Church & Dwight Co., Inc. (CHD) Q4 2019 Earnings Report, Transcript and Summary

Okay, gang. We’re going to get going now. Okay. Thank you all for coming today and thanks, everyone, who is dialing in from office or home. I’m going to begin with the Safe Harbor statement. I recommend everybody to read that at your leisure. Say who is with us today from management, we have our CMO, Britta Bomhard; our Head of International and Global New Products, Steve Cugine; our General Counsel, if you have any legal questions; Rick Dierker, our CFO; Rick Spann, who runs Supply Chain; and Paul Wood, who runs U.S. Sales. All right. So here’s – I’m going to give you a short story right now. So you don’t have to really pay attention to the other 150 slides. We had a terrific year. This is the second consecutive year that our company grew organic sales 4%. The U.S. posted 4% organic sales growth and 10 out of 12 of our power brands grew or held share. International posted 9.2% organic growth and continues to be a juggernaut for the company. And as we ended the year, organic growth returned to the Specialty Products business after two down years. Last time, we had an up quarter was Q4 2017. And the reason it turned positive is because the dairy market became healthy. And another encouraging sign is that domestic volumes turned positive in the fourth quarter. And finally, we had record cash from operations in 2019. So now looking ahead to 2020. We’re calling 3.5% organic growth, and that is net of exiting the low-margin gummy private label business. And consistent with our Evergreen model, we’re calling 7% to 9% EPS growth and that is top tier in CPG. Now I want to recap for a minute why Church & Dwight is a standout in the consumer space. Number one, we have an Evergreen model that our shareholders are very familiar with as our employees. Number two, we focus on cash. Number three, we have an ability to execute and that’s what drives our performance. We deliver meaningful top line and bottom line growth year-after-year. We have a very lean company with the highest sales per employee of any of our peers, and that sales per employee stat is an underappreciated metric. We are innovators with new product offerings across many categories year-after-year and we’re becoming digitally savvy. The 8% of our sales are online today and that does not include buy online, pickup in store. If we included that, it’d be much higher than 8%. But we made good choices when it comes to acquisitions. Those choices have led us to dry shampoo, gummy vitamins, women’s hair removal, water flossers and hair thinning solutions. So we believe there’s no better place to invest in CPG than Church & Dwight. So here’s our track record. Let’s go to the next slide. Here we are. So look at our last three, five and 10 years, we delivered double-digit TSR returns to our shareholders. And if you look at 2019, 8.3%, and that’s on top of a 2018 that was plus 30%. Let’s move on to the formal part of the program. So who we are, why we’re winning. Britta is going to come up and talk about them – give you an update for the master brand. And also Britta and I are going to ham and egg the consistent innovation story. Steve is going to come up and talk about international, I’ll kind of come back and tell you about animal productivity and how we run the company, and then we’re going to end with Rick on financials. All right, first, who we are. So let’s talk about our Evergreen business model. This is in green not only in the hearts of our employees, but all of our long-term shareholders as well, 3% top line, 8% bottom line. And if you say, well, how’s it going for you? And you look at the last 10 years, the average organic sales growth has been 6 – 3.6%. So where’s that 3% coming from? Well, it’s kind of 2% from the U.S., 6% international and 5% Specialty Products. We don’t always hit this in the market any one year, but that is the long-term algorithm. If you say, what are your brands? We have lots and lots of brands. Well, we have 12 power brands. And those 12 power brands account for 80% of our revenues and profits. And we have very well-balanced portfolio. A little bit more than half is – or consumer products part of the house. For those of you at home, those are just couple of balloons going off. The personal care, 49%; household, 44%; and you can see Specialty Products at 7%. Now it’s a diversified portfolio, in that, 63% is premium and 37% is value. That means we perform well in virtually any economy. And we have a lot of runway for international. So international has been a juggernaut, as I’ve said, for the last five years, still only 70% of the company. So we’ve got a long way to go there. And we do operate in the land of the giants. You can see, we have $4.4 billion in sales, all of our competitors are significantly larger than we are. We think this gives us an advantage. So we’re fast, we’re nimble. When you have only 4,700 – 4,800 employees, you can make quick decisions, you can move fast, your communication is easier, and you can adapt to change better. And we have a long history of acquisitions. We’ve added almost $3 billion in sales since 2004 over the last 15 years, and a lot of that came from acquisitions. And we have very specific acquisition criteria. We’re only going to look for a brand that has number one or number two share, high-growth, high-margin, needs to be asset-light. We need to be able to leverage our supply chain footprint and they must have a sustainable competitive advantage. And since the year 2000, so over the last 19, 20 years, we’ve acquired 11 out of our 12 power brands. In the year 2000, the only big brand we had was ARM & HAMMER. So what we say around the house is 12 brands today, 20 tomorrow. Now why are we winning? We have five reasons. One, we’re in the right categories; two, we know how to grow shares; three, we don’t have a high exposure to private label. We’re growing online and we are on trend. So let’s look at the categories. So if you look at the categories over the last four years, in general, our categories’ weighted average grow 3%. So this is the underpinning for the company’s long-term organic growth of 3%. As far as growing share, this is our report card. You don’t get this report card for many CPG companies. but every year, we tell you how we’re doing. So for our 12 major brands, we maintain our growth share. And you can see this year for the first time 10 out of 12, we’re green. And we get lots of questions generally about the laundry category. So what’s the long-term trend in laundry? So over the last three years, we’ve had 120 basis points of share in laundry. The other winner was Procter & Gamble and Henkel has struggled. Now, you know, as we go from quarter-to-quarter, you’ll have some questions on non-measured channels. Let me give you a sense for how big our non-measured channels for some of our categories. Most of these categories are going to be 70%, 80%, 90% represented on Nielsen. But if you go to the far right, you’ll see some of our more recent categories, power flossing, hair thinning and even electric – women’s electric grooming are all significantly less than 50%. So something to bear in mind going forward. We have low exposure to private label. The weighted average share of private label for our categories is only 12%. Only five of our categories have private label exposure. And as you can see from the lines on that chart, you can see it’s relatively stable and we’re growing online. Back in 2015, we were fourth quartile when it came to online sales. Today, we are first quartile. We hit our goal of 8% in 2019 and we have a goal to be over 9% in 2020, and we have lots of products – number one products on Amazon. And Amazon, of course, is the number one online retailer. Okay, on trend. So we’re all through four of our brands and while we think we’re on trend. Take BATISTE, it’s a business we acquired in 2011. So dry shampoo was a convenient solution to women between wet shampoos. This was a business with $20 million in sales in 2011. If you look at what kind of runway do you have in the U.S.? Well, in the U.S., 125 million women – there are 125 million women over the age of 18. Two-thirds of them don’t wash their hair every day and 13% of them today use dry shampoo. Now, if you look at household penetration, it’s only 7.5% in the U.S. So that’s why we’re trying to figure out, well, how big could it be in the U.S. We look at the UK. The UK is the most mature dry shampoo market, that’s where it originated. So if we compare with where the U.S. is, the U.S. is in the middle innings. And we can see by in comparison to where the UK is that the dry shampoo market will double from $225 million at retail to $450 million over time. So being the number one dry shampoo means, we have a lot of runway ahead of us. So next up is women’s electric hair removal. So we bought the number one women’s electric hair remover in FLAWLESS. So these are tools to remove – so I’ll go left to right, face, brow, leg and whole body. So women are looking for convenient ways to remove hair. And if you look at the household penetration, it’s only 2% in the U.S. and less than 2% rest of the world, so a lot of runway here for this business. Next up is water flossers. We have the number power pulse and recommended by the ADA. So what’s the story there? We can do a show of hands. Everybody knows, 80% of the people don’t floss everyday, even though they should. And consumers are discovering water flossers. Water flossers are the easiest solution to flossing. Again, look at household penetration. 22% in the U.S. not bad, but we think that could go as high as 48% if you just look at the penetration for electric toothbrushes. And then if you look at – in Europe, for example, it’s only 3% to 5%. So we’re just getting started with water flossers outside the U.S. Again, on trend, got a lot – lots of runway ahead of us. Next up is gummy vitamins. You know the story pretty well. The gummy form is more appealing than pills and capsules. And if you go back to when we bought the business, the adult gummy form was 3% of the category. Now it’s 18%. And if you look at the size of the category, it just continues to grow. It grew from 2015 to 2016, 2017 from $800 million to $1.5 billion today, lots of runway. And then finally, is hair thinning solutions. We have the number one hair fiber and the number one hair thinning supplement. We all know it’s on people’s mind. 40% of men and women have noticeable hair loss by the age of 40. So we have great solutions to that. And now I’m going to bring up Britta to talk about the master brand.

Okay. Hello, everyone. [indiscernible] So you might remember, ARM & HAMMER is by far our biggest brands. It’s more than a million – billion, sorry, dollar brand. So really important to us. And you might remember from last year, we presented our more Power to You campaign year in this iconic institution. Now, I know most of you are pretty skeptical. You’re a little bit like my boss. Is this really working? So I thought, why don’t I share a couple of results first. Since we launched the campaign in 12 months, we’ve actually added 2.6 million households who are now buying ARM & HAMMER, and that’s an increase of 3%. And this picture you’re seeing is actually, it is currently nearly seven out of 10 households buying ARM & HAMMER. And if this room is representative, my ambition is actually to have three out of four households buying ARM & HAMMER. So you might remember, there’s not many where the U.S. is as united as having three out of four people agree that this is a great choice. But what’s more important? You could now say, well, but you get them in via promotions? No. Actually, we have people spent more money on ARM & HAMMER, and you see here they’re spending 5% more. So if you think about it, what is a great sign for brand health? More people buying it and spending more. So I think that’s very clear answer that ARM & HAMMER is very healthy and growing wonderfully, right? There we go. And I think for those of you who saw it last year, you might want to note that we have ARM & HAMMER every single one of our brands and categories. And I want to show you a couple of how we communicate about ARM & HAMMER. And for those of you who have seen some of our cats, they just got cuter. So just have a look at the cats. [Commercials] That’s a really distinctive campaign and it’s working really well for us. You might not have seen this campaign, because we just recently launched our ARM & HAMMER dental campaign at the very end of last year, it’s a very hard one to break through. So I hope, A, you appreciate how different it is to a normal dental commercial you might see; and secondly, it also illustrates that this campaign works in no matter what category. So let’s look at that one. [Commercials] Challenged and check, how well the plaque removal is currently on what you use. And moving on to our next, you might know, if you’re not part of the Burning Man crowd, and I’m pretty sure most of us here in this room aren’t, then this one is what we say is a great deodorant. [Commercials] This is a broad spectrum of what we can do with the ARM & HAMMER campaign on every single of those different categories, playing to what’s important and what’s the consumer insight, but still bringing it all together and driving the overall 1 billion brands. So I think that’s pretty unique. But I’m actually here to talk about something new. Well, it’s not too much of a rear wheel as it’s standing or sitting on all your tables, but our new CLEAN & SIMPLE laundry detergent. It’s clean, it’s simple, it’s smart and it’s powerful. So what have we learned about consumers and you might have seen that in a few other areas. In food, the transparency in less is more in ingredients has already been quite established. And this trend is now moving from what people ingested to what’s on me and then to what’s around me. And this is where we have an amazing detergent, which has a no compromise, powerful, clean laundry with a simple ingredient list. So none of the others offer that. And what’s even better of it and it’s a pity that my colleague, Carlos, who heads up our R&D, is not here today. But he and his team are really revolutionizing of how we look at making innovation. One part is, there’s a very different innovation in culture. We are connecting the different teams around R&D and the different areas of expertise, a lot more risk-taking and obviously speed. And that’s what you can see here how we came up and looking at what’s happening in the food industry, it’s a very clear trend, which will come into the other areas. And that’s where our future works team actually discovered the CLEAN & SIMPLE formulation. So what’s in there, or better what’s not in there? Because that’s what consumers are asking. So it doesn’t have dyes, no added preservatives, no phosphates, no brighteners and no parabens. It sounds pretty attractive, doesn’t it? But what’s in there is six Essential Ingredients: a hard-working cleaner, active stain remover, laundry booster, baking soda, of course, water softener and fragrance. And what is more and important, it has few ingredients, but it is as powerful as our best selling product, which is ARM & HAMMER with OXICLEAN. And as we said, it has fewer ingredients not only as our own, but a typical average laundry detergent has between 15 and 30 ingredients, so we only have six. And here, less is more. But not only that, it’s also very good for the environment. So on the next iteration of laundry bottles, you will actually see this back label, which we’ll talk about our partnership with the Arbor Day Foundation, where we help planting trees for cleaner air and water. This product is also being elected as a Safer Choice, so we have that endorsement, which is very important to reassure consumers. And we’re also using the Green-e, which says it’s 100% certified renewable electricity. And, of course, we’re one of the leading partners of how to recycle, which is in a lot of our labels and also graces this label as the bottle is fully recyclable. And now you wonder how will we tell consumers about it. So let’s have… [Commercials] I hope you noticed. We’re helping women making the right choices and we have very positive feedback, because it’s such a good way to get it from a trusted brand like ARM & HAMMER. And once we drive people to store, this is what they will see in the future. We have massive executions in stores and coming soon, Dollar General. Sorry, that was too quick, can you go back? Wait, if I can do that. So what else do consumers want besides CLEAN & SIMPLE? There’s other trends, which are about sustainability and convenience. And Matt talked about online shopping, lots and lots of more people actually order online, that’s not as developed in the laundry area, because it’s difficult to ship big bottles. So we have a solution for consumers who want convenience and sustainability, because we have launched ARM & HAMMER plus OXICLEAN, our best seller as a super concentrated laundry detergent. It has three times more cleaning power, but it has 37% less plastic and uses 30% less water. So, again, fully on a sustainability trend and available to consumers who prefer shopping on e-commerce. I’ve talked a lot about ARM & HAMMER. We also have another exciting brand, OXICLEAN. And if I look around the room, except for everybody who is on my team today, you know that black clothes, dark clothes are very important. And about 42% of all wash loads get sorted into black, dark colors and we have a solution for that. So OxiClean Dark Protect, which is specifically formulated for dark and black fabrics. So as we’re now in winter season, take a note, you might want to get one of those. And with that, I hand it over to Matt, who is going to share insights on hair care.

All right. Obviously, I’m the expert on dry shampoo. So if you’re somebody with normal hair and you pick up an aerosol can of dry shampoo, that’s okay, that might make my hair dryer. So we said, “Hey, what’s going to appeal to women with normal to dry hair?” So we said, “Okay, we’re going to launch Batiste Waterless Cleansing Foam. So this is something that you rub into your hair and refreshes your hair and dries in 60 seconds, and we have four different variants we’re launching right now. And now WATERPIK. You also often hear us talk about WATERPIK water flossers. Well, WATERPIK, that business, we’re experts in water-jet technology. So that technology has been around for almost 50 years. And so now we’re coming out with a brand-new, the first-known FDA-registered showerhead. And the insight here is that, millions of Americans discuss massage with their doctors, it’s something that WATERPIK folks look into. So here it is, WATER FOR WELLNESS, this FDA-registered power pulse showerhead. And we’ve done nine clinical studies. And what those studies tell us is that, these particular showerheads soothes muscles, they increase flexibility and they promote better sleep. And here’s kind of a fun fact. The average shower is eight to 12 minutes. And what our consumers tell us is that, these benefits they start feeling after two minutes using these showerheads, really cool innovation. Okay, I talked a little bit about FLAWLESS earlier. Women are look – are focused on convenient hair removal. So new product from FLAWLESS called NU RAZOR. This is waterless, whole body hair removal anywhere, anytime. Now, floss, we’ve got a lot of interest in FLAWLESS on the part of analysts and shareholders. So let’s give a little bit of update on that. One major retailer right now, the reset has already happened from As Seen On TV through the wet shave aisle, and that’s happening in a lot of retailers. Why is that important? It’s because the traffic in the wet shave aisle is four times the traffic in As Seen On TV. So this is launching right now with one major retailer, wherein after two weeks, the POS consumption is up 7%, and that’s just one major retailer. We know what kind of wins we have for 2020 and our total distribution point is going to be up 15% in 2020. And recall, if you read it in the press release that we expect the FLAWLESS sales to be up to 15% and this is part of the underpinning for that, as well as the NU RAZOR launch, we think we’re going to be in good shape for the coming year. All right. Next up is natural toothpastes are growing 14 times the rate of the toothpaste category. So we’re introducing ARM & HAMMER Essentials Toothpaste, two different variants, and we’ve gotten really, really good reception from retailers, particularly the drug class trait. Next up, men, this is TROJAN condoms, wait for it. Men wants to ensure their partner is satisfied. So we got a new product called G SPOT from TROJAN and we have an ad for you. Take a look. [Commercials] We always have a lot of fun with that TROJAN brand. By the way, whenever we have a meeting for new products, it’s the most – for TROJAN, it’s the most well-attended meeting in the company, if you look people sitting on the window sills. All right. VMS, so vitamin. We have lots of line extensions coming in 2020, and we are addressing a lot more need states. And we’ve really picked up pace of innovation for vitamins. If you look at 2017 and 2018, we kind of averaged six new items a year. We had 22 new items in 2019. We’ve got 17 more coming in 2020. Too many to run through today. And we have more innovation coming in 2020 in other categories, so stay tuned. You’ll hear about those later in the year. And next up is Steve to tell you our fabulous international story. Come on up, Steve.

Thank you, Matt.

All right.

Excellent. So I’m pleased to be here to share with you the fabulous international growth story. So, as Matt already talked about, the Evergreen target for international is 6% per year. In 2014, we delivered $535 million in sales. We finished 2019 at $756 million in sales. The important note here is that, we firmly believe that we’ve reached global scale. There isn’t a market that we’re not in today and where we can’t reach with ourselves through our existing subsidiary markets or through our GMG business. I think even more impressive than the size of the business is that we tripled the organic growth rate from roughly 3% to about 9%. So significant, the larger business tripling the growth rate. This is an important chart that we show every year, but there’s some new information here. Our Global Markets Group is now 33% of the total business. For the first time, it is the largest segment within the international business, followed by Canada, Europe, three countries, Mexico, and Australia. We have grown historically well above our Evergreen target of 6%. In 2019, we hit 9.2%, an outstanding year, and we leave the year with momentum delivering 10.6%. So we feel the wind at our back. Let’s break that down in a little more detail. Our subsidiary markets delivered 5.2% and our GMG business, a whopping 19.2%. Our subsidiaries are largely in developed markets. So 5.2% in developed markets is really outstanding performance. Our brands are healthy, whether they be in emerging markets or GMG or in our subsidiary markets. So we’re excited about the performance of both of these businesses. The GMG business is certainly an engine of growth for the division and for the company. Since 2014, when we initiated the start of our new growth strategy for international, this business has delivered 19% CAGR throughout its lifecycle. And again, 2019, we did 19.2%, lot of 19s in there. And it’s driven by our core brands. So we’re driving ARM & HAMMER, BATISTE, WATERPIK, VMS, OXICLEAN, STERIMAR, FEMFRESH and now FLAWLESS. We continue to invest in building capabilities around the world. As you know, year in year out, I’ve been up here talking about the investments that we’ve made in Southeast Asia and then talk about China. We continue to make incremental investments in China, Southeast Asia, Germany, fast-growing market for us in Europe and in Central America. We’ve taken the opportunity to localize the content that we give to consumers, because these brands need to show up differently market-by-markets, so they’re relevant. We’re investing, particularly last year and this year in technology, because Matt talked about speed of decision-making we feel is a differentiator for the company. That is also true in these very dynamic international markets. We invest a lot in our GMG distributor training and regulatory affairs. We want to make sure that our partners in particular markets know as much as we do. We provide them innovation, case studies. That share case studies. So they are an extension of our family, and we think that is unique to Church & Dwight. So we’re absolutely committed to 6% organic growth moving forward. We believe we have a runway for our existing brands. We have demonstrated our ability to grow acquired brands, WATERPIK, now FLAWLESS. Our GMG group will continue to post double-digit growth and we made investments in fast-growing markets that we think we can leverage. Because we feel that we have a scaled global business for the first time, we’re going to make a new commitment. And that commitment is not only organic growth, but we’re going to continue to expand operating margin year in and year out. We’re going to take a big step change from 2019 to 2020. And part of our Evergreen target is to deliver another 50 bps of growth – of operating margin expansion. And that is on top of any incremental investments that we’re going to make to ensure that we have the capabilities around the world. So in summary, one, we have the right strategies for growth. We’ve demonstrated that, we know that. Two, we have brands that consumers love around the world. Three, we built a management team that is outstanding and several of them are around the world are here today. So to them, I say thank you. And we feel that we’re just starting. But there is a lot of runway in international markets for Church & Dwight’s products. Dropped the mic.

That was another balloon for you at home.

I see.

Wow, that was perfect punctuation mark. Okay, animal punctuation. So back to the algorithm – 3% algorithm, 2% U.S., 6% international and 5% for Specialty Products. Where is the 5% going to come from? Well, we have a bulk chemicals business, which is bulk sodium bicarbonate and then animal productivity, 6%. How has that been working out for you? Not very well. Well, let’s talk about why is that. So this one goes – flow on this. When you look at the top of the chart, that’s Specialty Products Division organic sales growth since 2011. So what do you notice? We’re up in 2011, down in 2012 and 2013. Up in 2014, 22.6%, down in 2015 and 2016, up in 2017, down 2018 and 2019, back up in 2020. And then below it, you say, “Okay, what was going on with milk prices.” And you can see, as milk prices recover, that’s when you see a green for the growth at a Specialty Products business. So we knew that a few years ago, 2015, we said, “Hey, we’ve got to start moving into other species.” And in 2015, 99% of the animal productivity business was dairy. And today, that’s not true. It was 1% non-dairy. Today, it’s 27% non-dairy. So we think that we’re going to be able to flatten this out over time. Now, why do we go into other species? Well, because of demand for protein and simply population growth. We have 7.7 people – 7.7 billion people today going to 9.8 billion by the middle of the century. And antibiotics are out of favor. And the consumers are telling retailers and farmers, “Hey, no antibiotics, no hormones, no chemicals.” And if you look at the stats, you see that there’s a 40% decrease in the use of animal probiotics since 2015. So that bodes well for us, because we bought two businesses. One was called VI-COR, the other was Agro BioSciences. They get us into prebiotics and custom probiotics. We were in nutritional supplements for dairy. We then got into prebiotics and probiotics. So now we have a nice portfolio for not only dairy, but cows, swine and poultry. So as I said before, the non-dairy business is 27% of animal productivity. Today, we think that’s going to have big growth in 2020. And we get lots of questions about milk. Hey, people raise their hands. Isn’t milk consumption in the United States on decline? Absolutely. So if you look at this chart here, the per capita consumption of 2015 was 174 pounds annually. More recently, it’s 164 pounds. But if you look what’s going on with cheese, big offset to that. It takes 10 pounds of milk to make one pound cheese. And then when you comes to the Church & Dwight Conferences, you always walk away learning something you didn’t know. So when you think about milk, also think cheese. Cheese is a big offset for the decline in milk production. So the dairy industry does have growth ahead of it. So we feel good long-term about our algorithm of 5%. We have the trusted brand. The ARM & HAMMER brand goes across prebiotics, probiotics, all of our products. We are aligned with the consumer trend, we’re now into multiple species, and all the growth is ahead of us, particularly internationally. Right now, I want to talk about how we run the company. There’s five operating principles. One, we leverage brands. We have 12 brands that account for 80% of our revenues and profits. These are brands that consumers love. Second thing, we’ve long been a friend of the environment. And I’m going to go into it a little deeper in a moment, and we leverage people. We have highly productive people in an environment, where people do matter. And finally, we’re asset-light. We leverage our assets. Now if you do those four things well, you’re going to have really good returns. But because one of our competencies is identifying, acquiring and integrating businesses, we turn our good returns into great returns. As I said, here are the brands. We have brands consumers love. As far as the friend of the environment goes, over 100 years ago, we started using recycled paperboard in our cartons. In the 1970s, we were the first and really only corporate sponsor for the first Earth Day. Actually 20 years later, in 1990, we’re still the only corporate sponsor of Earth Day, and we were the first to take phosphates out of laundry detergent. More recently, we’ve been more focused on green global electricity demand supply by renewable sources by wind and power. And we’ve been planting lots of trees with Arbor Day. And we all remember from fifth grade science, that trees take carbon dioxide out of the atmosphere and they turn into oxygen. All right. What are some of our goals. We want to reduce water and wastewater by 25% by 2022. We want to recycle more. We want it 75% by the end of this year. And finally, we want to be carbon-neutral. So 100% carbon-neutral by 2025, and that’s through having green electricity and also planting millions and millions of trees. So that’s our goal today. We’re at 60% carbon-neutral. What that means is, we offset 60% of the CO2 that we put into the atmosphere. Okay. And we’ve been getting some recognition for that as well. We’ve regularly show up on list of Barron’s, Forbes, the EPA list of companies that are faithful to the environment. All right. Now I’d just also mention highly productive people in a place where people matter. This is the statistic that is interesting. This is revenue per employee. So you can see, we’re on the far right. We’re over 900,000 right now on our way to $1 million per employee. And you can see where our peers are. We think this is very representative of how lean the company is. And the thing that most people can’t tell about any company we invest in is, what is the culture. And the culture in our company is as follows. And we talk about this both inside and outside the company. It’s blue collar, high aptitude, underdogs. We’re digitally savvy, we embrace diversity and we like taking risks. And because we – that is the environment within our company. And you can’t just snap your fingers, flip a light switch and create that. I didn’t create that. That’s been there for many, many years. It’s the greatest asset of the company. And I think that’s one of the reasons why we’re so successful year-after-year-after-year. Now, we have tremendous financial literacy within the company. Most companies will focus on revenue and EPS. We also focus on gross margin. And that’s 25% of everyone’s annual bonus. And when it’s in your bonus, you ask questions like, “Hey, what’s gross margin? And how can we get it, because it affects me.” And it’s – so how we get it is, we have a Good to Great program, that’s our continuous improvement program. We’re continually optimizing our plants, new products are launched with higher gross margins than the products they replace. And when we buy businesses, we make them better. We expand the gross margins of businesses that we acquire. We have very simple compensation structure. You can see on the left side of the pie, net revenue and EPS. On the right side, we focus on gross margin, which is uncommon, as a metric within incentive compensation program. And cash from operations, we’ve long described ourselves as free cash flow junkies and we still are. All right. I’m going bring up Rick to talk about financials now.

All right. Thanks, Matt. Good afternoon. So we’re going to go through three things. We’re going to go through the 2019 results for the quarter, for the full-year and then go through the outlook. And before we do that, we’ll just start with Evergreen model, we – because we always do. 3% top line growth and 8% EPS growth. And then the drill down for that is 2% organic net sales growth, 25 basis points of gross margin expansion, flat on marketing as a percent, higher dollars typically with revenue growth. We leverage SG&A and we get to 50 basis points of operating margin expansion and then 8% EPS growth. So that’s the backdrop. So how did we do? In Q4, you heard from Matt already, you saw in the release this morning, 4.4% organic revenue growth. Domestic was 3.5%, international was 10.5% and SPD for the first time in eight quarters with positive organic growth, which is great. Adjusted gross margin was 170 basis points up. I’ll walk through the detail of that in a minute. Marketing was up 240 basis points. So that’s the highest spend rate we’ve had in 2019. Just $37 million more year-over-year. It’s a very significant increase. SG&A was up largely because of the acquisition. Our TSA agreement as well as the amortization with that deal. Adjusted EPS was $0.55 versus the $0.54 outlook. So, on a revenue basis, the quarter was very strong, 4.4% and it was very strong even versus a strong year ago, 4.3%. So on a stacked basis, 8.7%. If you run your eyes across the page, 4.5% in the first quarter, 4.9% in the second, 3.5%, 4.4% and then 4.4% for the year. So for the full-year, like I said, 4.4% domestic has a 4% in front of it, that’s fantastic. As Britta said, 10 of 12 power brands grew share during the year. Internationally, just heard from Steve, 9% is a great number and then SPD was minus 3%. Gross margin was up 110 basis points. I’ll go through the detail gross margin in other slide. Marketing was up 10 basis points, that’s greater than our outlook. And then adjusted SG&A was also up for the same reasons I talked about in the quarter. EPS was up 9% to $2.47 and cash from operations was up to $865 million, up 16% year-over-year, just a fantastic result, higher cash earnings and improved working capital, which leads to free cash flow conversion of 128%, which is industry-leading, and we have a slide on that. So gross margin, just to walk you through the puts and takes. In Q4, plus 60 basis points, so that’s really the – we continue to get the benefit from price, as well as higher volumes. Inflation is a 50 basis point drag for the quarter, that has moderated a little bit since earlier in the year. Productivity programs are up 110 basis points. It’s been pretty consistent for the whole year. And then acquisition, so there’s two parts of the acquisition, 50 basis points from owning FLAWLESS, 10 basis points is because they have a slightly higher gross margin in the company. The other 40 basis points is acquisition accounting. Remember we took that the revenue minus COGS, minus marketing, marketing profit, that’s one line in net sales from the period of May through October. And so when there is no offset, it’s a pure margin. So gross margin expansion on a reported basis is 170 basis point. And then on a comparable basis, it would be 130 basis points. So that’s the quarter. And for the full-year, many of the same things apply and comparable gross margin expansion is plus 70 basis points. So just a fantastic year. We raised gross margin, I think, three times throughout the year. So on to 2020. So 6.5% reported sales growth, that’s larger than 3.5% for organic plus the FLAWLESS impact. Domestic is a 3%, international 7% and SPD is 3%, that’s our outlook for this year for the division. Gross margin is up 10 basis points. If you exclude or if you make 2019 comparable with the excluding the FLAWLESS accounting, we’re up 50 basis points apples-to-apples. Marketing is up 10 basis points. Again, we’re investing incrementally behind these brands and behind these big launches you see on the table today, as well as FLAWLESS. SG&A, we’re going to leverage by 10 basis points and operating margin on a reported basis is up 10 basis points, but apples-to-apples, up 50 basis points. The effective tax rate is 21%. The effective tax rate for 2018 was 21%, for 2019, it was slightly below 21% and for 2020, we think it’s 21%. What does that mean? It means all of our EPS growth is largely the operating income growth. EPS range from 7% to 9%, mid-point is 8% and then cash from ops is $890 million. So, as Matt talked about this year as a record, we would have a new record for next year. Okay. So here are some details on the outlook. We start with our 8% Evergreen model, 8% plus 2% accretion for FLAWLESS. Tariffs is a minus 1% drag. We’re getting a hit with tariffs 4B hitting FLAWLESS and our showerhead business to the tune of a drag of about 1% on EPS. Marketing investments for the new launch, that’s the 10 basis points you guys saw on the earlier page. And so that’s how we get to the mid-point of 7% to 9% and 8%. We focused on gross margin for a long, long time, it’s a hallmark of this company. Gross margin, as Matt said, is in everyone’s bonus. Gross margin drives cash flow, cash flow drives valuation. So we had an inflection point of 44.4% in 2018, we recovered nicely in 2019 and we’re going to continue to improve in 2020. So in 2020, here are the details. Plus 80 basis points as we continue to get some benefits carryover from price and as well as higher volume. Inflation continues to be a drag of 150 basis point, that’s largely pretty much across the Board from a commodity perspective. I would say, commodities were flat to up, slightly up. Some examples for you, ethylene is up mid single digits, clay is up high single digits, we have PCR, resin as an example, which is high, up significantly. HDPE resin is flat. So we have some headwinds on inflation, tariffs are in that – is in that number as well. Productivity programs are up 120 basis points, just getting very, very consistent with that. We’ve done some great work on the supply chain. And then the acquisition kind of making that apples-to-apples again shows you how gross margin on a reported basis is plus 10 basis points, but plus 50 basis points when you say it’s comparable. Matt showed this slide earlier, organic sales growth, 10-year trend, 3.5%, which is fantastic. In 2020, our expectations are no different. 2019 was the first time since 2015 that we had a 3.5% outlook. And so we’re proud to say that we’re doing that, again, despite the pullback on private label and getting out of private label vitamins and a little bit of OXICLEAN laundry high promotion. Okay. So just as important as volume, I mean, organic revenue growth is how we get there, right? So for the last 10 years, organic revenue growth was 3.5%, our volume growth on average is around 4%. You can see on the graph that we kind of inflected in 2019 and volume went down, right, and price mix went up. And our outlook for 2020, 3.5% organic revenue growth, about 50-50 is going to come from volume versus price mix. Then marketing spend again is up 10 basis points. We’re one of the top 20 advertisers within CPG. So we just have a significant amount of firepower here that we put to use for our brands. And then SG&A, on a reported basis, it looks like it’s gone up for the last few years. But when you strip out the acquisition, amortization, it’s actually very flattish. So we’re just really proud of this and 2020 is going to be no different. We expect to improve and leverage SG&A in 2020. We’ve had consistent strong adjusted EPS growth, so high single-digit, double digits with tax reform and again, high single-digit in 2019 and 2020. So our range is 7% to 9%, mid-point is 8%, the peer average is about 1% to 2%. This is my favorite Slide, best-in-class free cash flow conversion. We spend a lot of time on this, because we believe cash flow drives value and Church & Dwight in 2018 was 124% free cash flow conversion, that’s free cash flow divided by net income, the peer average was 85%, a lot of companies target 90%. Here is a new slide for you. Here’s our history over time. 125% in 2015, 130% in 2016, 123% in 2017, 124% in 2018 and 128% is what we just finished out in 2019. Our outlook for 2020 is 119%. So we just believe this is what sets us apart from our peer group to play in the 80s, 90s or close to 100. And how do we do that? Well, we do it a couple of different ways. One is really strong cash earnings. The second one is our improvement in working capital, cash conversion cycle. We’ve gone from 52 days in 2009 all the way down to 18 days in 2020. If you strip out the last two acquisitions we’ve done, this shows you how good we’re doing it at really moving the needle in working capital, trying to get down to zero. That’s still a goal. So we’ve gone – if you strip those two out, we’re at seven days today. Our baseline changes, because we’ve added these two new businesses that have a Chinese supply chain. So now we start off at 18 and we’ll continue to work through that number. But you’re going to see that we had great working capital improvement in 2019 and we expect no different in 2020. And we have a very strong balance sheet. We ended the year, less than 2 times levered, 1.9 times, we expect by the end of 2020 to be about 1.5 times. We have significant financial capacity, right? When you’re 1.5 times levered by the end of the year, you have the ability to do deals. Our prioritized uses of free cash flow has been the same for many years. Number one is TSR-accretive M&A. Number two is TSR-accretive M&A, but debt reduction is number two, and that’s where we’re going to use the cash for this year. Number three is NPD, number four is CapEx for organic growth, and then number five is dividends or buybacks. We’re not a capital-intensive company. We’re bumping up about $90 million next year and that’s still less than 2% of sales. We have a great dividend increase in 2020, it’s 5.5%. This is 119 years consecutively paying a dividend And then here is a new slide for you. Over the last three years, our average in the peer group for dividend annual growth rate was 8% and that’s the top tier of all of our peer set. And so with that, I’ll invite the management team up and we’ll answer any questions.

Well, all the hands are up, hands not even up here yet. Okay, Nik.

I finally beat someone taller than me. So I guess, two questions. I remember, I don’t know, maybe it was 10 years ago, seven years ago, compaction was a pretty big deal for Church & Dwight from a margin perspective. So I was hoping to get some perspective from you on the new product launch and what that means for shipping costs and just packaging costs and how you think about that? And then the second is, when it comes to FLAWLESS, I know there’s kind of conflict right between the As Seen on TV and the merchandising aspect. And so just thinking longer-term, is there a plan to like completely migrate this to a in-store and digital and online product where you don’t have that comp, because you guys have really execution, merchandising, display activity. So just – was hoping to get some clarity on the long-term plan there?

Well, I’ll take that one first. Yes, I mean the plan for FLAWLESS system migrated from As Seen on TV brand and completely into the wet shave aisle and completely vacate that part of the store. Because in a lot of stores, it’s not in a very attractive place. So if you look at one major retailers by automotive. But when we bought it, we said no, this is a brand that’s going to have legs at long-term and it belongs to wet shave aisle. And one major retailer is getting behind it right now. So over time, that’s what you’re going to see happening. It’s happening right now in 2020. Your other question was about compaction. So when compaction happen, there is one major retailer that drove that many, many years ago, that’s not on the horizon right now for the industry. I mean, right now, one would argue that the biggest form of compaction is pods. So that pods at some point – if pods at some point plateaus, I think, it’s possible then we would go back to, it may be a major compaction for liquid laundry detergent, but that is clear enough on horizon right now. Were you asking the question about that new product…

Yes.

…that we have online. I’ll let Britta take a swing at that one and what the insight was around that.

So I think you’re talking about the product I showed, that’s an e-commerce play, right? So it’s not in mass distribution, because I think I’ve said that, and you’ve seen our ambition to grow on the online class of trade, because that’s where all the consumers go and a lot of shopping happens. And currently, there is not a good loan resolution there. And that’s why we’ve developed this specific product for that class of trade, and we’re seeing phenomenal results.

Great. Thank you.

Okay. Bill?

Yes. Sticking on the laundry side, maybe first on CLEAN & SIMPLE. Can you give us a little more color. Is this incremental shelf space? How cannibalistic do you expect it to be? And then also, I mean – and maybe it’s in the plans, there is not a pod form coming out, I guess on the initial launch. Well, it seems that Tide is coming at you with the Tide Simply version of pods. So maybe the thought behind that of is, are you seeing pods in your category start to level out where it’s not as important? Do you not see this as big of a threat? So any more color both around what the shelf space looks like and how you expect this to interact with the core brand and then also just from the pod standpoint, the competitive launch?

Yes. So CLEAN – I’ll let Paul comment at some point, but CLEAN & SIMPLE, whenever you launch a new product in liquid laundry under the ARM & HAMMER brand, you’re going to have some cannibalization. But this one there will be some cannibalization, but net, it will be incremental to us and we think as well to the category. As far as, are we going to move into pods for CLEAN & SIMPLE, we wouldn’t disclose what our plans might be with respect to the CLEAN & SIMPLE as a platform. Could it happen? Absolutely. Bill, I’ll let Paul comment as well some retailer reception to CLEAN & SIMPLE.

Yes. I’ll be a little guarded just in the message, more for competitive reasons than I’m to avoid your question. But what I would tell you is, with every launch, we are going to have that cannibalization where you have the incrementality, absolutely. This one is a little different though, the story on this one of everything Britta showed in the marketing and the timing, what the consumers are looking for in the health and wellness front, just the other trends going on, makes us a very interesting story as you’re pitching it to get incremental space, different space, display space, other things in the store. I would tell you, it’s happening as we speak right now, the resets, so I don’t want to give away what others are doing. But I’d encourage you the next couple of weeks to get out to a retail, loved to have retail with you and show you firsthand. This one is a little different. I would also tell you on the insights front, we believe this isn’t just looking at the consumer within our set today buying another yellow bottle. This is going to get some attention on shelf from maybe you’re not buying it today. This is going to bring you in, the CLEAN & SIMPLE, the marketing grid has got behind it. You just saw fraction of it today. In the shopper marketing we’re doing with retailer is going to be a little special. So I’m excited, I’m going to temper my vocabulary here, but love to talk to you more on this one.

Okay. Rupesh?

So I guess, just my first question with FLAWLESS, just curious what drove the shortfall in Q4. And as you look to this year, just want to get a sense, it seems like distribution is driving all the growth, just wanted to get a sense of velocity, the contributor. And then, also do you expect any inventory adjustments?

Yes. So in the fourth quarter, we were down year-over-year. So business was $180 million in 2018, it was $186 million in 2019. We bought the business, we thought it would be higher by the end of the year. We know why – a couple of things we disclosed. We had an issue with one large retailer, Bed Bath & Beyond and we also delayed a launch into 2020. Now as far as the consumption goes, consumption was down significantly in the fourth quarter. We expect that to continue, but to start to recover in the first quarter. And by the time we get to the second quarter, we’re in the new launch and also the new distribution, we expect consumption in measured channels, because measured channels in this – for this category is less than 50%. But you’ll start to see in measured channels a year-over-year increase. And we think it’s going to build from Q2, Q3 and Q4. So I think a lot of the growth is ahead of us starting in Q2 as a result of the NU RAZOR.

Yes. And I would just add to that. From an organic growth perspective, right, we’re calling 50 basis points for tailwinds from FLAWLESS. In Q1, we think it will be flat to slightly down, and – but pretty much 90 basis points to 100 basis points of tailwind in the second-half and that’s how you get to the 50 basis points for the full-year for organic.

Okay, great. And then…

Do you have another one, Rupesh?

Yes. One quick one. So just in your guidance, what are you assuming for the promotional environment?

Okay. So on the promotional environment, we’ve talked about every quarter, and as many of you know the promotional environment generally talking about the household side of the house and not a personal care. And when we say household, it’s about laundry and we’re talking about litter. I’ll take litter first. The litter category is pretty tame right now as far as the promotional environment. So if you look at sequentially, it was pretty much flattish and even year-over-year, there is no story there. So we think it’s steady as you go in litter. I think you got to keep in mind is that, in the litter category these hard fought price increases, it’s unlikely that the suppliers are going to want to deal that, that the hard one increased back to the consumers. So I wouldn’t expect that to change in 2020. Laundry, same story. I mean, Q4 was our lowest quarter of the year, 25% sold on deal. And the category was 35%. And liquid laundry, little bit higher, it was 37% sold on deal. But two big suppliers would be Church & Dwight and Henkel both down sequentially from Q2, -- pardon me, Q3 to Q4. And Procter was up, it kind of filled the void in the promotional space. We expect that to continue in 2020. Okay. Your next. Yes.

Okay. Thank you. Just on the – sorry, 3.5% organic growth, like and you’re exiting that you said is now out of the vitamin. So the vitamin business in private label, is that going to be – I’m assuming that growth was more dilutive to your growth or – it was actually growing faster. So that 3.5% on a more continuing space is like a 4%, or is not – is small relative to make – to move the needle?

Yes. I’ll take a swing at this and then Rick can jump in. Yes. So we call it 3.5% for 2020. Our run rate in the second-half of 2019 as a company is 4%. We’ve said, hey, that’s going to accelerate by 50 basis points, because of FLAWLESS from 4% to 4.5%. So we have 100 basis points go in other way for two reasons. One, exiting private label vitamins and number two, we’re continuing to pull back on OXICLEAN promotions. Now with that 100 basis points, the lion’s share of that is the vitamin business. We have stepped up our innovation over the last couple of years in vitamins. If you saw the Slide that we had earlier, you’ll see – if you went back to 2016 and 2017, we had like six new launches a year, 2018 – from 2019, we had 22 new launches and next we’re going to have 17 new launches. So – but this is the right time to exit our private label, it came into the company with the acquisition and it’s lower margin and we think it’s fine.

Yes. I would just add, that business was flattish, the private label business for vitamins, it wasn’t declining or anything like that. We just felt that, that wasn’t the right strategic choice for the company. So we decided to proactively get out of it.

And that is I think – that is accretive to margins, If I assuming right on exiting, to end that business or that’s not?

It’s – when you think about the scale and the size of that business, right, where – if we give you a sense of it, if we’re saying 100 basis points is going down for those two things, maybe two-thirds of that is the private label and one-third of that is the laundry stuff. So, any impact on margin is pretty minimal.

And following up on Bill’s question, if I may, on the CLEAN & SIMPLE, is that a margin accretive innovation or in the meantime you might have – like, what is the price point that you’re positioning at this point?

Hey, Paul, do you want to take a swing at the price points?

Yes. So the price points, this is going to be right in line with our existing lineup. So just as Britta was talking about the efficacy and it being equal, that’s how it will show up for shelf as well. And that’s a really big message that our retailers really resonated with them that it was going to be line-priced.

And then from a margin basis, we wouldn’t really say much, but it’s at brand average. Year one we have, of course, cost to drive volume for incrementality.

Okay. Joe?

Thanks. Just wanted to get a bit more color on the increase in marketing spend, obviously a big in the fourth quarter, and it sounds like you’re looking for about a 1 point of headwind on EPS growth in 2020. What’s driving the increase? Is it bigger new launches and what particular brands is it going behind and are you shifting dollars away from promo into marketing?

Is the question with respect to fourth quarter?

Fourth quarter and 2020 as well?

Okay. Well, fourth quarter, we could see what was coming and we are doing well on top line and gross margin. So we have a chance to reinvest both in marketing and in SG&A. We call that all places we invested in SG&A. So obviously, we’re able to throw a lot of money behind on the brands. That – and that always helps you going into the new year. As your question about 2020, is the 10 basis points uptick?

Yes. More so that the 1 point of EPS headwind that you’re expecting to from launches?

The 10 basis points does represent the 1% EPS drag and it’s really for the new launches, right. The one on the table, we’ll really get behind that in a big way. The NU RAZOR for FLAWLESS get behind that in a big way. And then maybe, Britta, if you want to talk about.

Yes. So we have a couple of exciting product, as you saw. So, for example, BATISTE foam, we are category leader and as you’ve seen, there is a huge household penetration opportunity, it’s also a new hair type. So we’re going to spend some money on educating consumers about a new way, particularly women with curly and dry hair.

And maybe one more I had, I just thought of is, we showed you household penetration for WATERPIK in the U.S. versus internationally, and we found that it’s very responsive to advertising. And so now we’re going to start rolling that out in Europe and Canada and Australia. So that marketing investment is happening globally as well.

And just one for Steve. The increase in operating margin for international this year is pretty big. Is that coming from sales leverage among other things or cost savings programs? What’s driving that?

Yes. So I think there’s a couple of things. We had some expense in the year that we’re not going to recover. We feel like we’ve made investments on top of that, that we’re not going to repeat again in next year. I would say, that’s a large part of that and there is some mix as well.

Okay. Thanks.

Okay. Steve?

Okay. I do have a question for Steve. But something Rick said earlier prompted another question. Why would FLAWLESS have any impact on organic regardless of what it does in the first quarter, given that you didn’t owner it a year ago?

It doesn’t. I was trying to give you a sense that on a reported basis in Q1, that it could be flat to down. The organic impact is 50 basis points for the full-year. All of that’s in the second-half, around 100 basis points.

Okay, perfect. And then internationally, maybe you could get a lot going on, but maybe you could rank order, the growth initiatives you have on top three, whether you think about it by brand, by geography or by category? And then as you think forward with the commitments or margin expansion as an evergreen, does that inhibit your ability to kind of press on growth as you have been or should we expect some deceleration back down toward that Evergreen’s six-ish level?

No, we feel really confident, I mean we see the business accelerating as you saw in 2019, and we see that continuing into 2020, again with less requirement for investments. Because we think we have the right kind of staffing level in each one of the regions, China was a big investment over the last couple of years, as we’ve built our own team in China plus we spent money on slotting, getting product into that market. So we think all of that, whether it would be Latin America, which has been growing very nicely for us and in Asia-Pac, whether it would be China or Southeast Asia, we’ve made a lot of investments in the past. And now we think we can reap the benefits of continued strong organic growth without those investments repeating. That’s just – that’s why we feel, so confident that we can continue to deliver on the operating margin, because we’re going to get leverage in the P&L. So we’re going to get that on marketing and we’re going to get that on SG&A, for sure.

It is the growth investment skewed anywhere, I mean are you more excited about emerging markets about...

You know it’s a funny thing, and [indiscernible] is here. He runs our GMG business and he would say this year, we had strong growth in EMEA and in Latin America. Latin America is smaller for us, but fast growing. We made those investments in China, we saw very strong China growth in 2019 and we expect strong growth in Southeast Asia as well. Asia, in particular, we see is real growth engine long-term for the company, because we’re just still young and small, but growing fast.

Okay. Swing to this side of the table, Kevin?

All right. Kevin Grundy, Jefferies. I had a question on international as well. So it works out. So connecting the dots just to sort of pick up where you left off there, Steve, given that why the implied deceleration in the outlook for international and I don’t want to diminish 7%, which is outstanding. But you guys haven’t done a 7% in the past five years in the region and now you have a presence in China. So I’m just trying to to connect the dots with that. And then more broadly, maybe, Matt, you can chime in the role on M&A and how you potentially see that longer- and growing your international business. And lastly, from a capital planning perspective, when do certain markets you potentially consider moving them from the export model to the subsidiary model? What’s sort of like a tipping point? How do you think about that and implications from an income statement and from balance sheet perspective? Thanks.

Okay. I’ll try to remember all that. Let’s start off with the current year. So, we have an algorithm of 6% annually. So we always go back to that, can we sustain 6% year-after-year-after-year. And if you look at what Steve has been doing in international is hitting out of the park. And so, now we got a big plan for this year, you might say you’re sad because it’s not 9%, but we’re not a company that’s going to get way out over our skis. So we think we got a strong plan for 2020. We don’t view that as a deceleration, we look at that as we’re consistently now delivering above our algorithm. You asked the question about international. So we have done some M&A internationally over the past few years. Viviscal was a – is an international brand. Our WATERPIK had some international as well. We bought the ANUSOL brand from J&J. And so we’re putting a lot of effort behind those and we get a lot of traction. So Steve and his gang have done a great job, taking those two to international markets. So we’re continually scanning for things that we can acquire, and we can put into our infrastructure and leverage it. But we’re pretty fussy about what we’re going to buy. And as you know, you had a third one though, the third question.

Yes, when does it tip to go direct?

Yes. Okay, I’ll go – Steve can say what we’ve done in Germany.

Yes. So we look at markets where we can go direct and it really is all about SG&A leverage. So how concentrated is the retail environment. And in Germany, it’s quite concentrated. So, we were able to go direct in Germany and manage that P&L, so we get returns fast. My two buddies down here, they’re pretty disciplined about spending and returns, as you can imagine. So you really need like a 20 to 1 relationship in terms of SG&A investment to sales growth. And so where the markets are young and highly fragmented from a retail environment, it takes a lot more SG&A to make that happen. So we know the underlying economic model for us, what we need to have to shift from an export market to a subsidiary market. And we’ll make those calls as we see fit, but that is not required for us to hit our evergreen target.

Okay. All right. Same table, Jason.

Good afternoon, and thank you. Two very different topics for questions. First, sticking on international, but with a supply chain angle. Can you update us on the status of tariffs on your supply chain and also whether or not we should be considering any risk related to the coronavirus in terms of supply and manufacturing of – whether it’d be the WATERPIK or I’m not sure where FLAWLESS is manufactured whether we should be cognizant of that as well? Second is on private label. Could you size of 100 bps drag, how much of it is from the private label exit, any reason to think that may actually suck some capacity out of the industry and help your branded side? And is there also maybe on the other side of that, risk presumably a good time to exit would have been five years ago when you’re spending a lot of money to add capacity, I imagine you chose not to, because of, there was a risk tethered to it. If assuming that’s the case then why is that there no longer that risk?

I’ll start with China. So we’re well aware of what’s going on in China, right now with the virus. So we have checked with our suppliers of both of finished products and also business like FLAWLESS and SPINBRUSH and WATERPIK. And right now, it looks like because of the extension of the Chinese New Year, there is going to be a one, maybe two-week delay in startup of those manufacturing sites. But because of our safety stock what’s on the water and also, you can overcome some of delay like that with air freight, that we don’t see a risk right now with what we know right now to quarter call that’s in the – it’s in the release. Good on that one?

Yes. And then on tariffs I would I try to talk about in my prepared remarks, a little bit. But that 1% drag on EPS is tariffs that’s really the four B list that went into effect on December 15, and we’re getting hit on showerheads and FLAWLESS. So you can do the math on what about 1% EPS drag is, but it’s a couple of cents. And then your other question on private label vitamins of 100 basis points decline in organic growth, I had said about 60% is piece of the private-label vitamin beginning to exit, right? It’s a two-year process. So 50 bps of the 100 bps is from private-label vitamins. And I don’t know, Rick, if you want to say anything else about the supply chain in China or are you good?

Yes. Matt pretty much covered it. We’re working very closely with our suppliers. And what we know so far is the one to two-week delay that Matt referenced on starting up after Chinese New Year. We have ample safety stock don’t anticipate a material impact to Q1, but it’s something we’ll continue to monitor on a regular basis.

Okay. All right. Okay. You’ve been waving your hand for a while.

Thanks, Matt. Wanted to talk about two different categories and just state of competition in laundry and cat litter, and then also your expectations for fiscal ‘20 between volume versus price mix?

I couldn’t hear the very first part of it.

Laundry and cat litter, the state of competition.

Oh, the state of competition in the laundry and litter category? Okay. Well, I mean you saw the chart with respect to shares in laundry. We had a great year in laundry. ARM & HAMMER was up. XTRA, for the first time in a longtime held share up a little bit. And OXICLEAN, we lost some share, but that was as not as expected because we pulled back on promotions. You also saw from the chart the dynamics over the last three years, but who is winning and who is struggling. We think we have an unfair competitive advantage in the laundry detergent, because we have a value brand, that’s advertised, which is ARM & HAMMER. And ARM & HAMMER is $1 billion brand if you go across all of our categories. And actually we’ve done a wonderful job in positioning that product against Sun over the last couple of years and we continue to win distribution. So we’ve got a long-term plan and we aim to be the number two supplier of laundry detergent at some point. In the litter category, litter is a function of innovation and we have been the innovator in that category for many, many years. And we think that over time that is going to bode well for us as far as growing share in the future. I commented earlier about the promotional environment, it is pretty much – pretty tepid, I would say, in both categories. I don’t expect that to change in litter as we said, because we’re not going to deal back your price increases. And I do think that the reduction in the amount sold on deal in the laundry category is really de facto price increase, we want list price increases in laundry. But the pull back in promotions as a group over time is de facto an increase in price and it improves margins.

And Matt, if you want me talk about just how we advertise Oxi Laundry and what’s this done to the additives category?

You can do that.

Well, sometimes myopically we just look at, Oxi Laundry is down a little bit in share, but we really didn’t take a broader brush and say since we launched OXICLEAN laundry, we’ve gone from a 42 share in additive to 56 share in additives. So we’re really happy with our OXICLEAN megabrand.

I hope everybody paid attention to that. So if you go back and say, wow, OXICLEAN launched into premium laundry detergent and we’re sad because it didn’t work out. No. So in stain fighters, we had a 42% market share when we launched OXICLEAN over in liquid laundry, it went from 42% to 56% today. So all that effort paid off, and so we’re making a lot more money today. So that brand is alive and well.

Can I add something. So you see…

Let’s pile on here. This is good.

Sorry?

Let’s pile on.

Yes, well, I love that brand. So I have to talk about brands. And I think you’ve seen the more power to you and what it does for us. We now have a similar and that’s work your magic on OXICLEAN, which is equally working extremely well across the different components of OXICLEAN. So if we have several very clear evidence the lifts after we advertise and then it’s across the different sub-segments of OXICLEAN as well. So I’m very confident, positive that OXICLEAN is a very, very strong brand and we continue to grow.

Okay. All right. It looks like we might be done. Hey, I want to thank everybody for coming today. We had great questions and looking forward to talking to you at the end of the first quarter.