Church & Dwight Co., Inc. (CHD) Q3 2017 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen, and welcome to the Church & Dwight Third Quarter 2017 Earnings Conference Call. Before we begin, I've 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 risk and uncertainties and other factors that are described in the detail in the company's SEC filings. 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 turn the call over to Rick Dierker, our CFO. When Rick is finished, we'll have a Q&A session. So reported growth was 11.2%, which reflects strong organic growth and the Waterpik acquisition. We're very pleased with the organic sales growth of 3.2%. That was driven by 7.1% volume growth domestically. Our targeted investment spending has translated into share growth, as 7 out of our 11 power brands exceeded or met category growth. Both the International Consumer business and the Specialty Products business turned in really strong numbers. We're on track to achieve 8.5% full year earnings growth. Our International Consumer business exceeded our expectations with 6.2% organic growth. As you know, we continue to invest in our international business to sustain our long-term algorithm of 6% organic growth. Last year, we opened new offices in Singapore and Panama to support our export business. In August of this year, we established a new subsidiary in Germany to expand our European business. And over the last 12 months, we have been taking a hard look at Asia and the best approach to that region. There will be a lot more to come on this topic in the future. Our Specialty Products business had a strong quarter with 7.5% organic growth. U.S. dairy farm profitability remains at a higher level than a year ago. We are starting to get more traction outside of dairy in poultry and cattle. The acquisition of the Agro BioSciences business earlier this year is an important building block for animal productivity business. We've seen good growth for the probiotics products – that's a tongue twister. We have seen good growth for the probiotics products in the poultry industry and our new business development efforts in the dairy industry are translating into new sales. Turning, now, to some of our domestic categories, the laundry category declined 30 bps in Q3, driven by higher promotional levels and slower unit dose category growth, yet our laundry business grew 380 basis points in consumption. Once again, we were able to grow share in the quarter. That momentum has carried into October – and by the way, October promotional levels have also come back in line. ARM & HAMMER liquid detergent grew share for the 31st consecutive quarter. OXICLEAN laundry detergent gained share sequentially with improved efficacy claims and packaging. And now, finally, unit dose, behind our new Triple Chamber unit dose innovation, our consumption has outpaced the unit dose category rate for the sixth consecutive quarter. In Q3, ARM & HAMMER unit dose grew six times the category rate. Our total unit dose share, all in for all brands, is now 4.9%. In litter, the clumping litter category grew 4.6%, and the ARM & HAMMER consumption grew 5.4% and gained share. Our new litter innovation, SLIDE, has already reached 4% share (3:47) of the clumping litter segment and we grew share 60 bps in the quarter. SLIDE has a greater six-month repeat customer purchase rate than the last 14 category launches that we've had, except for Clump & Seal, which is slightly better. So, we feel good about the future of the SLIDE product. The dry shampoo category grew 33% in Q3. The dry shampoo category is now $140 million in the U.S. BATISTE grew 9.5 share points to a 33% share. BATISTE has the strongest brand loyalty of any dry shampoo in the category, including brands with significant hair care heritage. Now turning to gummies, the adult gummy category grew 13% in the quarter, while our business grew consumption approximately 2%. vitafusion, which is our adult gummy business, is contending with significant competitive discounting. There's been a lot of BOGOs going on in gummy vitamins. We haven't been participating, so that's been slowing our growth. The condom category declined in consumption by 2.7% in the quarter. TROJAN Condom share in measured channels was down, although some of that is offset by online consumption. As we discussed in our Q2 call, younger people are having less sex, plus we're seeing an increase in use of non-latex condoms. Innovation is always a catalyst to category growth. Our new XOXO condom, which is geared towards women, is going very well. Finally, we closed the Waterpik acquisition in the quarter. We were attracted to Waterpik because it has a bright future as consumer awareness of the importance of gum health continues to grow. Next up is Rick to give you some details on Q3 results and the outlook for the rest of the year. Richard A. Dierker - Church & Dwight Co., Inc.: Thank you, Matt, and good morning, everybody. I'll start with EPS. Third quarter adjusted EPS was $0.49 per share compared to $0.47 in 2016, up 4% excluding a $0.03 tax benefit from reversal of a tax reserve related to a prior-year joint venture impairment charge. The $0.49 was better than our $0.46 outlook, largely due to some help from tax, better gross margin and lower SG&A. Reported revenues were up 11.2% to $968 million, organic sales were 3.2%. Weather-related hurricane disruptions negatively impacted organic growth by approximately 20 basis points for the quarter. Now, let's review the segments. Consumer Domestic business organic sales increased 2.2% driven by higher volume; growth in ARM & HAMMER liquid laundry detergent, cat litter and baking soda; BATISTE dry shampoo; and, OXICLEAN stain fighters. Volume growth was 7%, offset by negative price mix of 5%. In terms of negative price, this reflected higher promotional levels, NPD support, lower personal care versus household growth, all of which we expect to improve in Q4. And as Matt said, October is off to a good start. International organic growth was up an impressive 6.2%, broad-based across the globe. For our Specialty Products division, organic sales were up 7.5% due to higher volumes in the animal productivity business. Turning to gross margin, our adjusted gross margin for the third quarter was 45.3%, a 10 basis point decrease from a year ago. This was a bit better than we originally expected, despite the impact of the hurricanes, largely due to continued productivity improvements and better margin on International and SPD. The Q3 gross margin decline breaks out as follows. We had higher volumes and promotional levels in Q3; netted, that was a drag of 100 basis points, improvement of 100 basis points due to the impact of acquisitions and divestitures, productivity programs helped by 30 basis points, and FX was a slight drag of 10 basis points. Finally, commodities were a 30 basis point drag on the quarter. I know a lot has been said on resin and, while spot prices of ethylene-based derivatives like resin and surfactants increased between 10% and 20% in the quarter, our impact was, in part, mitigated by our hedging program. Moving, now, to marketing, marketing as a percent of revenue was 11.6%. If we exclude Waterpik, we were up 60 basis points versus a year ago. Remember, in previous years, the big spend quarters were Q2 and Q4. This year we concentrated our spend in Q2 and Q3 to better support innovation. Our Q4 spending levels look a lot like Q3. SG&A as a percent of net sales was 13.2%, a 160 basis point increase, of which 100 basis points is attributed to acquisition transition and amortization costs. Base SG&A is up due to higher R&D and legal spending. Now, to operating profit, the adjusted operating margin for the quarter was 20.5%, which reflects marketing shift and higher SG&A from recent acquisitions. Other expense was $11.7 million, primarily driven by $14.4 million of interest. Next, the income taxes, our effective rate for the quarter is 28.7%, which includes a 400 basis point benefit due to the reversal of a joint venture tax reserve. Excluding that reserve reversal, the effective rate in the quarter approximates our full year adjusted rate of 33%. Turning to cash, we generated approximately $424 million of net cash for the first nine months, $70 million decrease from the prior year, largely due to working capital. The decrease was primarily driven by the timing of accounts receivable factoring, the higher deferred compensation payments and higher inventories. This was partially offset by higher cash earnings. Full year cash from Ops is expected to be approximately $650 million. So in conclusion, the third quarter highlights include strong share growth driven by growth in the Domestic business, continued expansion of our International Consumer business and strong growth in our SPD division. Turning to the fourth quarter outlook, we expect Q4 organic sales growth of approximately 2.5% as we ramp down MPD promotional support and our Personal Care business sequentially improves. The early read for October is category growth is stronger, promotional levels are down a bit and our Personal Care business is off to a good start. We expect fourth quarter adjusted earnings per share of approximately $0.50 compared to $0.44 a year ago, or a 14% increase year-over-year. And turning to the full year, we're adjusting our expectations for organic sales growth to 2.5%. We continue to expect to achieve 8.5% adjusted EPS growth, or $1.92 per share. And as a reminder, acquisitions are EPS neutral for the year. We expect approximately $605 million of free cash flow, net of approximately $45 million of CapEx for the full year. This represents in excess of 120% free cash flow conversion. And finally, we all know that tax reform's a moving target. The company believes that the most meaningful aspect is a lower corporate tax rate. And as a reminder, over 80% of our business is based in the U.S. from a revenue perspective, but 90% of our profits come from the U.S. So now, Matt and I will open it up for questions.

Thank you. Our first question comes from Bill Chappell of SunTrust. Your line is open.

Good morning. Actually, this is Stephanie on for Bill. My question is actually just looking for a little bit more color on the international business; definitely, outperformed and exceeded our expectations despite the tough comp. So maybe if you could just give some color on kind of which brands are doing better, or is it – what you're seeing there? And then, obviously, your comment on expanding more in Asia, just color there would be helpful. Thanks so much. Matthew T. Farrell - Church & Dwight Co., Inc.: Yeah. We said on prior calls that our – the three big brands that generally drive the international business are STERIMAR, BATISTE and – I forgot the third one. FEMFRESH, yeah. STERIMAR, BATISTE and FEMFRESH. In addition to that, in North America, ARM & HAMMER has been growing really well for us, ARM & HAMMER laundry detergent, both in Canada and in Mexico. You know, as far as the business goes, the business is extremely healthy and we've had broad-based growth across virtually all of our countries in the third quarter. As I said before, our long-term algorithm is for the international business to grow 6% annually, and we're confident that we can deliver that. As far as my comments earlier about Asia, so Asia-Pacific is extremely attractive to us. It has a growing middle class. I mean, the countries we'd be most interested there would be Indonesia, Philippines, Malaysia, Thailand. And with a growing middle class using increasing consumption of personal care products, and our products are under-represented there, so we're looking at consolidating our resources in that area, making more investments in the future.

Thank you. Our next question comes from Kevin Grundy of Jefferies. Your line is open.

Thanks. Good morning, guys. Matthew T. Farrell - Church & Dwight Co., Inc.: Good morning. Richard A. Dierker - Church & Dwight Co., Inc.: Good morning, Kevin.

I'm sorry. I apologize if I missed it. Did you guys comment on the 50 basis points lower outlook on organic sales for the year? So, it was approximately 3% before; now, we're down to 2.5%. I know you had a little bit of hurt from the hurricane in the quarter, but fairly modest in the quarter, so even less – far less material for the year. Can you comment on that? Matthew T. Farrell - Church & Dwight Co., Inc.: Yeah. You're only the second question in, Kevin, so you didn't miss it. So, our categories in the first half of the year grew 1.5%. That's ticked down a bit in the third quarter; a little over 1% for our categories, so – and we expect the same for Q4, and I think that's reflected in our full year call, up 2.5%. The other piece of that is international. International has had big growth for three quarters. They're going to be much lower in the fourth quarter, and that's – it can be somewhat lumpy in international, and one of the reasons for that is because of export. We have lots of different countries, so it doesn't always come in that evenly. It's no reflection of our long-term expectation of international, but international will be part of the story for the fourth quarter and why we'd be a little bit short.

So, Matt, was there a little bit of timing just to clean that up? Was there a little bit of timing that helped international in the quarter, because you guys are running ahead, I guess, of where you had guided for the year in international? Matthew T. Farrell - Church & Dwight Co., Inc.: Yeah. No, we came in at 6% – 6% and change organic for the quarter for international. It's early – we had a big first quarter for international, so it's a little bit lumpy. So, it'll be our lowest quarter of the year, but it's just going to fall over into 2018. Richard A. Dierker - Church & Dwight Co., Inc.: Yeah. And even on a stack basis in Q4, Kevin, we're still in the low-teens for the international business, so it's not like it's dropping off the face of the earth.

Yeah. No, no, no. Understood. Thanks, Rick. Two more quick ones for me. Waterpik, did you guys provide a growth rate in the quarter? I know you're guiding to 4%, but it's been growing 10%, historically, so I think a growth rate in the quarter would help. And then, related to that, what have you learned regarding the business post the close of the deal? Matthew T. Farrell - Church & Dwight Co., Inc.: Yeah. We didn't get into that level of detail as far as the net sales growth in the quarter, but what I can say is – what we had said is it's going to grow above our evergreen target of 4%. The business did perform well in August and September. So, we think that this business is going to be a big part of our story going forward. Some things we've learned, it's a very innovative culture; 20% of the business is online, which might be astonishing to you. It's sort of very sophisticated in how to sell online. I would think international is a big opportunity, because only $50 million of their business is international today. And of course, we have a $700 million business in international. So, we have a lot of leverage that we can help those guys grow their business. So, it's – we're very happy with this acquisition. The integration is going very well. Integration is not dependent upon people as much as it is a focus on how we can leverage the Church & Dwight with the suppliers and, also, the networks that we have internationally to grow their business.

Okay. Thanks, Matt. One more, if you guys could comment on the pricing environment; increasingly, discussion is coming up that input costs have sort of reemerged here, but the consumer environment's weak and you guys are even pointing to that with some slower category data. So, what's your expectation here with respect to pricing in Q4? And as we look out to next year, do you see inability to take pricing? Is that something that you would lead in some of your categories? So, any commentary there with respect to the ability to take pricing as input costs inflate here would be helpful. And that's it for me. Thanks guys. Matthew T. Farrell - Church & Dwight Co., Inc.: Yeah, tapering pricing in this environment is very difficult. I mean, generally the only categories you're going to be taking price in is where you have a clear number one share, and even then, you need to have a story with respect to input costs. So, that would be, for example, in condoms for latex. So, I think price – pass-through of input costs is generally difficult. Typically, what you see is changing in quantity sizes, in ounces and units in a package, is how you're going to get price.

Okay. Very good. Thank you. Good luck.

Thank you. Our next question comes from Jason English of Goldman Sachs. Your line is open. Jason English - Goldman Sachs & Co. LLC: Hey, good morning folks. Thank you for letting me ask a question. Matthew T. Farrell - Church & Dwight Co., Inc.: Hey, Jason. Richard A. Dierker - Church & Dwight Co., Inc.: Hey, Jason. Jason English - Goldman Sachs & Co. LLC: Hey, there. Matthew T. Farrell - Church & Dwight Co., Inc.: You can always ask a question, Jason. Jason English - Goldman Sachs & Co. LLC: I can, but usually there's not always an audience to ask it to. So, I'm trying to understand gross margin a little bit better here, given the magnitude of pricing – negative price drag that rolled through the P&L, only 30 bps of cost inflationary pressure, I think I heard you say, Rick. Can you fill in the holes in terms of the rest of the gross margin bridge, while we wait for your 10-Q to come out and do it for us? And high level, it's hard to get to where you're at without an assumption that there is maybe up to 200 basis points of mix benefit from acquisition that's kind of coming out at the SG&A line. So, A, is that true? If so, it sort of implies underlying base business gross margins are down pretty substantially. Are you still sort of on track? I guess, kind of where I'm getting to is are you still sort of on track to, on an underlying basis, getting the margin expansion you expected at both gross and EBIT? And sorry, long winded, multi-faceted question. Richard A. Dierker - Church & Dwight Co., Inc.: Yeah, lots of commas in there, Jason. But... Jason English - Goldman Sachs & Co. LLC: Yeah, I know. Lots of pauses, commas. Richard A. Dierker - Church & Dwight Co., Inc.: You know, I did go through the gross margin bridge in my prepared comments. I'll rehash it really quick for you, and then talk about the go forward. But we said net of higher volumes and leverage on that, plus promotional levels, was a drag of 100 basis points in the quarter; 100 basis points to the good was the impact of acquisitions and divestitures, and productivity programs helped by 30 basis points. Currency was a drag of 10 basis points and commodities were a hurt of 30 basis points. Now, on a go-forward basis, yeah, we are confident that gross margin is expanding. I think for the full year, the number's probably going to fall a little bit closer to the 20% than the 40% that our original outlook was. That's predominantly because of some of the resin costs, right. We do have a great hedging program, but some of that does impact us. We've had some mix headwinds from Personal Care versus Household. But the good news is that in Q4, as you look at our trends of negative price mix over the past couple quarters, we talked about it last call, domestic business in Q2 was down 600 basis points in price mix; this quarter is down 490 basis points. We expect it to be closer to flat, maybe slightly negative, in the fourth quarter. Why? Because a lot of our lower couponing – we have lower couponing around our new products, like the new litter and unit dose are doing well, so the trial generating activities ramp down and some of our promotional levels are being lapped. So, we had negative price in the laundry category a year ago in Q4. And then, we have improved Personal Care performance, as well, expectations in Q4. So, I would say the short answer is we expect the base business gross margin to continue to have momentum. We don't have any expectations for the base gross margin to be going backwards in any way. We continue to think that we have expansion there for next year, for sure. Jason English - Goldman Sachs & Co. LLC: And do you still expect 30 bps of EBIT margin expansion for the year? Richard A. Dierker - Church & Dwight Co., Inc.: It's kind of fuzzy, because we have three or four metrics that we talk about and go through, with and without Waterpik. I would tell you, including Waterpik, we do not because there is transition and implementation integration costs, but we're slightly positive ex Waterpik. Jason English - Goldman Sachs & Co. LLC: Thanks a lot, guys. I'll pass it on.

Thank you. Our next question comes from Jason Gere of KeyBanc. Your line is open.

Okay. Thanks guys. And I know you've kind of talked a little bit about what next year could look like. I know there's an EPS number out there when you did the Waterpik acquisition. I guess I really wanted to focus more on the organic sales. And I mean, good to hear that the promotional environment is coming down a little bit and Personal Care doing a little bit better, but can you – your commentary about category trends, 1%-ish fourth quarter. How are you starting to think about next year? Do you think that we could see outsized growth, again, from international? Do you think Consumer Domestic is – I guess, we're going to have a little bit more of the same promotional changes out there? I was just wondering if you could maybe tease a little bit in terms of how we should be thinking about next year's organic sales growth. Matthew T. Farrell - Church & Dwight Co., Inc.: Yeah. Well, as you know, Jason, we only give our outlook every February. So, we have no intention of giving a 2018 outlook today. What I can remind everybody of is that we have an evergreen target of 3% organic growth, annually, and that target is based on Domestic growth of 2%, International of 6%, and Specialty Products of 5%. And the Specialty Products of 5% is driven by the fact that, over the last couple years, we bought a couple of businesses, one was VI-COR, the other Agro BioSciences that got us into things other than dairy, so we're expecting a lot of growth from that business going forward.

Okay. Maybe if I could just extend it just into, maybe, the Personal Care, since I broached the topic. If you could talk about maybe some of the businesses where, I think, there's some new innovation coming out; just wondering how that's starting to play into consumption trends. If you think about oral or the condom category, obviously, BATISTE is doing well and I know you're saying Personal Care is sounding a little bit better in October, but maybe can you flesh that out a little bit more, which categories where the innovation is resonating, where maybe you're kind of matching promotions on maybe gummies; I'm not sure. Can you talk a little bit about the trends that you're seeing, there, that gives you the confidence that Personal Care will be better in the fourth quarter and, hopefully, into next year? Matthew T. Farrell - Church & Dwight Co., Inc.: Yeah. Well, we're already seeing those trends in the fourth quarter. We're seeing that both vitamin consumption and condom consumption has improved from quarter-to-quarter. Now, we can – it's a little early with respect to answering your fourth quarter question when XOXO could be part of that story for condoms. And obviously, we had some new innovation on the vitamin side of the business. BATISTE, of course, is in dry shampoo, has been a rocket ship for us. You might have probably heard on my comments that that category grew 33% year-over-year in the third quarter and, at the same time, we grew share tremendously and we are at 33% share. That's a category that's $140 million. And if it grows as fast as the UK and where the UK levels off, it will be a $300 million category. So it gives you a little bit of color on three categories in Personal Care.

Okay. Thanks, guys.

Thank you. Our next question comes from Rupesh Parikh from Oppenheimer. Your line is open. Rupesh Parikh - Oppenheimer & Co., Inc.: Good morning, and thanks for taking my question. So I also wanted to ask about the FY 2018 outlook. And I know you're not looking to provide much detail for next year, but is that $209 million figure still the current thinking for next year or do we have to wait until next year to get an update on that number? Richard A. Dierker - Church & Dwight Co., Inc.: Yeah. You have to wait till next year to get an update. There is a – we tried to give some visibility when we had the Waterpik acquisition on how we were thinking about it. There's also lots of puts and takes that we'll talk about in February, and we're going to wait until then to do it, right. Resin keeps coming up, right. And lots of forecasts out there are calling a return to pre-hedge pricing, but you see a lot of our peers taking big call downs in their external outlook. We don't think that's going to happen, for example, but we're not going to go through that level of detail right now in November. We're going to wait until February to give you the full soup-to-nuts forecast that we typically do. Rupesh Parikh - Oppenheimer & Co., Inc.: Okay. Great. And then, just going back to the category growth rates, clearly, everyone's speculating on what's driving the slowdown out there. Do you guys have any additional perspectives on the slowdown that you saw in Q3? And then, if there's also – I was just curious if there's any way to quantify the type of uptick you're seeing in October from a category growth rate perspective? Thank you. Matthew T. Farrell - Church & Dwight Co., Inc.: Yeah. I think the way to think about categories is you got to look at the volumes. So, the volumes are healthy in a lot of categories, so the real story is, when it comes to dollars, it's simply price; and, that's going to vary from category to category. And typically, it's much greater in household categories than it is in personal care, but as long as volumes stay healthy, I think that's a good barometer. So, I don't think that the price is something that is going to last permanently, but certainly it's something we're all dealing with now. Richard A. Dierker - Church & Dwight Co., Inc.: And to answer your other question, Rupesh, in Q3 Matt had said categories – our categories were around 1.1% growth in October, it was closer to 2%, as an example. Why? Because some of the promotional levels weren't as deep and they were lapping some higher promotional levels in Q4 year-ago. Rupesh Parikh - Oppenheimer & Co., Inc.: Okay. Great. Thank you.

Thank you. Our next question comes from Jonathan Feeney of Consumer Research (sic) [Consumer Edge Research]. Your line is open.

Good morning. Thanks very much. Just a couple of questions. First, I'd love you to comment on your club and e-commerce performance, given that Consumer Domestic tracked just a little bit better than our scan data would have indicated, and maybe what categories are driving that. And a second question, related, on e-commerce, you had mentioned Waterpik's 20% online is a huge number. I think there's some obvious differences in that business that maybe make it more e-com friendly, but they – are there some learnings about Waterpik and some overlap where you can sell – you can learn from that and really advance e-com adoption at some of your other real high-value businesses that might overlap directly? Thanks very much. Richard A. Dierker - Church & Dwight Co., Inc.: Yeah. Sure. This is Rick. I'll take the first one and Matt will talk about the Waterpik e-commerce. Your questions really shift into consumption. So, consumption was around 2.3% for the quarter. We have a 200 basis point drag from couponing, right. That doesn't get measured in Nielsen-type data and – similar to last quarter. And then, we have 200 basis points of positive from untracked channels, like online and club. We said in the release that our online business was up 70%, for example. That's really VMS, litter and TROJAN are the three – the big ones on online business. So, that's how we get to our shipment number or organic number of around 2.2% for Domestic.

Thanks. Matthew T. Farrell - Church & Dwight Co., Inc.: Yeah. As far as your question on Waterpik, as I said before, it's a really impressive group of people that run that business. And when it comes to working online, it's early days, but what we've seen with respect to their development of web pages, the development of content for online, their social listening skills, the fact that they're already focused on Amazon, have sales on Amazon in Europe, they've been in it for – and more sophisticated than we've been for a number of years. So, we do think we can learn a lot from these guys. As far as is there any one specific category that would benefit, I mean, certainly it would be Personal Care more than Household because Personal Care lends itself more to online sales than Household. But it's a good question and we're very happy that these guys are now part of the family.

Thanks very much.

Thank you. Our next question comes from Caroline Levy of Macquarie. Your line is open. Caroline Levy - Macquarie Capital (USA), Inc.: Thank you. Good morning. Just a few things... Matthew T. Farrell - Church & Dwight Co., Inc.: Hey, Caroline. Caroline Levy - Macquarie Capital (USA), Inc.: ...on the acquisition – Good morning. Thanks. On the acquisition contribution outlook, it just seems that the contribution was bigger than we had expected in the past quarter. So, if you could just give us a sense from a sales standpoint whether you see that Waterpik is coming in ahead of plan? And then, staying with Waterpik, what percent of the sales come from sort of electronic – the gadget part and what percent from the replacement part that's more the annuity business, and just what's the cycle there? Just a little deeper understanding would be really helpful. Matthew T. Farrell - Church & Dwight Co., Inc.: Yeah. Sure, Caroline. On the second one, in terms of the mix between units versus replacement, it's predominantly units, okay. It's a very small percentage that's replacements. That's not really as applicable at this time, right. Maybe that'll change one day in the future, but right now, it's largely just the replacement units and it's like a three-year replacement cycle, in general. So that's why innovation is so important, but that's also why category penetration is really the driver behind that business. And then, your first question was on Waterpik and just the contribution. We're not going to give details of the businesses; we just don't. That's not our past practice. We haven't done that with any acquisition, whether it was Avid, Orajel, or OxiClean. I'm trying to be as clear as we can, but for EPS it's a neutral impact for the year and that's what we're going to stick with. Caroline Levy - Macquarie Capital (USA), Inc.: Got it. Thanks. And then, just within the – you touched a little bit on the pricing environment and couponing, but are there any metrics you can put around what's going on in the vitamin business and just help us understand what the – how long this price war might continue? Matthew T. Farrell - Church & Dwight Co., Inc.: Yeah. Well, look, when it comes to vitamins, the category is healthy. There are a lot more competitors out there right now than when we first bought the business, so there's lots of options for consumers. The space has expanded, as far as when you go on shelf, and the space has expended largely for the existing pill brands that are now creating gummy products and expanding gummy products, like Nature Made, Nature's Bounty, Centrum. And there's a fair amount of brand loyalty when somebody switches from pills to capsules, and BOGOs are exacerbating that transition. So, we haven't been engaging in the BOGOs, which as I said, is affecting our ability to grow. We do have a new ad campaign right now to try to break through the noise in the gummy category and we do expect to be up in the fourth quarter. But yeah, it's concerning and something that we continue to watch, Caroline. Caroline Levy - Macquarie Capital (USA), Inc.: Thanks. Just lastly on that, is Amazon a major player there? Because one of our fears – and I think investors across the board are just wondering which categories is Amazon going to become a big private label player? And are you seeing them in any of your categories at this point? Matthew T. Farrell - Church & Dwight Co., Inc.: No. I mean, in gummy vitamins, we're the number one gummy on Amazon. In fact, our shares are super high in Amazon in comparison to what they are in bricks and mortar, so no worries there right now. Caroline Levy - Macquarie Capital (USA), Inc.: Great. Thank you very much.

Thank you. Our next question comes from Bonnie Herzog of Wells Fargo. Your line is open.

Thanks, guys. This is actually Sam Reid filling in for Bonnie. I actually had a bigger picture question. There's been a lot of talk about private label in many categories across the U.S., but a lot less talk in detergents, which I guess is a clear positive for you guys. Why do you think the detergent category is somewhat immune from private label penetration, at least here in the U.S.? And then, separately, we know that private label detergent shares in places like Europe are significantly higher, at least in the tracked channels. Do you ever see this as a potential risk longer term to the U.S. market? Matthew T. Farrell - Church & Dwight Co., Inc.: No. The reason for that is private label today in laundry, and has been for a long, long time, is generally mid-tier. It's not a deep value. And if you look at the long-term trends, mid-tier has been the share donor to premium and to value detergent for a long, long time. And the reason you don't have a value in private label is because you already have deep value laundry detergent products on shelf, and so it's very difficult to make any money in deep value and come in as the opening price point below an extreme value laundry detergent. So, yeah, private label laundry detergent really is miniscule in the U.S. for that reason.

Got you. No, that's really helpful. And then, I just had – I hate to belabor it, but another follow-up question on Waterpik; not about category growth here, though, but more on the showerhead business. What sorts of channel opportunities are you seeing here, specifically, now that you've owned this business for a little while? Just looking for some color there. Matthew T. Farrell - Church & Dwight Co., Inc.: Yeah. I wouldn't say it's a distribution game. It's really more innovation. So, the folks at Waterpik are experts in water jet technology. And just as they have the number one share and really own the water flosser category, they also have the number one share in replacement showerheads. So, there's – regulations typically affect the replacement showerhead business. In other words, the number of gallons per minute, today, generally around 2.0; that's going to go lower in the future. Question is, do you have the technology to deliver the same consumer experience that you did when you had a higher water flow? So, it's – to go back to your question, it's not a distribution game. It's really an innovation game. Richard A. Dierker - Church & Dwight Co., Inc.: I agree with Matt. It's not a distribution game. We are having some early success getting the Waterpik sales team in front of some other customers that we have a larger presence at. So, we're happy about that as part of integration as well. Matthew T. Farrell - Church & Dwight Co., Inc.: Yeah. I'll give you an example of innovation. So, one of the new products is a Pet Wand. So, you know that more people have pets than children today, and that continues to grow. So, it's getting behind that particular trend. So, its translating their technology in the shower into a wand for washing your pets.

Got you, guys. That sounds awesome. Thanks so much.

Thank you. Our next question comes from Mark Astrachan of Stifel. Your line is open. Mark Stiefel Astrachan - Stifel, Nicolaus & Co., Inc.: Thanks, and morning, everybody. Wanted to understand the rationale for the new share repurchase authorization. Anything you're trying to say regarding appetite for M&A just sort of broadly? And I guess, related to that, if larger assets and, like, large assets, sort of equal size assets became available, would you consider something sort of outside the box, like an RMT, to potentially merge with those? Richard A. Dierker - Church & Dwight Co., Inc.: Yeah. I'll take the buyback one and I'll let Matt comment on the RMT-type stuff. This is very in line with our history, right. We've got a $500 million repurchase authorization. We've done that pretty much every other year. It's just in line with our – really capital allocation model; doesn't mean we're going to go spend $500 million next year on share buyback. It just gives us the flexibility and authorization. So, yeah, historical levels that you would expect is what we probably would do in the future, in concert with paying down debt; and, number one priority, also, is going after the right acquisitions. Matthew T. Farrell - Church & Dwight Co., Inc.: And to answer your second question, in my time with the company, we have looked at bigger transactions than the Waterpik transaction, which is our most recent one. And as far as other structures go, yeah, we're no strangers to visitors from the major banks coming in, proposing combinations with various companies in the past through other structures, which we'd always be open to to the extent that it is going to create shareholder value. But that's about all I could say. Mark Stiefel Astrachan - Stifel, Nicolaus & Co., Inc.: Great. And just lastly, wanted to go back to the commentary on the promo levels and the view that price volume would sort of normalize in a more traditional way going forward. I guess, how do you think about sort of the puts and takes to that? How quickly can you change the programs that you have in place, should some competitors decide to become more promotional, particularly as category volumes seem to be softening despite, obviously, what you said about the month of October? Matthew T. Farrell - Church & Dwight Co., Inc.: Yeah. As far as how you react to a competitor move to take price down, typically it's IRCs, immediately redeemable coupons, those are things you can act on pretty quickly. As far as trade deals with the retailers, usually that's going to be six months out. Richard A. Dierker - Church & Dwight Co., Inc.: Yeah. And we're not saying that we expect to see dramatic improvement in the level of promotion. We're saying that we're starting to lap some of the negative promotion from year ago, some of the couponing spends going down around new products because the trial period has passed, and our mix from Household and Personal Care is improving. So, while October's a good early read, it's also not our expectation that promotional levels go down significantly. Mark Stiefel Astrachan - Stifel, Nicolaus & Co., Inc.: Got it. Thank you.

Thank you. And this concludes the Q&A portion for today's conference. I'd like to turn the call back over to Mr. Matt Farrell for closing remarks. Matthew T. Farrell - Church & Dwight Co., Inc.: Okay. Well, thanks for joining us today and we'll see everybody in February with the 2018 outlook.

Ladies and gentlemen, thank you for your participation in today's conference. You may disconnect. Have a wonderful day.