Q4 2019 Earnings Call

[noise], Okay gang.

Let me get going now.

Hi, Thank you all for comments today, and thanks, everyone, who is a dialing in from officer home.

I'm going to begin with the.

Oh Safe Harbor statement or recommended everybody read that at your leisure.

Hey, who's with us today from from management, we have our CMO bring a bomb hard had been a national and global new products, Steve Congeni. Our general counsel. If you have an illegal questions for darker CFO, Eric spark around supply chain and Paul would who runs the U.S. cells.

All right. So he was somewhat even the short story right now.

Sure that's a really pay attention to the other hundred 50 slots, we had a terrific year.

This is the second consecutive year that our company grew organic sales 4%.

The U.S. posted 4% or chronic organic sales growth and 10 out of 12 of our power brands grew or held share international posted 9.2% organic growth and continues to be a juggernaut for the company.

And as we ended the year organic gross returns to the especially products business. After two down years last time, we had an up quarter was Q4 2017.

And the reason is it turned positive it's because the devry market I became healthy and another occurring encouraging sign is that domestic volumes turned positive in the fourth quarter and finally, we had record cash from operations in 2019. So now looking ahead to 2020.

We're calling 3.5% organic growth and that is net of exiting the low margin gummy private label business.

And consist the weather evergreen model, we're calling 7% to 9% U.P.S. growth and that is top tier and CPJ.

I want to recap for Matt why church, and Dwight because a standout in the consumer space.

Number one we haven't evergreen model that that's our shareholders are very familiar with as are our employees number two we focus on cash.

Number three we have an ability to execute and that's what drives our performance, we deliver meaningful topline and bottomline growth year. After year, we've a very lean company with the highest cells per employee of any of our peers and that's sales per employee stat is an under <unk>.

Under appreciated metric, we're innovators with new product offerings across many categories year after year, and we're becoming digitally savvy <unk>.

8% of ourselves or online today.

That does not include buy online pickup in store, if we included that'd be much higher than 8%.

Well, we make good could choices when it comes to acquisitions those choices have led us to dry shampoo gummy vitamins women's hair removal.

Waterfall officers and here sitting solutions. So we believe there's no better place to invest in CPG been church and Dwight.

So here's a track record screw next slide.

Yeah, we are silicon over the last three five and 10 years were delivered double digit TSR.

Returns to our shareholder said, if you look at 2019, 8.3% and that's on top of a 2018 it was plus 30%.

Let's move onto the funding part of the program.

So who we are why we're winning.

It is going to come up and talk about them give you an update for the Master brand and also I Britain are gonna Hamon exit consistent innovation story.

Steve is going to come up and talk about international and kind of come back and tell you, but animal productivity in how we run the company never going to end with Rick on financials.

All right first who we are so I talked about our evergreen business model. This isn't grain not only in the hearts of our employees, but all of our long term shareholders as well, 3% topline 8% bottom line.

And if you say well how's it going for you when you look at what the last 10 years. The average organic sales growth has been six 3.6%.

So where is that 3% coming from well, it's kinda, 2% from the U.S., 6% International is 5% specialty products. We don't always says he's going to mark anyone here, but that is the long term algorithm.

Now she said <unk> what are your brands, we have lots and lots of Brad, but we have 12 power brands.

And those 12 power brands account for 80% of our revenues and profits.

We're very well balanced portfolio little bit more than than half is a heart or if they feel that consumer products.

[noise] [laughter] for those of you at home those are just couple of balloons going off [laughter] [noise].

So personal care, 49%, how sort of 44% you can see especially products at seven now it's a diversified portfolio again that 63% its premium and 37% as value that means we performed well in virtually any economy.

And we have a lot of runway for international So international it's been a juggernauts they've set for the last five years still only 70% of the company. So we got long way to go out there.

Yeah, we do operate in Atlanta. The Giants you can see we have 4.4 billion in sales all of our competitors for significantly larger than we are we think this gives us an advantage.

So were work fast we're nimble when you have only 47 up 4800 employees you can make quick decisions you can move faster communication is easier and you can adapt to change better.

We have a long history of acquisitions Weve added almost $3 billion in sales since 2004 over the last 15 years and a lot of that came from acquisitions.

And we have very specific acquisition criteria, we're only going to look for brand has number one number two share high growth high margin needs to be asset life, we need to be able to leverage our supply chain footprint and it must have a sustainable competitive advantage.

And since year 2000, so over the last 1920 years, we've acquired 11 out of our 12 power brands into your 2000.

Only big brand, we had was arm <unk> hammer.

So what we say around the house is a 12 brands today 20 tomorrow.

Now why are we when.

At least five reasons one we're in the right categories to we know how to grow share three we don't have a high exposure to private label, we're growing online and we are on trend.

So let's look at the category. So if you look at the categories over the last four years in general our categories weighted average growth 3%. So this is the underpinning for the company's long term organic growth of 3%.

As far as grown share just report card you don't get this report card for many CPG companies, but every year. We tell you how we're doing so for a 12 major brands did we maintain or gross share grow share and exceed this year for the first on 10 out of 12, where green.

And we get lots of questions generally about the laundry category. So what's the what's the long term trend in laundry.

So are last three years, we've had 120 basis points of share in luxury or the other winter was procter and gamble and a henkel has struggled.

Now.

You know as we go from quarter to quarter get lots of questions on non measured channels will give you a sense for how big or non measured channels for some of our categories. Most of these categories is gonna be 70, 80, 90% represent non Nielsen, but if you go to the far right to see some of our more recent categories powerful watching carefully.

And even electric women's electric grooming are all significantly less than 50% so something to bear in mind going forward, we have low exposure to private label the weighted average.

Share a private label for a categories. It's only 12% only five of our categories have private label exposure and as you can see from the lines and that chart you can see it's relatively stable.

And we're growing online you know back in 2015, we were fourth Cortile. When it came to online sales today were first quartile, we hit our goal of 8% 2019 than we have a goal to be over 9% 2020.

We have lots of product number one products on Amazon.

Amazon of course is the number one online retailer.

Okay on trend so they're roll through four of our Branson and why we think around trying to take the to assist the business. We acquired in 2011, so dry shampoo, that's was a what's like convenient.

Solution to women between which mpos.

This was a business was $20 million and sales in 2011.

If you look at what kind of runway do you have in the U.S. swell in the U.S. 125 men and women.

125 million one over the age of 18, two thirds of them don't watch their hair everyday and 13% of them today use dry shampoo.

Now if you look at household penetration, it's only seven <unk> percent in the U.S. snappy when I try to figure out how big could it be in the U.S.. We look at the UK UK is the most mature dry shampoo market, it's worried or originated Sophie compared to where where the U.S. is the U.S. isn't a middle innings, and we can see by in comparison to.

The UK is that the dry shampoo market will double from 225 at retail to $450 million over time, so being the number one dry shampoo, because we have a lot of runway ahead of us.

The next next up is the womens electric hair removal.

So we bought the number one women's electric headroom over in flawless. So these are tools to remove the cycle left or right face brow lag and whole body.

No. So women are looking for convenient ways to remove hair.

And if you look at the household penetration only 2% the U.S.

And less than 2% rest of world. So lots of runway here for this business next up is waterflood users because the number one power Plosser I recommended by the idea.

So what's the story there we can do a show and everybody knows 80% of people don't watch every day, even though they shut and consumers are discovering waterflood officers waterfall officers are the easiest solution to philosophy.

Again look at household penetration, 22% the U.S. not bad, but we think that could go as high as 48%. If you just look at the penetration for electric toothbrushes.

And then if you'd look.

At the Europe. For example is only 3% to 5%. So we're just getting started with water faustus outside the U.S. again on trend got a lot lots of runway ahead of US next up is gummy vitamins you know the story pretty well gummy form is more appealing until some capsules and if you go back when we bought the business the adult gummy form with.

3% of the category now with 18%.

And if you look at the size of the category just continues to grow scope from 15 16, 17 from 800 million the 1.5 billion not today.

Lots of runway and just finally as his hair thinning solutions, we have the number one hair fiber and the number one hair thinning supplement.

We on all the some people's minds, 40% of men and women have noticeable hair loss by the age of 40, so with great solutions to that.

And I'm going to bring up ready to talk about the mask Brent.

Okay.

Hello, everyone.

With me awake, so you might remember I'm in him as my follow biggest brands is more than the middle <unk> billion, sorry dollar Brad so really important to us.

And you might remember from last year, we presented more power to you can pay down here in this iconic institution.

No I know most of you a pretty skeptical your little bit like my boss.

It's just really working so I thought why don't I share a couple of results first.

Since we launched the campaign in 12 months, we've actually added 2.6 million households, well now buying arm <unk> Hammer and that's an increase of 3% and this picture you're seeing is actually it is currently nearly seven out of 10 households, buying arm <unk> hammer.

And if that's room is representative my ambition is actually do have three out of four how schools buying Harman hammer.

So you might remember there's not many you where the U.S. as adds unites it as having three out of four people agree that this is a great choice.

But what's more important you could not say well, but you'd get them in why a promotions no.

Actually we have people spend more money on Harman Hammer and you see here that spending 5% more so if you think about at what does a great sign for brand health.

What people are buying it and spending more I think that's very clear on said that arm <unk> hammer, it's very healthy and growing wonderfully.

Right.

We don't.

And I think for those of you. So he left yet you might want to know it but we have our Manhattan every single one off all brands and categories.

I know what does show you couple of how we communicate about Harman hammer and for those of you seen some of our cats. They just got cuter said, she's having up at the cat or how often actually my litter box, it's still smelled, but now I use Harman hammer clump <unk> seal it absorbs seals in destroys odor on contact thanks to clump <unk> seal.

Litterbox odor is no longer in issue Harman hammer more power to you.

So you can imagine that's really distinctive campaign that is working really well slot.

You might not have seen this campaign because we just recently launched our I'm a dentist campaign at the very end of last year. It's a very hard once a breakthrough so I hope I appreciate how different it is true enormous dental come actually you might see and secondly, it also illustrates that this campaign works.

No matter what category.

Let's look at what.

[noise] [laughter] [noise].

[noise] I'm definitely going to first I would have a nice [laughter] [noise].

[noise], so I invite all of you to take the arm and how much is paid challenge in check how well the plaque remove it is currently on what do you.

Moving on to our next.

You might know if you're not part of the burning man crowd.

I'm pretty sure most of my P. in this room are.

And this one is what we say is a great deal Doron.

[noise] today, he's on the astrological element and to make R&D out or [noise].

[laughter] theater older fighting baking soda and a free of aluminum inheritance natural without going overboard [noise].

[noise]. So you can see the broad spectrum of what we can do the arm and have not come pain on every single, although it's different categories, playing to what's important and what's the cuts you might inside but still would bring it all together and driving the over 1 billion brand. So I think that's pretty unique but I'm actually yet.

To talk about something you, what's it's not too much of a real as its standing was sitting on all your table, all but our new clean and simple laundry detergent.

It's clean.

Simple, it's smart and its powerful.

So what have you learned about consumers and you might have seen that in a few other areas in food that's transparency less it's more in ingredients is already being quite established.

On this trend this now moving from what people ingest it to whats on me and then to what's around me.

This is where we have an amazing detergent, which has no compromise how for clean a laundry with its simply ingredient less so none of the others offer that.

I bought even battlefield and that's a pity that my clay Carlos what's up our R&D is not here today, but he and his team I really revolutionizing of how we look at making innovation Wanda part is there's a very different innovation culture, we're connecting the different teams around R&D in the different.

Areas of expertise a lot more risk, taking and obviously speed and that's what you can see how we came up and you're looking at what's happening to food industry. It's a very clear trend, which would come into the other areas and that's where our future works team actually discovered the clean and simple formulation. So.

In there.

Well, but what's not in there because that's what consumers are asking so it doesn't happen dies no preservatives nice phosphate no brightened, there's no power beans sounds pretty attractive doesn't it but watson is sick essential ingredient hardworking cleaner active.

Hi, and remove a laundry boost up.

Baking soda of course.

What that self snap and fragrance.

And what is this more an important it has few ingredients, but it is as powerful as our best selling product, which is armen hammer with oxiclean.

And as we said it has a few ingredients not only as our own but they typically have rich laundry detergent has between 15 and 30 ingredients. So we only have six and here less is more.

But not only that it's also very good for the environment. So on the next it duration offered only be bottled you'll actually see this back label, which we'll talk about our partnership with the Arbor Day Foundation.

Where we how planting trees for cleaner air and water.

This product is also being elected as a safe choice. So we have that endorsement, which is very important to reassure consumers.

So using the Green E, which says its with 100% certified renewable electricity.

And of course, we have one of the leading part that's how to recycle which isn't a lot to follow labels and it was the braces. This label ask the bottle is fully recyclable.

I know you wonder how will they tell consumers about it.

So, let's see how they're up this one goes out all the moms out there and the genius way you make things cleaner [noise].

[noise] simpler [noise].

[noise] Mark [noise].

[noise] better [noise].

Buyer. So we made me Harman hammer clean is supposed to purchase just six essential ingredient.

Perfectly without unnecessary I'm, Oh, hi, there preserving [laughter]. If you just have Andre Yeah, we did [laughter] Harman hammer, what how would you.

So I hope you notice, we're helping women, making the right choices.

And we have very positive feedback because it's such a good way to get it from a trusted brand like Harman Hammer and once we brought drives people to store. This is what they will see in the future we have massive execution in stores and coming soon dollar general.

Oh, sorry that was to quit can you go to back Oh wait I can do that so what else do consumers want besides clean and simple that's not the trends, which are about sustainability and convenience.

Matt talked about online shopping lots and lots of more people actually.

Order online that's not us developed in the laundry area, because it's difficult to shut the bottle. So we have a solution for put too much one convenience and sustainability.

As we have launched on how about pets oxiclean, our best seller as a super concentrated laundry detergent. It has three times more cleaning power, but it has 37% less plastic and use of 30% less water. So again fully under sustainability trends and available to consumers.

Prefer shopping on E commerce.

I still lots about our Manhattan. We also have another exciting plans, Brian Oxiclean and if I look around the room, except for everybody who's on my team today.

You know that black close Doc plays a very important and about 42% or wash loads gets sorted into black dark colors, and we have to solution for that so oxiclean docked protect what's your specific he formulated for darkened blacks fabrics. So as we.

Now in winter season taken note you might want to get one of us.

With that I handed over to match he's going to share insights on headcount.

Right.

Obviously I'm the expert on dry shampoo.

So if you're a <unk> somebody with normal normal haired any pick up an aerosol can about ration from <unk>.

That's okay that that might that might make my hair dryer. So we said hey, what's going to appeal to win with normal to dry here. So we said, okay. We're going to watch up a piece waterless cleansing farms. This is something that you're robin to your hair and refreshes you're in driving 60 seconds for different parents, who are launch right now.

And I want to pick you also often hear us talk about water pick waterfall offices world water pick.

In that business were experts waterjet technology, so that technology has been around for almost 50 years and so now we're coming out with with a with a brand new.

First known F.D.A. registered a shower had the inside here is that millions of Americans to assess discuss massage with their doctors and something that war to pick folks are full look into.

So herdez water for wellness <unk> ft, a registered power pulse showerhead.

And if you do we've done nine clinical studies and what those studies palace is that these particular shower heads I sooth muscles, the increase flexibility and they promote better sleep and he's kind of a fun fact, the average salary shower is eight to 12 minutes and what our consumers tell us is that these benefits they start.

Feeling after two minutes using these says showerheads really cool inhibition.

Okay talk a little bit about flawless earlier women are looked are focused on convenient hair removal.

New product from flaw school, new raised for this is waterless whole body hair removal anywhere anytime.

Now a flawless we got a lot of interests and falls on the part of analysts and ER and sure whole issuance give a little bit an update on that.

One major retailer right now the reset has already happened from as seen on TV through the wet shave out and that's happening in a lot of retailers why is that important it's because the traffic and the wet shave vile is four times the traffic in as seen on TV.

So this is once you right now one major retailer in after two weeks. The Pos consumption is up 7%. That's just one major retailer.

We know what kind of wins, we have for 2020 and our total distribution for its going to be up 15% in 2020 and recall if you read in the press release that we expect a flawless fails to be up 15%. In this is part of the underpinning for that.

That is well suited to the new raise your launch we think we're gonna be good shape or for the coming here right. Next up is natural toothpastes are growing 14 times the rate of the toothpaste category. So we're introducing Harman hammer Central's toothpaste two different variants and we've gotten really really good reception for retailers, particularly the drug class of trade.

Next up man this is Trojan condoms wait for it or.

Men wants to ensure their partner is satisfied.

New product called GE spot from my Trojan.

And we have to pay a and add for you.

Hi, good luck.

[noise] Trojan man.

Sure and Shoji condom has unique shape, what does it feel like [noise].

[noise] any questions [noise].

[noise], we always have little fun with that.

Trojan brand by the way whenever we have a meeting for new products, it's them up for Trojan. It's the most well attended meeting in the company. She looked people sitting on the window sills.

All right Vms vitamin we have lots of line extensions coming in 2020, and we're addressing a lot more need states and we've really picked up the pace of innovation for vitamins. If you looked at 17 and 18 can average six new items a year, we had 22 new items since 2019, we got 70 more coming in 2022 many through.

Run through today.

We have more innovation coming in 2020 in other categories. So stay tuned and you'll hear about those later in the or.

And next up is Steve to tell you are Fabulous International story come on up Steve.

Yeah.

All right.

Excellent so I'm pleased to be here to share with you.

The Fabulous Thanks International growth story.

So it's not already talked about he evergreen target for international is 6% per year.

In 2014, we delivered $535 million in South we finished 2019 at $756 million in South the important note here is that we firmly believe that weve reached.

Global scale, there isn't a market that we're not in today and where are we can't reach with ourselves through our existing subsidiary markets or through our GM GE business.

I think even more impressive then the size of the business is that we've tripled the organic growth rate from roughly 3% to about 9%.

So significant.

The larger business tripling the growth rate.

This is important chart that we show every year, but there's some new information here our global markets group is now 33% Oh, the total business.

But the first time it is the largest segment within the international does this.

Followed by Canada, Europe, three countries, Mexico and Australia.

We have grown.

Historically, well above our evergreen target of 6%.

And 29 team.

We hit 9.2%, an outstanding year, and we leave the year with momentum delivering 10.6%. So we feel the wind at our back.

Let's break that down the in a little more detail our subsidiary markets.

Deliberate, 5.2% and AARGM GE business, a whopping 19.2% or.

Our subsidiaries are largely in developed markets. So 5.2% in developed markets. It's really outstanding performance. Our brands are healthy whether they be in emerging markets or G.M. GE or in our subsidiary markets. So we're excited about the performance of both of these businesses.

The G.M. GE business is certainly an engine of growth for the division and for the company.

Since 2014, when we initiated at the start of our new growth strategy for International This business has delivered 19% CAGR throughout its lifecycle and again.

19.

We did 19.2 lot of 19th in there and it's driven by our core brands. So we're driving arm and hammer the chief water pick Dms Oxiclean Star Maher from fresh and now flawless.

We continue to invest in building capabilities around the world as you know you're in a year out I've been up here talking about the investments that we've made and southeast Asia, and then talked about China, We continued to make incremental investments, China Southeast Asia, Germany.

Fast growing market for us in Europe, and in Central America, we've taken the opportunity to localize the content that we give to consumers because these brands need to show up differently market by market. So there are relevant.

We're investing particularly last year end this year and technology, because not talked about speed of decision, making we feel is a differentiator for the company that is also true in these very dynamic international markets.

We invest a lot in our gmg distributor training and regulatory affairs, we want to make sure that our partners in particular markets no as much as we do we provide them innovation.

Case studies they share case studies. So they are an extension of our family and we think that is unique to church and Dwight.

So we're absolutely committed to 6% on organic growth moving forward. We believe we have a runway for our existing brands.

We have demonstrated our ability to grow acquired Brent water put water pick now flawless, our G.M. GE group will continue to post double digit growth.

And we've made investments in fast growing markets that we think we can leverage because we feel that we have scaled global business for the first time, we're going to make a new commitment and that commitment if not only organic growth, but we're going to continue to expand operating margin year in and year out work.

On to take a big step change from 2019 to 2020 and part of our evergreen target is to deliver another 50 bips outgrowth of operating margin expansion and that is on top of any incremental investments that we're going to make a to ensure that we have the capabilities around the world.

So in summary, one.

We have the REIT strategies for growth.

It's demonstrate that we know that too we have brands the consumers love.

Around the world three we built a management team that is outstanding and several of them around the world are here today, so for them I say thank you.

And we feel that we're just starting but there's a lot of runway in international markets for church and Dwight products.

[noise] dropped device [laughter].

That was another blown for you.

[laughter] Wow that was perfect.

Punctuation Mark.

Okay animal productivity.

So back to the algo, 3% algorithm, 2% U.S., 6% international 5% for specialty products.

Well, it's a 5% gonna come from well, we have a ball chemicals business, which is a book sodium bicarbonate and then animal productivity, 6% hasn't been working now free and not very well.

Well, it's talking about why is that.

So I'm just curious wouldn't go slow on this we look at the top of the chart that specialty products Division organic sales growth since 2011, so what do you notice.

You are up in 2011 down and 12 and 13 up in 14 22.6 person down in 15, and 16 up and 17 down 18, and 19 backup and 29 below it.

You say, okay, what was going to milk prices and you can see as milk prices recover.

That's when you was you you see a green for the growth that especially products business.

We knew that a few years ago, you know 2015, we sit here, we've got to start moving into other species and in 2015, 99% of the animal Protiviti business was dairy.

And a you know today, that's not true used to be was 1% nondairy today's 27% nondairy. So we think that we're going to be a flattening this out.

Over time.

Now why do we go into other species well because the demand for protein is simply population growth at some point. Some people. Some point 7 billion people take going to 9.8 billion by the middle of the century.

Antibiotics are out of favor no consumers are telling retailers and farmers had no antibiotics or hormones still chemicals.

And if you look at the stats you see that this 40% decrease and use of animal <unk> probiotic since 2015, so that that bodes well for us because we bought two businesses. One was called Vicor. There was agro biossance they get us into pre Biotics and a custom probiotics we were in the Attritional supplements for dairy, we then got into pre.

Bionics and probiotic. So now we have a nice portfolio for not only dairy cattle swine and poultry.

So as I said before the nondairy business is a 27% of animal productivity today, we think that's gonna have big growth and a 2020.

And do get lots of questions about milk, Hey people razor hands isn't milk consumption in the United States on decline absolutely.

So really this chart here. The per capita consumption in 2015 was 174 pounds and its annually a more recently, it's 164 pounds, but if you look what's going on with cheese big offset to that takes 10 pounds of milk to make one pound cheese and then when it comes at a church and Dwight.

Conferences, you always walk away learn something I didn't know so when you think about milk also think choose cheese is a big offset for the decline in emote production. So the dairy industry does have growth ahead of it.

So we feel do feel good long term about our algorithm or 5% we have the trusted brand the arm <unk> Hammer brand goes across pre Biotics probiotics all of our products. We are aligned with the consumer trend, we're now into multiple species.

And all the growth is ahead of us, particularly internationally.

Right now I want to talk about how we run the company.

It was five operating principles, one we leverage brands, we have 12 brands that account for 80% of revenues profits. These are brands to consumers Love second thing, we've long been a friend of the environment and I'm going to go into old with deeper in a moment and we leverage people, we have highly productive people and the play an environment where people.

Do matter and finally were asset like we leverage our assets. If you do those four things well you're gonna have really good returns because one of our competencies is is identifying.

Acquiring and integrating businesses, we turn or good returns integrate returns because it's set here the brands we have brands consumers love.

As far as a friend of the environment goes so over 100 years ago, we started using recycled paperboard in our cartons and the 900 Seventys. We were the first and we were the only corporate sponsor. The first birthday actually 20 years. Later 1990, we're still the only corporate sponsor a birthday and we were the first to take a phosphates I wondered if surgeon.

More recently, we've been more focused on a green global electricity demand supply by renewable sources, but wind in power and we've been playing lots trees with Arbor day, we all remember from fifth grade science, the trees to carbon dioxide out of the atmosphere in the turn into oxygen.

Right what are some of our goals, we want to reduce water and wastewater by 25% by 2022.

We want to recycle more 75% by the end of this year.

And finally, we want to be carbon neutral, so 100% carbon neutral by 2025, and that's true having green electricity and also planning millions and millions of trees, but that's our goal today, we're at 60% carbon neutral what that means says, we offset 60% of the C O through that we put into the atmosphere.

Okay, and we've been getting some recognition for that as well we regularly show up on lifts the Barents Forbes the EPA list of companies that are faithful to the environment.

All right now the also mentioned highly productive people in a place where people. Matt. This is this is the statistic that is interesting because revenue for employees. So you can see we're in the far right.

We're over 900000 right now on our way to a million dollars per employee and you can see were appears or we think this is this is very representative of how lean the company is into the thing that most people can't tell about any company you invest in is what is the culture and the culture in our company is as follows.

And we talk about this both since inside and outside the company Blue collar.

Hi, aptitude underdogs.

Digitally savvy, we embrace diversity.

And we like taking risks.

<unk> and because we that as the environment within our company and you can't just snap your fingers football rights quite switching create that I didn't create that that's been there for many many years. It's it's the greatest asset to the company and I think that's one of the reasons why we're so successful year after year after year.

No we have tremendous financial literacy within the company most companies will focus on rep refocus on revenue P.S.. We also focused on gross margin and that's 25% of of everyone's annual bonus and when it's in your bonus you ask questions like Hey, what's gross margin and how can we get it because it affects me.

And if so how we get it is we have a good degree program, that's or continuous improvement program.

Continuously optimizing our plants new products are launch with higher gross margins and the products they replaced.

And when we buy businesses, we make him better we expanded gross margins as businesses that we acquire.

We're very simple compensation structure, you can see on the left side of the pie net revenue and if yes, but on a rightside we focus on gross margin, which is on common as a metric <unk> with incentive compensation program a cash from operation operations. We've long described as Celsis of free cash flow Junkies, and we still are all right.

I want to bring a breadth to talk about financials now.

All right. Thanks, Matt Good afternoon. So what are three things were going to be a 2019.

Results for the quarter for the full year and I guess the outlook.

Before we do that will just start with evergreen model a week, because we always do 3% topline growth an 8%. If you ask growth and then the drill down for that is 3% organic sales growth 25 basis points of gross margin expansion.

Flat on marketing as a percent higher dollars typically with revenue growth.

We leveraged yesterday, and we get to 50 basis points of operating margin expansion and an 8% Dps growth. So just that's the backdrop.

So had we do in Q4, you heard from that already sold the release. This morning, 4.4% organic revenue growth domestic was three and a half international was telling the half and SPD for the first time eight quarters was positive organic growth, which is great.

Adjusted gross margin was 170 basis points up I'll walk through the detail that in a minute marketing was up 240 basis points. So that's the highest spend rate we've had in 2019 just.

$37 million more year over year is very significant increase as she and I was up largely because the acquisition Rts I agreement as well as the amortization with that deal.

Adjusted EPS was 55 cents versus the 50 forced on outlook.

So on a revenue basis, the quarters very strong, 4.4% and it was very strong even versus a strong year ago, 4.3%. So on a stack bases, 8.7% you run your eyes across the paid 4.5 in the first quarter 4.9, the second bring a half 4.4, and then 4.4 for the year.

So for the full year like I said 4.4 domestic has a four in front of it that's fantastic as British said 10 of 12 power brands grew share during the year internationally just her from Steve 9% is a great number and then SPD was minus 3%.

Gross margin was up 110 I'll go through the detail gross margin. Another slide marketing was up 10 basis points, that's a greater than or outlook.

Then adjusted yesterday was also up for the same reasons I talked about in the quarter.

<unk> was up 9% to to 47 and cash from operations was up the age 65 up 16% year over year, just a fantastic result, higher cash earnings and an improved working capital, which leads to free cash flow conversion of 128%, which is industry, leading and we have a slide on that.

So gross margin just to walk you through the puts and takes in Q4, plus 60 basis points. So that's really they are we continue to get the benefit from price as well as higher volumes inflation is a 50 basis point drag for the quarter that it has moderated a little bit since earlier in the air from 70 programs are up 110.

Bases points, it's been pretty consistent for the whole year.

On an acquisition. So there's two parts the acquisitions 50 basis points from a owning flawless 10 basis points is because they have a slightly higher gross margin accompany the other 40 basis points is acquisition accounting remember we took that.

ER revenue minus Cogs minus marketing marketing profit, that's one line and net sales for the period of May through October and so when there's no.

Ah offset pure margin.

So gross margin expansion on a reported basis is 170, and then on a comparable basis. It would be 130, so that's the quarter and for the full year. Many of the same things apply a and comparable gross margin expansions plus 70. So just a fantastic year, we raised gross margin I think three times throughout the year.

So on the 2020.

So 6.5% reported sales growth, that's larger than 3.5% for organic plus the flawless NPAC domestic is a 3% international seven and SPD is three that's our outlook for this year for the division's gross margin is up 10 basis points. If you exclude or if you make 2019 comparable with the Uh huh.

Excluding the fall this accounting were up 50 basis points apples to apples marketing is up 10 again, we're investing incrementally behind these brands behind these big launches you you see on the table today as well as Wallace Sta, We're gonna leveraged by 10 basis points and operating margin on a reported basis is a pen ah, but apples to apples up 50 effect.

Tax rates, 21% effective tax rate for 2018 was 21 for 2019. It was slightly below 21 and for 2020, we think it's 21, what does that mean it means Oliver if you ask growth is largely operating income growth.

Yes, a range from seven to nine midpoint is eight and then cash from ops is 890, so as Matt talked about this year as a record we would have a new record for next year.

Okay. So here's some details on the outlook, we start with or 8% Evergreen model, 8% plus 2% accretion for flawless tariff is a minus 1% drag we're getting hit with tariffs for four be hitting flawless and our shower had business.

To the tune of a drag of about 1% on E.P.S. marketing investments for the new launch that's the 10 basis points you guys saw an earlier page and so that's how we get the midpoint of seven to nine eight.

We focus on a gross margin for a long long time, that's a hallmark of this company gross margin as Matt said isn't everyone's bonus gross margin drives cash flow cash flow drives valuation, we had an inflection point and 44.4 in 2018, we recovered nicely in 2019 now we're going to continue to improve in 2020.

So in 2020 here the details a plus 80 basis points as we continue to get some benefits carryover from price and as well as higher volume inflation continues to be a drag of 150 basis points now that's largely I'm pretty much across the board from commodity perspective, I would say commodities are flat to up slightly up.

Some examples for your ethylene is up mid single digits Clay is up high single digits, we have PCR resin as an example, which is high up significantly a if the p. resin is flat. So we have some some headwinds on inflation tariffs are in that isn't that number as well.

It could be programs are up 120, just getting very very consistent with that we've done some great work on the supply chain and then the acquisition I'm kind of making that apples to apples again shows you how gross margin on a reported basis is plus 10 plus 50.

When you say it's comparable.

[noise] match or this slide earlier organic sales growth 10 year trend, 3% to 5%, which is fantastic and 2020, our expectations are no different than 2019 was the first time since 15 that we had a 3.5% outlook and so it's we're proud to say that we're doing that again.

Despite the pull back on a private label and getting out of private label vitamins and a little bit of Oxiclean laundry high promotions.

Okay. So just as important as volume I mean organic revenue growth is how we get there right. So for the last 10 years organic revenue growth is 3.5% our volume growth on average is around 4% you can see on the graph that we kind of inflected in 2019 and volume went down right and price mix went up.

And our outlook for 2023 and half percent.

Organic revenue growth about 50, 50 is going to come from volume versus price mix.

And then marketing spend again is up 10 basis points. We're one of the top 20 advertisers within CPG. So we just have a significant amount of firepower here that we put to use for our brands.

And then I see an eye on a reported basis. It looks like it's gone up for the last few years, but when you strip out the acquisition amortization, it's actually very flattish.

We're just really proud of this in 2020 is gonna be no different we expand we expect a improving leverage yesterday and 2020.

We've had consistent strong adjusted EPS growth, so high single digit double digit the tax reform and again high single digit in 2019 and 20.

So our range of 79% mid point is 8% the peer averages about 1% to 2%.

This is my favorite slide best in class free cash flow conversion. We spent a lot of time on that's because we believe cash flow drives value and church and Dwight in 2018 was 124% free cash flow conversion. That's free cash flow provided by net income the peer average was 85% a lot of companies target 90%.

There's a new slide four here's our history over time, 125% 1500 30 in 1600, 23, and 1700 24 in 18 and a 128% is what we just finished out in 2019 our outlook for 2020 is 119%. We just believe this is what sets <unk> apart from our peer group whose tips.

In the eighties, ninetys or or close to 100.

And how do we do that well we do it a couple different ways. One is really strong cash earnings. The second one is our improving working capital cash conversion cycle. We've gone from 52 days in 2009, all the way down to 18 doubt days and 2020, if you strip out the last two acquisitions. We've done that shows you how good we're doing it at really moving the needle and working capital trying to.

Get down to zero, that's still a goal. So we've gone a if you stripped those two out where it's seven days today or baseline changes because we've added these two new businesses that have a Chinese supply chain. So now we start off at 18, and we'll continue to work through that number but you're going to say that we had great working capital improvement in 19, and we expect no different in 2020.

And we have a very strong balance sheet. We ended the year less than two times Levered 1.9, we expect by they added 2020 to be about one of the half times.

We have six significant financial capacity.

When you're when they have times levered by the year you have the ability to do deals.

Our prioritize uses of free cash flows during the same for many years number one is TSR accretive M&A.

Number two is TSR accretive M&A.

But debt reductions Embratel and that's why we're going to use of cash for a this year number three is MPD and number four is capex for again a growth.

And then mfive is dividends or buybacks.

We're not a capital intensive company, we're bumping up about $90 million next year, and that's still less than 2% of sales.

We have a great dividend increase in 20, 25.5%. This is 119 years consecutively paying a dividend.

And then here is in your slide for you over the last three years, our average in the peer group for dividend annual growth rate is 8% and that's a near the top tier of all of our peer set.

So with that I'll invite the management team up and we'll answer any questions.

Wow.

Well the hands are up the bands not even up here yet.

Okay.

Okay Nick.

I finally beat someone taller and [laughter]. So I guess two questions you know I remember I don't know maybe it was 10 years ago seven years ago.

Compaction was a pretty big deal for church and Dwight from a margin perspective, So I was hoping to get some perspective from you on on the on the new product launch and what that means for shipping costs and just.

Packaging costs, and I think about that and then the second.

Is when it comes a flawless I know, there's kind of conflict between the as seen on TV and and the merchandising aspect and so just thinking longer term is there a plant to like completely migrate this to a in store and digital and on online product, where you don't have that comp because you guys really excellent execution merchandizing display activity. So just was hoping to get some.

Clarity on the long term plan there.

Well I'll take that one first yes them is planned for flawless system migrated from ads as seen on TV brand a completely instead of wet shave out through completely vacate that part of the store because in a lot of stores, it's not in a very attractive place. So if you look at a one major retailers by automotive.

But when we bought it we sit now this is a brand it's going to have legs that long term that it belongs in the wet shave vile and one major retailers getting behind it right now so overtime, that's what you're going to see happening is happening right. Now in 2020. Your other question was about compaction. When compaction happened is when major retail that drove that.

In many years ago, that's not on horizon right now for the industry I mean right right now when would argue that the biggest form of kind of compaction is pots and so that pods at some point if pods at some point plateaus I think it's possible then we would go back to a maybe a major compaction for.

Look larger, Georgia, but that is clearly not on horizon right. Now were you asking the question about that new product. Yeah. That's so we have an <unk>, let's look Britain ticket a swing at that one on what the insight was around that.

Yes, that's.

Right.

I think you're talking about the product I should say E Commerce plate. Okay night. So it's not in mass distribution, because I think I said that you see no ambition to grow an online class of trade because that's what will the consumers go and a lot of shopping happens and currently there's not a good laundry solution there and that's why we've given up this.

Perfect product well that class of trade and we seeing phenomenal results great. Thank you.

Okay Bill.

Yes sticking on the on the laundry side, maybe get first on cleaning simple can you give us a little more color is incremental shelf space. How cannibalistic do you expect it to be and then also.

And maybe it's in the plans, there's not a pod form coming out that gets on the initial launch well. It seems that tide is coming at you with the tide simply version of pods. So maybe the thought behind that of is are you seeing pods in your category start to level out where it's not as important do not see this has begun.

Threat, so any more color built around what the shelf space looks like in how you expect us to interact with the core brand and then also just from the pod standpoint, the competitive launch yeah. So claimants I'll, let Paul come at some point, but claims plain and simple whenever you want to new product and liquid laundry under the arm <unk> Hammer brand, you're going to have some cannibalization, but this one there'll be some kind of.

Mobilization, but net it will be incremental oh to us and we think as well to the category as far as <unk> are we going to move into possible clear and simple we wouldn't disclose what our plans might be with respect to the a clean and simple as a platform could it happen absolutely, but I'll, let the Paul comment as well so retail a reception to claim and simple yeah.

It'll guarded or just in the message is more for competitive reasons than I am avoid your question, but what I would tell you is it with every launch you're gonna about cannibalization there yet incrementality absolutely. This one's a little different though the story on this one of everything British showed in the marketing and the timing what the consumers are looking for the health and wellness front just the other trends going on makes this a very interesting stuff.

Where is your pitching it to get incremental space different space display space other things in the store I would tell you its happening as we speak right now the reset so I don't want to give away what others are doing but I'd encourage you. The next couple of weeks to get out at retail loved it retail with Ya and show you first hand, this one's a little different I would also tell you on the on the the insights.

Front, we believe this isn't just looking at a consumer within our set today buying another yellow bottle. A this is going to get some attention on shelf from maybe you're not buying it today. This is going to bring you in the clean and simple the marketing grid has got behind it you just saw a fraction of it today and the shopper marketing, we're doing with retailers gonna be a little special so at.

Good I'm in a temporary.

Capillary here, but love to talk more on this.

Okay Rupesh.

So I guess it just my first question with flawless. So just curious what drove the shortfall in Q4 and as you look to this year just wanted to get a sense. It seems like distribution driving all the growth, but just want to get to get a sense that philosophy. The contributor I mean also do you expect any inventory adjustments yeah. So in the fourth quarter.

After we were down a year over year. Some business was $180 million in 2018 was under 86 in 2019, we bought the business. We thought it would be higher body ended the year. We know wives couple of things. We disclosed we had an issue with one large retailer and Beth and beyond and we also delayed a launch into a 2020.

Now as far as the consumption goes consensus was down significantly in the in the fourth quarter, we expect that to continue but to start to recover in the first quarter and by the time, we get to the second quarter when the new launch and also the the new distribution, we expect consumption in measured channels, because remember mystery sounds and this could do this for this.

Category is less than 50%, but you'll start to see in measured channels a year over year increase when we think it's going to build from Q2 Q3 Q4, but think a lot of the growth is is ahead of us starting in Q2 as result of the the the new razor yet I would I would just add.

I would just add to that from an organic growth perspective, right, we're calling 50 basis points. The tailwind from from flawless a in Q1, we think it'll be flat to slightly down and but a pretty much 90 to 100 basis points tailwinds in the second half that's how you get a 50 basis points for the full year for organic.

Okay, Great and then.

Not giving own <unk>, yeah, one quick one so just in your guidance what are you assuming for their promotional environment.

Yeah, the pursuit of promotional environments, we've talked about on every quarter and as many of you know the promotional armor generally talking about the household son of the house and not a personal care and we see how sort so my laundry and when we're talking about litter.

Take litter first a the litter category is pretty tame right now as far as the promotional environment. So if you look at the you know sequentially. The it was pretty much flattish and even year over year, There's no story there so.

We see good stead as you go and litter you Gotta keep in mind is that.

In the litter category. These hard fought price increases it's unlikely that the suppliers, who want to deal with that the hard won a increase back to the consumer so I wouldn't expect that to change in 2020 laundry same story Q4 was our lowest quarter of the year.

25% sold on deal.

And you know the category was at 35% and liquid laundry is a little bit higher was 37% sold on deal, but I'm you know to two big suppliers would be attrition Dwight and and Henkel both down sequentially from Q2 part of Q3 to Q4, Procter <unk> was up to that kind of filled the void.

In the and the promotional space, but we expect that to continue in 2020.

Your next.

Yeah.

Okay. Thank you just on that [noise], sorry, 3.5% organic growth like into your exiting that just sat isn't that of the vitamin so the vitamin business in private label is that going to be I'm I'm, assuming that growth was more dilutive to you'll go for a who is actually going for.

Faster, so that 3.5% on more continuing spaces like a floor is not small relative to <unk> to make too much yeah I'll take a swing of this and then Rick can jump in yeah. So while we call it 3.5% for 20 Bonnie.

Our run rate in the second half of 2019 as a company is 4%.

Hey, that's going to accelerate by 50 basis points because it flows from for the four and a half were 100 basis points going the other way for two reasons, one exiting private label vitamins number two were continuing to pull back on Oxiclean promotions now with 100 basis points, the lions share of that as the vitamin business.

We have stepped up our innovation over the last couple of years in vitamins. If you saw the slide that we had earlier you'll see if you know if you went back to a.

16, and 17 like six new launches a year 18 or <unk> for me 19, we had a 22 new launches next we wouldn't have 17 watches so but this is.

The right time to exit or private label it came into the company with the acquisition and it's a lower margin and we think it's its time.

Yeah, I would I would just bad that that business was flattish the private label business for vitamins wasn't declining or anything like that we would we just felt that that was in the right strategic choice for the company. So we decided to proactively get out of it and that is adding that is accretive tomorrow.

Right on X intend that business or that's not yeah. It's when you think about the scale and the size of that business right. We're you know if we give you a sense of it for saying 100 basis points is going down for those two things maybe two thirds of that is the private label and one third of that's the laundry stuff.

So any impact on margins pretty minimal and following up on Bill's question. If I may on the Cleveland simple is that a marching and created a innovation or in the meantime.

You might have like what is the price point that you are positioning it at this point.

It probably want to take the swing at their price points.

The price points. This is gonna be right in line with our existing lineup. So just as bring it was talking about the efficacy and you being equal that's how it'll show up a shelf as well and that's a really big message that our retailers some really resonated with them that it was gonna be line priced and then from a margin basis. So we wouldn't really say much but it's at brand average your one we have.

Of course, a cost Oh, you know to drive volume for Incrementality.

Okay Joe.

Thanks, just want to get a bit more color on the increase in marketing spend obviously, a big in the fourth quarter and it sounds like you're looking for about a point of headwind on E.P.S. gross a in 2020, what's driving the increase is it bigger new launches and what particular brands.

Is it going behind in our you'd shifting dollars away from promo into marketing.

There's a question with respect to fourth quarter fourth quarter, and 2020 as well, okay, well fourth quarter. We <unk>, we could see what was coming we are doing well on topline and gross margin. So we had a chance to reinvest both in marketing and an S. You know we call that all places we invested in as you know so obviously, we're able to throw a lot of money behind on the brands that.

And that always helps you going into the new year as your question about about 2020 is that the 10 basis points uptick.

Yeah more so the point of Vps side when that respect. It's just comes from launches the 10 basis points does represent the 1% Rep, yes drag and it's really for the new launches right. The one on the table a really good behind that a big way.

The new the new razor for falls, we could buy that a big way and then maybe bring if you want to talk about yes, we have a couple of exciting product as you saw so for example, the Keystone we are category leader and that's you've seen this huge household penetration opportunity. It's something you have types are we going to spend some money on educating consumers about can you.

Wait, particularly women with currently in dry here and maybe one more AD I. Just thought of is we showed you household penetration for water pick.

In the U.S. versus internationally and we found that it's very responsive to advertising and so now we're gonna start rolling that out.

And your up in Canada, and Australia, so that marketing investments happening globally as well.

Just one for Steve the increase in operating margin for international this year, it's pretty big is that coming from sales leverage amongst other things or.

Cost savings programs, what's driving that.

Yeah. So I think there's a couple of things we had some expense into year that we're not going to recover we feel like we've made investments on top of that that we're not going to repeat again in next year I would say, that's that's a large part of that and there's some mix as well.

Hi, Thanks.

Okay Steve.

So I to the question for Steve, but something Rick said earlier prompted to another question.

Why would flawless had any impact on organic regardless of what it does in the first quarter given that you didn't owner to a year ago. It doesn't I was trying to give you a sense that on a reported basis in Q1 that it would be flat to down the organic impact a is 50 basis points for the full year, but all that in the second half you ever 100 basis.

Okay, perfect and then internationally.

Maybe you could you give a lot going on but maybe could rank order. The the growth initiatives you have on on top three <unk>, whether you think about it by brand by geography or by category and then as you think forward with the commitment some margin expansion as an evergreen does that does that inhibit your ability to to kind of press on growth as you had been or should we expect some do so.

Conversation deceleration back down toward that evergreens six ish level.

No we feel really confident I mean, we see a the business accelerating as you saw in a 2019 and we see that continuing into 2020 again with less requirement for investments because we think we have the right kind of staffing level and each one of the region.

China was a big investment over the last couple of years, we built our own team in China, possibly spent money on slotting getting product into that market. So we think all of that whether it be and Latin America, which has been growing very nicely for us and in Asia Pac would that be China or south.

East Asia, we've made a lot investments in the past and now we think we can reap the benefits of continued strong organic growth without those investments repeating that's just that's why we feel so confident that we can continue to deliver on the operating margin because we're gonna get leverage in the piano.

So we can get that on marketing and we're going to get that on S. DNA for sure.

It is the growth investments skewed anywhere I mean are you more excited about emerging markets about you know with the funny thing ruinous here. He runs our G.M. GE business and he would say this year, we had strong growth in.

EMEA and Latin American Latin America is smaller for us that fast growing we've made those investments in China. We saw very strong China growth in 2019, and we expect strong growth in southeast Asia as well.

Asia in particular, we see is real growth engine long term for the kind of for the company because we're just still young and small but growing fast.

Okay swing to the said until the Kevin.

Perfect Kevin Grundy Jefferies I had a question on international as well so it works out so connecting the dots just to sort of pick up where you left off there Steve given that why the implied deceleration in the outlook for international and I don't want to diminish 7%, which is outstanding but you guys haven't done a seven.

In the past five years in the region to now you have a presence in China. So I'm just trying to trying to connect the dots with that and then more broadly maybe Matt you can chime in the Rowan M&A and how you potentially see that longer term and growing your international business in the last just slip from a capital planning perspective.

When do certain markets you potentially consider moving them from the export model to the subsidiary model, what sort of like the tipping point, how do you think about that and implications from from a from a income statement and from balance sheet perspective.

Good try remember all that [laughter], let's start off with a.

The current year. So we have an algorithm of a 6% the annually. So we always go back to that can we sustain 6% Europe, the or the year and a if you look at what receives from doing in international was added to sit hitting out of the park and so now we know we got to we've got a big plan for this year you might see your sad because it's not 9% but ER.

You know, we're not a company that's going to give way out over our skis, but we think we got a strong a plan for it for for for 2020, we don't view that as a deceleration. We look at that is we're consistently now delivering above our algorithm.

You asked a question about international inbound so we have done some M&A internationally over the past few years fiscal was with his international brand a water pack had some international as well we bought the and useful brand from Jane Jay and so we putting up in a lot effort behind those and we get a lot of traction.

So Steve and his gang have done a great job thinking those three to international markets. So we're continually scanning for things to weaken we can acquire and we can put it into into our infrastructure and leverage it but we're pretty fussy about what we're going to buy and as you know you get a third one though the third question. There was one is a tip too.

To go direct yes, okay, I've gotten Steve can say what was done in Germany.

Yeah. So we look at markets of where we can go direct and it really is all about SGN elaborate show how concentrated is the retail environment and in Germany. It's quite concentrated so we're able to go direct in Germany, and managed SAP T. and now so we get returns fast I to bodies down here.

There are pretty disciplined about spending and returns as you can imagine.

So you really need like a 20 to one relationship in terms of S. DNA investment to sales growth and so where the markets are young and highly fragmented from a retail environment. It takes a lot more asked you need to make that happen. So we know the underlying economic model for us, but we need to have.

Just shift from an export markets or to a subsidiary market and we'll make those calls as we see fit.

But that is not required for us to hit our evergreen target.

Okay, Alright same table Jason.

Good afternoon, and thank you [laughter] up to two very different topics for questions first sticking on international, but where the supply chain angle.

Can you update us on the status of tariffs on your supply chain and also whether or not we should be cogs or be considering any risk related to the krona virus in terms of supply and manufacturing of whether it be the water pick or I'm not sure where it falls is manufactured whether we should be cognizant of that as well second is on.

Private label can you size Oh, the 100 Bips drag how much of it is from the private label exit any reason to think that that may actually suck some capacity out of the industry and help your branded side and is there also maybe on the other side of that risk, presumably a good time to actually it would've been five years ago. When you are spending a lot of money.

To add capacity.

I imagine you chose not to because there was a risk to other two it.

Is it if assuming that's the case then why is that they're no longer that risk.

Let's start with a with China.

So.

We are well aware of what's going on trying out right now with the virus.

So we have checked with our suppliers are both of 'em finished products and those would be things like a flawless and spinbrush and water pick and right now it looks like because it extension of the Chinese new year. This is going to be a one maybe two week delay in start up of those Oh those manufacturing.

Sites.

But because of our our safety stock you know what's on the water and Phil. So you can overcome some of a a delay like that with the airfreight.

We don't see a risk right now with what we know right now to a two quarter call. That's in the <unk> it sooner in the release.

Good on them.

And then on tariffs I would I tried to talk about in my prepared remarks little bit, but that 1% drag on if you asked his parents that's really the for be list that went into effect on December 15th we're getting hit on shower heads and flawless. So you can do the math on what about you know I won't.

<unk> 's Dragons puts a couple of cents and ER and then your other question on private label bought vitamins and 100 basis points decline inorganic growth I had said about 60% is because the private label vitamin begin to exit rights to your process 60, Bips of the hundred is from Pretzel vitamins and I don't know.

Rick if you want us anything else about the supply chain in China or it could.

Matt Matt pretty much company, we're working very closely with our suppliers and die and what we know so far is that the one to two week delay that Matt referenced on starting up after Chinese new year, Oh, we have ample safety stocks don't anticipate immaterial impact to Q1, <unk>, but it's something we'll continue to monitor on regular basis.

Okay.

Right.

Okay, we have in your hand for awhile.

Thanks wanting to talk about your different categories and just to stay in a competition in laundry and cat litter and then also your expectations for fiscal 2000, <unk> between volume versus price mix I couldn't hear the very first part of it laundry and a cat litter and the company state of competition.

The state of competition in the laundry and litter category, Okay, well I mean, you saw the the chart with respect to shares and in laundry and we had a great year laundry Harman Hammer was up extra for first time I have a long time, well you know held share a little bit and oxiclean.

We lost some share but that was as expected because we pulled back on promotions. You also saw from the chart the dynamics over the last three years, but who's winning and whose struggling.

We think we have an unfair competitive advantage in laundry detergent, because we have a value brand, it's advertised which is harman hammer.

And our members a billion dollars Brent crude if you go across all of our categories and extra we've done a wonderful job positioning that I'm product against Sun over the last couple of years and we continue to win or distribute distribution. So that it we've got a long term plan and we aim to be that the the number two supplier of laundry detergent.

At some point in the litter category. It literally is a function of innovation and we had been the innovator in that category for many many years and we think that overtime that it's going to bode well for us as far as growing share in the future I've commented earlier about the promotional environment that's pretty much.

Tepid I would say in both categories I don't expect that to change in litter as Ray said, because you're not going to deal back your price increases and I do think that the reduction in the amount sold on deal and the laundry category. It's really a de facto price increase werent list price increases in laundry, but the pullback and promotions.

As a group you know over overtime is the fact that increase in price and improve improves margins. So yeah, Hey, Matt you want to talk about just how we advertised oxi laundry and with this down to the additives category you can do them, yeah, well, sometimes myopically. We just look at hey, oxi laundry is down a little bit in share, but we you know really just like a broader base.

I should say since we launched Oxiclean laundry, we've gone from a 42 share an additive to 56 year at its additive. So we're really happy with our Oxiclean.

Megabrands, Yeah, I hope everybody I paid attention to that so if you go back and say Wow, you know oxiclean launch into a premium laundry detergent and were sad because it didn't work out no.

So in in stain fighters, we had a 42% market share when we launched oxiclean over in liquid laundry went from 42%, 56% today. So all that effort paid off and supplemental we're making a lot more money today. So that that brand is is alive and well.

Can I had some thing so you see multifamily you highlight here. This is good sorry, it's pylon, yeah, well I love that brands I have to talk about brands.

Nothing you've seen the more power to you and what it does spots. We now have a similar and that's work you magic on Oxiclean, which is equally working extremely well across the different components of oxiclean. So it's oh, we have several very clear evidence the lift softer we advertise and then it's across the different sub segments of Oxiclean is.

Well, so I'm very confident.

Also test that Oxiclean is a very strong brand do we continue to grow.

Okay.

All right.

It's like we might be done.

Our hates it when thank everybody for comment today that we have great questions and I look forward to talked at the end of first quarter.

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