Good morning, and welcome to the Edgewell Personal Care second quarter fiscal 2016 earnings conference call. [Operator Instructions] I would now like to turn the conference over to Chris Gough, Vice President, Investor Relations. Please go ahead.

Thank you, and good morning, everyone. And thank you for joining us for Edgewell's second quarter fiscal 2016 earnings conference call. As a reminder, for comparative purposes, fiscal 2015 second quarter results include both personal care and household products businesses with the results of the household products business presented as discontinued operations. Historical results on a continuing operations basis include certain costs associated with supporting the operations of the household business, as these costs were not eligible to be reported in discontinued operations. As a result, EPS this quarter is not comparable to the prior year, as the prior year's results include SG&A expense, interest expense, spin costs, restructuring costs and tax associated with supporting the household business. Additionally, EPS was not comparable in the first quarter of fiscal 2016 and will not be comparable in the third quarter of fiscal 2016. To partially address this, we have provided normalized second quarter fiscal 2015 EBITDA, reflecting pro forma adjustments to SG&A. You will find these normalizations in the non-GAAP reconciliations at the back of the press release and on our website. With me this morning are David Hatfield, our President and Chief Executive Officer; and Sandy Sheldon, our Chief Financial Officer. David will kick-off the call, then hand the call over to Sandy for the earnings and outlook discussion, followed by Q&A. This call is being recorded and will be available for replay via our website. During the call, we may make statements about our expectations for future plans and performance. This might include future sales, earnings, advertising and promotional spending, product launches, the impact of go-to-market changes on sales, savings and cost related to restructurings, changes to our working capital metrics, currency fluctuations, commodity costs, category value, future plans for the return of capital to shareholders, and more. Any such statements are forward-looking statements, which reflect our current views with respect to future events. These statements are based on assumptions and are subject to various risks and uncertainties including those described under the caption Risk Factors in our Annual Report on Form 10-K for the year ended September 30, 2015, as amended and supplemented in our Quarterly Report on Form 10-Q for the quarter ended December 31, 2015. These risks may cause our actual results to be materially different from those expressed or implied by our forward-looking statements. We do no assume any obligation to update or revise any of these forward-looking statements to reflect new events or circumstances. During this call, we will refer to certain non-GAAP financial measures. These non-GAAP measures are not prepared in accordance with generally accepted accounting principles. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures are shown in our press release issued earlier today, which is available in the Investor Relations section of our website. Management believes these non-GAAP measures provide investors valuable information on the underlying trends of our business. With that, I would like to turn the call over to David.

Thanks, and good morning, everyone. Before Sandy takes you through the results, I'll briefly comment on a few highlights of Edgewell's performance in the quarter, and then I'll give a quick status update on the actions we're taking to best position the business going forward. For the quarter, our topline performance was in line with our expectations. Organic net sales were down 70 basis points in the quarter, but were essentially flat through the first half. Importantly, we grew in the quarter and year-to-date in our two largest segments, wet shave and sun. Excluding the impact from international go-to-market changes, our underlying growth was up 1 point in the quarter and up 2 points through the first half. In North America, we had good performance in the wet shave and sun. However, that was offset by declines in fem care. And our international business continued its positive momentum this quarter, growing underlying sales by 4.5%. And while we've delivered improved topline results through the first half of the year, we also continue to execute well on the key initiatives that we targeted to lead us through the transition to a standalone company. Now, let me give you a quick overview on the status of those key initiatives. First, our teams continue to effectively manage go-to-market and functional realignment initiatives around the world, and we're tracking to our milestones. We continue to expect these go-to-market changes to be mostly completed by the end of the third fiscal quarter. And to date, actual impacts have been in line with our forecast. Second, the investment in our brand accelerated this quarter, driven by wet shave, including a very successful Super Bowl add in the support of our next-generation Hydro line. Next, from a geographic perspective, the focus we've put on solidifying our U.S.…

Thank you, David, and good morning, everyone. I would like to turn to our performance in the quarter, beginning with a few headlines. Organic sales were down 70 basis points with underlying growth of 1%. Solid gains in wet shave and sun care more than offset declines in sun care. On an organic basis, volumes improved, but were more than offset by unfavorable price mix. We delivered $138 million of adjusted EBITDA and $1.17 of adjusted EPS in the quarter. Overall, these results are in line with our expectations coming into the year and we're pleased with this progress particularly in line of the volatile currency and macroeconomic environment, as well as the internal organizational and go-to-market changes we've made to create a new standalone company. Moving into details on net sales. Our net sales were $611 million in the second quarter, which is a decrease of 6% with impacts of 1.5 points from currency and 3.9 points from Venezuela and industrial, which were included in prior-year comparatives. In addition, we estimate that about $11 million of the net sales decline was due to the international go-to-market changes, including excess and transitions to distributors. Underlying sales, excluding those go-to-market impacts, were up about 1 point with international sales up 4.5%, primarily in Asia and Latin America with North America sales down just under 1 point. On a global basis, organic net sales grew in our two largest segments, wet shave and sun and skin care with declines in both feminine care and skin care. I'll come back to drivers at the segment level in a few minutes. Gross margin was 50.9%, a decrease of 40 basis points, which was primarily due to unfavorable currency translation in the quarter. Costs mix was favorable, driven by improved commodity and material costs and…

Thanks, Sandy. Before we open it up for a Q&A, I wanted to reflect for a minute on our announcement that Ward Klein has decided to retire from Edgewell, effective July 6. As know, Ward has served Edgewell, Energizer and Ralston for 37 years. And in his tenure as a CEO of Energizer from 2005 to 2015, he was marked by a dramatic growth and a superior value creation for shareholders. During that tenure, Ward was also a driving force behind the growth of the personal care business and he has been instrumental over the past year in the successful creation of Edgewell as a standalone public company. On behalf of all the colleagues at Edgewell, I thank Ward for all that he has done for the business, the company and our culture. We're grateful for his leadership and council, his tireless efforts to grow Edgewell and Energizer, and his countless contributions to both companies. We look forward to continuing to work with him through the transition into July. Following Ward's retirement, I've been appointed by the Board to succeed Board as a Chairman. And Dave Hoover will continue to serve as Lead Independent Director. I'll continue to work closely with my fellow Directors and all the colleagues of Edgewell to execute our strategies for future growth and the value creation. With that, we'll open it up for Q&A. Operator?

[Operator Instructions] The first question comes from Steve Powers with UBS.

David, just maybe picking up where you left off on Ward's departure, could you just give us a little bit of perspective as to was this a new decision on Ward's part or was this planned going back to the separation from legacy Energizer?

Well, I think as Ward said from a personal point of view now is the right for him to retire. And yes, from a business point of view, the year anniversary of the creation of Edgewell seemed like a natural transition point.

And then, either, David or Sandy, I realize there's only a $10 million change, but what's preventing you from flowing through the better FX in your updated EBITDA guidance?

Steve, good question. As you know, we were impacted last quarter by some fairly significant worsening currency and did not change our range for EBITDA that time. So although, it has improved, it really is just sort of solidified and given us confidence in the EBITDA range we have. And I would say that we move sort of towards the bottom end of where we were last quarter to more of the solid midpoint this quarter. So we feel pretty confident with that range.

And then just one last one if I could, which is on the disposables, and I know we've talked a lot about this. But I think, as you've said, the private label additions that you made carry more or less similar margins to the Wilkinson branded SKUs that they replace. I'm curious, two kind of derivative questions on that. Can you just comment a little bit on the $0.01 profit per unit, and if that too is similar, if it's somehow dilutive per unit? And then can you just confirm; it looks to us at least in the track channel data that though your branded disposables are down given the Wilkinson transition, the actual Schick branded disposable business is up year-over-year. And I just wonder if you could just confirm that or add some color?

On the $0.01 profit, I don't have that handy. And I'll just go back to, I think, the way that we talked about it, being the net-net margins are similar to our overall average. I think that's a good way to think about it. On your question about what's going on within dispo, certainly, I think, if you look at it over the 12-week period, EPC branded disposable shares were down 3.7 points. But as you know, that actually reflects the transition out of the opening price point of Wilkinson Sword brand. And if you back that out, Schick shares are flat for the 12-week period. And if you back way from that and you look at the 52-week share, we're up 1.3 points. And if you telescope into the four-week period, we're up also. So we're pretty happy with our branded Schick dispo performance. Going forward, I think we could see a little bit of softness there as we have a couple of customer share of shelf issues that we may have to tackle. But we're confident over the medium-term that we can grow the branded Schick dispo business through equity building, innovation, and an improved merchandising and fundamentals. One more point, while I said they were flat from a branded Schick point of view, when you add back the share that we gain with private label and you net out the loss of Wilkinson Sword, our overall EPC value share within disposables is up. And I think this is an example of how we plan to compete going forward with a balanced view of competing on the premium and with Hydro against the big middle with our Schick brands, but in a balance way growing private label. Thank you, Steve. Operator, next question please.

The next question comes from Kevin Grundy with Jefferies.

Just on the guidance, briefly just to build upon Steve's question there. It seems like organically or fundamentally in the business very little has changed. The move is strictly related to FX. Can you maybe talk about the puts and takes a little bit across the portfolio? And is that a correct comment that the business is indeed trending in line with your expectations?

Yes.

Yes, Kevin, we're definitely tracking in line with expectations. And again, we feel pretty confident with our outlook in the $440 million to $460 million range for EBITDA. And I'm sorry, I might have miss part of your question, were you wanting --

Yes. It seems like the only real change is FX. You talked about, Sandy, moving to the midpoint of the guide now, which would be all FX-driven. So I just wanted to get a little bit further commentary. As you look at wet shave and skin care, et cetera, if every thing is basically trending in line with when we spoke with you guys a few months ago, is that fair?

Yes, that's absolutely fair.

And then one for me if I may. Sandy, you alluded to the difference in growth and performance in the Nielsen scan channels versus non-track. Can you talk a little bit about that? Some of that is perhaps online, but maybe talk a little bit about the difference in growth rates by channel, what's you're seeing and why you think that's the case?

If I could jump into that. If you look at the measured universe within the U.S., Nielsen's down within shave. Nielsen is down about 5%. We actually estimate that the overall categories flat-to-up 1%. There's a pretty big gap there. And what we're seeing is non-measured is now 25% to 30% of the overall business. And it's driving all of the growth. So we are also growing rapidly within the non-measured channels. We don't really want to break that out, but certainly shaving in the club store channel was a big help for the quarter. Thank you, Kevin. Operator, the next question please.

The next question comes from Ali Dibadj with Bernstein.

So I have maybe three actually very quick questions. One is, David -- they can be answered by yes or no frankly. One is, David, you mentioned customer shelf issues in the transition. Just want to, in wet shave just a second ago, want to understand what do you mean by that. Does that mean that you're going to be losing some shelf space going forward in wet shave, that's beyond the private label ship? That's question one. Well, go ahead if you want with that.

Sure. The answer is yes. Yes, modestly, they are not a huge amount of the business, but it's -- so I don't want to overplay that, Ali. But there is some SKUs within dispo that we lost and we'll need to get [multiple speakers].

Two is, just back to Ward. Does the departure of Ward from the Board suggest that Edgewell selling itself is more or less likely? I guess, what was his view on Edgewell being sold? So does it make it more or less likely that he has left that you guys would be acquired?

There is no change in that regard, like I do today as a CEO, as a Chairman, I'm committed to delivering value to shareholders, and beyond that we have a strong independent Board and including Lead Independent Director, Dave Hoover, who has a legacy going back to the Energizer days to really creating value for shareholders. So this change doesn't change our corporate direction on that front.

And then last one. No shares were repurchased this quarter, it sounds like that's because of the, at least what we thought discretionary pension contribution. Should we expect a ramp up in share repurchases going forward and how should we think about that in terms of share repurchase from here on out?

We won't really speculate or forecast that, but it's certainly one of the arrows in our quiver and it's one of our key value drivers and that we will look at this quarter-by-quarter on that front. Operator, next question please.

The next question comes from Bill Schmitz with Deutsche Bank.

Can we just start with the fem care strategy broadly, so what you want this business to become, and including maybe calling some of the mid-tier brands, because it seems like some of those brands you bought, which were great from sort of financial accretion perspective don't really have like a natural fit within the category. So can you just share some thoughts on that? And then I have a follow-up.

Certainly, right now we're actually going through some volatile times, as the brands that we bought were being kind severally harvested and I think we're nurturing, get them back to health. And I think that we're making progress on that front. But the progress is a little bumpy and combined with our work we got to move the production footprint from Montreal to our Dover plant. The ramp up of our production, so we can take out lines and then ramping down that, that's moving cost around for us, plus on currency, so we're actually going through somewhat of a volatile time at the moment. Over the medium-term, we actually really think that we can hold share in this business. I think that we will need to manage the portfolio, but we think through equity building, innovation, and category management, we can compete well and hold those share. But the real goal is over the medium-term is to grow profitability through this footprint change that I mentioned, continuous improvement projects and then trade up.

And then can you just talk about the strategy in the private brands group within shaving. What percentage of sales it is now and kind of what your strategy is going forward in terms of lifting that? And then, maybe, I don't know if it's an easy question to answer, but does that business have a competitive margin structure with BIC, because if you look the disposable category, clearly most of the growth is happening at that low end and I'm just wondering if your legacy Wilkinson business and the private label business can kind of compete at those levels with the same cost structure or a better cost structure?

And there has been several questions about the private label, so let me maybe paint this. First of all, there is a real role for private label. First, from a consumer point of view, well, around the world, while there's segment -- the consumers that are doing well, there're segments that are not in a living paycheck to paycheck. There's trade channels catering to the wealthy, but we also see dollar stores, hard discount customers in the Europe. And there's a real role for a private label and we see it as a good fit with our overall portfolio. The notion that we have though is we want to balance. We're going to certainly try to punch above our weight in the premium segment. We want to build brands at the middle end. And in a balanced way, we actually want to grow opening price point and/or private label. Its size right now is about a $0.25 billion. That's about what it was when we bought the business back in 2011. Now, we've actually grown it organically, pretty well in the last three or four years. But FX has kept the dollar amount about $0.25 billion. So it's not dramatically bigger than it ever has been. In the U.S., this is kind of a one-time, one-off situation where we traded off with the customer, opening price point to a private label. It made sense for the customer category and it made sense for us, and as I've said from a margin point of view, we didn't mind it at all. I won't get into comparable margins with competition, but I will make a point, like I've said several times that a private label margins are, after you net out A&P the net profit contribution is pretty comparable to our overall average. And I know people kind of question that. But as you might know, shaving is a pretty different business, one that's advantaged versus other CPG categories. And if you analyze it many of the factors that make it so also apply to private label in wet shave. So it's a pretty different category for a private label than you're normally be used to maybe.

Your next question comes from Olivia Tong with Bank of America.

Can you talk about volume versus price mix, if you could break that out for the total company, and then particularly also in shaving and sun? And then what your expectations are for the rest of the year?

Yes, Olivia. So as I mentioned, we did have some pretty strong volumes this quarter, which were generally offset by a favorable price mix. So we ramped up on promotions both in fem care and in wet shave, partially behind the new product launch. So I guess that's really all I can say about it. We certainly continue to see some strong volumes coming through with wet shave over the remainder of the year and anticipate some good volumes across fem care as well. I'll say our comps in the Q3 differ a little bit, so it's really kind of looking at rest of the year, we feel pretty good about where we're headed with volumes, but we will continue to promote new products and support new launches.

And then just then two categories, shaving obviously pretty difficult to assess the track channels given the data, and you talked about the delta in growth between measured versus non-measured channels being about a 5 point delta. Is your growth differential about the same and if not what factors impact that? And then on feminine care, what are your plans to fix that business? Because I get that, there is a couple of factors going on, but how does the innovation pipeline look and if profitability is the focus right now as opposed to perhaps the topline or a bigger focus right now, what does that mean for the sales prospects going forward?

Maybe taking fem care first, we were satisfied that we have kind of an appropriate rate of innovation for the category going forward. I think we're going to emphasize on sharper category management in managing our portfolio differently. But we see a line sight to a pretty flat topline, maybe up a little bit with trade up, but much greater profitability growth over the medium term. From a shaving point of view, I don't know the exact answer to your question, but I'd say that our share in non-measured channels, I think we're under indexed. And therefore, I think we're actually growing faster than the market off of a low base. And that's the way that I think of that. Thank you, Olivia. Operator, next question please.

The next question comes from Bill Chappell with SunTrust.

My two questions are the same. Sandy, on the FX impact, can you maybe break a little bit more on what you're seeing that's driving that's kind of, which regions, because it's obviously tougher for us to figure out translation versus transaction. And what big moves have happened that kind of give you the confidence on the transaction side going forward for FX? And then second one, David, maybe, a little on infant care. I mean, I think the talk of that turning around has been going on for about three, four years now. Any signs of hope as we look in to the next three to four quarters?

Why don't I actually take infant, first. I know that we've been talking a lot about it. I actually think the new team in the more formal business unit within a business, that organizational model is working pretty well. And I'm pleased with where the business is trending. Diaper Genie was up high single-digits this quarter. So I think that it's stabilized and we have new products coming on the cups and the bottle line. So there is a lot of work yet to do. And I think we have to prepare some of our share of shelf losses, but I see solid fundamental progress happening within infant. Sandy?

So on the currency impact, so we've seen favorability in Canada, the yen and the euro. I would say those are the three main drivers of the improved currency rates. Latin America rates have been generally the same for us. So those are the main three.

And that's largely transaction too?

Transactional, it would be predominantly euro and then the U.K. So we have some cost rate issues there between euro and the pound.

Operator, next question please?

The next question comes from the Jason English with Goldman Sachs.

I want to come back to wet shave category growth, but not so much in the U.S., on the global figure. I recall back your Analyst Day, you guys had a chart up there, projecting global category growth around 2%. But I believe I heard you say it's actually contracting at about a 2% rate right now. So can you delve into a little bit more, maybe walk us around the world of maybe where some of the weaknesses are, where some of the growth is?

Yes. It was a soft quarter. And I don't think we look at it too hard in our measured markets internationally, because it bounces around a little. But yes, the global is down too in measured. You add back non-measured, and I call it more or less flat. What you see is it Western Europe has been soft. Actually Germany has been -- Europe has been pretty surprisingly strong. But France, the French markets been weak and kind of Southern Europe has been soft. Central Europe is actually growing fairly well. Asia, as a whole, has been pretty healthy. And then LatAm is actually growing pretty well. So it was a soft quarter, but I don't take it as a real trend. And I think that we kind of stick with our overall algorithm that the U.S. is total market measured and non is flat-to-up 1. Europe is pretty flat, but when you add the rest of the world, measured plus non, the rest of the world is kind of up to 2 to 3.

And one more question, if I may. Sandy, you mentioned trade budget, I think you said trade spend optimization. I guess, we refer to as TBO, trade budget optimization. We did a lot of work on the topic and we've been surprised that your name has actually come up in a lot of the discussions with people in the industry, as somebody who's on maybe the front-edge of the change, that's a foot in the industry. Can you elaborate a little bit more? I know it's preliminary, but elaborate a little bit more on sort of what the initiatives are that you're looking to undertake? And then maybe what the P&L implications could be for us, as we contemplate our model?

Let me maybe jump into that a minute. We are right on the implementation of a new IT systems that is going to really help us integrate all the way from trade promotion pre-planning, to budgeting, to setting what the actions are, modeling what the category impact is, and our profitability executed and then do post-work on it. So that's actually going into place now. We've also organized around it. So we've changed some of our commercial organization in our processes to really own that process and to really emphasize that change in how we do things. This will take a little while. So we're doing it right now, but we look forward to some really good productivity. The way we think is we're going to tackle and try to get the low quadrant, where we waste the most money and/or don't get lift, we're going to take those dollars and then repurpose them to try to grow ROI. From your profit models, I wouldn't drop that to bottomline. I think we're going to first try to really help move those to better generating ROI promotions and/or actions to help benefit sales plus our customers' categories.

Thanks, Jason. Operator, next question please.

The next question comes from Javier Escalante with Consumer Edge Research.

I have a follow-up question actually and probably something that I approached in the last conference call. Do you mind kind of like breaking out the organic growth rate in wet shaving between private label and branded for this quarter?

Well, --

Did you hear the question?

Hold on. I was just thinking of how do I characterize it? For us, I guess, one way to look at it is in the U.S. our branded consumption, it was down 12%. When you add back private label, we were flat. So I think for those facts, I go back to Nielsen and I think there you can calculate that.

And a question with regards to the pricing gap between private label and branded. I know that you mentioned earlier that you consider to be competing in the high-tier of that category, right? And I imagine that is what Hydro. But Hydro is priced at the mid-tier vis-à-vis Gillette. And from a consumer standpoint it's a mid-tier brand. So the question is, when you have this very wide price gap between branded, say, Fusion that had been introduced 10 years ago, right, and private labeled which is almost 4x. So don't you worry about the sustainability of a mid-tier pricing strategy, when almost every other category sold for either value or premium?

Good question. I think I'd quibble a little bit and I give you maybe some other framework to think about this. I mean, Hydro is prided 25% below Gillette's top offering. But when you take Hydro pricing per cartridge, we're on par with overall fusion. So we view, I mean, Hydro as a premium product. Certainly, we have a value proposition versus Gillette's highest product and we don't mind that, but it's a premium product. The big middle is all of the disposables in between Xtreme 3, Quattro and our offerings there. We have very solid mid-tier products that are price actually on Gillette offerings. And then we have private label down in the value segment. So that's how I think about it anyway.

Operator, the next question please.

This concludes our question-and-answer session. I would like to turn the conference back over to David Hatfield for any closing remarks. End of Q&A

Thank you all for your time, and have a nice day.