Good day, everyone, and welcome to the Clorox Third Quarter 2010 Earnings Release Conference Call. At this time, for opening remarks and introductions, I would like to turn the call over to Mr. Steve Austenfeld. Please go ahead, sir.

Great. Thank you. Welcome, everyone, and thank you for joining Clorox's Third Quarter Conference Call. On the call with me today are Don Knauss, Clorox's Chairman and CEO; 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, www.thecloroxcompany.com. On today’s call, Larry will start with comments on business unit performance, as well as perspective on the current category and share results. Dan will then follow with a review of the quarter’s financial performance, as well as comment on our updated fiscal year 2010 outlook and initial 2011 outlook, both of which were communicated in our press release this morning. Finally, Don will close with his perspective on a few key initiatives for the company. And after that, we'll open it up for your questions. 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 and debt to EBITDA. 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 information. And actual results or outcomes could differ materially from management's expectations and plans. 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 or outcomes to differ materially from management's expectations and plans. The company undertakes no obligation to publicly update or revise any forward-looking statements. With that, let me turn it over to Larry.

Thanks, Steve, and welcome to all of you on the call. Firstly, I want [ph] (9:42) to focus my comments on our top line results, highlighting sales and market share trends. Overall, we had a good quarter in what remains a tough economic climate. We delivered solid volume growth and increased sales despite the impact of the Venezuelan currency devaluation. We continue to invest in demand-building activities to build long-term brand equity, while addressing short-term competitive price gaps at the shelf. Starting with the U.S., consumer takeaway in our categories in track channels was down slightly in Q3, similar to the flattish results we had seen over the last several quarters. We grew our health share in three of eight categories, and our overall U.S. share was down a bit. Private label share was flat versus the year-ago quarter. For perspective, track channels account for only about a third of our U.S. business volume. Our total all-channel U.S. volume grew 3%, with shipments in non-track channels significantly outpacing track channels. On an all-outlet basis, our 52-week market share through February was up slightly versus the previous year. In our International business, market share results are generally positive, and we have seen stronger category sales growth, primarily due to pricing. International volume was up 3%, driven by shipments of disinfectant and fragrance cleaning products in Latin America. International sales were up 9% due to the volume growth and price increases. Overall, our categories in niche international markets are healthy. We grew share in a number of markets, most notably, bleach, dilutable cleaners and air fresheners in Latin America. Overall dollar share in Latin America increased almost a point. Our total company volume was up 3% for the quarter with volume growth in each of our four segments. Key drivers included higher…

Thank you, Larry, and hello, everyone. I'd like to provide some perspective on our third quarter financial results and updated fiscal year 2010 outlook, and then discuss our initial financial outlook for fiscal 2011. Looking at our third quarter results and our updated financial outlook for the current fiscal year, I want to highlight four key messages. First, we're encouraged by the improving fundamentals of our business. We continue to hold our own in a difficult economic environment. The external business environment remains challenging. Economic conditions continue to impact consumer demand, and competitive activity remains intense with the high level of price competition in the marketplace. During this fiscal year, we've meaningfully increased our trade spending to support new products and maintain or increase our products' value and affordability on shelf, where we've been focused on narrowing price gaps versus competition in certain categories. These initiatives are working. We continue to invest heavily on the long-term vitality of our brands. Overall, our year-to-date combined spending on advertising, sales promotion, trade spending and R&D is up significantly versus the prior year. We focused our advertising spending to support our new products such as Burt's acne and oral care lines, Kingsford's redesigned charcoal briquet, our litter packaging innovation, Clorox 2's new unit dose product and the affordability messaging on our core brands. We also increased our global health and wellness and disinfection messaging during the recent H1N1 flu pandemic. As Larry mentioned, for the third quarter, volume grew 3% and sales grew 1%. Sales growth was lower than volume growth, primarily due to the Venezuela devaluation and higher levels of trade spending, partially offset by the benefit of pricing and other favorable foreign currency movements. For the full fiscal year, we continue to anticipate sales growth in the range of 1% to…

Thank you, Dan, and hello, everyone. I think as both Larry and Dan have noted, we had a strong third quarter performance. I feel very good about how well we managed through a weak economic environment, and I'm certainly encouraged by the signs we're seeing that the U.S. economy appears to be on a path to recovery, noting the 3.6% increase in consumer spending that was reported for the first quarter of the calendar year. We do anticipate that the economic recovery will likely be slow, and the marketplace will continue to be dynamic with intense competition going forward. Now in this difficult economic and competitive environment, I certainly believe Clorox is well positioned across retail channels, with about 90% of our brands holding number one or strong number two leadership positions. I also feel very good about our Away from Home business, particularly in acute care facilities and hospitals and our focus on the growth platform we call stopping the spread of infection. I and the team look forward to building on the track record we have established for solid annual performance. In FY '09, we grew the top line in margins and achieved double-digit earnings per share growth. With today's updated FY '10 outlook, I believe we're well on track for our top line margin and double-digit EPS growth, again, this year as well. And as Dan noted, I have confidence in our plans to deliver our top line margin and EPS growth targets for fiscal year '11. Now before I open it up for questions, I would like to comment on our plans for our Auto Care business. As we have acknowledged in the past, our Auto Care business made up of the Armor All and STP brands do not really participate in categories that put us closely with the key consumer megatrends we've been focused on for the last three years such as health and wellness and sustainability. We have drawn share over the past 52 weeks, and the business maintains strong growth and operating margins. However, growing both the top line and economic profit has been challenging. Consequently, we believe it is in the best interest of shareholders that we explore some strategic options for this business. Now to be clear, we have not made a decision. Ultimately, we may conclude the best option is to retain the business in its current configuration and operating model, and our exploration may not lead to a transaction. As we move forward, while we do not plan to provide updates, we certainly will communicate if and when a decision has been reached. And I'll now ask the operator to open the lines up for questions.

[Operator Instructions] We will take our first question from Andrew Sawyer with Goldman Sachs.

It's Mike Kelter for Andrew today. The first question was really around gross margin for next year. I was very surprised by your forecast for growth despite commodity reinflation. Maybe you could help bridge the gap, not just on the cost savings side and the commodity side, but more detail about what you're expecting in the way of pricing and trade and things like that, help get confidence around your forecast?

Sure, Mike. Let me take that question on. So the outlook, again, is an increase in our gross margins of 25 to 50 basis points. The cost savings that we've talked about should benefit our margins, call it 160 to 170 basis points. And then we'll see an offset of probably 110 to 125 basis points from higher commodities. The other factors that you cite, we actually expect pricing to be slightly positive for the full year. So even though we're taking a little rollback this year, we do have other pricing actions, primarily in the international markets to help offset that. We do expect trade that will be -- will continue to be negative in the first half but will be lower in the second half. And all of those factors, both pricing and trade will help offset the Venezuela impact. So all those, we're expecting to net into a positive. We'll also be able to cover the normal inflationary pressures that we'll see in gross margins. So net of all those factors, we would anticipate being up about 25 to 50 basis points.

And then on the pricing side, I saw Cat Litter and Green Works -- the Green Works amounts were pretty substantial. I mean, is that -- it almost smacks of desperation on the brand. Is there something that's just not working? Do you think that taking a price down this much will solve it or is it just a proposition that's just not working at this point?

So the price rollbacks on the Cleaning side, the Hard Surface Cleaning side, was relatively modest and gets it to more like a 10% premium versus competition, traditional competition from about 15% to 20%. So I wouldn't call that a rollback extreme. It was more extreme on the detergent side. That was essentially funded by a major cost reduction on the product, which actually delivers the same efficacy that allows us to reduce the cost of the formula. That one is much more substantial, more like a 30% kind of range, which essentially puts us in line with the premium detergents in that category. So we continue to be optimistic about the long-term prospects around Green Works. We think we've gotten the value which [ph] (34:07) equation right at this point, partially funded by cost savings. We're getting traction on the business. It's obviously the very early going, but we're getting more traction in the business recently than we have in some time. So we continue to be optimistic about this. This is what I would term a premium niche opportunity in detergents and a broader niche opportunity in Cleaning.

One thing, Mike, I would add on Green Works. On the detergent side, as Larry brought up, that 30% decline takes us back into, as he said, more in line with the premium side of the category. When we launched that brand, we felt we have about a 10% to 20% premium. It ended up about 50% because of all the heavy spending in the laundry detergent aisle. I think one of the other benefits of getting that pricing right is we recently gained distribution in a good segment of Wal-Mart stores with Green Works laundry detergent and started scanning product. So I think getting realistic on the pricing, even though it's still at the premium, and it has helped continue to keep our customers' interest in the brand.

And I have one last question on the divestiture, a potential divestiture on Auto. I guess it struck us when you mentioned one of the things you didn't like about it is that it didn't fit into the health, wellness and sustainability bucket. And neither does Trash Bags. And I know that scenario you thought about divesting in the past, when you have these strategic conversations, at what point do you consider something more substantial like the Trash Bag business or do you want to hold on to that for the long haul?

So we're obviously continuously assessing whether certain parts of our portfolio fit the portfolio, whether we'd better off selling or not selling. Having said that, we feel particularly good about the pipeline of innovation we have had in the past on Glad and we have going in the future on Glad. And so our ability to differentiate on Glad and command a premium price versus competition, we think is real. And we think we have a better growth prospect on Glad than we have on current Auto business.

And one thing I'd add on the Glad business, Mike, when you look at the trade-up strategy on Glad, we now have over 50% of that Trash business, which is 2/3 of the brand in the premium end of the business, with ForceFlex and with OdorShield. And those gross margins are on par with the company average. So when you look at that and you look at the fact that the Auto business is probably one of the more discretionary pieces of our portfolio, I think Trash Bags fit more into the daily staple side of our business. So when you combine the inability to see growth in that category on the Auto side and the fact that it is more discretionary, that's what leads us to looking at that piece of the portfolio first.

We will take our next question from Wendy Nicholson with Citi.

My first question is just did you say what the tax rate was going to be in the fourth quarter?

Tax rate should be in the 34% to 35% range for the fourth quarter and should average out to be about roughly 34% for the full year.

And then my bigger picture question is if we go back kind of two years ago or 18 months when raw materials were really dramatically on their way up, you guys didn't raise your prices right away, and I thought one of the big learnings that you talked about last year at the Analyst Meeting and whatnot was that next time there was an inflationary cycle for raw materials, one of the big takeaways was, hey, we dragged our feet too much, we were too worried about market share and relative pricing, and we need to act more aggressively next time around. And outside of the Green Works, the Cat Litter price rollbacks, which seem much more sort of tactical and specific to those brands. It still feels like you're dragging your feet in being proactive, certainly, on the Glad side in terms of actually taking real price increases. So I know you're expecting some in the back half of 2011. But that seemed so far away. So what's the matter or how do you think about that, and maybe leading price increases so that you protect that gross margin even more than it looks like you will?

Couple of responses. You mentioned that pricing is specific individual brands and categories, and that's absolutely correct. They're always evaluating pricing based on the circumstances of the competitive set and the growth prospects and what we got on the cost side of the equation, et cetera. Specific to the Glad, there have been some significant ups and downs in trade spending, which to some large extent, really is pricing or a component of pricing. So we have made some movements on the trade spending side that are really kind of pricing-related. And I don't want to talk to the specific pricing plans on Glad. But in the event that resin stays at current levels, I think we're prepared to take further pricing on Glad trash or other areas of the Glad portfolio relatively quickly.

But in terms of your guidance for sales growth for next year, I mean, it doesn't sound like the categories are expected to accelerate all that fast. So the 2% to 4% sales growth implies that you're going to be gaining more share than you're losing. It just strikes me that, that could be a hard objective to realize certainly in any balance right through the year.

So I think the growth is a mix of things. Obviously, we have some impact of the Venezuela situation, which impacts the results. We have some impact of the H1N1 high base going out in the current year. But net of everything, we're pretty confident that, that sales rate is achievable, given the plans we have in place, and a lots of puts and takes across the portfolio in terms of pricing, trade spending and even marketing investment, which net to that number.

I think the other thing, Wendy, we feel good about for FY '11 in terms of the top line growth is the innovation pipeline. We feel that, that pipeline is pretty robust. And as we put into the release, we're looking at, at least two points of growth coming out of innovation. So we feel good about that as well.

And we'll take our next question from Chris Ferrara from Bank of America.

I just wanted to see if we could, I guess, pull together some of your comments around the promotional environment. It sounds like you're saying the environment is tough. But when you look at the fiscal '11 outlook, I mean I know there's going to be some international pricing, but you generally don't expect more erosion. I guess, what are you seeing broadly following the 200 basis points of increased trade spending you saw this quarter? I guess, how was it trending? Is trade spending and promotion higher or about in line with what you thought this quarter? How do you feel like it's trending in the near term? Do you feel like it's easing at all? Or do you feel like the environment remains just as competitive as you might have feared it was three months ago?

So I would say that the situation remains competitive, but highly variable by category. And we've talked about kind of the hotbeds of competitive activity in the past, and that would be, certainly, the Glad business and the Clorox 2 category through the wash additives. We do expect trade spending to come down in the course of fiscal '11. Some of that will happen in the first half. Some of that will happen in the first half, but the first half will largely be at kind of the same similar kind of high rates we're experiencing in the second half of this fiscal year. And we expect it'll be significantly lower than the second half of fiscal '11. At least, that's based on our planning assumptions today.

But I guess, are you seeing any specific categories where any competitor or even private label is doing anything that would indicate that, that promotional spending would ease at all, or it's the easing of promo spending and talking about simply just an anniversarying of the increased trade that you saw over the past year?

So the trash category is definitely getting more rational than it has been over the last several quarters. So we're definitely seeing some pullback in spending. It's obviously a reflection of the increase in resin costs. And also, I think there was not a lot of good payback on that trade spending investment over the last year. So we're seeing some pull back there. I think the activity in the Clorox 2 category will probably dissipate as we start to anniversary the launch of the new Tide product and the competitive response to that. And the two categories where, I think, we have experienced the highest level of competitive trade activity, I think we'll see some of that dissipate in fiscal '11.

Finally, the Manufacturing and Logistics line, that's been pretty consistently negative for most of the quarter so I've seen it broken out. This quarter, it was zero. Can you talk about why that is and whether there is anything that would be sustainable in that line?

Chris, the reason it's flat for the third quarter is that we had some diesel favorability that's included in that number that guided to zero. We're not expecting that to repeat in the out quarters. So you'll see a return to the normal level of inflation that you see on that line.

We'll take our next question from Bill Schmitz with Deutsche Bank.

The first thing that -- the big uptick in accounts receivables towards the end of the quarter, does that mean that sales came in really strong towards the end of the quarter? And did that continue into April?

Bill, we had a number of rather large merchandising events that happened in the second half of March. So probably about half of the receivables growth that you see there was due to the merchandising events. That's just the timing on when they fell.

And then on the -- I know this is kind of ancient history now, but the loss of the private label Sandwich Bag business at Wal-Mart, when do you lap that? Because I think it's almost $40 million annualized, if you look at some of the scanner data or the all-outlet panel data.

Bill, I think we've got another two to three quarters to go before that'll be behind us.

And then we can argue with salad dressing really as a Lifestyle choice because I know it's in the Lifestyle segment. But can you just talk about -- how much of the extra promotional spending this quarter was due to the some of the slotting fees to get some of those extra flavors in there? I know it's kind of a, sort of a food-centric business?

So first of all, Hidden Valley encourages you to eat more vegetables, which is healthy. Secondly, there are some slotting fees or introductory fees, but I wouldn't call them material. I think, overall, maybe probably slightly less than a point. And the total company was driven by such fees on charcoal and Hidden Valley Ranch and a couple of other places.

Did you say what the growth margin impact was from a higher promotional spending? I know it's in that all other line when you break out the bridge for gross margin?

On the quarter, it's about a point.

And then just lastly, I know you report total debt-to-EBITDA, but your cash balance is building pretty dramatically. And so, I think, net debt-to-EBITDA was closer to two, sort of two, one call it. I mean why wouldn't you do more than just offset the option dilution with the share repurchase?

Well, Bill, we may. It's still under consideration. We certainly have a lot of flexibility to either repurchase chairs or if we have a bolt-on acquisition. So we're certainly evaluating that now.

Just curiously, why do you use total debt-to-EBITDA instead of net-debt-EBITDA. That was the way the indentures are written.

We've reported both metrics. We generally use the gross number. It's certainly a little more conservative. And the cash build-out that you cited is primarily in in our International businesses, and that has to do more with the timing of cash repatriations during the year.

We'll take our next question from Lauren Lieberman with Barclays Capital.

Just a quick question first on an old and boring topic at this point but Venezuela. Can you break out how much of what you saw from Venezuela in your numbers this quarter? Could you mention the gross margin impact that was related to sort of the mismatch in the value of inventory versus the rate of which you're selling them? Because now it's gotten to a point where it feels like most of your peer group companies, for better or worse, are excluding that portion of Venezuela expense or charges, however, you want to phrase it from their reported numbers. And then I'm trying to find a way to look at everyone on an apples-to-apples basis.

No, our numbers are, obviously, all inclusive of the impact from Venezuela. Just to kind of run through the Q3 impacts on Venezuela, the top line was impacted about 2.3 percentage points. So that was, call it, sales impact. It was a little bit north of $30 million on the quarter. The pretax impact on the quarter was about $16 million or $0.07 EPS. As we look at the full year impact in fiscal '10, we would expect that the back half, the second half impact on the top line will be a little bit more than 2%, which will average out to be a little more than 1% on the top line for the full fiscal year. We're anticipating that the pretax impact of Venezuela in the back half will be in the negative range of $30 million to $35 million. And so we saw about $16 million of that in the third quarter, so we expect roughly the same amount in the fourth quarter. Now in Q3 and the second half, most of the impact of Venezuela, particularly on the top line, is being offset by other favorable currency movements plus pricing actions that we're taking. So we've included it in total there. In the first half of the fiscal, just to remind everybody, we took about $26 million or so of pretax charges in the first half. That was related to both cash conversion, the transaction losses, as well as the balance sheet remeasurement that we took. So that's what's embedded in our numbers. I can't help you too much in trying to compare how everybody else is doing, that's the full impact. And as we look at next year, we'll have a continuing impact from Venezuela in the first half. We would anticipate in the first half of fiscal '11 that we'll continue to see more than about a 2% impact on the top line, which will translate to a little bit more than 1%. We're anticipating right now a $25 million to $30 million pretax profit impact in the first half of fiscal '11. Now I'll say, we won't repeat the $26 million in transaction losses and balance sheet remeasurement that we saw in the first half of fiscal '10. So on a year-over-year basis, it should be relatively flat. So I hope that helps.

What you saw this quarter, is any of this -- the balance sheet remeasurement is a one-time, is a charge, but then it takes time for the inventory to flow through the P&L. So as inventory purchased at the prior exchange rate, has that been worked through at this point? Was that in this quarter or was that all taken care of previously?

A lot of that was taken care of in Q2. So whatever residual was there has bled through in Q3.

And then the other just final piece was -- and my memory may just be wrong, but was the total number for Venezuela in the second half of this year the pretax number. That's higher than what you previously said. I thought it was $0.09 for the second half originally.

Lauren, it is a little higher. And basically, that's because the parallel rate continues to deteriorate in Venezuela. So when we provided last quarter's -- on last quarter's earnings call, when we talked about the second half outlook, we had an estimate of the parallel rate being in sort of the 6.7, 6.8 range. Today, as we sit here, we're slightly ahead of 7x. So we have seen some further deterioration in the currency.

And then the other piece I wanted to talk about for a minute was, what product launch activity is still to come in the fourth quarter? Because there was a mention in the release about inventory build ahead of launches, and so it looks like I'm guessing advertising spending may be up significantly in Q4 versus the dollar level in the first nine months of the year. So just needed a refresher on what may still be left for Q4 launches?

Q4, what you'll see is basically a continuation of what we've already launched. Nothing significant that will be introduced in Q4. So we're talking continuation of the ForceFlex improvement on Glad trash, the conversion of litter pails to film, the improved charcoal briquet, the Burt's items, Acne and Toothpaste, and the new flavors in Hidden Valley Ranch would be the major ones.

Another piece, Lauren, of the inventory build was we've gotten off to a fast start on Kingsford for the season. And there is some -- as Dan pointed out, we had some merchandising events in the second half of March on Kingsford we didn't have last year. And so that's resulted in some of the inventory build as we get ready for the season.

We'll take our next question from Ali Dibadj with Bernstein. Ali Dibadj - Sanford C. Bernstein & Co., Inc.: I'm taking a little bit of a step-back, and we spent a lot of time over the past several quarters, past few years, really hearing about how Clorox's non-commoditized categories, brand is very important, you're number one and, for sure, many of your categories have great shares, et cetera. But when you get to a quarter like this, and frankly, a quarter like the past few ones and what we're contemplating going forward as well. You see price and trade spend becoming more and more how it seems like consumers are deciding in your categories until you need to do something about it. You need to monitor price gaps even more aggressively. It feels like you can't rely as much on brand. I'm just trying to understand whether there's anything in your thinking that has changed, given what's happened on the past few quarters as you look forward, given that dynamic?

So I think, overall, I would say that we're obviously suffering a bit from a very tough economy, which is why we have relatively flat categories in the U.S. compared to categories that were growing 3% to 4% a couple of years ago. And we're kind of slogging it out with the consumer and with the competitive set. Having said that, obviously, it varies a lot by category. But we have some extraordinary examples of brand power and the top two, I would say, are Hidden Valley Ranch, which has a very, very significant premium and has been growing share for, I think, about three to four years now, straight. Kingsford charcoal also has a very substantial premium versus competition. And through innovation and great marketing, we've essentially been accelerating that business over the last several years. So if there is a lot across the business, on the Glad business, where I think we have kind of the most commoditization, so to speak, we think we've had good success where we've been able to differentiate, and that's been on the premium trash side. Obviously, less success on the base trash side and parts of the portfolio like the food bags. They are less differentiated. But I'd say, overall, the effect that we have essentially held or slightly increased our all-outlet share over the last year speaks to the power of our brands. And while we have done some increased trade spending and some adjustments, I think the net impact of slightly growing share in a very tough economic situation is a testament to the power of our brands.

I think the other thing I would add, Ali, on this is that, I think in this recession, everyone has gotten sharper on price points. And I think, based on the brand analytics, we do. And looking at our pricing elasticities, I think we know that when we operate typically in a 25% to 35% premium versus retailer brands, we can maintain or build a share. And I think we're starting to see those gaps tighten up. And in fact, if you look at the track channel data, and I think this replicates what you just published, if you look at the track channel data, which now is only about 35% of our volume, but even in the track channel data where private label is the most developed product, when we look at the 52-week trends there, at 52 weeks, they were going three and a half and we were declining two and a half to the latest four-week trend, where they're declining two and a half and we're declining about a half a point. I think it evidences the fact that we're sharpening those price points up. We're still commanding significant premiums. And as Larry pointed out, we're gaining all-outlet share, and we're doing it with our gross margins getting back into historical high ranges. So I think we're all about protecting and gaining share, and I think we're doing a pretty good job of it. Ali Dibadj - Sanford C. Bernstein & Co., Inc.: How do you think about that as you go forward? And commodities are going up, obviously, and the plan is to take pricing. I mean is there a potential? Are you starting to see anything, the gap creep up a little bit or creep wider a little bit and trade down starting up again?

Well, I think we're going to, obviously, be very mindful of that. I think the other thing we're focused on and I think you hear this from a lot of our peer companies, too, as the pace of innovation is picking up, and I think we feel very good about our innovation pipeline for FY '11. So I think you'll see us continuing to really focus on this 3D approach we have talked about, desire, decide and delight, on all our core businesses, keeping price gaps in certainly front and center in our attention span, but the innovation pipeline is critical to this as well. Ali Dibadj - Sanford C. Bernstein & Co., Inc.: I guess innovation is my last question, actually quite fittingly. You mentioned that fiscal year '11, 2% to 4% growth, including about 2% of innovation. And I totally understand you can't -- I'd love for you to talk about innovation that you are going launch, but I'm sure you can't in detail. But I guess I'm trying to understand the historical precedence for this. So I thought every year, it's roughly 2%. And this year, I don't think it happened, although please tell me if that's not correct. It would be helpful. I don't know if it happened a year before, so I'm just trying to get a sense of how much confidence to put in this 2% from innovation within the context of 2% to 4% growth and this pricing that you're describing?

We have actually been very consistent in delivering about between two and four points in innovation this year, last year, and we are projecting essentially the same next year. And the way we track this is, this is innovation both on the form of new items, as well as improvements on existing brands that deliver incremental sales. So when we improve Charcoal, we don't include all of charcoal volume but the incremental volume we get based on the innovation. And so we're pretty confident that we can deliver at historical rates in innovation as we have for a number of years. Ali Dibadj - Sanford C. Bernstein & Co., Inc.: Where is the institutional position of like Caltech and some of that growth? Just what segment?

It's in the Cleaning segment, and we're seeing good growth in the Away From Home business, particularly kind of the disinfecting portion of that business. Although it's still a relatively small business, but we're seeing pretty significant growth in a small base.

We'll take our next question from Doug Lane with Jefferies & Company. Douglas Lane - Jefferies & Company, Inc.: I know Caltech is relatively small, but can you give us an idea of what it contributed to sales in the quarter?

I think the impact was probably around $3 million or so. Douglas Lane - Jefferies & Company, Inc.: And then on the input costs, two questions. One, where did gross margins come in vis-à-vis budgets? Did you see a lot of variability throughout the quarter? And secondly, what are the top, maybe three or four, inputs that are exhibiting the most pressure these days?

Let me take the last question first. I mean, obviously, it's resin that we've seen the most impact during the quarter. We saw a number of price increases taken into market for various reasons, so most of the pressure was there. And as it relates to what we are forecasting, obviously, we did come in higher on commodity costs than we had anticipated in the quarter. Douglas Lane - Jefferies & Company, Inc.: And anything beyond resins? I know you have a variety of input costs that are going all different directions. But maybe just two or three others?

Doug, I think, sort of across the board, we're seeing a little bit kind of everywhere. Pine oil continues to go up. We're seeing chlor-alkali starting to come off of its floor and starting to tick up. We also have the input costs for Charcoal business, which is wood waste that we're now having to pay for when we used to get that input for basically free. As I'd say just generally across the board, we're starting to see some modest reinflation. Douglas Lane - Jefferies & Company, Inc.: And then lastly, it's the first time we've talked about Burt's Bees being a significant contributor here, contributor to growth. Can you put a little bit more color on it? Was it mostly the new innovation? Or is there something else going on at Burt's Bees?

We're seeing solid growth in the U.S. business driven in part by the innovation. But obviously, the natural personal care category seemed to grow at a faster pace than traditional personal care. We're also seeing the impact of expansions in international markets. So both of those are going out at the same time.

We'll take our next question from Alice Longley, Buckingham Research.

I think you said the Bleach category was down in the quarter. Is that right? And you said that the color-safe bleach together with the chlorinated bleach, or is it just one or the other? And could you comment on that? I think the Bleach category was growing.

The hypochlorite bleach portion of the category was down, and that's where we suffered some volume losses, chiefly driven by that overall category decline. On the Clorox 2 business or the Color-Safe Through-The-Wash Additive business, we continue to see pretty strong increases in that category, driven by the new competition and the response of new competition, so quite different performance in the subcategories of Laundry.

Wasn't the hydrochloride bleach category growing because people were using it increasingly for cleaning floors? I mean I'm just -- why is it suddenly down?

So it's actually not suddenly down. It hasn't been a healthy category for some time, a little bit faster decline in this quarter than previous quarters. There is a significant portion of our Bleach business that's used for disinfecting chores. We estimate it's about 30%. It's been about that rate of usage for quite a long time. That's not a new phenomenon.

And then in the Lifestyle group where your sales were up 5%, volume, up 8%. Are you expecting that kind of growth, especially the 8% volume? Do you think that, that might continue through fiscal '11?

So we've got some very strong performing businesses in that business segment. And Brita continues to generally be on a very good trend based on sustainability concerns and concern about bottled water waste. The Food business continues to be a very good performer for us, and we expected the results out of Burt's Bees. So I'd be pretty optimistic about our performance on Lifestyle in fiscal '11.

So that kind of maybe mid- to high-single digit volume growth, is that in your budget for fiscal '11?

Alice, I don't really want to pin down this point to a specific range, except to say that it's probably going to be one of our faster-growing segments next year.

Why was the price mix trade dealing negative three there? You wouldn't think you need it very much in that segment. I think you've said it was slightly negative. But why was it negative three? Where was it negative three?

Alice, the bulk of that for that quarter was really behind innovation. I think we already noted that we've expanded the Hidden Valley line on the Food business. And in addition, we've got two pretty substantial launches going on at Burt's right now, behind the Acne and Oral Care line. So both of those got a significant amount of introductory marketing.

So it's sort of slotting fees, basically?

I wouldn't it describe as slotting as much as I've described it as just marketing support.

And is Burt's Bee still getting expanded distribution here in the U.S. into the channels?

There is new channel distribution going on that has also increased shelving in existing channels, particularly in the mass and supermarket trade. So yes, you're seeing see a combination of some new channel development, but also more commitment to the sections in store that's currently trading in that category. So we're seeing expanded shelf sets.

We'll take our next question from Leigh Ferst with Dudack Research Group.

I wanted to ask you about Green Works and how you have adjusted your plans for that brand. It sounded like such a great idea when you launched it, but maybe the timing wasn't quite right. How's the strategy and the plans change for that brand?

So Green Works set off to a very fast start, and it's really on the Cleaning side, with regard to major success. It did take a pretty significant hit in the economy headed downturn. And so our recent actions are probably focused on the area of pricing and reducing our premiums versus the alternatives. We've done that in both the cleaning products and the hard surface cleaners. And so we're now about a 10% premium versus traditional cleaners versus a 15% to 20% premium previously. And we have dramatically reduced the price on our detergent products to bring that in line with the premium detergents in the category.

And in terms of market share, can you share with us what your goals are?

I would say we are still the leading natural cleaners. Certainly, in that hard surface cleaner, we are the leading natural cleaner, have been quite for quite some time and elected to maintain a significant share of that category.

Yes, right now, we're in the low 40s in terms of share, which is about double what our closest competitor has.

We'll take our next question from Ed Kelly with Crédit Suisse. Edward Kelly - Crédit Suisse First Boston, Inc.: My question is on Homecare. We've had a bit of a weak flu season after getting off to a fairly strong start. And I've heard some retailers talk about having too much flu-related inventory, not you specifically but generally. Which gets me to my question, how do you feel about your inventories in the channel in Homecare? And then how do we think about this business over the next few quarters? Is this a business that might actually be down modestly the next few quarters?

So we saw some terrific gains on our Clorox Wipes business in the first half of the year. We anticipated, quite frankly, less robust growth in the third quarter, and we actually saw double-digit increases. So actually the strength of the business was stronger in the third quarter than we anticipated, because we did anticipate a bit of a trough. We do a lot of analytics on inventories and consumption, and we're basically seeing that our sales are tracking with the consumption. And our best guess is what we did is essentially drive new household usage during the H1N1, and we're seeing some of the benefit and consumption among those new households. As we go forward, we start indexing off a very high basis that were driven by the H1N1 issues. And so while we'll see very good performance on Wipes indexing off, the year-ago periods will be difficult. And so we probably are likely to see some declines on our Wipes business going into the future quarters.

One of the encouraging things we've seen on that business, as Larry noted, we had significant growth in the third quarter, better than we expected. When we looked at some of our larger retailers data and our own data, it looks like about 75% of the H1N1 spike was driven by new users coming into the category. So I think we're certainly speculating that they'll continue that regimen as they go forward. But that was even higher than we thought. Clearly, H1N1 had an impact on people's habits.

The next question will come from Jason Gere with RBC Capital Markets.

One, I think Larry, we were talking back in January about the planogram resets for January through May, and I think at that time, you had some guesstimates about some of the increases. I was just wondering if you could talk about what changed maybe in the last couple of months. It should be pretty concrete by now in terms of distribution gains and how that gives you confidence in terms of volume growth being in that really low- to mid-single digit going forward.

Probably the most material change we've seen is in the Glad category at Wal-Mart. There's a simplified shelf set, and I think it's much more favorably positioned toward Glad and the other products, and so I think we're benefiting from that. Broadscale, I don't think we saw the kind of assortment changes than we anticipated across the industry. So the weather, there has been some reduction at some retail accounts. I don't think it's been dramatic. So we continue to fare well based on the fact that we are typically the number one brands in these categories. So we've hung on to distribution or done some incremental distribution. But we haven't seen the dramatic simplification that now may have been anticipated six months ago.

And then just the second question, and before you were talking, obviously, we're hearing in the industry the pace of innovation creeping up. So can you just talk about -- and obviously the topic this whole earnings season has been about increased promotional spending to drive volumes. So can we just talk about that incremental investment where the balance between trade spending and advertising going forward because, obviously, both are necessary to drive volumes? But how do you make those decisions and what your kind of budgeting going forward in select categories?

So these days, we have a lot of good data on advertising ROIs. And we obviously look at our trade spending pretty intently by category, by customer, to figure out what kind of return we're going to get. So we've seen a tick up in our trade spending. We've kept our advertising essentially at the same kind of 9% to 10% rate for a number of years now. We think that's about the right target. It might vary by quarter, but it's probably about the right target. So we feel good about the mix. So ideally, overtime, the trade spending component would come down a bit. As we've talked about, some of that may be replaced by pricing actions that we take in the market. But expect the trend spending to come down a bit and advertising to be essentially maintained with historical numbers.

The 2 to 4 sales for next year, so that doesn't include a price on Glad but just a little bit less trade promotion on Glad in the back half of the year. That's the assumption right now.

Sorry, I don't think we want to talk about our specific pricing actions or what specifically has baked in because we're not ready to go public with that information.

With that, there is pricing in our International businesses and there is some level of pricing in the Domestic business.

We will take our final question from Karen Lamark with Federated Investors.

I've got a couple of questions about your contract manufacturing. Can you remind us, first of all, what percentage you're up to?

Karen, it's about 15% to 20% of our domestic manufacturing.

And who owns the inventory? Do you sort of contract for a certain amount?

Our contracts vary. In some cases, we own raw materials all the way through. In other cases, we pick it up when finished goods are shipped in. So it just depends on the contract.

And then do you do any factoring for your contract manufacturers?

No.

This will conclude today's question-and-answer session. Mr. Knauss, I will turn the conference back to you for any closing comments.

I'd just like to thank everyone for participating in the call. We look forward to speaking with you again in August. And obviously, by then, we'll share our full year, fiscal year '10 results, and then we'll revisit the FY '11 plans and targets with you then. Thanks, everyone.

Ladies and gentlemen, this will conclude today's conference call. We thank you for your participation.