Good day, ladies and gentlemen, and welcome to The Clorox Company Fiscal Year 2008 Third Quarter Earnings Release Conference Call. At this time, all participants are in a listen-only mode. At the conclusion of our prepared remarks, we will conduct a question-and-answer session. (Operator Instructions). As a reminder, today’s 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, thanks. 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; Larry Peiros, Executive Vice President and Chief Operating Officer of Clorox North America; and Dan Heinrich, our Chief Financial Officer. We’re broadcasting this call over the Internet and a replay of the call will be available for seven days at our website, thecloroxcompany.com. Lastly, please recognize that today’s discussion contains forward-looking statements. Actual results could differ materially from management’s expectations. Please review our most recent 10-K filing with the SEC and our other SEC filings for a description of important factors that could cause results to differ materially from management’s expectations. With that, let me turn it over to Larry. Lastly, please recognize that today’s discussion contains forward-looking statements. Actual results could differ materially from management’s expectations. Please review our most recent 10-K filing with the SEC and our other SEC filings for a description of important factors that could cause results to differ materially from management’s expectations. With that, let me turn it over to Larry.

Thanks Steve. Good morning or good afternoon to those of you on the call. As you saw in the press release, Q3 was a challenging quarter given commodity cost pressures and a troubled economy. Sales grew strongly on top of a high year ago base (inaudible) pricing, improved mix and generated significant cost savings. Margins, however, declined given the acute increases in energy and raw materials. All in all, we feel good about the progress we are making in a very difficult environment. I'm going to focus my comments on volume and sales and provide perspective on what drove our top line. Dan will cover details of the P&L as well as our fiscal ’09 outlook. Finally, Don will provide a summary and wrap up before opening up for questions. Overall we are very pleased with the strong Q3 sales growth given that we are lapping a 7% gain in the year ago quarter. Q3 sales were up 9%. Our base business sales growth was about 5%, the high side of our 3 to 5% target range. The other 4 point of sales growth was from the Burt’s Bees acquisition and the bleach acquisition in Latin America. Turning to volume, total company volume was up 4% with essentially all of the volume gains coming from the acquisitions. Our base business was only up slightly but was actually inline with our expectation given a year ago quarter of 8% volume growth as well as the negative impact of pricing and volume. The negative pricing impact has general has been only a percent or two and the increased revenues more than offset the volume softness on the sales volume. In Q3, we supported our brands with strong advertising programs as well as increased rate spending to address a highly competitive marketplace. Advertising…

Thank you, Mr. Knauss. (Operator Instructions). We will go first to Chris Ferrara of Merrill Lynch.

Hey guys. I just wanted to ask about commodities, so for the '09 outlook that you said you're looking for resin to ease again, but then you said you are looking for 100 to 120 million of pressure, which isn't that much less than what you're seeing this year. Can you just give a little more detail around I guess what kind of decline you need in resin and does the 100 to 120 million pressure really assume a big step back in your key commodities?

Yes, Chris, let me take that question. Again, we're anticipating about 100 to $120 million in incremental cost pressure, and you are right it's about the same size that we saw last year. We do anticipate that we will begin to see some declines in resin, but again we're starting from a much higher point than we had anticipated we would be. So we believe even though we may see some declines in resin in the first half of the fiscal year, on a year-over-year basis it will still be higher than last year and we'll have that impacting gross margin. We think the benefit from any resin price decreases are more likely to be in the second half of the year and we also have some inventory effects and things like that that would lag when those come through our gross margins. So, we do have a lost of cost pressure this year and while we do think resin will come down, it's coming from a much higher point and it's likely -- that benefit is more likely to be realized in the back half of fiscal.

Okay. And at the risk of trying to make you into a chemicals analyst, I mean what does that mean, if oil stays at 1.10 and natural gas stays at 10.50 does that mean you'd have to revise those raw material assumptions upward?

What I will say Chris is, the outlook that we're sharing today assumes that oil will be trading around the levels it has been recently. Now, if oil goes up materially from levels we’ve seen recently, remains that way over the course of fiscal ’09, certainly we will need to take some other actions and that may include more pricing. The key component for us as you point out is resin, and on the resin again as we said we are anticipating to see some declines, but we're starting from a very very high level.

Chris, I would just add to Dan's point, as we looked at our assumptions for fiscal ’09 to Dan's point, we've tried not certainly to be overly optimistic about the price of oil and I think using the recent trading range for oil is a pretty prudent way to look at our cost assumptions.

Okay. I just wanted to move on to CCEM real quick. I guess to get near, I guess you've done maybe 60 million so far this year to get to your revised target involves a pretty big step up in Q4. Is that because of the timing issue you were referring to? I mean, I guess, why does Q4 step up so much and can you just give a little detail and color on why would step up again into 2009, in other words, the amount of savings you can get?

As we came into this year we were looking – when we were with you last May, we were thinking we are going to see about 80 to $90 million cost savings. As we got into the year and saw the spike in commodity, we set a target to try to increase that to about $100 million. And as I said a little bit earlier, we're now looking at 85 to 90. That additional 10 million are so that we were looking based on the timing of when the project savings will come through, that's now anticipated to be in fiscal '09. For the quarter -- this quarter we did deliver $24 million in cost savings, about 19 million of that went through cost of goods sold. We are looking based on that 85 to $90 million outlook, we are still looking for 20 to $25 million in the fourth quarter. So, the savings right now that we're on track to deliver are about equal to what we delivered in the third quarter. Now, as I look at fiscal '09, normally we would come into a new year and continue with an 80 to $90 million cost saving outlook. The reason we now have a 90 to $100 million cost outlook is again on the timing of when those savings programs are scheduled to come online.

We'll go to Bill Schmitz of Deutsche Bank.

Hi, good morning.

Good morning.

Good morning.

Can you just talk about the distribution between Burt's Bees and Green Works because it seems like you're not in the drug channel yet, and I think last time we spoke I thought you said you were pretty close to 100% distribution there with Green Works?

We've done exceptionally well in Green Works both in terms of distribution and speed to shelf distribution. We are now well developed in the drug channel for that kind of product specifically the last channel that you see distribution in, but we're basically 100% of Target and 10% of Wal-Mart and I think we are 80 something percent of grocery outlets and that is by far away the bulk of the category sales. So, it feels very good about the distribution results on Green Works.

We'll go next to Ali Dibadj of Sanford Bernstein.

Hi, guys. I guess I want to plug away a little bit on the kind of core volume growth, which looks like it was roughly flat despite – it sounds like great success in grocery and it sounds like great success in Green Works. And in particular, it struck me that your North American description both in the release and also in your description Larry had a real big glaring omission which is kind of your namesake bleach business. What exactly is happening in your laundry business in terms of sales growth, I mean about 13 to 14% of your sales, is that shrinking? Do you need that to grow again in ’09 to make your numbers and if so how will you get there?

I will admit upfront that that's probably the weaker area of our portfolio right now. Stepping back, as you mentioned, it is just over 10% of the portfolio. Many people assume far larger than that. And actually, about 45%f the products franchise is on the home care side, which is doing very well behind our health and wellness initiative, initiatives and theme to grow share and gross volume. So laundry is a soft spot. Quite frankly we put a lot of our innovation dollars and our focus and attention on the home care side because there are some bigger opportunities on that side like wipes. We've not started to refocus back on laundry. Quite frankly we hadn't been telling the basic laundry story. So, we had been telling the health and wellness story and the power of Clorox liquid bleach to kill germs. We have not done as good a job according to laundry store, which is basically that we deliver a better benefit than detergent alone, so you have seen recent advertising efforts over the last six or seven months. This year returns that laundry message. We have introduced some modest innovation on Clorox liquid bleach. And as we talk before, we're doing a lot on Clorox 2 to try and turnaround that business given the share losses against the key competitor in that area. So, it's an area of focus for us. We're pretty optimistic that with some renewed focus on both the innovation side and the advertising side particularly getting back to the base laundry message that we can necessitate that part of the portfolio, but today it is a weaker area.

The only thing I would add to Larry’s comment is that if we look at past 13 week shares, we are still gaining share on our liquid bleach product. This is a category issue and I think it gets to the relevance issue. And as Larry said as we get back to spending against our basic laundry message as well as the disinfection message, I mean, bleach – half of bleach usage in this country in cleaning. So as we get back into that message I think we will see some resurgence there. Having said that, we had not baked in bullish assumptions at all on liquid bleach for next year to make the number and as Larry said it’s about 10% of our revenue at this point.

We'll go next to Filippe Goossens of Credit Suisse.

Yes, sir good afternoon or good morning, if we are on the West Coast. If I just may two housekeeping question and then one real question. Dan, in terms of housekeeping, can you just clarify what the assets impairment charge was in the international business? And then for innovation, you mentioned 2% for fiscal '09. I think to recall you had only 1% baked in. Do I have that correct or are you actually becoming a little bit more bullish on the contribution from new products?

We'll go next to Lauren Lieberman of Lehman Brothers.

Thanks. Good morning.

Good morning

Good morning, Lauren.

I am wondering could have one asked first. I guess, on international, the volume was kind of flattish there and it looks like the amount of pricing you are taking -- have taken has been pretty steady over the last couple of quarters. So if you can just kind of discuss their trends that’s going on and organic volume growth if and why you expect it to accelerate and it's some of what we are seeing is simply just the tradeoff on pricing?

So we actually feel very good about the international volume growth. It was up about 4%. If you take the bleach acquisition out of it, it's up 2%. It doesn't sound like a lot, but the base period was up 13%, so 2% on top of 13% growth feels reasonably good to us. There is some negative impact from pricing, but again overall, we feel very good about the volume results in Q3 as well as prospects going forward. I talked earlier about launching Green Works into some international locations. We've achieved a good level of success in Mexico and Puerto Rico and feel like there maybe opportunities beyond that. We're also doing more and more adjacency work. Obviously, the bleach acquisitions now give us a platform to build upon like we have in the US a broader Clorox franchise of health and wellness type product. So, we're feeling good about the international business at this point.

We will go next to Bill Pecoriello of Morgan Stanley.

Hi, everybody.

Hi.

A question on the -- with the modest gross margin improvement outlook for next year, you had mentioned you are going to take some incremental additional pricing in the first quarter and that you were going to try to largely offset this 110, 120 million commodity impact in ’09 with the pricing. If you layer in the savings and you are also getting positive mix. I know mix was better than expected. You've got the Brita double digit and then Burt's Bees and Green Works helping there. So just trying to figure out the why modest, I guess the pricing still is not offsetting all of the commodity impact and then you've got the logistics, I know that's still a drag?

Yeah, and it's also the timing of pricing and when it's going to layered in over the year and how quickly we can ramp that up. And, we are cautious right now and we need to think about what commodities will do over the course of the year. So I think modest is, it feels right to us at this point in time. What we said in our centennial strategies, we are looking to deliver about 50 to 75 basis points of margin improvement on an annual basis and we think we will be a little bit above that for fiscal ’09.

We'll go next to Connie Maneaty of BMO Capital Markets.

Let's see. I'd like to go over the commodities impact. I think you said for the third quarter it was 40 to 45 million or whatever it was?

43.

43. And that in the fourth quarter, it's going to be about the same rate. So, if we assume that commodities stay where they are, then we should be looking for that kind of quarterly hit I believe then in through the first half of fiscal ’09. So I guess the question is, will your gross margins decline as much in the fourth quarter of ’08 as it did in the third quarter and should we be anticipating this magnitude of decline for the first half of next year before things get a little better?

I think the way to think about the fourth quarter is we will see obviously year-over-year decline, likely to be a little less than what we saw in the third quarter. We have lower restructuring charges and we don’t have the Burt’s Bees inventory impact coming through, but it’s going to be less than the impact you saw, but it will be down. In terms of margins in first half versus second half of next fiscal year, we are still timing when the pricing is all going to go into place but, I think the expansion that we are anticipating in our margins is more likely to be in the back half of the year because we still had pretty reasonable run-up in oil and resin prices that will still impact us in the first half, but are only going to be partially offset by cost savings and our pricing. And then, we expect some moderation in the back half, which is where we'll see more of a margin expansion.

We will go next to we go next to Virginia Chambliss of JP Morgan.

Hi, thanks. My question is on debt reduction. I know Don, you mentioned in the prepared comments that you are reducing debt as it remain a priority for cash flow. I guess, I saw about 80 million of debt reduction in this last quarter. I’m just wondering if you can confirm that all free cash after dividends will go to debt reduction in the fourth quarter and how much you expect that to be? Thanks.

Our plan is still to use the majority of our free cash flow to reduce debt and we are on track to have our debt to EBITDA down to about 3.21 at the end of June fiscal fourth quarter. We believe we are still on track also to be at or below 3.0 debt to EBITDA by the end of December 2008. And then again assuming no acquisitions or anything like that in the back half of fiscal year, we anticipate that we would be down around 2.5 debt to EBITDA. So we will continue to support dividends, but most of our free cash flow will be debt reduction.

Just a comment, Virginia, on the dividend support, we're still committed to our payout ratio approaching 50%. So, you'll see news on that coming shortly after our mid-May board meeting, but we'll continue to be pressing on that as well.

We will go next to Andrew Sawyer of Goldman Sachs.

Sure. I just had a couple of quick questions on Green Works and Burt’s. I was wondering if you could talk a little bit about how you are you seeing early interaction with Green Works versus the other cleaning brands both in terms of cannibalization and shift in your own internal marketing support? Also, if you have any early read on any sort of repeat rates or for too early on that? And I guess similar with Burt’s, I guess, how are you guys thinking about promotional support funding for Burt’s and Green Works versus kind of the base of the portfolio?

So, we could not feel much better about Green Works at this point. We had an increase in our home care share in the quarter. A lot of the incrementality that Green Works brought to the table is reflective of total home care. So, we expected some modest cannibalization, something like 15%, which is kind of our fair share. I expect that to be the ongoing result of the cannibalization and really something to read after a long period of time. So we are seeing incrementality. We are feeling very good about where we are and really leaves at this point in time it's pretty much all positive on Green Works, in fact we are getting some benefit on some of our own businesses because of the sustainability angle, so we are seeing a lot of drug promotions with Brita for example with both Green Works and greater representing Earth Day events.

Andrew, if I could add to Larry’s comment, I think another interesting point is we just looked at card data, loyalty card data from one of our larger retailers and one of the interesting pieces of that data in the first 60 days of Green Works was out, but this is really January, February card data. 50% of the people in this particular chain who bought Green Works had not bought a home care product for the previous six months in that store. So what that tells to us is there is a lot of mainstreaming of natural cleaners with Green Works that were bringing new people into the category, which is pretty exciting. And I think to Larry’s point, we picked up $0.09 of a share point in the 13 week period ending in March, and most of that was incremental. We saw a little bit of dip down on Tilex and 409, but it looks like we are in the 75 to 80% incremental range, which as you know, very new product is a pretty neat place to be. As far as Burt's Bees, the 28% growth, we are really starting to see some great results across channels hanging in very tightly on the established channels like chain drug, but obviously seeing some dramatic growth in mass and grocery as well. So, we are not seeing any material step up at all in customer spending or trade spending in that area. We did see the first advertising, print advertising go out. So, we will continue with the current pricing in trade spending policy so, we don’t anticipate any uptick there.

We’ll go next to Alice Longley of Buckingham Research.

Hi, good afternoon. Back on this gross margin issue for fiscal '09, I am having trouble understanding why you expect it to be up next year when the incrementing raw material cost pressure is about the same as the last year, maybe the pricing is going to be higher? What kind of pricing do you think you’ll get or explain why gross margins are up next year versus being down this year with the same gross margin incremental pressure?

I think the only thing I will add to that is you are all foreseeing and I think some mix benefit on the gross margin line with some of the higher margin items that are growing at faster rates.

And we are also getting some margin increasing also from Burt’s Bees, which is obviously why it's in the portfolio.

We will go next to Wendy Nicholson of Citi Investment.

Hi. My question was on advertising because I feel like I have seen a ton of Green Works ads and a ton of Burt's Bees ads, but advertising is still down year-over-year. So I am wondering, number one, is there a timing issue here? Do you think advertising is going to trend back up? And can you tell us sort of proportionally how much of your advertising budget in the quarter was on Green Works and Burt's Bees?

So overall advertising as we said was about 9.1%. I think we talked before, if you look at total investment in building our brands, which includes the trade component, we're up year over year because we have allocated some additional spending on the trade side and particularly to addressing competitive issues. The 9.1% is within our targeted range of 9 to 10%. Having said that, it is on the lower end of the range in part because quite frankly our sales were higher this quarter than we initially anticipated and Burt's is spending at a bit lower rate, it's a small part of equation, but Burt's spends at a lower rate than the average [corress] product. So we think we are supporting our brands very well. I think some of the growth we are seeing is a testimony to that. Obviously it's both a quality issue as well as a quantity issue. I can't give you the specific breakout of the Green Works or Burt's, maybe we can get back to you with that one, but it sound like we are spending half of our advertising on those two brands something like that.

The only other thing I would to folks is that we look at the FY '09 outlook, when you look at our range of 9 to 10, which has been a historical commitment on supporting brands, our assumption going into FY '09 is that we will be at the very high end of that 9 to 10% range to support the brand.

We will go next to John Faucher of JP Morgan.

Yes. In terms of looking at Green Works, it sounds like you are going to be now moving into categories where historically you haven't played. I think you mention dish washing detergent? Can you talk about – are those ideas that are coming up incrementally internally, is that something the retailers are asking for? And how comfortable do you guys feel going into categories where traditionally you haven't played and you are going up against more branded competition? Thanks.

I think we talked about Green Works being a natural platform to potentially expand into our cleaning categories and potentially even outside cleaning, similar to what you have seen from other environmentally oriented brand. I think we are looking at trying to increase the size of the natural cleaning category and grow our share within it, similar to what we're doing on Burt's. So in this case we are taking a swap of a category across all cleaning categories. So I don't intend to go head to head versus the leading brands and dish washing liquids or rather big cleaning categories. What I do intend to is grow the natural cleaning category as big as I can and grow my share within that category as big as I can. That makes sense.

Yeah, John, one thing I would add to it is to your question about is this coming internally or from customer and consumer reaction. Frankly, the consumer reaction to the five core items out there on Green Works has been pretty amazing to what there had been a number of consumer requests for getting into the additional spaces like light duty liquids. We are also hearing it from our customer base as well because what we find in that category is there is not really a natural and I would defy natural is over 99% natural product offering. So while we think it's a niche opportunity at a premium price, clearly the consumers are asking for an option and a choice and the customers are backing them up.

We will go next to Chris Ferrara of Merrill Lynch.

Hey guys, just a point of clarity. I thought you said, I think your goal is 50 to 75 basis points of operating margin improvement ongoing, but I thought you said may be that '09 is going to be bigger than that. Did I hear that right or is that wrong? And if I did hear it right, what is that mean for your A&P plans or SG&A plans for that matter?

Chris, what we said is 50 to 75 basis points is what we try to target and I did say, yes, that we think we will be a little bit ahead of that, and again part of that is obviously the year over year comp issues, the items that won't repeat. So some of that is obviously just the year-over-year comparison. On the other components of the P&L, as you know, we target 9 to 10% on the advertising line and on the SG&A line, this year it's growing about equal to the growth rate of sales and that's obviously due to the fact that we have acquisitions in there and we also have some investments in our strategies. As we look out next year for the SG&A line, we are anticipating that SG&A will grow probably about half the growth rate of sales.

And just let me reaffirm Chris as Dan mentioned on the 9 to 10% support for the brand, our assumption going in and what is in our forecast for '09 is at the very high end of that range. So we feel good about the fact that we have been prudent about allocating enough dollars in there to support the brand.

We will go to Jason Gere of Wachovia Capital Markets.

Good morning. Just I think on to that point with advertising I guess next year you are anticipating will be close to the high end of 9 to 10. This year obviously there has been some higher trade spending and behind selective categories that I think are a little bit more competitive right now. Can you just talk a little bit about the mix between the two for next year especially in light of a softer economy?

So I would not say there's a dramatic change in the approach at this point in terms of our trade versus advertising. I mean we use advertising periodically to address specific competitive issues, some of those are predictable, some of those are unpredictable or unknown to us at this point, but I would not say we're going to see dramatic difference in kind of the mix we are seeing this year, a dramatic increase or decrease versus what we are seeing this year at least in the current plan.

We will go to Filippe Goossens of Credit Suisse.

Yes, good afternoon. Now I am finally get to answer my question for Don. Don, it clearly looks like, made from the initial read that you have personified a good opportunity with these natural cleaning products. It's not a conversation with one of our largest or larger competitors, they don’t think they have anything different in category at this moment. So if you could just kind of refresh our mind in term of how (inaudible) natural category. Do you see it as a niche or do you think that with the passage of time and the economy improving, it may go mainstream the same way that natural foods that will be going mainstream?

Yeah Filippe. Well, first of all I hope they retain that point of view. I think we are very bullish on the category and this is why. As we look at all the dollars that are spent out there in this country and in the developed world, but let's take the United States, of around 14 to $15 billion spent in home cleaning, which include laundry. About 1% of it is we have said is natural cleaning or 140 to 150 million in major channel. Now what was interesting to us when I went out and talked to consumers about Burt's Bees and with the initial research is that over 40% of consumers said if you give me a natural cleaning product that works and convince me it works as well as conventional product and you don’t price gout me, but you charge me only 10 to 20% premium, we are very interested in that. And given the early success of Green Works and the original five SKU and what we are gaining in terms of volume and share, we think what we are doing is starting to mainstream in natural cleaning space. So we think this is the category that is now growing at huge rate, it's over a 100% up as Larry mentioned and we think that as we continue to go over the next two, three, four years and getting to adjacencies that will continue to mainstream this natural cleaning space. We don’t see this trend on sustainability having any time soon. We think it is a cultural shift and we feel very well positioned to take advantage of it.

We will go to Lauren Lieberman of Lehman Brothers.

Great, thank you. I just wanted to ask a little bit more about pricing because as I recall over the last couple of years, your strategy and granted much less cost inflation but has been surprised to about half of the cost inflation or what you saw the ongoing run rate of inflation would be? So I wanted to know how that thought process has or hasn’t change in the more recent inflationary environment? And then also just where you think you are versus the competition or may be where you would like to be in terms of pricing, are you kind of little bit behind, are you ahead, are you sort of right on track with your competition?

Lauren, you say correctly what we have attempted to do in the past just trying to target what we think the long term cost structure will be in these categories, surprised to that. Obviously with this rapidly evolving energy market, oil, resin and everything else, its' well ahead of any expectations we had and we are now adopting to stance that we are going to price recover more of this cost pressure. However, if you look at it over the last three to four years and the total cost pressure that’s been out there even with this more aggressive stance this year, we are still -- our pricing recovery is still less than the total cost pressure that we have seen in the categories. The other thing we always have to keep in mind that the consumer value equation in the categories that we are in, so we take that into mind. But just given the share impact on our margins of all this cost pressure and how much they bend year over year, we are changing our stance on how aggressive we are going to be on pricing.

With respect to competitors, I think if you look back over the last four or five years, we have taken probably all to all maybe a 100 price increases across the portfolio, and I think there have been maybe two to three instances where we haven’t seen the competition follow. And I almost can't believe the competition will follow given the environment that we’re all facing and the cost pressure we are facing, including private labels. So I am not overlooking the trends about the competitive response, we have talked many times about the modeling we view behind pricing to try and optimize what price point we are trying achieve and diminish the volume impact, the negative volume impact of pricing. Fortunately or unfortunately, we’ve done a lot of practice now over the last four or five years. So what used to be a [lost art] in our industry around taking pricing has now become a good skill set for Clorox. So our models have proven to be very very predictive, and potentially we can totally offset the negative volume impact that we have on many brands by driving innovation or other kinds of marketing program to provide positive volume to internally offset the negative volume. So it’s not in all brands and all cases that we have negative volume, because we are able to offset it in other way. So we feel pretty confident that given that the quality of our brands, our number positions, the way we execute pricing that we can’t get through a pretty tough market.

We will go to Bill Pecoriello of Morgan Stanley.

Thanks. I just wanted to followup Don, when you had mentioned some of the factors on upping your organic sales outlook for `08 without the FX, you took it from 3 to 4, 4 to 5, and there is a number of factors you have been talking about. How much of this is in the `08 looking balance of this year was higher pricing versus the Green Works being better than expected, and then, some items on the core like Brita and it might be all of those, but I just wanted to get a feel of the contribution for those items? Thanks.

There are a handful of items that I think are contributing, Burt’s is a little bit ahead of our expectation. I think also in our outlook we are seeing a little bit more favorability from foreign exchange than we had in our outlook. Also the timing of exiting our private label food bag business, we had thought it would be a little bit of more of a drag in `08, and due to the timing when we get out of this contract that's a little bit less. And then as Don said our organic growth is a little bit ahead for all the reasons that we talked about. You talked about Brita, you talked about new products and everything else and that’s all contributing. So all of that is in the mix.

Bill, I would just add that Green Works, we have taken that book as of a few times because of the success that we are seeing across channels. I would also say we are seeing some vitality in our other brands like our Hidden Valley Ranch brand and we are seeing some share gain there as well, but really is a combination of a number of businesses across the portfolio.

We will go next to Connie Maneaty of BMO Capital Markets.

Hi, just two followup questions. I think you said Burt’s Bees grew 28% in the quarter.

Correct.

Could you let us know what the growth of Burt’s was excluding the pipeline sale of Wal-Mart and whether or not that is on trend with its growth before you acquired it?. And then secondly you also mentioned that sales in the grocery channel declined in the second quarter, third quarter versus being up 3 in the first half. So could you just go into that a little, what are the dynamics there?

Let me take the first part on Burt’s and I will let Larry take the second one, Connie. On Burt’s, the Wal-Mart is really just at this point the lip balm at the cash register. So we don’t have a full line of SKUs in any of the Wal-Mart store so that really is not a material impact overall on that 28%. Now as Larry noted in his prepared remarks, there are about slightly over 500 Wal-Mart that we will be going into this month with a fuller line of SKUs predicated on the demographics around those Wal-Mart stores. But as this quarter unfolds, we will tend to see some more growth obviously coming from there. But in the mass channel, in general and the grocery channel in general, we are seeing significant growth across the board in Burt’s Bees, and so that’s really where that's coming from. And then I will let Larry talk about grocery.

So I think that grocery talked many times about the initiative, the purpose on grocery given the EP opportunity, last three years we have been down 4% on average in grocery, first half of the year we saw 3% gain, and the latest quarter we saw 2% decline, but fiscal year to date we are up about 1%. So about a 5.3% versus where we have been, and I should mention these number exclude Burt's Bees. This is just the rest of the portfolio that we are focusing on at this point. If you dig down we don't feel great about being down 2%, but if you dig down to those numbers and you take up the seasonal brands which we talked about had a kind of weather related issue, more of a category issue, if you take those out, we are basically flat in grocery in the quarter and obviously up more than 1% fiscal year-to-date. So grocery remains an area that we want to focus on. We still feel good about the results we are achieving, actually most of the resources we have redeployed to grocery are just kind of getting onboard and getting used to new jobs, so we really haven’t fully benefited from the value they will add to our grocery channel activity, but we are feeling pretty good about the results we have today.

Why don’t we take one more question?

(Operator Instructions).

Nothing further, we can wrap up.

Yeah, I think let me just wrap up at that points, but thanks everyone for your attendance and thanks for your interest in the company. We look forward to talking with you either on the road or at the next call in a few months. So thanks for your interest.

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