Good morning and welcome to the Edgewell Fourth Quarter Earnings Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Chris Gough, Vice President, Investor Relations. Please go ahead.

Thank you, Kate, and good morning, everyone. And thank you for joining us for Edgewell's fourth quarter fiscal 2016 earnings conference call. As a reminder, for comparative purposes, fiscal 2015 full-year results include both the Personal Care and the Household Products businesses with the results of the Household Products business presented in discontinued operations. Historical results on a continuing operations basis in fiscal 2015 include certain costs associated with supporting the operations of the Household business, as these costs were not reported in discontinued operations. As a result, full year – fiscal year EPS is not comparable to the prior year, as the prior year's results include SG&A expense, interest expense, spin costs, restructuring costs, and tax associated with supporting the Household business. Additionally, EPS was not comparable in either the first, second, or third quarters of fiscal 2016. To partially address this, we have provided normalized fiscal 2015 EBITDA reflecting pro forma adjustments to SG&A. You will find these normalizations in the non-GAAP reconciliations at the back of the press release issued earlier today and on our website. With me this morning are: David Hatfield, our President, Chief Executive Officer and Chairman of the board; and Sandy Sheldon, our Chief Financial Officer. David will kick off the call, then hand over to Sandy for the earnings and outlook discussion, followed by Q&A. This call is being recorded and will be available for replay via our website. During the call we may make statements about our expectations for future plans and performance. This might include future sales, earnings, advertising and promotional spending, product launches, the impact of go-to market changes on sales, savings and costs related to restructuring, changes to our working capital metrics, currency fluctuations, commodity costs, category value, future plans for return of capital to shareholders, and more.…

Thanks, Chris, and good morning, everyone. Before Sandy takes you through the results, I'll briefly comment on a few highlights of Edgewell's performance for the full fiscal year and a comment on our outlook for fiscal 2017. We're pleased with our fiscal 2016 results, which were in line with the plans that we set for ourselves at the beginning of the year. And that we're particularly pleased with the top-line performance for the year. Full-year organic net sales grew 1.4% and underlying sales growth, excluding the impact of our go-to-market changes, exceeded our expectations at 2.8%. Let me spend a few minutes on the drivers of that growth. As we indicated at our Investor Day back in June of 2015, the 2016 fiscal year -- it was going to be a transition year and a year where we could focus on – or we would focus on four main business priorities to accelerate top-line growth. Our first priority, to complete go-to-market and functional realignment initiatives around the globe, was completed in the third quarter. The impact in the year was within expectations. And the new structure and distributor relationships are working well. Our second priority was to execute against our segment plans and to grow underlying sales in Wet Shave and Sun. For the year Wet Shave organic net sales were up 1.8% and Sun and Skin organic net sales were up 4.6%. That's solid progress in these two key segments. Within Wet Shave we're benefiting from our next-generation Hydro product improvement and strong private label sales, including the recently introduced fits Mach3 551 private-label product launched in a partnership with our U.S. customers. We've also grown Women's Systems and Shave Preps this fiscal year behind innovation and category management. Third, we had to solidify and return to growth in…

Thank you, David, and good morning, everyone. Let me take you through the specifics for the quarter and highlights for the year. Net sales in the quarter were $611 million, an increase of $51 million or 9%, driven by growth in all four segments in all key geographic regions. North American net sales were up 8.4% with growth across all segments. International net sales increased 14.2%, or 11% on an organic basis, driven by growth in Wet Shave and Sun and Skin Care. Gross margin was 51% of net sales, up 270 basis points over the prior year. The increase was primarily due to lower promotional spend and lower material costs, which were partially offset by higher startup costs related to the Sun Care production consolidation into our U.S. plant. A&P expense was $82.6 million in the quarter or about 13.5% of net sales, which represents a more normal level compared to relatively higher spend of 17% in Q4 2015. SG&A was 17.7% of net sales, including $3.6 million of intangible amortization. Excluding $30 million in prior-year charges related to the spin-off of the company's Household Products business, SG&A increased 100 basis points over the prior-year quarter. This increase was driven by higher spending in strategic growth projects, IT projects, and higher corporate costs, as well as increased compensation expense including incentive compensation. Other expense net was an expense of $2 million during the quarter compared to income of $3.5 million in the prior-year quarter. This change was largely driven by foreign currency hedging contract losses, particularly related to the Japanese yen and revaluation losses on non-functional currency balance-sheet exposures. Net earnings in the quarter were $52.2 million, compared to a net loss of $219 million in the fourth quarter of fiscal 2015. The increase in earnings was primarily related…

We will now begin the question-and-answer session. At this time we will pause momentarily to assemble our roster. The first question comes from Wendy Nicholson of Citi Research. Please go ahead.

Hi. Good morning. Two questions if I can. First, as you look towards next year and your top-line forecast, just looking – I know you don't give specific items by segment, but would you still expect Skin Care to be the fastest-growth segment among the three? And then secondarily, can you just run through exactly what's driving the target for gross margin expansion? Is that a continuation of some favorable commodities? Is it more favorable product or mix shift? Or what's driving that? Thanks.

Okay. Great. Thanks, Wendy. The first question for top line next year, we see Wet Shave continuing to grow kind of in the line with market, say 2% to 3%. And we see Sun and Skin also growing 3% to 4%, let's say. And then maybe if I can hand it over to Sandy.

Right. On the gross margin question, Wendy, yes, you're right. We are continuing to see favorable commodity prices. Obviously we have restructuring savings that roll through our gross margin. And we'll also benefit from some improved price mix in the year.

Got it. And back on that segment growth, in Wet Shave in particular, are you expecting a continuation of your market share gains? It sounds like your shift on the opening price point product has been really successful. Are you expecting any other changes sort of strategically with any major customers, anything like that?

It's really based on our continued focus on building baseline share through sales, baseline sales, through innovation behind – driving innovation, focusing on building equity, leveraging the full portfolio all the way from Hydro down through private label, and then continued International growth. Given the promotional headwinds, I think we're looking at more growing within – in the line to market growth.

Got it.

Thank you, Wendy. Thank you, Wendy. Operator, next question, please.

The next question is from Nik Modi of RBC Capital Markets. Please go ahead.

Yeah. Thanks. Good morning, everyone. Just a quick clarification. The Zero Based budgeting savings and the restructuring savings are separate, right? So you basically add them two together. I was just unclear on the wording in the press release on if those are two separate items, or if you were just including all the savings together. So that was the first clarification. And just talking about Zero Based budgeting in general, David, do you feel like the organization is ready, I mean, culturally, for something like this? Because that obviously is the key on really having a successful program, as we've seen from some of the other companies that have tried to do this. And then the second question is just on M&A. I mean you've obviously done a bolt-on. Just curious what you think of the environment generally for other potential bolt-ons. Thanks.

So maybe the first question, Sandy, if you can handle, and I'll...

Yes.

Yeah.

Nik, those are two separate sets of savings. They're not – yes. They are two separate. So...

Right.

Great.

That is a good question about ZBS and the culture. And I think – I actually think that we are. I think part of the timing and the reason that it's taking some time to get it finalized and all is we've taken a lot of time to set up the category owners set up so that we can replicate it. That's it's going to be part of our processes and our DNA. If you go back in the time over the last 3 or 4 years, we've actually focused a lot on cost and on productivity, so it's not a new theme. And I think that the organization understands. I think ZBS is bringing tools and a process to make it a living process. And I think the key is, as we communicated to the organization, is partly I would emphasize that we're doing this to generate flexibility, to put money back into the business, whether it's demand creation, whether it's better organizational capabilities, or it's I mean generating profit to return to shareholders. And I think that the balanced goal there I think will help make it a – or made it even more of a key lynchpin in our culture. Moving to your final question, we're actually pleased with our little bolt-on. I think it makes a lot of sense. The market out there is kind of tight. There's not a lot of candidates. We're looking hard. There's a lot of – I think price tends to be pretty high yet still. But we're actively looking, and we're actively looking at similar kinds of bolt-ons.

Thank you, Nik. Operator, next question, please.

The next question is from Jason English of Goldman Sachs. Please go ahead. Jason English - Goldman Sachs & Co.: Hey. Good morning, guys. Thank you for the question and congratulations on a strong finish to the year.

Thank you, Jason. Jason English - Goldman Sachs & Co.: So it appears that – I Wet -- mean, pretty rhetoric -- Wet Shave, your private label initiatives, some great momentum. Question for clarification, are you the only ones with the capabilities to do a Mach3 compatible blade out there right now?

Oh, probably not. But I think we're unique in making a fits Mach3 that actually shaves at a – yeah, a performance level that really makes it a viable value versus Mach3. Jason English - Goldman Sachs & Co.: And in terms of distribution or penetration of accounts where you think this product could be sold, where do you stand right now?

We're – within the U.S. it's been accepted everywhere that I know of. I think from a – if you look just at Nielsen ACV, we're still only at 50% to 60% the last time that I looked. So there's more room to get facings. And that will be more of a process as we pass other reset times for customers. But we have broad-based acceptance. Jason English - Goldman Sachs & Co.: Last question, and I'll pass it on. In terms of the cadence of how that built through the year, is that distribution still going to be largely incremental as you come into the year? And kind of when do you start to cycle it? And thank you for your time.

Yeah. A good question. I think it's sort of gradual. We'll anniversary it by April, March/April, I think.

I think it's closer to June.

Well, okay. Yeah. You're right. We didn't really begin. So June. And as I mentioned, I think that it's building now. So...

Incremental in the first half or so.

Right.

Yeah.

So figure that we'll really anniversary it maybe middle to end of next year I guess.

Yeah.

Thank you, Jason. Jason English - Goldman Sachs & Co.: Helpful stuff. Thanks, guys.

Thanks, Jason. Operator, next question, please.

Next question is from Bill Chappell of SunTrust. Please go ahead.

Hi. This is actually Stephanie (33:24) on for Bill. I was kind of – and maybe this goes off a little bit of Jason's question. Could you give the drivers of the kind of flat one quarter – first quarter growth outlook? Kind of what should we be looking for like from a year-over-year standpoint? Thanks.

So the question – okay. From Q1 I think there's a couple of things maybe. We're actually comping a fairly solid year before. And we're answering it with a little bit less promotional weight than we were last year. And I could see a little bit of softness maybe on the disposable front.

Thank you, Stephanie (34:19). Operator, next question, please.

Next question is from Ali Dibadj of Bernstein. Please go ahead.. Ali Dibadj - Sanford C. Bernstein & Co. LLC: Hey, guys. I have a couple I think straightforward ones. One is on the Mach3 look-alike. How do we think about the risk of patent infringement coming after you guys from a lawsuit perspective on Gillette? That's one. Two is on top line, even in the Nielsen numbers if we give you everything we can from private label, so assuming you're everything on private label and all the growth, it's still way far away from 9%. So how do we think about if any inventory loading that happened? Or is that – is it really just coming from a lot of the untracked channels? And then on – my last one is just, can you please help us understand what you mean by strategic initiatives?

Yeah. Okay. Fair enough. On the Mach3 front we're – you might have seen the suit. But we're not worried about it. The Mach3 patents have expired. And so we're confident we have the freedom to operate. On the bridge for the quarter, Wet Shave was up 7%. International – and it was up like $26 million. International was up $16 million, almost 9%. And it was up across all the areas and then segments. You move to U.S. which was up 7.8%. And you're right, when you take Nielsen, I'll fill you in that when you add private label, total EPC Nielsen consumption was down maybe 3% to 4%. Now bridging that gap, that was all – the major, major difference was actually price mix, where the comp versus previous year versus coupons plus some trade promotion spending. That was the big difference. From a channel point of view, measured and unmeasured, we're generally in line. And I don't think the underlying shipments track pretty much the EPC consumption of down 3% to 4%. So I don't see much of a difference from a ship/consumption point of view. And then what we were kind of talking about with the initiatives, though – the world is changing, and through the year we've been agile enough to move some money to try to build and accelerate capabilities in the digital and in the e-commerce, both in the U.S. but also China. And then some IT support and projects that also support working capital initiatives. And then ZBS also I would tuck into there.

Okay. Thank you, Ali. Operator, next question, please.

The next question is from Olivia Tong of Bank of America Merrill Lynch. Please go ahead.

Great. Thank you. Want to talk about the sustainability of growth. I know there is an easy comp in Q4. But your 2-year stack saw a pretty big acceleration. So why doesn't more of the benefit of the growth that you saw in Q4 flow through the next year? Because it doesn't look like you're really expecting much for fiscal 2017. And then in terms of the pullback relative to – on a year-over-year basis in promo and couponing, what does this say about the necessary levels of promotion and couponing to spur activity in your categories? Thanks.

Yeah. Okay. All right. So the first part of that, this was – last year's quarter was an anomaly. And so when you look at it – let's see. Let me – international grew – well, the easiest way to say this is half or a little more than half of the sales growth versus year ago was driven by lower couponing and promotion. So that gets us to 3% to 4% kind of normalized growth. And that was driven by some underlying growth in the U.S., but a lot of growth internationally where we were up in all geographies and all segments. So it was a strong, strong quarter. Gained share in the U.S. and in most major markets. But I wouldn't draw just a, I mean, straight line from thereon. It was a very good quarter. And with competitive pressures and all, I wouldn't say that we could do that every quarter. Your second question, I would just say that from a – do we have the right level going into next year? The quarter – this quarter was a pretty normal quarter when you compare trade spend to the year average. It was comparable. It was higher than that of 2 and 3 years ago. So it's a pretty sizeable level. And we're confident that it kicks us off in a good place.

Thank you, Olivia. Operator, next question, please?

The next question is from Kevin Grundy of Jefferies. Please go ahead.

Hey. Thanks. Good morning. First question, Sandy, on going back to the ZBS and the restructuring, can you help us better understand the split of those savings from COGS and SG&A, where some of the savings are going? It seems like some two-thirds is going to be reinvested. How much of that goes to advertising and marketing? How much of that goes to other areas? And then where can SG&A go over time, just beyond sort of what you've currently outlined? How should we be thinking about where core SG&A can go? And then I have a follow-up. Thanks.

Okay. So on the restructuring savings, really all of that goes into our gross margin and cost of goods sold line. From ZBS I would say we're – that project is looking at every line item and every cost bucket. And so while I can't give you specifics on line item at this point, because we are still only about halfway through the project, I'll say it is likely we will see savings across every line item. So probably not as much in cost of goods sold. But I will see it in – certainly in SG&A, we'll see it in R&D, we'll see some in some of our gross-to-net sales line items. So we are really looking at every cost bucket we have. In terms of where it's going, I think David expressed it well at the beginning, which is we're really – this is a balanced plan and a balanced view of how we'll reinvest and look at the savings from ZBS. So some of them will be going up and reinvested back into gross-to-net, some of them will be reinvested back into A&P, and some of them will be reinvested back into SG&A to build capabilities. And overall, we continue to focus on our financial algorithm of 50 basis points improvement. So some of them will go to shore that up as well.

Okay. That's helpful. And the follow-up for David, can you touch on shave club, both the risks and the opportunities there? And now we've seen Harry's move into Target, and they've had some success there. I think surprisingly so probably to both them and to the industry, I suspect. And clearly, Unilever's placed a decent-sized bet on Dollar Shave [Club]. And I think collectively there'd probably would be a lack of surprise if we saw them move into retail at some point as well. And seemingly I understand you guys are participating, but I think there's still sort of questions from your side in terms of the economic viability of the model, despite the fact that it seems like enrollment continues to move up there. And consumers are sort of willing to pay for the convenience, despite the fact that the efficacy is a bit lower and frankly, they're even spending more annually on the blades. But you're updated thoughts there would be appreciated, given the growth that we're seeing there with enrollment. Thank you.

Well, it's certainly a challenging area and a place where the world is changing. And certainly e-commerce, broadly speaking, around the world is a major issue, not only for us, but for every CPG company. And we're working hard to really ramp up digital capabilities in the broad sense and beyond just U.S., frankly. Within the U.S. when you look at e-commerce, when you look at the omni-channel and the pure-play channels, we've been powering up capabilities, putting a lot more resources against that. And we've gained share within those segments like for each of the last three years. Now when you talk to – about the shave clubs, the jury is out. And we can speculate where they'll morph. Over the last – sequentially over the last two to three quarters, they've been pretty flat, not versus year ago, but quarter to quarter to quarter. And with the challenge about profitability, I think you see them thinking about how to get their basket size up, become more than a shave club to really survive. So I think there's a question about how much aggregation needs to happen. So it's a question, and I'm not going to really, I mean, speculate how much Unilever uses DSC as a shave club or an entry way to men's grooming or personal care. But that's I think the big question mark. In terms of Harry's coming into Target, they got good execution with an end cap. And so not surprisingly, generated pretty good early trial. They got a sizable part of share in Target. And they got about a 2% to 3% share of systems nationally. I think we got hit with fair share, maybe a little less than fair share, so it's not a huge impact yet. We'll see how their trial converts to refills. And we'll see how their share moves once they go back to a more normal in-line set. And we'll see just how category profitability in that customer moves. As far as our plans there, they operate in a level where we have several options within our product mix, and we'll monitor them. So...

Thank you, Kevin. Operator, next question, please.

The next question is from Bill Schmitz of Deutsche Bank. Please go ahead.

Hi. I have two questions. So the first is just on the gross-to-net sales number. Can you tell us what like the gross-to-net was last year and what it was this year? And then sort of like bridge us to the gross margin year-over-year change? Because it seems like a decent chunk of that gross margin expansion – and I get that it was just very elevated real (47:34) spending in the year ago. But it seems like a lot of that gross margin expansion was driven by that. And then just sort of operationally, I think it'd be really helpful for you guys to give us a split between volume and price mix. So would it be okay if you guys to give us that number this quarter, what volume growth was versus price mix? And then I have a follow-up, please.

So I'll jump in on a couple of the questions. But, yeah, Bill, you're right. The gross margin expansion for the quarter was largely driven by the lower promotional spend in the gross-to-net change. The volume – most of our sales increase this year – or this quarter was the price mix. We did have some volume growth in Sun and Skin. And I think – but I think that's really predominantly how I would talk about it, is it's the majority of it is price mix.

Okay. All right. That's helpful. And then just looking at the price per blade. Do you think that the industry is at sort of peak price per blade pricing? Like it seems like it's gone very far. Every year it was profit per user per year. And it seems like you're getting some pricing friction though. So do you think the category maybe went too far? And not that it's a bad thing, but do you think we're probably peaking in terms of price per refill blade? And then along those same lines sort of, why aren't you more aggressive in some of the direct-to-consumer channels? Like why isn't Amazon selling private label blades yet? It seems like a logical customer. And why haven't you maybe embraced Dollar Shave Club in terms of supplying them? Because obviously the product quality of some of the blades they're using is dubious at best. And it seems like if you're already selling quite a bit of private label, doesn't seem like there would be a lot of channel conflict in supplying them.

Okay. Thanks. On the first question, I think at the high end, it's going to be hard to move price per blade a whole lot farther over the short to medium term. That doesn't mean the average price per blade overall needs to be capped, because I think there's different segments of consumers all the way through the market. And I think through innovation at all those tiers, we can give better product, better value, higher price. So, I think the trade-up remains a possibility and an opportunity for us and our customers. I think it's just not the same escalator of Men's Systems than it was. I think there's innovation at the top end, but that won't be I think the main driver. In the terms of your other questions I think they're a little more like customer-driven than I'd like to comment on for competitive reasons and just for customer reasons. But...

Okay. I mean can I just ask you why – like why Amazon isn't doing private label yet though? And is there like a reason for it? Because they've added a lot of other categories. It seemed like it'd be a logical one.

I'd kind of rather not walk in their shoes. I'd rather not comment on that.

Okay. No. That's fair. Thank you.

Thanks, Bill. And, operator, next question, please.

The next question is from Jonathan Feeney of Consumer Edge Research. Please go ahead.

Good morning. Thanks very much. You answered Oli's question by saying EPC or a Wet Shave takeaway including private label was down 4%. And I wasn't sure if that was a global or North American number, but I'm trying to get to the bridge between that and the 7.4% organic rev growth you showed in Wet Shave. Is that all price mix on the lower trade spend? Or – and if private label is growing faster within that, even if these Mach3 emulations, doesn't that give you somewhat of a negative mix? So I'd be interested and I'm trying to understand the pricing that's overcoming that ? Or is it International or something I'm just not thinking of? I know Sandy gave us four factors. So just the bridge between those and what's going on? I'd appreciate it.

Okay. Sure. So what I was saying, the total EPC consumption down 3% to 4%, that was a U.S. Nielsen. So a Nielsen...

And that's a dollar number, not a volume number?

Correct.

Okay.

And what I'm saying is that if you look at our shipments to consumption, they were generally trending with that, except for the – so the volume impacts. What I'm saying is the entire bridge from down 3% to 4% on a volume to our shipments up 7.8%. That's all price mix. Generally coupons, but also trade spend. That's what I'm saying. And I didn't quite follow your private label point. So if you could walk through that again?

Yeah. Sure. Like I gather, particularly with the Wilkinson Sword substitution, but just overall, private label has been growing faster. I would think that that creates – and correct me if I'm wrong, but that would create a negative price mix factor in general. A lower dollar per unit than average for your portfolio. Is that a correct assumption? And as private label grows faster both in the quarter and the year, that pricing more than offsets that I guess is my – is that right?

So that's a different question than trying to bridge to consumption, right? So that's...

Well, yeah. But it would be part of that. It would be partially offsetting and make the price that was needed even more. That's all I meant.

I don't think that's a major part of the bridge, other than the customer takes a different margin on – percentage margin on private label versus branded. And that diverges Nielsen versus ours some. But that's not the main driver in the quarter. And I go back, the major story was lower couponing and trade spend this quarter versus previous year.

Thank you very much.

Thanks, Jonathan. Operator, next question, please.

The next question is from Iain Simpson of Société Générale. Please go ahead. Iain E. Simpson - Société Générale SA (Broker): Hi there. A couple of questions if I may. Firstly, it seems that in general promotional intensity was down across the board quite meaningfully for you. Is this kind of a market wide trend? Or is it more just that you were lapping an exceptionally promotional heavy quarter. And secondly, if we dig into the weeds on your expectations for Wet Shave a bit, you're talking about 2% to 3% growth in line with the market. Within that are you thinking your price-mix balance is likely to be pretty much in line with the market? And if so how should we think about that weighting between price mix and volume? And secondly, when we think of the parts of your Wet Shave business, the branded, the private label, and the online, any areas within that where you hope to be outperforming the market? Thank you.

Great question. In the terms of promotion for the quarter, I have to say within the shaving business in the U.S., promotional intensity was – has really never been higher. Our major competitor, the percentage of volume done on promotion both for Men's Systems and also Disposables was higher than we've seen. So it was pretty heavy. We were down, but I think that was down versus, as you mentioned, a pretty high year ago. And I think we were at levels that we were pretty comfortable with. And we are trying to keep our focus in building baseline volume, baseline share through equity and innovation. Expectations about price volume mix for next year, I'd just say that it's a balance. And it'd be relatively in line with the category. And – yeah.

Yeah. I mean, well, one thing to think about on the Wet Shave is we will have some new products. We'll have what we talked about earlier, the anniversarying through the first couple quarters with the fits Mach3 product. So we do – and we've got obviously international growth continuing. So we do have some relatively good volume growth in 2017 based on our current outlook. But we also have some improvements in price mix as well.

Yeah. So it's kind of balanced.

Yeah.

Thanks, Iain. Operator, next question, please.

The next question is from Andre Shepley of UBS. Please go ahead.

Thanks. Hi, everyone.

Hey.

I just have a quick housekeeping question. Your 100%-plus free cash flow productivity guidance for 2017, is that based on GAAP or non-GAAP earnings? Thank you.

GAAP. GAAP earnings. GAAP net earnings.

Okay.

Okay. Thank you. Operator, next question, please.

There are no additional questions at this time. This concludes our question-and-answer session. I'd like to turn the conference back over to David Hatfield for closing remarks.

Well, hey, thank you, all, for your time and your interest. And have a great day. Thank you.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.