Jim Craigie - Chairman and CEO Matt Farrell - Chief Financial Officer.

Bill Schmitz - Deutsche Bank Bill Chappell - SunTrust Michael Steib - Crédit Suisse Alice Longley - Buckingham Research Connie Maneaty - BMO Capital Markets Jason English - Goldman Sachs Kevin Grundy - Jefferies Wendy Nicholson - Citi Chris Ferrara - Wells Fargo Caroline Levy - CLSA Nik Modi - RBC Capital Markets Jason Gere - KeyBanc Olivia Tong - Bank of America.

Good morning, ladies and gentlemen, and welcome to the Church & Dwight Third Quarter 2014 Earnings Conference Call. Before we begin, I’ve been asked to remind you that on this call, the company’s management may make forward-looking statements regarding, among other things, the company’s financial objectives and forecasts.

These statements are subject to risks and uncertainties and other factors that are described in the detail in the company’s SEC filings. I would now like to introduce your host for today’s conference, Mr. Jim Craigie, Chairman and Chief Executive Officer of Church & Dwight. Please go ahead, sir..

Good morning, everyone. It’s always a pleasure to talk to you, particularly when we have great results to report. I’ll start off this call by providing you with my overview of our third quarter business results, which you’ve read about in our press release this morning.

I’ll then turn the call over to Matt Farrell, who will provide you with his perspective on the financial details for the quarter. When Matt is finished, I’ll return to provide some more detailed information on the performance of our key brands and discuss our earnings guidance for the year. We’ll then open the call to field questions from you.

Let me start off by saying that I’m very proud of my team for delivering excellent third quarter business results in such a difficult business environment.

Despite continuing headwinds from weak consumer demand and increased competitive pressures, Church & Dwight achieved 4.7% organic sales growth in Q3, driven by record share results on all four of our mega brands.

In combination with continued tight control of overhead cost, the company delivered a 30 basis-point increase in operating margin and a 12% increase in earnings per share. On a year-to-date basis, our organic sales growth is right in line with our annual target of 3%.

So the excellent results from the first three quarters of 2014 makes us feel confident in achieving our aggressive annual EPS growth target of 8%, which would place us in the top quartile of EPS growth for the entire CPG industry.

I am also pleased to report that we’ve completed the acquisition of several leading women’s healthcare brands from the Lil’ Drug Store Products Company. This acquisition meets the company’s acquisition criteria which have been a key driver of our consistently strong EPS growth.

We expect the acquisition to be earnings neutral in 2014 and accretive to earnings per share in 2015. Let me assure that we are continuing to aggressively pursue acquisitions.

I’ll now turn the call over to Matt to give you some specific details on our third quarter results and then I’ll return to give you some further insights of results of our key brands and provide additional details and my outlook for the year..

SG&A was low year-over-year by $4 million; as a percentage of net sales, it was 11.1% which is 110 basis-point decrease from the prior year third quarter. And as a result, our reported operating margin for the quarter was 21.1% which was 30 basis points higher than the prior year third quarter. Next is income taxes.

Our effective rate for the quarter was 33.1% that compares to last year’s 33.9%; and we continue to expect the full year 2014 effective tax rate to be approximately 34%. Cash flow is next. We generated $408.7 million of net cash from operations for the first nine months of 2014, and we invested $36 million year-to-date in CapEx.

And we expect to spend approximately $70 million on CapEx for full year 2014. Cash from operations is expected to exceed $525 million and free cash flow is expected to exceed $450 million. Regarding buybacks, we have approximately 149 remaining on our authorization, and we may decide to get ahead of 2015 share creep in December of this year.

Now, I want to talk about the acquisition that Jim mentioned in his opening remarks. The company completed the acquisition of REPHRESH, REPLENS and other brands from Lil’ Drug Store on September 19th. We met all of our previously stated acquisition criteria.

The brands are number one in their niche categories; they’re asset-light and what that means is the products are co-packed. And we believe it has growth potential and the gross margin is accretive to the company’s gross margin.

Annual trailing sales of these brands are $46 million and the $260 million acquisition was initially financed with commercial paper. A little more color on this. So, REPHRESH is a number one gel for pH balance and vaginal health, and REPLENS is the number one gel to address vaginal dryness which is a common issue for menopausal age women.

We expect them to grow at or above our 3% to 4% growth target and these brands fit nicely into our global women’s health portfolio. And many of you may not know that in our international division, we have a vaginal care brand called Femfresh which is about $20 million brand. Now into some numbers, trailing EBITDA was approximately $17 million.

If you do the math on that this is an EBITDA margin of 37% and that would also equate to an EBITDA multiple that we paid of 12 times. So, since this is an asset deal, as many of you know, there is tax shield.

So, after taking into account $55 million tax shield and the minor amount of cost synergies, the multiple is actually less the 9%, 8.9% which coincidently is the same fully synergized multiple that we paid for the Avon business in 2012.

So, once these brands are fully integrated, the company expects to leverage distribution network and the support functions to generate some additional cost savings.

The acquisition is expected to be earnings neutral to 2014 EPS and approximately $0.02 accretive to earnings per share in 2015 that’s inclusive of two things, financing costs and amortization of intangibles.

If we add back the amortization of intangibles that’s about $8 million bucks, the acquisition is expected to be approximately $0.06 accretive to cash earnings per share.

And with respect to the financing that’s noted in there, although there are no guarantees, we expect to refinance the commercial paper borrowings with the longer-term instrument at market rates sometime in the future. I’m going to wrap it up now. The third quarter highlights include 4.7% organic sales and 12% EPS growth.

We expect fourth quarter earnings per share of approximately $0.78, compared to $0.65 per share last year which is a 20% increase.

As Jim has said and will say, we had an impairment charge and litigation costs in Q4, 2013 that aren’t expected to repeat; and this year, we have lower shares, and combined that makes up 10% of the 20% increase in the fourth quarter.

We expect Q4 organic sales growth of approximately 3% and marketing as a percentage of sales goes to approximately 12.2% for Q4; 12.2% is also our full year marketing target right now. As we mentioned in the release, we’re tightening our full year EPS range from 7% to 9%, to 8%.

Then just one last thing for those of you who are working on your models, on a full year basis, we expect 3% organic sales growth; gross margin contraction of 75 basis points, obviously influenced by slotting and couponing behind new products; as we work our way down to P&L, we now expect marketing at 12.2% of sales for the full year that’s given our Q3 actions and expect SG&A to be down a 100 basis points to 12%, will get you to a 50 basis points of operating margin expansion for full year 2014.

And now back to you Jim..

premium laundry detergent, bleach alternatives and automatic dishwashing detergents. Overall, this strategy is off to a great start as consumption of the total OXICLEAN brand in the third quarter was up 35% versus year ago. This included strong results on every form of the brand.

The OXICLEAN laundry additive product achieved a record third quarter share of 43.8%, which is more than the next 3 competitors combined. This represents the 12th consecutive quarter of year-on-year share growth for our core OXICLEAN laundry additive brand.

The new OXICLEAN premium liquid laundry detergent achieved a 1.2% dollar share in the third quarter in the $5 billion liquid laundry category after just seven months in distribution. This represents a 20% increase in sales versus the prior quarter.

Most importantly, our consumer research reveals that the sales of our new OXICLEAN premium liquid laundry detergent brand are over 80% incremental to our other liquid laundry detergents.

Our new OXICLEAN auto dish detergent achieved a 2.4% dollar share in the third quarter and has surpassed Colgate-Palmolive brand to become the number three player in the auto dish category. And our OXICLEAN bleach alternative, called White Revive achieved a 2.4% dollar share in the third quarter.

Distribution of White Revive was almost entirely incremental as we were able to get it placed in the bleach section rather than laundry detergent section where the core OXICLEAN laundry additive product is located. As a result, sales of White Revive are over 70% incremental to the core OXICLEAN laundry additive franchise.

The strong sales incrementality of our new product is critical to achieving sales growth. Our other megabrands also achieved strong results in the third quarter.

Our newest megabrand, the VITAFUSION and L’IL CRITTERS gummy vitamin business, delivered high single-digit consumption growth in the third quarter, behind expanded distribution, new products and increased marketing support.

We achieved this high single-digit consumption growth despite only 1% overall category growth as a result of unfavorable publicity late last year about the benefit from taking multivitamins.

The 1% overall category growth for vitamins is actually encouraging news as it represents steady improvement from a negative 2.2% category decline in the first quarter and a flat category in the second quarter.

We are optimistic that the vitamin category will soon return to its historic mid single-digit growth levels driven by new products and solid marketing spending by all competitors that reinforce the proven benefits from taking vitamins.

Notably, Church & Dwight’s vitamin business plays in the fast growing gummy form of vitamins, which now represents 7% of the total vitamin category that is more than double what it was when we bought the business in 2012 and that still leads 93% of the $7 billion vitamin category to be conquered by encouraging consumers to switch from swallowing tasteless hard pills to enjoying delicious tasty gummy vitamins.

We have the number one gummy brand for both kids and adults, and Church & Dwight was one of only two vitamin brands to show share growth in the third quarter.

These strong results to-date in our gummy vitamin business had built us to put us on track to deliver our strong sales growth outlook of the year despite lower than expected category growth and increased competition.

On our TROJAN megabrand, we achieved a record third quarter share in the total sexual health category, driven by record quarterly sales of condoms and continued growth of our new lubricant line that was launched in 2013. On the largest part of our sexual health business, our TROJAN condom business, we achieved a record quarterly share of 76.6%.

Our steady stream of new condom products and strong marketing programs has led to the TROJAN brand representing 26 of the top 30 [fuse] in the category. Our biggest megabrand, ARM & HAMMER, grew its share in the third quarter despite significant price competition.

In the laundry detergent category, ARM & HAMMER liquid laundry detergent achieved a record quarterly share of 10.3%. This share growth represents the 19th consecutive quarter that the ARM & HAMMER liquid laundry detergent brand has posted year-on-year share growth.

This share growth has also strengthened the brand’s number one position in the value segment and has enabled the ARM & HAMMER brand to pass the ALL brand to become the number three brand in the total laundry detergent category.

While these were very positive results for the ARM & HAMMER brand, the real star of the ARM & HAMMER mega brand portfolio was our cat litter business. Our new premium price cat litter, called ARM & HAMMER CLUMP & SEAL, has been a huge hit with consumers, as reflected in both our brand’s share results and its positive impact on category growth.

Our third quarter consumption for our ARM & HAMMER cat litter business increased by over 20% for the second consecutive quarter and our share grew 2.5 points to a record third quarter share of 22.5%. These great share results strengthen our position as the number two brand in the category.

Just as important, our new CLUMP & SEAL product has been a major contributor to driving cat litter category sales growth of over 8%, the strongest growth in any of our 13 categories and excellent growth for any CPG category.

This exemplifies our belief that innovation is the key to driving improved value creation for our consumers, our customers and our shareholders. Unfortunately, some of our competitors have not invested in developing new products and instead have increased their trade and coupon spending to defend their brands.

This has been happening in several categories, particularly the laundry detergent category. As you know, Church & Dwight is the only competitor to grow share in the laundry detergent category for every year for the past five years.

We are now the number two player in the category, and one out of every four wash loads is done with a Church & Dwight laundry detergent. The growth of our laundry detergent business has been driven by value pricing, great new products, increased distribution and higher marketing spending.

As I stated earlier, our largest liquid laundry detergent brand, ARM & HAMMER, has posted year-on-year share growth for 19 consecutive quarters, including share growth in the first third quarters of 2014.

Our OXICLEAN laundry additives brand has posted year-on-year share growth for 12 consecutive quarters and achieved a record quarterly share in the third quarter. In 2014, we launched innovative new products on our ARM & HAMMER laundry detergent brand.

And to continue our remarkable record of share growth, we also extended the OXICLEAN brand into the laundry detergent category, with solid results as I mentioned earlier. Overall, Church & Dwight’s total laundry detergent business achieved a record quarterly dollar share of 14.7% in the third quarter.

In a liquid detergents category which represents over 70% of total laundry detergent sales, Church & Dwight achieved an all time record quarterly share of 17.5%, driven by record quarterly share on the ARM & HAMMER brand and the incremental share delivered by our new OXICLEAN liquid laundry detergent products.

Hopefully, our laundry detergent competitors will come to share or belief that launching innovative new products is the preferred method of competition for both our consumers and retailers. We are anticipating a more normalized promotional environment starting in this quarter.

I will finish off our portion of the call today with a few words and our outlook for the year. As stated in the press release, we are reaffirming our 2014 guidance of organic sales growth of approximately 3% and we are tightening our annual earnings growth target to 8%.

This will be driven by our balanced portfolio of value and premium products, the launch of innovative new products, aggressive productivity programs and tight management of overhead cost. Our 8% earnings growth target is in the upper quartile of EPS growth target ranges in the CPG industry consistent with our historical performance.

And we are highly confident that we can deliver this aggressive target given the strong momentum exiting Q3. I also want to once again assure you that we are actively pursuing additional acquisitions and have over $2 billion of financial firepower to make them.

As you know, we have a great track record of making highly accretive acquisitions, because we are very selective about the type of businesses we acquire. At the same time, we are also fiscally responsible to our shareholders, so we will continue to be patient until we find the right deals that will pay dividends for many years to come.

Now before opening the call to questions, I’d like to mention of organizational announcement that we made this morning. I’m pleased to announce that Farrell will be assuming a broader leadership role within the company.

In addition to his current role as Church & Dwight’s Chief Financial Officer in which he has a superb track record, Matt will also become our Chief Operating Officer with all line functions reporting to him.

This expanded role will enable Matt to leverage his terrific depth knowledge of organization and the CPG industry to continue to build on the company’s outstanding track record of results. This organizational change will also allow me to focus more time on long-term corporate strategy and finding accretive acquisitions.

In conclusion, 2014 is shaping up to be another very challenging year.

But when things get tough, you should place your best in the company with the product portfolio and new product pipeline that can thrive in such an environment and the management team that has the track record of knowing how to successfully leverage that portfolio to deliver consistently strong EPS growth. That ends our presentation.

I’ll now open the call to questions that you may have, which Matt and I will do our best to answer. Operator, please go ahead..

(Operator Instructions). Our first question comes from the line of Bill Schmitz of Deutsche Bank. Your line is open..

Hey. Just kind of looking at the organic growth guidance and obviously came better this quarter, but you only kept a 3% for the year.

So was there anything that was pull forward from the fourth quarter? Do you think you will be conservative in the fourth quarter, kind of what’s changed relative to when we spoke last?.

Yes, Bill. It’s Matt. As you know, the specialty products business has been flying pretty high and Q4, they’re going to be coming down earth. So, that’s one of the reasons why it’s going to be lower sequentially.

In Q3, as you know, we took actions to particularly in the laundry category which we talked about on the last call, was actions we decided upon in May; June got a lot better year-over-year followed by July, August and September.

So that kinds Q3 was influenced by those, but it seems though we expect the relatively normalized commercial line in Q4 so that’s also reflected in our top-line..

Okay, great. And then it seems like you’re a lot more sanguine about the laundry category and the price for them also happened earlier last year.

Do you have a sense really kind of like what the planned outlook looks like for next year and what some of the pricing conversations have been, is that why you’re a little more optimistic?.

No, I think Bill we don’t have any information to share on that. We’re trying to just provide context on our expectation based on what we’re seeing right now. I would just say two facts kind of support that context. One is that improvement in the overall laundry detergent category.

The category is still down, it was down 2.3% in Q3, but that’s better than the 3.8% decline in Q1 versus a year ago and the 3.5% decline in Q2. So, we’re seeing improvement in the category and also the promoted price per wash load for liquid laundry detergent was higher in Q3. And keep in mind liquid is still 70% of the business.

So we’re seeing some trends, which we like..

Got you. And then just a follow-up on that, I mean does XTRA have to work for laundry to really be [pluming] because that’s the only brand that you wanted to really take a chance a little bit, it hasn’t really kind of does job recently.

So I guess is there plan there and do you guys need that brand to work for the broader laundry business to work?.

Well, we have a portfolio now Bill of three laundry detergent brands and every one of them is important. And we have plans in place to make XTRA do better going forward and I’m not going to reveal those. But yes, it’s a part of our portfolio, but we’re working on it.

Overall the portfolio is showing great record share results and XTRA was down a little bit, but we have plans going forward to make that better..

And congrats, Matt. One time comment, it’s well deserved. Thank you, guys..

Thanks Bill..

Our next question comes from the line of Bill Chappell of SunTrust. Your line is open..

Good morning.

Actually going after that last one, Matt congratulations as well, but can you tell us kind of what the difference is of what you’re doing day-to-day, Jim, other than Matt obviously getting a longer business card?.

Yes. Well, Bill all I’d say is two key drivers for our fast success, and then we’ve got a very experienced management team and I carefully leverage that team overtime to meet the changing needs of our customers and consumers and to meet the competitive environment that we face in order to live our great business results.

Right now, I wanted build more time to three things; one, long-term corporate strategy; two, acquisitions; and three, developing the organization’s capabilities. I need more time to do that, it’s enabled me to do that. I’ve asked Matt to step up and handle the additional duties of COO.

He will be overseeing and coordinating the day-to-day execution of our business. That leverages his last 8 years of experience as our CFO, which he has been involved in all aspects of the business. Matt, as you guys know; and I appreciate for the incredible Job as our CFO.

He is in a position to take on additional responsibilities because he has developed a world class financial team. So, in my mind this evolution of our management structure is what the company needs right now. Going forward, I’ll continue to make changes in the future if needed to continue deliver outstanding business results.

So that’s what’s going on..

Okay. And then switching to the operations on the laundry that you’re anticipating the promotional environment getting better this quarter, are you already seeing that in October or did you already see that in October and kind of what gives you comfort, I mean assuming most of these plans were put in place months ago.

Should we expect it to get better sequentially?.

I don’t want to go in detail, Bill, but yes, we’re continuing to see some positive things happening. But it’s still early in the fourth quarter..

Okay.

And then, Matt, just as we look out to 2015, I know it’s not big, but based on spot rates today, what’s kind of the currency headwind on your EPS guidance?.

Thanks for throwing me that beach ball, Bill..

You’re still the CFO..

Yes, right. Current spot rates we calculate to be almost 1.5% drag on EPS. And that’s best baked into our thinking still a high single-digits. So, where it is true that we have an acquisition and it’s going to help us by $0.02 next year, we got more than $0.02 going the other way at current spot rates for FX..

Got it. Thanks so much..

Our next question comes from the line of Michael Steib with Crédit Suisse. Your line is open..

Good morning. Just a question on the operating margin improvements, SG&A productivity since they’ve been driving a lot of the improvement in the quarter, I was wondering what’s behind that.

Is that just your general productivity program and what is the sustainability of that progress?.

Hi Michael, this is Matt. While we expect to sustain the year-over-year dollar saving, it’s a combination of a lot of things.

You may recall back at the -- in February when we closed the year that we expected a 100 basis points of help year-over-year from SG&A and that’s because of our vigilance with respect to headcount, in fact we had put it in SAP system two years ago now, we continued to try to leverage.

We’re far more progressive than any other [CPD] company with respect to how we manage medical and dental cost; in fact our medical and dental costs are down year-over-year as a result of us going to a private exchange. You won’t find many companies that have -- that did that as of 01-01-2014.

So, when I think about 2015, you’re trying to get at the sustainability of the SG&A. improvement. So, we expect to sustain the dollar save. And as you think about our algorithm, you can grow this company 3% top-line. So, if your reported number is 3% top line growth and you can keep a lid on SG&A.

So if SG&A can grow 1% or less, you’re going to get 25 basis points of leverage. So that’s half of the 50 basis points of operating margin leverage that we’d be looking for. That’s the simple way to think about it..

Yes, very helpful. Thank you..

Our next question comes from the line of Alice Longley of Buckingham Research. Your line is open..

Hi. Good morning. My question is a follow-up to the fourth quarter guidance, so 3% organic sales growth. We understand Specialty is coming down. Can you tell us more about the Domestic Consumer business we just had 3.5% but we’re going into the toughest comp of the year for Domestic Consumer and there is less promotional support.

So I’m just wondering if that Domestic Consumer goes down to 2% or something like that..

The way I think about it, Alice, is the last couple of quarters, the Specialty Products business has generated more than 1% of our growth. So, if you went back to Q3 for example of that 4.7%, the Specialty Products business was – number is around 1.5% of that. That’s not going to repeat in the fourth quarter.

So when you think about 3% fourth quarter organic growth, the simple way to explain it is that SPD is going to grow, Specialty Products will be less than 1% of Q4 year-over-year, which means the Consumer business is going to be higher.

But as far as my ability to tell you exactly what it’s going to be, I’ve whiffed on that last couple of quarters, so that’s as close as I can get it right now..

Okay. You don’t mean the Specialty is going to be up 1%, you just mean that it’s adding one….

Yes, right. Weighted average, how much that they contribute to the curve..

Yes. Okay, and then by another follow-up, how much were your detergents overall up or not in the third quarter? And that includes all the brands and all the forms including powders. Thanks..

Yes. Alice, our share was up 0.1% which was the same as Procter and again which competitors were down on a share basis..

So, that means your detergents were down a little bit because the category was down?.

Roughly plus or minus, just to give you an exact number that way around, but I’m going to give you exact number; I want to go check beginning on that one; you’re asking for specific numbers on specific category that’s a double check..

Okay. And then I guess one final one, you haven’t talked about the JV and equity income and that was better than I thought.

And could you bring us up-to-date on what’s happening there and what the outlook is maybe for next year?.

Well, I can’t tell you what is going to be for next year, as far as the full year this year; we expect it to land around 16 million bucks if that helps you, full year 2014?.

And what’s going on there, why is it growing?.

It’s cyclical. You do businesses that go up and down. So, if you look at our Ks for the last few years, you’re going to see that it’s driven by the end market, and their input costs, so some end markets are positive right now in that JV. But I wouldn’t say that I would count on there for next year just yes, we’ll update you, everyone..

Okay, good. Thank you..

Thank you. Our next question comes from the line of Connie Maneaty of BMO Capital Markets. Your line is open..

Good morning. .

Hi Connie..

It looks as though the litter market is going towards light weight litters and I am wondering where you are in the development of such a product..

I don’t want to announce it and can’t even before we do it. I would just say, we continue to rock and roll on Cat Litter. I think the month of October has just rolled in and we’re up actually 34% over a year ago. So, we continue to do very well. And again, I just have a policy of not announcing new product launches before actually they hit the market.

Our competitors like to tip us off, but we don’t do that..

Okay. And can you give us your outlook for resin, I think you noted that have negative contributor to the gross margin. A lot of people are expecting resin cost to go down and to follow oil.

But what’s your opinion?.

Yes. What happens with resin, Connie, is that there is less of a correlation with the oil than there used to be historically. So, it seems to be more related to capacity suppliers and outages both planned and unplanned. So, resin is still super high.

I know somebody wrote a note about resin coming down, love to see that happen because that looks certainly benefit from that next year, but it would thinking away to see right now..

Okay. And just final thing.

On gross margin expansion for next year, what would be the contributor to it?.

Well, remember this week Jim talked about new products this year was a biggest year in years as far as the number of new products that we’ve launched. And along with that came lots of slotting and couponing to stimulate trial.

So, next year will be -- we always have great years and next year will be a good year, but we won’t have as many of launches next year in 2015, ‘14 consequently have what we are slotting and couponing and obviously that gives you a bit of a tailwind for gross margin..

Okay. Thanks..

Our next question comes from Jason English of Goldman Sachs. Your line is open..

Hey, good morning folks..

Hey Jason..

Sorry, kind of still off the call there for a bit of time, so I may ask or redone a question, if so I apologize in advance. But I want to pick up that last line of question just done on costs and margins. Good organic sales growth this quarter, bad gross margin performance. You’re calling for an inflection to gross margin expansion next quarter.

Can you think that can be sustained as you go to the next year and if so, what are some of the puts and takes?.

We just talked about the gross margin for next year being influenced by lower slotting and couponing, I don’t know, if you heard that or not, Jason, because we have so many new product launches this year in particular OXICLEAN and that’s going to peel back a bit next year. So that’s a natural lift to gross margin in 2015 versus 2014.

As far as gross margin goes, Q3 to Q4, it’s sequentially a better. You’d probably saw in the release and Jim has made some remarks about that that we expect a more normalized promotional environment, but I comment this with respect in Q4. So we come in 15 or 16 there, but that seems to be the trend right now..

Okay. Thanks that’s helpful.

And Jim, real quick, usually when we see a COO named, it precedes CEO succession, what’s the likelihood of that happening here?.

Well, I’m a young 61, someday I will retire, but so that’s all there right now you’re getting out how do your speech is there as far as I’m concerned..

All right. Good. Thanks a lot guys. I’ll pass it on..

Next question comes from the line of Kevin Grundy of Jefferies. Your line is open..

Hey, good morning, guys..

Good morning..

And Matt, I wanted to extend my congratulations to you as well..

Thanks Kevin..

From a capital allocation perspective, Jim, maybe you can touch on this.

So, with respect to M&A, is it that you’re seeing assets that you think make strategic sense and the multiples are just too high? And then alternatively, how should we be thinking about buyback with respect to ‘15 and sort of going forward understanding what you said about share creep here in the remainder of the year? Should we be anticipating something similar perhaps a front-end weighted sort of buyback in’15 understanding that it’s a Board decision?.

Yes Kevin, I’ll address the acquisition environment and let Matt take the share buyback. I would just say it’s a very active environment out there.

And it’s more a case of we’re just looking for as I said in my comments for acquisitions that fit our criteria, we’re being selective as we’ve always been and when we make deals, they have long-term benefit in terms of being accretive. So, there is a lot.

Again one of the reasons I want to spend more time to be able to pursue these and chase them down because it’s a very active environment, but an environment which we want to be very careful in. We don’t want to repay and we want to make the right long-term deal and it takes a lot of focus to do that.

So that’s one the reasons for giving Matt the additional duty of COO. I’ll let Matt to address the share buyback..

Yes. On buybacks, Kevin, remember when we started the year we had $500 million of cash on the balance sheet, Jan 01, ‘14. And you know we’re a bit cash flow generator. So, we were somewhat opportunistic this year and be able to deploy that cash not having found large enough acquisitions that we thought met our criteria.

So, we bought that $430 million of stock this year. So, I wouldn’t expect that to repeat because the highest and best use of our cash flow is acquisitions. So, the one thing we would commit to is that we would try to address share creep for 2015 and number that’s around $85 million of buybacks..

Okay. And then if I may just one more. And without asking you guys, this is with respect to the product pipeline for ‘15 and understanding you’re not going to front run any new innovation I guess that.

But maybe you could just sort of help us sort of prioritize where you think the greatest opportunity is; you called out OXI, where are we I guess in sort of like what inning would you say with OXI in terms of looking at categories that could extend to TROJAN and also the gummy vitamin business and brand extensions there? That’s it from me.

Thank you..

One, our focus going forward will always be to give the strongest support to our four mega brands; and two we’re going to continue to strongly support the major new product launches we made this year. But as Matt referred to, we won’t have to pay slotting fees and we won’t be at introductory coupon levels next year; we’ll just be in of ongoing level.

So we’re going to continue to drive the growth. We’re happy with the start; it’s going very well, but we know we need to continue that next year and we’ll be launching of new products on especially on our mega brands next year..

Okay. Thanks..

Our next question comes from the line of Wendy Nicholson of Citi. Your line is open. .

Hi. Just a couple follow-ups. .

Hi Windy..

Hi.

The guidance for the fourth quarter includes a little bit of the incremental share repurchases pulling forward from next year, is that clear or would that be on top of which you’ve already guided us for?.

No, that’s not baked in right now..

Okay, fine..

I’ll tell you, Windy, but that’s another way we manage the places; we’re always looking for ways to spend back more on media with our brands; to that extent that we did buyback, we probably spend back any of that incremental profits in marketing. .

Got it. Okay, fantastic. And then can you quantify, I know there have been a couple of questions about the gross margin and the guidance for 75 bps contraction in 2014.

How much of that is the slotting fees? Is it 50 bps or 100 bps, just to try to sort of in our own mind add that back and think about where the gross margin is going to go next year?.

Let’s wait till we get to the end of year and we’re going to call that. So in February, we’ll give you the detail on how much of that was in 2014 and what the tailwind is for ‘15..

Okay, terrific. That’s all I had. Thanks so much..

Thank you. .

The next question comes from the line of Chris Ferrara of Wells Fargo.Your line is open..

Hey, thanks guys. I guess the message changed a little on the buyback. I know the last quarter you said don’t expect us to busy any more stock back, now you are saying you pull some forward for share creep.

So, I’m just curious is that because of what has happened in the M&A environment relative to what you had expected?.

No because of the M&A market at all, this is question of do you do it in December or do you do it in January and February, typically do it -- do it we do it front end loaded. So, we’ll just do that in December.

But like I said, it’s not going to have an impact our full year ‘14 and a month isn’t going to change -- make a difference with respect o 2015. But we haven’t made that call yet..

Okay. And then looking on guidance, I know Matt you guys always do good job of managing the next quarter guidance pretty carefully. But when I run the numbers that you are looking for through, there seems to be more flexibility into that Q4 EPS numbers than I’m used to I guess.

And I’m wondering if there is anything, maybe I’m not thinking about that will be an incremental drag next quarter that would cause you to only earn what your guidance is relative to the individual components you guys gave out?.

Could you be more specific about?.

Yes.

So, I mean when you run marketing being a 12% 2 for the year and SG&A being at 12% and organic at 3%, you get to an EPS number that’s bigger than what you’re guiding to and by a little bit more of a margin than normally?.

Yes. We always have puts and takes in a quarter, lots of variables and none of which we will go into today on the call. Mike, as you correctly point out as for quarter ahead and for the full year we’re always pretty careful about what our expectations are so we can help people either way to the numbers.

So, the big variable is always going to be the top-line too. That’s the one that’s hardest to call marketing in SG&A and is within our control, but certainly promotional environment and the top-line are not. And although, we might say we expect a relatively normalized promotional environment, it’s still early..

Thank you..

Our next question comes from the line of Caroline Levy of CLSA. Your line is open..

Good morning and congratulations Matt..

Hi. Thanks..

My questions are; number one, if you could say what’s going on in Canada and whether you expect that to reverse? And number two, on [home care], are there other areas that you can expand into.

Can you tell us a little bit about that category and how we should think about growth rates for the category?.

Yes. Canada is extremely competitive promotional environment right now. Some retailers up there are very aggressive with respect to promotions and who will remain nameless. It’s more or less the (inaudible) of the U.S. And so it’s the 10% of the U.S. sales in the Canada versus U.S.

It’s our most important subsidiary, but we’ve had struggles up there with respect to competition this year..

Okay.

So retailers rather than the manufactures?.

Not obviously the retailers there, it’s just we have to compete, right? So, you got to compete with your competitors as well..

And Caroline you know there has been retail consolidation up there, some new competitors. It’s just a very volatile market. We are showing some improvement in beginning the Q4. So, we’re optimistic there. It’s just something we’ve been dealing with the environment up there. I think everybody has been dealing with it.

And I think again, we had a good month of October overall especially in Canada..

That’s good. And on (inaudible).

What’s the second one, Caroline?.

Just you made these acquisitions in (inaudible) I’m just wondering if you could talk a little bit about that market and whether you see other opportunities to expand there..

Oh, you mean in the women’s health?.

Yes, with your acquisition..

Look, our women’s health business in the U.S. is essentially a pregnancy kit business. We still have an opportunity using our gummies to expand the first response into another area. This is complementary because we’re already in the business in Europe. So, it’s not -- we’re not strangers to this particular category.

These are small categories, but growing. So, I wouldn’t say that we were going to go on a roll up here with respect to women’s vaginal products. It is a subsection of lubricants.

Lubricants is not growing as a total category, but the subcategories within those are growing far more rapidly and that was what the attraction was for us of each of these brands..

Thank you. And finally just on vitamins, you said the categories come back to 1% growth.

Do you -- from past experience where the categories had that pressed, does it then resume within sort of 6 to 12 months? Do you think you will be back to that mid single-digit?.

Yes. Usually it does, Caroline. It’s something when we bought this business to be flatter and the category goes up and down based on news in the marketplace. So, we were told about that and that’s exactly what we’re seeing right now. I can’t predict exactly what number we’ll go to, but it’s definitely had a vacuum in the positive direction now..

Okay. Thank you..

Thank you. Our next question comes from the line of Nik Modi of RBC Capital Markets. Your line is open. .

Hello? Good morning..

Hey, sorry about that. I was on mute..

Okay..

Okay, good morning. Congrats Matt. Two questions from my side. Jim, general environment, I guess as we’ve been hearing other companies reporting you’ve indicated that U.S. has kind of improved and I know you’ve had a pretty good handle on the economy going back several years.

So, I want to just get your updated thoughts on the State of the Union here in the U.S.? And then the second question is on the vitamin business and I know one of the big initiatives you’ve had with sampling. And I am just curious as now maybe you have some statistics around conversion, around the sampling efforts? Thanks..

Yes Nik. The economy -- all I can say if I can go back to what I repeated in my call, so the categories that we’re in, we’re seeing good steady improvement from minus 0.8 to plus or minus in the second quarter the plus 0.8 in the third quarter. I can’t predict it going forward.

I mean you read the papers every day, someday it is headwind, someday it is tailwind on that.

So, I am just -- maybe I’m snitch more optimistic right now, but as we continue going forward I will tell you there is every day I read the negative news I know if you haven’t seen it there is concerns about the Port of Long Beach in California, with two to three week delays on products coming into the country.

Luckily we have very small part of our product line is imports, I don’t see any impact on that, but I feared impact on retailers being able to merchandise stuff in Q4. But overall, it’s just -- I think the categories we’re in again driven by innovation are starting to show some improvement. The BMS sampling is a key part of that program.

We continue to spend more money on that. I don’t have any statistics to give you honestly. So, it’s good news, our business continues to grow; we continue to be number one share position and we’ve got a lot of new products in the pipeline come along.

I think we often told we’re right now putting in a new capacity in the plant that will increase our capacity by about 75%. That new production lines will be up and running soon. So we have lots of very aggressive plans for vitamins going forward..

Great. And just one quick one on the acquisition announcement.

Can you provide any context on maybe distribution gaps? I mean what is the real opportunity in terms of low hanging fruit with some of these brands?.

No, I wouldn’t say that. Lil’ Drug Store is a really good operator and they had really good ACV for these. There are some of likes there, but I wouldn’t be looking at these brands as having big voids to sell..

I think Nik, we kind of -- Matt kind of alluded we have another business sort of like this called Femfresh over in Europe. It has products within this line which maybe applicable to this business. And with that we’d be launching additional products into these two brands..

Got you. Thank you..

Thank you. Our next question comes from the line of Jason Gere of KeyBanc. Your line is open..

Hey, thanks. Good morning and Matt, echoing the congratulations. Just actually most of the questions have been asked, just two kind of follow ups. One, I think Matt you mentioned about operating margin up 50 basis points, I just want to make sure that was for the full year, not for the fourth quarter.

And I have a second question as a follow-up?.

Yes, that’s full year, full year ‘15..

Okay, great. And then I guess the last question is just on the vitamin. In the third quarter, I think you said consumption to you guys was up high single-digit.

Did you say what the shipment -- your actual shipment growth was as a part of that whole personal care?.

No, we don’t do that. .

No, we don’t do that for any brand..

Okay.

Is it in line with what personal care or is can you say a little bit higher or little bit lower?.

We don’t do this for any brand. We always going to ask, but we don’t go into sales and margins by brand or SPU or any that..

All right. Okay, I’ll leave it with that. Thanks a lot..

Thanks Jason..

And our final question comes from the line of Olivia Tong of Bank of America. Your line is open..

Thank you. Thanks for fitting me in and Matt first congrats on your extended role.

As far as my question, can we talk a little bit about the key drivers of the 3% organic sales growth for fiscal ‘15 because specialty obviously grew much faster this year? And then you mentioned earlier that’s you’re not going to see as many new products in 2015 and 2014.

So perhaps can you talk a little bit about the spread between consumer versus specialty growth going forward? And perhaps some specifics on what’s going to drive consumer to help offset the difficult comps in specialty? Thanks so much..

Yes. I would say -- just to be clear. So, it’s not in the release and it’s not in the script. So we haven’t called the top-line for next year. So, we’re not ready to call any lines.

I don’t think we really said is that we expect gross margin expansion and the reasons for that we’re going to be the fact that we had such a huge number of new products launch this year unlike the slotting and couponing to generate trial in ‘14 that we don’t expect to repeat as much next year.

I gave an example with respect to the sustainability of the SG&A costs. And in my example I said that if you assumed 3% top-line growth then you kept the lead on SG&A at only 1% or less that you could generate 25 of your 50 basis points of operating margin expansion.

But we’re not ready right now to be calling the three pieces; domestic, international and specialty products. But I will say that you’re right with respect to lightening striking twice, when you look at the kind of year that specialty products had this year, it’s certainly not obvious to us either that that will repeat next year..

Got it. Thank you..

Okay. Hey I want to thank everybody for taking the time to meet with us this morning. Again, very proud of the results this quarter and just hope things keep going well, which I think they will. Again I said earlier, we had a good October and we’ve got a couple of months to go to finish the year. So, thanks again for taking the time. Bye, bye..

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program. And you may all disconnect. Everyone, have a wonderful day..