Wendy Nicholson - Citigroup Research Olivia Tong - Bank of America-Merrill Lynch Bill Schmitz - Deutsche Bank Ali Dibadj - Sanford C. Bernstein Chris Ferrara - Wells Fargo Securities John Faucher - JPMorgan Javier Escalante - Consumer Edge Research Michael Steib - Credit Suisse Connie Maneaty - BMO Capital Markets Lauren Lieberman - Barclays Capital

[Call Starts Abruptly] Clorox Company's Second Quarter Fiscal Year 2014 Earnings Release Conference Call. At this time, all participants are in a listen-only mode. At the conclusion of our prepared remarks, we will conduct a question-and-answer session. (Operator Instructions) As a reminder, today's conference is being recorded. I would now like to introduce your host for today's conference, Mr. Steve Austenfeld, Vice President of Investor Relations for The Clorox Company. Mr. Austenfeld, please go ahead sir.

Great, thank you. Welcome everyone, and thank you for joining Clorox's second quarter conference call. On the call with me today are Don Knauss, Clorox's Chairman and CEO and Steve Robb, our Chief Financial Officer. We're broadcasting this call over the Internet and a replay of the call will be available for seven days at our website, thecloroxcompany.com. Let me remind you that on today's call, we’ll refer to certain non-GAAP financial measures including but not limited to, free cash flow, EBIT margin, debt-to-EBITDA and economic profit. Management believes that providing insights on these measures enables investors to better understand and analyze our ongoing results of operations. Reconciliation with the most directly comparable financial measures determined in accordance with GAAP can be found in today’s press release, this webcast's prepared remarks or supplemental information available in the Financial Results area of our website, as well as in our filings with the SEC. In particular, it may be helpful to refer to tables located at the end of today’s earnings release. Please recognize that today’s discussion contains forward-looking statements. Actual results or outcomes could differ materially from management's expectations and plans. Please review our most recent 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, I'll now cover highlights of our second quarter business performance by segment. Steve will then address our financial results and our updated outlook for fiscal year ’14. Finally, Don will close with his perspective on the business, followed by Q&A. In the second quarter, volume was up a little more than 1% on top of the strong year ago period…

Thanks Steve and welcome everyone. As Steve mentioned we grew sales on top of a challenging comparison to the year ago quarter and sales increased 9% in the current quarter, scooting the impact of foreign currencies sales were up 2.3%. Turning to diluted earnings per share from continuing operations for the quarter, the 5% decline compares to a strong 18% growth in the year ago period, which included a gain of $0.03 from the sale lease back of our Oakland headquarters building. Unfavorable foreign currencies also impacted the current quarter results by about $0.05. With that, I’ll take you through the details of our second quarter financial results and then discuss our outlook for fiscal ’14. In the second quarter, we grew sales about 0.5 percentage point reflecting more than a point of volume growth and about 2 points of pricing benefit. These factors were partially offset by about 2 points of foreign currency declines across multiple countries. Gross margin for the current quarter came in at 41.9%, a decline of 60 basis points. For the quarter we delivered 20 million in cost savings or 150 basis points and about 70 basis points from pricing primarily in international markets. These benefits were offset by nearly 140 basis points of commodity cost primarily from resin, as well as more than 120 basis points of higher manufacturing and logistics costs due to continued high inflation in international markets particularly Venezuela and Argentina. Selling and administrative expense for the second quarter was 15% of sales, a slight improvement versus year ago quarter, primarily driven by lower employee incentive compensation, cost savings and lapping infrastructure-related investments. These results were partially offset by the impact of inflation in international markets and one-time costs associated with the transition to new IT service providers. Advertising spending for…

Okay, thank you, Steve and hello to everyone on the call. So as I reflect on the quarter, I do think we performed well growing volume and sales on top of a very high year ago base that both Steve’s referenced. And that year ago base of course was really driven by the launch of concentrated bleach and strong innovation pipeline and a double-digit increase in charcoal volume that we had. Importantly, I think it’s good to note that we realized volume gains in 6 out of the 9 U.S. business units and for the total U.S. volume was up 1% on top of very strong results a year ago. So I’m particularly pleased with this quarter’s top-line performance in International, which delivered 2% volume growth and 1% sales growth despite the material foreign currency headwinds we faced. In fact as Steve mentioned on a currency neutral basis, International sales grew 9% in the quarter. Interestingly, the biggest driver of this was Latin America which delivered 4% sales growth overall, but when you back out its 11% FX hit. LATAM for us delivered 15% sales growth on a currency neutral basis, very strong growth. And as mentioned, we have updated our outlook for foreign currency declines and sluggish category growth with sales now expected to grow about 1% to 2% for the year or about 3% to 4% on a currency neutral basis. So as discussed, commodity cost increases particularly in resin and increased manufacturing and logistics cost driven by inflation primarily in international market continue to put pressure on Q2 margins. Now at the same time, we continue to drive efficiencies across the Company and really do remain on-track to achieve our cost savings targets for the fiscal year. We also had success in taking price in some international…

and:

Thank you. (Operator Instructions) And we’ll go first to Wendy Nicholson with Citi Research.

Hi, I have two questions, if I may. First on, we’ve all heard from Church & Dwight this morning that they’re launching a new OxiClean product sort of directly head-to-head against bleach sort of a bleach alterative. Number one, is that factored into your plans? Number two, do you think you’ll lose shelf space to them? Does that affect your thinking at all? And then just secondarily, Steve, I wanted to go back to the comment you made that manufacturing and logistics cost your gross margin 120 basis points primarily because of the international markets and that just seems like a very large impact on your profitability given how relatively small Venezuela and Argentina are. So I guess the question is, is there anything more you can do to mitigate the margin impact of the devaluation because it just seems like a big number to me? Thanks. Citigroup Research: Hi, I have two questions, if I may. First on, we’ve all heard from Church & Dwight this morning that they’re launching a new OxiClean product sort of directly head-to-head against bleach sort of a bleach alterative. Number one, is that factored into your plans? Number two, do you think you’ll lose shelf space to them? Does that affect your thinking at all? And then just secondarily, Steve, I wanted to go back to the comment you made that manufacturing and logistics cost your gross margin 120 basis points primarily because of the international markets and that just seems like a very large impact on your profitability given how relatively small Venezuela and Argentina are. So I guess the question is, is there anything more you can do to mitigate the margin impact of the devaluation because it just seems like a big number to me? Thanks.

Yes, Wendy, thanks. Don, here. Let me take the first half of the question on bleach and Oxi and then I’ll turn it to Steve. I think in general we feel very good about our bleach plants for the second half, it didn’t anticipate another new product from Church & Dwight but I think the program we’ve out in place did anticipate significant competitive spending. So for example our trade spending on Laundry is definitely up in the second half of the year, the innovation pipeline as you know Wendy with smart seeking bleach which we think has helped offset some of the claims around bleach being harmful to a wider range of clothing options, it helps us also with a value launch of Fraganzia and also a value launch on our Tupac bleach. We think we’ve got a lot of innovation out there and stronger trade support, so we think we’re -- and as I noted in January we have already starting to see some share gain for the first time in 10 months, so we feel very good about the plans we have in place and think we can take on the competitive issue.

So Wendy, this is Steve, let me provide a perspective on the manufacturing and logistics cost, so as you noted, it increased about 120 basis points, a lot of this is coming from high inflation markets of Venezuela, Argentina and other Latin American countries. We are obviously taking steps through the cost savings programs to mitigate it, for perspective the 120 basis points represents about $16 million and the total cost savings in cost of goods sold was about 20 million in the quarter and if fact if you look at all of the lines of the P&L, the total cost savings was closer to 30 million. So we think the combination of leaning into the cost savings programs, taking pricing where we can and the belief that over the very long-term both in Venezuela and Argentina we’ll be able to get pricing, we’d be able to mitigate that, but certainly the gross margins this fiscal year will be challenged because we’re not likely to recover all of the commodity costs and inflationary pressures we’re seeing but we have got a pretty good track-record over the long-term move offsetting these costs with pricing and cost savings.

Okay. And then just to clarify on the bleach thing, Don, you’re not expecting to lose any shelf space this year over the next six months in bleach, is that right? Citigroup Research: Okay. And then just to clarify on the bleach thing, Don, you’re not expecting to lose any shelf space this year over the next six months in bleach, is that right?

Yes, we don’t anticipate that Wendy because of the innovation behind the Tupac, the new Fraganzia line items and also some new scents on king size we don’t anticipate that.

Terrific. Okay, thank you so much. Citigroup Research: Terrific. Okay, thank you so much.

Thanks Wendy.

And we’ll take our next question from Olivia Tom with Bank of America-Merrill Lynch.

Thank you. Wanted to talk a little bit about promotion, because that continues to be a big topic for both you and your peers, and I’m just wondering how do you think all this plays out because it doesn’t seem like you’re going to take your foot of the pedal, nor are any of your competitors, so then it’s just, everyone going to operate at a new lower normal, or how do you think that plays out? And then how is the retail reaction been so far to smart bleach obviously you just shipped so there’s no consumer reaction yet, but can you remind us how that’s going to be merchandized is it a trade up for current bleach users, is it a stain fighter, so potentially it can go against this new OxiClean product and essentially where do you expect that share to come from? Thank you. Bank of America: Thank you. Wanted to talk a little bit about promotion, because that continues to be a big topic for both you and your peers, and I’m just wondering how do you think all this plays out because it doesn’t seem like you’re going to take your foot of the pedal, nor are any of your competitors, so then it’s just, everyone going to operate at a new lower normal, or how do you think that plays out? And then how is the retail reaction been so far to smart bleach obviously you just shipped so there’s no consumer reaction yet, but can you remind us how that’s going to be merchandized is it a trade up for current bleach users, is it a stain fighter, so potentially it can go against this new OxiClean product and essentially where do you expect that share to come from? Thank you.

Thank you. Wanted to talk a little bit about promotion, because that continues to be a big topic for both you and your peers, and I’m just wondering how do you think all this plays out because it doesn’t seem like you’re going to take your foot of the pedal, nor are any of your competitors, so then it’s just, everyone going to operate at a new lower normal, or how do you think that plays out? And then how is the retail reaction been so far to smart bleach obviously you just shipped so there’s no consumer reaction yet, but can you remind us how that’s going to be merchandized is it a trade up for current bleach users, is it a stain fighter, so potentially it can go against this new OxiClean product and essentially where do you expect that share to come from? Thank you.

Olivia, let me take the last part of your question on smart seeking bleach, we priced it at line pricing to our regular bleach so that we could get, cold merchandizing together. We think it’s going to expand use education for bleach, that’s what we think particularly among millennials where they don’t typically wear just pure white clothing, so we think it’s an expansion of the use education for bleach and we expect it to be merchandized and shelved along with regular bleach and as I’ve said that’s why we priced it on a line pricing basis so we could get, cold merchandizing. Because we would expect people to potentially buy both bleaches, one we’re seeing more and more usage of regular bleach in cleaning around the home, particularly during flu season and obviously smart seeking bleach more used ideally in the laundry room. Now as far as promotion goes, as you say everybody is amping up promotional spending, our spending in the first half of the year was essentially flat on trade spending, we are seeing as I noted a ramp-up in the second half particularly between behind those brands that have challenged from a share standpoint, particularly Laundry, Home Care, Litter, and Glad, so that’s where you’re going to primarily see the increases. Most of our increases are behind innovation spending except in the case of bleach where we’re getting one incremental event basically as we get back into the regular merchandizing calendar, so I don’t know if it’s a new normal, I think everybody is obviously trying to, from a retail standpoint, trying to generate traffic, I think they’re using number one brands to do that which bodes well for us. I’ve met with about 15 retailers three weeks ago at the FMI Midwinter Conference in Arizona, and I think the biggest issue, all of them basically talked about was getting traffic back into their stores. So I think you’re going to continue to see aggressive activity on everybody’s part to help get that traffic but again, number one brands are really what’s in their forefront in their mind to get the traffic private label, focusing on private label is not getting traffic in the stores and they recognize that.

Well the only thing I’d add is that, we’ve seen this before they, you tend to go in cycles with light or heavy promotional activity and it’s particularly heeded right now to your point but as the retailers try to lap this going forward and with their quest for same-store sales growth eventually they’re going to get back to more call it rational pricing it had some degree of rationality in the category so making it growth again.

Thanks and if I could just call up on one thing, in your prepared comments you talked about mix shift is a larger packs and I remember a couple of years back that was an issue but more recently I thought that people had switched to smaller packs maybe not willing to go as far to the stores with the larger packs, is that a shift back or is this just kind of ebbs and flows. Bank of America: Thanks and if I could just call up on one thing, in your prepared comments you talked about mix shift is a larger packs and I remember a couple of years back that was an issue but more recently I thought that people had switched to smaller packs maybe not willing to go as far to the stores with the larger packs, is that a shift back or is this just kind of ebbs and flows.

Thanks and if I could just call up on one thing, in your prepared comments you talked about mix shift is a larger packs and I remember a couple of years back that was an issue but more recently I thought that people had switched to smaller packs maybe not willing to go as far to the stores with the larger packs, is that a shift back or is this just kind of ebbs and flows.

This is Steve. I think it just comes as ebbs and flows, if you look at the fiscal year-to-date margin the impact of mix has been fairly benign from the first half of this fiscal year. But again, over the long-term I think as consumers have more money they tend to shift up to larger more value-oriented sizes which is one of the reasons our cost savings programs look at trying to take cost out of the system to try to mitigate that, but not a big issue for this fiscal year in terms of the first half and ongoing though I think it’s going to be a trend you’ll continue to see.

Got it. Thank you very much. Bank of America: Got it. Thank you very much.

Got it. Thank you very much.

And we’ll go next to Bill Schmitz with Deutsche Bank.

Hi. Can you just give us a little bit more color on what’s going on in Wipes because, I know it’s not the bulk of the sales but the scanner data looked a lot worse than the growth you reported. So, I know it’s obviously the Costco business, was there anything we should keep in mind kind of as we model the lap for next year? Deutsche Bank: Hi. Can you just give us a little bit more color on what’s going on in Wipes because, I know it’s not the bulk of the sales but the scanner data looked a lot worse than the growth you reported. So, I know it’s obviously the Costco business, was there anything we should keep in mind kind of as we model the lap for next year?

I think Bill, on Wipes. I think you’ll start to see the share losses that we’ve sustained reserve themselves out in the fourth quarter as we saw a lot of private label activity in some of our larger customers that started last April. So, you’ll start to lap that. I think the other thing that you’ll see is obviously the new innovation from us behind glass and tub and shower wipes is helping. And I think what I’m hearing from retailers as well as they start to lap the private label push particularly some of the largest retailers we have. They’re hungry for growth because they’re already starting to see the category slow. If you look at -- this is the category that’s been growing in mid to high single-digits. If you look at the last quarter, the category actually declined two tenths of a point and if you look at January it declined 3.2 points. So, I think people are finally recognizing you can’t grow this category if you have got a 50 share brand setting on the sidelines. So, I think you’re going to see through our innovation and also increased merchandising focus in the, not only this quarter but the fourth quarter we’ll start to see those share declines reserve and I think you’ll start to see a little bit more robust category going forward.

Got you. But it grew in the quarter, right? So, was there difference maybe with… Deutsche Bank: Got you. But it grew in the quarter, right? So, was there difference maybe with…

They grew substantially in the quarter because of as you said, we have a strong Costco business, club business which wasn’t reflected in those numbers and also the professional side of our wipes business grew substantially as well.

Thanks. And then is there any more activity on sort of professional products acquisition front. Because it seems like we hit a little bit of a low and that was obviously a huge priority and I know it’s still a very fragmented business. So, are you still in kind of integration phase before you kind of look for new properties to add in or is it just lack of available properties right now? Deutsche Bank: Thanks. And then is there any more activity on sort of professional products acquisition front. Because it seems like we hit a little bit of a low and that was obviously a huge priority and I know it’s still a very fragmented business. So, are you still in kind of integration phase before you kind of look for new properties to add in or is it just lack of available properties right now?

We have pretty robust pipeline of targets and companies that we’re interested in again keep in mind many of these are smaller bolt-on acquisitions that are held by families and others and we’re going to continue to work the pipeline we haven’t had anything as you say in the last year or so after we completed AppleCare and Health Link. But we have money to spend. We’re actively looking for deals and we think over the next couple of years we ought to be able to get some more bolt-on acquisitions but it takes time to work these.

Bill I think just to help and give you all some perspective on that business and the help of that business fiscal year-to-date that recall that at the Analyst Day we walked about that part of the business growing 10% to 15% annually. That business through the first half of the fiscal is at the upper-end of that range lapping over 50% growth in the year ago half. So, that business organically is really coming on strong and continues to be a real growth driver.

Okay. Thank you so much. Deutsche Bank: Okay. Thank you so much.

Okay. Thanks Bill.

And we’ll take our next question from Ali Dibadj with Bernstein.

Hi guys. Just a follow-up again on the M&A piece, so it’s professional is still the number one priority in terms of acquisitions. So that you don’t have that much more interest in some of these OTC properties that are coming on the market or the healthcare business for Kimberly or anything like that. It’s still these kind of smaller roll up plays in professionals, is that a fair assessment? Sanford C. Bernstein: Hi guys. Just a follow-up again on the M&A piece, so it’s professional is still the number one priority in terms of acquisitions. So that you don’t have that much more interest in some of these OTC properties that are coming on the market or the healthcare business for Kimberly or anything like that. It’s still these kind of smaller roll up plays in professionals, is that a fair assessment?

Yes Ali. I think that’s a very fair assessment. What we’ve said to-date is stopping the spread of infections in the professional space with these bolt-on acquisitions that’s center of play for us. We’re also open to looking at bolt-on acquisitions in core CPG brands where we think we can add value, things like Soy Vay and other brands and that continues to be the primary focus for us. These larger acquisitions they tend to have a lot of happy sellers and less happy buyers in our experience, so never say never if there is a good deal that comes along but at this point we think bolt-ons in the spaces that we’ve identified are right.

Okay. That’s helpful. And then on this trade spends. I am coming at a sense of how much more it will be in the back half of the year and then perhaps even ongoing. The helpful gross margin driver chart that you showed over the past couple of years, the price changes have been 100 basis points plus and very much over, much higher than the market movement or the commodities number they have and now they’ve dropped down to kind of a 75 or 70 or 80 basis point level. And again from your discussion it sounds like a lot of that is trade spend and I’m just trying to figure out as you go forward how much more trade spend, how much less maybe price change should we expect in this gross margin chart as we look forward given the competitive intensity you’re feeling and the retailer pressure you’re feeling? Sanford C. Bernstein: Okay. That’s helpful. And then on this trade spends. I am coming at a sense of how much more it will be in the back half of the year and then perhaps even ongoing. The helpful gross margin driver chart that you showed over the past couple of years, the price changes have been 100 basis points plus and very much over, much higher than the market movement or the commodities number they have and now they’ve dropped down to kind of a 75 or 70 or 80 basis point level. And again from your discussion it sounds like a lot of that is trade spend and I’m just trying to figure out as you go forward how much more trade spend, how much less maybe price change should we expect in this gross margin chart as we look forward given the competitive intensity you’re feeling and the retailer pressure you’re feeling?

Yes, you got a couple of questions embedded in there. Let me say the second half trade spending will be higher than what we saw in the year ago period. In part because what we’re allocating spending out of advertising over to trade to drive some of the merchandizing and some of the new products that we have coming up so don’t want to quantify a specific number but you will see the number is going up and that’s part of the plan that we have to vigorously defend our market shares. In terms of the price changes, in the second quarter we had about 70 basis points of lift from pricing, I would expect that overtime, the number is going to continue to hopefully go up but a lot of it depends on our ability to get pricing in some of these international markets like Venezuela and Argentina. In the U.S., you will see us price to recover long-term commodity cost and other inflationary pressure. So commodities go up we’re likely to take more pricing, if commodities stay benign we’ll take less. So that number is going to float up and down based on what we see with inflation and commodity cost.

I think Ali just to be clear, as we do allocate some more demand spending behind trade, particularly behind new products in the second half the U.S. retail advertising and consumer promotion number is still going to remain in the 9% to 10% range whether it’s been for the last couple of years. In fact, this quarter it was at 10% for U.S. retail. So we still feel strong about maintaining at least the mid to high 9s in the U.S. retail even as we allocate some of the spending out of particularly troubled international markets where it just doesn’t make a lot of sense to put TV on or other forms of mass media when we have price controls.

Ali also just a point of clarification.

Yes. Sanford C. Bernstein: Yes.

That table that you’re referring to, which is I believe attached to our earnings release and I know it’s on our website, that price changes are strictly a rate change for price. It’s a rate impact it doesn’t reflect changes in trade spending. I think to the extent that you see trade spending increase in the second half of the year that will probably be reflected more in the all other line.

Understood, that’s actually the clarification. Okay, that’s very helpful. Because I thought that was net of trade spending. Sanford C. Bernstein: Understood, that’s actually the clarification. Okay, that’s very helpful. Because I thought that was net of trade spending.

No, that’s strictly rate adjusted price.

Okay, so then the all other would go up. Because currently you’re not I mean Steve to your point Steve Robb to your point, you’re not offsetting the commodity movements at this point with what you’re seeing from a price change, rate price change perspective and you expect that gap to close going forward? Sanford C. Bernstein: Okay, so then the all other would go up. Because currently you’re not I mean Steve to your point Steve Robb to your point, you’re not offsetting the commodity movements at this point with what you’re seeing from a price change, rate price change perspective and you expect that gap to close going forward?

I think over the long-term it will close. But there is always a lag, so we took a 6% price increase on the Glad business as an example to reflect the higher cost that we’re seeing in resin. But we’re taking that in March, it’s going to take a couple of months to sell through. So, pricing we try to price as much as we can to the long-term average cost of commodity but there tends to be a bit of a lag. And so I think over the very long-term we remain confident in our ability to protect our gross margins. But you are seeing a lag. And again as we’ve said many times, unfortunately the price controls in Argentina and Venezuela just add to that certainly in the short to intermediate term.

Okay. And sorry, just a quick on your -- on the quick clarification on the free cash flow to sales at 10%. That’s a step up starting at quarter, right? I mean, the taxes and the pensions effectively go away this quarter and that’s a step up to get to that 10%, right? It’s not a ramp-up. Is that fair? Sanford C. Bernstein: Okay. And sorry, just a quick on your -- on the quick clarification on the free cash flow to sales at 10%. That’s a step up starting at quarter, right? I mean, the taxes and the pensions effectively go away this quarter and that’s a step up to get to that 10%, right? It’s not a ramp-up. Is that fair?

Yes. You will see free cash flow as a percentage of sales significantly better in the second half than the first half, and that should get us to the 10%, because the tax payments in our estimate are essentially timing. We expect to go offset in the second half.

Okay, thanks very much. Sanford C. Bernstein: Okay, thanks very much.

Thanks Robert.

And we’ll take our next question from Chris Ferrara with Wells Fargo.

Thanks guys. I just wanted to go back on Cleaning for a second, right I mean so obviously the volume growth is pretty heroic on that comparison. And it sounds like Wipes were up again better than what the scanner data would have indicated. But can you just talk about I guess how bigger deal were the Bath and Glass Wipes and how sustainable was that? And I guess is there anything going on at inventory levels at the trade with those products? I mean is everything kind of normalized? Wells Fargo Securities: Thanks guys. I just wanted to go back on Cleaning for a second, right I mean so obviously the volume growth is pretty heroic on that comparison. And it sounds like Wipes were up again better than what the scanner data would have indicated. But can you just talk about I guess how bigger deal were the Bath and Glass Wipes and how sustainable was that? And I guess is there anything going on at inventory levels at the trade with those products? I mean is everything kind of normalized?

Yes. Chris, on the Wipes business in the quarter, it was really driven by merchandising support as the flu season ramped-up and particularly in December, it was really tied to some incremental activity behind merchandising and some of the larger customers behind Wipes. Obviously Glass, Wipes and tub and shower wipes did not ship until January. So they really didn’t impact the quarter at all. So I think as I said about the second half of the year, we’re going to start to see obviously improved performance on Wipes behind the innovation, behind ramped-up trade spending, resulting in more merchandising events going into the back half as well as lapping, starting in April, this significant push by private label for the few key customers. So a lot of the October, November, December, Wipes business was driven by incremental merchandising activities getting secondary locations in the number of retailers, not only in the club channel but in the grocery channel as well in pharmacies across the country. So I think a lot of guys learned from last year when the flu season ramped up, that they needed to get secondary location. So we had a lot of shippers out there, a lot of incremental locations.

So do you feel like, I mean, so if this cold and flu season to the extent that it’s less a deal than it was last cold and flu season all of the secondary points of distribution, is that essentially end up amount at the inventory into channel or does it not work that way? Wells Fargo Securities: So do you feel like, I mean, so if this cold and flu season to the extent that it’s less a deal than it was last cold and flu season all of the secondary points of distribution, is that essentially end up amount at the inventory into channel or does it not work that way?

No I think we’ve seen pretty good sell through. I don’t think we’ve heard from any retailers that we’ve got a lot of hanging inventory at all particularly because the flu season this year really got more aggressive in late December and early January, through January, than it did last year. And last year remember the flu season was really ramping up in November, and this year it’s been October and November, this year it’s been more or like December and January.

Got it. Got it. And then just on Argentina. It sounds like you guys said that with mix in pricing, you’ve been able to offset the currency devaluation so far. And relative to the $0.05 to $0.10 you guys have baked into the guidance, I mean, do you feel like again incremental devaluation aside, has that $0.05 to $0.10 been sort of an over-management of that like did you even need the $0.05 to $0.10 so far? Wells Fargo Securities: Got it. Got it. And then just on Argentina. It sounds like you guys said that with mix in pricing, you’ve been able to offset the currency devaluation so far. And relative to the $0.05 to $0.10 you guys have baked into the guidance, I mean, do you feel like again incremental devaluation aside, has that $0.05 to $0.10 been sort of an over-management of that like did you even need the $0.05 to $0.10 so far?

Yes. The $0.05 to $0.10 was primarily designed to cover for the operating challenges in Venezuela the high rates of inflation, the price controls and it’s certainly embedded in the outlook that we’ve shared with everyone today. And we’re using that, as Steve mentioned and as I’ve mentioned before, we’re losing money in Venezuela now. And we have lost money in the first half of the fiscal year, fully expect to lose money in the second half of the fiscal year and the $0.05 to $0.10 really covers for that cost. The Argentina business excluding currency effects is actually performing quite well. From an operating standpoint I think the team is doing a very nice job there, but unfortunately what we’re starting to see now with the devaluation in some of challenges, it’s going to certainly make for a much more difficult second half in Argentina.

Got it thanks guys. Wells Fargo Securities: Got it thanks guys.

Thanks Chris.

And we’ll go next to John Faucher with JPMorgan.

Thank you. Just to follow-up on Chris’s question. If we look back at your Brazil business which you guys had exited if I remember correctly. Is there a way to sort of look out four year or five years on the Argentina and Venezuela businesses and say okay, here’s where we think we need to be is it a situation where you could manage the portfolio down, sell fewer products. I guess the real question is are there structural options from a more aggressive stance to manage these businesses going forward or do you just, at this point need to sort of ride things out. JPMorgan: Thank you. Just to follow-up on Chris’s question. If we look back at your Brazil business which you guys had exited if I remember correctly. Is there a way to sort of look out four year or five years on the Argentina and Venezuela businesses and say okay, here’s where we think we need to be is it a situation where you could manage the portfolio down, sell fewer products. I guess the real question is are there structural options from a more aggressive stance to manage these businesses going forward or do you just, at this point need to sort of ride things out.

I think it’s -- each country is a bit different, Argentina again that business has done really well for us, we know how to ride the ups and downs and obviously when it goes up it feels pretty good and when it goes down it’s a bit more challenging. But that’s a business that we think we’re taking all of the right actions to make sure that we keep the very lean cost structure, we keep those brands healthy and we kind of whether the storm if you will. So I feel very good about that business over the long-term. And Venezuela is actually a much more challenging situation for us, it’s a business that historically has been very profitable, one of our better businesses. And certainly the brand equities and I think are holding up very nicely. The challenge we have is we have got inflation that’s running north of 50% and we have got the government that’s imposed price controls on more than two-thirds of our portfolio, and as a result the business has gone from profitability to losses. What we need to assess I think over the next couple of quarters year or so, is number one, our ability get pricing through and that’s where the government’s going to have to kind of weigh in and say are you going to let companies take pricing or not? And second what’s going to happen with the currency? Because we’re currently translating that business at a CADIVI of 6.3 to 1, if you look at the parallel market it’s in the high 70s, so it’s pretty big gap there. So I think the combination of understanding what’s going to happen with the currency as well as price controls will probably inform longer-term, what do we want to do in that business?

John the only thing I would add is, if you look at Argentina for example, I mean Argentina in this quarter grew over 9% in sales and over 5% in volume. So from an operating standpoint and that’s not currency neutral, that’s in U.S. dollar. So strong operating performance in Argentina, we did get pricing through on a number of products in October, so we’re doing quite a bit better than forecast in Argentina, and as Steve said the wild-card here is the inflation rate and the currency issues going into the second half. I think from an operating standpoint we’re doing the right things. In Venezuela there are structural things that we are changing, I am giving you an example. We used to have a, for example double-digit SKUs of bleach; we’re going down into a handful of SKUs on bleach so we would run the lines more efficiently. There are a number of things we have done to lower our cost structure and be prudent so that while we’re losing a modest amount of money year-to-date in Venezuela we’re better than we forecasted going into the year. So the team is making some improvements there. There are trigger points at down the road where we say when we look at inflation rates, we look at the operating efficiencies, we’re getting the ability to take pricing for example, we’re having ongoing dialog with the government. I think the government is starting to realize a number of businesses are in a very tough spot, and they are going to have to do something if these businesses want to keep producing. And I don’t think they want essential products like bleach out of production. So there are number of things that we’re doing, but I would say both in Argentina and Venezuela given the changes we have made, we’re doing better forecast and we are starting to see some vibrancy in Argentina.

John I think it’s also helps to remember that, when we exited Brazil, I mean that was many, many years ago. We had a very fragmented relatively low market share business. I think it’s hard to remember Venezuela and Argentina these are very strong market share businesses. In fact Argentina which is the bigger of the two countries for us, either of that market shares that are equal to if not north of some of our U.S. market shares, so we have got very strong businesses there.

Okay, great. And then one sort of unrelated follow-up question which is Cat Litter, which you guys have talked a lot about, you showed us some new products at your Analyst Day. We’re hearing more about this category, we have seen packaging improvements, new product improvements. Is this is a category where you can push the consumer that far ahead so that she is willing to pay more, because it seems to be getting more competitive and can you really grow the profit full in that category with this much activity? JPMorgan: Okay, great. And then one sort of unrelated follow-up question which is Cat Litter, which you guys have talked a lot about, you showed us some new products at your Analyst Day. We’re hearing more about this category, we have seen packaging improvements, new product improvements. Is this is a category where you can push the consumer that far ahead so that she is willing to pay more, because it seems to be getting more competitive and can you really grow the profit full in that category with this much activity?

Well I think you can John I think if you look at some of the recent success that one of our competitors had with a light weighting product that is a significant premium price to what the normal litter is in the category. So we think it is a category that the last 13 weeks has grown a little bit north of 5%. We think the demographic trends are great. We do have some significant innovation coming that we think out flanks competition, and our odor control is better than it’s ever been, our trade spending will go up on this business, in the second half we’re going to defend these shares. So I think the combination of innovation and trade spending and packaging basically all elements of the marketing mix, everybody’s hair is on fire over here to get this thing turned around. And I think we have the plans in place to do it and I do think it’s a category that has terrific trend and demographics in its favor.

Great, thanks. JPMorgan: Great, thanks.

And we will go next to Javier Escalante with Consumer Edge Research.

Hi, good afternoon everyone. Consumer Edge Research: Hi, good afternoon everyone.

Hey, Javier.

Hello. I have a question with regards to the guidance, right. If I go through the release you have got higher commodities, greater currency impact, you are facing a lower category growth and you need to hone on an increasing trade spending. So, it looks as if you have a lot of headwinds to offset with only 1 point of pricing at a corporate level at the end of the third quarter which corresponds to what you are doing in Glad and you just lower guidance by 1 point. Is this enough of reset in terms of to deliver your earnings forecast? And then I have another question. Consumer Edge Research: Hello. I have a question with regards to the guidance, right. If I go through the release you have got higher commodities, greater currency impact, you are facing a lower category growth and you need to hone on an increasing trade spending. So, it looks as if you have a lot of headwinds to offset with only 1 point of pricing at a corporate level at the end of the third quarter which corresponds to what you are doing in Glad and you just lower guidance by 1 point. Is this enough of reset in terms of to deliver your earnings forecast? And then I have another question.

So Javier, this is Steve. Let me try to provide you perspective. So, in our previous outlook we had anticipated sales growth in the range of 2% to 3%. And as I’ve mentioned in my opening comments the devaluation of the Argentine peso was significantly larger than we had anticipated. So, we do think that bringing this down from 2 to 3 to 1 to 2 to reflect the new foreign exchange assumptions and somewhat slower U.S. category growth makes sense. And basically that implies that we have got 3% to 4% currency neutral sales growth on the full year and Ali just pointed out in the first half of the fiscal year sales growth on a currency neutral basis was about 3%, so it implies 3% to 4% growth in the second half. We think that’s very reasonable. From an earnings per share standpoint we did drop the range by a nickel in the top and the bottom that was to deal with the FX assumption change for Argentina. Commodity costs are about what we thought in the previous outlook, they are up a little bit but not a lot. Trade spending is expected to be elevated in the second half but again not much different than what we have thought in the previous outlook. So, we do feel that this outlook is balanced and anticipates a range of assumptions. The biggest open item would be what happens with Venezuela and that’s the one we are watching carefully.

Okay. The second question has to do with the increase in trade promotions, Church & Dwight said it today that they are going to do the same. So, how big of an increase in shelf space whatever you are going to do buys you and for how long, so I wonder whether these payments that you are going to do to the trade, are going to benefit through 2015 or just a one quarter thing, just to support innovation and that’s it? Consumer Edge Research: Okay. The second question has to do with the increase in trade promotions, Church & Dwight said it today that they are going to do the same. So, how big of an increase in shelf space whatever you are going to do buys you and for how long, so I wonder whether these payments that you are going to do to the trade, are going to benefit through 2015 or just a one quarter thing, just to support innovation and that’s it?

Yes I think Javier, the elevation in trade spending is concentrated on a few businesses. I don’t think you will see it, you are not going to see it across the board. For example we just talked about litter, you are going to see clearly support behind new products there and support behind incremental merchandizing events. So, it’s not really payment for shelf space as much as it’s payment for feature and display activity and whether that continues into FY15, we will see how the dynamics in the category go. But it’s really more of display and feature support behind new products and increased frequency of events. Than it is anything to do with slotting allowances or anything like that.

Okay. Thank you. Consumer Edge Research: Okay. Thank you.

Thanks, Javier.

And we will go next to Michael Steib to Credit Suisse.

Hi, I have two questions if I may. And the first is on Burt's Bees, you mentioned that growth was flat in the quarter, is that entirely due to just a comparison base and should we therefore expect growth to pick up in the second half of the year? And then the second question is on the concentrated bleach formula, can you just confirm that that’s back on the normal merchandizing cycle, so does that also support volume growth in the second half? Credit Suisse: Hi, I have two questions if I may. And the first is on Burt's Bees, you mentioned that growth was flat in the quarter, is that entirely due to just a comparison base and should we therefore expect growth to pick up in the second half of the year? And then the second question is on the concentrated bleach formula, can you just confirm that that’s back on the normal merchandizing cycle, so does that also support volume growth in the second half?

Yes, Michael on Burt’s, there was a significant growth last year. So, you are right. The interesting thing is while it was flat in the quarter consumption was up 7% and the category was up 4%. So, we gained share and consumption was in the high single-digits, so we feel good about we are lapping these big inventories moving last year with the new lip products but consumption looks strong. In fact consumption in January on Burt’s was up 11%, so we feel like the trends are very good on Burt’s and there is some interesting innovation coming on color for lip in the second half of the year. On, would you repeat your question on bleach, I couldn’t quite hear it?

Back in the merchandizing segment. Credit Suisse: Back in the merchandizing segment.

Yes, the bleach cycle, I think one of things you are seeing with the January share increase to 60.7 we hit in January as we are getting back into the normal cadence. We are up about one full event which is about 15% to 20% increase in merchandizing activity for the year. So, we are back more into a normal cadence now on bleach. And I think as we go through the balance of the fiscal you will continue to see the share position improve particularly behind the new products that are out there.

Okay. Thank you very much. Credit Suisse: Okay. Thank you very much.

Thanks.

And we will go next to Connie Maneaty with BMO Capital Markets.

Hi, I have a question on Venezuela of course. We are hearing a couple of things, one is that instead of devaluation there in the form of an event where the government would say we are devaluing by 40%. That there might be a rolling devaluation sort of unannounced but every month or every so often the prices change, are you seeing that in your operations yet and is the rolling devaluation easier or harder to manage? And then I have a follow-up. BMO Capital Markets: Hi, I have a question on Venezuela of course. We are hearing a couple of things, one is that instead of devaluation there in the form of an event where the government would say we are devaluing by 40%. That there might be a rolling devaluation sort of unannounced but every month or every so often the prices change, are you seeing that in your operations yet and is the rolling devaluation easier or harder to manage? And then I have a follow-up.

We’d say it’s actually a hard question to answer. The government has come out and publicly said there is no devaluation, the CADIVI remains to 6, 3. Concurrent with that, they have run C Cat auctions and while they have not published these rates. The market would seem to indicate that they’re running between 11 and cal it 14. So it’s a form of a stealth devaluation, we have not been able to participate in the C Cat auction to-date at least successfully. So it’s fairly clearly unclear to us what is the exchange rate we’re all going to have to use and for what transactions and what will the rates be. And I think we’re waiting to get additional clarity on what does this multi-tiered exchange rate system look like and then what does it mean, if you’ve got dual exchange rates. And the CADIVI has held at 6, 3 and then C Cat or something else continues to devalue. So lot more questions than answers. I think the only that’s certain is that the Venezuelan Bolivar is significantly overvalued. And probably the good news is the Venezuela business for Clorox is something less than 2% of sales, so it’s an important business, but it’s not the biggest thing that we’ve got in the portfolio.

Yes, well that brings up the follow-up question. This has been going on since 2010 where every so often you have to takeout $0.10 to $0.20 from your earnings outlook for a business that’s 2% of sales. So when do you decide if this is really strategic or why bother it at all? BMO Capital Markets: Yes, well that brings up the follow-up question. This has been going on since 2010 where every so often you have to takeout $0.10 to $0.20 from your earnings outlook for a business that’s 2% of sales. So when do you decide if this is really strategic or why bother it at all?

First of all I’m not sure that’s completely accurate Connie. In 2011, we had an all-time record of profitability in Venezuela, so I wouldn’t say it’s been going on for three years. It’s really been the last 18 to 24 months when things have changed dramatically.

Okay. BMO Capital Markets: Okay.

But as I said, we’ve taken structural changes to lower the cost structure of that business. As I said, the team is performing better that we had forecast. We’re looking at a comprehensive plan to say, okay, how do we stay and then we want to stay in this country for the long-term because it has been over the last 10 years, one of the best, if not the best performing countries in Latin America for us. So, we’re making it more efficient. We’re having dialogue with the government. I think we’re getting at a tipping point whether the government is going to have to sit down with a number of businesses and just say, look, if you want us to stay here long-term you are going to have to give us a reasonable profit margin. And we’ll be having that dialogue in the next 30, 60, 90 days with the government. Clearly, we don’t like the situation we’re in through fiscal ’14, but we’re doing better with than forecast and it’s not going to be a significant drag unless there is another major devaluation going forward.

Thanks, very much. BMO Capital Markets: Thanks, very much.

Okay Connie.

And we’ll go next to Lauren Lieberman with Barclays.

Thanks, good afternoon. First question was just on private label. The mention of it in the release and I think on the call, so with Brita filters that was actually the first time I’d heard about that, so could you just, is that a newer dynamic? How prevalent this private label? Has there been in shifts in shelf space? And do you at this point have any plans to kind of be able to stay ahead of that becoming a more lasting trend? Barclays Capital: Thanks, good afternoon. First question was just on private label. The mention of it in the release and I think on the call, so with Brita filters that was actually the first time I’d heard about that, so could you just, is that a newer dynamic? How prevalent this private label? Has there been in shifts in shelf space? And do you at this point have any plans to kind of be able to stay ahead of that becoming a more lasting trend?

Yes Lauren, it’s primarily in one customer, a large customer, but it’s in one customer. And we do have plans to change our filters over the next two quarters. So, you’ll see a very different filter structure for us coming out and we think it addresses this issue.

And will those different filters then require new pitchers too? Barclays Capital: And will those different filters then require new pitchers too?

Well, put it this way, the new filter will be unique at how it fits into our pitcher.

Okay. Okay. Great. And then second thing which is I’m actually feeling a little bit confused on the conversation on your own spending on trade promotion because my understanding was that, your expectation for the year was that first half was heavier trade promotion activity until you had the innovation that you’d planned to launch in the second half? So how did that not exactly play out? Was it that, it was just in terms of a first half second half story, did I misunderstand to begin to with but I thought really the plan was we’ll promote to protect our shares until we have got new product activity? Barclays Capital: Okay. Okay. Great. And then second thing which is I’m actually feeling a little bit confused on the conversation on your own spending on trade promotion because my understanding was that, your expectation for the year was that first half was heavier trade promotion activity until you had the innovation that you’d planned to launch in the second half? So how did that not exactly play out? Was it that, it was just in terms of a first half second half story, did I misunderstand to begin to with but I thought really the plan was we’ll promote to protect our shares until we have got new product activity?

Laura, this is Steve. I think you are probably misunderstood. Our trade spending for the first half of the fiscal year is essentially flat on a year-on-year basis.

As a percentage of sale.

As a percentage of sales. And as we look to the second half of the fiscal year, the plans that we have put in place many months ago is to increase that to defend our market shares and to support the innovation. So there has been no change to the trade promotion plans. We’re just continuing to echo the fact that trades promotion spending will be up in the second half as planned.

Yes.

Okay. And the final thing was just on pricing in Argentina, if you had heard any chat or anything around price control potentially becoming more onerous or coming into some of your categories or if that’s not really been a source of worry just yet? Barclays Capital: Okay. And the final thing was just on pricing in Argentina, if you had heard any chat or anything around price control potentially becoming more onerous or coming into some of your categories or if that’s not really been a source of worry just yet?

We have had been under price controls for some time. We were able to get pricing through the second quarter which is certainly going to help the results. I think we’ll have to see following this significant devaluation what the government does. They tend to tighten up a little bit on the price controls in the short-term has been our experience. But in Argentina, we have been able to take pricing just not as much as pricing as we would like to get and we’ll have to see how it plays out over the next few quarters.

Yes, the Government of Argentina has certainly more flexibility around pricing particularly behind innovation, so that’s what why we were successful in October so I think that’s what helped drive the results in the second quarter.

Okay. And if the outlook and adjustment you’ve made for Argentina, what’s the assumption around your ability to price in the second half of the year? Barclays Capital: Okay. And if the outlook and adjustment you’ve made for Argentina, what’s the assumption around your ability to price in the second half of the year?

Essentially it assumes that the pricing that we have taken that we can carry into the second half of the year, we’re hopeful to get more pricing but we’re not counting on it right now.

Yes, there’s nothing, no incremental pricing baked into the plan for the back half Lauren.

Okay great, thanks so much. Barclays Capital: Okay great, thanks so much.

Thank you.

And that concludes the question-and-answer session. Mr. Knauss I’d like to turn the conference back over to you.

Well thank you everyone we know it was a, you had a lot going on today with the Church & Dwight Analyst Day as well so we appreciate the strong attendance and we look forward to talking to you on the next call. Thanks everyone.

Thank you. And that does conclude today’s conference call. Thank you for your participation.