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Clorox Co. (NYSE:CLX)

F4Q08 (Qtr End 06/30/08) Earnings call

August 1, 2008 11:00 am ET

Executives

Steve Austenfeld - VP of IR

Don Knauss - Chairman and CEO

Larry Peiros - EVP and COO of Clorox North America

Dan Heinrich - CFO

Analysts

Chris Ferrara - Merrill Lynch

Ali Dibadj - Sanford Bernstein

Bill Schmitz - Deutsche Bank

Nik Modi - UBS

Lauren Lieberman - Lehman Brothers

Connie Maneaty - BMO Capital

Filippe Goossens - Credit Suisse

John Faucher - JPMorgan

Linda Weiser - Caris

Andrew Sawyer - Goldman Sachs

Priya Ohri-Gupta

Jason Gere - Wachovia

Bhupinder Bahra - Banc of America Securities

Operator

Good day, ladies and gentlemen. Welcome to the Clorox Company fourth quarter and fiscal year 2008 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, this 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

Welcome everyone and thank you for joining Clorox's fourth 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, debt-to-EBITDA and economic profit. Management believes that providing insights on these measures enables investors to better understand and analyze our ongoing results of operations.

Reconciliation with the most directly comparable financial measures determined in accordance with GAAP can be found in today's press release, this webcast, prepared remarks or supplemental information available in the financial results area of our website, as well as in our filings with the SEC. In particular, it may be helpful to refer to tables located at the end of today's earnings release.

Lastly, please recognize that today's discussion contains forward-looking 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

Thanks, Steve, and good morning to all. As you saw in the press release, we had a solid fourth quarter and a very sold fiscal year. Sales grew strongly with broad-based growth in base business and incremental benefit from acquisitions. Margins declined given the acute cost 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 results. Dan will cover details of the P&L as well as our fiscal '09 outlook. Finally, Don will provide you a summary and wrap up before opening up for questions.

For the quarter, total company sales were up 11%. Our base business was up 8%, well above our long term 3% to 5% target range. The other three points of sales growth was from the Burt's Bees acquisition.

Total volume for the quarter was up 6%, with volume up 4% excluding Burt's Bees. For the total fiscal year, company sales were up 9%. Sales growth was up 6% excluding the Burt's Bees and bleach acquisitions.

On the volume side, the total fiscal year volume was up 6% with three points coming from acquisitions. Top-line growth was broad-based, we grew sales in 10 of 11 business units during the fourth quarter.

Our homecare business had a strong quarter with a double-digit sales increase. Green Works continues to track significantly ahead of expectations. Program received a 2008 innovation and creativity award from the Grocery Manufacturers Association and a sustainability award from Wal-Mart. Natural cleaners have more than doubled in size and Green Workers is the category leader at 50% share. This month of grant is being extended into dishwashing liquid.

Brita is benefiting from sustainability tailwinds and consumers' focus on value, given the savings versus bottled water. The brand delivered strong double-digit volume and sales growth in Q4 and achieved an all-time record sales year for the fiscal year.

Burt's Bees exceeded plan with 36% sales growth versus the year ago quarter and significant share growth in key segments, including lip, skin, face, personal wash and baby. We remain extremely pleased with this acquisition.

In cat litter, we delivered our 6th consecutive year of volume growth. This business continues to build on the momentum of the order eliminating carbon innovation, which has been added to Fresh Step regular to the clay litter as well as all of our scoopable litters.

Turning to our food business, we are winning in the Ranch dressing segment with bottled Hidden Valley showing double-digit volumes growth and increased share. We continue to find innovative ways to reach consumers with our Love Your Veggies campaign.

Moving on to our seasonal businesses, Kingsford was up in volumes, sales and share per quarter, following softness in Q3 due to bad early season weather. In auto, overall volume was slightly down due to category softness and due to the price increases we took in January at Armor All and STP. However, our shares in auto continue to be up.

In international, we delivered 16% sales growth on top of 21% growth the year ago quarter, driven by the volume growth, favorable foreign exchange rates and pricing.

Turning to our laundry business, shipments of Clorox liquid bleach were down versus the year ago quarter. Although our share was up, the category remains soft behind declining consumer relevance. We are taking actions to revitalize this business, including a campaign highlighted the benefit of using bleach versus detergent alone.

We also continue to market bleach as a particularly effective broad-spectrum disinfectant. Bleach used for hard surface cleaning and disinfectant now makes up about half of all bleach sales. Shipments of Clorox 2 Color Safe Bleach ping were about flat for the quarter and share declined as retailers reduced inventory to prepare for the conversion to our two times concentrated formula. This new formula started shipping in July.

Finally, our Glad business was down in volume for the quarter, grew sales due to price increases and consumer trade up to premium ForceFlex trash bags.

Most of this favorable mix impact took place in the club channel which doesn't show up in tracked market shares. Clearly, our business has been impacted by the current commodity cost environment. Dan will discuss our outlook for commodities in a few minutes. First let me talk about the pricing actions we plan to take over the next few months.

To help offset the impact of commodity cost pressure, we will increase prices on slightly more than half of the portfolio during fiscal '09, including Clorox bleach, Hidden Valley, Glad trash bags, cat litter, several homecare products and multiple international brands. This is in addition to the price increases taken earlier this calendar year in charcoal, auto care, Glad trash bags and Pine-Sol cleaner. We are well aware of the pressure that current economic environment is putting on the consumer.

We are using our proven models to help predict consumer reaction and carefully execute pricing and marketing plans in '08 that will lessen any negative volume impact.

Our models have proven to be very predictive on the more than 40 price increases we have executed in the last three years. We believe taking further pricing is necessary and appropriate given the cost situation and that the marketplace will support these pricing actions.

Most of our products are everyday staples that people buy even in tough economic times. We have leading brands and preferred products. Further, some of our brands like Kingsford charcoal or Hidden Valley salad dressing benefit from more people staying home.

In fact, our recent share results are evidence that our brands have remained relatively healthy. Our total Q4 share in tracked channels was up slightly and we've gained share four to eight categories.

Private-label share in our categories was up a bit about 7/10 of a share point, just over 16%, and our brands grew share in two or three categories that have the highest private-label presence, hydrochloric and charcoal. We did lose share to private label on Glad, but all outlet panel data shows relatively flat share given the strong increases on ForceFlex in the club channel.

Overall, we are very pleased with our Q4 and full year results, especially given the intense cost environment and market volatility.

With that, I will it over to Dan.

Dan Heinrich

Thank you, Larry. I'll briefly discuss our fourth quarter and fiscal year 2008 financial results, followed by more detail on our updated outlook for fiscal year 2009.

Turning to our fourth quarter results, for the quarter we delivered diluted earnings per share of $1.13. This includes a $0.01 impact from Burt's Bees dilution and a $0.04 impact from restructuring charges.

Excluding these impacts, diluted EPS for the fourth quarter was a $1.18. In the year ago quarter, we delivered a $1.07 diluted EPS.

Fourth quarter gross margin before charges declined about a 150 basis points to 42.7% of sales, compared with 44.2% in the year ago quarter. As we again saw a significant year-over-year negative impact from commodities and energy costs, that we're able to fully offset through price increases and cost saving.

Fourth quarter selling and administrative expense increased on a dollar basis, but came in about flat as a percent of sales versus the year ago quarter. About half of the dollar increase is related to the acquisition of Burt's Bees. The balance is due to a variety of factors including incremental investments in the grocery channel.

Fourth quarter restructuring charges came in at $10 million, which is consistent with what we had estimated. Of the $10 million in total restructuring charges, $8 million are reflected in gross margin and $2 million on the restructuring line of the income statement. About $6 million of the charges are non-cash.

Interest expense increase versus year ago, due to higher debt levels associated with financing the Burt's Bees acquisition and the accelerated stock repurchase. Other income in the quarter was $9 million. While this line continues a number of smaller items, the largest impact in the fourth quarter was related to net foreign currency transaction gains, which were factored into our outlook.

Our effective tax rate for the quarter was about 34% compared with 31% in the year ago quarter. The higher Q4 tax rate was principally due to the release of accruals in the year ago quarter due to the settlements of certain tax mattes.

Turning to cash flow, our cash flow from operations was $254 million compared with $282 million in the year ago quarter. Free cash flow for the quarter was a $187 million or about 13% of sales, compared with $231 million or about 17% of sales in the year ago quarter.

The lower cash flow versus the year ago quarter was primarily due to the timing of tax payments, partially offset by improvements in working capital. As a reminder, we define free cash flow as cash provided by operations, less capital expenditures.

Q4 capital expenditures were $67 million, compared with $51 million in the year ago quarter. Higher capital expenditures were due primarily to the homecare manufacturing network consolidation into our Atlanta plant.

For the full fiscal year, we delivered diluted EPS of $3.24. This includes a $0.09 impact from Burt's Bees dilution and a $0.26 impact from restructuring charges. Excluding these impacts, we delivered earnings per share of $3.59. This includes a $0.05 benefit from the accelerated stock repurchase.

Our full year results also reflect the contribution of cost saving which totaled $93 million for the year and was in line with our target as well as the benefit of favorable foreign exchange.

Full year restructuring related charges came in at $59 million, consistent with our previous estimate. Of the $59 million in total restructuring charges, $23 million are reflected in gross margin and $36 million on the restructuring line of the income statement. About $48 million of the charges are non-cash.

Cash flow from operations for fiscal year 2008 was $730 million, compared with $709 million a year ago. The increase was primarily due to improvements in working capital, partially offset by the timing of tax payments.

Free cash flow for the year was $560 million, or about 11% of sales, within our 10% to 12% target range.

Capital expenditures for the fiscal year were $170 million, or about 3.2% of sales, compared with a $147 million in fiscal 2007.

We use most of our free cash flow during the second half of the year to pay down debt. As of July 1, 2008 our debt-to-EBITDA ratio was down to 3.21 as anticipated. More than a year ago in May 2007, we communicated our initial fiscal year 2008 EPS outlook of $3.52 to $3.67 before charges. We are very pleased to have delivered within this original range, particularly in light of commodity cost increases of more than $100 million above our initial outlook estimates.

With that, I will turn to our fiscal year 2009 outlook which we updated in today's press release.

On the top line, we continue to anticipate sales growth of 6% to 8%. Included in this range is about 3 to 4 percentage points in the first half from Burt's Bees, averaging to about 2 percentage points of total company sales growth for the year.

We anticipate the balance of sales growth primarily to be achieved through price increases with some benefit from mix. Our outlook projects that the incremental pricing actions we are taking will have an impact on volumes, with shipments coming in at about flat to up slightly for the full fiscal year.

The benefit from foreign exchange in fiscal year 2009 is expected to be less than fiscal year 2008 and any benefit on the top line will likely be offset by completing the exit of our remaining private label food bag business.

Taking these factors into consideration, we now expect earnings per diluted share in the range of $3.60 and $3.75. This revised outlook takes into account our latest view of the commodities cost environment.

As you know commodities continue to be extremely volatile. In the last three months, oil has ranged above the roughly $115 per barrel price estimate we had included in our initial outlook. Many of our commodities are not directly tied to oil. For those commodity inputs that are linked oil, we are using an estimated range of $135 to $145 per barrel in our current outlook.

In addition to the impact of oil, our current outlook also includes an updated view on other commodity cost increases. For fiscal year 2009, our updated outlook for commodity and diesel cost increases is now a $180 million to $200 million versus our initial estimate of $100 million to $120 million. More than half of these costs fall in the first half of this fiscal year.

We anticipate that our gross margins will be down in the first half of the fiscal year, up somewhat in the second half and about flat for the full fiscal year. We have taken the following into consideration with respect to our commodities cost outlook. Energy costs are still very high versus historical norms. Developing economies are creating increased demand and market pricing remains extremely volatile with price projections uncertain.

The global supply of resin is expected to increase as new capacity comes online in the Middle East. Demand in the US for many commodities, including resin, may further decrease given the economic environment, which includes declines in housing, autos and other sectors.

If commodity costs move higher than our outlook range contemplates, there are other mitigating actions we will pursue. Conversely, if commodity costs drop below our outlook range for a sustainable period of time, we're likely to use at least a portion of the benefits to reinvest in category growth and demand building activities.

As previously discussed, we plan to be more aggressive in recovering cost increases through pricing in fiscal 2009. Our current financial outlook assumes we will price to recover about 75% of the commodity cost increases we now anticipate.

We are considering further pricing actions in the second half of the fiscal year to recover more cost increases. Anticipated cost savings targeted at $90 million to $100 million for fiscal 2009 will also help offset some of the commodity cost headwinds.

Our outlook for fiscal year 2009 restructuring-related charges remains in the range of $20 million to $25 million, or about $0.09 to $0.11 diluted EPS, primarily related to the previously announced consolidation of our manufacturing network.

More than half of these charges are anticipated to be reflected in cost of goods sold on the P&L.

As I said last quarter, we anticipate the restructuring actions we're taking to openly generate ongoing cost savings of about $22 million to $24 million when fully phased in.

Let me now turn to economic profit; as part of our Centennial Strategy, we are targeting double-digit annual increases in economic process. As we've previously discussed for fiscal year 2008, we did not anticipate achieving our annual economic profit growth target due to the level of restructuring charges we were taking and the impact of the Burt's Bees acquisition.

For fiscal year 2008, we generated $362 million in economic profit, down somewhat from $379 million in fiscal 2007. Although Burt's Bees has a diluted near-term effect on economic profit, we feel very good about the acquisition. We believe Burt's Bees and the natural personal care category position us well for higher top-line margin and economic profit growth over the longer term.

Burt's Bees is running ahead of our valuation case and we feel very good about the growth prospects in the natural personal care category. Restructuring actions we are taking in fiscal years 2008 and 2009 will help improve future year margins, profits and cash flow.

Let me now turn it over to Don.

Don Knauss

Thank you, Dan. Good morning, everybody. While also we feel very good about the results we delivered in FY '08, especially given the volatile cost environment we all see out there. At the end of the day, we achieved the earnings per share target we announced almost 15 months ago saw you in New York in May '07, despite the fact that we had commodity cost increases of more than a $110 million above our initial projections.

Now looking back our 9% sales growth is testament, I think to the strength of our brands and the direct outcome of our strategic decisions to pursue these key consumer mega trends I have been talking about since I got here, notably sustainability in health and wellness. You can see that in the launch of Green Works, the repositioning of Brita for robust growth and acquiring Burt's Bees.

As Dan just noted, we are very pleased with Burt's Bees business is performing ahead of our expectations to-date.

Now looking ahead let me give you my perspective on FY '09. It's clear been significantly impacted by commodity cost increases for a couple of years now. We believe we have taken a balanced approach to projecting commodity cost for FY '09 and we feel good about the actions we are taking to achieve our goals, including price increases.

Many of you have expressed concerns about the impact of price increases on the consumer. To be clear, we do expect an impact on volume as Dan just noted; however, I have confidence we can successfully implement our '09 pricing actions for the following reasons.

First, I believe we are doing as a good job of anyone recognizing and capitalizing on key consumer trends, including health and wellness, sustainability and convenience. These trends across our portfolio, and it's not just in the more obvious area, such as Green Works, Brita, and Burt's Bees.

Our togetherness platform for Kingsford Hidden Valley in KC Masterpiece is all about inspiring families to eat together at home. Not only eating at home more sustainable and less costly for families given this cost environment, but research shows this simple act is strongly linked to lower incidences of things like teenage drug and alcohols use and greater emotional stability.

The togetherness platform is certainly good for retailers also making easier for them to connect these brands in store with a home-built solution and obviously, this togetherness platform is working as evidenced by the results on Kingford and Hidden Valley Ranch that Larry talked about earlier.

The second reason we believe we can successfully implement our pricing actions is that we have a strong brands, consumers' trust and retailers truly want. We still have in this country 11 of number one brands in 15 categories and over 25 number one brands internationally.

Third, our overall shares are holding their own in this economic climate and despite the pricing actions we have implemented today.

And finally, we really have strong customer capability that our retail partners value. Just to give you some perspective, our investment behind the customer generated 19 new retailer advisory positions in fiscal year '08. Of these category captaincies, 17 are in the grocery channel where you all know with incremental investment. And that channel represents about a third of our US sales but more than half our US economic profit.

Importantly, I think is to note that our emphasis on grocery has resulted in a 5 point turnaround for the past four-year trend where we have been trending a 96 index and this year, we're at a 101 for fiscal year '08.

There are several things I hope you will take away from this call today. First of all that FY '08 was a very good year, it was our seventh consecutive year of sales growth at or above our target range. It was our seventh consecutive year of strong cost savings. Despite commodity increases of more than $100 million above our initial estimates, we delivered EPS results excluding one-time charges solidly within our original outlook.

Second; I think we're confident certainly that we can deliver FY '09. We anticipate another year of strong overall top-line growth. We anticipate continued strong results from Burt's Bees which will be accretive for the year.

International remains strong I think and international as well as domestically, we're capitalizing on the consumer mega trends, including the launch of Green Works now in Australia, Finland New Zealand, Mexico, Puerto Rico, certainly in Canada and about to go into Ireland. We also have a lot of upside internationally with Burt's Bees is going into Australia and working on Japan right now as we speak.

We have a strong new product pipeline including several new product introductions plan for Burt's Bees. And as Larry mentioned, the new Green Works LDL product will be going out starting next week.

The third reason I believe we can really make this work as we anticipate another year of unprecedented commodity cost increases, but we think we have a realistic outlook on where commodity increases will be. And I think you would all admit that we have a proven strong track record for managing our business well in difficult environment and we are taking the right steps to mitigate these impacts.

Of course, we are taking a significant level of pricing that will provide more benefits in the second half than the first. This will however put some pressure on volumes.

Well, our margins will be pressured, particularly in the first half. We do anticipate some expansions in the second half and flat margins overall for the year. And certainly, we anticipate a lower level of restructuring in FY '09.

Finally, we remain focused on driving shareholder value over the long term. In FY '09, you will see from us that we will continue to pay down our debt, as promised, and we'll also support our dividend growth.

Importantly, we remain committed to our Centennial Strategy. We're changing the nature of our portfolio with a focus on higher growth, higher margin businesses. I feel good about how we are allocating resources to focus on the highest opportunities to deliver EP growth over the long term, including our choices to focus on the key consumer mega trends. Secondly, pursue 64 innovations wins. Third, continue to investment in the grocery channel. Fourth, drive out wastes through our cut cost and enhanced margin initiative. And lastly, make investments to keep our brands strong and growing.

I would like to thank you all for joining us today and I will now ask the operator to open up the lines for questions.

Question-and-Answer Session

Operator

(Operator Instructions). Our first question today comes from Chris Ferrara, Merrill Lynch.

Chris Ferrara - Merrill Lynch

Hey, good morning, guys.

Larry Peiros

Good morning.

Don Knauss

Good morning.

Chris Ferrara - Merrill Lynch

I was just wondering so with relative to your last outlook, the cost outlook is $80 million higher for '09 and the guidance I guess on a pre-tax basis is down by $30 million and cost savings are the same, so it implies I guess $50 million of price. Is that right and I guess where is the incremental pricing today that you are thinking about relative to when you to talk to us in early May?

Dan Heinrich

Yes. I think you have the math right, Chris, so to cover, part of it is obviously we are taking our outlook down. The balance we intend to recover with higher pricing and when we last spoke to you, as well as some belt tightening and some spending cuts in other areas of the company.

So we anticipate probably a little more than half of that GAAP will be made up with pricing and the rest will be adjustments we are making in the rest of the business.

Larry Peiros

The most notable change in pricing plans is we are taking the price increase on our Glad trash business given the increase in resin to be about 10% effective in October.

Don Knauss

I think the other thing Chris, Don here. I would suggest that as our mix continues to shift to higher margin products, Green Works, Brita, Burt's Bees, you will see some benefit from next two enabling us to cover some of that gap. So, I think it's all three of those elements combined pricing cost and mix.

Chris Ferrara - Merrill Lynch

Okay. So, I am sorry, just to be clear so, commodity costs are $80 million higher, the guidance comes down by $30 million, so that $50 million spread you have to make up for, you are saying half of that is pricing. So like maybe $25 million in incremental pricing and $25 million from things like mix and other cost savings that fall outside of CCEM, is that right?

Larry Peiros

A little bit higher than the $25 million on pricing, but those are the general items that will help offset it.

Don Knauss

I would think of it as 60/40 Chris, about $30 million coming from pricing in round numbers and the other $20 million from cost.

Chris Ferrara - Merrill Lynch

Okay, great. And then just on the A&P spend, I think you guys have said that, you'd expect '09 to have been at the higher end of the 9 to 10 range. Is that still the case?

Larry Peiros

I think in fiscal '09, we are still trying that 9% to 10% range, hopefully towards the middle of that range, a little bit at low end for the current fourth quarter. We feel good about the support we have behind our brands. We continue to focus on the working part of the mix, that a lot of work on the efficiency of the non-working component.

So we are seeing pretty good shift between non-working and working. But overall, we feel good about the level of support we hope to stay within that 9% to 10% range.

Don Knauss

And I think Chris if you, I think the same we're really looking at is the money we're spending effective, and I think the top-line growth is what we're most happy about. I think it's exceeding people's expectations about the top-line growth. Excluding the acquisitions, our base growth is as strong as it's ever been at least in the last few years and the fourth quarter. So we feel good about the effectiveness and the efficiency of the spend we have out there.

s Larry said, we are still committed to the 9 to 10 range. If there is any mitigation of commodities, we'll continue to be looking at additional investments in consumer brand building. And we're also looking at I think like most CPG companies, people have between 10% and 20% of their budgets in non-working dollars. We continue to squeeze those dollars and feel good about that. Our marketing ROIs are up 9% for the year, so we feel very good about the way we're deploying the money.

Chris Ferrara - Merrill Lynch

Okay, great. And I just wanted to ask real quickly about resin and I'll leave you alone. With the recent pullback in the hydrocarbon cost, obviously, like our chemicals analysts internally here are saying that there are reports that the resin buyers are saying the August price increase has no shot and the July price increase is expected to roll back a little.

Then you have Newell Rubbermaid on their call yesterday saying that they don't believe that with resin where it is now that even reflects oil at 120 that they expect resin prices to go up in July and August and again in September, and there was such a just disconnect from someone who's obviously not a chemicals analyst. I was wondering if you could just give a little color as to how you see all these dynamics?

Larry Peiros

Definitely, it's hard to call. Obviously, we have a lag effect in our P&L because of inventory that we carry. There have been some announced price increases historically; a lot of the price increases have been stuck. We are optimistic that some of the longer-term price increases in the marketplace won't stick based on oil coming down; however, we are seeing obviously current resin going on.

Dan Heinrich

Chris, let me try to talk a little bit about the progression and how we're thinking about it, playing out in fiscal '09. So if you went back to Q4 of last year, Q1 of this year, and I'll talk about market prices, because that's easier to talk about. So market prices were probably in the mid $0.70 per pound range.

We then saw upward pressure on resin in Q2. We saw that jump up to about the mid $0.80 range. There were some announced price increases earlier in the calendar year. Most of those did not stick, but then in the fourth quarter, we did see another jump probably $0.10 to $011 in the market pricing. They got us up into the mid $0.90 range.

There are two more announced price increases in the market and I am talking primarily liner low density polyethylene here. I think there is an $0.08 increase in August and $0.05 increase in September. Now as we look at those, from a supply demand standpoint, we do not believe that those prices should stick.

Having said that, we have seen earlier price increases that based on supply and demand should not have stick and some of that has. So as we look out over the next quarter or two, with these announced price increases, I mean our view right now is from a supply/demand standpoint, there is not a basis for those increases. We also still believe in the thesis that in the back half of the fiscal year, we will start to see some declines in resin as that Mideast supply comes online.

What we are saying now on our outlook is that likely to happen a little bit later in the fiscal year and because of the way we contract our hedging inventory lags, things like that. We are not projecting right now in the current commodity cost outlook any material benefit from those declines, but we do expect them to continue. So it is kind of an uncertain world right on resin. The supply/demand would suggest that prices should come down. They have been sticky, but we do still anticipate in the back half of the fiscal, we will start to see some declines.

Chris Ferrara - Merrill Lynch

Great, thanks a lot guys.

Operator

Our next question will come from Ali Dibadj with Sanford Bernstein.

Ali Dibadj - Sanford Bernstein

Questions, one is of the clarification of what you just said around resin. So in the 180 to 200, you are essentially banking on resins kind of where they are today, is that right?

Dan Heinrich

What I say is fairly steady pricing over, call it the next couple of quarters. Ali, the thing you need to keep in mind is, we do have lags on when these costs come through the P&L. So as you think about the first half of the year, the increased run-up that you saw in Q4 is, has not really flown through the P&L.

We'll see that probably in the first quarter. So, even though we're projecting out, the resin may stay at these levels. We don't think the pricing will stick and will decline in the back half. As you are thinking about the P&L though, the run-up that you saw in the fourth quarter, you will see that flow through our P&L in the first quarter.

Ali Dibadj - Sanford Bernstein

Okay. So ups and down a little bit. Okay, great. So, now on to couple other questions. Particularly on volumes, you mentioned hydrochloric bleach and the declining consumer relevance there. Can you give us a sense of what the volume actually was and similarly on the Glad business please?

Larry Peiros

So again on Clorox liquid bleach, our share was up, the category was down 6% or 7% at a volume range and pretty similar what the category did, although large share was up slightly.

Ali Dibadj - Sanford Bernstein

Okay.

Larry Peiros

On the Glad overall category is down about 2%, which was actually about in line with the rest of direct channel categories. Our volume was down a couple of points, but our sales were up pretty significantly given pricing and the shift to ForceFlex.

Ali Dibadj - Sanford Bernstein

Okay. And those are just under about a quarter of your business, right, if you add it all up just in terms of sales?

Larry Peiros

Correct.

Ali Dibadj - Sanford Bernstein

So, then translation that forward to the price increases which you kindly always put in your releases here. You are taking pricing on some of those same categories. Is it because the (inaudible) was a little bit better than you thought or is it because you are pumping back more trade spend so you are not getting back enough in terms of commodities? How should we think about the stability of those volumes, given the pricing that you're taking going forward?

Larry Peiros

We are counting for some volume losses as a result of pricing. We're obviously taking pricing where we're seeing the most margin pressure, the most commodity pressure, obviously, Glad being top of the list in terms of commodity pressure. So we are assuming a decline in volume in both of those businesses as a result of pricing, the net effect with pricing will follow probably see positive in terms of the sales growth.

Ali Dibadj - Sanford Bernstein

Okay.

Larry Peiros

Definitely seeing some volume decline.

Ali Dibadj - Sanford Bernstein

But you'd expect a little bit of kind of acceleration of a decline going forward, as you take more pricing?

Larry Peiros

My guess is that in both those categories, we will see matching by the competitive set. And so shares will remain stable or hopefully improve over the course of the fiscal year. So I don't know if there will be any much different than what we're seeing this year in terms of the overall picture.

Ali Dibadj - Sanford Bernstein

Okay. Shifting gears to a prior business, which is growing pretty well here, Burt's Bees and Green Works, particularly on Burt's Bees, just an understanding question, what's the seasonality for that business?

Larry Peiros

Its slower seasonality in the fourth quarters than the third quarters so we're seeing very, very big growth in both quarters, but the absolutely sales in the fourth quarter is less than the third quarter because of the seasonality. The largest sales quarter for Burt's is our fiscal second quarter and that's due to all the gift kits that go out for the holiday season.

Ali Dibadj - Sanford Bernstein

Okay. And then my last question on other piece of business, Green Works, how much did that contribute to your top line growth?

Larry Peiros

Green Works is about 1% overall total company growth. We had a very strong quarter in our homecare business, so even though Green Works has been a terrific success, it actually was less than half of the double-digit growth in our homecare business this quarter, a lot of good shipment growth.

Dan Heinrich

And for fiscal '09, we are again anticipating about little more than 2 points of growth in new products and it would include the incrementality from Green Works including the launch in the dish.

Larry Peiros

Just a note on the dish launch Ali, the current five SKUs of Green Works compete at about $1.4 billion of categories. By going into the LDL category, we will be adding another $1.4 billion of category space another Green Works brand will be exposed to almost $3 billion of sales which we think even with the modest, if we get anywhere near the kind of success we had with the original 5 into LDLs, I think the product is unique. It could have a nice impact for us on the top line.

Ali Dibadj - Sanford Bernstein

Okay. Thanks, guys.

Operator

Next is Bill Schmitz with Deutsche Bank.

Bill Schmitz - Deutsche Bank

Can you just talk about the sort of the strategic importance of Glad; it doesn't really fit into health and wellness and whether or not you think strategically about kind of parting ways with the business?

Larry Peiros

Obviously, it has its challenges from a sustainability standpoint. We are doing some testing in terms of biodegradable, compostable bags up in Canada with some success. And it maybe that over the long term as prices come down on those alternatives that becomes a larger part of the category. Obviously, we are seeing some people go away from plastic bags in grocery stores etcetera.

On the short term it seems to be helping our business a little bit because people still need plastic bags, still want plastic bags. So now they are purchasing bags versus getting them free. But obviously this is the business that is less sustainable than other businesses which over time we need to focus on how to make it more sustainable.

Don Knauss

Bill, Don here. The one trend that we have been focused on, where we are trying to push Glad is the whole convenient trend and obviously things like ForceFlex Odor Shield which are now about 40% plus of our mix of trash are helping push into that direction and provide a solution for consumers around convenience.

So clearly there are some challenges on the sustainability side. We are doing what Larry suggested with compostable bags etcetera, but we are also trying to be mindful of the convenience trend that's going on and as more municipalities eliminate plastic bags in grocery channels, a lot of those bags are currently being used in home or trash bucket liners etcetera. We think that could have some minor upside for the branded business. But we are clearly focused on the convenience trend and mindful of the sustainability trend.

Dan Heinrich

And Bill from a margin standpoint, as you know, we are exiting the private-label component there which will be accretive to margins and EP. We have the overall trade-up strategy underway within Glad and obviously we are taking some price increases because of the cost increases that we're seeing.

Bill Schmitz - Deutsche Bank

Got you. I mean would you take the dilution if a good offer came through for Glad in this environment?

Don Knauss

How much money you got?

Bill Schmitz - Deutsche Bank

I don't have very much, but a lot of people out there do. Dan, can you also just put some more color behind some of the commodity assumptions, like we didn't really talk about the agricultural commodities for the charcoal business obviously in Valley, I mean what are your thoughts there?

Dan Heinrich

Bill, as we look at, obviously we came in thinking it's going to be 100 to 120, we're now at the 180 to 200. The biggest movers in there, obviously we are seeing some continued impact from diesel, resin is probably the biggest mover that's in there. We are seeing sort of across the board general increases in most if not all of our commodity categories.

There is a little bit of pressure on chlor-alkali certainly on soybean oil and things like that. We are seeing some further increases. So it's kind of across the board. I wouldn't say anyone category is huge, but just sort of the general tied is rising on most of commodity cost. But the biggest drivers for us in the change in the outlook is going to be in the resin diesel primarily.

Bill Schmitz - Deutsche Bank

Okay, great. Thanks very much.

Operator

Our next question will come from Nik Modi with UBS.

Nik Modi - UBS

Good morning, guys.

Larry Peiros

Good morning, Nik.

Nik Modi - UBS

Just a couple of quick questions. Are there any repeat metrics you can share with us on Green Works. And then on the category captaincy, can you help us illustrate how winning those captaincies could manifest in the P&L as we look at fiscal '09? And then just on the share buyback, obviously you have the authorization. Just curious as to how would you think about that over the next year, year and half? Thanks.

Larry Peiros

Let me talk to the Green Works. We track both trial and repeat, and both those factors are right on track with our expectations. And all the anecdotal evidence is very positive. We continue to get great reviews from consumers about the effectiveness of these products, particularly versus other environmentally friendly products they are used to using. So, it looks very good from both the trial and repeat standpoint.

Don Knauss

On the category captaincies mix, obviously, the focus there and what our customers believe in our capabilities is that we best know how to grow their overall categories. I think where we see the manifestation on our own P&L given the number one stable of brands we have is we tend in those situations going through the analysis to pick up assortment which is, our business is 90% plus base business.

So when one picks up assortments of additional SKUs, we're also seeing expansion of sets in different retailers. For example, we have a retailer on the West Coast that just committed to larger trash bag sections. And once those sections are enlarged, obviously Glad picks up additional SKUs and facings. So to see it across AMPS, what we call, Assortment Merchandising, Pricing and Shelving, but you see it manifest itself on an assortment and shelving standpoint. And that's what really gives you sustainable build over time.

Dan Heinrich

Nick, let me address your question on share repurchases, so the outlet that we updated today assumes that we're using our free cash flow to support dividend growth and to retire debt. So there is no assumption right now that we are buying back shares.

Having said that, early in the third quarter, we will back to 3.0 debt-to-EBITDA or less. So at that point, we certainly have more flexibility to consider some share repurchases in the back half of the year depending on our view the share price. But for right now, the outlook does not assume that we are buying back shares.

Nik Modi - UBS

Okay. Thanks a lot.

Operator

Our next question comes from Lauren Lieberman with Lehman Brothers.

Lauren Lieberman - Lehman Brothers

Thanks. Good morning.

Dan Heinrich

Good morning.

Lauren Lieberman - Lehman Brothers

Can we talk a little bit maybe about SG&A leverage. Remember in last year's first quarter there was quite a bit of SG&A leverage which took a lot of us by surprise because we were all expecting that to see the beginning of the step-up in reinvestment, particularly in the grocery channel. So as I think about '09, it feels like you need a pretty good amount of cost savings or overhead control at the SG&A line or for advertising to be done further as a percentage of sales. I mean, can you maybe give us a little bit more specifics in what will drive that?

Dan Heinrich

Let me address the SG&A question. So as we look at SG&A year-over-year, obviously FY '08 was an investment year for us. We did acquisitions. We did the bleach acquisition. We had about a half year of cost for that. We did the Burt's Bees acquisition. We also had some impacts in SG&A from currencies and then just sort of general inflation. We did drive some cost savings however on that line item.

As we look at SG&A out into this next year, obviously we still have the inflationary effects that we will face on wages and benefits and will have a half year's worth of impact or so from Burt's Bees. But we are certainly looking at all areas of spending in our belt tightening to see where we can trim and be more efficient on our spending.

And in terms of advertising, I think Larry addressed that. We expect to be in the 9% to 10% range on our advertising and that's an area where we're looked at. We're looking at the efficiency of the spend, as you described, it's really about generating higher returns for the level that we're spending.

So, it's an that we continue to look at in terms of efficiency, but we certainly want to support our brands. The way we think about SG&A is we're trying to limit any growth in SG&A to have the growth rate of sales. So, if you think about the projected strength of our top line in fiscal '09, we're trying to limit our SG&A growth there, half that rate or less. And certainly, we've got a lot of people focused on trying to reduce that number as we go into '09.

Lauren Lieberman - Lehman Brothers

Okay. That's helps a lot. Thanks. In terms of the flow, I know you guys are talking more about the two halves of the year, but Q1 is actually a pretty tough comparison, even just from that SG&A leverage standpoint and you had a big pretty revenue quarter. Should we be thinking about Q1 because of that tougher comp and because you described the Q4 resin inflation kind of flowing through then, does that will probably be the toughest quarter of the year?

Don Knauss

I guess it depends on you define toughest quarter of the year.

Lauren Lieberman - Lehman Brothers

Not a lot of growth, I mean earnings growth.

Don Knauss

I don’t want to get back. We've gotten away from talking a lot about detailed quarters. Let me talk about the halves.

Lauren Lieberman - Lehman Brothers

Okay.

Don Knauss

Because I think it's a little easier to talk about the halves. So, if you think the halves, most of the commodity cost inflation that we saw in fiscal '08 hit in the back half of the year. We did see a fairly significant run-up in the fourth quarter of costs that will flow through our P&L mostly in the first quarter, somewhat into the first half.

So, when you think on a year-over-year comparison, commodities are lot higher and we were lower in the year ago period. You also pointed out the SG&A, so certainly our margins will be under pressure in the first half and then as we get into the second half, as we look at our commodity projections there, we're going to be comping against some pretty high levels in the year ago period.

Certainly, we're driving cost savings as hard as we can and we might see a little bit more of those cost savings in the first half versus the second half. And then just from a top line standpoint, a lot of the pricing is going into effect in August and there's a lot of it and it's going in. There is some in the back half, but a lot of it is going into place in August. So we're going to see fair amount of that benefit in the first half of the year.

Lauren Lieberman - Lehman Brothers

Okay. And then the last thing I just wanted to clarify on volume is, if I just make the assumption that the 2 points of growth from innovation is mostly, you are talking about volume and mix there. And, if I assume international say grows at 5%ish, it's probably going to be better, but let's be relatively conservative, then the core business volume growth is probably down something like 1% to 3%. Is that how you guys are thinking about it, sorry core US? I quoted the wrong word, I mean non-innovation, sorry.

Larry Peiros

I think we are seeing probably slightly down volume on the base business, obviously as a result of the pricing actions that we're taking. Better sales results, but definitely volume will be soft as a result of the pricing.

Lauren Lieberman - Lehman Brothers

Okay, thank you.

Operator

Connie Maneaty with BMO Capital is next.

Connie Maneaty - BMO Capital

Good morning. Could you talk a bit about the slower restructuring through the year, the $0.09 to $0.11, is that even in every quarter and what are the projects you're undertaking?

Dan Heinrich

The projects in restructuring are really primarily continuation of the announced manufacturing, restructuring actions that we had in fiscal '08. So most of that is tied to the home cleaning, consolidation of our manufacturing into the Atlanta plant and we would anticipate that the lion share of those charges will come through in the first half of the year.

Connie Maneaty - BMO Capital

Have another $0.09 in the first half?

Dan Heinrich

Good portion of it will be in the first half of the year.

Connie Maneaty - BMO Capital

And also on the concentration of liquid bleach, I heard all that correctly, are you concentrating liquid bleach by 2 times the way liquid detergent was?

Larry Peiros

No, actually we are concentrating our Clorox 2 Color Safe Bleach.

Connie Maneaty - BMO Capital

Clorox 2.

Larry Peiros

Yes, not the basic hydrochloric bleach. There is quite a bit of technical challenge of doing that.

Connie Maneaty - BMO Capital

Yes, that's what I recall from the old days. That's it for me. thanks.

Operator

Filippe Goossens with Credit Suisse has our next question.

Filippe Goossens - Credit Suisse

Yes, good morning, gentlemen. I have also kind of second Bill's suggestion here too definitely continue to look at the opportunities to find somebody who is willing to pay you lots of money for the Glad business. But anyhow Don as you know the two areas that I still continue to struggle with and I hope that once again you can try to raise my level of comfort.

The first one being the impact of the economy today on the Burt's Bees and Green Works, I think these are great products, great initiatives. But I am just still kind of wondering to what an extent you are relying on the success of these two product lines on Wal-Mart. In other words, is the Wal-Mart customer today willing to pay the type of premium that you need to make these products successful?

And then the second question relates to the commodity prices, but if you can just touch again on, how dependent are you on Wal-Mart and the Wal-Mart customers be willing to pay that premium in order to make Burt's Bees and secondly also, Green Works, the success that you all believe these lines can deliver eventually?

Don Knauss

Let me take the last part first Filippe on Burt's Bees and Wal-Mart. We are really not really dependent at all yet, in the sense that today Wal-Mart is selling less than 5% of Burt's Bees. So we've only been in the few 100 stores. We are testing 2 foot, 4 foot and 8 foot sections in those markets where we believe the demographics are right.

Clearly, Burt's Bees will not be rolled off across the entire 3500 stores because of demographic simply wouldn't work. So, we're still in a testing mode. So, there really hasn't been much impact yet in fiscal year '08 and as we go into fiscal '09. So, I don't think we're really dependent at all there.

We're seeing obviously in our traditional customers who've done a great job that new target resets are doing extremely well. The three main drug chains are doing extremely well and of course Whole Foods and other outlets for this brand built was built initially are continued to do well.

I think the bigger upside potentially is in the grocery channel, where of course we have 35,000 supermarkets and we're doing less than 10% of our volume on Burt's Bees in supermarket. So, I think we have a lot of opportunities to spread the wealth on Burt's Bees. So, not very dependent at all yet on Wal-Mart. As far as Green Works goes Wal-Mart is obviously taking the lead in their sustainability emphasis. They've done a terrific job with it.

What I think that's done if forced the rest of the industry to really pay attention to it. I don't know that I would suggest that we're overly dependent. I think the grocery channel has jumped on it, all of our major top 25 grocers are investing heavily behind Green Works and the international side is also starting to take off. So we feel very good that we've kind of spread the wealth, if you will, and all of these retailers understand this, how well these brands link in with the current trends and I think they're really trying to push it hard.

Larry Peiros

The only thing I would add to that is, it's really a value equation versus pricing. So innovation offering added values have been a big way we've offset pricing increase for absolute price. So ForceFlex is growing double-digits even though that's a 15% premium. Green Works is doing really well even though that's a premium product. Burt's is doing exceptionally well even though that's a brand, that's a better value from a consumer's perspective because of what they offer.

Filippe Goossens - Credit Suisse

In terms of Green Works, are you pretty much done with the initial shipments into the channels that you have targeted or there is more to come here?

Larry Peiros

I think the distribution at this point is pretty broad-based. There is still probably some distribution opportunity in the drug channel, which is typically a channel we get to later in new product launches, but distribution is pretty broad at this point and pretty deep.

Filippe Goossens - Credit Suisse

Okay. Then the question I have with regard to commodity prices, can you just give us a little bit of a better feel where you stand in terms of diversification in terms of suppliers? Are you still pretty much right now tied to Dow Chemical or the diversification has already been much more advanced than what I think it is at this moment?

Larry Peiros

Specific to resin, we have tried to broaden our supplier base, also changed some of the specs of our resin requirements in order to do that. So we have a wider variety of suppliers today, I mean many suppliers that we did previously. We have different strategies by area. In most cases, we have multiple suppliers for any kind of key ingredient.

Don Knauss

I would think it's safe to say, Filippe, on resins that we're much more diverse in our supplier base than you might think.

Filippe Goossens - Credit Suisse

Okay. And then you mentioned earlier, I think it was Dan about the two price increases that are stills scheduled August and September that you think they might not stick. When you gave us the updated guidance for commodity prices in 2009, does that include these two scheduled price increases will stick or you are assuming that they won't stick?

Dan Heinrich

I am probably not going to that answer that question directly. I mean, our outlook has our best estimate of what we think commodities are going to do over the course of fiscal '09. There is a range of scenarios that are embedded into that range.

And so I wouldn't really say there is a specific point we are taking with respect to that. We have developed a range based on the volatility that we see in the market and some of the trends that are currently there and we feel as comfortable as you can be with that $180 million to $200 million, but that gives us flexibility in there depending on whether individual commodities move up or down versus what we may currently believe.

Filippe Goossens - Credit Suisse

Okay. And then my final question if I may today, can you just talk a little bit about what you are currently seeing in terms of channel dynamics. We all know the comments that Costco made recently within the context of higher energy prices, one would argue that the grocery channel should actually benefit as people are not willing to make the larger trips to the club channel given that you continue to invest in the grocery store channel. Can we expect that in fiscal '09 you might perhaps see more traction with the grocery store channel as compared to the club channel? Thank you.

Larry Peiros

We've definitely seen a bit of recovery in the grocery channel which is one of the reasons why we've been focusing on that channel. Our business in grocery has seen a significant turn around versus trend. We're up about 1% for the year, which is about 5 point turnaround from the three previous years. Overall, we continue to see higher growth in what we term the untracked channels, then the tracked channels.

So, untracked will include the club channel and dollar channel. In the current quarter, that's true as well. It's narrower than it has been historically, but we are still talking high single-digit differences in terms of the overall growth in the untracked universe versus in tracked universe.

Filippe Goossens - Credit Suisse

Okay. Thank you.

Don Knauss

I think your instinct is right on grocery in the sense that there are roughly 35,000 grocers in this country and less than 1,000 club stores and less than 3,000 roughly 2,500 Wal-Mart. Obviously with $4 gasoline, people are tending to stay closer to home. I think we are seeing that in our own trends in grocery.

Our investment timing I think was very good based on what's going on in there, out there with that trend and as grocery retailers get away from insult pricing in the center of the store, I think it bodes rather being much more competitive with the guys who have set the pricing floors like Wal-Mart and Target and the club channel.

Filippe Goossens - Credit Suisse

Okay. Thank you, gentlemen.

Operator

Our next question will come from John Faucher with JPMorgan.

John Faucher - JPMorgan

Yes, good morning everyone. So, two quick questions here. First off, if I look at the reduction in charges, it looks as though you are underlying gross margin excluding the impacts of charges year-over-year should be down about 50, 60 basis points and I am wondering if that lines up with what you guys are thinking?

And then on Green Works, I think you mentioned that half the category and the category has doubled, so would that basically imply that you're not really taking much share from the existing cleaner businesses at least the environmentally friendly cleaner businesses?

And then can you also give us some idea in terms of how much of the environmentally cleaner category growth is coming from the regular cleaner business, I assume that's fairly cannibalistic situation? Thanks.

Dan Heinrich

Let me try the gross margin, if I answer it for you John. So as we look at the restructuring charges that are going through margins, we had about $23 million in fiscal '08. The majority of the charges that we're looking at in '09 are also going to go through cost of goods sold.

So at least on the gross margin line, on a year-over-year basis, there is not a big impact or not a big delta, if you will, between a level of restructuring charges that are going to flow through. So our margins, again we're expecting to be down first half, up second half and about flat for full year and I don't think restructuring will be a big impact either way.

Larry Peiros

So let me take a stab at your Green Works.

John Faucher - JPMorgan

Just one quick second. Does that include the Burt's Bees charges as well or is that just restructuring piece of it?

Dan Heinrich

That's just a restructuring. On the Burt's Bees, we have the $90 million charges past year if you want to include that in there as well. You will see that impact on a year-over-year basis.

John Faucher - JPMorgan

Okay.

Larry Peiros

So let me try to answer your Green Works question, if you basically add up all the products in homecare that either are natural or purport to be natural or green, that overall category has more than doubled and we have a 50% share of that category. We account for obviously the bulk of the growth of that segment, but the other guys are growing as well.

They are loosing substantial share obviously, as obviously Green Works just taking the bulk of the share away. Overall if you looked at our homecare share, most of our share growth from Green Works is incremental to our total homecare business. Again just some sense of the cannibalization of about at least in our own business.

Don Knauss

For example, John, if you take the last period, we are seeing 409 and Tilex shares flat so we are not obviously cannibalizing those spray cleaners. There is some cannibalization but our original numbers are around 75% to 80% or so incremental. It seems like it's holding true.

John Faucher - JPMorgan

Are you seeing dramatically different source of volume depending on what was available in the channel previously. So if you look at places where method was available, can you tell us you're sourcing a lot more share from method in those particular outlets versus our regular grocery store where they probably didn't have anything from that standpoint?

Larry Peiros

Probably don't have enough liable data to give you an accurate answer on that quite frankly, in this natural category, Method would be the number two brand with about a 20% share per perspective. So it's a fairly small pretty quick.

John Faucher - JPMorgan

Thank you very much.

Larry Peiros

Thank you.

Operator

And next is Linda Weiser with Caris.

Linda Weiser - Caris

Thank you. My questions has been answered.

Larry Peiros

Thank you.

Operator

Thank you very much. Next, we'll hear from Andrew Sawyer with Goldman Sachs.

Andrew Sawyer - Goldman Sachs

I just had a real quick one on Burt's Bees. I was wondering if you could just help us through how you would proceed taking the mid 30s growth rate and what you consider distribution driven versus the natural same-store sales or whatever you want to call it. And also if you could just give us some maybe at little color on what type of growth rate you are building in or expecting into fiscal '09? Thank you very much.

Larry Peiros

Our base plan on Burt's, what we put together for the original acquisition was in the teen growth rate. But we're obviously seeing more than that right now. A significant chunk of that is driven by new distribution. The overall natural personal care category, however, is growing at something like 10% to 15% growth rates.

So we're benefiting from distribution, the overall growth rates of natural personal care as well as obviously the new products that are being introduced on the Burt's Bees line. So it's probably all three components; I don't know if we can break it down specifically which is driving the most, but we still have opportunity in all three of those vectors for fiscal '09.

Andrew Sawyer - Goldman Sachs

But you are still embedding a mid-teens case in your numbers?

Dan Heinrich

We're a little bit higher than that for fiscal '09. The valuation case that we did assume that we would have higher levels of growth in the earlier years averaging down over time to CAGR of about 15%. So, you are going to still see very robust sales growth numbers from Burt's in fiscal '09.

Andrew Sawyer - Goldman Sachs

Thank you very much, guys.

Dan Heinrich

Thank you.

Operator

Our next question will come from Priya Ohri-Gupta.

Priya Ohri-Gupta

Hi, good morning. Just a quick question, you had noted that, you will continue to pay down debt in fiscal year '09. Given your current CP, your short-term debt balance of $755 million, would you look to pay this amount down entirely or could you potentially look to refinance some of this in the term debt market later this year? Thank you.

Dan Heinrich

On the CP, that's where all the pay down will come from as we look out over the next year. There are no current plans to go and term that debt out. We just have plans to pay it down and create greater flexibility.

Priya Ohri-Gupta

Thank you.

Operator

We will take our next question, Jason Gere with Wachovia.

Jason Gere - Wachovia

Thanks. Can you just talk about the progression of the sales and your market shares during the course of the months and maybe just how that extended from June into July?

Larry Peiros

I don't have a break down by month, but I wouldn't say it's been dramatically different. I mean, we're seeing some slight improvements on some businesses, but overall shares aren't all that different month by month.

Jason Gere - Wachovia

And secondly, can you just talk maybe a little more the marketing mix between advertising and promotional spending, certainly with second round of price increases going to, just your outlook in terms of, will there be a little more promotional dollars needed to get back to the retailers at this time and I got the clarification on advertising earlier?

Larry Peiros

So, at this point, as we've said previously, we hope to hang onto that 9% to 10% range for advertising. At this point, we are not expecting a big tick up in our trade spending, some of the incremental trade spend that went into fiscal '08 because competitor situations, we don’t think will exist in fiscal '09, obviously that depended on what we see over the course of the year and could change, should we see some competitive introductions that we want to address. But overall, not a big change and certainly not an uptick in terms of trade spending.

Don Knauss

Yeah, there's absolutely no uptick in trade spending. In fact, even sales organization are looking very hard the last two years to get very exclusive guidelines out there, event by event and we've actually seen much more efficiency out there than we had, say three years ago and how we manage that spend. So you won't see any uptake in trade spending but I think you'll see better deployment of spending we use.

Jason Gere - Wachovia

Okay. Has there been any push back from retailer just with the additional price increases going in August?

Don Knauss

We have been out with a lot of retailers obviously and I can tell you I have never seen that environment like this work which is kind of slide the piece of paper over the table and let's talk about what the amount is. Everybody is under the same pressures. There is not a CPG company out there. That's not taking somewhat significant pricing versus past routines.

So we really haven't got into any drawn out negotiations, if you will, with any of our retail partners. They are in the same situation with their own retail brands and what they are trying to do in terms of pricing in those brands. So it's been a pretty benign environment from that standpoint of getting the price increase accepted.

Jason Gere - Wachovia

Okay, great. And then just a last question if you could just talk about the seasonable products, I guess the Hidden Valley, the charcoal, in particular. Can you just talk about the actual growth in the quarter and in terms of other type of, I guess vacation type programs that you are expecting through the rest of, I guess through September? Thanks.

Larry Peiros

Both the charcoal and food had highest single-digit growth rates in the quarter. Our charcoal business remains very healthy. We are growing share. Our Hidden Valley business remains very healthy, we are growing share. Categories were slightly down in both case but our brands grew very well.

Jason Gere - Wachovia

Okay, thank you.

Operator

Next, we will take a follow-up question for Ali Dibadj with Sanford Bernstein.

Ali Dibadj - Sanford Bernstein

Thanks very much for taking the follow-up. Couple of questions. One is just a clarification on the commodity, you said 180 to 200 in the release you were announcing today. Does that include or exclude logistics costs?

Dan Heinrich

That would, if you are referring to diesel that would include diesel.

Ali Dibadj - Sanford Bernstein

Include diesel. So what does that compare to for this year in terms of the number?

Dan Heinrich

Specific to diesel you mean?

Ali Dibadj - Sanford Bernstein

No, the 180 to 200, what's the apples-to-apples comparison for fiscal year '08?

Dan Heinrich

For '08, we ended up in the 130 to 135 range in total commodity cost increases.

Ali Dibadj - Sanford Bernstein

Okay. So, that number, okay. Other question, you mentioned one thing which was interesting to me. Grocery is about a third of your sales, but half of your EP?

Dan Heinrich

Right.

Ali Dibadj - Sanford Bernstein

Can you talk about that a little bit more? That's a little bit of a surprise to me, is it a mix? So Burt's Bees, for example, really pushes it that far over?

Dan Heinrich

It's not Burt's Bees. Burt's Bees is a very small piece of the grocery makeup. It's really the breadth of line that those grocery retailers carry versus a club account, for example, where you may just have a handful of SKUs. We will typically have a well over 100 to 200 SKUs across our brands in number of our key grocery partners.

A lot of those brands don't have significant trade support hooked to them. They sell more full price off the shelf. So, when you look at the mix that's goes on in those stores, it's fundamentally different from the mix that will go out in the club store or mass store where you have less SKUs on shelf.

Larry Peiros

It's all mix. We have a fair enough of policy with respect to trade spending. So, what you are looking at is the effect as Don said, of the mix in grocery versus other channels.

Ali Dibadj - Sanford Bernstein

Okay. Thanks very much.

Don Knauss

We will take one more question.

Operator

We will take that final question from [Bhupinder Bahra] with Banc of America Securities.

Bhupinder Bahra - Banc of America Securities

Hi, good morning guys. I have two questions for you. The first one is actually on, could talk about your Glad product mix, like the regular trash bag and the premium. What the mix is actually in that business?

Larry Peiros

So, the overall trash volume for the quarter was down. We saw very good growth, double-digit growth on our ForceFlex trash bags which are premium. Also saw a strong double-digit growth on our Odor Shield bags which are also premium, but did see a pretty dramatic in our base trash business. So we're definitely seeing the continued migration to the premium trash bags, but the overall volume was down because of the larger amount of growth in the base trash business.

Bhupinder Bahra - Banc of America Securities

Okay. And the pricing which you guys mentioned in October increase, is that like for the overall or just for the premium or the regular?

Larry Peiros

That's across the line.

Bhupinder Bahra - Banc of America Securities

Across the line, okay. And the second question actually would be, you mentioned about global resin capacity coming online, just can you give us some flavor on that like how big is that and when is it exactly going to hit like second half of your fiscal or calendar '09?

Dan Heinrich

Let's say, the increase in the worldwide supply of resin is projected by most folks to be in a range of 30% to 40% over the next several years. There are various plants coming on line at various times. We should see the bulk of that capacity coming on in calendar 2009 and 2010.

Bhupinder Bahra - Banc of America Securities

Okay, thanks a lot guys.

Dan Heinrich

Thank you

Don Knauss

Okay. I think that's the last question for the day. I would just like to thank everyone for joining us today. While we know we have certainly challenges ahead of us like most of our competitors, particularly in the first half of this fiscal year, I've got a lot of confidence in our brands and their ability to connect with the trends that are out there and the consumers and I think we are demonstrating that with our top-line growth. I am also really convinced that we have got a long-standing proven track record of dealing with high cost environment and I think this organization is more than capable of doing it in FY '09. So I look forward to speaking to you next quarter when we share our Q1 results. Thanks everyone.

Operator

That does conclude our conference call. Thank you for joining us today.

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