Good day, ladies and gentlemen, and welcome to The Clorox Company first quarter fiscal year 2010 earnings release conference call conference call. (Operator Instructions) I would now like to introduce your host for today’s conference call, Mr. Steve Austenfeld, Vice President of Investor Relations for The Clorox Company. Mr. Austenfeld, you may begin your conference.

Great, thank you. Welcome, everyone and thank you for joining Clorox’s first 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, thecloroxcompany.com. On today’s call, Larry will start with comments on business unit performance as well as a perspective on the current commodity and retail environment. Dan will then follow with a review of the quarter’s financial performance as well as comment on updated fiscal year 2010 outlook, as communicated in our press release this morning. Finally, Don will close with a perspective on key initiatives driving overall company performance and after that, we will open it 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, and debt-to-EBITDA. 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 section of our website as well as in 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 good morning to all of you on the call. As you saw in our press release, we had a very good quarter. We delivered solid sales and volume results on top of double-digit growth in the year-ago quarter and our earnings were up 23% as a result of our third consecutive quarter of gross margin expansion. Very strong results in what remains a very challenging economic environment. As usual, 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 U.S. categories, consumption remains stable. Versus year ago, consumer takeaway in U.S. track channels was about flat for Q1, a similar trend to what we have seen for the last several quarters. Our sales growth in untracked channels continues to significantly outpace sales in tracked channels with consumers migrating to value oriented retailers like Club and Dollar. In tracked channels, we grew our held share in four of the eight categories we measure in the U.S. Our overall U.S. share was down slightly in the quarter, primarily due to competitive activity in a few key categories and the growth of private label shares. For perspective, on an all outlet basis, we grew our overall market share nearly a full share point during the past 52 week period. In our international businesses, our market share results are positive and we generally have seen stronger category growth than anticipated, driven by pricing. Our volume was up 1% for the quarter. Gains were primarily due to higher shipments of disinfecting products due to the H1N1 flu pandemic, largely offset by lower shipments of Glad trash bags and our exit from the private label food bags business. The upside related to the H1N1 flu was well…

Thank you, Larry. While economic conditions remain challenging, the company continues to perform very well, achieving strong first quarter results. Larry has already provided a recap of our top line and share performance, so I will comment on our first quarter financial performance and provide an update on our outlook for the fiscal year. I think there are three important takeaways on our first quarter results. First, we are reasonably pleased with our sales performance in the quarter. We are somewhat ahead of plan due to various factors, including very strong growth in disinfecting product sales driven by the H1N1 flu pandemic. We also saw double-digit growth in food product sales and strengthening foreign currencies in our international businesses. While we continue to be pressured by foreign currency headwinds in the quarter, those pressures were less than anticipated. Our international categories continue to show improvement and we returned to total company volume growth as we anniversaried the majority of the pricing actions from last fiscal year. Our top line momentum in the quarter was moderated somewhat by the factors Larry mentioned, including the challenges in the Glad business and increase in our trade spending to address a ramp-up in competitive activity and somewhat lower sales for our Green Works line. On balance, we feel good about our sales performance in the quarter as we compare with the 12% sales growth in the year-ago quarter. Second, we are very pleased that we are continuing to see a return to historical gross margin levels in a very tough climate. Q1 gross margin increased about 450 basis points to 45.1% of sales, compared with 40.6% in the year-ago quarter, driven by lower commodity costs, strong cost savings, and the continuing benefit from price increases. Our EBIT margin also continues to expand closer to…

…met in New York at the analyst day and I talked about how our strong leaders and business model have proven agility and flexibility to respond in any economic environment and we have continued to remain agile to adapt our plans and tactics to really address the rapidly changing environment while staying focused on the long-term and true to our strategies. Now in Q1, our people clearly demonstrated the ability to course correct after the volatility of the past year and execute and take action in a pretty dynamic marketplace. I think our response to the H1N1 pandemic is a great example of that capability. For several months now, teams company wide have been working to anticipate demand and take steps to ensure our disinfecting and sanitizing products are really available not only where consumers shop but also for our institutional customers as well, certainly as this primary flu season will continue to hit the southern hemisphere and now takes hold up here in the North. And in recent weeks, we have significantly increased manufacturing capacity for Clorox disinfecting wipes to really help us stay ahead of the strong demand we are seeing. Now, knowing that disinfecting products are critical in fighting the spread of viruses that can cause the flu, we are working closely with a number of public health agencies and others supporting efforts to educate people on how to protect themselves, including a few key things I want to highlight for you. First of all, we work with the National Education Association to distribute canisters of Clorox disinfecting wipes to U.S. based teachers and received 100,000 requests from teachers for product within four days. Secondly, partnering with the visiting nurse association of America and families fighting to encourage families to get vaccinated. Third, partnering with the American…

(Operator Instructions) Our first question comes from the line of Nik Modi with UBS.

Just a couple of questions -- can you provide any context on the upside from the H1N1, just kind of relative to what you were looking for, how the business played out during the quarter?

So we think H1N1 accounted for about two points of growth in the quarter and obviously that came across several business units, including homecare in the U.S., a lot of international volume, particularly in Latin America, as well as our away from home business.

And then just another quick question -- outside of trash bags and laundry, where else did you see the most heightened competitive activity during the quarter?

Those are probably the biggies. I would say there were some skirmishes in some parts of different categories. There’s some aggressive pricing or trade spending in cat litter but I would say the two biggies are really laundry and Glad.

And our next question comes from the line of Wendy Nicholson with Citigroup.

My first question is with regard to the pricing, I think you said in the international markets you are benefiting from higher pricing but are you planning now that the dollar has weakened to have to roll back some of that pricing?

At this point, no, we are not anticipating any price rollbacks. In fact, right now we are staying with the original plan we had in terms of price increases in the international market, so even though foreign exchange has improved versus our expectations, we are still planning to move forward with the pricing actions that we had planned for the year.

And our next question comes from the line of William Schmitz with Deutsche Bank.

Could you just give some context on how you sort of see the volume versus pricing play out in the back half of the -- or the remaining three quarters of the year?

We expect the volume will be stronger than the sales line, probably by a point or two would be our best guess. So talking about the sales in the 1% to 2% range and probably volume in the 3% to 4% range would be our best guess at this point.

And our next --

Excuse me, one question for the Operator, or one comment -- there’s no need to limit ourselves to just one question going forward. Thanks.

Okay, I do apologize. Our next question is Chris Ferrera with Bank of America-Merrill Lynch.

Hey, great timing on that!

So ask all nine of your questions, Chris.

Okay. So you basically on Glad, I mean, it sounds like you guys are saying promotion has kicked up a lot and just trying to understand this in the broader context of what is going on there -- there have been a lot of tests going in the market, not just in Walmart but lots of other places. I mean, is this kind of a battle ground right now for who is going to win some of those tests? Can you just give a little color around that?

I would say it definitely is a bit of a battleground. Obviously you’ve got the impact of pricing coming down and people trying to reflect the new pricing on shelf. We do have some assortment tests going on in the marketplace that people are probably reacting to. We are obviously in the best position to survive the onslaught over the long-term, given our share position and the portfolio that we have but I would say we are in a unique situation in which category spending is up, both advertising and trade dollars and yet [inaudible] is going down, and [retail dollars] are going down even more as a result of the price declines.

I think the only thing I would add to that is we have seen this movie before. I mean, we know how to react in this category and I suppose I would also take a little -- where we take a little bit of heartened response, if you will, is the fact that on an all outlet basis, Glad trash is gaining share. So while the category is really soft, we think the brand is healthy.

I mean, I guess given what is at stake, which seems like a more permanent issue of shelf space within the larger retails, I mean, is that why you are seeing such heavy competitive spending as commodities are going up and if that’s true, is it something that I guess you’d expect to continue just because of how much is at stake here?

Your speculation is probably as good as ours. I am sure some of the competition has reacted to some of the assortment tests going on. One would expect that over time, it gets to a more normalized range of activity.

And I have to think that these tests that are going on, I mean, they are not going to go on forever so I think somewhere in the next three to six month window, people are going to make a determination what they want to do with this category.

Got it. Thanks, guys.

And our next question comes from the line of Ali Dibadj.

I guess I want to push a little bit on the pricing point because as far as I can tell, if you strip out private label, foreign exchange, private label, divestiture of private label, foreign exchange, pricing was already down or at least price mix including trade spend was already down this quarter and it sounds, Larry, from your comments that it is going to get a little bit worse. Now what we had heard from you guys at the analyst day was you know what, it is only Glad where we are going to have issues. It feels like it is becoming more pervasive. How far do you anticipate it going as it has gone beyond what you originally thought of only being a Glad issue? How should we think about that pervasiveness in terms of price pressure on other categories including maybe even cat litter, et cetera, et cetera?

I would not call it pervasive. I would say that we push this button up and down depending on what is going on with respect to our total value equation as well as what is going on in the competitive front. So beyond the Glad category and the laundry category and a few small places, maybe cat litter included, I would not call this movement pervasive. Overall though our trade spending will go up significantly in the second half of the year, primarily a result of those businesses.

But if you take laundry plus cat litter plus the Glad business, that’s a -- I mean, I guess depending on how you --

It’s a good chunk.

Yeah, so -- okay, so maybe I’ve got my definition of pervasive wrong but it looks like it’s a pretty big issue.

Well Ali, remember coming into this year we had planned for an increase in trade spending, so what we are saying is we are increasing off a base that was already increased. We also had the Glad price rollback that went into place May 1st, which is still bleeding into the marketplace. So we came into the year anticipating a higher level of spend and now based on what we are seeing in laundry and Glad, we are increasing that spend.

And then thinking forward, I guess I’m concerned about that inflection point for two of your big drivers going in the opposite direction, I guess. One is pricing getting tougher and perhaps more trade spend it sounds like having to be taken and on the flip side commodities going up, and it feels like déjà vu, I guess, back to a year ago or so where you are getting again commodities going up, pricing this time going down. Have you thought through that? Is that what you are anticipating in terms of you are unfortunately being forced to take pricing down at a time where commodities are going up and that could be a very difficult situation, even more difficult than we had seen last year, perhaps? Given the economic -- the consumer economic situation that is out there?

I would say that the pricing actions that we are taking, the trade spending reductions or the trade spending approach we are taking, it is still pretty surgical. It’s focused on certain brands and you know, [inaudible] laundry, for example, really the focus is on the Clorox 2 side of the equation. It doesn’t really affect very much the Clorox liquid bleach side of the equation, so it’s pretty surgical, it’s pretty focused on activity that is going on in those categories. Overall we still expect to have a commodity benefit this year, maybe a bit less than what we anticipated a few months ago but we still see a significant commodity benefit for the full year.

I think the other thing to keep in mind is if our outlook is correct and we see some increases in commodities in the second half of the year, it’s going to -- we believe it will over time dampen some of these competitive actions that we are seeing because the margin structure just won't support long periods of times with some of the competitive spending that we have seen. So assuming that goes up a bit, we would assume over time that our trade spending will come back to more normal levels.

Okay, and then just my last question and I’ll get back in the queue is can you give us a sense, given FX was a little better here, what your organic sales guidance is then going forward?

On the organic side?

Yes, sorry.

Let’s see -- if I think about the components on the year, so we came into the year assuming foreign exchange would be about a two point headwind for the full year, we are now saying that’s about flat. We came into the year saying we had about an extra point of trade spending -- now that’s likely to be in the two to three point range there. And as Larry said on the volume side, we are still anticipating the three to four percent range on the volume side. Does that help?

It does, yes. Thank you.

And our next question comes from the line of Alice Longley with Buckingham Research.

For the second half of the fiscal year, if I back out the fact that currency actually should help you a little bit there and look at what you are saying was for volume, it looks like the combination of price and promotion should be down 3% to 4% in North America -- is that accurate?

I don’t have a --

Pricing is going to be up in offshore.

Alice, is your question around what is going to happen to margins in the second half or are you trying to --

No, it’s the impact on top line of price plus promotion. It looks like it’s a 3% to 4% hit for North America.

Pricing actually is a small positive for us for the full year, so while it is down a little bit from what we originally expected, price in and of itself will be positive for the year.

I’m asking about the second half of the year.

I’m referring to the second half as well. We will have some continuing benefit on pricing in the second half of the year and a lot of that will be in the international markets. We will have higher trade spending levels though in the back half than what we previously projected. But I would not add it up to be three to four points in the second half of the year.

But if you just look at North America alone without international, wouldn’t it be about that much of a hit?

You know, Alice, I think to a great degree if you are looking at our sales equation, as we’ve noted we are going to see favorable currency versus order expectations but to a great degree, that is going to be offset by the higher trade spending that we’ve indicated. We are only one quarter into the fiscal year. It’s difficult to predict with precision exactly what those are going to be but I think directionally, that’s the right way to think about it, a more favorable currency environment offset by higher trade spending.

Okay, and my other question is will the ad ratio still be up for the year?

Sorry, the what?

Say that again, Alice?

Ad ratio.

The ad percentage? We will still be in the 9% to 10% range. We are shifting a little bit of our ad dollars, so the total spending will on the advertising will be about the same. We are shifting a little bit of the spend, however, into trade spending but we will still be solidly in the 9% to 10% range, perhaps not as high in the higher end of the range as we talked about last quarter.

Okay. Thank you.

And our next question comes from the line of Doug Lane with Jefferies.

Can you refresh our memory on the for new products that you are introducing in the second half of this year, what the impact will be on the various quarters -- December quarter, March quarter, and June quarter? And maybe I misunderstood something you said earlier but it seems to me with the new products hitting the shelves in the second half of the year, coupled with the easy comparisons, your actual base business growth should be better in the second half than in the first half. Is that correct?

Let me walk you through the new products that we’ve got going on. We started the launch of the natural detergent stain remover under the Green Works name. That started in July. Obviously it will carry over to the second half. I think we’ve talked about that particular launch not meeting expectations. We also have the new improved force flex bag which has that stay in place feature, which started in August. That’s a base brand improvement, so we will expect some improvement in our base brand growth, but it’s not technically a brand new product. We have a couple of conversions on our littler line where we are converting from one type of packaging to another packaging that again is our base brand kind of improvements that we expect to add some health to our base brands. We have a fairly major conversion on our charcoal business to an improved product, faster lighting that’s actually a lighter weight charcoal but performed better than the current charcoal. And then on the Burt’s line we have the acne launch which we started in July and then in January 2010 we will be starting with our toothpaste launch.

So just to follow-up, also with the easier comparisons on last year, shouldn’t I have a better base business growth in the second half than in the first half? That’s basically organic growth excluding foreign exchange?

Well, we have the impact of the H1N1 flu, so we are up quite a bit in the first half on volume and project we will have a strong second quarter as well. Our outlook does assume that there is probably some consumption [trough] in the second half. Consumers are loading up their inventory and they will need to bleed that off so you’ve got that factor impacting first half versus second half.

I got it -- so that’s the offset. Okay. Thank you.

And our next question comes from the line of Joe Altobello from Oppenheimer.

My first question I guess is on the trade spend situation, it sounds like most of the spending is to combat branded competition but I think earlier when you talk about your overall market shares dipping modestly, you also cited a shift to private label and I had thought the trade-down to private label, at least the impact, that it was starting to wane. Is that not the case?

Private labels are still growing but they are definitely growing at a lower rate than they were previously. Private labels are really a threat for us in three major categories and that would be hyperchloride bleach, the trash bag business, and the charcoal business. I would say that in the Glad business, we are dealing with competitive activity on both the private label and as well as the branded end. Within the laundry category, more specifically in the kind of stain remover aspect of that category, it’s more around branded competition, both new entries as well as the reaction to those new entries by branded competition.

But I think you are right though -- when we look at the FDKT data, of course that’s about half of our business. If you look at the 13 weeks ending March of this year, private label grew in our categories 1.8 points. If you look at the last 13 weeks ending in September, they grew 0.9. If you look at the last four to five weeks, the September month, they grew 0.6, so clearly sequentially the impact is going down fairly significantly.

Okay, and in terms of the H1N1, you mentioned the impact in the quarter. In October, did you guys still see elevated levels of shipments or has that started to slow as well?

No, we are still seeing elevated shipments. As Dan alluded to, it’s just hard to call this one. It is difficult to call the impact of the virus but what we are assuming is that some of the inventories we are building in both retail customers as well as consumers’ homes may over time cause a bit of a trough once the flu season winds down. That’s our best guess at this point.

Okay, and just lastly, the Green Works laundry launch you mentioned was not up to your expectations and I think part of that had to do with Walmart not taking it and it sounded like you guys were at least somewhat optimistic that there was a chance maybe later in calendar ’09 or early calendar ’10 that that might be reversed. Are you hearing anything from Walmart on that?

Don’t expect to get distribution at Walmart anytime soon I guess would be my bottom line answer. You know, there’s an awful lot of activity going on detergent these days in terms of [inaudible] and pricing, some very -- so this is probably not the best time in the world to be launching a premium priced detergent, given what is going on in the category as well as what is going on with the economy. So obviously our discussion with Walmart is private but that’s not in our expectations at this point.

Okay.

I think the good news about it, if there’s some good news in this, is while the trial, consumer trial is off to a slower start, where we are getting the trial, what we have seen from some retailer data is that our repeat is significantly higher than we anticipated, so we know we’ve got a great product. It’s just getting trial in this pricing environment that is most difficult and that’s what we are -- that’s what tactically we are trying to address now is to get some trial.

Got it. Thank you.

And our next question comes from the line of Andrew Sawyer with Goldman Sachs.

Don, I was wondering if you could speak a little bit about some of the natural or green derived businesses, not just Green Works but Burt’s Bees and also Brita. It just felt like at the margins, some of these things have slowed a bit and I was wondering if you could break that up. Are you guys in your consumer studies picking up any less interest in that theme or do you think it is just that the economic situation outweighs it? And how should we think about the path to recovery and how that jives with the consumer economic situation or consumer retail spending power?

Let me start off, Andrew, and then I’ll turn it over to Larry. I think in general it is more the economic situation out there. Let’s take the hard surface cleaning category, those that add up to the core five segments we’ve launched, Green Works and I think Larry noted this, while that category has come down obviously in the growth rates, it is still growing at quite a faster clip than the conventional cleaners and we are still maintaining or gaining slightly in share at about a 45 share level. But I think consumers are looking for more value brands and that category has slowed. But where we take heart is that it is still growing at a faster clip than conventional players, so we feel good about that. As far as Burt’s Bees go, the encouraging thing there for the last 24 weeks, and this has maintained over the last 12 weeks as well, we are seeing consumption in the high-single digits on Burt’s returning, so it isn’t the double digits we saw before the recession but it is far outpacing the conventional personal care categories, which are flattish. So we feel very good about where Burt’s is competing and we are gaining significant international presence with Burt’s as well, so we feel good about that. As far as laundry itself goes, as Larry said there is so much pricing activity going on around value brands in that segment, it is a difficult time to be launching a brand with significant absolute price points in the -- on the larger size in the $12 to $14 range, and getting trial for that. But those categories -- or that category, natural in general is still outpacing the conventional cleaning segment. As far as Brita goes, we are gaining share in Brita. I think a bit of an anomaly in we had some merchandising shifts from the first quarter into the quarter on Brita and that has slowed down some of the shipments but we were lapping double-digit growth in year-ago and we are gaining share and in the second quarter, we are off to a good start on Brita, so that continues to gain momentum. I think that is one of those things where it is not just a sustainability story but the value story is kind of almost overtaking now the sustainability benefits of water filtration. It’s just people don’t want to spend that kind of money to drink bottled water at home.

And then just kind of a question on -- thanks a lot of that, Don -- a separate question for Dan; could you talk a little bit about getting down towards your leverage targets, are we thinking about potentially buying stock again as we get into the latter parts of this fiscal year?

Andrew, we will certainly take a look at that. We will -- we anticipate probably in the third quarter we will be at or below our 2.5 to 1 and we will balance our view on how to use that cash based on what the M&A agenda might look like and other needs for the cash but certainly we bought back shares in the past and I think we have a long track record if we don’t need it in the business, we will return it to shareholders. So we will consider that in the second half of the year. No change right now but we will consider that in the second half of the year.

Are you seeing more decent quality M&A books come across your guys’ desks at this point?

You know, we are seeing a little bit of an up-tick in the activity. As to quality, it’s still a pretty mixed bag right now. As you know, we are focused really on a couple of key areas that we have talked to you in the past about, natural personal care. So the opportunities there tend to be pretty small. We are also focused on the away-from-home business, the institutional business -- again, some of the opportunities there are relatively small. And then the third area is obviously looking outside the U.S. and that’s always a question of whether you can action any of those ideas but we are seeing a little bit of an up-tick in terms of some properties on the market.

All right, well, thank very much, guys.

And our next question comes from the line of Victoria Collin with Atlantic Equities.

A couple of my questions have been answered but if I could just ask you would you mind splitting out the Burt’s Bees the percentage of sales that is international versus the U.S.? And also just a question on the price points of Green Works. Obviously they are on a little bit of a premium due to the natural elements of the business but would you consider doing trade promotions in this area or are you prepared to keep the prices where they are to maintain this sort of more prestige higher priced elements despite the softness in the market at the moment? Thanks.

So let me start with Green Works; on the base cleaning products, we’re at about a 15% to 20% premium, and I would not say that’s an area where we are heavily focusing trade dollars, so we are comfortable with that premium. We still have growth in that segment, so that’s not an area where we are dealing more heavily than we did previously.

And our international sales, Victoria, about 20% are outside the U.S.

So 20% is international?

It pretty much mirrors the company on average.

Okay, that’s great. And just to clarify, your increased trade spend is going to be targeted mainly at the laundry and the trash business, as well as perhaps some of the cat littler?

Correct.

Okay, great. Thank you very much.

And our next question comes from the line of Connie Maneaty from BMO Capital Markets.

Could you talk a little bit about the Burt’s Bees toothpaste launch? What kind of distribution you are going to get with that -- excuse me, I mean, is it going to go into natural type outlets that compete with [inaudible] main or are you thinking it is going to be placed in the regular toothpaste aisle?

I think it is going to go along with the rest of the Burt’s Bees line, so we would look for a pretty similar distribution pattern to what we have in the rest of our Burt’s Bees products. I think there are six items in the line, two are focused on kind of multi-care, two on whitening, and two focused on kids, which is obviously important within natural toothpaste.

And one of the things that really appeals about that segment is that the size of that segment is over $150 million just on the natural side, so it’s obviously a white space that we think Burt’s has some real credibility for.

Who is making this for you? I mean, are you contracting this?

It’s self-manufactured.

Okay. If I could also ask you about the bleach plants and the new process that you are going to go through. Could you describe what you mean by it’s going to provide you with more security? What is -- what did you call it, high impact bleach?

Well, it’s high strength bleach. I think what we mean by higher security is that it is more reliability in the supply chain, if you will. Obviously as we look out in the years, looking out into the future, we could see or we would forecast that the cost of transporting chlorine gas around the United States is going to go up. I think it’s a higher risk proposition for railroads, et cetera so as we look at it, when we talk about security, it’s really about continuity of supply and making sure that we can have both capabilities, if you will, retaining still the capability of converting but transitioning over time to where we manufacture high strength bleach. So that’s what it really means. It’s around continuity of supply and making sure we can continue that.

So does high strength bleach mean you are buying something that is further along in the process than --

Yes, that’s exactly what it means, is you are buying something and then we dilute it down a little bit further but we are not converting chlorine gas into sodium hyperchloride bleach.

And are the economics of this favorable to you? Are there patents and can -- do you have some advantage over your private label competitor with this?

Given the increasing costs in terms of rail transportation of chlorine, given the risks involved and the insurance rates, et cetera, this will probably be a -- about a break-even proposition for us by the time all is said and done.

Connie, ideally there is a cost avoidance in the future on the increasing cost structure that we see with chlorine.

Okay. Thank you.

And our next question comes from the line of John Faucher with JP Morgan.

I just want to follow-up on the heightened competitive activity in trash. Can you talk about the form that you are seeing it? I think you guys had talked about higher levels of couponing, maybe as opposed to just straight price discounting. Is that still the case? And when you look at that, I guess why isn’t it driving better category consumption at this point? It seems as though -- is this something that just in the recent economic environment people just pulled back on their use of trash bags?

I think there is definitely an economic impact. We took the cost of trash bags pretty high as a result of resin costs going up and so I think there may have been a bit of a shelf shock when you just went to the shelf and see how much it costs to buy 40 trash bags. So I think part of it is economic. We are seeing the competitive activity from the branded competition I would say across the spectrum, so there is a lot of pricing activity, so that our value equation or price value relative to them has gone down versus year ago. We are also seeing some increase in advertising as well as couponing. And then on the private label side, most of this is in the form of just pricing, just more aggressive pricing or more promotion activity by individual retailers.

Thanks.

And our next question comes from the line of Lauren Lieberman with Barclays Capital.

I just have one quick question remaining -- on the hard conversion, can you just remind us which of the new products you are launching, I think it is maybe just cat litter and charcoal where there is going to be a sort of concerted draw-down or retail inventory, and what quarter that is going to be in? Is it still second quarter?

So charcoal begins in the second quarter and that is a hard pull-down of inventories and replacements, so that will -- it starts in the second quarter and will continue into the third quarter. And then on the litter side, the packaging change that Larry referenced is more of a rolling roll-in of the SKUs starting in the third quarter.

Okay, and is that the only two where this is an issue to think about?

Yes, for this year, yes. We had a third hard conversion that we had talked about before. That was intended to be a late fiscal year conversion. That likely now will be in fiscal ’11.

Okay, great. Thanks so much.

And our next question comes from the line of Jason Gere with RBC Capital Markets.

Just two questions, one just on volumes I guess following up kind of with Lauren’s question -- if we strip out H1N1 and then we look at the conversions, I mean, I think this quarter your volumes sequentially improve from negative 2 to negative 1. I mean, with the spending that’s [been on there], I mean, should we be assuming that you will see volumes sequentially improve once you strip out the H1N1? And factoring in all the conversions, how that, the timing plays through of bleeding down the inventories?

I’m not exactly sure how to strip put H1N1. I think that we are concerned about some draw-down in H1N1 inventories in consumers homes and in retailers warehouses in the second half as a result of the build-up we are seeing in the first half, so that’s part of our outlook for volume in the second half of the year.

I would just go back and reiterate what Larry said earlier, Jason -- on volume for the year, we are still seeing 3% to 4% volume growth. We had 1% volume growth in the first quarter, so you could project out from there but we’ve seen fairly strong volume growth in the out three quarters.

Okay, fair enough. And then if we could just talk maybe about the household margins. Clearly over the last year and with the new segment reporting, the margins have been kind of all over the place, given all the puts and takes in there. So as we look to the rest of the year with commodities starting to go less favorable and I guess competitive activity stepping up, I mean, would you anticipate that the margin structure, at least in near term, is going to be back down to the single-digit range? I guess at what point do you want to not sacrifice as much margin in order to maintain your market share? I was just wondering if you could add a little color to that and the dynamics of that segment.

So the Glad business, if you look at the last half of last fiscal year, obviously we saw some pretty nice expansion in margins as commodity costs begin to come down. We are still actually seeing decent margins in the Glad business, although the ramp-up in trade spending and now the softness in the category definitely will squeeze our margins, particularly as we get into the second half of the year. I guess the question on margin is sort of the mid-term and longer ranger perspective of the competitive activity that we are seeing today, how long will that continue. As we are ramping up our trade spending to address some of the competitive activity, how long will that competitive activity sustain itself? So as we look at the second half of the fiscal year, we’ve already said we are forecasting some increase in resin in the back half of the year and we think that should have a dampening effect on some of this competitive activity, assuming that does occur. So while we are certainly spending to make sure we have the value equation right and to address some of the price gaps, we are not currently anticipating that that is going to -- we are going to have to have that level of spending for an extended period of time. But obviously this is a volatile category, resin can move around. We’ve seen it move incredibly over the last 12 months but based on what we see today, near-term we believe the increase in trade spending is the right thing to do. It will pinch our margins a little bit longer range if our outlook is correct and resin has kind of a slow rise to it. We think that will probably dampen some of the competitive activity.

And I think you’ve got to take those margin comments on Glad into the context of the entire company, so as we are taking guidance up overall on our margin, we still see healthy margin expansion back to historical levels, though I wouldn’t read too much into what is going on on Glad, which that particular part of our business, that trash part of our business is about 12% to 13% of our revenue.

Okay and if I can just add one housekeeping, just as we look at other expense and the Venezuela piece that’s in there, I think there was a $0.04 FX -- what should we anticipate for the full year in terms of other expense flowing through to the P&L? Thank you.

Jason, as Dan noted in his comments, I believe, the Venezuela impact at this point we are projecting somewhere between a $28 million and $30 million impact. And then there’s a few other relatively smaller expense items that tend to flow through other expense on an annual basis, so again, it’s always been a difficult line to predict but you ought to be thinking around $30 million, plus or take, would be our best projection right now for that line item.

Okay, great. Thanks.

And our next question comes from the line of William Schmitz with Deutsche Bank.

Can you just talk about gross margin guidance for the second quarter? Is it going to be down considerably sequentially? Is it going to be up? What is the outlook there?

It should be up it the second quarter but we won't see the kind of expansion that we saw in the first quarter.

Okay, how about just from like the first quarter level, just the sequential margin trends?

Sequential on a year-over-year growth or on an absolute basis?

On an absolute basis quarter to quarter.

I’m not sure if I have that in front of me here.

It will be down, Bill, versus the roughly 45% number for Q1. A couple of things come into effect -- we will have anniversaried a good portion of the pricing that we took last year in August. That will no longer be an incremental benefit this year. And then with the higher trade promotion spending that we spoke to as well, some of that will begin to factor into Q2 as well, so as Dan said, we still expect a pretty healthy increase but probably not the level of increase in Q2 nor would you see the absolute gross margin being quite as high as in Q2 as it was in Q1.

Okay, great. And then we all kind of know how this game is played -- I mean, the promotional spending levels, is that kind of what you could spend or what you will spend?

I think, Bill, that we are trying to -- I’ll put it this way; we’re committed to share growth, as I said. It needs to be profitable share growth. I think given how we had such a solid first quarter, I would say we are being conservative about what we are going to spend but we are going to keep some dry powder available so that we don’t let this brand share erode.

Okay, good, that makes sense. And then lastly, I promise, did you give a number for your sort of restructuring and restructuring related charges for the year? I mean, is there going to be anything related to this high strength bleach changeover in the year? And also what the absolute number is you think for restructuring, both the -- what you would report and also the restructuring related?

Bill, our outlook still has the $20 million to $30 million range and it’s not impacted by the shift over to high strength bleach. In fact, the -- that shift over shouldn’t have any significant impact on fiscal ’10.

Okay, and how about CapEx?

CapEx, we’re still right around our $200 million to $210 million for the year. Over the next three years, there will be a little bit of capital involved with the shift over to high strength bleach but our forecast for CapEx is unchanged relative for the next couple of years, even including that project.

Okay, great, thanks. Sorry for jumping back on.

And our next question comes from the line of Chris Ferrera with Bank of America.

Sorry, I promise I’ll be quick -- just the timing of the restructuring -- so I guess Q1 was smaller than we had thought, and I think you guys said first half loaded, so how do you think that 20 to 30 is going to flow for the year?

Let’s see, if I think about it from a quarter standpoint, I think we had -- you know, my guess is, Chris, the second quarter will be -- will see about the same level of charges that we saw in the first quarter and then it will be down a little bit in Q3 and Q4 of next year and again, we’ll be in that $20 million to $30 million range.

Great, thanks a lot.

And this concludes the question-and-answer session. Mr. Knauss, I would now like to turn the program back to you.

I just want to thank everybody for joining us today. Obviously we feel very good about this quarter and feel very good about the balance of the year, so we will look forward to talking with you on the next quarter. Take care, everyone.

This concludes today’s conference call. Thank you for your participation.