Good day, ladies and gentlemen. Welcome to the Clorox Company fourth quarter and fiscal year 2008 earnings release conference call. At this time, all participants are in a listen-only mode. At the conclusion of our prepared remarks, we will conduct a question-and-answer session. (Operator Instructions). As a reminder, this call is being recorded. I would now like to introduce your host for today's conference call, Mr. Steve Austenfeld, Vice President of Investor Relations for the Clorox Company. Mr. Austenfeld, you may begin your conference.

Welcome everyone and thank you for joining Clorox's fourth quarter conference call. On the call with me today are Don Knauss, Clorox's Chairman and CEO; Larry Peiros, 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. 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, 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. 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, and good morning to all. As you saw in the press release, we had a solid fourth quarter and a very sold fiscal year. Sales grew strongly with broad-based growth in base business and incremental benefit from acquisitions. Margins declined given the acute cost 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 results. Dan will cover details of the P&L as well as our fiscal '09 outlook. Finally, Don will provide you a summary and wrap up before opening up for questions. For the quarter, total company sales were up 11%. Our base business was up 8%, well above our long term 3% to 5% target range. The other three points of sales growth was from the Burt's Bees acquisition. Total volume for the quarter was up 6%, with volume up 4% excluding Burt's Bees. For the total fiscal year, company sales were up 9%. Sales growth was up 6% excluding the Burt's Bees and bleach acquisitions. On the volume side, the total fiscal year volume was up 6% with three points coming from acquisitions. Top-line growth was broad-based, we grew sales in 10 of 11 business units during the fourth quarter. Our homecare business had a strong quarter with a double-digit sales increase. Green Works continues to track significantly ahead of expectations. Program received a 2008 innovation and creativity award from the Grocery Manufacturers Association and a sustainability award from Wal-Mart. Natural cleaners have more than doubled in size and Green Workers is the category leader at 50% share. This month of grant is being extended into dishwashing liquid. Brita is benefiting from sustainability…

Thank you, Larry. I'll briefly discuss our fourth quarter and fiscal year 2008 financial results, followed by more detail on our updated outlook for fiscal year 2009. Turning to our fourth quarter results, for the quarter we delivered diluted earnings per share of $1.13. This includes a $0.01 impact from Burt's Bees dilution and a $0.04 impact from restructuring charges. Excluding these impacts, diluted EPS for the fourth quarter was a $1.18. In the year ago quarter, we delivered a $1.07 diluted EPS. Fourth quarter gross margin before charges declined about a 150 basis points to 42.7% of sales, compared with 44.2% in the year ago quarter. As we again saw a significant year-over-year negative impact from commodities and energy costs, that we're able to fully offset through price increases and cost saving. Fourth quarter selling and administrative expense increased on a dollar basis, but came in about flat as a percent of sales versus the year ago quarter. About half of the dollar increase is related to the acquisition of Burt's Bees. The balance is due to a variety of factors including incremental investments in the grocery channel. Fourth quarter restructuring charges came in at $10 million, which is consistent with what we had estimated. Of the $10 million in total restructuring charges, $8 million are reflected in gross margin and $2 million on the restructuring line of the income statement. About $6 million of the charges are non-cash. Interest expense increase versus year ago, due to higher debt levels associated with financing the Burt's Bees acquisition and the accelerated stock repurchase. Other income in the quarter was $9 million. While this line continues a number of smaller items, the largest impact in the fourth quarter was related to net foreign currency transaction gains, which were factored into our…

Thank you, Dan. Good morning, everybody. While also we feel very good about the results we delivered in FY '08, especially given the volatile cost environment we all see out there. At the end of the day, we achieved the earnings per share target we announced almost 15 months ago saw you in New York in May '07, despite the fact that we had commodity cost increases of more than a $110 million above our initial projections. Now looking back our 9% sales growth is testament, I think to the strength of our brands and the direct outcome of our strategic decisions to pursue these key consumer mega trends I have been talking about since I got here, notably sustainability in health and wellness. You can see that in the launch of Green Works, the repositioning of Brita for robust growth and acquiring Burt's Bees. As Dan just noted, we are very pleased with Burt's Bees business is performing ahead of our expectations to-date. Now looking ahead let me give you my perspective on FY '09. It's clear been significantly impacted by commodity cost increases for a couple of years now. We believe we have taken a balanced approach to projecting commodity cost for FY '09 and we feel good about the actions we are taking to achieve our goals, including price increases. Many of you have expressed concerns about the impact of price increases on the consumer. To be clear, we do expect an impact on volume as Dan just noted; however, I have confidence we can successfully implement our '09 pricing actions for the following reasons. First, I believe we are doing as a good job of anyone recognizing and capitalizing on key consumer trends, including health and wellness, sustainability and convenience. These trends across our portfolio, and…

(Operator Instructions). Our first question today comes from Chris Ferrara, Merrill Lynch.

Hey, good morning, guys.

Good morning.

Good morning.

I was just wondering so with relative to your last outlook, the cost outlook is $80 million higher for '09 and the guidance I guess on a pre-tax basis is down by $30 million and cost savings are the same, so it implies I guess $50 million of price. Is that right and I guess where is the incremental pricing today that you are thinking about relative to when you to talk to us in early May?

Yes. I think you have the math right, Chris, so to cover, part of it is obviously we are taking our outlook down. The balance we intend to recover with higher pricing and when we last spoke to you, as well as some belt tightening and some spending cuts in other areas of the company. So we anticipate probably a little more than half of that GAAP will be made up with pricing and the rest will be adjustments we are making in the rest of the business.

The most notable change in pricing plans is we are taking the price increase on our Glad trash business given the increase in resin to be about 10% effective in October.

I think the other thing Chris, Don here. I would suggest that as our mix continues to shift to higher margin products, Green Works, Brita, Burt's Bees, you will see some benefit from next two enabling us to cover some of that gap. So, I think it's all three of those elements combined pricing cost and mix.

Okay. So, I am sorry, just to be clear so, commodity costs are $80 million higher, the guidance comes down by $30 million, so that $50 million spread you have to make up for, you are saying half of that is pricing. So like maybe $25 million in incremental pricing and $25 million from things like mix and other cost savings that fall outside of CCEM, is that right?

A little bit higher than the $25 million on pricing, but those are the general items that will help offset it.

I would think of it as 60/40 Chris, about $30 million coming from pricing in round numbers and the other $20 million from cost.

Okay, great. And then just on the A&P spend, I think you guys have said that, you'd expect '09 to have been at the higher end of the 9 to 10 range. Is that still the case?

I think in fiscal '09, we are still trying that 9% to 10% range, hopefully towards the middle of that range, a little bit at low end for the current fourth quarter. We feel good about the support we have behind our brands. We continue to focus on the working part of the mix, that a lot of work on the efficiency of the non-working component. So we are seeing pretty good shift between non-working and working. But overall, we feel good about the level of support we hope to stay within that 9% to 10% range.

And I think Chris if you, I think the same we're really looking at is the money we're spending effective, and I think the top-line growth is what we're most happy about. I think it's exceeding people's expectations about the top-line growth. Excluding the acquisitions, our base growth is as strong as it's ever been at least in the last few years and the fourth quarter. So we feel good about the effectiveness and the efficiency of the spend we have out there. s Larry said, we are still committed to the 9 to 10 range. If there is any mitigation of commodities, we'll continue to be looking at additional investments in consumer brand building. And we're also looking at I think like most CPG companies, people have between 10% and 20% of their budgets in non-working dollars. We continue to squeeze those dollars and feel good about that. Our marketing ROIs are up 9% for the year, so we feel very good about the way we're deploying the money.

Okay, great. And I just wanted to ask real quickly about resin and I'll leave you alone. With the recent pullback in the hydrocarbon cost, obviously, like our chemicals analysts internally here are saying that there are reports that the resin buyers are saying the August price increase has no shot and the July price increase is expected to roll back a little. Then you have Newell Rubbermaid on their call yesterday saying that they don't believe that with resin where it is now that even reflects oil at 120 that they expect resin prices to go up in July and August and again in September, and there was such a just disconnect from someone who's obviously not a chemicals analyst. I was wondering if you could just give a little color as to how you see all these dynamics?

Definitely, it's hard to call. Obviously, we have a lag effect in our P&L because of inventory that we carry. There have been some announced price increases historically; a lot of the price increases have been stuck. We are optimistic that some of the longer-term price increases in the marketplace won't stick based on oil coming down; however, we are seeing obviously current resin going on.

Chris, let me try to talk a little bit about the progression and how we're thinking about it, playing out in fiscal '09. So if you went back to Q4 of last year, Q1 of this year, and I'll talk about market prices, because that's easier to talk about. So market prices were probably in the mid $0.70 per pound range. We then saw upward pressure on resin in Q2. We saw that jump up to about the mid $0.80 range. There were some announced price increases earlier in the calendar year. Most of those did not stick, but then in the fourth quarter, we did see another jump probably $0.10 to $011 in the market pricing. They got us up into the mid $0.90 range. There are two more announced price increases in the market and I am talking primarily liner low density polyethylene here. I think there is an $0.08 increase in August and $0.05 increase in September. Now as we look at those, from a supply demand standpoint, we do not believe that those prices should stick. Having said that, we have seen earlier price increases that based on supply and demand should not have stick and some of that has. So as we look out over the next quarter or two, with these announced price increases, I mean our view right now is from a supply/demand standpoint, there is not a basis for those increases. We also still believe in the thesis that in the back half of the fiscal year, we will start to see some declines in resin as that Mideast supply comes online. What we are saying now on our outlook is that likely to happen a little bit later in the fiscal year and because of the way we contract our hedging inventory lags, things like that. We are not projecting right now in the current commodity cost outlook any material benefit from those declines, but we do expect them to continue. So it is kind of an uncertain world right on resin. The supply/demand would suggest that prices should come down. They have been sticky, but we do still anticipate in the back half of the fiscal, we will start to see some declines.

Great, thanks a lot guys.

Our next question will come from Ali Dibadj with Sanford Bernstein.

Questions, one is of the clarification of what you just said around resin. So in the 180 to 200, you are essentially banking on resins kind of where they are today, is that right?

What I say is fairly steady pricing over, call it the next couple of quarters. Ali, the thing you need to keep in mind is, we do have lags on when these costs come through the P&L. So as you think about the first half of the year, the increased run-up that you saw in Q4 is, has not really flown through the P&L. We'll see that probably in the first quarter. So, even though we're projecting out, the resin may stay at these levels. We don't think the pricing will stick and will decline in the back half. As you are thinking about the P&L though, the run-up that you saw in the fourth quarter, you will see that flow through our P&L in the first quarter.

Okay. So ups and down a little bit. Okay, great. So, now on to couple other questions. Particularly on volumes, you mentioned hydrochloric bleach and the declining consumer relevance there. Can you give us a sense of what the volume actually was and similarly on the Glad business please?

So again on Clorox liquid bleach, our share was up, the category was down 6% or 7% at a volume range and pretty similar what the category did, although large share was up slightly.

Okay.

On the Glad overall category is down about 2%, which was actually about in line with the rest of direct channel categories. Our volume was down a couple of points, but our sales were up pretty significantly given pricing and the shift to ForceFlex.

Okay. And those are just under about a quarter of your business, right, if you add it all up just in terms of sales?

Correct.

So, then translation that forward to the price increases which you kindly always put in your releases here. You are taking pricing on some of those same categories. Is it because the (inaudible) was a little bit better than you thought or is it because you are pumping back more trade spend so you are not getting back enough in terms of commodities? How should we think about the stability of those volumes, given the pricing that you're taking going forward?

We are counting for some volume losses as a result of pricing. We're obviously taking pricing where we're seeing the most margin pressure, the most commodity pressure, obviously, Glad being top of the list in terms of commodity pressure. So we are assuming a decline in volume in both of those businesses as a result of pricing, the net effect with pricing will follow probably see positive in terms of the sales growth.

Okay.

Definitely seeing some volume decline.

But you'd expect a little bit of kind of acceleration of a decline going forward, as you take more pricing?

My guess is that in both those categories, we will see matching by the competitive set. And so shares will remain stable or hopefully improve over the course of the fiscal year. So I don't know if there will be any much different than what we're seeing this year in terms of the overall picture.

Okay. Shifting gears to a prior business, which is growing pretty well here, Burt's Bees and Green Works, particularly on Burt's Bees, just an understanding question, what's the seasonality for that business?

Its slower seasonality in the fourth quarters than the third quarters so we're seeing very, very big growth in both quarters, but the absolutely sales in the fourth quarter is less than the third quarter because of the seasonality. The largest sales quarter for Burt's is our fiscal second quarter and that's due to all the gift kits that go out for the holiday season.

Okay. And then my last question on other piece of business, Green Works, how much did that contribute to your top line growth?

Green Works is about 1% overall total company growth. We had a very strong quarter in our homecare business, so even though Green Works has been a terrific success, it actually was less than half of the double-digit growth in our homecare business this quarter, a lot of good shipment growth.

And for fiscal '09, we are again anticipating about little more than 2 points of growth in new products and it would include the incrementality from Green Works including the launch in the dish.

Just a note on the dish launch Ali, the current five SKUs of Green Works compete at about $1.4 billion of categories. By going into the LDL category, we will be adding another $1.4 billion of category space another Green Works brand will be exposed to almost $3 billion of sales which we think even with the modest, if we get anywhere near the kind of success we had with the original 5 into LDLs, I think the product is unique. It could have a nice impact for us on the top line.

Okay. Thanks, guys.

Next is Bill Schmitz with Deutsche Bank.

Can you just talk about the sort of the strategic importance of Glad; it doesn't really fit into health and wellness and whether or not you think strategically about kind of parting ways with the business?

Obviously, it has its challenges from a sustainability standpoint. We are doing some testing in terms of biodegradable, compostable bags up in Canada with some success. And it maybe that over the long term as prices come down on those alternatives that becomes a larger part of the category. Obviously, we are seeing some people go away from plastic bags in grocery stores etcetera. On the short term it seems to be helping our business a little bit because people still need plastic bags, still want plastic bags. So now they are purchasing bags versus getting them free. But obviously this is the business that is less sustainable than other businesses which over time we need to focus on how to make it more sustainable.

Bill, Don here. The one trend that we have been focused on, where we are trying to push Glad is the whole convenient trend and obviously things like ForceFlex Odor Shield which are now about 40% plus of our mix of trash are helping push into that direction and provide a solution for consumers around convenience. So clearly there are some challenges on the sustainability side. We are doing what Larry suggested with compostable bags etcetera, but we are also trying to be mindful of the convenience trend that's going on and as more municipalities eliminate plastic bags in grocery channels, a lot of those bags are currently being used in home or trash bucket liners etcetera. We think that could have some minor upside for the branded business. But we are clearly focused on the convenience trend and mindful of the sustainability trend.

And Bill from a margin standpoint, as you know, we are exiting the private-label component there which will be accretive to margins and EP. We have the overall trade-up strategy underway within Glad and obviously we are taking some price increases because of the cost increases that we're seeing.

Got you. I mean would you take the dilution if a good offer came through for Glad in this environment?

How much money you got?

I don't have very much, but a lot of people out there do. Dan, can you also just put some more color behind some of the commodity assumptions, like we didn't really talk about the agricultural commodities for the charcoal business obviously in Valley, I mean what are your thoughts there?

Bill, as we look at, obviously we came in thinking it's going to be 100 to 120, we're now at the 180 to 200. The biggest movers in there, obviously we are seeing some continued impact from diesel, resin is probably the biggest mover that's in there. We are seeing sort of across the board general increases in most if not all of our commodity categories. There is a little bit of pressure on chlor-alkali certainly on soybean oil and things like that. We are seeing some further increases. So it's kind of across the board. I wouldn't say anyone category is huge, but just sort of the general tied is rising on most of commodity cost. But the biggest drivers for us in the change in the outlook is going to be in the resin diesel primarily.

Okay, great. Thanks very much.

Our next question will come from Nik Modi with UBS.

Good morning, guys.

Good morning, Nik.

Just a couple of quick questions. Are there any repeat metrics you can share with us on Green Works. And then on the category captaincy, can you help us illustrate how winning those captaincies could manifest in the P&L as we look at fiscal '09? And then just on the share buyback, obviously you have the authorization. Just curious as to how would you think about that over the next year, year and half? Thanks.

Let me talk to the Green Works. We track both trial and repeat, and both those factors are right on track with our expectations. And all the anecdotal evidence is very positive. We continue to get great reviews from consumers about the effectiveness of these products, particularly versus other environmentally friendly products they are used to using. So, it looks very good from both the trial and repeat standpoint.

On the category captaincies mix, obviously, the focus there and what our customers believe in our capabilities is that we best know how to grow their overall categories. I think where we see the manifestation on our own P&L given the number one stable of brands we have is we tend in those situations going through the analysis to pick up assortment which is, our business is 90% plus base business. So when one picks up assortments of additional SKUs, we're also seeing expansion of sets in different retailers. For example, we have a retailer on the West Coast that just committed to larger trash bag sections. And once those sections are enlarged, obviously Glad picks up additional SKUs and facings. So to see it across AMPS, what we call, Assortment Merchandising, Pricing and Shelving, but you see it manifest itself on an assortment and shelving standpoint. And that's what really gives you sustainable build over time.

Nick, let me address your question on share repurchases, so the outlet that we updated today assumes that we're using our free cash flow to support dividend growth and to retire debt. So there is no assumption right now that we are buying back shares. Having said that, early in the third quarter, we will back to 3.0 debt-to-EBITDA or less. So at that point, we certainly have more flexibility to consider some share repurchases in the back half of the year depending on our view the share price. But for right now, the outlook does not assume that we are buying back shares.

Okay. Thanks a lot.

Our next question comes from Lauren Lieberman with Lehman Brothers.

Thanks. Good morning.

Good morning.

Can we talk a little bit maybe about SG&A leverage. Remember in last year's first quarter there was quite a bit of SG&A leverage which took a lot of us by surprise because we were all expecting that to see the beginning of the step-up in reinvestment, particularly in the grocery channel. So as I think about '09, it feels like you need a pretty good amount of cost savings or overhead control at the SG&A line or for advertising to be done further as a percentage of sales. I mean, can you maybe give us a little bit more specifics in what will drive that?

Let me address the SG&A question. So as we look at SG&A year-over-year, obviously FY '08 was an investment year for us. We did acquisitions. We did the bleach acquisition. We had about a half year of cost for that. We did the Burt's Bees acquisition. We also had some impacts in SG&A from currencies and then just sort of general inflation. We did drive some cost savings however on that line item. As we look at SG&A out into this next year, obviously we still have the inflationary effects that we will face on wages and benefits and will have a half year's worth of impact or so from Burt's Bees. But we are certainly looking at all areas of spending in our belt tightening to see where we can trim and be more efficient on our spending. And in terms of advertising, I think Larry addressed that. We expect to be in the 9% to 10% range on our advertising and that's an area where we're looked at. We're looking at the efficiency of the spend, as you described, it's really about generating higher returns for the level that we're spending. So, it's an that we continue to look at in terms of efficiency, but we certainly want to support our brands. The way we think about SG&A is we're trying to limit any growth in SG&A to have the growth rate of sales. So, if you think about the projected strength of our top line in fiscal '09, we're trying to limit our SG&A growth there, half that rate or less. And certainly, we've got a lot of people focused on trying to reduce that number as we go into '09.

Okay. That's helps a lot. Thanks. In terms of the flow, I know you guys are talking more about the two halves of the year, but Q1 is actually a pretty tough comparison, even just from that SG&A leverage standpoint and you had a big pretty revenue quarter. Should we be thinking about Q1 because of that tougher comp and because you described the Q4 resin inflation kind of flowing through then, does that will probably be the toughest quarter of the year?

I guess it depends on you define toughest quarter of the year.

Not a lot of growth, I mean earnings growth.

I don’t want to get back. We've gotten away from talking a lot about detailed quarters. Let me talk about the halves.

Okay.

Because I think it's a little easier to talk about the halves. So, if you think the halves, most of the commodity cost inflation that we saw in fiscal '08 hit in the back half of the year. We did see a fairly significant run-up in the fourth quarter of costs that will flow through our P&L mostly in the first quarter, somewhat into the first half. So, when you think on a year-over-year comparison, commodities are lot higher and we were lower in the year ago period. You also pointed out the SG&A, so certainly our margins will be under pressure in the first half and then as we get into the second half, as we look at our commodity projections there, we're going to be comping against some pretty high levels in the year ago period. Certainly, we're driving cost savings as hard as we can and we might see a little bit more of those cost savings in the first half versus the second half. And then just from a top line standpoint, a lot of the pricing is going into effect in August and there's a lot of it and it's going in. There is some in the back half, but a lot of it is going into place in August. So we're going to see fair amount of that benefit in the first half of the year.

Okay. And then the last thing I just wanted to clarify on volume is, if I just make the assumption that the 2 points of growth from innovation is mostly, you are talking about volume and mix there. And, if I assume international say grows at 5%ish, it's probably going to be better, but let's be relatively conservative, then the core business volume growth is probably down something like 1% to 3%. Is that how you guys are thinking about it, sorry core US? I quoted the wrong word, I mean non-innovation, sorry.

I think we are seeing probably slightly down volume on the base business, obviously as a result of the pricing actions that we're taking. Better sales results, but definitely volume will be soft as a result of the pricing.

Okay, thank you.

Connie Maneaty with BMO Capital is next.

Good morning. Could you talk a bit about the slower restructuring through the year, the $0.09 to $0.11, is that even in every quarter and what are the projects you're undertaking?

The projects in restructuring are really primarily continuation of the announced manufacturing, restructuring actions that we had in fiscal '08. So most of that is tied to the home cleaning, consolidation of our manufacturing into the Atlanta plant and we would anticipate that the lion share of those charges will come through in the first half of the year.

Have another $0.09 in the first half?

Good portion of it will be in the first half of the year.

And also on the concentration of liquid bleach, I heard all that correctly, are you concentrating liquid bleach by 2 times the way liquid detergent was?

No, actually we are concentrating our Clorox 2 Color Safe Bleach.

Clorox 2.

Yes, not the basic hydrochloric bleach. There is quite a bit of technical challenge of doing that.

Yes, that's what I recall from the old days. That's it for me. thanks.

Filippe Goossens with Credit Suisse has our next question.

Yes, good morning, gentlemen. I have also kind of second Bill's suggestion here too definitely continue to look at the opportunities to find somebody who is willing to pay you lots of money for the Glad business. But anyhow Don as you know the two areas that I still continue to struggle with and I hope that once again you can try to raise my level of comfort. The first one being the impact of the economy today on the Burt's Bees and Green Works, I think these are great products, great initiatives. But I am just still kind of wondering to what an extent you are relying on the success of these two product lines on Wal-Mart. In other words, is the Wal-Mart customer today willing to pay the type of premium that you need to make these products successful? And then the second question relates to the commodity prices, but if you can just touch again on, how dependent are you on Wal-Mart and the Wal-Mart customers be willing to pay that premium in order to make Burt's Bees and secondly also, Green Works, the success that you all believe these lines can deliver eventually?

Let me take the last part first Filippe on Burt's Bees and Wal-Mart. We are really not really dependent at all yet, in the sense that today Wal-Mart is selling less than 5% of Burt's Bees. So we've only been in the few 100 stores. We are testing 2 foot, 4 foot and 8 foot sections in those markets where we believe the demographics are right. Clearly, Burt's Bees will not be rolled off across the entire 3500 stores because of demographic simply wouldn't work. So, we're still in a testing mode. So, there really hasn't been much impact yet in fiscal year '08 and as we go into fiscal '09. So, I don't think we're really dependent at all there. We're seeing obviously in our traditional customers who've done a great job that new target resets are doing extremely well. The three main drug chains are doing extremely well and of course Whole Foods and other outlets for this brand built was built initially are continued to do well. I think the bigger upside potentially is in the grocery channel, where of course we have 35,000 supermarkets and we're doing less than 10% of our volume on Burt's Bees in supermarket. So, I think we have a lot of opportunities to spread the wealth on Burt's Bees. So, not very dependent at all yet on Wal-Mart. As far as Green Works goes Wal-Mart is obviously taking the lead in their sustainability emphasis. They've done a terrific job with it. What I think that's done if forced the rest of the industry to really pay attention to it. I don't know that I would suggest that we're overly dependent. I think the grocery channel has jumped on it, all of our major top 25 grocers are investing heavily behind Green Works and the international side is also starting to take off. So we feel very good that we've kind of spread the wealth, if you will, and all of these retailers understand this, how well these brands link in with the current trends and I think they're really trying to push it hard.

The only thing I would add to that is, it's really a value equation versus pricing. So innovation offering added values have been a big way we've offset pricing increase for absolute price. So ForceFlex is growing double-digits even though that's a 15% premium. Green Works is doing really well even though that's a premium product. Burt's is doing exceptionally well even though that's a brand, that's a better value from a consumer's perspective because of what they offer.

In terms of Green Works, are you pretty much done with the initial shipments into the channels that you have targeted or there is more to come here?

I think the distribution at this point is pretty broad-based. There is still probably some distribution opportunity in the drug channel, which is typically a channel we get to later in new product launches, but distribution is pretty broad at this point and pretty deep.

Okay. Then the question I have with regard to commodity prices, can you just give us a little bit of a better feel where you stand in terms of diversification in terms of suppliers? Are you still pretty much right now tied to Dow Chemical or the diversification has already been much more advanced than what I think it is at this moment?

Specific to resin, we have tried to broaden our supplier base, also changed some of the specs of our resin requirements in order to do that. So we have a wider variety of suppliers today, I mean many suppliers that we did previously. We have different strategies by area. In most cases, we have multiple suppliers for any kind of key ingredient.

I would think it's safe to say, Filippe, on resins that we're much more diverse in our supplier base than you might think.

Okay. And then you mentioned earlier, I think it was Dan about the two price increases that are stills scheduled August and September that you think they might not stick. When you gave us the updated guidance for commodity prices in 2009, does that include these two scheduled price increases will stick or you are assuming that they won't stick?

I am probably not going to that answer that question directly. I mean, our outlook has our best estimate of what we think commodities are going to do over the course of fiscal '09. There is a range of scenarios that are embedded into that range. And so I wouldn't really say there is a specific point we are taking with respect to that. We have developed a range based on the volatility that we see in the market and some of the trends that are currently there and we feel as comfortable as you can be with that $180 million to $200 million, but that gives us flexibility in there depending on whether individual commodities move up or down versus what we may currently believe.

Okay. And then my final question if I may today, can you just talk a little bit about what you are currently seeing in terms of channel dynamics. We all know the comments that Costco made recently within the context of higher energy prices, one would argue that the grocery channel should actually benefit as people are not willing to make the larger trips to the club channel given that you continue to invest in the grocery store channel. Can we expect that in fiscal '09 you might perhaps see more traction with the grocery store channel as compared to the club channel? Thank you.

We've definitely seen a bit of recovery in the grocery channel which is one of the reasons why we've been focusing on that channel. Our business in grocery has seen a significant turn around versus trend. We're up about 1% for the year, which is about 5 point turnaround from the three previous years. Overall, we continue to see higher growth in what we term the untracked channels, then the tracked channels. So, untracked will include the club channel and dollar channel. In the current quarter, that's true as well. It's narrower than it has been historically, but we are still talking high single-digit differences in terms of the overall growth in the untracked universe versus in tracked universe.

Okay. Thank you.

I think your instinct is right on grocery in the sense that there are roughly 35,000 grocers in this country and less than 1,000 club stores and less than 3,000 roughly 2,500 Wal-Mart. Obviously with $4 gasoline, people are tending to stay closer to home. I think we are seeing that in our own trends in grocery. Our investment timing I think was very good based on what's going on in there, out there with that trend and as grocery retailers get away from insult pricing in the center of the store, I think it bodes rather being much more competitive with the guys who have set the pricing floors like Wal-Mart and Target and the club channel.

Okay. Thank you, gentlemen.

Our next question will come from John Faucher with JPMorgan.

Yes, good morning everyone. So, two quick questions here. First off, if I look at the reduction in charges, it looks as though you are underlying gross margin excluding the impacts of charges year-over-year should be down about 50, 60 basis points and I am wondering if that lines up with what you guys are thinking? And then on Green Works, I think you mentioned that half the category and the category has doubled, so would that basically imply that you're not really taking much share from the existing cleaner businesses at least the environmentally friendly cleaner businesses? And then can you also give us some idea in terms of how much of the environmentally cleaner category growth is coming from the regular cleaner business, I assume that's fairly cannibalistic situation? Thanks.

Let me try the gross margin, if I answer it for you John. So as we look at the restructuring charges that are going through margins, we had about $23 million in fiscal '08. The majority of the charges that we're looking at in '09 are also going to go through cost of goods sold. So at least on the gross margin line, on a year-over-year basis, there is not a big impact or not a big delta, if you will, between a level of restructuring charges that are going to flow through. So our margins, again we're expecting to be down first half, up second half and about flat for full year and I don't think restructuring will be a big impact either way.

So let me take a stab at your Green Works.

Just one quick second. Does that include the Burt's Bees charges as well or is that just restructuring piece of it?

That's just a restructuring. On the Burt's Bees, we have the $90 million charges past year if you want to include that in there as well. You will see that impact on a year-over-year basis.

Okay.

So let me try to answer your Green Works question, if you basically add up all the products in homecare that either are natural or purport to be natural or green, that overall category has more than doubled and we have a 50% share of that category. We account for obviously the bulk of the growth of that segment, but the other guys are growing as well. They are loosing substantial share obviously, as obviously Green Works just taking the bulk of the share away. Overall if you looked at our homecare share, most of our share growth from Green Works is incremental to our total homecare business. Again just some sense of the cannibalization of about at least in our own business.

For example, John, if you take the last period, we are seeing 409 and Tilex shares flat so we are not obviously cannibalizing those spray cleaners. There is some cannibalization but our original numbers are around 75% to 80% or so incremental. It seems like it's holding true.

Are you seeing dramatically different source of volume depending on what was available in the channel previously. So if you look at places where method was available, can you tell us you're sourcing a lot more share from method in those particular outlets versus our regular grocery store where they probably didn't have anything from that standpoint?

Probably don't have enough liable data to give you an accurate answer on that quite frankly, in this natural category, Method would be the number two brand with about a 20% share per perspective. So it's a fairly small pretty quick.

Thank you very much.

Thank you.

And next is Linda Weiser with Caris.

Thank you. My questions has been answered.

Thank you.

Thank you very much. Next, we'll hear from Andrew Sawyer with Goldman Sachs.

I just had a real quick one on Burt's Bees. I was wondering if you could just help us through how you would proceed taking the mid 30s growth rate and what you consider distribution driven versus the natural same-store sales or whatever you want to call it. And also if you could just give us some maybe at little color on what type of growth rate you are building in or expecting into fiscal '09? Thank you very much.

Our base plan on Burt's, what we put together for the original acquisition was in the teen growth rate. But we're obviously seeing more than that right now. A significant chunk of that is driven by new distribution. The overall natural personal care category, however, is growing at something like 10% to 15% growth rates. So we're benefiting from distribution, the overall growth rates of natural personal care as well as obviously the new products that are being introduced on the Burt's Bees line. So it's probably all three components; I don't know if we can break it down specifically which is driving the most, but we still have opportunity in all three of those vectors for fiscal '09.

But you are still embedding a mid-teens case in your numbers?

We're a little bit higher than that for fiscal '09. The valuation case that we did assume that we would have higher levels of growth in the earlier years averaging down over time to CAGR of about 15%. So, you are going to still see very robust sales growth numbers from Burt's in fiscal '09.

Thank you very much, guys.

Thank you.

Our next question will come from Priya Ohri-Gupta.

Hi, good morning. Just a quick question, you had noted that, you will continue to pay down debt in fiscal year '09. Given your current CP, your short-term debt balance of $755 million, would you look to pay this amount down entirely or could you potentially look to refinance some of this in the term debt market later this year? Thank you.

On the CP, that's where all the pay down will come from as we look out over the next year. There are no current plans to go and term that debt out. We just have plans to pay it down and create greater flexibility.

Thank you.

We will take our next question, Jason Gere with Wachovia.

Thanks. Can you just talk about the progression of the sales and your market shares during the course of the months and maybe just how that extended from June into July?

I don't have a break down by month, but I wouldn't say it's been dramatically different. I mean, we're seeing some slight improvements on some businesses, but overall shares aren't all that different month by month.

And secondly, can you just talk maybe a little more the marketing mix between advertising and promotional spending, certainly with second round of price increases going to, just your outlook in terms of, will there be a little more promotional dollars needed to get back to the retailers at this time and I got the clarification on advertising earlier?

So, at this point, as we've said previously, we hope to hang onto that 9% to 10% range for advertising. At this point, we are not expecting a big tick up in our trade spending, some of the incremental trade spend that went into fiscal '08 because competitor situations, we don’t think will exist in fiscal '09, obviously that depended on what we see over the course of the year and could change, should we see some competitive introductions that we want to address. But overall, not a big change and certainly not an uptick in terms of trade spending.

Yeah, there's absolutely no uptick in trade spending. In fact, even sales organization are looking very hard the last two years to get very exclusive guidelines out there, event by event and we've actually seen much more efficiency out there than we had, say three years ago and how we manage that spend. So you won't see any uptake in trade spending but I think you'll see better deployment of spending we use.

Okay. Has there been any push back from retailer just with the additional price increases going in August?

We have been out with a lot of retailers obviously and I can tell you I have never seen that environment like this work which is kind of slide the piece of paper over the table and let's talk about what the amount is. Everybody is under the same pressures. There is not a CPG company out there. That's not taking somewhat significant pricing versus past routines. So we really haven't got into any drawn out negotiations, if you will, with any of our retail partners. They are in the same situation with their own retail brands and what they are trying to do in terms of pricing in those brands. So it's been a pretty benign environment from that standpoint of getting the price increase accepted.

Okay, great. And then just a last question if you could just talk about the seasonable products, I guess the Hidden Valley, the charcoal, in particular. Can you just talk about the actual growth in the quarter and in terms of other type of, I guess vacation type programs that you are expecting through the rest of, I guess through September? Thanks.

Both the charcoal and food had highest single-digit growth rates in the quarter. Our charcoal business remains very healthy. We are growing share. Our Hidden Valley business remains very healthy, we are growing share. Categories were slightly down in both case but our brands grew very well.

Okay, thank you.

Next, we will take a follow-up question for Ali Dibadj with Sanford Bernstein.

Thanks very much for taking the follow-up. Couple of questions. One is just a clarification on the commodity, you said 180 to 200 in the release you were announcing today. Does that include or exclude logistics costs?

That would, if you are referring to diesel that would include diesel.

Include diesel. So what does that compare to for this year in terms of the number?

Specific to diesel you mean?

No, the 180 to 200, what's the apples-to-apples comparison for fiscal year '08?

For '08, we ended up in the 130 to 135 range in total commodity cost increases.

Okay. So, that number, okay. Other question, you mentioned one thing which was interesting to me. Grocery is about a third of your sales, but half of your EP?

Right.

Can you talk about that a little bit more? That's a little bit of a surprise to me, is it a mix? So Burt's Bees, for example, really pushes it that far over?

It's not Burt's Bees. Burt's Bees is a very small piece of the grocery makeup. It's really the breadth of line that those grocery retailers carry versus a club account, for example, where you may just have a handful of SKUs. We will typically have a well over 100 to 200 SKUs across our brands in number of our key grocery partners. A lot of those brands don't have significant trade support hooked to them. They sell more full price off the shelf. So, when you look at the mix that's goes on in those stores, it's fundamentally different from the mix that will go out in the club store or mass store where you have less SKUs on shelf.

It's all mix. We have a fair enough of policy with respect to trade spending. So, what you are looking at is the effect as Don said, of the mix in grocery versus other channels.

Okay. Thanks very much.

We will take one more question.

We will take that final question from [Bhupinder Bahra] with Banc of America Securities.

Hi, good morning guys. I have two questions for you. The first one is actually on, could talk about your Glad product mix, like the regular trash bag and the premium. What the mix is actually in that business?

So, the overall trash volume for the quarter was down. We saw very good growth, double-digit growth on our ForceFlex trash bags which are premium. Also saw a strong double-digit growth on our Odor Shield bags which are also premium, but did see a pretty dramatic in our base trash business. So we're definitely seeing the continued migration to the premium trash bags, but the overall volume was down because of the larger amount of growth in the base trash business.

Okay. And the pricing which you guys mentioned in October increase, is that like for the overall or just for the premium or the regular?

That's across the line.

Across the line, okay. And the second question actually would be, you mentioned about global resin capacity coming online, just can you give us some flavor on that like how big is that and when is it exactly going to hit like second half of your fiscal or calendar '09?

Let's say, the increase in the worldwide supply of resin is projected by most folks to be in a range of 30% to 40% over the next several years. There are various plants coming on line at various times. We should see the bulk of that capacity coming on in calendar 2009 and 2010.

Okay, thanks a lot guys.

Thank you

Okay. I think that's the last question for the day. I would just like to thank everyone for joining us today. While we know we have certainly challenges ahead of us like most of our competitors, particularly in the first half of this fiscal year, I've got a lot of confidence in our brands and their ability to connect with the trends that are out there and the consumers and I think we are demonstrating that with our top-line growth. I am also really convinced that we have got a long-standing proven track record of dealing with high cost environment and I think this organization is more than capable of doing it in FY '09. So I look forward to speaking to you next quarter when we share our Q1 results. Thanks everyone.

That does conclude our conference call. Thank you for joining us today.