in Argentina and Venezuela.

Turning to our fiscal year outlook, sales growth is now anticipated to be in the range of 3% to 4%. As Steve mentioned, we'll likely come in at the lower end of that range as we expect lower charcoal sales in Q4 and the continued impact of declining foreign currencies and challenging market conditions in Argentina and Venezuela. For the full fiscal year, we continue to anticipate EBIT margin expansion of 25 to 50 basis points consistent with our long term annual target. Our diluted earnings per share from continuing operations continues to be in the range of $4.25 to $4.35. This continues to include a range of $0.05 to $0.10 of diluted earnings per share impact for economic uncertainty in Venezuela. The recent devaluation was a $0.02 impact and with the remainder is expected to cover the effects of inflation, price controls, and consumer uncertainty over the course of the fiscal year.

I'll turn to our financial outlook for 2014. We anticipate sales growth in the range of 2% to 4% reflecting continued product innovation moderated by about a point of negative impact from declining foreign currency with nearly all of it coming from Argentina. For the full fiscal year, we anticipate gross margins to be about flat, reflecting cost savings of 150 basis points and some benefit from pricing offset by about a point in commodity cost increases, mostly from resin and another point from inflation, impacting manufacturing and logistics costs. We expect EBIT margin to increase 25 to 50 basis points, reflecting lower selling and administrative expenses consistent with our long term goal of reducing this line item to 14% or less of sales. We also anticipate a higher effective tax rate of 34% to 35% in the next fiscal year. Net of all of these factors, we anticipate diluted earnings per share to be in the range of $4.55 to $4.70 for fiscal '14.

The Company's outlook also reflects a $0.05 to $0.10 of diluted earnings per share impact related to anticipated effects of continued price controls and high inflation in both Argentina and Venezuela, as well as the impact from the previous devaluation of the Bolivar. Given the continued uncertainty in the Venezuela foreign exchange system following recent elections we are not assuming any additional currency devaluation in our fiscal '14 outlook at this time. However for perspective if the Bolivar devalued by 30% or from VEF6.3 to VEF9.0 to the US dollar, the approximate full year impact to the Company could be at least a half a point-of-sales growth and the potential impact from the balance sheet remeasurement could be about $0.05 of diluted earnings per share. In closing, I believe we're taking the right steps to manage through the macroeconomic headwinds we're facing, particularly in our Venezuela and Argentina businesses. We're also taking the right steps to drive margin improvement over time, including reducing selling and administrative expenses and building on our strong track record for delivering consistent and cost savings annually. And with that I'll turn it over to Don.

Okay, thanks, Steve and hello, everyone on the call. Before I open up to questions just let me give you my point of view on the year-to-date results and what we're seeing with the consumer out there and also the outlook we provided today. So I'd say about the full year we feel good about the year-to-date performance even with the impact of the headwinds that both Steves talked to you about that we faced in this quarter. I think three quarters of the way through this year we've delivered about 4% sales growth, about 60 basis points of gross margin expansion, and about 6% diluted EPS growth so we feel good about that performance. And although we've tightened our FY13 sales outlook to the lower end of the range as we head into Q4 we're pleased that we're still targeting solid top line growth for the year, even with the negative impacts from foreign currency, and obviously the weather driven declines in our charcoal business. When we saw a 23% decline in the category in the month of March we never quite seen a category decline like that in a major category of ours. So importantly we continue to anticipate achieving our target range for EBIT margin growth as well as the EPS growth that we talked to you about. I also believe we're being prudent in our assumptions regarding some of the headwinds out there.

Our outlook takes into account the operating and consumer environments, the economic challenges we anticipate continuing in Venezuela and Argentina, which Steve just went through, and the softness in our charcoal business which has continued into April. Today's outlook reflects our view that the economic recovery continues to be bumpy and despite an uptick in optimism in February when we looked at the US consumer confidence levels they dipped more than eight points in March, as I think the reality of the 2% increase in payroll taxes took hold. And many consumers are obviously had faced some delays in receiving their income tax returns, and also the job market improvements did tend to level off. I'm pleased that we're holding market share in the US at about flat while our categories continue to improve. If you look at those categories they have grown about 1.1% with the 52 weeks ending on March 24th. So getting back more into historical ranges on the 1 to 2 points of category growth. And apart from the difficulties in Argentina and Venezuela, our international business otherwise remains pretty healthy so we're seeing strong growth in many markets, for example, in most other markets in Latin America. For example, we grew 4% in sales in Latin America in Q3 and our Burt's business outside, Burt's Bees business outside the United States continues to grow in strong double digits.

Now of course having said that, it's not to diminish the real impact of Argentina and Venezuela on our overall business, and we certainly can't change the weather or the actions of foreign governments. I think we're taking the appropriate actions to manage the business effectively in that environment. So looking ahead to '14, the outlook we provided today, I'm pleased that we're targeting solid sales and earnings growth and I think we've factored in prudently the headwinds that we see. So as we look forward to next year, you can count on us to focus on three primary areas, first delivering on our goal of 3 points of growth from innovation and continuing strong support from our brands, in fact being at the upper end of our 9% to 10% range on spending on the US market. Second, delivering improvements in productivity and administrative costs. And thirdly, smartly managing through and being transparent with all of you on the challenges in Argentina and Venezuela. So I'm optimistic about those plans going forward and confident in our ability to execute those plans, and as we continue to focus on driving long term shareholder value. So with that why don't we go ahead and open it up to questions.

(Operator Instructions)

Chris Ferrara, Bank of America.

Hi, thanks guys. I wanted to try to tease through some of the stuff like some of the moving parts for the quarter that may or may not be recurring, and I guess can we start out with the $50 million to $55 million for IT infrastructure, what was that number? Is that still the full year number for '13 and what was it in Q3 if you have it? What was the break out of COGS and SG&Aa?

This is Steve. What I would say is our outlook continues to anticipate about $50 million to $55 million for that. It breaks out pretty evenly across the quarters with a little bit more in the back half but generally it's pretty even is what I would say and as you look to fiscal '14, as we've talked before we do anticipate the typical numbers, call it $20 million to $30 million that we typically set aside will return to more of a normalized rate.

And Chris, the majority of that was in selling and admin expense. There's a little bit that runs through R&D, a small amount that goes through income but most part that's in selling and admin which is an enabler to our selling and admin expense reductions next year.

Got it. And on Venezuela, what was the, can you talk about what the hit was for, break out the balance sheet remeasurement versus ongoing if that's possible. What it was in the quarter. And I think you said it was $0.02 for the quarter but I'm not sure if that was the remeasurement or ongoing and how do I think about that? And is $0.05 to $0.10, I think you said that is still the number of the drag baked into the '13 number. Does that make sense?

Yes, so let me try to help you understand it. So a couple of things. The balance sheet remeasurement piece in the third quarter was approximately $0.02. Now that's probably less than what people might expect because there was actually a 30% devaluation in the Bolivar, but I would just remind everyone that we were using the Sidney to translate our financial statements. That had a rate of approximately VEF5.7, so when it went to VEF6.3 we only experienced about a 10% devaluation, so that's why it was only a $0.02 devaluation. Little bit less than we were anticipating.

Now what I would say is that the $0.05 to $0.10 that we've set aside in our outlook is still the right number, because while the balance sheet remeasurement came in a bit less, unfortunately inflation continues to ramp up in that country. And we're continuing to experience stringent price controls, which is really compressing our imagines, so we've got the $0.05 to $0.10 for fiscal '13. It's the right number based on what we have seen fiscal year-to-date, and certainly what we expect. And we've also set aside a similar amount for fiscal '14 of $0.05 to $0.10. But that $0.05 to $0.10 again is to cover price controls, inflation, really the impact that's coming through on margins as well as just economic uncertainty. What we have not built in is an additional devaluation of the Bolivar beyond what we've already seen.

Got it, and I'm sorry, just one last one. I know obviously the weather hurt you, but cold and flu probably helped you, wipes were up double digits. Do you have a quantification for what that benefit might have been?

Well I think Chris that we saw some help in January from the flu issue we had in November, December. It really dissipated fairly quickly after mid, late January and I think that was one of the drivers behind the 10% volume growth that Steve talked about in January. We saw that, but it quickly dissipated and then we got into this unusually cold weather from mid February on through March.

Wendy Nicholson, Citigroup.

Hi. My question goes sort of to the heart of the charcoal issue, which is not to be overly critical, but I'm wondering if it was maybe more of a year-over-year comp issue as opposed to a weather issue, because I went back and looked at your transcript from third quarter of last year and you talked about high single digit volume growth in charcoal, which just doesn't show up in the Nielsen data for category growth. And I know we don't see all of the channels in the Nielsen data, but I still wonder if maybe we just all had our expectations not set right given the tough comp. But sort of I guess more broadly speaking about charcoal, the category growth there has been so sluggish, on an annual basis for so long and even with all your spending, your market shares have been under pressure so I know when you sold the auto care business it was a really tough decision, but it was kind of the right thing to do. Do you think that the charcoal business still has a place in the portfolio given how slow growth it is? Are the margins that good that it makes sense to keep it? So if you could talk about it a little bit more, I don't really care about the quarter so much, but just longer term about the business that would be great.

Yes, Wendy it's Don. I think it still plays a key role in our portfolio. I think it's obviously the highest share brand we have at almost a 75 share. I think you'll start to see share building back again. We already saw in April where we're picking up share again. I think the sluggishness in the category has been more related to the pricing we've taken and there's no pricing planned for this upcoming year, so I think we'll start to see these consumption trends turn around a bit.

I also think there was some dislocation in some of the key customers that are not measured by the Nielsen data as well. When you look at the home improvement centers, I think a lot of people had significant investments in the category last year, drove some very high consumption, plus we obviously had the warmest March in about 115 years last year, which kicked off the season. So there is some unusual stuff going on that I think is transitory and will even out over time. But I do think the brand at a 75 share with very healthy margins, and with the fact that I think we've got a number of retailers now that for the medium to long term really see this as a key brand in meal solutions, and I think we are making progress on making this more than a four month business. So I think given all those measures is the fact that we're seeing significant tie ins between Hidden Valley and KC Masterpiece and charcoal. It gives us a lot of credibility with retailers to be part of the solution around meals, so I think it does play a strategic role in the portfolio and I think you'll start to see that consumption trend change.

The one other thing I would add, I know you've heard this before but internally as we look at this category, it is really unique in that it's again just us and private label competing. We have 100% share of voice and we've got fantastic relationships with the retailers on this to where it's a category that just has great dynamics, and they are very hard to find, so I think with that we've got a lot of positives is really --

It's hard to quantify all the tail winds we get off it Wendy on other brands that we link it to, so it really does play an important strategic role.

And is it both, it's accretive on both the gross margin and on the EBIT margin line is that right?

It's got gross margins that are fairly consistent with the Company average and I would say that the EBIT margins look particularly good and it's a business that throws off a lot of cash, so from an economic standpoint it's actually a very attractive category and we've got good shares.

Okay, that makes me feel better. Thanks so much.

Okay. Thanks, Wendy.

John Faucher, JPMorgan.

Thanks. We've heard some companies talk about in the fact that volumes don't seem to be responding to what may be a heightened promotional environment, or at least less pricing growth in the categories as raw material inflation has lessened. Can you talk about sort of what you're seeing, and whether that's gotten better over the course of the first couple of months of the year? Are you seeing consumers respond to promotions or is it just sort of a tree falling in the woods at this point?

John, I think if you exclude the charcoal issue we had, volumes were actually up 1% in the quarter, and with categories flattish, that doesn't sound too bad to us, so there is a little bit of vibrancy there on volume. We had 2% volume growth last year, so it's not like we're seeing this 2%, 3%, 4% bleed off in volume. We've got some stability there in volume. So we're seeing actually trade spending come down modestly and I think that's one of the reasons, if you look at the last five, if you look at the last six quarters in the Nielsen data now that measures 81% of our volume, five of those quarters were growing in the 1.5% to 2% range in dollars. And obviously this last quarter ending March 24 was flattish to down 0.2 points. There was certainly pricing in those quarters. I don't think you're going to see much pricing over the next 6 to 12 months and I think that may bode better for a little bit more stability and maybe a little bit more growth in volume.

Okay, so you don't see anything that would make you think that the volumes aren't going to at least rebound somewhat at this point?

I think we'll see volumes very stable. Like I said if you exclude charcoal from this quarter we were up 1%. If you look at the last year we were up 2%. I think as, I don't think you're going to see much pricing in the CPG sector in the next 6 to12 months as I said because we take pricing based on two principles. One is we've got commodity costs we have to recover or we've got significant innovation that warrants a price dislocation. Well we've got some good innovation. If you see any pricing from us it will be hooked to innovation, just like we did on the spray bottles that we just launched a couple months ago. But when you look at the base brands and our plans for next year there's virtually no pricing in there in the United States because there's not enough commodity pressure to justify it. So I think with that lack of pricing and with the heavy investment of 10% plus on advertising and promotion in the US that we're going to do, I think you'll see a little bit of vacancy, certainly some stability in volume.

Thanks.

Yes.

Bill Schmitz, Deutsche Bank.

Hi guys, good morning. Can you just talk about what your percentage of growth is from new products year-to-date and maybe some of like what some of the products are?

Bill, this is Steve Robb. Let me lead off on this one. I don't want to break it down but I would say that we're very much on track to get to the 3% incremental sales growth from our new products and it's been pretty consistent. We've got bleach as you know we've been rolling out regionally and we've really completed that rollout in the third quarter. We've got our smart tube technology we're pretty excited by, it's kind of the first real innovation in spray cleaners in a long time and that came out in the third quarter. So I would say by the end of the year we should have an incremental three points of sales growth.

Bill, if you tick down through the categories I think, and you look at, and this is a year-to-date number, not a quarter because I think you can get messed up looking at just a 13 week period, but if you look at home care for example, very strong growth in home care, almost 6% year-to-date. And a lot of that obviously coming from wipes, some tail wind behind obviously the flu issue that we had in the fall. When you look at laundry, Steve talked about the compaction thing, we've seen some growth there over the course of the year, so we're positive on laundry for the full year, obviously not in the quarter. You look at Glad we've seen strong growth from Glad with some of the innovation around Force Flex and Odor Shield. Look at food, food is up in the mid low mid single digits and again, sandwich spreads some of the other flanker line items that we've launched off of Hidden Valley have been well received. And Burt's, Burt's had another double digit quarter and I think you look at the innovation around Lip Shimmers, Lip Wands, I think the teams doing an exceptional job there, so you look at this 4% growth year-to-date as Steve said we're well on track to getting three points from new products and the rest of it's a little bit of pricing.

Great, thanks. And then it seems like at least through the three segments you cited higher logistics and manufacturing costs, some of which are non-recurring. What are those and kind of what's driving the inflation there?

Yes, so if you look at the quarter, we had about 250 basis points of gross margin compression associated with higher manufacturing logistics. A good percentage of that is just inflationary pressures on wages and benefits, and a lot is coming out of our international markets where as you know we're just really struggling to get pricing through given the government restrictions. But some of this is one-time costs for investments we're making in like the smart tube technology, the concentrated bleach and those things. And we would expect some of that to anniversary off as we cycle through the numbers. And then there was also a little bit, it's not large but there was some in our charcoal business. Unfortunately in charcoal, you basically produce a lot to get ready for the early season. The production was going full steam but when the shipments were down 23% in March, we incurred more warehousing costs, more logistics costs and those kinds of things. I would expect next year we'll be able to anniversary some of that but that did cost us about a third of a point in margin.

Okay, great. Thanks so much. I appreciate it.

Thanks, Bill.

Joe Altobello, Oppenheimer.

Hi thanks guys. Good morning. I just want to go back to your consumer and I think Don you touched on a little bit of this earlier, but what did you guys see in the quarter in terms of the continuing shift toward larger sizes? Fill in shopping trips and more deal conscience consumer overall?

Yes, I think it's interesting. We monitor obviously social media. The primary issue that was most chattered about, well there were three. The primary one was weather. Cold weather. We saw the most chatter on social media about that, whether it was tweets or Facebook.

The second one was around managing budgets and around payroll tax increase and delayed tax returns and higher gas prices and people having to really stick to a budget. The third issue and this dissipated quickly after early Mid January was the flu. So I think Joe we've got a continued consumer whose very pressured week to week. That hasn't really changed and I think what has changed is we've had these five quarters in a row of 1.5% to 2% category growth and then bam, we hit this negative 0.2 in the latest quarter, and I think a lot of that obviously, there's all those factors influencing that, higher payroll taxes, gas prices, et cetera. The weather was also a big piece of that, so I don't know that a lot has changed. I certainly wouldn't read too much into one quarter of category slowdown here. I think that we've had 15 months of pretty good growth, but I do think to John's earlier question, that once we see more mitigated pricing in the next 6 to 12 months maybe we'll see a little bit less category growth in dollars, and a little more stabilization in category around volume.

Just building on Don's comment the one thing I would point out is unfortunately if you've followed the news the weather is particularly bad in April as well, so not only did it impact us in March but it is continuing to impact us, primarily in the charcoal business in April. We're hoping May and June will be better as we get into the primary consumption period, but it is something as Don says we're hearing a lot about it from consumers and we're watching this very carefully.

We saw this pattern two years ago where we had a bad April in charcoal and made up most of the difference in May and June. May and June are the pivotal months. That's when about a third of this charcoal business is done so obviously behind Mother's Day and Memorial Day kicking into the season.

Okay. That's helpful and just switching gears to commodities, you mentioned that you expect next year commodities to be about 100 basis point drag on the gross margin. This year it's been relatively benign. You did talk about resin. Could you talk about that in a little more detail and maybe how many of your commodities, or how much of your commodities have you locked in at this point?

Let me start with resin. In fiscal '13, the current fiscal year we've actually seen resin prices decline on a year-over-year basis, and that's actually been good news for us because the lower resin prices have enabled us to offset higher commodity prices in other commodity groups so that net-net its been a fairly benign environment. As we look forward to fiscal '14, we're anticipating energy will trade in the range of $90 to $100 per oil. We do anticipate that resin will begin coming back up again. And so what you'll see is modest inflation in packaging materials and chemicals plus slightly higher resin pricing, and when you bring it together we think it's about a one point drag overall to the commodity environment. The only thing we know here is you're well aware commodities are very -- they can move a lot. They are volatile. So you could see some variability across the quarters associated with this and we'll just have to get into the year and monitor it.

Joe as it relates to how much the costs are locked in, I think we mentioned in the past that where we have options to hedge some things like soybean oil, corn and others, we generally do try to get some predictability through hedging. But the reality is it's relatively small percentage of our commodity buy, so most of our commodity buy, although there may be delays as to when it filters through the P&L we're going to be subject to market movement.

Got it. Okay. Thanks guys.

Ali Dibadj, Sanford Bernstein.

Hi guys. Hi. I know we've talked a lot about charcoal impacting the top line volume but I did want to go a little bit deeper on the cleaning segment. You mentioned we all kind of saw the flu season being quite strong. Concentrated bleach should have helped. And look I understand Clorox 2 hurt but how big of an impact could that have been because we have been hearing about Clorox 2 hurting for years now. So I'm just trying to get underneath and see are there other big things that you think drove it. You touched on private label merchandising, again to try to tease out what consistent thing we need to worry about, or is this just a short term blip, because for some of us at least the volume number was little bit disappointing, in that as well.

Yes, I think, Ali, let me start and Steve can jump in. On Clorox liquid bleach I think we saw this pattern 12 years ago when we went through the first round of compaction and we saw it took awhile for consumers to adjust. I think we're seeing some decent category growth but primarily the issue we have is in a handful of customers. Like Steve pointed out in his talking points before we got into the Q&A, we've seen 15 of the top 20 customers' share position improve in the last four week period. We've seen at least over half, if you look at the 13 week period, we've seen at least over half or more of the top 20 customers gaining share, CLB gaining share, so I think we're seeing some sequential improvement. We have an issue in a couple of key customers and it really results from this, and on the one hand it's a double-edged sword. It's helping drive the category significantly, but it's not helping us specifically right now.

Let me explain. When the pricing was held, we took pricing about a year and a half ago and Wal-Mart held that pricing. I think Wal-Mart obviously using national brands to drive traffic as they've gotten back on track with their more historical growth rates. As they held that pricing it certainly put downward pressure somewhat on the industry in general, but what it also did was it depressed the penny profit that some retailers are obviously making on Clorox liquid bleach relative to private label. So that's one of the issues that we've been addressing most recently and I think that's why we're seeing 15 of the top 20 now pick up some share as we try to get back to either through special packs or different merchandising events, different higher value skews that private label can't replicate, whether it's splashless or different scents, outdoor, different ways of, gel bleach, so different ways of changing the mix up. So that when you look at the profit picture on Clorox liquid bleach it looks favorable. So that's the issue we're addressing. As I said I think we're getting the majority of the top 20 now moving in the right direction but that's been the central issue is it's really, it's not so much that the consumer pull of Clorox liquid bleach or private label bleach, it's the shifting of merchandising support inside some of these key retailers to more private label because of the penny profit issue.

And are you losing shelf space because of the concentration now or do you anticipate to do so before --

Yes, if you look at the top 20 customers, we have, the category has not lost shelf space in any. In terms of our shelf space, I'd say maybe 1 or 2 of those 20 we've lost shelf space and the others we've either held or gained.

Okay, cool. So slightly different topic. If you could talk a little bit more about what you think the right level of ad spend is, even 9% is actually quite low versus if you have a historical, I totally get there's this natural downdraft from categories away from home as an example or international mix.

Yes.

Do you think this is the right level? And to pile on to a flavor of an earlier question, we've been hearing from a lot of CPG companies that it's getting tougher to grow, more expensive to grow. Are you sensing that?

Yes, well as far as the right level Ali, I would say it this way. We spent 10.3% on US retail in the quarter. I think you'll see that level between 10% and 11% continue into FY14 and again, I know you've heard this before, but just to reiterate, we've got brands like Hidden Valley that are spending significantly above that level. We've got brands that because of their unique share position, like charcoal with a 75 share that spent well under 10%, the dynamics of the category don't merit that kind of spend. So in those categories where we see competitive intensity, we're spending well north of 10% and I think we've got a kind of a unique mix given the eclectic nature of our portfolio where we don't have to spend at the same level. You can get lost in the averages so I think 10% to 11% in the US is an appropriate level and I think as we go forward that's the level you'll see from us, and I do think there is downward pressure obviously from some of the international markets. It doesn't make a lot of sense to spend a lot of money in Argentina or Venezuela at this point because we are not going to spend a lot of money creating demand for products where we have modest margins, if any margin. So I think that dynamic continues to play into '14, but I do think 10% to 11% is the appropriate level in the US and our eclectic portfolio I think says that's a pretty good rate to spend at.

Okay, if I could just lob in one last one about Green Works, there's been a lot discussed and written about that, you guys have seen it on social network sites. Can you talk about the strategy there and the pretty large price reduction that accompanied that relaunch? Thank you.

Yes. Ali, the relaunch is really anchored into one central idea and the idea is green for all. And the idea of lowering the price to get it more competitive with traditional cleaners in general is this thought that you don't have to be wealthy or an environmentalist to have access to natural products, natural cleaning products, so that's kind of the central thought, because if you look at the competitive set in that, it's more targeted to niche and elite or more wealthy consumers. And obviously in channels that tend to be more oriented to those who are probably more financially well off so our whole focus here is how do we get this more broad based. How do we get access to natural cleaning products for everybody, so that's the key point.

Now, having said that, I mean Green Works is at this point, less than, it's about 1% of the Company's revenue. We do think there is some upside obviously in getting some of these retailers who have cut distribution on Green Works over the last couple years as the sustainability focus waned in a number of retailers. We think there's a real opportunity as this pricing comes down, and we're really, we haven't changed our margin structure on the products as we've taken the pricing down. We've reengineered the products. We've kept the natural percentage at the 98% to 99% range, which is the most natural in the space, but we've reengineered the products. So we've learned a lot and so we've kept the margins about where they were while lowered the prices, so I think we've got another shot at this thing in terms of repositioning it as a real mainstream cleaner.

Thank you very much.

Okay Ali.

Lauren Lieberman, Barclays.

Thanks. First one is just a follow-up on SG&A. You mentioned both the lower IT spending but also the compensation expense. Can you just maybe give us a little more granularity on how those two add up, particularly I'm thinking about because next year when I need to model this quarter, thinking about how the compensation expense could impact comparisons.

You know, that's a tough one. What I would say is that the compensation accruals in fiscal '12 in the same period were much higher than what we've got in fiscal '1, and so that's why you're seeing a change. And that accounts for a good piece of the change in the SG&A. Call that a third, maybe a bit more. You've also got a pretty good chunk because we're starting to lap some of the IT related investments and other things in there. It's very difficult to comment on compensation accruals for next year because it really depends on how we perform relative to the goals we have for sales as well as for economic profit growth. I would just say as you think of the SG&A outlook for fiscal '14 this year we think we'll be about 14.5% of sales. Next year we fully expect to be less than 14.5% of sales and it's one of the things that should contribute to the EBIT margin expansion of 25 to 50 bips that we're projecting at this point.

Lauren, if this helps you, I think the accruals on comp are still a little bit above average so there's not like there's some drastic change in the accruals versus where we have been so we're not, it's not a significant amount, as Steve said it's about a third or so but it's not a significant amount in absolute dollars.

Okay that does help a lot and then really the rest of it is the comparison on the IT and R&D investments?

It's IT and R&D are the biggest ones I think that we're seeing, but we also have productivity initiatives we're putting through to lower the SG&A expenses as well, so it's really all of those things combined. Again you're going to see variability in SG&A across the quarters depending on how international inflation plays out, the anniversarying of all of these one-time investments we're making, and certainly compensation accruals as you get moved through the year can move the number up and down. But the key is to focus on the full year and for the full year we would expect to be less than 14.5% of sales. We think there's good traction there. And long term, I would say long term being over the next 24 months, we think we can get this number to 14% or less and just recognize there will be some variability across the quarters here.

Okay, thank you and then just a quick follow-up on bleach. So I just wanted to ask if you completed the rollout, the third region for compaction, if that was completed this quarter.

Yes, we finished it Lauren at the end of March.

Okay, so that also, so when we think about just the bleach performance in the quarter, and I know you already talked about starting to see shares move in the right direction from here anyway, but that still would have been a positive dynamic for volumes in the quarter, right?

You know, I think it's mixed. I think the conversion went about as we expected within the, and private label followed, and I don't think it did and certainly didn't hurt the top line but I wouldn't say it was a big growth driver.

It wasn't much of a growth driver in this sense, Lauren that the last region which was the West Coast, the retail makeup in the section sizes on the West Coast are fundamentally different than the first two regions we rolled out, particularly through the Midwest part of the country and the Southeast where we see larger store footprints, larger bleach categories where the category development indices are higher on bleach. So it wasn't, we didn't see as dramatic a boost on the West region as we did in the center part of the country if you will in the Southeast because the store footprints are just different.

I would point out importantly we are starting to see the cost savings flow. We certainly picked up a little of that in the third quarter, but by the fourth quarter as we anniversary some of the one-time conversion costs we've been talking about, that's one of the reasons we believe that we should see solid gross margin expansion in the fourth quarter because we're going to lap those investments and start to enjoy some of the cost savings.

Great. Thank you so much.

Greg Kessler, Bank of America.

Hi thanks for taking the question. Think you guys had a $500 million note that matured in March and I believe it was on the last earnings call where you may have mentioned that you plan to address that with the combination of cash and short-term borrowings. Is that kind of how that played out? And if you did use some short-term borrowings, do you plan to refinance that?

Good question. Yes we did exactly what we said we were going to do. We used a combination of cash and short-term borrowings in the commercial paper market, which as everybody knows has very attractive rates to pay off the $500 million. We'd also prefunded, the last time we'd issued debt in the fall we had prefunded, so we had extra cash built up to cover for it. And at this point, we have no additional plans to bring any additional debt to market. We feel good about the debt structure that we've got. In calendar '15 we'll have more debt that will be maturing and at that point we will take a look at what we want to do.

Okay, thank you.

Connie Maneaty, BMO Capital.

Good morning. I also have a question on bleach and that is we look at four week data and don't normally make much of it because it's a short period of time, so if Clorox liquid bleach is gaining share in, I guess you said 15 of 20 accounts, does that mean that you have regained shelf space? Is that what gives you confidence here?

Connie just to be clear the 15 out of 20 reference is that in the four to five week data, 15 of the top 20 customers have improved market share results versus the quarterly data. They aren't necessarily all increasing yet, but they are better than they were at the 13 week period.

And what do you attribute it to though?

I think part of it, Connie is getting back into the merchandising cycle. That's a big driver. I mean this business does have obviously a strong base, but it also has merchandising support that's critical either on a quarterly basis or a couple of times a quarter. So I think it's just getting back into the merchandising cycle and not letting that cycle get too much tipped to private label.

Okay, great. Awesome and then so just one follow-up on Venezuela. If the ongoing impact from inflation and the lack of pricing power is $0.08 in the June quarter and you've got $0.05 to $0.10 built in for fiscal '14, most of that I assume will be in the first three quarters. If it's $0.08 now and $0.10 over the next three quarters, why would the conditions there improve?

Let me try to explain it like this. In fiscal '13 on a full year basis, we set aside $0.05 to $0.10. Of that $0.05 to $0.10 about $0.02 will be used to cover the balance sheet remeasurement that occurred in the third quarter. The balance will be used across the quarters to reflect the fact that we had a business that was once profitable and we've had significant margin compression, and so the business has gone from profitability to breakeven to slight losses and really that's what's consuming the fiscal '13. As we look into fiscal '14, unfortunately we don't see the situation getting better in the short term, so we are projecting losses in our Venezuela business in fiscal '14. And the $0.05 to $0.10 is really designed to cover for those losses as well as some challenges in our Argentina business as well. So I think that it's likely to spread across the full year, although the exact amount depends on what the government does with pricing in terms of letting companies take pricing. And then the only unknown piece that we have right now is whether there's going to be another devaluation, and if so when, and how much, and that is completely uncertain given the situation, and we need more time to assess that.

Our assumption, Connie is on the operating environment there, and the reason we've set this $0.05 to $0.10 aside again in '14 is we're assuming that there's going to be no relief on these price controls. And as Steve said, that just compresses your margins to basically nothing at the gross line. So we're trying to assume, if not the worst, I think a fairly realistic scenario that says this isn't going to get better in '14 and we better be prepared for it.

I guess my question is why it's only $0.05 to $0.10. If the impact is $0.08 in the June quarter, why isn't it more like $0.10 to $0.15 next year?

I'm sorry I'm not following the $0.08 in the June quarter. The $0.05 to $0.10 for fiscal '13 is a full year number, okay, of which $0.02 considered in the third quarter. And the balance is going to occur over a series of quarters which would be Q1, Q2, Q3 and Q4.

Oh, okay, great. I needed that clarification. Thanks.

And I would also just say being completely transparent with our investors about this is we will be challenged in the first half of the fiscal year unfortunately because of the situation in Venezuela and Argentina. So combination of foreign currency headwinds and very difficult economic environment will continue to be a drag on both top line growth for our international business as well as profitability. So we think we're taking the right actions to mitigate the impact associated with this including right sizing our advertising investment, but obviously this is a challenging situation.

Yes, and that's why in addition to the $0.05 to $0.10 on this Venezuela and Argentinian issue, that's why we also took one point of sales growth against the, we would have came out with 3% to 5% on a currency neutral basis but we came out 2% to 4% in the outlook because we wanted to recognize that Argentinian devaluation which is slowly eked out over time. It's not like the government has taken a formal action like the Venezuelan government.

Great. That's very helpful, thanks.

Erin Lash, Morningstar.

Thank you for taking my question. I wanted to talk about the cat litter business. You mentioned in the press release that cat litter shipments declined again this quarter reflecting the price increase you took about a year ago. Obviously price increases, you've mentioned that you tend to take those reflecting commodity cost increases and that sort of thing. Is there any, I guess do you feel that taking the price increase on cat litter was a good thing or what is your strategic direction for that business given the challenging volume metrics that you've seen recently?

Well I think, Erin, actually on the cat litter business if you look at the quarter, while we saw some volume compression we saw NCS or net sales growth in the mid single digits. So it looks like it's starting to recover and that certainly is a sequential improvement for year-to-date, we're up a little over 1% in sales, so we're almost triple that rate in the latest quarter. So I think we're starting to get some traction there. And if you look at the category, the category growth on litter, if you look at the last 13 weeks, and this is data ending in March, you're looking at 5.5% dollar growth and while we have lost some share we're starting to see some sequential improvement as we go into, as we go, I think we'll see some improvement as we go into April. So we're seeing some decent sales growth now certainly at a higher rate than we saw year-to-date in the latest quarter.

Thank you, that's very helpful and just one other question. You've talked on the call about the challenging economic environment and consumers being under pressure at home. And I was wondering if you could talk about the different channel shifts that maybe you're seeing, and how you feel you're positioned in various channels that a strained consumer may be shopping in, now more so.

I'm sorry, let me just clarify something Erin, before we get to that question. The year-to-date number on litter is actually north of 3% so we've got a pretty good number year-to-date on that, so could you go back to your question though again?

Yes, you talked about the fact that the consumer spending environment in the US remains challenging, so I was just wondering if you could talk about any channel shifts that you might be seeing from the consumer perspective?

Yes, one thing, couple of things we're seeing, one is, and this is from panel data that we have that fill in trips are increasing and fill in trips, this is defining a trip as less than, 15 or less items during the purchase. Fill in trips now are 85% of the shopping trips that are out there and accounting now for almost half the dollars spent, so we're seeing that's clearly a change from say a couple of years ago. So people hopping around different channels, cherry picking if you will, and reducing the purchase size when they're hitting these channels. We're still seeing gravitation to value channels, whether it's the dollar channel which is slow to bid certainly as our largest customer has gotten more competitive in the last 15 months to 18 months, but we still see the club channel, the dollar channel and the mass channel continuing to really be fairly robust compared to the traditional grocer.

Thank you very much. That's helpful.

Javier Escalante, Consumer Edge Research.

Good afternoon everyone. I would like to talk about your fiscal '14 guidance, the 25 to 50 basis points EBIT margin improvement, which is very similar to your, it's kind of your default target, but you have already 25 basis points at least of margin expansion, which I believe is a sure thing because it has to do with the ramp down of the IT and R&D spending. And it seems to me that you are less inclined to bake in gross margin expansion in 2014. And I wonder whether this is being conservative, or you feel that you have taken too much pricing and given the consumer environment you don't see enough justification to try to pass through the commodity increase of 100 basis points that you are calling for your gross margin. So if you can help us understand whether there's this change in the business model, how you want to drive earnings in 2014 meaning more from SG&A, less from gross margin expansion for the whole year.

So Javier, this is Steve. So first let me say that we feel very good about the 25 to 50 basis points is our plan to expand gross margins consistent with our long term outlook, so it is certainly not a default position. So as you think of our EBIT margin expansion of 25 to 50 basis points, there's a couple of reasons why the gross margin will be a bit more challenged next year versus what you might expect over the longer term, and really the biggest thing I would point to is our international business. We would like to take more pricing in Venezuela and Argentina. Unfortunately we can't so right now, we've got good plans to expand gross margins on the US side of the business, but the challenge is we're really struggling to be able to take pricing internationally. And certainly that's placing a drag on the gross margins versus what you might expect to see on an ongoing basis.

Now that said, we continue to believe we have leverage on SG&A, and we've got good plans to drive productivity improvements and cost savings, and as you say anniversary some of the infrastructure related costs. So we do think that SG&A will drive more of our EBIT margin expansion in fiscal '14. I think longer term, you would expect that both gross margin and EBIT margin should grow together. But we do have some unique challenges that we are facing in fiscal '14.

But is this commodity increase that you are calling, right, that you have great visibility because of your long term buying programs, you're saying that your fiscal '14 does include already price increases, so if it does include price increases, why your gross margin are going to be still below those that you had in 2011?

Javier--

Why is it difficult to come back to higher gross margin?

Yes, you may have missed this earlier but what I said is if you look at the US business which is 75%, US retail business which is 75% of the Company's mix, there's virtually no pricing in that next year. So if there's any pricing at all in the P&L there may be some modest pricing in international outside of Venezuela and Argentina where we can take no pricing, virtually no pricing, so there's very little if any pricing in the P&L. I think that's the change when you're looking at commodities up 100 basis points and other inflation up about 100 basis points, and you're looking at cost savings of about 150 basis points, we've got a very modest build in there from pricing, which I think is prudent and/or from mix improvement so that's kind of your offset. You've got a couple hundred basis points of pressure and a couple of hundred basis points potentially of offset so you're basically in this flattish area.

Okay, thanks.

And I don't know if I'd define that, I don't know if I'd describe that as conservative. Perhaps it is. I think I'd describe it more as realistic at this point.

I understand, you mentioned the consumer environment and I was just trying to see.

Right.

Whether you had build price increases in the US or not, given whether this level of inflation is in limbo that it's hurting, but it's not enough to justify a price increase to retailers, that's what I meant.

Yes, and I think the way you just said it is the right way to think about it, Javier. That we don't think given where commodities are that it warrants a price increase for the most part, and going into retailers and trying to persuade them. Unless we have a particular innovation that warrants it, then I think we're standing pat and saying no, we're really going to focus on holding, really focusing on price value.

Okay, thank you very much. Very helpful.

Jason English, Goldman Sachs.

Hi, good afternoon guys. Thanks for the question. Quick housekeeping item. Did I hear you lower your CapEx guidance for the full year to $180 million?

You certainly did. We brought the CapEx down to about $180 million and really it's just a reflection in part of lowering some of our spending expectations for international given some of the dynamics in that market. And we're also just tightening up the spending to try to get that free cash flow back to where we think it needs to be, which is around 10% to 12% free cash flow as a percentage of sales over the long term, and this year we think we'll be right around 10%.

Okay, so you're curtailing your CapEx a bit. You're not buying back many shares, and you're starting to see the option creep as a result. And you're running down net debt. How should you think about your use of your balance sheet going forward?

I would say we're pretty consistent in our uses of cash. We've been focused on obviously supporting the organic growth of the business and paying off the $100 million approximately that we invested for the bolt on acquisitions. We're going to continue to look to support the dividend and the growth of the dividend, that will be something that people should expect.

Yes, I think if I could just jump in on that one, Jason, we have our Board meeting coming up in two weeks and this is a traditional time of year where we'll revisit the dividend with the Board. So you should expect news coming out of that Board meeting in a couple of weeks.

We've also been focused on, as we've talked for awhile, not just infrastructure investments in terms of funding those, but also paying the debt down. We were above our debt to EBITDA ratio for quite awhile. We've gotten that down into the lower end of the debt to EBITDA ratio, so I think the good news is we anniversary the infrastructure investments, the debt is back down to more normalized levels. Our expectation is we will probably start building up on cash. And to Don's point, consistent with what we've done for many years now is we'll look to get that back to our shareholders in some way that makes sense. Certainly we'll take a hard look at the dividend in partnership with the Board. And I think at some point we'll go back and look at share repurchases as a way of returning cash back to our shareholders. But again, that's one of the benefits of the Company is we do throw off a lot of cash and I think our options will open up as we go forward over the next 12 months.

So I should not interpret this as you guys building a coffer to go out with more aggressive M&A?

We will continue to focus on bolt on acquisitions that we can fund out of cash and commercial paper. That doesn't mean we can't let the debt to EBITDA ratio go down to the low end of the range or even slightly below to build up some dry powder, but at the end of the day if we don't foresee a need and use of the cash over time we'll look for ways to get that back to our shareholders.

Just to be clear, Jason, I think you're correct in, what I want to be declarative about is we are not looking at any transformational acquisition. As Steve said, what we're talking about here is bolt-ons like we've done over the last couple of years so just to be clear on that point.

Great. Thanks a lot guys.

Okay.

Chris Ferrara, Bank of America.

Hi thanks for the follow-up. I'll try and keep it quick. Just back to trying to size the order of magnitude of the weather related hit to charcoal versus the benefit you got in cold and flu, and if you look at scanner data sales, it looks like the amount you lost year-to-date in dollars year on year on charcoal is a little bit lower than the amount you gained in things like disinfectant and wipes. And I guess I'm just trying to understand is that right? What's your take on that? Is that the wrong way to think about it? Why shouldn't i think of cold and flu as as big a benefit to the quarter as maybe the charcoal weather related hit was a detriment?

Well disinfecting wipes business was certainly up pretty, it was nicely, I think as we said at the beginning of the call but charcoal unfortunately was down pretty significantly, so from a sales standpoint, fair enough. You've got disinfecting wipes up, you've got charcoal down. I would say however from an earnings per share standpoint, this is really important, because we missed the consumption period in March and unfortunately, April has had some pretty poor weather and we're missing some consumption there. That the $0.06 of diluted earnings per share impact that we say in the quarter, that will fall through to the full year, so I think there's puts and takes in the quarter but--

Let me say it this way to you too Chris, I think if you look at the sales growth, forget the scanner data for a minute, looking at what drives the P&L, if you're looking at the hit from charcoal in sales in the quarter it was double the gain in home care for the quarter. So that, to Steve's point, a point and half of growth for the entire Company is about $20 million in the quarter, so when you look at that, it was double the gain of home care, so home care did not offset.

Thanks, guys.

Yes.

Jason Gere, RBC Capital Markets.

Great, thanks for squeezing me in. Just two questions, I have a housekeeping and then more strategic. The housekeeping is, I'm not sure if you broke down the difference in the sales line between price and mix for the quarter, if you could talk about that, and maybe the trends, how that maybe was influenced by charcoal. And then the more strategic question is when you look at the organic sales numbers that you guys have been delivering, if you look at last quarter, where obviously you delivered a very high number on a very tough comparison, for the most part, you guys have been averaging between 3% and 4%, just wondering if internally you guys ever think about, especially with category growth still in that 1% range, is it more prudent to go with a long term or at least a near term sales target of more like 2% to 4% rather than a 3% to 5%? And just considering your geographic mix how it's in there, doing 2% to 4% for being a predominantly US Company is not too shabby, so I was wondering about not setting the expectations too high for yourself.

Yes, well let me start on this and then I'll let Steve jump in. I think that when you look at the way we've built that 3% to 5% up over time, it was always based on 2 points of growth from new products, 1 to 2 points from category, and then 1 point or so from pricing and/or mix so that got us into this 4% to 5% range. When the categories collapsed a bit a few years ago and went from growing 1% to 2% to being basically flat to down 2%, we said we've got to redouble our efforts on innovation, so this year we should deliver another year of 3% plus in innovation as we did last year. So we think we've made up the slack so of the categories going down to more of a 1% level, so if you take 1% from category, 3% from new products and any pricing or mix improvement, we should be in this 4% to 5% range. Now that's currency neutral. It was always predicated on being currency neutral. If there's more significant currency headwinds in there then that obviously takes off from that so that's the real wild card in this, if on a currency neutral basis we think 3% to 5% is appropriate, 2% to 4% is more appropriate if we're going to get 1 point of headwinds out of FX.

Just on your question regarding price mix. Price mix in the third quarter was about 2 points, so 2 points positive, and to Don's point 2% to 4% is the right outlook to be using for fiscal '14 given the foreign currency headwinds, and given the fact that it's likely we'll have less pricing in part because of price controls and in part because in the US retail business we're likely to take less pricing unless we see some major shift in the inflationary environment.

And the only other thing I would add to that is if you look at some of the growth engines of the Company right now, and albeit they are a bit smaller, Burt's Bees for example, the margin structure of Burt's is significantly better than the Company average. If you look at our healthcare business, which is also growing in double digits, that is slightly better than the Company average. So you look at that and you start to say maybe there's a little bit of mix tail wind in here as well, so that's why we felt confident that on a currency neutral basis 3% to 5% was still appropriate.

Okay, thanks.

Yes.

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

Yes, well just a thanks to everyone for attending the call. Like I said I think we feel good about the quarter given the headwinds we've experienced, and certainly about the year-to-date performance. So we will certainly get back to you obviously in August, we look forward to that discussion, and then later in the year in October when we host all of you out here. Thanks, everyone.

This concludes today's conference. We thank you for your participation.