Church & Dwight Co., Inc. (CHD) Q1 2017 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen, and welcome to the Church & Dwight first quarter 2017 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, Church & Dwight's financial objectives and forecasts. Church & Dwight will be discussing the results as reported on a GAAP basis and also on a non-GAAP basis. The company believes the non-GAAP financial measures provide investors with useful supplemental information about the financial performance of their business, enable comparison of financial results between periods where certain items may vary independent of business performance and allow for greater transparency with respect to key metrics used by management in operating their business. These non-GAAP financial measures are presented solely for informational and comparative purposes and should not be regarded as replacement for corresponding GAAP measures. See the Appendix in this morning's earnings release for a reconciliation. I would now like to introduce your host for today's call, Mr. Matt Farrell, Chief Executive Officer of Church & Dwight. Please go ahead, sir. Matthew T. Farrell - Church & Dwight Co., Inc.: Good morning, everyone. Thanks for joining us today. I'll provide some color on the quarter, and then I'll turn the call over to Rick Dierker, our CFO. And when Rick is finished, we'll open the call up for questions. So Q1 was a strong quarter for our company. There's lots of good news. Organic sales growth of 2.3%, exceeded our outlook of approximately 1% to 2% and we also exceeded our EPS outlook. Our global consumer business delivered organic sales growth of 2.6%, led by continued strong growth by our international consumer business. In the U.S., organic sales grew approximately 1%, meeting our expectations and comping a big first quarter in Q1 2016 of 5%, and six of 10 power brands grew share in the quarter. So, a good report card there. Our international consumer business exceeded our expectations with 11.8% organic growth. International has emerged as a growth driver for us over the past few years. The investments that we have made in new leadership, regional hubs and brand focus, have been paying off. Our international business grew 8% in 2015, 10% in 2016 and we expect 6% to 7% growth in 2017. In Q1, many regions contributed to the success story. Turning to Specialty Products, our Specialty Products Division saw a continued improvement. The flattish organic growth was actually better than expected. The dairy economy continues to recover from the weakness that we saw in 2016, and we have easier comps going forward. So, now back to the U.S., categories slowed down a bit in the U.S. in Q1, particularly January and February, but we have seen signs of improvement in March and April. Innovation is always a good stimulant for category growth and we have excellent innovation on the way. Many of our new products are hitting store shelves now and we attempt to get behind them in the coming quarters. We've leveled the playing field in unit dose laundry detergent with the launch of our own Triple Chamber detergent product. In Q1, before the launch of Triple Chamber, ARM & HAMMER nearly doubled the category growth rate for unit dose for the fourth consecutive quarter. The Triple Chamber product is hitting shelves now and we expect future share gains as a result. And liquid detergent, which still accounts for almost three quarters of the category, ARM & HAMMER detergent grew share for the 29th consecutive quarter. Also, in laundry, we are restaging our OXICLEAN laundry detergent in Q2 with new packaging, a new formula and new advertising. Turning to cat litter, our launch of ARM & HAMMER SLIDE cat litter is off to a great start. Consumers have responded to this innovative new litter that does not stick to the litter box. This benefit addresses a major frustration for cat odors adding much needed convenience to the clean-up process. SLIDE has already reached a 4-share of the clumping litter segment and we expect to gain share as we move through the year. In adult gummy vitamins, VITAFUSION is launching an energy vitamin made with caffeine to address consumers' desire for mental energy and alertness. Over to condoms, TROJAN has launched a new XOXO premium quality condom targeting both men and women with a soft touch, aloe lubricated latex in a unique portable carrying case. TROJAN will be advertised for the first time on network television this year. Many of you will see our commercials in series finales this spring. In fact, we will be airing on Saturday Night Live this Saturday night, May 6. Dry shampoo. Dry shampoo consumption grew 32% in Q1 and is now $120 million category in the U.S. Our BATISTE brand launched new variants to continue to broaden the line. Our new lightly scented Bare is getting strong reviews from women and BATISTE is the number one dry shampoo in the world. Just a few more things. As you read in the release, we plan to put significant muscle behind these innovations in the next couple of quarters, both in store and on-the-air. Remember that six out of our 10 power brands grew share in Q1, and we're aiming to improve on that mark in the coming quarters. On the acquisition front, we continue to build the capabilities of our animal productivity business. This week, we closed the acquisition of Agro BioSciences. This is a terrific business that adds products and a lot of scientific talent to our team, and we are really excited about the Wisconsin team, that's joining us. Agro BioSciences expands our ability to provide non-antibiotic solutions to promote the health and productivity of production animals. And this is in a world that will grow population from 7 billion today to 9 billion by the middle of the century. And we expect this business to grow very rapidly in the coming years. Finally, we streamlined the company a bit in Q1 with the sale of our Brazilian chemical business. We will continue to concentrate on growing our existing consumer business in Brazil. Next up is Rick to give you details of our first quarter results and Q2 and full-year outlook. Richard A. Dierker - Church & Dwight Co., Inc.: Thank you, Matt, and good morning, everybody. I will start with EPS. First quarter adjusted EPS was $0.52 per share compared to $0.43 in 2016, up 20.9%. The $0.52 was better than our $0.46 outlook, largely due to organic revenue and gross margin expansion as well as $0.03 from tax. Adjusted EPS excludes a $0.01 per share charge related to the sale of the Brazilian Specialty Products business and includes a $0.03 per share positive impact from adopting a new stock option accounting standard. We did change our methodology here, which is consistent with the rest of our peer group. Reported revenues were up 3.3% to $877 million. Organic sales grew 2.3%, exceeding our Q1 outlook of approximately 1% to 2%. The organic sales beat was driven by our international consumer business. Now, let's review the segments. The Consumer Domestic business' organic sales increased by 0.8%, primarily due to ARM & HAMMER liquid and unit dose laundry detergent, BATISTE dry shampoo, ARM & HAMMER baking soda, and ARM & HAMMER cat litter. We continue to expect the full-year organic sales to be approximately 2.5% for the Consumer Domestic business. International organic growth was up an impressive 11.8%, driven largely by OXICLEAN, FEMFRESH and BATISTE in the export business and ARM & HAMMER liquid laundry detergent and litter in Canada. As Matt said, investments we've made continue to drive that business forward. For our Specialty Products Division, organic sales were essentially flat due to lower volumes in the specialty chemical sector of the business. The animal productivity business improved in both price and volume on higher demand from the U.S. dairy industry, as milk prices and dairy farm profitability improved. Turning now to gross margin. Our adjusted first quarter gross margin was 45.7%, a 110 basis point increase from year ago. Q1 benefited from two factors primarily, productivity programs and the higher margin from acquired businesses. These were partially offset by higher raw material cost and a slight drag from price mix. Moving now to marketing. Marketing as a percent of revenue was 10.3%, which was down slightly year-over-year, but remember, we are shifting some spend out of Q1 and Q4 into Q2 and Q3. Adjusted SG&A as a percentage of net sales was 12.6%, flat from the prior year. And now to operating profit. The adjusted operating margin for the quarter was 22.8%, which was 170 basis points higher than the prior year. Other income and expense was $5.9 million, which was a drag and largely due to $8 million of expense from interest. Next, the income taxes. Our effective rate for the quarter was 30.3% on an adjusted basis. And now to cash, we had a strong cash flow quarter. We generated $139.6 million of net cash for the quarter, $30 million decrease from the same quarter a year ago, largely due to working capital and some retiree deferred comp and higher incentive comp payout. So, in conclusion, the first quarter highlights include 2.3% organic, 20.9% EPS growth which translates into a reported EPS growth of 18.6%. Now, turning to second quarter outlook. We expect Q2 organic sales growth of approximately 1% to 2%. Consumer domestic growth looks similar to Q1, and international SPD growth (10:01) to 1% to 2% of the company. We expect marketing as a percentage of revenue to be significantly higher year over year and gross margin to contract in Q2, as we increase support behind our new products. We expect second quarter earnings per share of approximately $0.37 compared to $0.43 a year ago, or a 14% decrease year over year. Primary drivers, again, are the higher marketing in support of our new products and the higher consumer promotional spend. And now turning to the full year. To summarize our thinking, we're maintaining our expectations for organic sales of 3%. In February, we called approximately 60 basis points of gross margin expansion and given the incremental promotion, we're now calling 40 basis points. Our full-year marketing expectation is approximately 12% of sales, consistent with 2016 and prior years. Moving to SG&A. Our original expectations were a 10 basis point increase. We now expect that to be about 20 basis points, largely due to the incremental amortization from our small deals. We expect operating margin expansion to be flat when adjusted for the pension and Brazilian charges. And then finally for the income tax line, the full-year rate forecast will be 33.5%, which includes the effect of the new stock option accounting standard in our outlook. On a reported basis, we now expect EPS to be $1.75 to $1.77 per share, which includes a $0.01 negative impact from the Brazil charge and a $0.14 to $0.16 negative impact from the pension settlement. Excluding these items, we now expect to achieve 8.5% adjusted EPS growth of $1.92 per share. And finally, turning to free cash flow. We continue to expect $600 million, net of approximately $50 million of CapEx for the full year of 2017. This represents an industry-leading 124% free cash flow conversion. And with that, we'll turn it back over to you, Sumat, and I can answer any questions.

Thank you. Our first question goes to the line of Steve Powers with UBS. Your line is open.

Hi. This is actually Megan Cody on for Steve Powers. I was wondering, could you guys break down your international growth trend a little bit further and talk about the sustainability of those rates? Matthew T. Farrell - Church & Dwight Co., Inc.: Yeah. So we posted 11% organic growth in Q1, and more than half – let's say two-thirds of that is non-export. Too often we focus on the export part of the business. But, let's say a third of it is export and two-thirds of it is the rest of the world. You know we're making a lot of investments there over the past couple years, so we think the export growth will continue for us. If your question is around the full year, so we're calling 6% to 7% for the full year – or we posted almost the 12% for Q1. So we don't expect that the 12% to continue throughout the year. To break it down, we mentioned in the release that Canada had a big quarter, but it does vary from quarter to quarter, somewhat lumpy as to which businesses or which regions might drive it. I think the best way to think about it is that we do think that we're taking our number up on the full year. I think we started the year with 4% to 5% for international to grow and now we're calling 6% to 7%.

Okay, great. Thank you very much.

Our next question is from Bill Chappell with SunTrust. Your line is open. Matthew T. Farrell - Church & Dwight Co., Inc.: Hey, Bill.

If your line's on mute, please unmute your phone. Matthew T. Farrell - Church & Dwight Co., Inc.: Hello, Bill? Richard A. Dierker - Church & Dwight Co., Inc.: It's okay, just move on to the next call.

All right. Our next question is from Kevin Grundy with Jefferies. Your line is open. Matthew T. Farrell - Church & Dwight Co., Inc.: Okay. Hey, Kevin.

Hey, good morning, guys. Matt, curious to kind of get some thoughts from you on how you're seeing the U.S. environment. You sounded pretty good, I guess, on sort of what you're seeing in March and April, and we're seeing that in Nielsen data as well. But of course, a lot of the sort of cautionary commentary that we're hearing, I'm sure is not lost on you guys at all. So a couple of questions with that, just kind of how you're seeing, Matt, things with the retail environment and the state of the consumer. And then, the second part of the question with respect to your outlook for the year and what seems to be baked in, using sort of back-of-the-napkin math, because you guys broke out that 110 basis point contribution from non-tracked channels. It would seem like the tracked channel growth in the quarter in terms of your shipments matched pretty well I think with what we're seeing in the Nielsen data. And probably to get to the 3% core sales or organic sales for the year, you're baking in some of this improvement that we're seeing. So I just wanted to know if that was sort of accurate math roughly and sort of fair characterization of your outlook. Matthew T. Farrell - Church & Dwight Co., Inc.: Yeah. Okay. So I'll give you some color around the macros, and I'll let Rick address the reconciliation from the, say, measured channels and what we post for organic versus what you've seen. So as far as macros go, yeah, so the categories certainly January, February are somewhat slow, picked up March and April. We started the year thinking that our full year was based on a 2% category growth rate. We didn't see that in Q1 as we're little closer to 1.5% for the categories that we play in. We still feel good that we can get there, and we saw GDP just everybody else, 70 basis points, so that's a bit of a head scratch. We got to wait for the jobs report on Friday. But as far as the trends go, there's a lot of discounting that took place in the first quarter. We saw laundry was down 50 basis points, but remember, year-over-year, laundry was up 6% last year as a category. So, it's like a huge comp for laundry, but there is well a lot of discounting in the first quarter. You heard a couple of retailers cite the impact of late tax returns of anybody who claims here in income credit, you can't get your refund until after Feb 15. Then, of course, there's uncertainty always affects consumer behavior. So, you have – because we have a new administration, there's uncertainty around health care and taxes. And then somebody wrote a piece on Hispanic purchasing bloc and that's down year-over-year. So, it's empirical data that supports that, why, because of worries about immigration policy and deportation. And then, you have the shift to online, and obviously, that's – you won't see that in measured channels. But, yeah, certainly, there was a slowdown for the first couple of months. I see March and April picking up. I don't think other than what I cited, I don't think there's a lot more that we would point to as far as to why it's slowed down, but things certainly look better in April. So, we're not expecting a repeat of that for the remainder of the year. Richard A. Dierker - Church & Dwight Co., Inc.: Yeah. Then, in terms of shipping to consumption. For Q1, our math says for the quarter that we're maybe down 70 basis points or organic growth was 0.8% for example and domestically, that's 150 basis points, and we said about 110 basis points of that 150 basis points was largely due to untracked channels. We think that trend will continue. I think you're going to see that across our space. For us, from an organic perspective for the full year, we had 2.3% in Q1, we're calling 1% to 2% in Q2 and then Q3 and Q4, that would require high-3s type of numbers. We feel good about that for a variety of reasons but also because of even the category growth comps year-over-year. Remember, laundry grew about 4.5% year ago, 4.5% in the first half and about 2% in the second half. So, we have some good tailwinds on that perspective too.

Thank you. Just one follow-up, guys, if I may. Matt, any update, any commentary you can share on the M&A pipeline, any particular areas you're seeing, valuations et cetera, that would be helpful. And then with respect to the small tuck-in deal, the Agro BioSciences sort of additive in the specialty business. So broadly with that, Matt, so specialty is like less than 10% of mix. What role do you kind of see with specialty? Do you have any sort of percentage in mind or is there an aversion to how high you would take specialty as a percent of the company's mix within sort of the broader household products and personal care portfolio? Would you ever take – should the asset present itself, would you take the business up to 15% to 20% of mix? Just curious as to how you see that. Thank you. Matthew T. Farrell - Church & Dwight Co., Inc.: Yeah. I would say that the Specialty Products business and particularly animal productivity business is a business that we'd like to get as big as it can get. And the reason for that is that, it's completely on trend, A. B, we have a base in technology and science behind it. From a financial standpoint, its operating margins are close to the consumer business and its asset-light. So, it meets all of our criteria frankly of the business that we would buy. It just happens to be a business that we've had for many, many years. And now because of the trend towards non-antibiotics to raise production animals, we find ourselves in the sweet spot. So, we bought a business in January 2015 called VI-COR and that was a prebiotic business. And we just picked up this fantastic business in Wisconsin, Agro BioSciences. And these guys can customize probiotics for their customers, I mean it's just a wonderful business model. So, we think the combination of those two businesses with our existing business is going to make us less cyclical, A, and, B, able to serve more than the dairy market going forward. So, we feel real good about that business. Richard A. Dierker - Church & Dwight Co., Inc.: Meanwhile, Kevin, I mean, you should see in the release, right, we did sell the chemical business down in Brazil, so it's investing where the future is.

Okay. Thank you.

And our next question is from Olivia Tong with Bank of America. Your line is open.

Hi. Thanks. First question is just kind of talking about the key categories, you're directing your promotional dollars to in Q2. And then also, perhaps, you can give a little bit of color on what your expectations are on volume versus price mix and specifically for Q2 given the step-up in promotional spend? Matthew T. Farrell - Church & Dwight Co., Inc.: Yeah. A lot of this with respect to promotional spend, we wouldn't be very specific about where that's going. We do have to narrow some gaps a bit in laundry. So, laundry, we actually were down year-over-year in our spend for ARM & HAMMER and OXICLEAN as the percentage sold on deal. So, that gap has widened a bit with some of our competitors. So, that would be one area we would put some money to work. So, we'll selectively use some promotions and couponing in Q2 and Q3, just to narrow those gaps. Richard A. Dierker - Church & Dwight Co., Inc.: Yeah. And then from a volume, price mix in Q2, we think volume is going to be up about 3% to 4% and price mix will be a drag of 1% to 2%. And that's also why margin came down for the full year from 60% to 40%. So, that's the short answer.

Great. Thanks. And then, back to the M&A and Specialty. Could you talk about the growth rate of that business to kind of warrant a 7 times multiple, I mean excuse my ignorance, but is that just the going rate for livestock probiotics at this point? Richard A. Dierker - Church & Dwight Co., Inc.: No. We don't always look at the trailing EBITDA or sales multiple, Olivia. But I would tell you that on a forward EBITDA multiple, we're 10 times or less. And that business is going to grow really fast and that's our expectation. Matthew T. Farrell - Church & Dwight Co., Inc.: Yeah. And then a combination of that business with our organization is, we're going to work real hard to make sure they hit that earn-out target.

Got it. Thanks. And then just lastly on OXICLEAN, the restage that you're planning, it sounds like your doubling down again. And obviously, laundry has been a very tough category the last couple of years, whether it'd be for sales and products et cetera, et cetera. So, can you talk a little bit about the plans and what's changing for OXICLEAN this time around? Matthew T. Farrell - Church & Dwight Co., Inc.: Yeah. Well, you're going to be – you'll see it on shelf soon. So, we have a new bottle, and we've got new claims which – they aren't public either right now and a new advertising. So yeah, you say we've launched it a couple years ago, 2014 and we've kind of gone sideways for a couple of years around a 1-share. And of course, Persil came in I guess 2015 and so that was unexpected. So now, we've kind of retrenching and restaging the business and we feel good about our prospects.

Thanks so much.

Our next question is from Bill Chappell with SunTrust. Your line is open.

Good morning. Matthew T. Farrell - Church & Dwight Co., Inc.: Hey, Bill. Richard A. Dierker - Church & Dwight Co., Inc.: Hey, Bill.

Just on the industry trends, saying that the things are looking better in April. I mean, we've heard that from a few others. Any reason why you think that is and do you think that – or why you think that will continue? Matthew T. Farrell - Church & Dwight Co., Inc.: Yeah. I wouldn't say we – it's better in comparison to January and February. I think we're still thinking the categories will be between 1.5% and 2% for the year. So, we've kind of looked it as a blip sort of recovery. We're not euphoric. We're not saying that, hey, it's blue skies and cool breezes in the rest of the year, but it's better than it was, Bill. So, I think, we're kind of back to where we thought we were in February when we gave our full year outlook.

And on Olivia's question on the restage of OXI and maybe just what you're seeing out of Henkel in general? If you're seeing any change from the Sun, Henkel, if you're expecting anything? But also, with the thought that maybe OXI's initial prospects were deemed by the strong launch of Persil. Are you rethinking on pricing or where it should be positioned as you restage that whole product? Matthew T. Farrell - Church & Dwight Co., Inc.: No, we haven't changed the position. I mean, it is just a slightly under a Tide Persil again from a price standpoint. As far as what we see out of the Sun-Henkel combination. All you can really look at is tactics and how much was sold on deal in Q1 this year versus last year. I can comment with respect to Purex. Purex brand was pretty much the same last year versus this year. There was a significant increase in Sun sold on deal, like 41% versus 35% last year in Q1. So, you might say they got a little more promotional on the lower end. But on the top end, Persil is still doing well. We continue to take some share. So we have to find our niche below Tide and Persil, and we think we've found a way to do that.

And last one for me. Is there an expectation of where SLIDE can get in terms of share? I mean, are you thinking high single-digits by the end of the year? Matthew T. Farrell - Church & Dwight Co., Inc.: We're not going to do any grandstanding right now. We just feel real good about the launch. It's only been out there for a few weeks now. So we'll update you again in August, but we like the way consumers are reacting to it. It's a good insight.

Sounds great. Thanks. Matthew T. Farrell - Church & Dwight Co., Inc.: Okay, Bill.

Our next question is from Faiza Alwy with Deutsche Bank. Your line is open.

Yes, hi. Thank you, good morning. So, I just wanted to ask first about the laundry category, just following up on Bill's question. So it seems like you're gaining a lot of share in laundry, especially if we look at the four-week data. So is that just the new products, or do you think you've gained more shelf space relative to Henkel and P&G? And then just if you could talk about trends outside the scanned channels in laundry for your business. Matthew T. Farrell - Church & Dwight Co., Inc.: Yeah, well, laundry outside the scanned channels, I wouldn't say is much of a story for us right now. It's more on shelf. People still do buy – that's a category that's less developed from online versus bricks and mortar. Yeah, as far as how we're doing. I mentioned that ARM & HAMMER liquid grew share again in the first quarter for the 29th consecutive quarter. ARM & HAMMER grew 30 bps in the first quarter. Where our issue is, is on Oxi and XTRA, so that's what we run into. On the XTRA side, we lost 30 bps when we do the discounting. So that's one of the reasons why we're going to have to close some of those gaps in the next couple of quarters. We get our fair share of distribution gains just like other folks. We have strong brands, particularly ARM & HAMMER, so some of it is distribution, but the success of ARM & HAMMER in the first quarter was not promotionally driven. As I mentioned earlier that we actually sold less on deal in Q1 2017 than 2016. And now, we got the new triple-chamber launching, so we feel great about that, right? So ARM & HAMMER grew share in Q1 without it. And now, we're finally showing up with that. And our unit dose share, if you combine Oxi and ARM & HAMMER, it's over a 4-share. So, we got to get our fair share back in unit dose. That's the future, so that's where we're putting our money.

Okay, great. And then just on this new acquisition, the probiotics. What is the – I know you said the forward EBITDA multiple was around 10 times. Should we think of it as a next year forward multiple, or is it more sort of out of the future? Just if we could think about the timing and just sort of how big the opportunity could be next year. Richard A. Dierker - Church & Dwight Co., Inc.: Yeah. Next year. Next year forward multiple around 10 times. That's a good way to think about it.

All right. Thanks.

Our next question is from Jason English with Goldman Sachs. Your line is open. Jason English - Goldman Sachs & Co.: Hey, guys. Thanks for - Matthew T. Farrell - Church & Dwight Co., Inc.: Hey, Jason. Jason English - Goldman Sachs & Co.: Congrats on a pretty solid result in a tough environment out there. Matthew T. Farrell - Church & Dwight Co., Inc.: Yeah. Thanks. Jason English - Goldman Sachs & Co.: Clearly, International was a strong source of strength for you guys with that 12% growth. A couple questions on that. Can you give us a little more context and color about exactly what it is and where that growth is coming from? And then related, your guidance of 6% to 7% implies sort of a decel to 4% to 5% – 5%. Is that just sort of prudent conservatism, or is there real reason to think that the business could sort of come back down to earth? Matthew T. Farrell - Church & Dwight Co., Inc.: Yeah. Well, look, first off, you've heard us say on other calls in the past that export can be a little bit lumpy. So that's a bit of it. As far as where the success is coming from, you've heard us say we got new leadership, we got new regional hub that's certainly helping the export business, but we have a focus on brands. So, the important brands for us in the International is STERIMAR which is a nasal hygiene, FEMFRESH which is feminine hygiene and BATISTE of course which is dry shampoo. And then we've had success with ARM & HAMMER in Canada and Mexico. So, there's a lot of effort around those brands and that concentrated effort has been paying dividends for us. As far as the rest of – are we sad because the rest of the year isn't 11% and for the next three quarters, no. We've taken Europe from 4% to 5% to 6% to 7%, and we think that's a prudent way to think about the year. Jason English - Goldman Sachs & Co.: Yeah, I agree. There's nothing too disappointing on that 4% to 5%, if that is with the rest of the year. Turning to – well, as you offset 6% to 7%, you're not upping your overall sales, so kind of what's moving a little bit lower in that algorithm? Matthew T. Farrell - Church & Dwight Co., Inc.: Yes. Yes. So, we said 2.5% to 3% for domestic beginning of the year. So, we're shaving that back down to 2.5%. Richard A. Dierker - Church & Dwight Co., Inc.: Yeah, largely because of the incremental trading and promotional activity. I think volumes are still as strong as they were, in our opinion. Jason English - Goldman Sachs & Co.: Makes sense. One more question and I'll pass it on. The 110 bps of outperformance, pretty big fade from 300 bps, kind of back to normal long term. I think we've always had roughly 100. What drove the fade and is there any sort of lumpiness we should think about on that as we think through the rest of the year? Richard A. Dierker - Church & Dwight Co., Inc.: Yes. So you really asked about gross margin, why is it going down so much and... Jason English - Goldman Sachs & Co.: No, no, no. The sales outdelivery. Sorry, consumer domestic, the 110 basis points of overdelivery versus measured channels. That was closer to 300 when you finished the last year? Richard A. Dierker - Church & Dwight Co., Inc.: Got you. Yeah. I think part of that, when we're talking last year especially, we had some of the club channel helping that number. This is purely largely online untracked channels because we're confident in any of the club benefits. Jason English - Goldman Sachs & Co.: Got it. Thanks a lot, guys. Matthew T. Farrell - Church & Dwight Co., Inc.: Okay.

Our next question is from Joe Altobello with Raymond James. Your line is open. Joseph Nicholas Altobello - Raymond James & Associates, Inc.: Hey, guys. Good morning. Matthew T. Farrell - Church & Dwight Co., Inc.: Hi, Joe. Joseph Nicholas Altobello - Raymond James & Associates, Inc.: So, first question. I wanted to go back to marketing and promo and obviously, you guys mentioned this morning that you're kind of increasing spend in the second and third quarter out of the fourth quarter. Is that due to the timing of your innovation or it's just right now, you're seeing a really competitive environment given where some of your competitors are spending? Richard A. Dierker - Church & Dwight Co., Inc.: Yeah. On the marketing side, Joe, I would just tell you that kind of consistent with what we said in February, over the last few years, we had just seen an increase really in Q4, on top of Q4 increases. So, we want to move some of that money back to where it belongs in support of the new products and that's what we're doing by moving it to Q2 and Q3. On a trade and couponing perspective, I'd say it's really across the board in Q2 and Q3, and so hopefully, that helps. Joseph Nicholas Altobello - Raymond James & Associates, Inc.: Okay. Is there a risk that fourth quarter doesn't come down to that, so it remains at a high level? Richard A. Dierker - Church & Dwight Co., Inc.: There's some in Q4 too. But we're pretty laid back about it. I think as we said before, we expect category growth to be 1.5% and 2%. And we've done the marketing shift, we've put the coupon in and trade in place. And so, that's what we're confident about a 3% call for the year. Joseph Nicholas Altobello - Raymond James & Associates, Inc.: Okay. Okay. And then secondly, on litter, like you mentioned the new SLIDE product is off to a good start. Clorox mentioned yesterday, they gained some share, Tidy Cats has done very well. So, curious what the overall ARM & HAMMER business is doing in terms of market share. Thanks. Matthew T. Farrell - Church & Dwight Co., Inc.: Yeah. You're right. We lost some share in the first quarter, but the latest four weeks, now we're up and we're up with the categories. So, we think the SLIDE is going to start pulling the train for us the rest of the way. Joseph Nicholas Altobello - Raymond James & Associates, Inc.: Great. Thanks. Matthew T. Farrell - Church & Dwight Co., Inc.: Okay, Joe.

Our next question is from Andrea Teixeira with JPMorgan. Your line is open.

Hi. Good morning, everyone. So, I was hoping if you can pretty much understand how TROJAN was weaker this quarter and how – I know you were staging a new contain as you pointed out in the – so were you just like reducing the advertisement spend so that you can stage it for the second quarter? And also if you can touch on how you're spending. I'm assuming in these categories are under the radar like dry shampoo and probiotics, that you're gaining market share and also gaining distribution. So, if you can touch on that. Then lastly if you can contemplate bolt-ons internationally, given that you have been so lucky with – not lucky I should say, so efficient on the growth in Mexico and Canada, so, potentially being a white space for you guys. Thank you. Matthew T. Farrell - Church & Dwight Co., Inc.: Normally, you only get one or two, you got three. Richard A. Dierker - Church & Dwight Co., Inc.: Yes, so I'll take the TROJAN one really quick. So, your question was why is TROJAN down. Well, in context with my earlier answer on marketing spend, we did – marketing spend was down for TROJAN in Q1 because we wanted to move it into Q2 and Q3 in support of our new products. So, we hope to see that trend reverse as we increase our marketing spend and our new XOXO condom launches. Matthew T. Farrell - Church & Dwight Co., Inc.: Yeah. And also, with TROJAN, that's a more developed category with respect to online. So, when you look at the measured channels, there is always a shift going to online purchases. And your second question was on International?

Yes. About M&A, if you would contemplate bolt-ons abroad. Matthew T. Farrell - Church & Dwight Co., Inc.: And so, will we contemplate, say that again?

M&A abroad. So, let's say bolt-on acquisitions that you could find in countries like Mexico or Canada or other countries or even the U.K. Matthew T. Farrell - Church & Dwight Co., Inc.: Yeah. Sure. 2011 is when we acquired the BATISTE business and more recently, we just bought a business from J&J, which is a hemorrhoid business that's in multiple countries, primarily U.K., South Africa, Australia, Canada, so, certain English-speaking countries. So, yeah, we did one recently, and we do want to build out our International business. So, we are on the hunt for acquisitions outside the U.S. And we apply the same criteria to those as we do for domestic acquisitions. So, yes. And your last question was the advent – are probiotics becoming more important to vitamin?

Yeah. No, I was just hoping if you can touch on how you, obviously you are advancing on market share on those categories. But how much of your growth probably is coming from, for example, your organic growth that you had in the first quarter is coming from these new businesses, if you will, or new distribution? Richard A. Dierker - Church & Dwight Co., Inc.: Yeah. We don't get into that brand-level detail on organic growth. I would just say even for next year in 2018, you're going to see some of those small acquisitions play a good role in organic growth. But for now, it's all – we'd be calling that out separately for reported growth anyway. Not really lot to add there.

Okay. Thank you.

Our next question comes from the line of Jon Anderson with William Blair. Your line is open. Jon R. Andersen - William Blair & Co. LLC: Hi, Matt. Hi, Rick. Matthew T. Farrell - Church & Dwight Co., Inc.: Hey. Good morning. Richard A. Dierker - Church & Dwight Co., Inc.: Hey. Jon R. Andersen - William Blair & Co. LLC: Two quick ones for me. Wonder if you could talk broadly about e-commerce and which particular categories or brands are bigger for you in the e-commerce channel? And do you think you have your kind of fair share in e-commerce relative to kind of conventional and kind of what you're doing there to make sure that is the case? And then the second question is just an update on BATISTE both in the U.K. and the U.S. and if that's continuing to see the kind of growth that you're looking for within that brand. Thank you. Matthew T. Farrell - Church & Dwight Co., Inc.: Yeah. Okay. As far as online goes, you may have heard us say, or maybe others, that in general, consumer products companies have 1% to 3% of their global sales online. And not too long ago, we were at 1% and then we moved to 2%. So today, we're at 3%, that's our run rate. And in the U.S., it's 4% of our net sales. So that continues to build for us, so consequently then we have to become a lot more sophisticated in facing that market. And it's – certainly it's Amazon, it's Walmart.com, Target.com, it's all the big direct companies. So we have to interface with all of these folks for this new online class of trade. But I would say it's building, it's more developed in the U.S. than outside the U.S. As I said, it's 4% in the U.S., it's less internationally, but it's going to continue to build. What was your second question? Jon R. Andersen - William Blair & Co. LLC: A question on BATISTE. Matthew T. Farrell - Church & Dwight Co., Inc.: Oh, yeah, BATISTE. BATISTE has been a rocket ship for us. One of the things we've pointed out is that the U.K. market in dollars is a $60 million market, and it's a country with 60 million people. And the growth of the dry shampoo market in the U.S. has just been astonishing. It grows 20% to 30% a quarter year over year. It's now $120 million, and of course we have over 300 million people in the U.S. So you would think that this category has got a lot of runway ahead of it, and is going to generate a lot of growth for the company in the future. So hope that helps you. Jon R. Andersen - William Blair & Co. LLC: Thank you.

Our next question is from Lauren Lieberman with Barclays. Your line is open.

Hi. Good morning. This is actually Shirley Serrao for Lauren Lieberman. Just wanted to talk a little bit about non-tracked channels. They're clearly emerging as a significant contributor to top line. Could you talk about what kind of investments you're making here? Is it primarily online and club, or are you exploring new channels beyond this? Is there room to innovate or push further? Just some more color would be great. Thanks. Matthew T. Farrell - Church & Dwight Co., Inc.: Yeah. The non-tracked channels would be club, but it would also be online, would also be beauty. So you've got three channels there to think about when you're trying to reconcile between non-measured and reported numbers. And I would say we treat all the channels similarly. I mean, obviously, there's some sophistication in digital marketing, which digital marketing also is going to (41:31) all your bricks-and-mortar marketing. So I wouldn't say there's anything in particular we're doing differently, treating those particular retailers than other retailers. Hope that helps you.

Thanks.

Our next question is from Jonathan Feeney with Consumer Edge Research. Your line is open.

Hi, how you doing? This is Armani Khoddami in for Jon Feeney. So maybe - Matthew T. Farrell - Church & Dwight Co., Inc.: Good morning.

Yeah, how are you? So maybe a quick follow-up there on the non-tracked benefit. It sounds like, Rick, you said that you guys are comping some wins in club or Costco last year? Could you elaborate maybe what those are that are now sort of in the base? And then with the majority of the non-tracked benefit now coming, e-commerce and beauty, like you were just saying, I mean, this seems to be – a lot of it is BATISTE. Could you talk about the opportunity on BATISTE still a lot of distribution wins, or do you feel like now that you're in ULTA and in some of the other mass outlets, is it mostly just the penetration? Thank you very much. Richard A. Dierker - Church & Dwight Co., Inc.: Yeah, sure, I'll take the first one. So, just to reemphasize what I told Jason, he was asking there was a 300 basis point difference between our kind of our tracked and untracked organic growth from a year ago. And that was really driven because we had some club wins and we had some high – some growth online. We've anniversaried that growth, and in Q1, it's largely solely online growth, which is still significant. I mean, we have businesses like vitamins, for example, or like condoms that you heard Matt allude to that are doubling year over year. Right? So, we just have some really strong growth online. Matthew T. Farrell - Church & Dwight Co., Inc.: Yeah. As far as BATISTE goes, yes, we continue to get distribution. We are the number one brand, and our share continues to expand as the category grows. So we're getting new distribution, but we're getting, what's really driving it is velocity. There's just so much demand for the product and being a number one brand, we're winning. And we actually have the best product out there as far as efficacy goes, so it's just a combination of both great marketing, good claims and the best product.

Thank you very much.

Thank you. Our next questions is from Mark Astrachan with Stifel. Your line is open. Mark Astrachan - Stifel, Nicolaus & Co., Inc.: Thanks and good morning, guys. Wanted to ask first just a housekeeping. The shelf space for the three-chamber pod, is that coming from existing or are you guys getting a bit of incremental shelf placement for that? Matthew T. Farrell - Church & Dwight Co., Inc.: Yeah. Yeah we're getting some incremental space with the pod upgrade. Mark Astrachan - Stifel, Nicolaus & Co., Inc.: Great. Richard A. Dierker - Church & Dwight Co., Inc.: Yeah. Remember retails are putting a lot more focus on pods over time, so that shelf space is growing. Mark Astrachan - Stifel, Nicolaus & Co., Inc.: Got it. Okay. And then, second just on thoughts about creating even more specialized packaging for key product categories that you could sell, whether being sold online in an increasing way. Do you think there's a need to do it? Do you think it creates a bit of a competitive advantage in doing so, especially as I sort of think about perhaps some of your competitors being a bit slower moving in decisions like that. I think there's a necessity, opportunity, just any sort of thoughts there would be helpful. Matthew T. Farrell - Church & Dwight Co., Inc.: Yeah. No, I think that's true. The online packaging is and will be different for a lot of categories going forward. So, that's one thing we're looking at across all of our categories. And that's a big change. But as our company, we always – as you correctly point out, is we move quickly and focus in speed is, those are the two hallmarks of Church & Dwight, and we look at change as our friend. So, we like our chances to the extent that people are going to move quickly to different packaging where appropriate and be first. Mark Astrachan - Stifel, Nicolaus & Co., Inc.: Great. Thanks. Matthew T. Farrell - Church & Dwight Co., Inc.: All right. There's no further questions. I want to thank you all for tuning in today and we'll talk to you again in August.

Ladies and gentlemen, this does conclude the program and you may now disconnect. Everyone, have a great day.