Good day and welcome to today’s Clorox fourth quarter and FY 2009 conference call. As a reminder today’s conference is being recorded. At this time, I would like to turn the conference over to your host Mr. Steve Austenfeld. Please go ahead sir.

Great, thank you. Welcome everyone for joining Clorox’s fourth quarter conference call. On the call with me today are Don Knauss, Clorox’s Chairman and CEO, Larry Peiros, Executive Vice President and Chief Operating Officer of Clorox North America, and Dan Heinrich, our Chief Financial Officer. We’re broadcasting this call over the Internet and a replay of the call will be available for seven days at our website, www.thecloroxcompany.com. On today’s call, Larry will start with comments on business unit performance as well as perspective on the current commodity and retail environment. Dan will then follow with a review of our quarter’s financial performance as well as comment on our fiscal year 2010 outlook. Finally, Don will close with perspective on our recently completed fiscal year 2009 as well as our plans for fiscal year 2010. After that, we will open the call up for your questions. Let me remind you that on today’s we will refer to certain non-GAAP financial measures including but not limited to, free cash flow, EBIT margin, debt-to-EBITDA, economic profit and ROIC. Management believes that providing insights on these measures enables investors to better understand and analyze our ongoing results of operations. Reconciliation with the most directly comparable financial measures determined in accordance with GAAP can be found in today’s press release, this webcast, prepared remarks or supplemental information available in the financial results area of our website as well as on our filings with the SEC. In particular, it may be helpful to refer to tables located at the end of today’s earnings release. Lastly, please recognize that today’s discussion contains forward-looking statements. Actual results could differ materially from management’s expectations. Please review our most recent 10-K filing with the SEC and our other SEC filings for a description of important factors that could cause results to differ materially from management’s expectations. With that let me turn over to Larry.

Thanks Steve and welcome to those of you on the call. As you saw in our press release, we had a very good quarter, and completed a very strong fiscal year. We delivered modest sale growth, return to margin expansion, grew earnings and maintained investments in the long-term health of our brands. All in all, we are very pleased with our performance in this very tough economic climate. I am going to focus my comments on market share, volume and sales and provide perspective on what drove our top line results. Starting with our categories, consumer consumption remains relatively stable despite the economic downturn versus a year ago consumer takeaway in U.S. tracked channels was up about 1.6% for the quarter and 0.5% for the full year. In fact Q4 was the strongest quarter of the fiscal year for our categories in track channels, and our sales growth in the untracked customer base continues to outpace sales in the tracked universe. In the eight categories we measure in the U.S. we grew our health share in five and lost share in the three during the quarter. Our overall share was down slightly. Share declines were primarily due to pricing actions we’ve taken and the growth in private label shares given the economic environment. For the full fiscal year, we maintained overall company market share and on all outlet bases despite price increases across nearly two-thirds of our portfolio and the growth in private label. Market share continues to be one of our top priorities and we plan to increase our investment in demand creation activities in fiscal 2010 to keep our brands strong. Volume was down about 2% for the quarter and 1% for the fiscal year, in line with our forecast. Volume declines were primarily due to the impact…

Thank you, Larry. In May 2008, we provided our initial financial outlook for fiscal year 2009. Our initial diluted EPS outlook range was $3.75 to $3.90. Surely thereafter, we saw the price of oil increased to more than a $147 per barrel, commodities and energy prices spike, financial market cease up, foreign currencies collapsed, and started one of the worst economic recessions in memory. We saw fundamental consumer spending habit shift, retail customers under significant economic pressure, suppliers curtailing production are going out of business and a surge in interest rates. Frankly, the outlook for the fiscal year was becoming extremely difficult. Given these conditions, we adapted our plans and tactics to address the rapidly changing environment. In doing so, we remained focused on those things within our control. We created greater flexibility in our operations, we implemented mitigation plans to help offset significant cost pressures, and we remain through to our strategic direction. I’m particularly proud of the fact that we weathered through this period and still delivered incredibly strong earnings in cash flow in fiscal 2009. With diluted EPS solidly within the original 375 to 390 outlook range. Our economic and financial condition remains part from ideal and significant volatility remains. I believe Clorox is well-positioned for fiscal 2010. I would like to highlight some of the key trends and themes we experienced in fiscal 2009. First, we delivered strong results, we grew full fiscal year diluted EPS 18% from $3.24 in ‘08, to $3.81 in ‘09. For the fourth quarter, we delivered diluted earnings per share of a $1.20; a 6% increase from a $1.13 diluted EPS in a year ago period. Included in this quarter’s EPS result, is a $0.10 impact from foreign currency transaction losses and a $0.05 impact from restructuring related charges. Excluding the…

Thank you Dan, and good afternoon everybody. I feel very good about the results we delivered in FY09. We grew sales despite the difficult economy we have talked about and certainly some negative foreign currency impacts. Contributing to that growth was nearly 3 points from innovation in fiscal year ‘09 and that exceeds our annual 2 point target that we have often talked to you all about. We have a very solid new product pipeline for FY10 based on several plan to introductions that we covered at the analyst meeting including, Green Work’s natural laundry detergent that started shipping last month. We significantly increased our percent of sales from products with 60/40 wins with consumers, internal benchmarks to 44% of sale that was versus our 35% that we achieved in fiscal year ‘08. According to the American customer satisfaction index, Clorox remained the industry leader in consumer satisfaction for personal care and cleaning products. We also maintained market share as Larry noted in an intensely competitive environment despite price increases across nearly two-thirds of our portfolio and some private label growth due to the recession. As we said before, we manage our business for the long term and managed towards annual financial targets. We achieved the EPS target range, we announced more than a year ago in May 2008 despite the commodity cost increases, negative foreign currency impacts and the deep recession that Dan noted. We feel we have executed very well against those factors that we can’t control. Let me take a moment to recap our annual performance against economic profit because the measure we believe was closely aligned with generating shareholder return and value creation. Economic profit for the year came in at $376 million compared with $363 million for the prior year. Now we delivered that increase…

(Operator Instructions) Your first question comes from Doug Lane - Jefferies & Co. Doug Lane - Jefferies & Co.: I am curious about the impact to the wipes business from the H1N1 virus. How does that play out during the quarter and how do you anticipate that playing out next fall and winter, should that recommence here in the states?

We did see a pretty strong response on our wipes business during the quarter. We’re up double digits, kind of just above between 10% and 15% from the shipment volume. We also saw a similar kind of response in the international markets. Overall, probably less than a point of growth in the quarter, but a pretty significant increase in those businesses. Obviously, we are preparing for the potential of H1N1 or other flu’s expanding during the traditional flu season. We are actually working very closely with our retailer partners to try and take advantage of opportunities that may accrue to us, and obviously that may benefit consumers as we go through another wave of H1N1 expansion.

Doug, if I could just add a point to that, I think as we work with retailers on this issue, I think one of the things we are seeing is that retailers are starting to redefine health and wellness to a broader definition to include disinfecting and cleaning the home, not just nutrition, what goes in your body but what you’re around; and I think that’s a significant trend that obviously plays to the strength of our portfolio. Doug Lane - Jefferies & Co.: Now, this is just in response to consumers wanting demand through your traditional outlets or is there a B2B opportunity with industrial healthcare customers?

There is some institutional opportunity. I think most of the traditional healthcare folks already address these kinds of issues with disinfecting protocols. There is some opportunity in kind of the Jensen segment, which is a smaller part of our business, but there was an uptick there as well to what we saw on the retail side.

I think we are seeing some increased heightened awareness too Doug in place where people mass together, like airports and other things where we are starting to see some opportunities for providing, what I would call immediate consumption disinfecting products if you will.

Your next question comes from Bill Pecoriello - Consumer Edge Research

You had mentioned that your overall category growth was improving nicely sequentially in the measured data and then even on all channel basis, I believe the category turned up. How do you see that playing out as we’re going through sequentially now? You’ve got the tough lap in Q1. In Q2 you talked about clearing some inventory off the shelf and in front of that innovation. So will it be until Q3 when we’ll start to see that volume turn positive, because there’s a number of underlying positing things happening here, but you’ve got some things going on with the laps and then what you’re doing with the timing of your innovation?

So, I would hope we would see some volume growth in the first half of the year. Obviously it should be more robust in the second half of the year. We are now largely behind a lot of the pricing actions, so I would expect that our sales growth will be more in-line with our volume growth as it has been historically, probably the one notable acceptor that we would be glad we’ve been taking down price in sort of a bit of a mismatch there, but we do expect positive volume growth in fiscal ‘10.

Then I just had a question on the foreign currency. The $21 million hit in the fourth quarter was a little bit higher than you had guided to. You mentioned it was mostly Venezuela. For ‘10, 2% top line hit, is that mostly Venezuela again and do you still see it being about a point drag on gross margin, in terms of quantifying how that translates into the profit side?

So the $21 million in the quarter was primarily related to Venezuela. It was somewhat higher. We thought we’d see around $15 million, maybe $16 million; we incurred $21 million and most of that did come from Venezuela. Our outlook for next year substantially allows the impact from transaction losses, although we still anticipate, we’ll see a little bit from Venezuela. On the top line again, we are looking at about a 2 point drag on the top line from currencies; mostly in the first half of the fiscal year, and that’s a broader basket of currencies in just Venezuela. We haven’t anniversaried the drops in currencies like Canadian currency, Australia, New Zealand, Mexico, Argentina, some of the others; so Bill that’s a broader basket, but certainly there is some impact from Venezuela as well.

Your next question comes from Wendy Nicholson - City Investment Research.

My first question just a follow up I think on Bill’s, is this sequential growth or improvement in earnings as we go through the year. Can you give us a sense of direction the first half versus second half; number one, how restructuring charges are going to be waited and then if there is anything else, it sounds like second half is going to be much stronger than the first, but help us with an order of magnitude please?

So on the restructuring side, we’ll see more of our charges in the first half of the year than the second half. If you recall this year, we took operating model charges in the second half, we will not repeat those again next year. So, most of what we’ll see, a large percentage of it will be in the first half of the year.

In terms of overall earnings growth, do you still think both the first and the second quarter earnings growth is going to be positive year-over-year?

Yes, we would anticipate that. Again, it’s going to be relatively modest in the first half of the year, given that we still have to anniversary some pretty strong top line growth numbers. We will see some nice margin expansion in the first half of the year. We’ll probably see more margin expansion in the first half than we will in the second half, although we are expecting second half still to be positive expansion. Again, I’ll remind everybody, that in the pattern of our earnings, as we said at our analyst day, we generally see about 40% of our EPS in the first half of the fiscal and about 60% in the second half, given the seasonality that we have.

Okay, then my last question is on your advertising spending and I think the investment community usually prefers it when advertising spending goes up and it looks like you are reinvesting in the portfolio, but in a funny sort of way, because advertising rates have come down so much and because it sounds like you’ve got a relatively robust new product pipeline to come, but a little bit less than the June quarter that we just saw, I’m almost surprised you spent as much on advertising as you did, and I wonder if in this environment more promotional spending wouldn’t have made more sense. So, can you kind of help me understand how you choose whether it’s promotional spending or advertising spending and whether you feel like you’ve got the right balance right now?

So, this is absolutely not a perfect science, particularly by a quarter, but we do think that 9% to 10% kind of target range is about the right kind of range. I think for the year we’ve had some quarters where we’re in the low end of that and I think we feel good about being in the higher end of that. The fact is we are getting a little bit more efficient, given the current media market place and we are essentially using that to get more impressions, more advertising out there and we think that’s a good thing. I will say that the results always tick-up on the trade spending this quarter and that was essentially to address some pricing issues on a couple of brands where it didn’t make sense to take a price roll back, but there was some competitive activities that necessitated that we do something on the trade spending side. So in terms of demand building, there was what we call a substantial increase, but an increase in demand building activity in both the trade line as well as the advertising line.

Your next question comes from Chris Ferrara - Bank of America-Merrill Lynch.

I think Larry maybe you said that the impact of the flu viruses may be altogether was a little less than one point to sales. Can you talk a little bit about what the impact of the seasonal businesses were? I’m not sure from your perspective how weather played out, but can you talk a little bit about those businesses overall, and what you think the impact of weather might have been year-on-year?

We didn’t see any negative impact from weather; in other words, at least one analyst reported about weather and that was news to us. We had a good quarter on charcoal. We actually had record volume in charcoal. Overall the volume was kind of flattish, but the sales were up in our pricing. We were up despite pricing, so not a lot of negative impact from weather.

I guess you just cited a couple of defensive maneuvers with respect to trade firm. I know at analyst day when you talked about promo, you guys said “I guess an extra point to sales just because things come up. There are places where we need to get a little bit more competitive” and it sounds like may be you did see some of that in the quarter.

So, I think we talked about the fact that trade spending should be up in fiscal ‘10 and one of the key drivers of that is not around pricing competitiveness, it’s around some hard conversions. So there’s always some reduced revenue associated with hard conversions than we have preplanned for the year. Overall, I think there maybe a bit of a tickup in terms of pricing issues that we need to address, but I wouldn’t call it traumatic on the year. Now Chris you will see more of that in the first half of the year versus the second half of the year, particularly as we’re going through the hard conversions.

I’m sorry to get back to this sort of question again, but I’m just trying to understand the underlying. If you look at the $0.20 increment on Apex transaction exposure you guys had talked about this year, and that’s substantially going away next year, I guess if you take that out next year, it looks like your fiscal ‘10 EPS guidance is more like 2% to 6% overall. I’m just trying to understand, and I understand it’s a lot of moving parts and it’s difficult to forecast, I just want to make sure from your perspective, it’s not some underlying drag that maybe we are not thinking of that would have caused the underlying growth rate to be something like that, as opposed to the typical run rate you guys have been posting over the last few years.

Chris, I’m glad you asked that question, let me try to clarify a little bit. So we saw about $21 million of transaction losses in the fourth quarter. We saw a total of about $28 million for the full year. We don’t completely get relief on that next year, there will be on a flow basis, some level of transaction losses that we will take next year, particularly Venezuela, but also a few other countries, so it’s not like we are getting full relief from that. We do have in our outlook for next year, some level of impact from transaction losses, not at the size that we saw this year. In essence in Venezuela, we had about two to three years worth of cash that we needed to repatriate back. We have been trying to get as much of our cash back through the official conversion process, but over the course of the last six months, as Venezuela’s oil revenues have gone down, the official translation mechanism, we were able to take advantage of it less and less as they narrowed what they would converge, so we then elected to take our cash out. So on a flow basis to be clear, there is going to be some impact next year. Ranges probably maybe about, it’s kind of tough to know, because these things are pretty volatile, but call it maybe another $10 million to $12 million probably sitting in next year’s outlook associated with transaction related losses.

Okay, so versus the 28 that you put up this year, is that about…?

Yes, that is correct.

Your next question comes from Andrew Sawyer - Goldman Sachs.

I was hoping you guys could help us square up your gross margin guidance. If you look at the second half of this year, you reported something around 45.5% and your guidance for next year is 43.5% to 44%. Now I recognize there is some seasonality impacts, that your second half gross margin tends to be about 60 to 70 basis points above the full year average, but on the other side you said pricing is holding up pretty well, and you should see some sequential deflations just from your P&L perspective I would think, just because of the lag effect between the spot prices and what you see on a realized basis. So I was wondering if you could help us square up directionally why it is that gross margins should get 150 to 200 basis points on what you just reported over the last two quarters.

Well let me talk about first half, second half of fiscal ‘10. So as I look at the first half of fiscal ’10, we should see fairly strong gross margin expansion; although right now as I indicated in my remarks, we are probably seeing a little bit less so than we had in our original outlook. So we still expect a decent expansion in the first half, a little bit less because of the recent run up. Then as we get into the second half, we are obviously going to be competing against some pretty sizeable increases in gross margin. So we would expect in the second half of the fiscal, we’ll see more modest growth in our gross margin. We also have a much bigger impact in the first half of the year from foreign currency slowing through. As we get into the second half of the year, we will start to lap some of those things. So hopefully that gives you a little perspective on how we are thinking about margins.

Well, just taking a different way at it; if you just put up 45.5% in the last few quarters and the second half tends to be a little strong than the first half sequentially, I would think that your guidance would imply that the first half gross margin can be just as low as 43%, I guess we just don’t really understand what it is that’s driving that large sequential deterioration.

I guess, I’m trying to understand the question. We do have seasonality in our numbers, so we will seasonally…

Well, the seasonality is average 60 basis point for the second half versus full year. I’m just saying, if on average your second half gross margin is 60 basis points above the full year average, then your annualized run rate in the second half is consistent with about a 45% gross margin, and your guidance is a 100 to 150 basis points below that.

Well keep in mind, you’ve got currency impacts in there, so you need to make sure you’re factoring that in. I also want to point out, we have about a full point of trade merchandizing spending which is an increase year-over-year, primarily as it relates to hard conversions and then again, having some dry powder for any competitive activity that we need to respond to. So you need to make sure that that extra point from trade merchandize is factored in your outlook.

Your next question comes from Ali Dibadj - Sanford Bernstein.

I want to get some clarification on a couple of things if I could please. One is the, continuing on the first half, second half of the year, it sounded like we’re still with this 40% to 60% split. Can you help clarify that, because it sounds like in the first half some things are worse than you had anticipated, for example maybe commodity, sounds like maybe foreign exchange, if Venezuela carried through a little bit of a worse surprise in the first half perhaps; maybe even some trade spend and some competitive action. So I’m trying to get a sense of is that 40/60 still for real, because you haven’t said it, and I would have suspected it’s actually a little bit lower in the half of the year.

Again, the 40/60 is sort of a rule of thumb if you look at our performance over long periods of time. Obviously there is going to be volatility. As I look at the first half of the year, there is no surprises at this point in terms of what we had in the outlook for Venezuela. There is no change in our outlook as it relates to how we are going to be spending trade merchandizing in the first half. The main view that’s changing somewhat is, because of the recent run up in resin and oils, we are anticipating that we’ll have a little bit lower benefit in the first half of the fiscal year as it relates to our commodity. We still expect it to be pretty favorable, but we are seeing a little bit less so. Now obviously in our outlook we try to provide for a range of possible outcomes and create flexibility in our planning. So even though we are seeing a little bit lower potential benefit for commodities in the first half of the year, we are not at the point where we are going to say “We need to touch our full year outlook.” Now in terms of exactly when that hits, there are some lags and we have some hedges, there are some lags in our contract. So it will come through at different points of time in the P&L. But at this point, we are not coming off of our EPS outlook, and I think 40/60 is kind of a good rule of thumb, understanding that there would be some variability.

One of the areas to drill down on a little bit if you could is trade spend. I guess I was keen in on that thing, and it sounded like it was a little bit more heavy this quarter than you had anticipated, just because you are saying you are taking some action for some competitive measures in some categories. I guess, the first part of the question is I’m just trying to understand what category those were? I think Larry was talking about that.

I’d say there’s a few categories where we are taking a little bit more trade spending. I don’t know that for competitive reasons I want to talk about all of them, but Glad would be one area for example where we’ve taken some; a little bit more aggressive on trade spending. As you know, we’ve taken some price rollbacks in that area and we have found that the key competitors still have been spending pretty heavily in trade spending despite the price rollbacks. So I’d say that’s probably the key place where you are seeing incremental trade spending, but we are doing it at a couple of other places as well.

What about laundry care?

I would say a bit given the competitive activity; in anticipation of a new competition in that segment, which you’re probably familiar with.

Just to add in to that Ali, I think some of that trade spending is more oriented in the laundry area to increase merchandizing events more than it is, a deeper pricing on the current events that we have. So we are seeing people getting more aggressive, some customers getting more aggressive with adding events.

Your next question comes from Joe Altobello - Oppenheimer

First question, I just want to go back to the fiscal ‘10 outlook in terms of volumes, and obviously you guys are implying a volume growth next year after this year now 3% to 4%, and your volume has been down for three quarter in a row, obviously you guys are lapping the pricing increase you took the last twelve to eighteen months, you’ve also got innovation in the pipe line but just give us a little more comfort that we are going to see a heavy accelerations in volumes to that level.

I think you just said it basically, I mean a lot of our volume losses in the past had been because of pricing and we talked in the past about how we model the impact of pricing and we typically do see volume losses. Often or usually the sales line does much better obviously because of pricing, but with most of that pricing activity behind us in fact it sounds like going the other way to the point we are offering price rollbacks, we expect to see volume growth. Looking at Glad trash specifically, we have seen a pretty dramatic change in trend on volume behind our price rollback. So looking at the second quarter we are down something like double digits and volume down by 5% and volume in the third quarter and we are actually up in volume in the fourth quarter, reflecting the price rollbacks, so we do expect largely because of the price to roll those things that we are doing for innovation to see volume growth in the fiscal year.

We also had a drag in fiscal line from the exit of private label, so as we fully anniversary that which we will do in the second half, no longer have that level of the drag, we have a little bit coming in the early first part of the year, but after that we won’t have that drag.

Okay, that’s a good point, and then secondly you talked about SKU rationalization and retailer simplification, today you also mentioned at the analyst day, and you also, I think cited a couple of examples where you are gaining shelf space already, is that still ongoing, have you got additional wins, since the analyst day or is that still on to come?

I would say it’s largely still to come, there are some interesting test going out there with retailers that were pretty optimistic about but none of those have been fully realized as yet we can feel good about the fact that more than number one or number two brand with a lot of good innovation and advertising support at the end of day, our retailers would choose us versus the competitive set, but no big news to spread at this point.

Okay, then one last one if I could; the Green Works laundry launch, are you happy with the distribution you are getting?

So we’ve gotten very good support, and we are launching in both US and Canada. There is one notable exception to that, we do not have distribution at Wal-Mart in the US at this point. I think there is a lot going in the category right now, and Wal-Mart have chosen not to take Green Works detergent in the initial phase. We are being well supported by Wal-Mart Canada, and we are being sometimes exceptionally well supported by other retailers in the US environment. So we have tailored back our plans to be a little bit more retailer specific, and it’s still a good expansion for us, a good launch for us is to represent to say positive MPV and we hope that overtime we can grow the brand to a point where Wal-Mart want to take us on.

I would think the only thing I would add to it Joe is that of our largest retailers, all of whom are taking over the exception that Larry just noted with Wal-Mart, I think the initial orders looked very strong, so we feel good about that obviously it’s filling the pipeline, but we feel very good about the consumer support we have planned with those retailers, so far so good.

Your next question comes from Connie Maneaty - BMO Capital Markets.

Could you talk a little bit about the timing of advertising given the launches and the products here choosing to support this year?

Yes, you will probably see a little heavier weight of advertising in the first half of the fiscal year. As you know we ramped up some of our ad spending here in the fourth quarter. We will continue to see that. We also have advertising support behind the laundry launch, and so you will probably see a little heavier waiting of our adverting in the first half of the year versus the second half. Also in the second half we will obviously be confident getting to higher levels.

Okay, I know you don’t talk about the quarter specifically, but given FX and the tough comp from last year and the shipments of new products, and all the information that Wal-Mart has been taken, the detergent, our first quarter sales is going to be up or down?

We try to stay away as you noted Connie from specific quarters. I think for the factors you cite however, one could anticipate that our are sales in the first quarter will be down.

Okay, great. That’s helpful for modeling purposes. On Venezuela, the fact that it’s going to continue into 2010, does that suggest that you did not get the full amount of the cash that had been building out of the country and is there about a third left to go?

I am not sure if I fully understand your question. Obviously when we are converting, we are taking losses from local currency to US currency. We were taking those at the parallel rate which is in the low seven range versus the official rate around the low two. So we are taking losses and converting out of the Boulevard in the US dollars. What we have in our outlook for next year is the estimated impact on a flow basis of converting our earning stream out of Venezuela back to US dollars.

One, final question; of the 20% of your sales that are not ranked number one and number two, are you seeing or being asked to discontinue any items as retailers simplify their store shelves and what kind of sales impact if any would that have?

So, I’d say overtime, we see pressure on those brands more than obviously we see in the number one and number two brands. I wouldn’t say it has a huge impact, but Glad food bag is one example where for the last several years now, we have been seeing distribution losses. I don’t see a dramatic spike this year, but obviously we will be pressured where we have third, fourth or fifth brands, they are not being well supported with advertising and innovation.

Your next question comes from Lauren Lieberman - Barclays.

Just a question about logistics inflation; I was just surprised with such a magnitude of logistic inflation in the quarter. If these are the components, is it mostly shipping or is it a negative area which it’s on lower volume or what’s really driving that line item within gross margin?

So Lauren on logistics, keep in mind we report the gross impact of logistics not net of cost savings. So we tend to gross up the impact a little bit. Most of it is just normal inflationary pressures that we typically see in our logistics network. So, we reported gross, but there’s a chunk of our cost savings that if we are to net it down, you would probably see on the net logistics line, much less of an impact.

Okay, so that gross number though, is always a line item. I get a bit confusion, just the magnitude always surprises me year over year over year. So, is this 150 basis points the right way to be thinking about it going through fiscal 2010, is it a good run rate for the normal inflation in the business?

I think the inflation has been higher the last couple of years for a lot of reason, obviously we’ve seen fuel prices go up, we’ve seen some pressure in the trucking industry. I think there has been a lot of dynamics there. I guess as we look out over the next couple of years, we would expect the gross impact to be a little bit less than probably what we’ve been tracking over the last couple of years.

Okay, and then I know everyone has been really focused on the pacing of revenue growth of the year. There is no hard conversion in Q1 right, that starts in Q2?

Yes, there’s just a tiny bit in Q1 it’s not really immaterial. On our litter business we are converting from pails of boxes, most of that actually take place in the second half.

The real impact on Q1 in sales that there’s really a foreign exchange.

By far the biggest impact plus the fact that we are lapping 12% growth year ago is probably the steepest not only we have to climb in five years in any quarter.

The volume comp at least in North America is not difficult than your expectation based on elasticity modeling is that the absence of so much pricing, we should see volume growth in North America in Q1?

I guess the way I would answer that would be, we do expect volume growth in the first half. We may not see volume growth in the first quarter.

Yes, because we are not going anniversary those price increases, so we get deep into the quarter.

Your next question comes from Linda Bolton Weiser - Caris

We were looking at some data on the trash bag pricing over the last couple of years and it looks like the premium of the brand Hefty and Glad, are the premiums bigger versus private label now than in, like say a couple of years ago. Is that accurate? Can you comment on that?

, :

Well, yes, except we were looking at non-Force Flex SKUs we were looking at all the SKUs. So even on the basic SKUs, it seemed like it was a bigger premium than in the past.

Yes, so depending on which period you are looking at, I would say the gap has maybe widened a bit on what we would term our base trash items versus private label.

Do you think there is some need to correct that in order to regain volume growth or not?

Again we feel we have taken two price rollbacks, we think right now we reflect accurately what the resin prices are. Private labels have been up and down, but generally in line with us in terms of their movements, and as I said earlier we are starting to see volume growth on trash again in the quarter, which is after a couple of quarters some significant decline. So we are starting to see a return to volume growth and we are optimistic that will continue into next year.

Did the trash volume growth continue in July?

I don’t even have final numbers on July, I can’t tell you.

Your next question comes from Nik Modi - UBS

Yes, most of my questions have been answered. Dan you mentioned during your comments that you are seeing early signs of recovery or somewhere along those lines, I was just curious what kind of was driving that statement.

Just looking at the stability in some of the markets, we have been observing obviously our retail customers and a lot of our vendors and suppliers who have been under some pretty significant pressure. As we look at their numbers as we are in conversations with them, we are feeling like there is some more stability in the market. So there are some signs that maybe we are balancing along the bottom here. I don’t know that we can point to anything that would say we are starting to climb up. But it doesn’t feel like it’s getting any worse. And so we are hopeful as we work with these customers and suppliers over the coming quarters, we will see a little bit of an upturn.

I just to add to Nik, I think what Larry talked, when we looked at our categories and tracked channels they were up 1.6% for the quarter and just a 0.5% for the year. So sequentially, I think Bill noted this earlier too that these things are starting to improve, so we are seeing a little bit more robustness where we compete.

And that is more of a comment on what you are seeing with your retailers and suppliers, but from a consumer standpoint it would be helpful if you can share any insights of work that you have done since as a consumer permanently impaired post this last kind of tough eight months or do you think that they are going to resume their all purchasing habits or is it just too early to tell?

Obviously it’s too early to tell, but I think you know that overall our categories are more or like staples, and they have been far less impacted than many other categories. And if anything is done, so we are seeing a bit of a tick up versus a tick down, so.

Your next question comes from Bill Schmitz - Deutsche Bank.

The difference between the higher commodity cost versus obviously the dollar weakening from here and the expected pension expense because of the market rally, do you have numbers on how those have changed in connection with each other?

You mean looking at correlations of movement in oil to dollar weakness?

No, just like the dollar magnitude of the currency weakness and probably less with pension P&L had next year versus what you think might happen with commodities versus your previous guidance?

I don’t know if we have tried to look for the trade offs there. On the pension side, we did see some strong returns to the assets in the quarter. We are hopeful we will continue to see some returns there. We will be making the contribution, the estimated contribution 25 to 30, we think that will be fine. We are in the process of going through the annual evaluation on that. On the commodity side obviously whenever the dollar weakens we see an uptick particularly in oil as a hedge against the US Dollar. But they are all interrelated in the P&L when the US Dollar is weaker then our foreign currencies are stronger, but then you have an offset on commodities and then interrelated with that is pricing actions we may take in our international businesses. So it’s hard to thrift out an easy relationships or rules of thumb except there is a lot of moving parts.

The reason I asked the question, but are you at least a little bit tempted to raise guidance for fiscal ‘10, just trying to see it might be a little bit better than you expected before?

You are not expecting us to add into the question.

I thought I catch you in a bad moment. How about distribution wise, obviously the new product pipeline and obviously innovation, are there opportunities to expand your ACB, I know there is notable drug retailer where you don’t have any distribution, is there a chance that you get into some of those accounts?

Probably pretty limited opportunities on most of the US portfolio, obviously Burt’s is still expanding distribution, there still remains opportunity there. And truly internationally there was opportunity on Burt’s than probably elsewhere.

Your next question comes from Jason Gere - RBC Capital Markets.

My question is on some cost savings. I was just thinking about it as you are talking about oil and other commodities running up and certainly in the past you guys have turned towards cost savings rather than initially right on to pricing. So I was just wondering about flexibility you have; with some of the projects in place, cost saving seems to be more normalized this year maybe versus last year. So I was just wondering about the pipeline of projects out there that if need be you could bring some projects forward and raise cost saving opportunities?

We are always looking at the flow of cost savings initiatives that mostly things are multiyear in nature, and so a fair bit of them, there is not a lot of ability to change their timing. As we said in the past we will take cost savings when they hit. So given the fact you have to invest behind these over substantial periods of time, and there are certain actions you need to take to be able to realize them, there isn’t a great deal of flexibility to change the timing of them. What we have been pretty good through Jason, over the last couple of years is, we’ve been executing really well against our cost saving, so where normally you come into a year, and you may haircut your estimate a little bit, because you are just uncertain of whether you are going to fully executing against it. We feel really good about our execution in fiscal line and as we look into fiscal ‘10, the range of cost savings that we have out there, the vast, vast majority of that is already identified and underway. So we are feeling pretty solid on the range that we have got, but similar to this year over the course of the year or fiscal line over the course of that year. We slowly as we are executing and we identified some more we were taking up our outlook for that, and so we’ll look for any opportunity to increase the absolute level. In fact given the impact, potential impact we see from, perhaps some slightly higher oil and resin prices, particularly in the first half of the year, we will be looking for a lot of different ways to see if we can find some offsets for that impact.

Okay, great. Second question on Burt’s Bees, you said that the consumption is healthy, the shipments that were weak, can you compare like I guess in part stocking the gap between consumption and shipment, this quarter versus last quarter, and when do you think that that should get back to a more normal period? Are you comfortable with the inventory levels that you had in retail?

We actually about a 1% increase in volume and a slight decline like about 1% in sales this quarter. The data sources in that business are not nearly as detailed and robust as we have in other businesses, in particular because target stopped giving their data to the IRIs or Nielsen in other world, so we don’t have that cover. But based on our best estimates we think we are seeing probably mid single digit kind of consumption growth in the quarter, which is least a few points ahead of what our sales rep was.

We think most of the stocking probably occurred in Q4 it’s probably behind us, and so, we don’t think there is going to be a lot of the stocking going forward. So, again this is a business where we think that the consumption and sales would be more in line with what we see from a volume standpoint.

We are also starting to see Jason some more vitality in drug channels, which has been the channel that was hit the hardest in terms of the stocking, so we are starting to see some return to normalcy there as well.

Your next question comes from Alec Patterson - RCM.

Dan, I just wanted to clarify the run rate on interest expense, going forward is that going to hold?

For full year you are referring to?

Yes, please.

The range for next year is probably in the 140 to 150 range, it’d be down somewhat obviously from this year as we continue to pay down debt.

Okay. Next, I want to clarify on your breakdown of the gross margins, all other category you highlighted with trade spending and transactional, I was trying to get a sense of how much of that was trade spent versus transactional from FX, and does that imply that there is no transactional hit to the commodity impact on gross margin? That’s just a pure commodity read.

There is nothing sitting in commodity as it relates to the foreign currency transactions date, so just to be clear on that. The other does include trade spending, I don’t have the breakdown Alec, between exactly how much were trade spending and how much were some of the foreign currency transaction that flowed through cogs. My recollection is the transaction piece is relatively small fitting in cost to goods sold, but you do have other FX translation impact that would fit in there.

Your next question comes from John Feltcher - JP Morgan.

Guys I’m looking at your currency guidance at least on the top line for next year and you had one positive quarter and three negative quarters this year and you delivered minus two from currency, and your guidance for 2010 basically says the same thing minus two. So, are we looking at just an absolute brutal first quarter or I mean is there something you are seeing in currency in terms of where this is going to play out in the second quarter as well, can you just give me a little bit of help there?

Yes. I mean what’s in our outlook today John is we talked in June into our analyst day is the official outlook still had some negative impacts from other currencies in the back half of the year. The vast majority of the impact is going to be in the first half of the year and it will be a pretty tough first quarter because we have an anniversary with a significant drops a year ago. But our original outlook did have some further declines in currencies. Now, we are seeing in a few countries a little bit of improvement. We have seen the US dollar starting to weaken, so as we go forward in the year we are going to need to look at our currency assumption on what’s fitting in there. I wouldn’t touch it in the first half of the year, but maybe in the second half we look at it. I’ll also advise that our pricing decisions internationally are also partially based on what’s happening with currency. So, if we see a little better foreign currency environment next year we ma need to take a little off of our pricing assumption so that you may balance each other a little bit.

Your next question comes from Shannon Joseph - Wells Fargo Securities

I was wondering if you could talk about your plans for the debt maturing in January, and whether you plan to repay that with cash from operations or just refinancing the debt market?

We will have some level of refunding that we’ll probably do later in the fall, I don’t think we will refund the full $575 million maturity, we will have cash flow in the first half of the year, we’ll continue to pay down commercial paper, and we haven’t really finalized our plans yet, but I think what we’ll refund or refinance will be only part of the $575 million maturity.

Just wanted to follow up on something you had mentioned, kind of finally voluntarily talked about Wal-Mart and the Green Works laundry, was that in your plan for them not to take it when you talked to us back in June or there is a new outcome or how should we think about what transpired?

So, to be straight-forward it was not in our plan, and obviously we would love to get distribution there as soon as we can get it, but was not part of our original plan, nor was it the initial indication we got from Wal-Mart at that point in time.

Just to give us a sense, how can that change going forward, is there a time to it to get distribution there, how does that work?

Obviously, not within our control, but I think Wal-Mart will continue to look at the opportunity at what’s going on in their category, as well as how we are performing and the other retailers where we are. So I think there is always an opportunity for them to change their minds and we obviously will be there to help change their minds over time.

I think Ali given what’s going on in terms of the resetting of that category at Wal-Mart and what they are doing in terms of looking at the assortment across all the brands in that category, and besides I think this is one of those things that over the next 30 to 90 days we would hope that they would revisit that based on what goes in the market.

Oh in that much of a short time, okay, 30 to 90 days. I thought it was, and correct me if I am wrong, but part of it’s gong to be, laundry is going to be about one point of your top line growth next year. Is that roughly the right number, because I am trying to get a sense of how much now to pull out given this new information?

I think we did say it was going to be about a one point of our sales growth for the year. Again we are feeling good about what we have going out with other retailers. So we will see a bit less of a sales behind that launch, but we still think that’s going to be healthy sales growth, and we still overall I think that we can deliver that at least two points of sales growth for the year behind innovation on detergent as well and some of the other things that we are doing.

Okay. And then just to follow-up on FX one last thing, thanks for taking that this time. Dan, my reading of what you said is you have not updates since June the FX negative 2%?

We have not updated, we are still with our two point drag for the full year in currencies on the top line.

That can give you some local room for kind of kind of Wal-Mart deciding to take it or is it a kiddies for some local room or is it just purely to have an update because it’s volatility in FX particularly?

It’s volatility in FX and again it’s our pricing plans in international are tied to what currencies do. So, I wouldn’t view it as some sort of cushion or offset for any other issues that may arise over the course of the year in our top-line?

Well, we just want to thank everybody for joining us and we will probably be speaking with you next quarter when we share the Q1 results. So take care everybody.

Once again, that does conclude today’s conference. We appreciate your participation.