Good day, ladies and gentlemen, and welcome to The Clorox Company Third Quarter Fiscal Year 2018 Earnings Release Conference. At this time, all participants are in a listen-only mode. At the conclusion of our prepared remarks, we will conduct a question-and-answer session. As a reminder, this call is being recorded. I would now like to introduce your host for today's conference call, Ms. Lisah Burhan, Managing Director of Investor Relations for The Clorox Company. Ms. Burhan, you may begin your conference.

Thanks, Stephanie. Welcome, everyone. On the call with me today are Benno Dorer, our Chairman and CEO, and Kevin Jacobsen, our CFO. 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, we'll refer to certain non-GAAP financial measures, including, but not limited to, free cash flow, EBIT margin, debt to EBITDA, and economic profit. Management believes that providing insights on these measures enable investors to better understand and analyze our ongoing results of operations. Reconciliations 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 on our website as well as in our SEC filings. In particular, it may be helpful to refer to tables located at the end of today's earnings release. Please also recognize that today's discussion contains forward-looking statements. Actual results or outcomes could differ materially from management's expectations and plans. I would also direct you to read the forward-looking disclaimers in our quarterly earnings release, particularly as it relates to the impact of tax legislation. 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. With that, let me cover our Q3 performance, discussing highlights in each one of our segments. Kevin will then address our financial results as well as updated outlook for the fiscal year. Finally, Benno will offer his perspective and we'll close with Q&A. For the total company, Q3 volume and sales each grew 3%. We grew sales in all…

Thank you, Lisah. We're pleased to deliver another solid quarter of volume and sales growth with sales increases in all four of our segments. As we mentioned in our press release, we've updated our fiscal year outlook for two main reasons. First, our outlook now reflects the impact of the Nutranext acquisition, which closed last month. Second, as we also noted, our outlook now reflects a more favorable fiscal year tax rate. I'll address the details behind our full year outlook and provide additional context on the Nutranext acquisition in a moment. First, I'll take you through our financial results for the third quarter. Third quarter sales grew 3% consistent with volume growth of 3% and about 1 point of pricing benefit, which was offset by about a point of negative mix. As a reminder, third quarter sales included a reduction of nearly 1 point from the Aplicare divestiture in August 2017. Gross margin was down as expected and came in at 42.8%, a decrease of 120 basis points versus year ago. This included about 160 basis points of higher commodity costs, as well as 130 basis points of higher logistics costs, which were driven, in large part, by ongoing challenges in the transportation market. Both commodities and logistics reflected the hurricane-related pressures we've previously discussed. Third quarter gross margin also included the benefit of about 140 basis points of cost savings, continuing our longstanding program of driving out waste. Selling and admin expenses as a percentage of sales were relatively flat at 13.7%. Advertising and sales promotion spending came in at about 10% of sales with spending behind our U.S. retail business at about 11% to continue supporting the long-term health of our brands. Net of all these factors, we delivered diluted net earnings per share from continuing operations…

Thank you, Kevin, and hello, everyone. Let me share with you my three key messages for today's call. First, we had a solid third quarter, delivering top line growth in line with targets and introducing several meaningful innovations to market. We're pleased, we grew third quarter volume and sales 3% on top of strong growth in the year-ago quarter with all segments reporting sales gains in the quarter. I feel good about these results, particularly given the impacts from the Aplicare sale and from our Charcoal business due to weather, which have continued into Q4. With the Nutranext acquisition which closed on April 2, we've updated our sales growth outlook for the fiscal year to about 3%, in an environment where growth continues to be hard to come by. A key factor in our achieving this is our continued ability to deliver strong innovation in innovation starved environment. In Q3, we launched or expanded several innovations, including the second wave of our successful Clorox Scentiva platform, which now offers bathroom and toilet cleaning products and a new scent; Fresh Step Clean Paws low track cat litter which while still early is thus far exceeding expectations; Glad ForceFlex Plus Advanced Protection trash bags with leak guard, our best Glad bag ever; and Burt's Bees cosmetics, which launched in Q2 and continued to expand distribution and grow velocities in Q3. Second, we remain committed to keeping our business fundamentally strong and healthy by taking aggressive, decisive and principled actions to address the headwinds that are affecting Clorox and our industry. Let me highlight three of the actions we're taking. First, we are taking pricing. We're pleased that the increase we took last November on Clorox disinfecting wipes is going well and we delivered double-digit Q3 volume and market share growth even in…

Thank you, Mr. Dorer. We will take our first question from Wendy Nicholson with Citi. Please go ahead.

Hi. Good afternoon. Could you talk a little bit about the private-label trends you're seeing in some of your bigger categories? Some of your other competitors in the HPC group have talked about more headwinds and I'm curious because you've historically had more exposure there what you're seeing specifically. And then second thing, can you just address the share repurchase program? I know the comments you just made said that you're willing and open to buy back more shares, but I'm kind of surprised we haven't seen you step up the pace of the repurchase activity yet. Thank you.

Yeah. Thank you, Wendy. I'll let Kevin comment on share repurchases and I'll briefly address your private-label question. As everybody recalls, we compete with private label largely in three out of our nine main categories. Our shares are stable. Our business is healthy in these categories. We're not seeing anything that would cause an increased level of concern as it relates to private label relative to what we've commented on in the last few quarters. We're always mindful of private label, which is why we're investing in our business, which is why we're keeping the value sharp, which is why we have innovation in those categories that we're competing with private label in, and which is why our businesses are generally doing well. So, private label is something that we're always mindful of, but there's no change to a stable status quo. And, with that, Kevin maybe you can comment on share repurchases.

Sure. Hi, Wendy. In regard to the share repurchase programs, just as a reminder, we have two authorized programs with our board. One is called our evergreen program, which we use to manage stock option dilution and we've consistently been in the market over the last several years repurchasing shares. The other program is our open-market program, which we're authorized up to $750 million and we have not leveraged that program to date. What I would tell you is we have a very disciplined allocation of how we apply our cash and we'll continue to pursue that. And so, for us as we think about our priorities, first and foremost we're using our cash to invest back into our business, including targeted M&A and that's very consistent with our recent Nutranext acquisition. Secondarily, we're going to continue to focus on our dividend. We know that's important to our investor base and we'll continue to look at our dividend payout ratio. And consistent with that priority, as you folks saw, we just recently accelerated our dividend increase from May to February and took an outsized increase of 14%. Our third priority is, we'll continue to manage our debt. Currently, following the Nutranext acquisition, we're sitting nicely within our range of 2 to 2.5 times debt to EBITDA. And then finally, as we've always said, if we have cash pooling up on the balance sheet and we do not have good uses for it, we'll certainly look for ways to return that to shareholders and certainly open-market share repurchases would be the primary way to do that. And so, I would tell you going forward, as you know, Wendy, Clorox generates a significant amount of cash flow, tax reform has certainly increased the cash flow we generate as a company, and we'll continue to pursue these priorities going forward.

Okay. Got it. That's very helpful. But can you just clarify specifically on the Charcoal business, Benno, just vis-à-vis private label, it sounds like they're just weather headwinds and all those sorts of things. But in terms of your share, all of the incremental promotion you're going to be doing at retailers to stimulate some demand there. Is your share in the way you measure it still competitive and no issues there with private label gaining share in Charcoal?

Yeah. No concerns on Charcoal and private label. There's always some variation in share, particularly in the short term and in the periods that is less heavily promoted. What matters to us more is what shares look like in the late spring and the summer. The big news for us on Kingsford this quarter is that the weather, obviously, in Q3 has been very bad for this business and we can influence a lot of things, but weather we cannot. And Q4 certainly in April hasn't started much better. So, weather and the overall category declined as a result of it is the topic, which has led to a material impact in Q3 and we expect the softness perhaps also to impact Q4. But in terms of overall share, we feel good about this business. We're working with retailers on catch-up merchandising events to make up for some of the lost sales due to the weather earlier this year. We've just launched several innovations, new flavors and natural lighter fluid. We've kicked off partnership with Major League Baseball which we're very excited about, which includes customized baseball packaging. And we have new advertising in the category where we continue to have 100% share of voice. So, fundamentally this is a good business. It's delivered a lot of value to the company and to shareholders for many years. The basic underlying dynamics as millennials love barbecuing and they love barbecuing with Charcoal because of taste and the experience that Charcoal gives are very favorable. We're dealing with the short-term weather issue, which frankly makes for an easier comp next year, but that's about it. Business is stable and good and we're feeling optimistic about it once we've been through this weather issue.

Got it. Thank you very much.

Our next question will come from Andrea Teixeira with JPMorgan. Please go ahead.

Hi, thank you for the opportunity. I just want to zoom in more into the pricing commentary. Obviously, we all appreciate a more rational environment for pricing, but I wanted to kind of, if you can – obviously, when you had the Analyst Day in New York a couple of quarters back you were saying, which is a fair comment that it is tough now to take listing pricing increases. And obviously we never knew commodities would stay elevated as they are right now and then on top of that transportation. So, on your conversations with retailers, like how are you intending and is it embedded in your guidance for the revised guidance for margins? Is it embedded that you're taking these list price increases? And how much of that is already negotiated into the trade? Thank you.

Yeah, Andrea. So, we can't comment on specific retailer conversations as always. What we have said is that obviously we have taken some price increases already. We have newly announced a few minutes ago that we have started to announce a price increase on Cat Litter. And as I also commented, we will finalize plans shortly to take additional pricing. Now, you will appreciate that there is lead time and that this will not affect this fiscal year anymore and we'll comment on how it will affect next fiscal year when we give our guidance in August. But there's always a 60 to 90 days lead time on when price increases become effective. And like I said, we're finalizing plans right now. You took us back to the Analyst Day in October. I would certainly say that what we've commented then on is that we're always looking at pricing when justified. The cost environment has changed very significantly versus last October. And now we're putting the pricing power that we have on our brands to action. We have leading brands. More than 80% of our brands are number one or strong number two. We believe our advantaged portfolio gives us confidence. Market leaders generally tend to lead pricing and we have many of those market leaders. We remain committed to offering brands that give consumers superior value, but we've always said that the majority of our brands does just that, which is why we're expanding household penetration of the majority of our brands. We're investing in our brands. Our price elasticities have been lower. We have innovation on all of our brands. So, we feel like the fundamental health of our business, the dynamics of our brands as well as the experience and the track record that we have, having executed many price increases over the last decade successfully, take hold here, in particular in an environment as we're seeing it today where these price increases are principled. They're cost justified and they generally do work for our categories. So, pricing is never easy to execute, but we have experience and are justified. And what we've certainly seen of the recent price increases on disinfecting wipes and on our professionals business and in International. We know how to take pricing and we're just putting that back to work. What I will say and I've hinted at that is that we're staying committed to value. So, I don't expect these price increases to negatively impact the superior value perceptions that our brands have among consumers because that's the lifeblood of our business and that's how we've been successful over the last few years. So, we're taking all of these price increases that we're announcing today and that we will continue to announce in the next quarter with an eye on staying committed to value for consumers. So, not easy, but the right thing to do and we have a solid case here which is why we're putting it to work.

And just to follow up, Benno, there is no effect now as you had with the wipes, with the trash bags, right? So, net-net you're still going up and you're not seeing opportunities on the value segment at this point, right? The movement is actually up, a net up.

Yeah. I mean you've seen disinfecting wipes had another great quarter. That's a business that's been running from strength to strength. It's been growing double digits and that's because we're not just taking pricing. We have a lot of innovation in the market and we're investing in marketing campaigns that resonate with consumers. So, wipes has done exceptionally well in the face of pricing, but we're also seeing the Glad trash bags as a result of the pricing action that we took, which as you'll recall was a price decline end of last year on about 40% of volume. The business has responded very well. Total Glad business grew volume and sales in Q3. The trash business grew volume high-single digits in Q3. The most strategic business in trash bags, which is our OdorShield business grew double digits. And Glad trash has now returned to share growth in tracked channels which is something that we're pleased to notice. So, those two pricing actions have gone exactly in line with plans, which is again consistent with a message that we've conveyed to you over many years, which is that we are able to model based on strong analytics what are price increases and in the Glad case, the price decreases due to our business very well and very reliably. And we'll certainly update you and the rest of the community on specifics and how it will impact our fiscal year 2019 in August. But what we've commented on is that we're optimistic that in the midterm we're able to grow profitably, meaning growing sales and margins. And we continue to be optimistic about that very thing.

Thank you very much. This is helpful.

Our next question will come from Bonnie Herzog with Wells Fargo. Please go ahead.

All right. Thank you. I wanted to circle back to private label in your categories, Benno. I was hoping you could give us a sense as to how private-label competitors have been responding to your price increases and the pressures they're also facing from higher commodities and manufacturing costs.

Yeah, Bonnie. Again, the only price increase that's been out for a while now is on Clorox disinfecting wipes where we have not seen much pricing from private label where we also didn't count on any pricing from private label. But I think the results on sales, again double-digit growth last quarter speak for themselves. So, I can't comment yet on how private label will respond to other price increases because we haven't announced any other price increases other than Litter just yet, but that's not been effective in the marketplace. So, I can give you certainly a more detailed outlook and report back when we talk again next quarter. But generally, what we do is we make very specific assumptions based on market dynamics. We don't always count on private label to respond. Clearly, to your point that you made in your question, the increases that we see are cost increases that retailers see too, that private-label manufacturers see too. Everybody in our industry is affected by them and historically what we've seen is that many times when we took pricing, private label have followed. In some cases, they haven't. But that doesn't negatively impact the materiality of the positive impact that pricing has on our business and the general success of our price increases. So, more to come on Q4.

Okay. That's helpful. And if I may just also ask a little bit of a follow-on question on the pricing, I know we're talking a lot about it, but I think it's important. But I'd like to hear more on elasticity or the impact on your volumes, what you might be seeing from what you've put into the marketplace already. And has that elasticity changed in the last year? And then in terms of volume, is it fair to assume that your volumes should accelerate in Q4 given you've really lapped the tough comps now?

Yeah. I can't comment on Q4. We don't typically do that. When I think about the rest of your question as it relates to elasticities, again, I can speak to Clorox disinfecting wipes. No change to elasticities, post the price increase. Even though it's early, it takes a while until we have reliable data on that, but again double-digits gains. So, you can see that that business continues to do well because we match up price increases with innovations and with the right investments and we certainly have every intention to continue to do that, too. I commented on a new price increase on Cat Litter, which comes on the back of a double-digit growth quarter on that business because we are investing behind Clean Paws, which is off to a really fantastic start. So, we know how to take pricing and what we would expect is that price elasticities aren't fundamentally harmed. What we have commented on last quarter, which I want to re-emphasize, is that our price elasticities over the last three years actually have gone down. And you all know that lower price sensitivity is just better and they've gone down significantly, whereas for the rest of the industry the price elasticities have gone up. So, we are perhaps somewhat of a unique case in this industry. I know that other companies have perhaps commented that the pricing environment is more challenging. But again, I would point to the strength of our portfolio, but the strength of our investments, the strength of our innovation program, and the facts and the data behind growing household penetration, having brands that offer superior value, lower price elasticities that all make a very solid case that we have pricing power on Clorox brands.

All right. Thank you.

We'll move next to Kevin Grundy with Jefferies. Please go ahead.

Thanks. Hello, everyone.

Hey, Kevin.

Kevin, question for you on cost savings. Clorox Company has done a tremendous job on this front over a long period of time. But clearly in this environment with higher input costs and pricing difficulty come by, it's even more important. Two questions for you on this front. What are the biggest areas of focus? And then number two, how do you think about the opportunity relative to the 150 basis points per year that you've delivered now over the past several years? How should we think about that contribution now going forward?

Yeah. Thanks for the question, Kevin. What I'd say overall on cost savings is, your first question was where's our focus, our focus consistently has been looking at every area where we spend money and the way I describe Clorox very simplistically is $6 billion in sales. We spend about $5 billion on all aspects of the company and we generate about $1 billion in profit. We are focused on attacking the entire $5 billion spend. So, I have no one area that I focus on. But we have a program that looks at that entire spend. And every year we're trying to deliver 2% productivity across that spend. And as you mentioned, Kevin, we have a very strong track record of doing that. And I have strong confidence that going forward we'll continue to be able to deliver that type of savings.

And, Kevin, can you help us just frame the potential magnitude in that front just from a modeling perspective? I mean, as we look at the headwind from freight and commodity costs, pricing will hopefully come through and stick. But can you help us at all frame the potential favorability from upside above and beyond what you've historically delivered given that it's sort of takes on greater urgency?

Yeah, I would say, Kevin, you guys should be considering that we'll continue to pursue 150 basis points of EBIT margin expansion through cost savings. We've done that historically very consistently and going forward, again I feel very confident we'll continue to be able to do that.

Okay. Thank you.

We will take our next question from Stephen Powers with Deutsche Bank. Please go ahead.

Hey, guys. Can you hear me?

Yeah.

Okay, great. Sorry. Benno, I guess a big-picture question for me. The sector is broadly under a lot of duress and there are a lot of factors at play, but it really seems to me that we're seeing just a shift in the historic balance of power within the CPG value chain away from incumbent big branded CPG companies and towards new niche players, towards retail inclusive of Amazon and private-label brands, and ultimately towards the consumer resulting in this perceived lack of CPG pricing power and perceived risks for long-term market share and margins. So, I guess the question is, what's your perspective on that? Do you agree that such a shift is happening? And if so, why is Clorox in a more sustainable position than others? You're clearly outperforming on the top line, but can you afford to maintain both market share and margins over the longer term against what – I think it feels to many like a structurally more difficult backdrop going forward? Thanks.

Yeah. Thanks, Steve. Certainly not an easy environments for all the reasons that you said. We remain confident that we will be able to grow and grow profitably, meaning sales and margin going forward. And we have a lot of things that perhaps aren't very common these days. We have increased our brand investments over time. We are leading our industry when it comes to engaging consumers online. We have innovation in an environment where little innovation exists. And we have built a relatively wide moat around our businesses through innovation, through technology, through manufacturing capabilities. So, we do feel like our business fundamentally is healthy and I think our top line results show that. We're dealing with heavy headwinds, which hopefully will be temporary and which everybody sees, and that's what we're addressing. But we do feel like we're in a relatively unique position because our brands are strong. And if I look at our fundamentals, they're really healthy. You mentioned customers. Last quarter we grew volume with 15 out of our 20 top U.S. customers, which includes the very largest customers. So, while philosophically I can appreciate how retailers are in a position of power, how retailers certainly like the profitability of private labels. At the end of the day, consumers are the ones who decide whether companies are successful or not. And we are serving consumers extremely well and better than we ever have, I might add, which is why fundamentally our business is healthy. We have a short-term margin issue. We're addressing that margin issue aggressively mostly through pricing. And that's why we remain confident in our ability to not just grow profitably, but also on the back of a really strong balance sheet continue to add a lot of value to shareholders. So, it's a dynamic environment. But this environment will have winners and losers. But we at Clorox look at this as a time to lead and as an opportunity. And today we're winners and we have every right to be confident that it will continue to be like that.

Thank you very much. I'll leave it there. Welcome to the call, Kevin.

Thank you.

We will take our next question from Olivia Tong with Bank of America. Please go ahead.

Great, thanks. My first question is around gross margin. First, for the quarter, that 70 basis point benefit from other, is that primarily revenue mix? And then on the outlook, how much would the outlook have changed on gross margin, excluding Nutranext or said another way, is the $0.07 to $0.11 dilution for the deal, is that all coming in COGS because that's a really wide range on the gross margin given we have only one quarter left in the year? Thanks.

Yeah. Thanks, Olivia, for the question. On the 70 basis points, I'd say that's a combination of revenue mix as you described. It includes our divestiture of the Aplicare business which certainly improved margins. And then on your other question as it relates to margin, the change in our outlook is solely driven by the addition of Nutranext to our outlook. And so, as we said previously in February, we'd be down modestly and we described that as less than 1 point. That's still my expectation for the base business as we look forward. But we are now adding in Nutranext to the business. And if you're familiar with the acquisition accounting, we will now have to revalue all the inventory we've acquired to fair market value, which means as we sell through that inventory we'll generate very little margin or profit on that business. And so, I expect that to play out certainly for the fourth quarter and then likely early into fiscal year 2019 as well before we sell through all the acquired inventory. And maybe last comment in regard to the range, what I'd say there is this is obviously new business. We've owned it less than 30 days. And so, we're still working through trying to understand the implications of that business. I think this was an appropriate outlook for the new acquisition. But we'll see how that plays out in the next few months.

Understood. And then just broadly, would love to understand the rationale for the Nutranext deal. You guys have obviously been very clear in your interest in expanding in areas like wellness. It's obviously growth accretive, but it's a very fragmented category with no clear leader. So, I'm wondering, what do you guys think that you guys have that will either, A, give you a platform to consolidate share; B, be able to launch some of – or potentially bring in some of your existing products into new channels or vice versa bringing that business into channels where you have greater relationships.

Yeah. Thanks, Olivia. As you know, we like fragmented categories with no clear leader. We feel like this meets all the criteria of a solid acquisition that we've frankly been emphasizing for years. It's bolt-on in nature. It's U.S. centric. It's in the health and wellness space which, of course, we know well and have expanded into more specifically as it relates to vitamins, minerals and supplements well with RenewLife. It's a really solid fit with our capabilities and it's profitable and growing. So, those are the criteria that we talked about for many years and this one checks off all the boxes. So, we're excited about the prospects. This is a fast-growing business, a profitable business, gives us scale and breadth in vitamins, minerals and supplements. And importantly, we have several number one brands in differentiated niches, and we love that. We've built our company on the back of precisely such brands. And what Nutranext does is bring really strong capabilities, for instance, in direct to consumers to Clorox. About a third of this business is in direct to consumer and we love that. But this business will benefit from our capabilities, for instance, in marketing, R&D, sales and product supply. So, near term, right now what we're focused on is bringing the two companies and organizations together and are off to a really nice start. And then, we'll go ahead and expand distribution and brick and mortar and e-commerce. We'll plug in our marketing capability. We love that we're in differentiated segments here, emerging segments, not single letter vitamins, but product benefits that are scientifically grounded and that start to have a really strong following among consumers. We'll create a strong innovation program. We'll choicefully take these brands international and see a lot of opportunities there. And importantly, we'll realize cost synergies as we plug in our operational machines. So, this has all the components of an acquisition that we like. For anyone who's listened to what kind of acquisition we like, this meets all criteria and we're very optimistic about this.

Right. Thanks, Benno. Thanks, Kevin.

We'll take our next question from Ali Dibadj with Bernstein. Please go ahead. Ali Dibadj - Sanford C. Bernstein & Co. LLC: Hey, guys. Wanted to tackle a few more things. One is back on pricing, totally get the commentary that you've made, but very simply, are you taking pricing in line with inflation? Because it looks domestically always your pricing might have been down, including trade spend and everything else. So, want to pressure test a little bit that topic. And then, the second one is around reinvestment. Clearly, marketing spend look like it was down a couple of hundred – or 100 basis points this quarter. Can you talk a little bit about the plan there? Why that was a good idea for the quarter, and the plan there going forward?

Yeah. Ali, I'll take reinvestments, and then I'll let Kevin answer your question on pricing. So, as you think about advertising spending, so we have committed and said that about 10% of sales is the right level. We've also said that there's going to be variability by quarter based on timing of initiatives. Q3 was 9.8% of sales. So, that's exactly in line with about 10% long-term guidance. And at the end of the day, look, the proof is in the pudding. We grew 3% in volume and sales on top of 7% volume and 4% year ago despite the headwind in Charcoal and despite a 1-point hit on Aplicare. So, to me this is a non-issue. We remain committed to the 10% and we have no interest in cutting, in particular, because we have and we'll continue to have a very strong innovation program.

Yeah, Ali. And in regard to pricing, as you look at our pricing, we anticipate about 1 point of benefit to both the quarter and the year. Historically, that's been primarily driven by our International segment. I'd say though this year's a bit different with some of the pricing actions that Benno previously talked about. A portion of that is being driven by the U.S. And then as it relates to trade spending, we've actually pulled back a bit on trade spending and so we've taken pricing in the U.S. and reduced our trade spending. Ali Dibadj - Sanford C. Bernstein & Co. LLC: And so just a follow-up on that and a different question on M&A, just a follow-up on pricing. I guess, I stay with the question, are you able to take pricing in line with cost inflation?

So, Ali, the way we think about it is, we certainly price what we describe as the long-term inflation rate. So, we won't look at a change in any one quarter, but we price to the long-term view we have of commodities, and so that's certainly the approach we take and we've taken historically. Ali Dibadj - Sanford C. Bernstein & Co. LLC: Okay. And then the separate question is just in terms of M&A and I want to pause on that for a moment and try to understand the track record and where you think your skill set is in terms of M&A. You can go back to things like Aplicare, you can go back to – which you're divesting now clearly. Burt's Bees took a little while obviously to ramp up. RenewLife sounds like a short-term hiccup, would love more color there, but there is a hiccup going on there now. Can you talk a little bit just about your core competencies that you may have developed over the past little while in terms of acquisition capabilities or any places you think you can improve?

I mean, we feel good about our ability to do M&A. We started as a bleach company and we built our company based on M&A over 105 years. So, I feel good about that. I would clearly call Burt's Bees a successful acquisition for our company. We've divested Aplicare, but you can't win them all. RenewLife has been a real success with a one-time hiccup that will return to normal and back on track in Q4. And now we're going into Nutranext and feel like this is a great fit with our company. So, feel good about our ability to do M&A, feel good about the ability to create value, and feel like we have a solid track record. I don't think any company has a track record of 100%. If that company exists, I would like to know which it is. But I look forward and feel very confident about Nutranext. We've invested a lot in M&A capability and our approach over the last three years, it's nothing I want to comment on publicly, but feel very confident about our capabilities in the area and very bullish about Nutranext. Ali Dibadj - Sanford C. Bernstein & Co. LLC: Okay. Thanks very much, guys.

Next question will come from Jonathan Feeney with Consumer Edge. Please go ahead.

Good afternoon. Thank you. Or it's good morning your time, sorry. A couple things, first of all, ACV on Burt's Bees cosmetics that were launched in Q2 both where we are today and versus target? And how would we or even you looking back a year from now, what would be a success for the size and rollout of that business? And then just secondly, how big did an outsized flu season play? Is there any way of quantifying that within Cleaning? I know it was huge in the scanner data. I want to know how that lines up with shipments maybe some of the unmeasured volumes. Thank you.

Yeah. Thanks, Jonathan. I'll take cold and flu first while it's fresh. Clearly, this was a relatively strong cold and flu season, but actually it wasn't as strong as it was presented in some of the commentary that I've read. Cold and flu incidents was up 6% to 8% versus a year ago. The cold and flu season was below the levels of, for sure of fiscal year 2013 and 2015. So, it was higher, but not severe. And as a result, we've seen some impact perhaps on our wipes business, but not material and that's because that particular business as is our business, in general, is less and less dependent on cold and flu because what really drives consumption is the planning that we do with our customers year-on-year to merchandise this business very aggressively during the winter season. And we have very strong merchandising plans and consumption, regardless of the season, which is why I wouldn't look at cold and flu as a material driver behind our Q3 results in that segment. On Burt's Bees, perhaps more broadly and to put it in perspective, strong quarter again with volume and sales growth in the high-single digits. Feel good about lip care and the consumption. A little tidbit, it's early and before we get overly excited, but the last four weeks was the first time that our lip balm actually reached the number one market share position in tracked channels ever. So, that tells you that we're very focused on continuing to keep the core business very healthy and it is. But also our innovation in face care and in cosmetics continues to do well and has contributed. We don't typically comment on ACV levels on innovations, but it's still building. And that's driven by retailer shelf resets and…

Thank you.

We'll take our next question from Shannon Coyne with BMO Capital Markets. Please go ahead.

Hi, thanks for taking my question. Just really quickly back on the pricing, I'm just wondering if you guys – are you seeing the same or different dynamic in pricing online versus brick and mortar. Also, I'm wondering if there are regional differences. So, are you finding it harder, or are retailers pushing back and raising prices in the Southeast, for example, where all the (01:00:48) are opening up a large number of stores there?

Yeah. So, for us we have one – we have a pricing policy that we call fair and equitable, so there's no difference between online and brick and mortar. And as far as regional differences are concerned, again, can't comment on specific discussions that we have with retailers, national or regional. And again, keep in mind that there's just one new price increase out there. And what we've commented is that we will finalize plans to certainly take additional price increases over the next few months. Those will take time. In many cases, the discussions, of course, because we haven't finalized plans yet, have not taken place. So, it's a little bit premature, yeah. But what I will say is that again taking pricing is never easy. Taking pricing always has bumps in the road near term. Taking pricing always as consumers adjust to new higher price levels leads to somewhat lower volumes temporarily for about 12 months or so until consumers have gotten used to the new price points. But we have a strong track record of taking pricing. And we know how to execute it successfully and I expect that track record to continue.

Okay, thanks.

Our next question comes from Lauren Lieberman with Barclays. Please go ahead.

Sorry, I was on mute. Wanted to just ask about inventory de-stocking. I mean obviously nothing apparent in your results this quarter in terms of volume growth, but I was curious what you are seeing in terms of inventory levels at retail of any of the de-stocking that you'd mentioned last quarter and then I think some other peer companies have still discussed, it's something you're still seeing or not really?

Yeah. Thanks, Lauren. As you mentioned, we had inventory adjustments late in Q2 in a few of our categories and we commented on that in our last quarterly call. We also then commented on the fact that we're off to a really strong start in January leading us to believe that some of it came back. We also commented that we didn't see a material impact on the year then. And there's really no news to that. So, certainly in Q3 we don't feel like there was a significant impact from inventories. We also continue to believe that this is not going to impact the fiscal year in any material way. We also think that it always evens out in the long run. So, we don't think that we're sitting on high inventories that are at risk going forward. So, inventories this last quarter was a non-factor.

Okay, great. And then just one follow-up I still had on Nutranext. So, my understanding anyway of the probiotics is, there's a lot of medical research, all of it. There's a lot of work going on in the probiotics space, in my sense, is it probably maybe a bit of a difference in terms of the clinical studies and things that have gone on in that space versus some of the areas where Nutranext plays? So, if you could just talk a little bit about, I guess, the credentials, the medical backing and so on of this new business that you're acquiring is one. And then, two, just a bigger question on cyclicality in the VMS category, I feel like it's a business where it was on trend for several years and then there's some journal article that tells people it doesn't work or whatever it is and then there's a falloff and then it comes back. So, is there any concern that you're introducing a level of cyclicality to your business that really doesn't exist otherwise? Thanks.

Yeah. Thanks, Lauren. So, before we become interested in the category, we start with the attractiveness of the category itself and that includes, in this case, the scientific backing. It also includes the sustainability of a category. And we feel like we've done our homework on this. If I mention two of the major brands that we bought, one is around anti-stress and sleep and that has a lot to do with magnesium levels. If you Google that and if you do a research, there's a lot of scientific research out there. One of their brands, NeoCell is a leader in collagens. Again, a lot of research out there. And if you think about perhaps the third bigger brand, which is in food-based vitamins, that is a trend within multivitamins that people like, they're less synthetic, more food-based multivitamins that also contain super foods and other nutrients. And that, of course, is a more general trend not just in vitamins, minerals and supplements. So, we do think that these are based on solid science. We have a good advisory council of scientists that we use to assess the attractiveness and the scientific soundness of the categories that we're in. And we've always commented as a company, we build brands for decades and not just for the short term. And we feel like the businesses that we bought and the categories that we will now be in certainly fall into that category line.

Okay. Thanks very much.

We'll take one more question.

Our last question will come from Jason English with Goldman Sachs. Please go ahead. Jason English - Goldman Sachs & Co. LLC: Hey, guys. Thank you for squeezing me in. I appreciate that. I wanted to come back to the pricing question real quick and I apologize if you already gave this, Benno. But can you give us some color in terms of how the Cat Litter price increase has been received so far? And the broader price moves that you're planning right now was the decision to move forward those at all educated with some preliminary conversations with retailers. And if so, how did those preliminary conversations go?

Yeah. Jason, appreciate the question. Cannot comment on specific conversations that we have with retailers. As you will appreciate, the Litter conversation is still pretty new. As I've commented, we began to announce this last month. So, by no means are we through those conversations. And then as we think about what we do to consider pricing, we always look at the competitive set. We look at the retailer dynamics. We look at the strength of our business. We look at price sensitivities. So, there's multiple factors that go into the decision on taking pricing. But I would perhaps just point back at my comments from earlier that we know how to take pricing because we've taken pricing many times before, including this fiscal year, and we always get through it. We live in categories where consumers do not buy more if pricing is lower. So, we understand and over the years it's been proven that taking pricing when justified as is the case here, it's a key driver to add value to categories for retailers, too. Most of our categories as you think about volume have grown modestly, but in terms of value have grown significantly over the years. And a big part of that is trade up through pricing and through innovation. That's how our categories work. That's what we've built our company on and that's why we're investing in innovation, in marketing and solid value. But that's also why we keep taking pricing when justified. Jason English - Goldman Sachs & Co. LLC: No doubt.

And today's environment is no different than the environment was, for instance, 10 years ago when the economy went south when it was really hard to take pricing, but we did. So, I look at this as a very solid case that's very well considered and that we'll execute with excellence. Jason English - Goldman Sachs & Co. LLC: Thank you for that. And one follow-up just on productivity within the gross margin line, clearly looking at margin bridges you guys continue to deliver. But you're leaking all of it and then some out through logistics and manufacturing line there. I appreciate there's some logistical cost inflation system right now, but just looking back over the last five years in netting cost saves just first logistics manufacturings netted you to zero, if not a modest deficit. So, as we think about cost saves and that net logistics manufacturing line, so effectively a net cost save line, is there a glide path to getting that, the aggregate to flip positive? If so, what are the drivers? And what could the cadence look like?

Yeah. Jason, this is Kevin. What I would say is if you look over long periods of time and as we've said, we are committed to growing EBIT margins 25 to 50 basis points. If you look back over the last nine years, I think we've grown EBIT 35 basis points on average per year. That clearly won't be the case in any given quarter and given year. But over long periods of time, I feel very comfortable with our ability to keep growing margins. As we look forward, we're clearly in an inflationary cycle right now and then obviously you're hearing us talk quite a bit about pricing, because we need to price to recover the cost increases we're incurring. So, as I look forward, I have to set an expectation that we're still committed to growing margins. We feel confident that we can do that because we do have pricing power and we will execute that pricing power to offset the cost increases we're incurring. Jason English - Goldman Sachs & Co. LLC: Okay. Thank you.

This concludes the question-and-answer session. Mr. Dorer, I would like to turn the program back over to you.

Yeah. Thank you and thank you, everyone. We look forward to speaking with you again in August when we share our fiscal year-end results and outlook for fiscal year 2019. So, have a good day, everyone.

This concludes today's conference. Thank you for your participation. You may now disconnect.