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The Clorox Company (NYSE:CLX)

Q3 2008 Earnings Call

May 1, 2008 at 1:30 pm ET

Executives

Steve Austenfeld - Vice President of Investor Relations

Don Knauss - Chairman and CEO

Larry Peiros - Executive Vice President and Chief Operating Officer of Clorox North America

Dan Heinrich - Chief Financial Officer

Analysts

Chris Ferrara - Merrill Lynch

Bill Schmitz - Deutsche Bank

Ali Dibadj - Sanford Bernstein

Filippe Goossens - Credit Suisse

Lauren Lieberman - Lehman Brothers

Bill Pecoriello - Morgan Stanley

Connie Maneaty - BMO Capital Markets

Virginia Chambliss - JP Morgan

Andrew Sawyer - Goldman Sachs

Alice Longley - Buckingham Research

Wendy Nicholson - Citi Investment

John Faucher - JP Morgan

Jason Gere - Wachovia Capital Markets

Operator

Good day, ladies and gentlemen, and welcome to The Clorox Company Fiscal Year 2008 Third Quarter Earnings Release Conference Call. At this time, all participants are in a listen-only mode. At the conclusion of our prepared remarks, we will conduct a question-and-answer session. (Operator Instructions). As a reminder, today’s call is being recorded.

I would now like to introduce your host for today’s conference call, Mr. Steve Austenfeld, Vice President of Investor Relations for The Clorox Company. Mr. Austenfeld, you may begin your conference.

Steve Austenfeld - Vice President of Investor Relations

Great, thanks. Welcome everyone and thank you for joining Clorox’s third quarter conference call. On the call with me today are Don Knauss, Clorox’s Chairman and CEO; Larry Peiros, Executive Vice President and Chief Operating Officer of Clorox North America; and Dan Heinrich, our Chief Financial Officer. We’re broadcasting this call over the Internet and a replay of the call will be available for seven days at our website, thecloroxcompany.com.

Let me remind you that on today’s call we will refer to certain non-GAAP financial measures including but not limited to free cash flow, EBIT margin, and economic profit. Management believes that providing insights on these measures enables investors to better understand and analyze our ongoing results of operations. Reconciliation with the most directly comparable financial measures determined in accordance with GAAP can be found in today’s press release, this webcast, prepared remarks or supplemental information available in the financial results area of our website, as well as in our filings with the SEC. In particular, it may be helpful to refer to tables located at the end of this morning’s earnings release.

Lastly, please recognize that today’s discussion contains forward-looking statements. Actual results could differ materially from management’s expectations. Please review our most recent 10-K filing with the SEC and our other SEC filings for a description of important factors that could cause results to differ materially from management’s expectations.

With that, let me turn it over to Larry.

Larry Peiros - Executive Vice President and Chief Operating Officer of Clorox North America

Thanks Steve. Good morning or good afternoon to those of you on the call. As you saw in the press release, Q3 was a challenging quarter given commodity cost pressures and a troubled economy. Sales grew strongly on top of a high year ago base (inaudible) pricing, improved mix and generated significant cost savings. Margins, however, declined given the acute increases in energy and raw materials. All in all, we feel good about the progress we are making in a very difficult environment.

I'm going to focus my comments on volume and sales and provide perspective on what drove our top line. Dan will cover details of the P&L as well as our fiscal ’09 outlook. Finally, Don will provide a summary and wrap up before opening up for questions.

Overall we are very pleased with the strong Q3 sales growth given that we are lapping a 7% gain in the year ago quarter. Q3 sales were up 9%. Our base business sales growth was about 5%, the high side of our 3 to 5% target range. The other 4 point of sales growth was from the Burt’s Bees acquisition and the bleach acquisition in Latin America.

Turning to volume, total company volume was up 4% with essentially all of the volume gains coming from the acquisitions. Our base business was only up slightly but was actually inline with our expectation given a year ago quarter of 8% volume growth as well as the negative impact of pricing and volume. The negative pricing impact has general has been only a percent or two and the increased revenues more than offset the volume softness on the sales volume.

In Q3, we supported our brands with strong advertising programs as well as increased rate spending to address a highly competitive marketplace. Advertising for the quarter came in at 9.1% of sales within our targeted 9 to 10% range. Our shares in US track channels held steady overall despite continued economic pressure on consumers. Our combined US categories were a bit soft showing about a 2% decline versus the year ago period.

Private label share in our category was up slightly about three-tenths of a share point to just over a 15% share. But our branch grew share in each of the three categories that had the highest private level presence, [hyper-coated] bleach, trash bags and charcoal. Returning to the sales story, the 5 points of base print sales growth reflects about 1.5 points from foreign exchange, benefits from pricing and mix and a slight offset due to the exit from a private label food bag business.

Sales growth was broad based with nine of our 12 businesses showing positive results in the quarter. Our Brita business had its strongest quarter in several years, with very strong double digit volume and sales growth propelled by sustainability tail winds. The filter for good partnership with reusable water bottles has been a terrific success with visitors to the filter for good website pledging to save more that 66 million plastic water bottles.

Our cat litter business continues to deliver very strong results with all time record shipments of Fresh Steps scoopable litter. As a result on the Fresh Expressions cat litter introduced in January are promising. Fresh Expressions is a highly fragranced line of cat litter that builds on our activated carbon odor elimination platform.

Our largest business homecare grew sales and share behind the success of Green Works. The Sierra Club’s logo is not featured in all Green Works’ product to celebrate our unique alliance with this environmental advocacy group. We are significantly ahead of our expectations on this new brand launch and saw a lot of exciting activities in April in support of Earth Day.

Natural cleaners have more than doubled in size and Green Works has quickly become the number one selling brand with over a 40% share. In Q3, Green Works accounted for over a point of total company sales contributing to the strong 5% increase in base sales growth.

While Green Works drove our homecare business, we did see a bit of a decline in Clorox disinfecting wipes, which lacked a quarter with extraordinary 40% growth. Clorox Wipes is still a growth business for us with high single digit growth fiscal year-to-date. Moreover, we have successfully defended that business in a highly competitive category and had maintained strong share leadership.

Our Glad business was down in volume, but grew sales behind pricing and our continuos focus in driving trade up to ForceFlex premium trash bags. In the quarter, ForceFlex volume grew more than 20% while our base trash business declined more than 20%. Most of this mix effect took place in the club channel, which does not show up in direct shares. Premium trash bags now account for over 50% of our total Glad trash sales.

Our seasonal businesses Kingsford charcoal and auto-care were negatively impacted by bad early season weather versus very good weather in the year ago quarter. Both were down volume and sales while our both businesses were up in share because of subcategories.

It's not unusual for us to see weathering patterns affect a quarter, but we typically see the weather impact net after neutral over the course of a full season. We’re optimistic that we'll see improved results in Q4.

With respect to our new grocery initiative, we did not see a pickup in the grocery channel in Q3. Sales in grocery declined 2% versus the year ago period compared to the 3% increase we saw in the first half of the year. However, our fiscal year to date performance is one on one index, which is a 5 point turnaround from the last three year trend. We will continue to focus on grocery and anticipate improved results as the new resources get fully deployed.

Turning to international, we delivered 14% sales growth on top of the 16% sales increase in the year ago period. Sales were driven by both core volume growth and the bleach business acquisition as well as pricing and very favorable foreign exchange rates. Categories remain healthy, growing at double digits and our shares in core categories held steady. Latin American sales were up more than 20%. We also grew double digits in Australia and New Zealand businesses and saw a modest increase in sales in the smaller Asia business.

On the acquisition front, I already mentioned that the bleach acquisition added to our volume growth in Latin America. We've now fully anniversaried the bleach acquisition in all geographies and feel very good about our results behind this bolt-on addition. We are ahead of our financial objectives and are confident that we now have a new platform for growth in the five countries impacted.

Burt's Bees has been a very exciting addition to the portfolio. The business exceeded plan with 28% sales growth and enjoyed significant share growth in several key segments, including lips, skin, face, and baby. The launch of lip balm at Wal-Mart continues on track and we will be operating a full line of Burt's products in select Wal-Mart stores. The brand rolled out its first national advertisement support in February and executed several successful product launches including lip gloss, body wash, and a naturally ageless skin care line.

Looking forward, we're confident that we can continue to exceed our sales objectives despite a difficult economic environment. Key for us is providing solid advertising support on our brands and driving innovation and trade out to improve our mix. For the full fiscal '08 year, we anticipate 8 and 9% sales growth including the benefits of the bleach and Burt's Bees acquisitions.

Longer term, we will be taking additional pricing given the current commodity and energy cost projections. As a reminder, we have already increased prices in fiscal 2008 on a number of brands and recently announced a price increase on Pine-Sol cleaner. Our new pricing actions will be announced shortly and will be effective during Q1 in next fiscal year.

We are using our proven models to accurately predict consumer reaction and carefully execute pricing and marketing plans in a way that will minimize any negative volume impact. We are well aware of the pressure the current economic environment is putting on the consumer, but given escalating costs we believe taking further pricing is both necessary and appropriate. The marketplace should support the pricing and we do not anticipate that there will be a substantial increasing consumers trading down to less expensive brand.

I'm happy to report that we are successfully expanding Green Works into Canada, Mexico, with Puerto Rico and away from home market. We will further build on our Green Works success with a new Green Works launch into dish washing liquids. This is a premium niche product for consumers that want to trade up to a natural product that delivers strong performance. Shipments will begin in Q1 of next fiscal year. We will also launch a two times concentrated version of Clorox 2 in July, following on the footsteps of the (inaudible).

With that, I’ll turn it over to Dan.

Dan Heinrich – Chief Financing Officer

Thank you, Larry. I will review our third quarter financial results and our updated financial outlook for fiscal year 2008. I will also cover our initial financial outlook for fiscal year 2009.

For the quarter, we delivered $0.71 in diluted EPS. The $0.71 includes the $0.05 impact from Burt's Bees solution and a $0.08 impact from restructuring charges. Adjusting for those two items, our base diluted EPS was $0.84. In the year ago quarter, we delivered $0.84 in diluted EPS. Excluding the $0.06 impact from restructuring the asset impairment charges in the year ago period, we delivered $0.90 in diluted EPS.

The biggest challenge we faced in the quarter was commodities and energy costs. While I believe we are managing very well through a very volatile commodity cost environment, we did see a significant year-over-year negative impact on our gross margins from commodity and energy cost increases that were only partially offset by pricing, cost savings mix and other factors.

Our gross margin was also impacted by restructuring charges in the purchase accounting step-up impact on Burt’s Bees inventories. While our gross margin is down significantly for the quarter, the commodity impact and our gross margin results are essentially inline with what we had anticipated.

Overall, gross margin for the quarter declined 350 basis points to 39.8% compared with 43.3% in the year ago quarter. Excluding the impact from restructuring charges and the purchase accounting step-up in Burt’s Bees inventory values included in the cost of goods sold, our third quarter gross margin was 41.8% or down 150 basis points versus the year ago period. A reconciliation of the gross margin change was provided with this morning’s press release. Total cost savings for the quarter were $24 million with $19 million reflected in gross margin and 5 million in other parts of the P&L.

Selling and administrative expense increased about $20 million versus the year ago quarter. A little more than half of the increase is related to the acquisition of Burt’s Bees and the bleach acquisitions and the balance is primarily due to increased commissions from higher sales, the impact of foreign exchange, and incremental investments in the grocery channel and other strategic initiatives among other factors.

Third quarter restructuring came in at $17 million, which is slightly higher than what we had estimated for the quarter due to timing. Of the $17 million in total restructuring charges $10 million are reflected in gross margin and $7 million on the restructuring line of the income statement. About $14 million of the charges are non cash.

This morning, we provided our updated fiscal year 2008 financial outlook. As Larry discussed, we now anticipate 8 to 9% sales growth. This range includes 5 to 6% base business growth and about 3 points of full year growth from acquisitions.

As we've previously communicated, our financial outlook anticipates continued pressure on gross margins from commodities and energy cost increases, as well as normal inflationary pressures from manufacturing and logistics cost increases.

For the full fiscal year, we now anticipate a total year-over-year increase in commodities and diesel costs in the range of $125 million to $135 million an increase from our previous outlook of $120 to $130 million. Through the end of the third quarter, we have seen about $80 million in total commodity and diesel cost increases this fiscal year. The anticipated dollar impact of commodities and diesel cost increases in the fourth quarter will be in the range of 45 million to $55 million which is higher than the third quarter impact.

We have anticipated that we would begin to see some declines in the resin cost in the back half of the fiscal year, albeit starting from higher price levels in previously envisioned. With continuing rapid increases in oil prices and the further weakening in the US dollar, we no longer anticipate a softening of resin prices during this fiscal year. Overtime, we continue to believe that resin prices will begin to decline. However, we are not anticipating seeing that trend start until we get into fiscal year 2009. We also anticipate continuing pressure from agricultural related commodity prices.

Our full year gross margins are also being impacted by restructuring related charges. Our full year outlook for restructuring related charges remains unchanged at 58 to $60 million or about $0.25 to $0.26 diluted EPS. About 22 to $23 million of the total restructuring charges will be included in gross margin. For the fourth quarter, we anticipate slightly lower restructuring charges in the range of 9 to $11 million with about 7 to 8 million reflected in gross margin.

Additionally, our fiscal year gross margin outlook includes about $19 million from the purchase accounting step-up in inventory values associated with the Burt’s Bees acquisition. All of the inventory adjustments have flowed through cost to goods sold by the end of the third quarter and we will not see any further impact in the fourth quarter.

On prior calls, we've discussed with you the various actions we're pursuing to mitigate the impact of commodity and diesel cost increases on gross margin. We are taking price increases on a number of products impacted by higher commodity costs. We continue to aggressively pursue our cost savings initiatives. We realize a margin accretion from favorable product mix, new products and the Burt's Bees acquisition. And we're pursuing trade spending efficiencies and are benefiting from appreciation of foreign currency.

For the full fiscal year we anticipate significant gross margin benefit from price increases. We also anticipate about 85 to $90 million in benefits from our cost savings initiative. The 85 to $90 million cost savings range is somewhat lower than stretched target of the $100 million we set for ourselves during the fiscal year. But at the higher end of our original 80 to $90 million target range.

The short fall of this stretched target of $100 million is primarily due to the timing of when the cost savings will be realized. Our overall pipeline for cost savings remains robust and we continue to anticipate strong margin contributions from cost savings in the future.

While we have been able to offset a significant portion of the commodity and other cost increases, we will see an overall decline in gross margin for fiscal year 2008. We now anticipate full year diluted EPS in the range $3.20 to $3.28. This updated range includes anticipated restructuring charges in the range of 25 to $0.26 and lower dilution from the Burt's Bees acquisition, which we now anticipate will be in the range of $0.09 to $0.11.

With that updated financial outlook for fiscal year 2008, as a backdrop, I'll now discuss our initial financial outlook for fiscal year 2009, which commences on July 1st. As a remainder, this is the first time we have provided our outlook on the upcoming fiscal year.

We anticipate total sales growth for the fiscal year in the range of 6 to 8%. This anticipated sales growth range includes about 4 to 6% coming from our base business, which is somewhat ahead of our long-term target of 3 to 5% primarily due to a greater impact from pricing actions.

Price increases will likely have a near-term negative impact on volume growth, but will have a positive effect on total sales growth. Also included in our base business sales growth range is the negative impact from exiting our private label food bag business, our outlook for the impact of foreign currencies and about two points of incremental growth from new product innovation, including the incremental contribution from Green Works.

Our 6 to 8% total sales growth target range includes a little more than 2 points of growth from Burt's Bees. The Burt’s Bees sales growth impact will be primarily reflected in the first half of this fiscal year as we will anniversary the acquisition in December 2008.

Our outlook for gross margin anticipate higher year-over-year commodity and energy costs particularly in the first half of the year. Particularly for resin and agricultural commodities.

We do anticipate declines in resin prices due to anticipated softening demand in the United States and the influence of longer term resin production capacity increases in the Middle East. However, commodity and energy markets remain extremely volatile.

For the fiscal year we anticipate modest gross margin expansion. Cost pressures include our outlook for commodities, diesel and energy costs, as well as other normal cost increases and inflationary pressure related to manufacturing, logistics, wages, benefits and other factors. We anticipate more than offsetting those cost pressures to cost savings, trade spending efficiencies, the benefits of price increases and other factors.

Gross margin and EPS are also benefiting from the impact of Burt’s Bees, which is anticipated to be gross margin accretive and slightly accretive to EPS. We anticipate gross margin expansion will be weighted more heavily to the back half of the fiscal year.

Our outlook anticipates about 100 to $120 million in commodity and diesel cost increases for the fiscal year 2009 based on our current view of oil, resin, agricultural and other commodities. Our outlook also assumes that we’ll price to recover most of the anticipated commodity cost increases for the fiscal year. Our cost savings target for fiscal 2009 is in the range of 90 to $100 million. We are always looking to do more on the cost savings front and we’ll consider even more price increases if wanted.

Our outlook for fiscal year 2009 restructuring related chares is 20 to $25 million or about $0.09 to $0.12 diluted EPS primarily related to the previously announced consolidation of our manufacturing networks and the exit of our private label food bag business. We anticipate consolidation of our manufacturing networks and the other actions we’re taking to generate ongoing cost savings of about 22 to $24 million when fully phased in.

Our tax rate for the fiscal year is anticipated to be in the range of 34 to 35%. For the fiscal year, we anticipate weighted average diluted shares outstanding of about 142 million. Net of these factors, our outlook for fiscal year 2009 diluted earnings per share is $3.75 and $3.90.

With that let me now turn it over to Don.

Don Knauss – Chairman and Chief Executive Officer

Thank you, Dan. I’d like to give you all my perspective on our business results and of course the outlook and progress against our centennial strategy. Now starting with our third quarter within the context of commodity cost increases and the environment, consumers out there are facing -- I do really feel good about our overall results for the quarter and where we are now.

We obviously had solid base growth especially given the 7% growth we were lapping from last year including 8% volume growth. And our investment, innovation of growth with Green Works and Burt Bees are certainly tracking ahead of plan and we are continuing to gain traction with our focus on the consumer mega trends that I talk about over the last year.

In short, I would say our strategy is working. Our centennial strategy's key focus has always been the acceleration of profitable top line growth. And I think the most important foot point for our strategy are the 5 to 6% base growth in this year’s outlook and also the 4 to 6% base growth outlook for fiscal year 2009.

This is the first time in years that our company has changed our long standing base growth target of 3 to 5%. And I think the 5 to 6% base growth this year and the 4 to 6% forecast for next year speak to our confidence and our innovation pipeline, our new participation in faster growing categories that are margin accretive and our growing relevance with our customers.

And let me talk a little about that last point. As we accelerate growth we gain more customer relevance. Obviously, our customers like top brands and products that sell. As we gain relevance what we are finding is the fundamentals of our business improve with the point of purchase where a lot of the purchase decisions are made in our categories. And what results from that is better assortment on the shelf, increased shelf space and more impact for merchandising and that is the virtue with cycle we are starting to see now in our business.

Now despite those very positive top line trends and obviously the near-term profit when we are facing are reality for Clorox and obviously many of the other companies that are out there. And I think we have done a very good job of managing the cost pressure with our focus on addressing them through cost savings, price increases and improved mix by focusing on higher margin brands like Brita and Glad, ForceFlex.

At the same time and as we have said before, we are committed to taking a long-term view of the business and continuing to invest in our brand. We are continuing to deliver against our centennial strategy and do the things we believe will drive economic profit growth and value for our shareholders over the long-term.

Now with that as some context, we will like to give a little more texture around our centennial strategy. As I've talked about in previous calls with all of you, one of our key growth agendas is focusing on these consumer mega trend of sustainability, health and wellness, convenience, and then there is more multi-cultural marketplace we are seeing not only in this country but around the world.

I would like just to take a moment to touch on a couple of them. On sustainability: sustainability has proven to be in a especially strong consumer trend and we continue to be very pleased with the results we are experiencing as we leverage it across several parts of our business, including Burt Bees, Brita, Green Works, as well as several of our other new products.

And on the health and wellness front our bleach acquisition has enabled us to begin establishing in five more countries a health and wellness platform like we have in Tier-1 international markets, as well as in the US. And then the away from home market, which Larry touched on, we are creating hospital-grades surface-disinfecting products in establishing partnerships. We just have a new partnership with the McKesson for example to help reduce the risk of hospital acquired infection.

So our strategy to relentlessly drive out waste is really all about fueling our growth initiative that I just talked about. The restructuring activity Dan mentioned including our decision to exit the private label foods bag business are examples I think of the progress we are making against the strategy. As we have discussed with you before the private label foods bag business had a negative impact on economic profits. And although the withdrawal somewhat impacts the company’s top line in the near term we firmly believe that’s the right decision for the long-term help of the business.

Now turning to FY '09, while we anticipate continuing high cost commodity environment that Dan detailed for you, we are pursuing cost savings opportunities and we are planning to take those price increases that he mentioned. The foundation we are laying in FY '08 through our restructuring initiatives is going to further align our business with our centennial strategy in the quarters ahead. So in the near-term we are using our strong cash flow to reduce debt and support our dividends just as we've promised you.

Now, what I hope you will take away from today’s call is that we are managing effectively through this high cost environment and we feel very good about the plans we develop for the coming year. We've recognized the slowdown in the economy. We've recognized the pressure consumers are facing from unprecedented fuel and food prices and the fight the cost of these necessities are taking out of their disposable income. At the same time, our products in our categories, our products that consumers need for their everyday life. And we believe the pricing actions we have planned are justified and will be supported by the market.

As we all know, this has been a rapidly changing environment and we had to remain flexible in our response. Despite continued intense commodity cost, and these are approaching now $110 million, more than our original forecast when we met last May with many of you. We are still on track to deliver within our original EPS range that we communicated to you a year ago, excluding the one time items. We have been able to do this for three major reasons. One, our organic rate is in the 5 to 6% growth range this year, which is above our stated targeted of 3 to 5%. Second, we did take in some contingencies around our anticipation of higher cost environment last spring, and third certainly more favorable foreign exchange then we originally planned.

I think as we move out of fiscal year ’08, we believe our ’09 outlook also supports our views that Clorox is well positioned against major consumer and customer trends to perform well, despite of pretty choppy economic environment out there.

So with that, I would ask the operator to open the lines for your questions.

Question-and-Answer Session

Operator

Thank you, Mr. Knauss. (Operator Instructions). We will go first to Chris Ferrara of Merrill Lynch.

Chris Ferrara

Hey guys. I just wanted to ask about commodities, so for the '09 outlook that you said you're looking for resin to ease again, but then you said you are looking for 100 to 120 million of pressure, which isn't that much less than what you're seeing this year. Can you just give a little more detail around I guess what kind of decline you need in resin and does the 100 to 120 million pressure really assume a big step back in your key commodities?

Don Knauss

Yes, Chris, let me take that question. Again, we're anticipating about 100 to $120 million in incremental cost pressure, and you are right it's about the same size that we saw last year. We do anticipate that we will begin to see some declines in resin, but again we're starting from a much higher point than we had anticipated we would be. So we believe even though we may see some declines in resin in the first half of the fiscal year, on a year-over-year basis it will still be higher than last year and we'll have that impacting gross margin. We think the benefit from any resin price decreases are more likely to be in the second half of the year and we also have some inventory effects and things like that that would lag when those come through our gross margins. So, we do have a lost of cost pressure this year and while we do think resin will come down, it's coming from a much higher point and it's likely -- that benefit is more likely to be realized in the back half of fiscal.

Chris Ferrara

Okay. And at the risk of trying to make you into a chemicals analyst, I mean what does that mean, if oil stays at 1.10 and natural gas stays at 10.50 does that mean you'd have to revise those raw material assumptions upward?

Dan Heinrich

What I will say Chris is, the outlook that we're sharing today assumes that oil will be trading around the levels it has been recently. Now, if oil goes up materially from levels we’ve seen recently, remains that way over the course of fiscal ’09, certainly we will need to take some other actions and that may include more pricing. The key component for us as you point out is resin, and on the resin again as we said we are anticipating to see some declines, but we're starting from a very very high level.

Don Knauss

Chris, I would just add to Dan's point, as we looked at our assumptions for fiscal ’09 to Dan's point, we've tried not certainly to be overly optimistic about the price of oil and I think using the recent trading range for oil is a pretty prudent way to look at our cost assumptions.

Chris Ferrara

Okay. I just wanted to move on to CCEM real quick. I guess to get near, I guess you've done maybe 60 million so far this year to get to your revised target involves a pretty big step up in Q4. Is that because of the timing issue you were referring to? I mean, I guess, why does Q4 step up so much and can you just give a little detail and color on why would step up again into 2009, in other words, the amount of savings you can get?

Dan Heinrich

As we came into this year we were looking – when we were with you last May, we were thinking we are going to see about 80 to $90 million cost savings. As we got into the year and saw the spike in commodity, we set a target to try to increase that to about $100 million. And as I said a little bit earlier, we're now looking at 85 to 90. That additional 10 million are so that we were looking based on the timing of when the project savings will come through, that's now anticipated to be in fiscal '09. For the quarter -- this quarter we did deliver $24 million in cost savings, about 19 million of that went through cost of goods sold. We are looking based on that 85 to $90 million outlook, we are still looking for 20 to $25 million in the fourth quarter. So, the savings right now that we're on track to deliver are about equal to what we delivered in the third quarter. Now, as I look at fiscal '09, normally we would come into a new year and continue with an 80 to $90 million cost saving outlook. The reason we now have a 90 to $100 million cost outlook is again on the timing of when those savings programs are scheduled to come online.

Operator

We'll go to Bill Schmitz of Deutsche Bank.

Bill Schmitz

Hi, good morning.

Don Knauss

Good morning.

Dan Heinrich

Good morning.

Bill Schmitz

Can you just talk about the distribution between Burt's Bees and Green Works because it seems like you're not in the drug channel yet, and I think last time we spoke I thought you said you were pretty close to 100% distribution there with Green Works?

Larry Peiros

We've done exceptionally well in Green Works both in terms of distribution and speed to shelf distribution. We are now well developed in the drug channel for that kind of product specifically the last channel that you see distribution in, but we're basically 100% of Target and 10% of Wal-Mart and I think we are 80 something percent of grocery outlets and that is by far away the bulk of the category sales. So, it feels very good about the distribution results on Green Works.

Operator

We'll go next to Ali Dibadj of Sanford Bernstein.

Ali Dibadj

Hi, guys. I guess I want to plug away a little bit on the kind of core volume growth, which looks like it was roughly flat despite – it sounds like great success in grocery and it sounds like great success in Green Works. And in particular, it struck me that your North American description both in the release and also in your description Larry had a real big glaring omission which is kind of your namesake bleach business. What exactly is happening in your laundry business in terms of sales growth, I mean about 13 to 14% of your sales, is that shrinking? Do you need that to grow again in ’09 to make your numbers and if so how will you get there?

Larry Peiros

I will admit upfront that that's probably the weaker area of our portfolio right now. Stepping back, as you mentioned, it is just over 10% of the portfolio. Many people assume far larger than that. And actually, about 45%f the products franchise is on the home care side, which is doing very well behind our health and wellness initiative, initiatives and theme to grow share and gross volume. So laundry is a soft spot. Quite frankly we put a lot of our innovation dollars and our focus and attention on the home care side because there are some bigger opportunities on that side like wipes. We've not started to refocus back on laundry. Quite frankly we hadn't been telling the basic laundry story. So, we had been telling the health and wellness story and the power of Clorox liquid bleach to kill germs. We have not done as good a job according to laundry store, which is basically that we deliver a better benefit than detergent alone, so you have seen recent advertising efforts over the last six or seven months. This year returns that laundry message. We have introduced some modest innovation on Clorox liquid bleach. And as we talk before, we're doing a lot on Clorox 2 to try and turnaround that business given the share losses against the key competitor in that area. So, it's an area of focus for us. We're pretty optimistic that with some renewed focus on both the innovation side and the advertising side particularly getting back to the base laundry message that we can necessitate that part of the portfolio, but today it is a weaker area.

Don Knauss

The only thing I would add to Larry’s comment is that if we look at past 13 week shares, we are still gaining share on our liquid bleach product. This is a category issue and I think it gets to the relevance issue. And as Larry said as we get back to spending against our basic laundry message as well as the disinfection message, I mean, bleach – half of bleach usage in this country in cleaning. So as we get back into that message I think we will see some resurgence there. Having said that, we had not baked in bullish assumptions at all on liquid bleach for next year to make the number and as Larry said it’s about 10% of our revenue at this point.

Operator

We'll go next to Filippe Goossens of Credit Suisse.

Filippe Goossens

Yes, sir good afternoon or good morning, if we are on the West Coast. If I just may two housekeeping question and then one real question. Dan, in terms of housekeeping, can you just clarify what the assets impairment charge was in the international business? And then for innovation, you mentioned 2% for fiscal '09. I think to recall you had only 1% baked in. Do I have that correct or are you actually becoming a little bit more bullish on the contribution from new products?

Dan Heinrich

Filippe, let me take the first question. There was some small impairments on some non-strategic intangible assets that we had in the international business so it's relatively small, sort of a normal course of business type charge. On our new products, what we typically said in the past is that they would contribute about 1 to 2 points of incremental growth and what we're saying for both fiscal ’08 and fiscal ’09 with the contribution of Green Works and the strength of all of the other products that we got, it’s going to deliver about 2 points of growth. So we're not saying 1 to 2, we’re simply saying we anticipate at least 2 points being delivered from new products.

Operator

We'll go next to Lauren Lieberman of Lehman Brothers.

Lauren Lieberman

Thanks. Good morning.

Dan Heinrich

Good morning

Larry Peiros

Good morning, Lauren.

Lauren Lieberman

I am wondering could have one asked first. I guess, on international, the volume was kind of flattish there and it looks like the amount of pricing you are taking -- have taken has been pretty steady over the last couple of quarters. So if you can just kind of discuss their trends that’s going on and organic volume growth if and why you expect it to accelerate and it's some of what we are seeing is simply just the tradeoff on pricing?

Larry Peiros

So we actually feel very good about the international volume growth. It was up about 4%. If you take the bleach acquisition out of it, it's up 2%. It doesn't sound like a lot, but the base period was up 13%, so 2% on top of 13% growth feels reasonably good to us. There is some negative impact from pricing, but again overall, we feel very good about the volume results in Q3 as well as prospects going forward. I talked earlier about launching Green Works into some international locations. We've achieved a good level of success in Mexico and Puerto Rico and feel like there maybe opportunities beyond that. We're also doing more and more adjacency work. Obviously, the bleach acquisitions now give us a platform to build upon like we have in the US a broader Clorox franchise of health and wellness type product. So, we're feeling good about the international business at this point.

Operator

We will go next to Bill Pecoriello of Morgan Stanley.

Bill Pecoriello

Hi, everybody.

Larry Peiros

Hi.

Bill Pecoriello

A question on the -- with the modest gross margin improvement outlook for next year, you had mentioned you are going to take some incremental additional pricing in the first quarter and that you were going to try to largely offset this 110, 120 million commodity impact in ’09 with the pricing. If you layer in the savings and you are also getting positive mix. I know mix was better than expected. You've got the Brita double digit and then Burt's Bees and Green Works helping there. So just trying to figure out the why modest, I guess the pricing still is not offsetting all of the commodity impact and then you've got the logistics, I know that's still a drag?

Don Knauss

Yeah, and it's also the timing of pricing and when it's going to layered in over the year and how quickly we can ramp that up. And, we are cautious right now and we need to think about what commodities will do over the course of the year. So I think modest is, it feels right to us at this point in time. What we said in our centennial strategies, we are looking to deliver about 50 to 75 basis points of margin improvement on an annual basis and we think we will be a little bit above that for fiscal ’09.

Operator

We'll go next to Connie Maneaty of BMO Capital Markets.

Connie Maneaty

Let's see. I'd like to go over the commodities impact. I think you said for the third quarter it was 40 to 45 million or whatever it was?

Dan Heinrich

43.

Connie Maneaty

43. And that in the fourth quarter, it's going to be about the same rate. So, if we assume that commodities stay where they are, then we should be looking for that kind of quarterly hit I believe then in through the first half of fiscal ’09. So I guess the question is, will your gross margins decline as much in the fourth quarter of ’08 as it did in the third quarter and should we be anticipating this magnitude of decline for the first half of next year before things get a little better?

Dan Heinrich

I think the way to think about the fourth quarter is we will see obviously year-over-year decline, likely to be a little less than what we saw in the third quarter. We have lower restructuring charges and we don’t have the Burt’s Bees inventory impact coming through, but it’s going to be less than the impact you saw, but it will be down. In terms of margins in first half versus second half of next fiscal year, we are still timing when the pricing is all going to go into place but, I think the expansion that we are anticipating in our margins is more likely to be in the back half of the year because we still had pretty reasonable run-up in oil and resin prices that will still impact us in the first half, but are only going to be partially offset by cost savings and our pricing. And then, we expect some moderation in the back half, which is where we'll see more of a margin expansion.

Operator

We will go next to we go next to Virginia Chambliss of JP Morgan.

Virginia Chambliss

Hi, thanks. My question is on debt reduction. I know Don, you mentioned in the prepared comments that you are reducing debt as it remain a priority for cash flow. I guess, I saw about 80 million of debt reduction in this last quarter. I’m just wondering if you can confirm that all free cash after dividends will go to debt reduction in the fourth quarter and how much you expect that to be? Thanks.

Don Knauss

Our plan is still to use the majority of our free cash flow to reduce debt and we are on track to have our debt to EBITDA down to about 3.21 at the end of June fiscal fourth quarter. We believe we are still on track also to be at or below 3.0 debt to EBITDA by the end of December 2008. And then again assuming no acquisitions or anything like that in the back half of fiscal year, we anticipate that we would be down around 2.5 debt to EBITDA. So we will continue to support dividends, but most of our free cash flow will be debt reduction.

Dan Heinrich

Just a comment, Virginia, on the dividend support, we're still committed to our payout ratio approaching 50%. So, you'll see news on that coming shortly after our mid-May board meeting, but we'll continue to be pressing on that as well.

Operator

We will go next to Andrew Sawyer of Goldman Sachs.

Andrew Sawyer

Sure. I just had a couple of quick questions on Green Works and Burt’s. I was wondering if you could talk a little bit about how you are you seeing early interaction with Green Works versus the other cleaning brands both in terms of cannibalization and shift in your own internal marketing support? Also, if you have any early read on any sort of repeat rates or for too early on that? And I guess similar with Burt’s, I guess, how are you guys thinking about promotional support funding for Burt’s and Green Works versus kind of the base of the portfolio?

Larry Peiros

So, we could not feel much better about Green Works at this point. We had an increase in our home care share in the quarter. A lot of the incrementality that Green Works brought to the table is reflective of total home care. So, we expected some modest cannibalization, something like 15%, which is kind of our fair share. I expect that to be the ongoing result of the cannibalization and really something to read after a long period of time. So we are seeing incrementality. We are feeling very good about where we are and really leaves at this point in time it's pretty much all positive on Green Works, in fact we are getting some benefit on some of our own businesses because of the sustainability angle, so we are seeing a lot of drug promotions with Brita for example with both Green Works and greater representing Earth Day events.

Don Knauss

Andrew, if I could add to Larry’s comment, I think another interesting point is we just looked at card data, loyalty card data from one of our larger retailers and one of the interesting pieces of that data in the first 60 days of Green Works was out, but this is really January, February card data. 50% of the people in this particular chain who bought Green Works had not bought a home care product for the previous six months in that store. So what that tells to us is there is a lot of mainstreaming of natural cleaners with Green Works that were bringing new people into the category, which is pretty exciting. And I think to Larry’s point, we picked up $0.09 of a share point in the 13 week period ending in March, and most of that was incremental. We saw a little bit of dip down on Tilex and 409, but it looks like we are in the 75 to 80% incremental range, which as you know, very new product is a pretty neat place to be.

As far as Burt's Bees, the 28% growth, we are really starting to see some great results across channels hanging in very tightly on the established channels like chain drug, but obviously seeing some dramatic growth in mass and grocery as well. So, we are not seeing any material step up at all in customer spending or trade spending in that area. We did see the first advertising, print advertising go out. So, we will continue with the current pricing in trade spending policy so, we don’t anticipate any uptick there.

Operator

We’ll go next to Alice Longley of Buckingham Research.

Alice Longley

Hi, good afternoon. Back on this gross margin issue for fiscal '09, I am having trouble understanding why you expect it to be up next year when the incrementing raw material cost pressure is about the same as the last year, maybe the pricing is going to be higher? What kind of pricing do you think you’ll get or explain why gross margins are up next year versus being down this year with the same gross margin incremental pressure?

Don Knauss

Now, as part of the answer is obviously we took a lot more charges this year through gross margin than we will next year so you have that year-over-year benefit. We have a $19 million up charge on Burt’s Bees inventory and gross margin this year that will not repeat last year so, you have year-over-year effect. We are looking for 90 to $100 million of cost savings. We are anticipating to this 100 to 120 million of commodity. And as we've have said, we will price to try to recover as much as that cost pressure as we can. So that is what's leading us to believe we will see margin expansion in our margins.

Larry Peiros

I think the only thing I will add to that is you are all foreseeing and I think some mix benefit on the gross margin line with some of the higher margin items that are growing at faster rates.

Don Knauss

And we are also getting some margin increasing also from Burt’s Bees, which is obviously why it's in the portfolio.

Operator

We will go next to Wendy Nicholson of Citi Investment.

Wendy Nicholson

Hi. My question was on advertising because I feel like I have seen a ton of Green Works ads and a ton of Burt's Bees ads, but advertising is still down year-over-year. So I am wondering, number one, is there a timing issue here? Do you think advertising is going to trend back up? And can you tell us sort of proportionally how much of your advertising budget in the quarter was on Green Works and Burt's Bees?

Larry Peiros

So overall advertising as we said was about 9.1%. I think we talked before, if you look at total investment in building our brands, which includes the trade component, we're up year over year because we have allocated some additional spending on the trade side and particularly to addressing competitive issues. The 9.1% is within our targeted range of 9 to 10%. Having said that, it is on the lower end of the range in part because quite frankly our sales were higher this quarter than we initially anticipated and Burt's is spending at a bit lower rate, it's a small part of equation, but Burt's spends at a lower rate than the average [corress] product. So we think we are supporting our brands very well. I think some of the growth we are seeing is a testimony to that. Obviously it's both a quality issue as well as a quantity issue. I can't give you the specific breakout of the Green Works or Burt's, maybe we can get back to you with that one, but it sound like we are spending half of our advertising on those two brands something like that.

Don Knauss

The only other thing I would to folks is that we look at the FY '09 outlook, when you look at our range of 9 to 10, which has been a historical commitment on supporting brands, our assumption going into FY '09 is that we will be at the very high end of that 9 to 10% range to support the brand.

Operator

We will go next to John Faucher of JP Morgan.

John Faucher

Yes. In terms of looking at Green Works, it sounds like you are going to be now moving into categories where historically you haven't played. I think you mention dish washing detergent? Can you talk about – are those ideas that are coming up incrementally internally, is that something the retailers are asking for? And how comfortable do you guys feel going into categories where traditionally you haven't played and you are going up against more branded competition? Thanks.

Don Knauss

I think we talked about Green Works being a natural platform to potentially expand into our cleaning categories and potentially even outside cleaning, similar to what you have seen from other environmentally oriented brand. I think we are looking at trying to increase the size of the natural cleaning category and grow our share within it, similar to what we're doing on Burt's. So in this case we are taking a swap of a category across all cleaning categories. So I don't intend to go head to head versus the leading brands and dish washing liquids or rather big cleaning categories. What I do intend to is grow the natural cleaning category as big as I can and grow my share within that category as big as I can. That makes sense.

Larry Peiros

Yeah, John, one thing I would add to it is to your question about is this coming internally or from customer and consumer reaction. Frankly, the consumer reaction to the five core items out there on Green Works has been pretty amazing to what there had been a number of consumer requests for getting into the additional spaces like light duty liquids. We are also hearing it from our customer base as well because what we find in that category is there is not really a natural and I would defy natural is over 99% natural product offering. So while we think it's a niche opportunity at a premium price, clearly the consumers are asking for an option and a choice and the customers are backing them up.

Operator

We will go next to Chris Ferrara of Merrill Lynch.

Chris Ferrara

Hey guys, just a point of clarity. I thought you said, I think your goal is 50 to 75 basis points of operating margin improvement ongoing, but I thought you said may be that '09 is going to be bigger than that. Did I hear that right or is that wrong? And if I did hear it right, what is that mean for your A&P plans or SG&A plans for that matter?

Dan Heinrich

Chris, what we said is 50 to 75 basis points is what we try to target and I did say, yes, that we think we will be a little bit ahead of that, and again part of that is obviously the year over year comp issues, the items that won't repeat. So some of that is obviously just the year-over-year comparison. On the other components of the P&L, as you know, we target 9 to 10% on the advertising line and on the SG&A line, this year it's growing about equal to the growth rate of sales and that's obviously due to the fact that we have acquisitions in there and we also have some investments in our strategies. As we look out next year for the SG&A line, we are anticipating that SG&A will grow probably about half the growth rate of sales.

Larry Peiros

And just let me reaffirm Chris as Dan mentioned on the 9 to 10% support for the brand, our assumption going in and what is in our forecast for '09 is at the very high end of that range. So we feel good about the fact that we have been prudent about allocating enough dollars in there to support the brand.

Operator

We will go to Jason Gere of Wachovia Capital Markets.

Jason Gere

Good morning. Just I think on to that point with advertising I guess next year you are anticipating will be close to the high end of 9 to 10. This year obviously there has been some higher trade spending and behind selective categories that I think are a little bit more competitive right now. Can you just talk a little bit about the mix between the two for next year especially in light of a softer economy?

Larry Peiros

So I would not say there's a dramatic change in the approach at this point in terms of our trade versus advertising. I mean we use advertising periodically to address specific competitive issues, some of those are predictable, some of those are unpredictable or unknown to us at this point, but I would not say we're going to see dramatic difference in kind of the mix we are seeing this year, a dramatic increase or decrease versus what we are seeing this year at least in the current plan.

Operator

We will go to Filippe Goossens of Credit Suisse.

Filippe Goossens

Yes, good afternoon. Now I am finally get to answer my question for Don. Don, it clearly looks like, made from the initial read that you have personified a good opportunity with these natural cleaning products. It's not a conversation with one of our largest or larger competitors, they don’t think they have anything different in category at this moment. So if you could just kind of refresh our mind in term of how (inaudible) natural category. Do you see it as a niche or do you think that with the passage of time and the economy improving, it may go mainstream the same way that natural foods that will be going mainstream?

Don Knauss

Yeah Filippe. Well, first of all I hope they retain that point of view. I think we are very bullish on the category and this is why. As we look at all the dollars that are spent out there in this country and in the developed world, but let's take the United States, of around 14 to $15 billion spent in home cleaning, which include laundry. About 1% of it is we have said is natural cleaning or 140 to 150 million in major channel. Now what was interesting to us when I went out and talked to consumers about Burt's Bees and with the initial research is that over 40% of consumers said if you give me a natural cleaning product that works and convince me it works as well as conventional product and you don’t price gout me, but you charge me only 10 to 20% premium, we are very interested in that. And given the early success of Green Works and the original five SKU and what we are gaining in terms of volume and share, we think what we are doing is starting to mainstream in natural cleaning space. So we think this is the category that is now growing at huge rate, it's over a 100% up as Larry mentioned and we think that as we continue to go over the next two, three, four years and getting to adjacencies that will continue to mainstream this natural cleaning space. We don’t see this trend on sustainability having any time soon. We think it is a cultural shift and we feel very well positioned to take advantage of it.

Operator

We will go to Lauren Lieberman of Lehman Brothers.

Lauren Lieberman

Great, thank you. I just wanted to ask a little bit more about pricing because as I recall over the last couple of years, your strategy and granted much less cost inflation but has been surprised to about half of the cost inflation or what you saw the ongoing run rate of inflation would be? So I wanted to know how that thought process has or hasn’t change in the more recent inflationary environment? And then also just where you think you are versus the competition or may be where you would like to be in terms of pricing, are you kind of little bit behind, are you ahead, are you sort of right on track with your competition?

Larry Peiros

Lauren, you say correctly what we have attempted to do in the past just trying to target what we think the long term cost structure will be in these categories, surprised to that. Obviously with this rapidly evolving energy market, oil, resin and everything else, its' well ahead of any expectations we had and we are now adopting to stance that we are going to price recover more of this cost pressure. However, if you look at it over the last three to four years and the total cost pressure that’s been out there even with this more aggressive stance this year, we are still -- our pricing recovery is still less than the total cost pressure that we have seen in the categories. The other thing we always have to keep in mind that the consumer value equation in the categories that we are in, so we take that into mind. But just given the share impact on our margins of all this cost pressure and how much they bend year over year, we are changing our stance on how aggressive we are going to be on pricing.

Don Knauss

With respect to competitors, I think if you look back over the last four or five years, we have taken probably all to all maybe a 100 price increases across the portfolio, and I think there have been maybe two to three instances where we haven’t seen the competition follow. And I almost can't believe the competition will follow given the environment that we’re all facing and the cost pressure we are facing, including private labels. So I am not overlooking the trends about the competitive response, we have talked many times about the modeling we view behind pricing to try and optimize what price point we are trying achieve and diminish the volume impact, the negative volume impact of pricing. Fortunately or unfortunately, we’ve done a lot of practice now over the last four or five years. So what used to be a [lost art] in our industry around taking pricing has now become a good skill set for Clorox. So our models have proven to be very very predictive, and potentially we can totally offset the negative volume impact that we have on many brands by driving innovation or other kinds of marketing program to provide positive volume to internally offset the negative volume. So it’s not in all brands and all cases that we have negative volume, because we are able to offset it in other way. So we feel pretty confident that given that the quality of our brands, our number positions, the way we execute pricing that we can’t get through a pretty tough market.

Operator

We will go to Bill Pecoriello of Morgan Stanley.

Bill Pecoriello

Thanks. I just wanted to followup Don, when you had mentioned some of the factors on upping your organic sales outlook for `08 without the FX, you took it from 3 to 4, 4 to 5, and there is a number of factors you have been talking about. How much of this is in the `08 looking balance of this year was higher pricing versus the Green Works being better than expected, and then, some items on the core like Brita and it might be all of those, but I just wanted to get a feel of the contribution for those items? Thanks.

Larry Peiros

There are a handful of items that I think are contributing, Burt’s is a little bit ahead of our expectation. I think also in our outlook we are seeing a little bit more favorability from foreign exchange than we had in our outlook. Also the timing of exiting our private label food bag business, we had thought it would be a little bit of more of a drag in `08, and due to the timing when we get out of this contract that's a little bit less. And then as Don said our organic growth is a little bit ahead for all the reasons that we talked about. You talked about Brita, you talked about new products and everything else and that’s all contributing. So all of that is in the mix.

Don Knauss

Bill, I would just add that Green Works, we have taken that book as of a few times because of the success that we are seeing across channels. I would also say we are seeing some vitality in our other brands like our Hidden Valley Ranch brand and we are seeing some share gain there as well, but really is a combination of a number of businesses across the portfolio.

Operator

We will go next to Connie Maneaty of BMO Capital Markets.

Connie Maneaty

Hi, just two followup questions. I think you said Burt’s Bees grew 28% in the quarter.

Larry Peiros

Correct.

Connie Maneaty

Could you let us know what the growth of Burt’s was excluding the pipeline sale of Wal-Mart and whether or not that is on trend with its growth before you acquired it?. And then secondly you also mentioned that sales in the grocery channel declined in the second quarter, third quarter versus being up 3 in the first half. So could you just go into that a little, what are the dynamics there?

Don Knauss

Let me take the first part on Burt’s and I will let Larry take the second one, Connie. On Burt’s, the Wal-Mart is really just at this point the lip balm at the cash register. So we don’t have a full line of SKUs in any of the Wal-Mart store so that really is not a material impact overall on that 28%. Now as Larry noted in his prepared remarks, there are about slightly over 500 Wal-Mart that we will be going into this month with a fuller line of SKUs predicated on the demographics around those Wal-Mart stores. But as this quarter unfolds, we will tend to see some more growth obviously coming from there. But in the mass channel, in general and the grocery channel in general, we are seeing significant growth across the board in Burt’s Bees, and so that’s really where that's coming from. And then I will let Larry talk about grocery.

Larry Peiros

So I think that grocery talked many times about the initiative, the purpose on grocery given the EP opportunity, last three years we have been down 4% on average in grocery, first half of the year we saw 3% gain, and the latest quarter we saw 2% decline, but fiscal year to date we are up about 1%. So about a 5.3% versus where we have been, and I should mention these number exclude Burt's Bees. This is just the rest of the portfolio that we are focusing on at this point. If you dig down we don't feel great about being down 2%, but if you dig down to those numbers and you take up the seasonal brands which we talked about had a kind of weather related issue, more of a category issue, if you take those out, we are basically flat in grocery in the quarter and obviously up more than 1% fiscal year-to-date. So grocery remains an area that we want to focus on. We still feel good about the results we are achieving, actually most of the resources we have redeployed to grocery are just kind of getting onboard and getting used to new jobs, so we really haven’t fully benefited from the value they will add to our grocery channel activity, but we are feeling pretty good about the results we have today.

Steve Austenfeld

Why don’t we take one more question?

Operator

(Operator Instructions).

Steve Austenfeld

Nothing further, we can wrap up.

Larry Peiros

Yeah, I think let me just wrap up at that points, but thanks everyone for your attendance and thanks for your interest in the company. We look forward to talking with you either on the road or at the next call in a few months. So thanks for your interest.

Operator

That concludes today's conference call. We thank you for your participation.

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