Church & Dwight Co., Inc. (CHD) Q3 2015 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen, and welcome to the Church & Dwight Third Quarter 2015 Earnings Conference Call. Before we begin, I have been asked to remind you that on this call, the company's management may make forward-looking statements regarding, among other things, the company's financial objectives and forecasts. These statements are subject to risks and uncertainties and other factors that are described in detail in the company's SEC filings. I would now like to introduce your host for today's call, Mr. Jim Craigie, Chairman and Chief Executive Officer of Church & Dwight. Please go ahead, sir. James R. Craigie - Chairman & Chief Executive Officer: Good morning, everyone. It's always a pleasure to talk to you, especially when we have great results to report. I'll start off the call by providing you with my perspective on our third quarter business results, which you read about in our press release this morning. I'll then turn the call over to Matt Farrell, our current Chief Financial Officer and Chief Operating Officer, and soon to replace me as Chief Executive Officer. Matt will provide you with his perspective on the financial details for the quarter. When Matt is finished, I'll return to discuss our earnings guidance for the year, and then we'll open the call to field questions from you. You should also know that Rick Dierker is here with us today, who replace Matt as CFO in 2016. Let me start off by saying that I'm very proud of my company for the third quarter business results that we achieved. Despite headwinds from continued soft U.S. consumer demand and weakening foreign currency, the Church & Dwight team built upon our momentum in the first half of this year and continue to leverage our innovation-driven strategy to deliver strong business results in the third quarter 2015. This is exemplified by the fact that our organic revenue growth of 3.2% in Q3 was the sixth consecutive quarter of organic growth above 3%, even though we are now lapping high organic growth levels of 5% achieved in the back half of 2014. As I have stated on previous earnings calls, we believe that innovation is the key to delivering strong sales and earnings growth in any economic and competitive environment. Innovation has been a key driver of our past success, as shown by the fact that over 25% of our domestic sales so far this year came from new product launched in the past five years. In 2015, we launched new products in every one of our major category. Some of these new products, like our new premium price cat litter called ARM & HAMMER CLUMP & SEAL, have become a huge hit with our consumers as reflected in both the brand's share results and its impact on category growth. We first launched the new ARM & HAMMER CLUMP & SEAL cat litter products in 2014, which drove a 23.5% increase in our consumption and grew our share by 290 basis points to a record share of 22.9%. In 2015, we built upon this success by launching a new lightweight version of the CLUMP & SEAL cat litter. This product is also off to a great start. Our total ARM & HAMMER cat litter consumption in the first nine-months of 2015 was up 15% and our share grew to a new record of 24.0%. This share growth in 2014 and 2015 has enabled our cat litter brand to grow from number three brand in the category to a strong and growing number two brand. And this growth help drive the cat litter category up 8.6% in the first nine months of last year on top of the 8% growth in 2014. This exemplifies our belief that innovation is the key anecdote to driving improved value creations for our consumers, customers and shareholders. Our goal is to continue launch innovative new products to drive share gains and category growth in all the categories in which we compete. I'll now turn the call over to Matt to give you specific details on our third quarter results. Matthew T. Farrell - Executive VP, Chief Operating & Financial Officer: Thank you, Jim, and good morning, everybody. I'll start with EPS. Our third quarter reported EPS was $0.90 per share compared with $0.85 in 2014, that's up 5.9%. The $0.90 was better than our $0.87 to $0.88 outlook for the quarter. And netted in our $0.90 is 4.7% drag from FX year-over-year. Reported revenues were up 2.4% to $862 million. Organic sales were 3.2%, exceeding our Q3 outlook of 2%. The organic sales beat was driven by our consumer business, both domestic (04:17 – 04:23) is due to volume with 1% positive product mix and pricing. Now, let's review the segments. The consumer domestic business' organic sales increased by 2.8%, driven by the continuous success of our ARM & HAMMER Clump & Seal cat litter franchise, including the new lightweight variant. Also, ARM & HAMMER liquid laundry detergent and higher sales of VITAFUSION gummy vitamins and BATISTE (04:50 – 04:52) Out of the 2.8% organic sales growth in the domestic business, volume growth contributed approximately 1.6% plus to 1.2% effect of positive price. We continue to expect the full-year organic sales to be approximately 2.5% for the consumer domestic business. Now, let's talk about international. International organic growth was up 7.9%. Volume increased approximately 6.9%, and we had favorable product mix and pricing of 1%. We had strong growth across Australia, Canada, Mexico and Europe, and in particular, our French team had a spectacular quarter with success with BATISTE. We now expect the full-year organic growth to be approximately 7% for the consumer international business. Now, we'll talk about specialty products. For our specialty products division, organic sales was down 2.2% with volume declining 1.4% and unfavorable product mix and pricing of 80 basis points, driven by a difficult comp of up 22% a year ago. We said in May that SPD would come back down to Earth, and it has. Currently, the U.S. dairy industry is still healthy, although milk prices have declined from an average of approximately $23 in Q3 2014 to approximately $16 in Q3 2015. The good news is that corn and soybean are also down, and the dairy industry continues to be profitable. Our comps are very difficult in the second half of this year. Remember, last year Q3 and Q4 were both 20% up quarter. We now expect the full year to be approximately flat for the Specialty Products Division. For the total company, we continue to expect organic sales to be approximately 3% for the year. Now, gross margin. Our reported third quarter gross margin was 44.8%, a 110 basis points increase from a year ago. The Q3 gross margin benefited from four factors: lower trade spending as we had a more normalized pricing environment in the laundry category; productivity programs; lower commodities; and a higher margin from our acquired businesses. These factors were partially offset by foreign exchange, negative product mix, and incremental costs associated with our new vitamin capacity at our York plant. For the full year, in August, we called 25 to 35 basis points of gross margin expansion. We now expect a range of 35 to 45 basis points on a full-year basis. Now, marketing. Marketing spend for the third quarter was $92.8 million or 10.8% of revenues, which is 70 basis points lower than the prior-year spend rate, largely driven by shifting some marketing funds through trade and coupons to continue supporting consumer trial generating activities for the OXICLEAN megabrand. For Q4, our expectation is for marketing to be flat year-over-year. Our full-year expectation is approximately 12.3% of sales or down 30 basis points, primarily due to the previously mentioned OXICLEAN megabrand investment shift. Now, SG&A. SG&A as a percentage of net sales was 11.9%. That's an 80-basis point increase from the prior-year third quarter. This was primarily due to incremental amortization from acquisitions, higher incentive compensation and research and development spending. Our full-year expectation is for SG&A to be flat as a percentage of sales. Other income and expense was $4.9 million, which is largely interest expense of $7 million. With respect to operating profit, the reported operating margin for the quarter was 22.1%, which was 100 basis points higher than the prior-year third quarter. Next is income taxes. While quarters may be uneven, our effective rate for the quarter is 35.2% and that's higher than our full-year expectation of 34.5%. The Q3 rate is higher year-over-year, primarily due to the year-ago benefit from an IRS settlement. Cash flow is next. We generated $408.8 million of net cash for the first nine months of 2015 and that's in line with the prior period. We have invested $44.7 million year-to-date in CapEx and continue to expect to spend approximately $70 million for full-year 2015. Cash from operations is expected to exceed $585 million and free cash flow to exceed $515 million. In conclusion, the third quarter highlights are 3.2% organic sales growth, 5.9% EPS growth, which equates to 10.6% currency neutral EPS growth. Now I'm going to talk about the fourth quarter. Remember, our previous outlook was for the second half top line to grow 2%, we still believe that. With Q3 growth of 3%, we expect Q4 organic sales growth of approximately 1%. For context, if we want to look at this on a two-year stacked basis; Q1 would be 5%; Q2, 8%; Q3, 8%; and then the coming Q4, 6%, as last year we had a 5% organic growth quarter. And (10:23 – 10:25) we expect gross margin to expand. We expect fourth quarter earnings per share of approximately $0.79 per share (10:33 – 10:36) and remember we had 20% EPS growth a year ago in the quarter. Now, I'm going to wrap and talk about the full year to summarize our thinking. We continue to expect 3% organic sales growth and full-year gross margin expansion of 35 to 45 basis points. As we work our way down the P&L, we now expect marketing at 12.3% of sales and operating margin expansion of 65 to 75 basis points. As far as other income and expense, excluding the impairment from earlier in the year, other income and expense is higher by $6 million or approximately $23 million expense in 2015. The full-year adjusted EPS range is now 7% to 8%, that's inclusive of a 4% drag from currency. And I want to remind us that we started the year with a 7% to 9% EPS outlook and a 2.5% currency drag. The currency drag has been growing all year long. In May, it grew to 3%. In August, when we spoke to you, it was 3.5%. And now, it's 4%. So, that's a total of $0.06 of higher EPS drag than when we started the year. So we've raised our currency neutral midpoint to 11.5% in August and we're affirming that today. Back to you, Jim. James R. Craigie - Chairman & Chief Executive Officer: Thanks, Matt. Before I open the floor to questions, I'd like to provide a few additional highlights on our third quarter business results in our key categories and business units. As you know, we continue to sharpen our focus on our four megabrands: ARM & HAMMER, OXICLEAN, Trojan and our vitamin business, which each cover multiple categories. These four brands represent over 60% of our company's sales and profits and have achieved the most growth over the past five years through delivering a bigger bang for every dollar of marketing investment than smaller one-category brands. In 2015, we plan to spend over 80% of our media investment on the four megabrands. This investment continues to pay off as we achieved share growth on two of these four megabrands through the first nine months of 2015 despite aggressive competition. The ARM & HAMMER megabrand had an excellent quarter with total consumption up 5%, driven by its laundry detergent and cat litter products. I previously mentioned the excellent cat litter share results for the first nine-months of 2015. The specific third quarter results continued a strong momentum of this business as consumption grew 15% and our share increased 150 basis points to a record 24.0% share behind the new Clump & Seal product line. ARM & HAMMER laundry detergent also had a solid quarter of growth, driven by its liquid laundry detergent which achieved its highest ever quarterly share and its 23rd consecutive quarter of year-on-year share growth. It's important to mention that the total laundry detergent category grew 2.6% versus a year ago in the third quarter, the second consecutive quarter growth after three years of category decline. This category growth reflects two factors: first, a return to more normalized pricing environment and second, that the category has now absorbed most of the unfavorable impact of the launch of the unit just formed by our competitor. Hopefully, the laundry category will continue to grow in future quarters as it historically did driven by category-building innovation and a normalized pricing environment. We now can talk about other products and all the categories covered by the ARM & HAMMER megabrand. The ARM & HAMMER carpet deodorizers achieved its highest ever quarterly share of 53.9%, up 420 basis points versus year ago. All in all, a great quarter for the ARM & HAMMER megabrand, which is our largest megabrand with over $1 billion in annual sales. Next, the OXICLEAN megabrand, who share is up 20 basis points in the first nine months of the year. This megabrand's third quarter dollar share was down slightly. However, the brand's two biggest forms, OXICLEAN powder and OXICLEAN liquid laundry detergent achieved share gains. OXICLEAN's share of the $1 billion stain fighters category, its original category, increased 230 basis points to 46.0% which is greater than the combined share of the next five brands in the category. OXICLEAN liquid laundry detergent, which was first launched in the first quarter of 2014, grew its sales over 20% versus year ago and achieved its highest ever quarterly share. Our third megabrand, the Trojan brand, had a solid quarter as all three segments of this megabrand grew. The Trojan condom business achieved its second highest quarterly share in the past five years at 76.4%. In the total condom category, the top 12 SKUs all belong to the Trojan brand, and 25 of the top 30 SKUs are also Trojan SKUs. Other forms in the Trojan megabrand also had a solid quarter. The Trojan Vibrations line of products grew its share by 310 basis points to 58.0%. Our Vibrations line now has the top 3 SKUs in the category. And finally, the Trojan lubricant line first launched in February 2013 grew its share by 30 basis points to 7.7%, making it the number three selling brand at lubricants category. While the condom category is relatively flat, our Vibrations and Lubricant categories are growing at high-single digits, far above the average consumer products business category growth rate. Last but not least is our newest megabrand, the gummy vitamin business, which we bought in October 2012. This business consist of two brands; L'il Critters for kids gummy vitamins and VITAFUSION for adult gummy vitamins. Last quarter, I reported that despite strong demand for our gummy vitamin business, sales actually declined in the second quarter, primarily due to self-inflicted supply constraints, involving the slower than expected startup of a new production line in our York, Pennsylvania manufacturing facility. I'm pleased to report that our gummy sales grew over 7% in the third quarter as production rates and customer service levels have significantly improved. In addition to our four megabrands, we had a great third quarter of some of our higher margin power brands. Our First Response pregnancy kit brand achieved a record quarterly dollar share of 32.9%, up 250 basis points. Church & Dwight has been the number one manufacturer of branded pregnancy kits for 43 consecutive quarters. And our NAIR depilatory brand achieved a record quarterly share of 60.9%, up 450 basis points. NAIR has been the number one depilatory brand for 44 consecutive quarters with 7 of top 10 SKUs in the category. I'd also like to highlight some great news on our dry shampoo brand called BATISTE. We purchased this brand in the second quarter of 2011, which at that time, was the number one dry shampoo in the UK. We have now expanded the brand to over 80 countries, and next year, it'll become our next power brand with projected sales over $100 million. In the U.S., BATISTE is the fastest growing dry shampoo brand with sales up over 100% this year which propelled it from the number seven rank dry shampoo, to the number two rank in the third quarter. While dry shampoo represents only 3% of the total shampoo category in the U.S. The dry shampoo sub-category is up 34% year-to-date, while the bigger wet shampoo sub-category is up only 2%. Going forward, we plan to leverage the double-digit growth of the dry shampoo sub-category through new product innovations and increased marketing support. To drive the dry shampoo sub-category to at least where it is in the UK at 9% of the total shampoo category three times the current market share in the U.S. This is another great examples of Church & Dwight's successful acquisition strategy in which we can make even a relatively small acquisition with unique consumer benefits and quickly turn it into a strong contributor to the profitable growth of our company. Overall, a very solid quarter for our four megabrands and several of our power brands. I'll finish off, our portion of the call today with a few words on our outlook for the year. As I stated in the press release, we are maintaining our 2015 guidance on organic sales growth and improving our guidance on gross margin. We are not changing the midpoint of our currency-neutral adjusted EPS growth for 2015 of 11.5%. You might question why we're not raising our targets in view of the strong results in the first nine months of 2015. We simply do not feel comfortable of doing at this time for several reasons. First, we had an incredibly strong organic sales growth of over 5% in the fourth quarter of 2014, so we have to comp over those results. And second, if we do have additional earnings upside we will invest it in incremental marketing to enable us to support stronger share growth in our four megabrands behind our new product innovations as we exit 2015. In summary, we feel confident in delivering our annual targets which are in the top quartile of EPS projections that in our industry consistent with our historical performance. The achievement of our targets will be driven by a resilient portfolio of value and premium products, the launch of innovative new products across every one of our major categories, aggressive productivity programs and tight management overhead costs. I also want to assure you that we are aggressively pursuing acquisitions and a significant financial firepower to make them. As you know, we have a great track record of making highly accretive acquisitions because we are very selective of the types of businesses we acquire and very aggressive how we integrate them into our existing business. That ends our presentation. I'd now like to open the call to questions.

Thank you. And our first question comes from the line of Kevin Grundy with Jefferies. Your line is now open.

Thanks. Good morning, guys. James R. Craigie - Chairman & Chief Executive Officer: Hi, Kevin.

Hey. I'd like to start, so you guys put up a slide, I guess, in late September at an investor conference and took the top line algorithm down to 3% from 3% to 4%, understanding that you hadn't put that slide up in Ohio. But can you guys touch a little bit on industry growth, how your view – I guess three different components, really. Talk about industry growth, ability to gain market share, and then maybe a little bit of the tougher M&A environment with respect to multiples and given the long discipline that the company has had, the inability to close some of these deals and get accretive organic deals done? James R. Craigie - Chairman & Chief Executive Officer: And, Kevin, it's Jim. I'd answer as follows: Industry growth as far as – I can talk in category growth – is actually ticking up a little bit with probably one of the best quarters in a long time in the sense of how many categories of the 14 we compete in grow. It's not huge, but it's a nice little incremental growth. So I feel somewhat positive despite all those somewhat negative signs you read about the economy these days. So I would say at this point in time, I would not worry about the industry growth and maybe it's getting a little better. Share growth, hey, we always feel good about that. I mean, we've got great new product pipelines this year. Next year, I feel extremely good about our new product pipeline. Marketing spending, we've shaved it a little so far this year, but nothing near what everybody else has shaved, when your revenue (21:39) like Colgate has cut 23% of their marketing. Our share of voice is still very high, and we feel very confident we'll continue to grow share out there. And M&A environment is – if you read a lot of stories, I would just tell you, we're very active. I'm not worried about competing on price for the right acquisition out there. But always – the story is finding the right acquisition that we believe has all the factors that we want to see in acquisitions as far as having strong growth potential, a higher margin than our corporate margin, the asset-light net. So, we are continuing to scour the minefield for those kind of acquisitions, and I don't worry about price.

Okay. All right. That's helpful and just one for me. Maybe touch a little bit on the decision, so A&M comes down modestly, not a big deal but I guess the decision has been made to reallocate some of that to trade promotion. Can you talk a little bit about that decision? James R. Craigie - Chairman & Chief Executive Officer: Yeah. Kevin, I would just say that A&P spending, if you adjusted it for FX in Q3, we spent equal to a year ago. And again, that's a hell of a lot better than a lot of our competitors who cut their A&Ps significantly to cover problems like foreign exchange. And in Q4, the marketing spending will be the highest level of smart marketing spending for the year. So, I feel very confident that it will propel us to some good strong share gains in the fourth quarter and next year with strong momentum. So, we have kept marketing up much better than I believe many of our competitors, have been able to keep our share of voice. And it should lead to very strong share results going forward.

Okay. Thank you, guys.

Thank you. And our next question comes from the line of Jason Gere with KeyBanc. Your line is now open.

Okay. Thanks. Good morning, guys. Matthew T. Farrell - Executive VP, Chief Operating & Financial Officer: Hi, Jason.

Hey. I guess, I was just wondering if you can give us maybe a little bit of a sneak peek into next year. I'm sure you're going through all the budgeting now and want to get to the fourth quarter. But can you talk maybe, I guess, two things in particular, about the core business, if there's anything out there that you think might get a little bit better, worse, versus what you've seen this year. And then, maybe tie into kind of currency, how that's positioned into next year? Just – I know this year you're saying kind of a 4% drag to the bottom line, but how we should be thinking about that for next year? Matthew T. Farrell - Executive VP, Chief Operating & Financial Officer: Yeah. Hey, Jason. This is Matt. So, as you know, our model, as Kevin pointed out, is for revenue growth of 3% and 50 basis points of operating margin expansion annually, and we're going to keep with our past practice of giving our outlook in February and then a line item outlook at that time, too. But as you know, there's always pluses and minuses so, take one of your points, currency. So, the EPS drag this year was 4%, but that was actually muted by FX hedges that we got out in front of. So, actually the FX hurt this past year would have been 6% if not for actions that we took before the year started. A year ago, things started getting pretty volatile with currencies. On the plus side, the vitamin business is coming around, and we expect the vitamin production difficulties not to repeat in 2016, so that's a plus. I'm sure that's on some people's minds as well. But if you wanted to estimate what the – what would the FX drag be for us next year, we'd say probably 2% to 3%.

Okay. No, that's good. Yeah, I do know you wait until February, but I just figured this was on the topic of mine. The other question, and maybe we could just talk a little bit about laundry and maybe specifically just about OXICLEAN at the high end, and certainly we've seen a little bit more. I mean, I know you're saying the environment is more rational, and I do agree with that. The high end, kind of the bigger player out there, I think, is doing a little bit more responding to the new guy in town. So, I was just wondering how that affects OXICLEAN. Is that where some of that promo spending might be going on that brand? And then how does that really affect to the consumer? I know the high end and the low end are different, but usually when there's gaps in terms of the price to the consumer, do customers kind of see that or are they kind of just mutually exclusive? Matthew T. Farrell - Executive VP, Chief Operating & Financial Officer: Yeah. Hey, Jason. This is Matt. You probably – if you got the Nielsen data, you know that the OXI liquid laundry detergent was up 8% in consumption in the third quarter. And we had lots of successful promotion in Q3. In fact, it created some out-of-stock situations with some of our retailers. And consequently, if you're looking at the Nielsen's, you'd see lower ACV, that's purely because of out of stock. So we made a decision that we wanted to get behind OXICLEAN. When you enter a new category, you're always going to find a lot of competition. And as you know, the OXICLEAN has been growing its share throughout the year, but it's tough sledding. So with respect to the pricing, it's a 20% discount to Tide -Tide which is top end of the brand of the tier. So, naturally, we have somewhat of an advantage there. When you mention Henkel coming into the category, naturally Persil is – started out at Walmart and Amazon earlier in the year, and now they're going to be rolling out to other retailers. So this is a good time for us to get behind the brand.

Okay. Great. Thanks a lot, guys. Appreciate the color. Matthew T. Farrell - Executive VP, Chief Operating & Financial Officer: All right. Thanks.

Thank you. And our next question comes from the line of Bill Schmitz with Deutsche Bank. Your line is now open.

Hey, guys. Good morning. James R. Craigie - Chairman & Chief Executive Officer: Hey, Bill.

Hey, how big is BATISTE and how big can it be? Because I've talked to some industry folks and it seems like it's got like software margins on it. James R. Craigie - Chairman & Chief Executive Officer: What kind of margins?

Software. James R. Craigie - Chairman & Chief Executive Officer: We're not going to comment on the margins for BATISTE. When we bought that business in 2011, it had $25 million in trailing net sales, and as Jim said, we think that this thing can be $100 million, and that would be not just – it's growing significantly outside the U.S. right now. It's very small in the U.S., but we're the number two brand, and we started a year out as the number five brand. So we've been growing like a rocket. Matthew T. Farrell - Executive VP, Chief Operating & Financial Officer: Bill, I would just say the gross margin is well above the company average, and we're gaining distribution left and right. So this is a super hot brand we have, and it's very hot in those consumers out there, and we feel very positive about the growth of this brand. It's just a little monster for us, I would call it.

Great. Awesome. And then I started to belabor the laundry point, but like it seems there's a huge disconnect now between people's share of shelf and their share of market, so like how long does it take to make those adjustments if some of the stuff doesn't kind of work as planned? And then where does XTRA kind of fit in? Because everything else is going great, but it seems like it's been a couple of years now where XTRA is just kind of find out where it fits in, and it seems like they've been linked to one of the biggest share donors in the category. Matthew T. Farrell - Executive VP, Chief Operating & Financial Officer: Yeah. Bill, your comment on share of market and share of shelf is very interesting. For example, Persil just lost this year to Walmart. They initially got 19 SKUs. Our analysis would show only 2 or 3 of those SKUs would survive long tier, the rest of them all in the bottom quartile of SKU performance. So as they roll out, they're going to have to justify hard why they have any more than 2 or 3 SKUs as they go out based on their performance at Walmart. XTRA's got a little bit of a hard year. We have plans in place to restore growth on that brand. We still believe it's a very strong part of our franchise. It still hangs in around a five share, which is a very meaningful player in the category, and we've got some new product performances, new products from non-XTRA I think will revitalize growth of XTRA.

Hey, Bill. It's Rick, Bill. The only thing I'd add on XTRA is, yeah, share is down, but sales and profits are up. So, we're not repeating some of those cheap trade deals we had a year ago.

Okay. That's very helpful. And then, just one last quick one. Do you know when will the commodity favorability peak for you guys? I'm trying to figure out like when does all of this stuff kind of like flow to the P&L?

Yeah. It's been flowing through this year. One of the reasons why we're taking gross margin up for the full year from 25% to 35% to 35% to 45% is because of the commodity favorability.

Got you.

There aren't going to be four more quarters to that afterwards.

Right. But are they with the top of the bell curve or are we still on the upward slope?

No. I think we're peaking.

Okay.

We're not going to be seeing a whole lot of year-over-year favorability next year.

Okay. Great. Thanks, guys.

Thank you. And our next question comes from the line of Olivia Tong with Bank of America. Your line is now open.

Great. Thanks. Matthew T. Farrell - Executive VP, Chief Operating & Financial Officer: Good morning.

Good morning. First on the Q4 organic growth guidance. Obviously, Q3 came in better than we expected, but you're only looking for 1% in Q4 and I get that the comp gets a bit tougher, but the deceleration in Q4 versus Q3 is a bit more than that. So, was there – is there anything that pulled forward from the fourth quarter or is that potentially just some conservatism? And then – I'm sorry I jumped on late, but on SG&A, can you just give a little bit of color on what drove that increase there? Thanks. James R. Craigie - Chairman & Chief Executive Officer: Yeah. Olivia, on the Q4 organic, keep in mind, as you said and we noted the – we're comping a huge number a year ago of 5% and a fair part of that number was driven by some increased promotional spending in the laundry business. So, the whole category has kind of pulled back on that. Hey, look, if we wanted to beat 1%, we could easily put more money into the trade line and drive a bigger thing, but we don't want to upset what seems to be a much more normalized pricing environment in laundry category right now. So, we're very happy to deliver the 1% on top of the 5%, which as Matt said, if you stack it on the two-year basis is a very small number. Don't view that all to deceleration of our business. It is not, we've got a great new product pipeline for next year and we're going to be coming out with kind of, we're not calling the number now, but quite a historic type of organic growth rate as we have in the past, we feel very confident about that. On SG&A, I'll turn it to Matt. Matthew T. Farrell - Executive VP, Chief Operating & Financial Officer: Yeah. On SG&A, we started the year saying we were going to get 15 basis points of leverage on that line item as percentage of sales. And now, we're saying flat, two reasons for that, and one is R&D spend and the other is just our incentive comp. So it's pretty simple.

Great. Thanks.

Thank you. And our next question comes from the line of Bill Chappell with SunTrust. Your line is now open.

Good morning. Thanks. Matthew T. Farrell - Executive VP, Chief Operating & Financial Officer: Hey, Bill. James R. Craigie - Chairman & Chief Executive Officer: Hey, Bill.

Jim, I know you love these calls so much. Is this the last time we're going to hear from you for retirement? James R. Craigie - Chairman & Chief Executive Officer: Yeah. You kind of spoiled my closing there. But this is my 45th and last quarter of the earnings call. And as you all know, Matt will be replacing me as the head of the company, but I'll stay on as the chairman. I will just tell everybody it's an honor and a privilege to be the CEO of this great company, and I've enjoyed most of the time communicating with you over the past 11 years. I'd also tell you that I strongly recommended Matt as my successor and I have total faith in his ability to continue the great results. And I put my money where my mouth is because the large portion of my personal wealth is tied up with Church & Dwight stock and I intend to keep it that way. So I would just say thank you to everybody. I'll be around, you may see me hanging out at some Analyst Conference once in a while as they give on free food. And otherwise, I've got a great team here between Matt and Rick taking over the company. And we also appointed a new chief marketing officer last week. So we got a great team for the future.

That's great. I enjoyed working with your and didn't mean to preempt your closing. But it actually ties into my next question of in terms of P&G, I mean, Jim, you've seen over the years the biggest competitive changes have been – have occurred when there's been a new CEO at P&G. What's your initial take or what are your – what's kind of the expectations with the CEO change of how the competitive landscape might play out over in laundry over the next six months? James R. Craigie - Chairman & Chief Executive Officer: Yeah, that's an interesting question. But I mean, I don't think it will change that much. In fact, it's like we've referenced a few times already today, it seems like the laundry category is getting back to more of a normalized pricing environment, which we really think it's the right way to go and drive the categories through innovation. So, that's the way we're going to play the game. We got great new innovations next year. I think the CEOs who are all taking over at Procter has taken over, and Matt and gang all have great experience in the laundry category, are smart enough not to do stupid things and start trade wars that have nobody benefits from. So, I think you got a bunch of very smart characters who understand the business and understand that innovation is a key to it. And now we've had two straight quarters of growth in the laundry category, which are very positive. So I certainly hope everybody understands that, and I think certainly we do at Church & Dwight here. Matt and Rick understand that well, and I think it bodes for good things going forward in the laundry category in my opinion.

Okay. Great. And then, Matt, just on the vitamins, so the thought that vitamins are kind of back on growth trend and there are less kind of category issues, and then can you maybe quantify what the total expense of kind of the start-up costs were to this year which we'll be comping through next year? Matthew T. Farrell - Executive VP, Chief Operating & Financial Officer: I can help you with some of that, Bill. I don't know about the last one. To give everybody some context, we had operating difficulties with the new plant and the contractors in Q2. Our sales were down for vitamins. We had some retailers on allocation. Had some out of stocks and pulled some promotions. So we're pretty much in the penalty box. And today, I'm happy to report that our fill rates for the last six weeks are over 95%. Production rates are up, our product quality has improved, and importantly, we have growing interest on the part of the retailers (35:43) new products looking ahead. So it's – things have turned around for us. As far as quantifying, Bill, we wouldn't take a swing at that.

All right, I got to ask. All right. Well, thanks so much. And, Jim, congratulations. I enjoyed working with you. James R. Craigie - Chairman & Chief Executive Officer: Thanks, Bill.

Thank you. And our next question comes from the line of Joe Altobello with Raymond James. Your line is now open. Joseph Nicholas Altobello - Raymond James & Associates, Inc.: Hey, guys. Good morning. Thanks.

(36:09). Joseph Nicholas Altobello - Raymond James & Associates, Inc.: In terms of M&A, you guys have obviously been pretty active over the last few years. But recently, something that was (36:17) of the smaller variety or should have – there's a way for you our megabrand strategy to some extent. So as you think about M&A going forward, is it still your preference to do bigger acquisitions or you're more comfortable with the smaller, sort of tuck-in variety? James R. Craigie - Chairman & Chief Executive Officer: Joe, I would tell you we're ambivalent toward it because it always just depends on the right deal. What we mentioned today, BATISTE was a relatively small acquisition and now it's quadrupling in size. It's growing like crazy. So we don't mind that. And because we're still a relatively small player in this category, a small acquisition like that can have a great meaningful impact on our bottom line. And, hey, if a big one comes along that fits our criteria, we will do that too and we have the firepower to do it. We can do a $1 billion-plus acquisition. We have that money in the tank. So I – trust me, we have been working hard. We're scouring the landscape for both small and big, but we're not going to just do a big one so we can pound our chest and do what I saw – Cody today bought a business down in Brazil. I mean, I sometimes can even not (37:17) understand some of the prices my competitors pay, and for what I don't consider to be the highest quality stuff, but we're not going to do that. We're not going to do an acquisition to say we've done an acquisition, or do a big one just to come up with some big numbers. We'll find – we've got a great history of finding the right acquisitions, big and small. They've all been winners, and that's the goal. And we are – I can only tell you we are working fast and hard on that constantly to find those acquisitions. Joseph Nicholas Altobello - Raymond James & Associates, Inc.: Okay. That's helpful. And just one last one on vitamins, and I apologize if I missed it. But in terms of your manufacturing, obviously, with the capacity expansion, do you guys have a cost advantage today versus your competitors from a manufacturing standpoint? And did you guys gain back any shelf space you might have lost with regard to the disruptions from last quarter? James R. Craigie - Chairman & Chief Executive Officer: Yeah. I wouldn't say that we have a competitive advantage from a cost standpoint because remember, we expanded capacity 75% and we're still significantly under that, take us years to fill that up. So obviously, we have fixed costs that we're going to have to absorb over time. So, I wouldn't go there, Joe, from a cost perspective. What was the second part of your question? Joseph Nicholas Altobello - Raymond James & Associates, Inc.: In terms of the shelf space that you guys might have lost with regard to the production issues you had last quarter. James R. Craigie - Chairman & Chief Executive Officer: Yeah. Well, the shelf space that you saw, if you look at the Nielsen's for Q2, the reason why it looks like we lost points of distribution, which Jason pointed out on the last call, is because we had out of stocks. Out of stocks, when you're sold out, you show up as not having distribution. Because we're filling those back up, if you look at the Nielsen's now, you'll see that our points of distribution have grown. As far as getting new shelf space, when you're in the penalty box, you're not going to get a lot of new shelf space for new products. As I said before, the retailers are showing growing interest now, because our fill rates are back up and we're a good supplier, they're showing growing interest in our new products for 2016. Matthew T. Farrell - Executive VP, Chief Operating & Financial Officer: And Joe, I would just remind you, we have a much bigger vision for the gummy business than just vitamins. We actually hope to take that business into other OTC categories in the future and build that, we're working on that. It takes a lot more effort because of greater FDA regulations in some of those businesses, but it's not a gummy vitamin business, it's a gummy business. And we hope to take it in a lot of different directions in the future and the capacity we have enables us to do that. Joseph Nicholas Altobello - Raymond James & Associates, Inc.: That's very helpful. Thanks, guys and congrats and good luck, Jim. Take care. James R. Craigie - Chairman & Chief Executive Officer: Thanks, Joe.

Thank you. And our next question comes from the line of Joe Lachky with Wells Fargo. Your line is now open.

Oh, hi. Thanks. Matthew T. Farrell - Executive VP, Chief Operating & Financial Officer: Good morning.

Good morning. Quick one on price mix and consumer domestics. So it was flattish in the first half of the year and it jumped up about a point sequentially here in Q3. And I thought you mentioned there would be some investment behind OXICLEAN this quarter, and it sounds like you're now talking about that in fourth quarter. Did some of that maybe get pushed back? Is that a timing issue? And how do you see price mix evolving going forward here? Do you see it positive? Thanks.

Yes, so price mix – this is Rick, Joe. Price mix in Q3 was favorable, around a point, and that's largely because of those deep trade deals we didn't do as we're comping a highly promotional environment in Q3 and Q4. So, I think long term, it's still the same algorithm for us. It's largely volume, but this quarter or next quarter as we're not comping some of those trade deals we do have some benefit of price.

Cool. Thanks.

Thank you. And our next question comes from the line of Jason English with Goldman Sachs. Your line is now open. Jason M. English - Goldman Sachs & Co.: Hey, guys. James R. Craigie - Chairman & Chief Executive Officer: Hello, Jason. Jason M. English - Goldman Sachs & Co.: I'm here. Sorry. I was a little bit slow today. Lots going on. But hello, Jim. I wanted to circle back on the questions on top line, many of which have been asked one way or another, so I'll regurgitate. I apologize for some of that. You mentioned OXICLEAN laundry momentum growth this quarter. As we look at the track data, the syndicated data, it actually – the trend line is kind of down and to the right, with fairly sharp declines in the last month. Can you give us a little more context? Is it fair to say that's just sort of the hangover impact of more aggressive promotions earlier in the quarter and that should normalize in a forward? And secondly, on vitamins, we know you have some out-of-stocks, 7% strong growth. Is that reflective of how we should expect to think about that business going forward, or was there some replenishment restocking benefit in the quarter? James R. Craigie - Chairman & Chief Executive Officer: Jason, I'd say yes and yes to your questions. Yeah, OXICLEAN, it was just the last four weeks was just an all-promotion period. We've actually been gaining distribution on OXICLEAN laundry detergent out there, and the promotions have been helping to drive that. So, we feel very confident that brand is building momentum, doing well. And the vitamin business thing, which is your second question, that business, Matt – let Matt jump in. Matthew T. Farrell - Executive VP, Chief Operating & Financial Officer: Yeah. Jim quoted a number – sales being up 7.8%. If you look at consumption in the quarter, Jason, it's 4.9%. So, there is a bit of an imbalance in Q3, and it was reversed in Q2. Jason M. English - Goldman Sachs & Co.: One more – thank you for that. One more quick follow-up. We obviously look a lot at the Nielsen data because it's the only data we have. Is there anything unique happening outside of that data in terms of distribution wins, et cetera, that we should be cognizant of as we think about interpreting the data going forward? James R. Craigie - Chairman & Chief Executive Officer: I don't think I'd say it's – since you had an interest in OXICLEAN, it's that we're picking up two new retailers in Q4, and that should start scanning at some point in Q4. Jason M. English - Goldman Sachs & Co.: Good stuff. All right. Thanks, guys. James R. Craigie - Chairman & Chief Executive Officer: Thank you.

Thank you. And our next question comes from the line of Jon Andersen with William Blair. Your line is now open. Jon R. Andersen - William Blair & Co. LLC: Hey. Good morning, guys. James R. Craigie - Chairman & Chief Executive Officer: Good morning. Jon R. Andersen - William Blair & Co. LLC: Jim, congrats, and, yeah, good luck in your next endeavors. James R. Craigie - Chairman & Chief Executive Officer: I'll see you in the beach. Jon R. Andersen - William Blair & Co. LLC: Wish I was heading there, too. Consumer international, a question there. The business has been quite strong, essentially volume driven year-to-date. I think you've guided to something like 6% growth for the year, but you've been trending quite a bit stronger than that. Can you talk about, number one, kind of the underlying kind of volume dynamic in that part of the business and what's driving the kind of upper-single-digit growth you've experienced? And then is that – are we going to see – should we expect to see a drop off from here, or is that kind of sustainable as we look out over the next few quarters? Thanks. James R. Craigie - Chairman & Chief Executive Officer: Yeah. The business, actually in August, we called 6% full-year organic growth for international. So we raised that to 7% today. And as you know, we have a collection of different businesses. We have a European business, Canadian, Mexico, Brazil, Australia, a small business in China. They all have very, very different dynamics. In Mexico, we've been doing a terrific job in pushing ARM & HAMMER laundry down there. In Europe, we have three brands; BATISTE, Sterimar and femfresh, which have been real horses for us, and we're doing just a terrific job with those PC brands. So this is somewhat country-by-country specific, but we've been competing extremely well in difficult markets. As you probably know, there's been consolidation in the retailers in France which we've been combating and still finding a way to grow. We're going to be calling 7% organic next year for international unlikely, but I'll still say we'll give everybody guidance on that in February. Jon R. Andersen - William Blair & Co. LLC: Thanks, guys.

Thank you. And I'm showing no further questions at this time. I would like to turn the conference back over to Mr. Jim Craigie for any closing comments. James R. Craigie - Chairman & Chief Executive Officer: Okay. Well, again, thank you very much. Kind of sentimental. This is my last earnings call, and I got a great team taking over. At this point forward, if you want to go down to the beaches in Florida, you'll see AG (45:23), myself and Don Canales (45:24) enjoying a fruit Corona moment. I just hope we drink the bottles instead of hitting each other with them. So, anyways, it's been a pleasure, folks, and great talking to you. Take care. Bye-bye.