Thanks for coming. We have a lot of familiar faces here today and we have got a great program planned for you. I am going to start off with the Safe Harbor statement. I encourage everybody to when you have some time take a look at it and read it. And I have a very packed agenda. Many of these topics are familiar to you, who we are, why we are winning and take you through the ARM & HAMMER brand today, also all our exciting innovation in ‘19 and then our other couple businesses, international and animal productivity. I will also talk about how we run the company and Rick will come up and talk about the financials. So, we just wrapped up another strong year. And we entered 2019 with a lot of confidence. So, our EPS is expected to increase 7% to 9% driven by operating income growth and that is top tier in the CPG space. Our 3.5% organic sales outlook is above our evergreen model. All three businesses are healthy. In the U.S. we are enjoying strong demand for our products, we are in the right categories and we have low exposure to private label. Our international business continues to be a juggernaut and we will hear more about that today from Steve Cugine who leads our international business. Our Specialty Products business is also setup for a good year. We have an impressive lineup of innovative products across many categories that you are going to hear about today and our ability to rapidly innovate is differentiating among CPG companies. In 2019 we are going to return to gross margin expansion as we have price and productivity programs at our backs. Our price increases have been well executed for ARM & HAMMER cat litter, baking…

Hello, everyone. As Matt just talked about, we are all about brands, consumers, love. And how we bring that to life, I want to share with you today. You have heard we have 11 power brands and I think about a year ago when I was here, I shared actually what we are doing on OXICLEAN. You might remember, it’s been a whole year I know that we talked about how we activate in digital and how we do targeted marketing and predictive analytics as one of the key tools. And as you know, we are all about transparency and results. So, Matt loves to talk about our report card. So I thought I would share today the results of the year of OXICLEAN. So what you can see behind me is OXICLEAN had the highest share ever at more than 53% and we have actually grown 4x the category. So that’s what great marketing can do for brands. And today we are actually here to talk about our biggest and most exciting brand, ARM & HAMMER. And I know that I want to refresh briefly what you should know about ARM & HAMMER. It is one of the oldest brands in the United States. It was actually one of the first ones trademarked in 1905, which gives it more than 100 years. It is truly part of the American DNA. So one of my colleagues was actually in a museum in Utah and on the wagon displays of the wagons going west, there was a baking soda box, because the versatility of that product is so ingrained in American philosophy about making yourself a brighter future, but it’s not only a historical brand. Even today one in two households buy an ARM & HAMMER product every year and I…

Okay. Thank you, Britta. Now we have got some really exciting things to talk about. I mentioned earlier that we have quite a scale as an innovator in CPG and I think this little show here is going to give you a real pace of the breadth of the innovation that we have in 2019. We will start off with Waterpik Sonic-Fusion. So we have the world’s first flossing toothbrush. Now you can brush and floss at the same time and only 16% of American adults floss daily. And this is clinically proven to be twice as effective as traditional brushing and flossing. So, this is a fabulous new product. And there is a lot of science behind this. So I am going to roll a couple of minutes here. So everybody can appreciate the design behind this product. [Video Presentation] Okay, gang. Everybody run out there and buy one today. Alright, next up is OXICLEAN. So we all know OXICLEAN for its whitening powers. But now we are launching OXICLEAN Dark Protect. So this is directed towards dark and black fabrics. So 42% of our wash loads are dark loads. So we are bringing anti-fade technology to OXICLEAN and it includes OXICLEAN Stain Fighters, it’s cold water soluble. This keeps dark and black fabrics looking newer. And we are also bringing that technology to value detergent. So, ARM & HAMMER plus OXICLEAN Fade Defense. This is for vibrant whites and bright colors. So, color fading is the number two laundry frustration. So this is a new benefit, Fade Defense that we are bringing to the value detergent category. Litter, so we have ARM & HAMMER Cloud Control, so you can breathe easy. If you are a cat owner, you know there is a cloud of nasties when you are…

Well, it certainly is a big sexy world. So I guess that’s why I am up next to talk about the international story. As Matt said, I think everybody is familiar with our evergreen target international at 6%, but I thought I would give a little color here on international. For the last several years, we have been focusing on building scale. As you can see in 2013, we were $430 million in sales and we exit 2018 with $710 million in sales. Not only have we increased scale to the point where we believe we can really have access to every major market around the world, we have doubled our organic growth on a much larger base from 3% to almost 8% and exiting 2018 at 7.8%. When we started this journey, we started really implementing our new strategies in 2014. We saw the fruits of that labor by Q4 and you could see from every year from 2015 to 2018, we have exceeded our 6% evergreen growth target exiting 2018 at 7.8%. Even better news is we had a very strong quarter finishing Q4 at 9%. So, we leave 2018 with a lot of momentum. The net sales composition for international is really 8% Mexico and Australia; 23% Europe, which is made up of three subsidiaries, France, UK, Germany; Canada at 31%; and total export or our global markets at 28%. Breaking that down for 2018 even further, our subsidiaries delivered a solid 4.3% organic growth and export continues to deliver strong double-digit growth every year. As we look forward and we say where is the engine of growth coming from? And what is the fuel for that growth? In our subsidiary markets that now exceed $0.5 billion in sales we focus growth in three areas one, brand…

Okay. Animal Productivity, so we have a 5% algorithm here. Remember we said that the Company grows 3%, U.S. is 2%, international 6% as Steve just took you through, and Specialty Products 5%. So, you might think, hey, that’s kind of a big number considering that we went backwards in 2018 minus the 3.4%. Here’s how that 5% breaks out. So, we have a bulk chemical business. That’s essentially bulk sodium bicarbonate. It’s a real steady-Eddie business. Animal Productivity is the one that we expect to grow at 6%. Two-thirds of the businesses is Animal Productivity; one-third is bulk chemicals. Now the Animal Productivity part of the business is the one that’s been most volatile and the most cyclical over time. The reason we like being in that space is just because of this statistic is there’s 7.5 billion people on the planet today; going to 10 billion by 2015. So, animals have to be more productive. If you went back to the 1970s, that’s when we first got into the dairy business. Essentially baking soda was Alka-Seltzer for cows. They could pretty much eat more and more grass. From there we moved into nutritional supplements, still in dairy. And then 3 years ago we decided we have a great brand in ARM & HAMMER. We can move into other species; that will be cattle, swine, and poultry. So first we bought into pre-biotics, then we bought into probiotics. So now today, 2018, 24% of the business is non-dairy and growing. This is good for us going forward. Second thing is that 13% of the business is now international. So, the population growth is outside the U.S. That’s where we need to be. So, we’ve made a lot of progress over the last three years and that’s what gives us…

Okay. Alright. Thanks, Matt. I am going to go through three things, look at the 2018 results, quarter, full year, talking about the outlook, and will start with evergreen model like we always do. So just as a reminder and we have been doing this for over 10 years, but organic net sales growth of 3% is kind of our algorithm, 25 basis points from gross margin, flat marketing, higher dollars of course, and then leverage SG&A by 25 basis points to get to the 50 basis points on operating margin, which translates into 8% EPS growth. I’m sure all of you guys can tell me the same thing. And as Matt alluded to earlier, it breaks out by division, 2% domestic, 6% international, and 5% for SPD. So, Q4 highlights; 4.3% organic growth in the quarter, which is really strong top line performance. Our outlook was 3%, domestic was 4%, international was 9%, and SPD went backwards by around 4%, consumer organic also almost a 5% grower. Adjusted gross margin; now this is where we’ve had a lot of conversation. Our full-year outlook was down 120 basis points that implied down 160 basis points. In the quarter we finished down 250 basis points in the quarter. So, what happened? Three things; first of all, there was a mix impact of about 40 to 50 basis points. Our household business grew faster than we expected. Our personal care business, excluding Waterpik, grew a little bit slower than we expected. And so that was one. Number two was tariffs, so the timing of tariffs, right. As our Waterpik business grew faster, we thought that tariff impact was going to really hit ‘19. It got pulled forward into 2018 and then the third thing was on gross margin. We really blew the…

Okay. We have got the whole squad coming up here, every function is represented. There would be chance to pepper us with questions, so we got a microphone for the crowd.

Yes.

Okay. Joe Altobello.

Thanks. Couple of questions on gross margin, I guess first for Rick, can you walk us through why the cash flow over-delivery was a drag to gross margin in the fourth quarter?

Yes, sure. The question is why is cash flow over-delivery from an incentive comp perspective a drag to gross margin rate, right. Well, we have 4,700 employees, two-thirds of whom are at the manufacturing facilities all over the world. And so when you do incentive comp or salaries, that goes through direct labor or overheads at the plants. And so increases in compensation flow through the gross margin line as part of COGS, so that’s why.

Got it. And secondly in terms of the ‘19 outlook for gross margin, what level of promotion activity you are expecting, is it going to get better than it was this year or worse than it was this year or pretty much equal?

Yes. One of the things I have said upfront is that we see an opportunity to reduce promotional spending in the laundry category. If you looked at two big household categories right now, so if you looked at laundry detergent and litter and you looked at the last six quarters, you see that the fourth quarter was the lowest quarter in 1.5 year. Unilaterally we think because the strength of our brands and the strength of the consumer that we can go further.

Okay. Thank you.

Kevin?

Thanks. My question is on the international business, how big can the China opportunity be, what’s potentially the role of M&A with respect to that growth strategy. And then lastly, touching on that with the guidance that was the one segment where you are guiding in line with the evergreen target, but it seems like this would be a year with the – with your alliance Jahwa coming on where maybe we would see above sort of evergreen target growth, but that’s not at least initially anticipated in the outlook, so maybe you could touch on that as well? Thank you.

It’s never enough, Kevin is it. We have got a 6% algorithm. We said we are going to hit the 6%, but…

[Question Inaudible]

Yes, okay, alright. Well, I am very curious to hear what Steve has to say about how big the international business can be particularly in China.

Okay. So put it in perspective, right. So outside the U.S. for Procter, China is the number two largest country. For us, it represents about 1% of total sales. So it’s a very significant opportunity for us. So we believe that we are putting in the foundation for what I think is a decade, maybe two decades worth of growth, right. To maintain a 6% plus algorithm, you are going to need to have some large markets contributing for a long period of time. So how big can it be, I think it can be pretty big, but I won’t put a number on it today. We are just starting with Jahwa as of Q1 in ‘19, so we would like to get a little momentum under our belt. Your second question was on why only 6% growth and I would say there is two reasons for that. First is that we are investing both in Southeast Asia and in China, right, particularly in terms of expanding distribution. That is a net negative against organic sales. If we looked at a unit basis, we think there would be faster growth, but we are really ceding that for 2020 and beyond, that’s number one. And number two we are being just a little cautious as it relates to Brexit. So we have a large manufacturing plant in the Southern UK that supports a lot of our international personal care brands.

Okay. Jason.

Thank you for the question. Two quick questions, first on cadence to gross margins, obviously we finished on a slightly softer note, can you give us any directional indication of what the shape of it may look like throughout next year? And then second question, I will just plow them both in now. Can you update us on your M&A ambitions? I know a lot of observers of Church & Dwight had a sense that there maybe acquisitions coming sort of late last year. Clearly, we are into the next year and nothing has happened. Is there reason to have a heightened sense of anticipation that there is something happening sometime in the near-term?

I am going to let our attorney answer that second question. So I will take the second question first. So you know that there is no property that is sold in the United States without us being aware of it. So any book that’s floating around, we have it. So we look at everything that comes to market, but we never tip our hand with respect to what we are going to hunt for or if something is imminent. But rest assured, we are very busy looking at opportunities, so that’s as far as we can go. Patrick, are you good with that? Alright.

And then your second question on gross margin just the curve, largely because of commodities it’s, I’d say, first half, second half. So the first half will have to be down on gross margin, the second half will be up on gross margin, because of the timing on commodities.

Okay.

Okay, thank you. So, following up on a question on guidance and a question on international for Steve, on the guidance 2.5% consumer domestic growth, your commentary was very bullish on pricing and optimistic on lower promotion, some of that 2.5% price mix versus volume, should we expect that to be skewed significantly more towards price mix? If so, how do we square that and the flat A&P against the backdrop where just a couple of your competitors, Henkel and Colgate are reinvesting pretty significantly? Maybe not all the funds in the U.S. market in your categories, but they are investing. P&G is not relenting. So is your spending outlook enough and the price mix optimism, how do you square that with the investment backdrop competitively? Secondly...

Do you want to pause there and let us answer that?

Sure.

So one of your questions is we have some competitors talking in high-pitched voices about they are going to be investing more money, whether it’s P&G or Colgate or Henkel. We don’t view this as something new. These guys have been spending lots of money the last few years. So I don’t look at this as a sea change. So Henkel, for example, yes, they bought a business a few years ago and they got bigger in the U.S. Obviously, they want to make a big splash into premium laundry and they have with Persil. They have less than a 3% share today. They do have other brands in the mid-tier and in value, but we have been winning in value for the last 2 years and it’s not from them lack of trying. Our share of laundry today is 15%. 2 years ago, it was 14.1%. So we have had huge growth in the last 2 years and it’s defined everyday. So we don’t really view this as something we got to sweat. If you go back to Henkel and mid-tier, one of their brands is all. Two-thirds of all is a sensitive skin consumer. That’s not the lion’s share of our brands. So obviously, it’s something we are going to watch. I would imagine OXICLEAN liquid laundry will get knocked around a little bit up in the premium tier, because of average for Persil, but that’s not something that we think is going to influence our 2019 results.

And I would just add to your question on volume versus price mix, probably two-thirds price mix and one-third volume is a good kind of general direction. And then in terms of why you are growing faster is kind of the crux of the outlook on revenue. And 3.5%, we think is a great number relative not just to our history, but also relative to the peer set. We are not going to go lead with a 4% growth when the rest of peers are growing 2%. So is there conservatism, maybe but 3.5% feels right at this point in time.

Great. This one will be quicker. Just on the international horizon, thinking long-term, at what point you are leading with a lot of export-led, distributor-led growth, at what point, as you realize that, do you foresee organically you need to step up like cash investment in those markets to really build your own infrastructure versus going on the back of distributors? Is that something that’s within a 5-year time horizon or is it going to be just more even keel as you go forward?

Yes. Today, I would say Church & Dwight is 82% sales in the United States, right. We have a big world and that’s why I was joking. I don’t know who put the TROJAN spot in before me, but I really do believe passionately that we have a lot of runway for growth before we really need to put in kind of big assets. And the big assets are usually around SG&A frankly if you’re going to go direct, and we have a model that we prescribe in terms of the size of the business and the percent of SG&A required to make that math work. It works in Germany, but – and that’s really just because there are a few large customers. So, the SG&A as a percentage of sales makes the math work. In other countries like China, we said we’re never going to be able to get to the scale that would be required that say P&G has been able to do over decades of time. So, we’re taking that partner route and we’re going to do that in most of our markets. But what we’re doing is we’re attacking that market through a brand building partnership approach for large markets. And in that case, we see that playing out for years to come. So even in the 5-year timeframe, I think we have a lot of runway in the current model that we have structured so far.

I would just add to that, it’s also a pay-as-you-go model. I mean, these guys are doing a great job. We’re not calling out of our EPS or investment like we’re spending millions of dollars in China, that we spent millions of dollars going direct in Germany. That’s embedded in our outlook of 7% to 9%.

Let’s stay with the same table.

Thanks, Matt. Appreciate it. Wanted to talk about pricing. The 30% of the business that you’re planning to price on, are those price plans already in market? If not, when are they coming? And then also are your peers, have they announced their pricing plans? And just on gross margin, mix, tariff, these are kinds of things I think that they’ll continue. So, why does it get better from here?

Yes. So, with respect to pricing, when we say 30% of the portfolio is price that’s across all three businesses. It’s U.S., International, and also Specialty Products. Within Specialty Products, it’s the bulk sodium bicarbonate driven by rises in soda ash. As far as announcements go, yes, they have been announced. The 30% has been announced globally, and one of your questions was have competitors moved in the U.S., the 30% they all moved. So, it’s still early days. This is just a measure of price elasticity, but we’ll be watching out over the next 3 months to 6 months.

Maybe you want to – Paul, do you want to comment on just the volume elasticities in just early days?

Everything – generically speaking it’s always tough to take price anywhere, but those are progressing as expected and similar to Matt’s. The price elasticity, the volume, mix that we put on has been positive. As expected, we’re making progress. So, we’re going into this – these are always tough conversations, but I think no surprises and going exactly as we expected and planned.

Yes, great. And then, Olivia, your second question was on gross margin and mix continues and tariffs continue. I already talked about tariffs, right. Tariffs are implicitly in there, but we’ve already priced those. Those prices are effective already. And so from a profit dollar perspective, we’re protected, right. If those roll back then great. From a mix perspective, this was a year that we just missed gross margin in a big way, right. I was here a year ago and I told we were going to be flat and then commodities came in a big way, transportation came in a big way, and mix came in a way. So, we planned 2019 a little more conservatively from a mix perspective. So, I feel pretty good up here in February talking about it.

Got it. And then if I could just pivot over to SG&A, obviously that’s a big bucket of your operating margin delivery for 2019. And SG&A has actually been going up as a percentage of sales the last couple of years. Obviously, last year you got the tax benefit that you put back into the business, but what’s going to drive that SG&A improvement for 2019?

Good question. Three things, one, and this is just consistent with our evergreen model. I’ve said it many times. If we can grow our SG&A dollars at half the rate, we can – we grow our top-line. That’s worth about 15 basis points, okay? We’ve done the math there many times. We get about 15 basis points again just from incentive comp, right. Again, we really blew the doors off the cash, and so that is going to be a benefit year-over-year in 2019. And then the third thing, we’re really – working really hard on systems and automation, whether it’s the quality system, whether it’s our PLM system for R&D, our SAP system or whatnot. All these systems that we put in place so that we don’t have to add people that we get more effective and efficient that way. So those are the three reasons.

So, here’s a fun fact. So, we have just about the same number of employees on December 31, 2018 as December 31, 2017. And we expect to be the same way December 31, 2019. So, we’re a really lean shop. And one of the beauties of that is it forces the Company to prioritize. We can’t do everything. So, we just focus on high-value activities. Who’s next? Let’s come forward here.

Thank you. Andrea Teixeira from JPMorgan. So, I wanted to follow up a little bit on the Nielsen data. For the first time actually the fourth quarter kind of tracked the Nielsen data and usually you would be – we are aspired to see you’re growing faster than that. So, I was wondering, if there is an indication of like the gains that you had in distribution in off-track channel kind of like easing off? And kind of related to that also, Amazon, you mentioned that 50% of your e-commerce now is through Amazon, which does make sense in terms of like share. But like there’s a lot of sampling talks about Amazon asking for more support from the manufacturers. So, I wonder if embedded in your guidance there is also some investment within e-commerce?

Yes, I’ll take the first one. So, the question is organic versus what Nielsen would say. So, I think organic for us is 4% for consumer domestic, Nielsen was 3.9%. And you’re right, typically we’ve had around, I don’t know, 100 basis points of a tailwind from untracked channels, whether that’s online or club. It was 150 basis points this quarter, so that 4% – 3.9% plus 150, right, becomes 5.40% 15 [ph] and then we had incremental couponing that was already in place 6 months ago for Q4 around one of our laundry brands. And so that part brings it back down because coupons are not in Nielsen. So that brings it back down as well as some SRAs, sales returns and allowances back down to 4%. So that’s how you get there. It looks like it’s the same, but there’s really two moving pieces.

Britta, you want to take a swing at the Amazon?

Sure. I can talk about investment in Amazon. So, I think with all our marketing investment we actually evaluate efficiency. So, Amazon’s part of the mix, and from that we read rather how effective it is. We don’t do it like specific by any retailer ads. It’s much more about what can we achieve in total results.

[indiscernible].

Of course, at Amazon, I would say what you will see is that effectiveness in their advertising, if you go on their sites, the search engine has been improving. So, with that, yes, we are investing with Amazon in line with the results we’re getting.

Okay. Nik?

Yes. I have one question with 11 parts. Just on the business, I’m just looking at slide number 25 with some of the businesses, the power brands have been struggling. Matt, maybe you can just give us some context on what the challenges are, so we can kind of think about 2019 and some of the drivers?

Yes, which – you’re looking at this slide with the 7 out of 11?

Yes. So vitamins, XTRA, SPINBRUSH, ORAJEL?

Yes, okay. Yes, generally, investors are only interested in things that are red or that can hurt you. So, we would generally say 7 out of 11 is a win, that’s a high five year.

High five. Got it.

Okay. So, let’s just bound through them. So, vitamins, for example. So the vitamin category you know when we bought the business, it had 6 competitors, now it has 30. So, it’s very cluttered right now. We continue to grow our consumption year-over-year, but we’re just not growing as fast as the category. What’s happened is that a lot of the pill brands are now moving to gummies. Net they’re about standing still, but gummies is growing faster, right, than the pill category. So, consequently, it looks like we’re losing share. But we’ve been happy about our growth. We grew at 6% consumption in 2018. So, we feel good about that. What’s the next one?

XTRA?

Okay, so XTRA, XTRA has been in decline for a number of years up until this year. So, this year we’re just slightly – a slight decline in 2018. So, we – actually that is a good story for us. That one almost turned green. We almost got to 8%. So that’s terrific and one of the reasons that has done better it’s because of our Odor Blasters campaign. We brought Odor Blasters into the XTRA story.

Okay. And then just on ORAJEL and SPINBRUSH?

Yes. SPINBRUSH has been a tough one for a number of years, again a cluttered category. That’s where we shipped 40% of our units in the fourth quarter. There’s a lot of competition from Colgate, Crest, others. There isn’t a really great story. It’s not that big a business, but we’re still the number one battery-operated toothbrush, but it’s very competitive. What’s your last one?

And ORAJEL?

ORAJEL. You want to take ORAJEL?

Sure. So first of all, I have to extend more love to XTRA than actually Matt has done. I think if you look at the laundry category in total in the different price segments, XTRA competes in a very value-priced tier. We’ve actually done significantly better than anybody else in that segment. And as I said, we were so close to being flat. It was minus 10 bps in market share in the end of the year. So, I think that’s a tremendous improvement and if you look at total laundry, an absolutely success. So sorry if I think there is a little bit more passion behind XTRA and we love this brand. Secondly, I would say on ORAJEL. You might have seen it. We had an FDA change of mind regarding benzocaine and teething products and that has had an impact. We are the number one in teething and in young kids, and as we had to withdraw from that segment that’s why you’ve seen a decline. But all our other ORAJEL businesses, so we have canker sore, you’ve seen the new strips, and the kids toothpaste are doing very well. So, that’s actually, as you know, sometimes regulation can be surprising.

Nik, I didn’t hear you thank us for providing that scorecard so that you could ask that question. Okay. Anybody else? Here Caroline.

Sorry for the repetition, but can we go back to gross margins, because I think going into the fourth quarter, we saw great sales trends, and we were definitely surprised as it sounds as if you were by the margins. My understanding then is more people in the Company are incentivized by cash flows and by gross margin. Is that what affected the pay?

Yes, no, what I’m saying is and Matt said, we have a simple incentive comp program, 25% each, but when cash flow maxes out because of great working capital management, the P&L expense for that is split between SG&A and cost of goods sold. And so it’s only 10 basis points or 20 basis points really. I mean, we’re going through to – maybe 20 basis points on the gross margin impact from higher incentive comp.

Okay. And then on the pricing, you took your pricing up, but the retail price hasn’t gone up, but your income statements affected by what you get from the stores? So, can you just explain on that?

Right. So we – but typically in industry if you protect, you price protect for the retailers for a period of time, right, because they have their own pricing policies of, yes, you can do your announcement, but you’re going to protect me for 30 days or 60 days or 90 days, right. And so what we’re saying is there was a price protection program even to our pricing to retailers, but that’s all labs and so in Q1 and going forward, it’s a new retail price.

Was there forward buying in the fourth quarter, so the volumes –

We don’t let – I mean you limit the amount that can ever happen, it’s an immaterial amount. We limit the amount our retailers can order when you have a pre-buy for pricing.

Okay. And then if I might, on the WATERPIK. Is WATERPIK lower than average margin to the Company at the gross level?

No, it’s not. Gross margins are on par with the company. Now with tariffs, it’s a few 100 basis points lower than the company margin, right, but normal operating – normal gross margins are on par with the company.

So to the extent – and this is my last one, but to the extent that household continues to grow faster plus WATERPIK grows faster, that’s just a negative mix shift that –

Well the household business, WATERPIK rolls up in the personal care business, but when the household business grows faster and if the WATERPIK business grows faster with tariffs, then that’s a negative drag on mix. But we were conservative when we planned 2019 was my earlier comment.

Got it. Thank you.

Okay. Lauren, you’re next.

Thank you. So first, I just wanted to continue on WATERPIK. I was curious if it’s possible to shift sourcing for WATERPIK to outside of China, so you can just get around the whole tariff issue to begin with? And on top of that, I just want to be clear because I think last quarter when you talked about pricing plans on WATERPIK, I just would have expected it to hurt so much this quarter because the plans were in place and it was discussed. So, is it that your retail partners or your distributors kind of was a longer period of price protection, there was maybe some buying ahead of that pricing going into place that really kind of threw the balance off, because it feels like a lot of the gross margin shortfall in the quarter was related to the dynamic of tariffs and also WATERPIK?

Yes, let me answer the second one first. And really Steve Cugine’s Group is doing a great job with WATERPIK, right. They had explosive growth internationally. We’re not changing the price of WATERPIK internationally. But when you have explosive growth internationally and sales are higher than you expected, then all of a sudden, the tariffs which you thought were going to be in inventory are now flowing to the P&L. That’s what happened.

Okay.

And your other question is with respect to sourcing, so, I’ll let Rick take a swing at that. The short story is, this is a fairly sophisticated product. So, it’s not something that’s easily moved nor do we have plans to move it. So right now, we’re planning on riding things out, but maybe see Rick can give you a little more color on what’s involved at the plan?

Yes. So we have a great network of contract manufacturers making the WATERPIK products and we’ve been working with them for a number of years. We are exploring other alternatives outside of China, but as Matt said, it’s a complicated product and we don’t want to jump the gun on that given that the tariff situation is pretty dynamic right now, but we’re doing our homework, so that if they’re here to stay, we will have some options hopefully.

And then I just had one more on gross margins. The long-term algorithm, everyone else had like seven questions. So, the long-term algorithm though for gross margin, I just want to talk about kind of some of the contributors because in terms of what’s growing fastest in your portfolio, International, SPD, right, temporary hopefully the tariff situation, retail environment arguably only getting tougher and tougher in the U.S., all these components. Like why is 25 basis points kind of the right algorithm going forward? And also in terms of the closer in promotional environment, you definitely cited the continued more rational environment in laundry as being contributing to your outlook for ‘19. But at the same time, we know you’ve got Henkel with very, very clear objectives. I know you talked about nothing’s changed. These guys never step back. But the numbers are big what they’re throwing around. And again, if we’re talking about promotion being lower and a positive contributor in the near-term, why isn’t that something we should be worried about changing course as we go through ‘19?

Look, whenever you build a plan, you build some flexibility, so you have some bullets to fire if something different happens. So, of course, if there’s something unforeseen that happens, we’ll react to that. But I don’t have anything to add to what I said earlier about what our expectations are. We actually think we can pull back further on promotions in laundry in 2019.

And the other thing that’s kind of under the radar, but we put a slide up about it was how much progress we’re making with our productivity program. It was plus 80 basis points in 2018, plus 100 basis points is the outlook in 2019. We’re in the early days of reinvigorating our productivity program with incremental dedicated resources in R&D and supply chain. So, we’re doing things that give us the flexibility, the degrees of freedom so we can confidently say 25 basis points is the evergreen model.

So while we have a robust continuous improvement program, it’s just that in ‘17 and ‘18, all the cost increases from – ‘18 I should say, outran whatever we could do with continuous improvement. And there was another step up this year with costs, but not as much. It was 250 basis points in ‘18, I’d say 190 basis points negative in ‘19. But as Rick said, we’ve got a lot more juice in continuous improvement, but not enough to overcome that next year. So, pricing is what gets us over the hurdle. But we still see plenty of runway in future to become far more efficient as a company.

Okay. Alright, last one.

I just had a quick follow-on on the pricing what you just mentioned. If I understand it correctly, you have pricing in the market on about 30% of your portfolio and then you’re considering doing more pricing. Is that a decision you’re going to be making in the next few weeks or months or is that more of a second half decision when we can expect to see more pricing going in the market?

Yes. We’ve said – we’ve said in the release, we’re already talking to retailers about categories beyond the initial 30%. As far as when that would hit, we wouldn’t be able to disclose that. But those conversations are happening right now and particularly in the personal care categories.

Would it be then more than half of your portfolio in terms of the discussions you’re having right now in terms of price increases?

Yes, we’re not prepared to say. We will update everybody in May. Okay. One more question. Okay. You’re the absolute last. Okay Michael, what have we got?

Thank you, Matt. It’s a marketing question. It’s about the millennials. Could you share your thoughts about that particular group of the population and specifically what behavior are you observing that are helping you, hurting you, or what are the bigger trends that will affect us over the next 3 years to 5 years?

Well, that’s a very philosophical question. So first of all, question is how many of you have millennials in your household already? So first of all, I would say what do we see. I mean, we’ve all heard about it. Maybe a little bit more sheltered lives early on later moving out and forming their own households, a little bit more, how would I say, media consumption very different. I think we’re showing how we’re responding to that in all our different avenues. Overall, I see nothing, but opportunity for us. I think millennials are great, because it gives you opportunity to have a dialog with consumers going forward. And as I would say, we are very fast, agile at adapting, that works in our favor.

Okay. We’re going to pull the plug right now. Thanks for coming today, gang. We’re very enthusiastic about 2019. We’ve got a lot of confidence in delivering our plan. Thank you all for coming today.