The Clorox Company (CLX) Q1 2012 Earnings Report, Transcript and Summary

Donald R. Knauss - Chairman, Chief Executive Officer and Chairman of Executive Committee Lawrence S. Peiros - Chief Operating Officer and Executive Vice President Stephen M. Robb - Former Vice President of Financial Planning & Analysis and Member of the Leadership Committee Steve Austenfeld - Vice President of Investor Relations

Joe Lachky - Wells Fargo Securities, LLC, Research Division Christopher Ferrara - BofA Merrill Lynch, Research Division Nik Modi - UBS Investment Bank, Research Division Lauren R. Lieberman - Barclays Capital, Research Division Ali Dibadj - Sanford C. Bernstein & Co., LLC., Research Division John P. San Marco - Janney Montgomery Scott LLC, Research Division William Schmitz - Deutsche Bank AG, Research Division Javier Escalante - Consumer Edge Research, LLC Alice Beebe Longley - Buckingham Research Group, Inc. Edward J. Kelly - Crédit Suisse AG, Research Division John A. Faucher - JP Morgan Chase & Co, Research Division Joseph Altobello - Oppenheimer & Co. Inc., Research Division

Good day, ladies and gentlemen, and welcome to The Clorox Company First Quarter Fiscal Year 2012 Earnings Release Conference Call. [Operator Instructions] As a reminder, this call is being recorded. I would now like to introduce your host for today's conference, Mr. Steve Austenfeld, Vice President of Investor Relations for The Clorox Company. Mr. Austenfeld, you may now begin.

Thanks, David. 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; and Steve Robb, our Chief Financial Officer-Elect. We're broadcasting this call over the Internet, and a replay of the call will be available for 7 days at our website, thecloroxcompany.com. Let me remind you that, on today's call, 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's prepared remarks or supplemental information available in the Financial Results area 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. Please recognize that today's discussion contains forward-looking statements. Actual results or outcomes could differ materially from management's expectations and plans. 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 or outcomes to differ materially from management's expectations and plans. The company undertakes no obligation to publicly update or revise any forward-looking statements. Today, Don will start with some opening comments. Larry will then discuss our top line results for the quarter, followed by Steve, who will review our financial performance and outlook for fiscal year '12. And finally, Don will come back to wrap up with his perspective on our current operating and business environment before we take your questions. With that, let me turn it over to Don.

Okay. Thank you, Steve, and hello everyone, and thanks for being on the call today. I'd really like to start out today by thanking Dan Heinrich. Many of you know Dan well, who's retiring from the company as CFO later this month. And I think, through Dan's leadership over the past decade, he certainly had a substantial and positive impact on the company's performance. I think as many of you know, Dan joined Clorox in 2001 as our Controller, and then in 2003 was promoted to the Clorox Executive Committee and Chief Financial Officer. He's certainly a strong leader and advocate for our finance organization and really made people development a top priority, and I think that's evidenced by our ability to name a new CFO, Steve Robb, from within our organization. And Dan was also instrumental in developing our overall company strategies, which obviously have delivered superior stockholder returns over time. Now, in addition to his leadership with the company, I think Dan worked very effectively with the analyst and investment community over the years. I think, no doubt, that had a hand in his being twice-named the best CFO for our sector by Institutional Investor magazine, among his many awards. So, importantly, I think in the 5 years I've been here, Dan's been a great partner to me and the rest of the executive committee, and I'm certainly going to miss having him here. But we're grateful to Dan for his many contributions and wish him the very best as he moves on. I also want to congratulate our CFO-Elect, Steve Robb, who's with us today on the call. Steve has been with the company, I think as many of you know, since 1989, and most recently served as Vice President of Finance. So Steve really had day-to-day responsibility for the global finance function. Steve obviously brings a lot of deep Clorox and finance experience into this post. He's served as VP of Finance for several of our major businesses and as Finance Director for Product Supply as well. And in addition, Steve, for a number of years, has overseen our cost savings efforts, which I think as you all know, have been very successful. And Steve's going to give you the financial perspective in a few minutes and the outlook, but first, I'll turn it over to Larry.

Thanks, Don, and welcome to everybody on the call today. Hey, as you saw in our press release, we had a solid quarter and a solid start to fiscal year 2012. Volume was up 2%, and sales were up 3%. Top line results include 9 of 11 SPUs delivering year-over-year growth, driven primarily by product innovation and pricing across most of our businesses. Our margins were severely pressured by commodity costs and other inflationary pressures, but we feel good about our actions to get to improved margins over the course of the year. Overall, we're pleased with the results for the quarter in what continues to be a difficult economic environment. Hey, as usual, I'm going to focus my comments on market share, volume and sales and provide perspective on what drove our top line results. Steve will then provide the financial detail. Starting with our U.S. business, we continue to be confident about the strength of our brands. Our track channel share was down slightly in the first quarter, and, for perspective, track channels now comp for about 1/3 of our sales. On an all-retail outlet basis, we grew share over the past 52 weeks and held our gain share in all of our categories. Our total company share remains at an all-time high of 27.9%, up 1.4 share points since fiscal 2008, with private label up only 1 share point during the same timeframe. While our U.S. categories continue to be impacted by the weak economy, the trends are improving. Category consumption on an all-retail outlet basis were down only 1% for the past 52-week period versus year-ago declines that were closer to 2%. In International, our market shares were more mixed, with shares down a bit in Latin America due to pricing actions. Categories in the international markets are healthier than in the U.S., with both positive volume and dollar sales trends. In our Cleaning segment, which includes our Home Care, Laundry and Away From Home businesses, volume declined 1% and sales declined 2%. Home Care, the largest business in this segment, grew sales and market share behind higher shipments of Clorox disinfecting products, driven by stronger merchandise and support for the back-to-school and cold-and-flu seasons. We also saw growth behind innovations like our new bleach foamer spray and new Liquid-Plumr Double Impact. Gains in Home Care were more than offset by lower shipments of Clorox laundry additives, driven by continuing weak category trends and recent pricing actions. In August, we executed a 12% price increase on Clorox liquid bleach and a 5% increase on Clorox 2 to address higher commodity costs. Most private label and branded competitors have followed. On the positive side, our all-outlet share of laundry additives is up about 2 points on a 52-week basis, and we achieved an all-time record share in Clorox liquid bleach. Improving our laundry business is a major area of focus, and we feel good about the new plans we have in place to drive brand and category growth over the long term. We just launched a new advertising campaign called Bleachable Moments that targets a new generation of users, employing humor to highlight problems that only bleach can solve. In addition, in January, we will introduce a new bleach gel in a precision pour spout package that will make it easier to use bleach in the new HE machines. In our Household segment, which includes bags and wraps, charcoal and cat litter, volume increased 5% and sales grew 3%. Glad had strong sales growth, but volume was down slightly due to the volume decline in base trash bags driven by our May pricing action. Sales grew behind pricing and trade-up to premium trash bags like Glad OdorShield with Febreze. We also launched several new products that drove sales growth in our Glad food storage line. Looking forward, we just introduced new Glad base trash bags that use breakthrough patented technology to deliver a stronger, consumer-preferred bag with less plastic. This is the first major innovation of base trash bags since we purchased Glad back in 1999. Cat litter grew sales and market share behind product improvements on the base brands, as well as a new line extension focused on extreme odor control. Charcoal volume was up in the high single digits, although sales results were less impressive because of a mix shift to very large sizes. A number of major retailers have been investing in selling large packages of Kingsford at sizable discounts in order to build store traffic during key holidays. We sold a lot of charcoal on July 4, but the mix was unfavorable from a sales and profit standpoint. We plan to put a number of changes in place to diminish this issue for next year's charcoal season. In our Lifestyle segment, which includes food products, water filtration and natural personal care, we increased shipments across all of our businesses, delivering a 6% volume increase and a 6% sales increase. Burt's Bees had an excellent quarter with double-digit volume and sales growth behind wipes and sensitive skin care product launches, innovation of lip products and expansion into international markets. We're also excited about the upcoming launch of a new brand called Good from Burt's Bees. This brand is targeted to younger consumers and will offer natural products with vibrant fragrances. Good hits store shelves early Q3. Brita grew sales behind our launch of the new Brita On-the-Go bottle, which is well ahead of expectations and largely incremental to Brita volume. Finally, our food business saw solid volume gains as a result of base brand growth, new salad dressing flavors and Hidden Valley-branded veggie kits. In our International segment, volume increased 3% and sales were up 9%, driven by both price increases and favorable foreign exchange rates. The greatest volume gains were in our well-established business in Argentina, the expansion of our Glad business in China and distribution gains in a number of small emerging countries in Asia and the Middle East. Let me now provide an update on pricing, since it's a topic that we often get a lot of questions about. We took a 10% price increase in Glad trash bags back in May and included aggressive pricing on other products in our FY '12 plans, given the dramatic escalation in commodities. We're happy with the results behind our Glad trash price increase, given that our recent track channel shares remain very healthy. The bulk of our fiscal '12 price increases were executed in Q1 and included increases on Clorox liquid bleach, Hidden Valley salad dressings, Brita pitchers and many of our home care products. We also took aggressive pricing actions in the international markets like Argentina and Venezuela to keep pace with high inflation rates. Thus far, our pricing actions have gone as expected, and competitors, including private labels, have also increased prices in most categories. We do expect pricing to have a near-term dampening impact on volume, as it typically takes 3 to 4 quarters for consumers to adjust to new pricing. That said, we anticipate our pricing actions with contribute to sales growth for our brands and our categories. Coupled with our brand-building efforts and strong innovation pipeline, we continue to feel good about our sales outlook for the year at 1% to 3%. So to sum up, our Q1 results show a solid start to this fiscal year. We're on track, despite weak U.S. categories and aggressive pricing actions to offset commodities and other inflationary factors around the world. And we continue to invest in the long-term health of our brands, with strong demand-building programs and strong innovation. With that, I'll turn it over to Steve.

Thanks, Larry, and welcome everyone. I'll provide more depth on our first quarter results and our financial outlook for fiscal '12. We're pleased with the start to the fiscal year. As Larry said, we delivered 2% volume growth and 3% sales growth, and we continue to anticipate sales growth in the range of 1% to 3% for fiscal '12. First quarter gross margin decreased 250 basis points to 41.8% of sales, compared with 44.3% in the year-ago quarter. The decrease was driven by higher commodity costs, inflationary pressures in manufacturing and logistics and unfavorable mix. But these factors were partially offset by the benefits of price increases and strong cost savings of $24 million, with $20 million of the savings reflected in gross margin. Now while we had anticipated that our Q1 margin would be down, our results came in lower than prior assumptions due to unfavorable mix and higher inflationary pressures. For the fiscal year, we continue to anticipate commodity cost increases in the range of $140 million to $150 million, as well as $40 million to $50 million of inflationary pressure in manufacturing and logistics. Although there was a decline in the price of oil during the last few months, energy costs remain highly volatile. Equally important, overseas demand for many raw materials remains quite high. Both of these factors lead us to believe that overall commodity costs will remain elevated during this fiscal year. We're taking steps to offset these impacts for the year. Now we anticipate the combined benefit of cost savings and broad price increases across our global portfolio will enable us to hold gross margin flat for the fiscal year, with year-over-year improvement expected to begin in the second quarter. Our fiscal '12 outlook continues to anticipate total cost savings in the range of $90 million to $100 million. First quarter selling and administrative expense increased versus the year-ago quarter as a result of nearly $12 million in advisory fees related to the withdrawn proxy contest. As planned, we're continuing to ramp up our multiyear investments in global information technology systems and new R&D facilities. About a month ago, our first countries went live with new international systems, and we're pleased with how the transition has gone so far. For fiscal '12, we continue to anticipate incremental spending in the range of $36 million to $40 million behind the extension of our SAP platform globally as well as our R&D facilities. These incremental spending will be made throughout the fiscal year. Making these investments in fiscal '12 and into the first half of fiscal '13 will provide platforms for long-term growth and cost savings. In addition, we expect selling and administrative cost to reflect higher incentive compensation expense than in the prior fiscal year when we didn't hit all of our financial objectives. We also expect a negative impact from very high inflation in many international markets, as we saw in the first quarter. Overall, we anticipate selling and administrative expense to be about 15% of sales in fiscal '12 before tapering off over the next several years. Advertising for the quarter was 9% of sales, about flat year-over-year. As a reminder, we were up double digits in the fourth quarter of last fiscal year. Q1 also reflected a greater investment in introductory trade promotions behind new products launched in the quarter. We expect that our mix of spending will shift to advertising later in the fiscal year. For fiscal '12, we plan to maintain our targeted range of 9% to 10% of sales to support our new product introductions and base business. Our effective tax rate of 30.5% in the current quarter was about flat versus the year-ago quarter, as rates for both periods reflect the benefit of tax settlements. For the full fiscal year, we now anticipate our effective tax rate will be in the range of 32% to 33%, with some variability across quarters. Turning to cash flow. Free cash flow from continuing operations increased to $94 million or 7% of sales, compared with $92 million in the year-ago quarter. The increase was the result of a discretionary pension contribution of $15 million in the year-ago quarter, partially offset by lower earnings in the current quarter. In Q1, we did repurchase a small number of shares of our common stock at a cost of about $9 million. We currently plan to use the remaining $150 million of proceeds from the sale of the Auto Care business to repurchase shares, likely in the second half of this fiscal year. Net of all of the factors I've discussed today, we delivered diluted earnings per share from continuing operations of $0.98, flat versus year-ago. Turning to our earnings outlook. We continue to anticipate diluted earnings per share from continuing operations in the range of $4 to $4.10 for the fiscal year. To recap, this outlook anticipates continued commodity and general inflationary pressure; higher selling and administrative expense, including our infrastructure investments; the advisory fees related to the withdrawn proxy contest; and inflationary pressures in international markets. The outlook also reflects updated foreign exchange rates, the updated timing from share repurchases now occurring later in the fiscal year than previously anticipated, a lower anticipated tax rate and our solid top line performance in the first quarter. In closing, we're pleased with the first quarter, and we remain confident in our fiscal '12 plans and outlook. Our innovation plan is off to a good start, and we anticipate strong incremental sales from new products. We're taking the right steps to recover gross margin through aggressive pricing actions and cost discipline. We're also investing in global information systems and new R&D facilities to enable long-term growth and cost savings. And we remain committed to using our strong cash flow to invest in inorganic growth and return excess cash to our stockholders through dividends and share buybacks. With that, I'll turn it back over to Don.

Yes, why don't we go ahead and open it up to questions?

[Operator Instructions] And we'll first take our first question from Bill Schmitz with Deutsche Bank.

Did you say what the $6 million of other income was in the quarter?

Yes, Bill. Keep in mind, the other income includes some transition services revenue we're getting from the sale of the Auto business. We're continuing to support that transition. So the primary difference in the other income and expense is the fees we're getting on the TSA agreement that we have.

Will that be pretty consistent throughout the year? Does it look like it's the...

You're going to -- we have some in Q1. There'll probably be a little bit in Q2, and then you're going to see a drop off because the transition will pretty much wrap up in Q2 and early Q3.

Okay. And then, just on Argentina, are there any concerns that it's kind of heading towards hyperinflationary land? Because I've seen some of the price increases across the group, and just the inherent inflation in that market. I mean, is that on your radar screen?

So we don't see hyperinflation coming, but they do have high inflation rates. They're higher than the government will admit to, but they're typically cited in the 20% to 30% kind of range. And essentially, we're taking as much pricing as we can to keep up with the inflation. And I obviously can't predict government actions and other activity in Argentina, but we're not projecting hyperinflation at this point.

Bill, the other thing I'd add on that, when you look at our volume growth internationally, excluding Canada, so as you know, because you exclude Canada, most of our international volumes is in Latin America, and Argentina is a big chunk of that. Our volume was up 6% in those markets, so volume is pretty robust. So we think the pricing we're taking is certainly not dampening down pretty solid volume performance.

Okay, can you just directionally tell us what percentage of sales Argentina is?

Bill, it's about 1% to 2% for total company sales.

Oh, okay. It's tiny. Okay. And I mean, you probably won't answer the question, but do you think the bleach business can grow this year, total sales? I know there's a big price increase coming through.

We sure hope so. And I think pricing will be part of it. But also, as we look forward to the later part of the year and early next year, there'll be more and more innovation that will help drive that growth.

All right. And next, we'll go to Ali Dibadj with Bernstein. Ali Dibadj - Sanford C. Bernstein & Co., LLC., Research Division: Wanted to learn a little bit more about the volume versus price mix trade off. Given on the guidance for the year, it still is and was, volume is roughly flat and 1% to 3% sales, so mostly price. And I'm just trying to get underneath, kind of, why exactly was it so different this quarter? I understand the bucket is mixed, but why was it different? And I guess I asked that coming from, or in the context of, our common, at least, refrain, which is not as positive as yours around the price elasticities of your categories. So I'm just trying to understand what's different. What didn't happen like you had planned?

So I'd say that volume was a bit ahead of our expectations quite frankly. We expected more flattish kind of volume in the first quarter. I'd also say that a lot of the pricing activity has just kind of barely kicked in, right? Most of it took place effective in August, and so it's barely getting on the shelves. The elasticity varies considerably by brand and by category, but, in most cases, we do see volume dampening as a result of pricing actions. The other thing I'd say is the competitors following us is probably, if anything, a bit ahead of our expectations at this point. So in each case, when we model pricing action on any brand, we look at will competitors follow? When will they follow? How quickly will they follow? What portion will they follow? And at this point in time, we're a bit ahead of those projections. So we're optimistic that we will weather the storm in terms of this pricing.

I think, Ali, as we noted on the prior call, and I think some of you folks have noted that, in our modeling, we've been somewhat more conservative on the volume fall off than some of our competitors. So I think, as Larry said, we were certainly heartened by the almost 2.5% volume growth in the first quarter.

The only thing I'd say is that the bulk of the pricing in Q1 was really on the International side, and that was really keeping up with inflation in places like Argentina and Venezuela. Ali Dibadj - Sanford C. Bernstein & Co., LLC., Research Division: I guess I'm a little confused because you didn't say mix as any part of that answer, and that seems to be a surprise. So why can't I read this as, yes, volumes were good where you took prices, but people traded down?

So we did have a little bit of a mix issue in Q1. I cited one big element of that, and that was the element of charcoal being, what you might call, footballed by some major retailers, particularly around key holidays like July 4. So we sold a lot more large sizes. We sold a lot of charcoal, which is good, but we sold a lot of large sizes of charcoal. These were investments made by our retail partners, not money that we invested, but it did drive a lot more volume toward bigger sizes that tend to be less profitable and lower sales per unit. Ali Dibadj - Sanford C. Bernstein & Co., LLC., Research Division: So July 4, you probably knew about, happens every year, last time we talked.

There's more -- there's actually -- quite a bit more extreme this year. If you look at the pricing and the individual retailers versus a year ago, in one case, it was actually 50% below what they did last year, and in another case, 20%. So it was definitely exacerbated versus anything that any reasonable person would have predicted. Ali Dibadj - Sanford C. Bernstein & Co., LLC., Research Division: Okay. So Kingsford -- but if you look at price mix for Cleaning, probably down a little bit over 1; for Household, close to 2; for Lifestyle, roughly flat. If price is always up and up and up and up, then I guess I'm confused how we keep saying there's a lot of pricing power when it feels like there's massive trade down going on, which you yourself in this report say that you're surprised by. So I can't -- I'm just having, honestly, trouble putting "everything was as expected" and "but it wasn't" together.

You know Ali, we're not suggesting that all of the mix was a surprise. There's certainly an element of the mix that we were anticipating, with some modest trade in across the portfolio, and we've been seeing that for sometime. The biggest component of that was this charcoal promotion, and frankly -- or I should say, the charcoal activity driven by the retailers and frankly, that's not going to be that extensive through the remainder of the year. And as you know, given the seasonality of that business, that'll lessen into the second quarter. So I wouldn't want to make too much of a deal about the mix issue. It'll probably still be modestly negative throughout the year, that's what we're assuming. But I don't think it'll be as great as it was in the first quarter. And again, not a significant surprise to us. Ali Dibadj - Sanford C. Bernstein & Co., LLC., Research Division: Okay. But just to finish that one, was the mix intra-category mix? So i.e., trade down? Or inter-category mix, i.e., you sold more of the lower price per unit stuff?

It's a combination of factors, and it's little bits and pieces all over the place. Some cases, it's category, different country and -- but there is definitely a -- it has been and continues to be a bit of a size migration toward value channels, which tends to have bigger sizes. Charcoal being one notable example. Ali Dibadj - Sanford C. Bernstein & Co., LLC., Research Division: Okay, okay. I guess I'll stay a little bit confused still on that one. But let me ask you just on something totally different, or maybe a detail, I apologize. But there are different ways one can interpret kind of the signaling you may be creating with the statement that you're going to buy the Auto Care shares mostly in the back half of the year? Of course, again, there are many ways to interpret that. But I'm just trying to understand why maybe I'm just misinterpreting it.

Yes. Ali, this is Steve Robb. Let me see if I can bring some clarity. And let me just step back and just make sure everybody understands this. So first of all, in fiscal '10, we repurchased about 10 million shares. Okay? And as we had indicated earlier in my comments, we've also went back into the market with a 10b5-1 and repurchased a few shares in the first quarter. So we have $680 million of net proceeds from the Auto business. Of the $680 million, we've got about $530 million that we've used to buy back shares. So there's about $150 million left. At this point, we do anticipate taking the $150 million of Auto proceeds and going back into the market, probably some time in the second half. Now our outlook assumes a range of potential things that we may do. So depending on market conditions and other things, we could choose to go in a little early or not. But as of today, our expectation is we'll go into the second half, use the $150 million of proceeds and go ahead and complete the share buyback tied to the use of the Auto proceeds. Okay? And we'll update the outlook as appropriate as changes warrant.

All right. Next we'll go to Chris Ferrara with Bank of America.

I know in the release it says -- I guess there was $8 million in restructuring and related charges. I guess, can you -- I apologize if you said this already. Can you talk about how much you guys spent on the IT and facility stuff? Because I think last quarter, you guys had said it would be, I guess, evenly split by the halves but it would be Q1 heavy? So much of that was with the IT and facility stuff?

So Chris, for the year, we're still anticipating that the restructuring-related costs will be in the range of $20 million to $30 million. As noted in the press release, there was about $8 million in Q1. I think what you're pointing out is you don't see any of that on a typical restructuring line of the P&L, and I think that's going to be the nature of the type of cost we're going to incur this year, where they're going to be on other lines to the P&L. And that's no different than what we've seen in some past years as well. Specific to Q1, the $8 million book down is about $5 million or so in cost of goods and another $3 million I believe, round numbers, in the selling and admin line. And a good portion of that was related to the IT transition we're going through in our international businesses. And I think you'll see more of that as the year goes along.

Okay, great. And I guess, last quarter, you guys had said that you thought EPS would be about 35%, 40% in the first half. Is it still a good number to work off of?

Yes, there's not a material change to our financial outlook at this point to suggest that that would be materially different.

And I guess, also on commodities, right, so you kept the commodities guidance the same, and I think you said something like $80 million to $90 million of commodity pressure in the first half. So not that much of a change there either, right?

Yes, I think -- that's absolutely right. I think that we're still holding to the $140 million to $150 million in commodities. It will have more -- more of that impact is going to happen in the front half versus the back half. Keep in mind, I know there's been a lot of discussion about softening in the energy markets. But one thing that we've seen over time is that, in order for unit prices to really start coming down, we need to see energy prices come down and stay down for some sustained period of time. So at this point, while we do think that certain commodity groups may have peaked in the short term and will begin to taper down through the second half of this fiscal, we're still projecting $140 million to $150 million in pressures, and that seems directionally correct based on what we know today.

And next we have Joe Altobello with Oppenheimer. Joseph Altobello - Oppenheimer & Co. Inc., Research Division: Just a couple of quick questions. First, in terms of volumes that you saw in the quarter and in terms of the trends in particular, did you guys notice a tapering off of volume growth after the August price increases?

Generally on the brands where we took pricing, yes. We saw a tapering off. Joseph Altobello - Oppenheimer & Co. Inc., Research Division: Was that because of prebuying ahead of it? Or did you feel like there was just less demand on the part of retailers?

That was driven by inventory adjustments more than anything else. And I wouldn't call it material, but we're not really seeing a consumer impact as yet. Joseph Altobello - Oppenheimer & Co. Inc., Research Division: Okay. And then secondly, on the gross margin line, it looks like the impact from manufacturing logistics was rather large relative to what you've seen in the past few quarters. Could you talk to that? And is that mostly diesel?

Yes. Well, it's got a little bit of that. But again, if you look -- if you step back and just look at our first quarter gross margins, gross margins were down about 2.5 points. We had about 3 points from commodity pressures that we've already discussed, and then there was 2 points from inflationary pressures that we're seeing in logistics and manufacturing, really globally. I guess the good news about the gross margin in the first quarter is the combination of the partial pricing benefit as well as the cost savings allowed us to reduce that by about 50%, so we kind of cut that in half. I think as we look to the balance of the year, we're still looking at the gross -- the commodities, $140 million to $150 million, and we're still going to have those pressures we discussed in manufacturing and logistics, although again -- there again, that should start to ease as we go through the year. Joseph Altobello - Oppenheimer & Co. Inc., Research Division: Why was that piece so large though in the quarter?

You'd be surprised. There's even some tightness in the markets for trucking and things of this nature. And we've got diesel costs and other wage and other inflationary pressures. So there's just a lot of pent-up pressure that's in the system that's been building for some time, and that's really started to come through. Joseph Altobello - Oppenheimer & Co. Inc., Research Division: Got it. Okay. And just one last one, the advisory fees you saw in the quarter, are there any additional ones you're expecting in the December quarter?

I'm sorry, can you repeat your question?

Was it the advisory fees, Joe? Joseph Altobello - Oppenheimer & Co. Inc., Research Division: Yes, the advisory fees. Is that over? Or do you see additional fees in the December quarter?

That's the bulk of it. That's essentially it on the year. It was $12 million on the quarter. There might be a little bit in Q2, but it's essentially over.

It's essentially over.

And next we have Alice Longley with Buckingham Research.

Could you give -- I think your profits turned positive according to your guidance in the second half of the year. If we look at the pretax profit performance of your four groups, you were up International and down in the three domestic groups. Are we going to see international profits turn down and unfavorable exchange in the second half? And then for the three domestic groups, will they all turn up? Or could you give us a sense for where we're going to get the better performance of the three groups in the second half?

Let me lead off and maybe give you an update on foreign exchange and then ask Larry to talk a little bit about the segments. In terms of foreign exchange, first, the good news is Clorox is less exposed, I think, than the many other companies in our industry, obviously, to foreign exchange. I think if you go back about 3 or 4 months ago, there was a hope that we might have some very modest tailwinds in foreign exchange. I think as we look at the markets today, given everything that's transpired, I think what we would say is that foreign exchange will probably be about neutral for the company on a full year basis. It might be slightly unfavorable, and that might come through over the next couple of quarters. But at this point, we don't think it's material to the company.

Alice, I don't know that I want to get too specific on segment profitability by quarter, but I'd say directionally, in addition to the FX reference that Steve just noted, we would certainly expect our Household and Lifestyle segments to improve profitability as the year goes along. Household because the pressure on resin, particularly with the for the Glad business, will lessen. And again, that's not that we're expecting resin prices to come down, but just the year-over-year comparison will be more favorable. In the Lifestyle segment, you do have an awful lot of promotional spending going on right now behind a lot of the innovation on really all those businesses. And as that becomes more normalized throughout the year, I think those two businesses in particular should start to see some year-over-year profitability gains. I think Cleaning will probably still be our most challenged business from a profitability [Audio Gap]

It depends on where resin goes, to a great degree, but yes it's possible.

And next we have Joe Lachky with Wells Fargo.

First of all, congratulations, Steve. Have you -- Don, have you talked to Icahn since you withdrew his slate of directors? And any indication of his level of involvement or cooperation going forward?

Well, obviously, Joe, I don't comment typically on conversations I had with investors. I will say this, and just as kind of a reinforcement of what Carl has said publicly, which is he's an activist, and that's what he does. If he doesn't believe he can activate, so to speak, he's probably going to be fairly quiet. But I don't know what Carl plans on doing. But so far, it's been certainly a good relationship. And I don't expect that to change, and we'll see what, given his focus on other areas right now, like Navistar, we'll see where he goes in the future.

Okay. And then a question here on the Cleaning segment. If you could kind of go through, I guess, the Laundry and the other parts of it. I guess you're seeing some ongoing category weakness in Laundry. If you can you maybe talk about trends you're seeing there, whether it's accelerating, decelerating on a category basis? And then you also mentioned some increased merchandising needed for disinfecting products. Are those basically neutralizing any price increases you're having there? And for the category as a whole, or for the segment as a whole, when do you expect the pricing mix to turn positive?

So let me try -- there's a bunch of questions there, let me try and tackle them one at a time. So in terms of the segment, obviously, two big components are Home Care and Laundry. I would call our Home Care business in very good shape. We're growing volume, we're growing share, and we had another good quarter on disinfecting wipes, as well as other disinfecting products, behind both the normal flu season kind of back-to-school merchandising activity that we do every year, and we continue to do it in a very strong way, as well as some good innovation on some -- which you might call base brands, as well as line extensions. Things that I mentioned like the Clorox Bleach Foamer spray, which is doing quite well and above expeditions. So the Home Care story I think is a very solid one. That's our biggest business unit. That's a big portion of that segment. Quite a different story on the Laundry side, where we are definitely seeing very weak laundry trends, bleach trends. We continue to do well from a share standpoint, particularly on liquid bleach, where we had all time shares, but we're suffering from category declines. As we take pricing, this is probably the single brand where we've paid the most attention to, in terms of what the modeling is and what the -- both the customer and competitor behavior is going to be. So we're in the very early beginning of that to see how that will play out. But generally this is a brand where pricing does impact volume and obviously, this is a pretty aggressive price increase. We're taking a 12% price increase on CLB. Net we think will be positive probably in the sales line over the longer term period, so over maybe the next 12 months. We'll probably see some positive sales growth because of pricing, but we'll definitely see some dampening on the volume side.

Larry, if I could just add. Joe, on CLB in particular, because that is, as Larry said, the most challenging, I think there are two fundamental issues which we believe we are tackling both of them. The first one fundamental issue, and we talked a bit about this before, is dosing, where now, with the U.S. market about 30% to 35% HE machines, clearly, the dosing issue, or the confusion around dosing and the difficulty of pouring into those small additive and laundry compartments, is problematic. So we think the new product that we're launching in January, the gel product, helps address that fundamental issue. And of course that product will be introduced in January. It will be tied to the second key issue, which is we've not educated the newer generation of people of how to use bleach, both in the laundry room and outside, and the Bleachable Moments campaign is certainly an attempt to do that. We've gotten good feedback from consumers so far about that campaign that just started about 3 weeks ago. But clearly, we will tag the gel product on the end of that campaign as well. So those are the two big issues that we think we're hitting head-on as we move into the second half.

And next, we have Javier Escalante with Consumer Edge Research.

I have a couple of questions. One is just simply a clarification on the SG&A leverage. You guys said that -- or ratified the target of $36 million to $40 million in IT spending and, at the same time, are providing a break out of restructuring charges versus called out SG&A. So I'm a little bit confused whether -- how much of it is the same thing. So if you can clarify whether the IT spending is above and beyond what you guys are referring as restructuring? And if it is, how much of that IT spending fell in Q1, and how -- whether we should expect an acceleration for the back of the year? And then I have a question with regards to the volume and innovation.

Okay. Javier, this is Steve Robb. We may be best in taking this one offline and giving you a little bit more granularity. What I would say is we are -- our outlook does anticipate $36 million to $40 million of infrastructure investments. IT, as you had mentioned, is clearly included in that. And yes, we do expect the investments in our ERP implementation to ramp up as we go through the next couple of quarters, and you'll see that in the numbers. Some of that's reflected in the $20 million to $30 million of restructuring costs, but again, I think, let's have a discussion maybe offline, and we can give you a little more granularity around that.

So basically, there is an overlap between the two. So It's not the restructuring plus the IT. There is a little bit of overlap in these two figures, right?

Yes, there is some overlap in the figures, and we can get you some information offline on that if that's helpful.

No, for sure it's going to be helpful. And then the second question has to do with how the pricing goes or flows through your P&L, and we see it on retailers' shelves, right? And I know that IRI is only 1/3 of your sales, but in IRI, actually, we saw price increases already in the September quarter, and we saw volume deceleration basically in the levels of 3% to 4%. So then the question then is, you basically are saying, in terms of the reported volume, that because pricing was taking -- in the middle of the quarter, basically in August, you didn't see volume actually decelerating. On the contrary, volumes actually turned out better than expected. So you can -- if you can explain why is it that we saw price increases in Hidden Valley and all this stuff in the track channels, even though it seems like you guys didn't report it? So it's a little bit confusing basically to seeing the price increases coming first in the consumer level and not seeing in the reported side. I would had expected it to be the vice versa. So if you can clarify that situation and what should we be thinking about volume then in the second quarter, given that -- basically, what you're telling us is that volume didn't weaken because there was barely any pricing in the marketplace?

So let me be a little more specific, maybe this will be helpful. So I talked about the Glad trash price increase, which was back in May. So that is a price increase, which has been basically fully reflected at retailers, where we are seeing the volume impact in our trash business. And volume on Glad, as we reported, was down slightly. Sales were up, but volume was down. So that's the impact we see from -- typical impact we see from pricing. On the other brands, it's just starting. So the consumer impact is kind of barely out there. You have all kinds of other merchandising activity going on, particularly in the broader set of channels. So Charcoal, it's a big quarter for Charcoal. We talked about some of the special merchandising that went on in Charcoal that affected our volume in a big way, didn't help our sales in a big way. So there's all kinds of other factors but, generally speaking, we definitely will see volume losses as a result of pricing, and our forecast for the year is about flattish volume, despite our sales going up 1% to 3%.

And would you expect volumes to weaken, say, in the realms of, say, 2% to 3%, given that this is pretty much what we saw back in 2008, 2009, that would be a reasonable expectation for volume to weaken in the second quarter?

I don't think it's going to -- I understood your question right, I don't think you can extrapolate and say, hey, you did okay on volume in Q1 and therefore, pricing is okay. Particularly when you dissect that volume, a lot of that volume growth came in the international markets, which have the natural buoyancy of healthy categories. In the U.S. markets, our volume wasn't as strong, and that's where -- that's I think the pricing that you're addressing here, the track channel data.

Javier, I think one of the messages we are trying to communicate today is that, by and large, at this very early stage, pricing is playing out about as we expect it. To Larry's point, it's still early, so you're not seeing the full impact on volume yet. But I think even in the track channel data, I'm glad you acknowledge it's only about 1/3 of our business in the U.S. But even there, as I think some of the analysts are reporting, or IRI and Nielsen are reporting, in September, you start to see the mix of sales growth shift a bit, with pricing playing a bigger role and volume starting to taper off. And I think that's what -- consistent with what Larry said and what we've been pointing out lately. As we move into Q2 and Q3, you'll begin to see a dynamic play up. Pricing will play more of a factor in both track and all-outlet performance, and volumes will begin to taper off. And overall for the year, it's early, but I just don't think we would expect to see any material difference versus our earlier assumptions.

Yes. Because what is confusing about this quarter is, as you said, that leaves relative to your own expectations, right? Gross margin actually came weaker, but in the end, they operating profit growth decline was a lot, at least in my numbers, a lot better than you guys thought it would be. So essentially, the upside or the benefit came in the SG&A line, even though you have $12 million of legal charges. So I'm trying to understand how that SG&A leverage play out, how much -- what exactly is happening? Because it's very confusing this quarter for you guys, or at least for me.

Well, look, I would -- this is Steve Robb. I would just say that I think we had a very good start to the year, in the first quarter. I think we feel very good about the numbers. We certainly delivered good top line growth. We did have a little bit more pressure on the gross margins, but it's one quarter of four quarters. And so I think, at this point, we feel like flat volume on the year, the 1% to 3% growth, and gross margins being about flat. I mean, that still feels right to us. And there's no question about that, we had good volume in the first quarter based on the fundamentals of the business. But as Steve's point, you will see that taper off a bit as expected. And as we've seen before, it tends to come down for a couple of quarters, and then it comes back. Okay?

It's obviously quite different by business unit. So we talked about some great growth on Burt's Bees, which is totally unaffected by pricing now or later in the year. And so it really depends on business unit in terms of those trends.

And next we have John San Marco with Janney Capital Markets.

I was just hoping you could discuss the margins in the Lifestyle segment and whether there was also a meaningful mix issue specific to that segment or if it was innovation, cost? Or what exactly keeps pushing margins lower there?

John, there were two primary elements there. One is that segment, as with the others, is facing some commodity pressure, and you weren't seeing this -- perhaps the same amount of pricing there taken in that segment as we have some of the others. But I think the other primary aspect of Q1 was a lot of the introductory margin cost and the advertising behind new products. Because every one of those segments had a pretty healthy amount of innovation in the quarter, and you might see that continue for another quarter or so. But I think that will normalize as we go throughout the year.

Yes. And I would just build on that. It really is the commodities and inflationary pressures that we've talked about that had appeared to have peaked and, again, it should be tapering off over the next couple of quarters, and you'll see those margins improve as we go through time.

And so the year-over-year commodities actually worsened in the September quarter?

They were higher than the year-ago period, yes.

Okay. And then some of it also you said was the new product. But it's not that the new product is lower margined and will be a structurally dilutive but just...

It's the introductory cost, John.

Okay, would you expect it to be accretive over the longer-term?

Yes. The new products that we're bringing out are very margins. They're very good. They're not dilutive to the franchise.

Okay. And then lastly, just a quick housecleaning item, was there some IT -- I guess a little -- a footnote was a little confusing to me. Was there some IT expense allocated differently this quarter out of corporate and into some of the segments?

Well, keep in mind that the international ERP implementation, we are charging our International division, as you do in this, for the cost of that implementation. So as we make these investments in infrastructure, you will see that come through the International numbers, and that will have the tendency to suppress the profitability. And so you have to kind of look through that to look at the underlying health of the business.

Was there something that came out of the corporate line as a result? Or some...

John, what I think you're referring to is in the corporate profitability. A lot of the upfront discovery work related to the implementations we're doing now, was done a year ago, and that ran through the corporate segment. This year, as Steve is noting, more of that is going actually against the business segments, which is International for the most part, because now, we're going through the implantation.

Next we have John Faucher with JPMorgan. John A. Faucher - JP Morgan Chase & Co, Research Division: Just wanted to talk a little bit about the Charcoal promotional activity, and you talked about the seasonality of the business going down. But is this something where, longer-term, we're going to have to look at some potential margin degradation in terms of this continuing? Do you think the retailers are switching to this as sort of a go-to package? And then separately, on Good, which I realize is a relatively small piece, but the last time we saw you guys go, sort of little more math with the higher-priced products that was sort of out of your category sweet spot, was on the Green Works Laundry Detergent. So I'm just wondering, what are the lessons learned on Green Works Laundry that maybe will help you as you look at Good this time?

Okay. So I think on Charcoal, Kingsford is one of those brands that retailers will invest behind because it builds traffic in their stores, particularly on the key holidays. And we have a lot of on-track channel business in Kingsford these days, in places like the home hardware channel. So we saw basically one retailer respond to another retailer. At the end of the day, it's probably not good for anybody. So to some degree, I think they're all concerned about how do we address this, and we will be addressing it in some structural ways in terms of sizing and other things that can hopefully prevent it. Obviously, in some ways, this is good for us because it builds our business and gets us big-feature ads. In other ways, it's not so good. But I think this was probably -- will go down as an extraordinary year in terms of the impact it had on the business.

As far as Good, John, what I would say the learning on -- as it applies to Green Works, I think one of the things we learned in Green Works' launching prior to the recession hitting was that, if we could get the price points of natural products closer to traditional cleaners in that market, we would stand to have a much better chance of driving trial and repeat and depth of repeats. So we've continued to re-engineer the Green Works products to get the pricing down, and we are doing that. For example, in one major retailer now, Green Works All-Purpose Cleaner is the same price as Clorox Clean-Up. So we're starting to see that, some vibrancy come back. I think the learning -- how that translated into Good was we wanted to offer a product that met the National -- Natural Products Association definition of natural, which is 95% of the ingredients being natural, but at a significant discount to natural products. So you see Good pricing coming in at 15% to 20% cheaper than Burt's, for example. So I think that's kind of the learning -- we wanted to make sure we are offering a natural product, but even getting it below the gold standard in the category and closer to traditional personal care products.

And next we'll go to Lauren Lieberman with Barclays Capital.

So just a quick one on SG&A. Given that you guys had the advisory services' cost in there this quarter, outside of that, it looks like there were sort of remarkable SG&A savings or controls of overheads or whatever it may have been. So can you just help us a little bit with where you were able to maybe save some short term in SG&A, or selling and admin, if we should think about that accelerating from here, outside of what we know in terms of the IT and ongoing investments in the infrastructure.

Yes, and I think it's a good question. And just to recap, SG&A for the quarter was at about 14.5% of sales, which, to your point, did include the advisory fees of $12 million. What I would say is, first and foremost, we do continue to very tightly control our SG&A spending. I mean, that's not new. We tend to have SG&A spending historically that's in the range of 13% to 14%, which -- can puts us in that top tertile in terms of companies that are really controlling SG&A. That said, I think you will see the infrastructure investments in IT and real estate build as we go through the year, which is why we are projecting SG&A cost to be about 15% of sales this fiscal year. And it will probably be somewhat elevated as we go through the first half of fiscal '13, because we're going to be continuing those infrastructure investments. All of that said, we would anticipate that, as we work through these infrastructure investments, that we will get back into this 13% to 14% SG&A range as a percentage of sales as we anniversary these investments.

But Lauren, there was nothing extraordinary in the first quarter, to your point. I mean, it's just continued discipline against travel and entertainment spending and everything else that impacts that line.

And one other thing I would add is, relative to the 15% of sales outlook that we're suggesting for the year, there is an element of incentive compensation here. Where last year, Steve noted in his remarks earlier, we reduced that expense as the year went along last year because we admittedly didn't hit all of our financial targets. This year, we're just assuming a more normalized expense. So as I think you get in the future quarters, that will add a little bit to the selling and admin. What I would also point out, though, is if you back out the incremental IT and R&D investments we're making this year and the advisory fees from the first quarter, our selling and admin's really growing about in line with sales. So, to Steve's point, I think it's all being pretty well managed.

Okay. So the -- and so last year's first quarter was a normalized incentive comp quarter. It was through the year that that number, sort of, that accrual, started to decelerate?

That's correct.

Okay. And then was there any -- and I know people sort of asked it in different ways, but on the intended $36 million to $40 million that was going to be more first half weighted, was any of that sort of delayed a bit this quarter given the advisory expenses?

It wasn't delayed because of the advisory. But yes, you will see a little bit of a ramp up as you're going into the -- in the coming quarters Q2 through Q4. But that's strictly in terms of how we're managing those projects. It's not because we're doing anything unusual.

Okay, got it. So there was a little bit of timing issue there versus initial plans.

There is a bit of a timing issue but again, it's just a question of how we're working very large, complex projects.

And next we have Nik Modi with UBS.

Just two quick questions. Just quickly on the commodity cost, it seems like it's been surprising almost every company this quarter, in terms of being worse than everyone expected. And so, just curious on why you think that's the case and what gives you confidence that it's actually going to hit the, kind of the guidance range that you've set? And the second question, Don or Steve, if you can just talk about the payback of some of these whitespace expansion initiatives that you're pursuing right now, whether it be in China or across certain of your categories?

Yes, okay. Let me start with the commodities and try to provide a little bit more color. Certainly, when you had energy prices for a long period of time, that were sitting -- you know, oil was sitting well above $110 for a long time, that kind of got into the cost system and it's raised a lot of the unit cost. And what we're seeing is it's not just on resin, it's not just on packaging materials, it's literally across the board. So even very small commodity groups that you buy are seeing some fairly significant increases. So what is true is that we absolutely expected to face quite a bit of commodity pressure. The first quarter did come in a bit higher. But that said, as we still look at the full year, we're still thinking it's within the 140 to 150. And again, I would just say that it's probably the across-the-board nature, even in small category groups, that's causing this number to be maybe a little bit higher for us and even other people.

And Nik, as far as the priority in terms of inorganic growth and where we see that playing out, I think, as we talked a lot about the Away From Home business, that business continues to be a really well-performing business, particularly around the healthcare side. The Caltech business has been fully integrated at this point. We do have, I would say now, the most robust bolt-on acquisition pipeline we've seen in a longtime on that particular business, so stay tuned on that. But we think there are -- there is a real opportunity to consolidate and roll up that industry, if you will, around the healthcare and acute care side, particularly around disinfecting products, but also getting into different spaces like potentially skin for disinfecting. So that continues to be the top priority. The second priority is again bolt-on acquisitions in the international markets. China business is growing rapidly. It's off a small base. That's focused primarily on the Glad business. We do have plans to expand into disinfecting businesses in the near term in China, but right now the focus is on Glad, and it's growing in fairly strong double digits there. The third is the ability to get some bolt-on acquisitions in Latin America in our Laundry and Home Care businesses. We're continuing to evaluate those. So those are moving as we had expected.

I was actually also curious on -- you're talking about whitespace expansion initiatives with some of your businesses. I'm just trying to get an understanding of the payback for some of those. Obviously, you guys don't have much scale in some of these markets. So just curious on when you think -- how long it'll take for you to get a payback on some of the investments you're putting into place?

Yes. We look at those through a pretty tough lens, which is economic profit. And typically, those things, on an EP basis, can take 6 to 8 years. We think on this bolt-on side though, when we look at acquisitions like Caltech, which of course is domestic, but also the international ones like the Colgate bleach acquisition we did, we think we can get paybacks in the 3- to 4-year range or, if not quicker. So they're much more accelerated than say a strategic acquisitions, which could take a lot of years for any company to engage in.

We'll next go to Ed Kelly with Crédit Suisse. Edward J. Kelly - Crédit Suisse AG, Research Division: You've given some color on this, so I apologize if it's repetitive, but can you give us more color maybe by category on the timing of price increases in the U.S. the rest of this year?

So as I said, the bulk of the price increases occurred in Q1, kind of August timing. There were a few at the end of last fiscal year, I mentioned the Glad trash one and a couple of smaller food items. There is at least one brand increase plan for the second half of the year, which we haven't quite gone public on. But the bulk of the pricing is really in the first quarter, on both the domestic side as well as the international side.

And actually, Ed, on the -- you're probably aware of this, but on our -- there's a supplemental schedule to our earnings release that actually details the pricing actions over the last couple of years. So if you need the category or brand break out, we provide them. Edward J. Kelly - Crédit Suisse AG, Research Division: Assuming that commodities stay where they are now, is that adequate at this point in time?

Yes. We do believe that the pricing actions that we've taken, when we start to get the full benefit of the pricing, and as the comps for commodities on a quarter-over-quarter basis continue to improve, yes, we believe that it's sufficient for us to be able to go back and start rebuilding our gross margins and get them flat on the year. Edward J. Kelly - Crédit Suisse AG, Research Division: Okay. And your largest customer has been talking about stepping up price investments, really kind of over the next 5 years or so. Does this impact your business in any way? Are you being asked to help at all? I mean, does this...

Yes. It's certainly positive from our standpoint. I mean, we have a very good business with Wal-Mart, a very good partnership. They're getting sharper on their pricing. They're getting back to their kind of historical EDLP approach with good prices on major brands. We're definitely seeing that across our portfolio, and our business is definitely starting to pick up. So that's all good.

Yes. I think, as Larry said, the way they certainly demonstrate their price leadership is through pricing on national brands. So I think when you have the bulk of your brands #1 or #2 in your categories, it certainly bodes well in relation to our business with Wal-Mart. Edward J. Kelly - Crédit Suisse AG, Research Division: So they are really funding most of this and not asking you to help much?

Well, that continues to see how it plays out. All of our customers are treated the same in terms of the pricing that we give them. So any investments by these retailers, which you tend to see at as the margin -- if there is margin compression in a typical category by a retailer, it's typically going to be around a #1 brand. And so, I would think, over time, we'll see how this plays out, but it would disproportionately affect and help those people who have #1 brands. Edward J. Kelly - Crédit Suisse AG, Research Division: Okay. And then last question for you. It seems like flu's off to a little bit of slow start. Are you seeing any of that? And what are you embedding in your guidance I guess?

I'm sorry, was that flu? Edward J. Kelly - Crédit Suisse AG, Research Division: Yes, like the cold, cough and flu, related to your business that that would impact?

I can't speak for the flu season, but I will tell that we had a healthy quarter on Clorox Wipes on top of a healthy quarter in the base in the year-ago. So no signs of problem so far.

Why don't we take one more question?

Okay. Next we'll take Priya Ohri-Gupta with Barclays Capital.

Just wondering if you could talk to your thoughts around potentially refinancing some of your outstanding commercial paper? And secondly, when you look at management of your maturity profile, do you look at through 7-year end in or potentially 10-year end in?

Okay. So well, a couple of things. As you know, we do have a commercial paper market that we regularly access to support the business on a day-to-day basis. Commercial paper is up a bit in terms of what we're holding today, and the reason for that is because we had a $300 million worth of debt that came due. At this point, I guess, all I would say is that we are strongly considering looking to take advantage of some fairly low interest rates in this environment and to potentially go out with a debt placement. But we'll provide you with an update on that as appropriate. And then finally, just in terms of the capital structure, I think we're very comfortable with our debt-to-EBITDA ratio. I think we've communicated to folks that we'll target 2 to 2.5, and we'll make sure that our debt maturity profiles, that we're comfortable with the debt and when it's coming due and how we're managing that.

Well, thanks, everyone, for joining us on the call. As we said throughout the morning, I think we're certainly pleased with our start to the fiscal year. We've got a lot of good innovation coming through our pipeline, and so we look forward to updating you more on that as a lot of that innovation starts to manifest itself on the marketplace over the next few months. So take care, and we'll look forward to talking to you in February.

That does conclude today's conference, and we thank you for participating.