Operator: Good morning, ladies and gentlemen, and welcome to the Church and Dwight's first quarter 2026 earnings conference call. Before we begin, I have 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 forecast. These statements are subject to risk and uncertainties and other factors that are described in detail in the company's SEC filings. I would now like to introduce your host for today's call, Mr. Rick Durker, President and Chief Executive Officer of Church & Dwight. Please go ahead, sir.
Rick Durker: All right. Thank you. Good morning, everyone. Thanks for joining the call. We had a fantastic quarter. I want to start off by thanking all of our Church & Dwight employees around the world on executing so well in a volatile environment. I'll begin with some thoughts on the macro environment and then a review of our Q1 results. Then I'll turn the call over to Lee McChesney, our CFO. And when Lee is done, we'll open it up for questions. Starting with the broader environment, conditions remain dynamic, and the consumer backdrop continues to be mixed. Consumer sentiment remains pressured by inflation, borrowing costs, and geopolitical uncertainty related to the Middle East, which, as you know, is also contributing to significant inflation in commodities and transportation costs. That said, the consumer remains resilient. Employment remains stable, and our largest categories grew 3% in the quarter. Our portfolio, with its balance of value and premium offerings, continue to perform well in this type of environment, supported by strong brands and innovation. Turning to the Q1 results, we delivered a strong start to the year and exceeded our outlook across key metrics. Net sales increased 0.2% ahead of our expectation for a decline. and organic sales grew 5%, well above our 3% outlook. This growth was driven by volume. Adjusted gross margin expanded 130 basis points to 46.4%, and adjusted EPS was 95 cents, up 4.4% year over year, and above our 92 cent outlook. Overall, this was a high-quality beat driven by strong execution across the business. Now I'm going to turn my comments to each of the three divisions. First up is the U.S. consumer business. Organic sales increased 5.4%, which was primarily all volume. Across the portfolio, our brands continue to perform exceptionally well. Growth in the quarter was led by TheraBreath, Arm & Hammer, Hero, and OxiClean, supported by strong innovation and distribution gains across all classes of trade. Global e-comm also remained a key contributor, with online sales now representing approximately 24% of total consumer sales. Innovation and distribution gains continue to be key drivers of our performance, and the first quarter of this year is no different. We're confident that our relentless focus on innovation will continue to drive industry-leading growth, distribution gains at shelf, and market share expansion. In fact, we are just finishing tabulating all the distribution gains looking forward, and I'm proud to say Church & Dwight was number one across all of CPG on total distribution points gained year over year. New product launches this year are expected to account for half of our organic growth as we innovate in key categories across our portfolio of industry-leading everyday products. The Arm & Hammer brand had another quarter of growth with laundry hitting record shares across total laundry detergent. Arm & Hammer laundry detergent consumption grew 4.1% in a quarter compared to category growth of 2.7%. The value segment of laundry continues to grow. Arm & Hammer laundry grew despite a lower level of promotion in the quarter. Our newest innovation in laundry is Arm & Hammer Baking Soda Fresh with 10 times the amount of baking soda and is off to a great start with a 4.9 consumer rating where most laundry items are around 4.5. Our Arm & Hammer laundry sheets also continue to do well, growing consumption by 30%. We like the category building potential of Evo and we are well positioned to win in value. Next up is litter. Fantastic results as Arm & Hammer cat litter consumption grew a robust 6.8% and share increased 0.4 points to reach 24.6%. While category promotional levels remain elevated, they did decline sequentially from Q4. OxyClean share declined in the quarter as we continue to be impacted by distribution loss and lapping that from a large club retailer a year ago. The good news is that the trends on OxyClean improved throughout the quarter and sales growth surpassed our expectations. Hero and TheraBreath continue to contribute considerably to overall performance. TheraBreath achieved another quarter of record share gains, 3.5 points to 24.1, and further solidifying our number two position in total mouthwash. Household penetration remains low relative to the category. In fact, even with these great distribution gains recently, we still have less than 20% of the shelf, so more room to run even in mouthwash. Early days, but the TheraPrest toothpaste launch is off to a great start. Hero consumption growth also outpaced the category, leading to share gains and remains the share leader, two times larger than the next competitor. Hero's growth was driven by distribution expansion, strong Q1 activations led by brand ambassador Jordan Childs on Mighty Patch Original and Mighty Shield Innovation. Mighty Shield is already achieving retailer hurdle rates, Finally, touchline. In Q1, consumption continued to grow low double digits, but sales were impacted by a strong Q4 holiday multi-pack sell-through. Recent consumption has slowed as we lapped year-ago launches. Internally, we are hard at work on integration and innovation. Turning to international, our international business delivered organic sales growth at 3.7%, driven by our GMG and our subs. Growth was led by TheraBreath, Hero, and Batiste brands, and partially offset by lower Middle East regional sales. Of note in April, we went live with our upgraded ERP system. Our project leader, Nicole, said it best. Our customers did not notice the transition. Thank you to the entire team. I'll close by saying that we were very pleased with our start to the year. Our brands remain strong, our portfolio is well positioned, and our strategic actions continue to support long-term growth. I'm proud of our Church and Dwight team as we perform well in a volatile environment. As we look forward, our TSA agreement with the VMS business is winding down. And that organizational time that has been freed up is being spent on our forward-looking growth initiatives. We're laying the groundwork for Arm & Hammer expansion, oral care growth behind TheraBreath, and international M&A. And with that, I'll turn the call over to Lee for more detail on the quarter.
Lee McChesney: Thank you, Rick, and good day, everyone. Back in January at our 2026 Investor Day, we shared an industry-leading outlook for 2026. The highlights of that outlook included organic sales growth of 3% to 4%, and EPS growth of 5% to 8% in line with our Evergreen model. As we now share results from the first quarter, we're delighted with the execution of our Church and Dyke team members across the globe. The first quarter highlights once again the many strengths of our portfolio and the team's execution capabilities. Let's jump into the details and provide you an update on our views for the year. We'll start with EPS. First quarter adjusted EPS is $0.95, up 4.4% from the prior year. And $0.95 was better than our $0.92 outlook and was driven by higher volume and gross margin results. Organic sales in 1Q were up 5% above our outlook of 3%. And organic sales were broad-based across the globe with volume growth of 5.3%, partially offsetting a negative price and mix of 0.3%. Our organic growth was fueled by a steady stream of market-leading innovation and strong distribution wins with our commercial partners. The organic results also drove our reported revenue up to 0.2% versus our original outlook of negative one back in January. I want to put our reported results in perspective. Due to our portfolio actions, our reported sales results would naturally be down 8%. However, our organic growth of 5%, our touch on acquisition, and some FX favorability fully closed the gap. The first quarter fueled by volume growth was certainly a strong start to the year. Our first quarter adjusted margin was 46.4%, 130 basis point increase from a year ago. Our results versus last year were driven by 150 basis points from productivity programs, 110 basis points from higher margin acquisitions, combined with the impact of the strategic portfolio actions, 50 basis points from the combination of volume, price, and mix, and 10 basis points from FX. These factors offset 190 basis points of inflation and tariff costs. Let's jump to our investments in marketing. Our market expense as a percentage of sales was 9.5%, or 20 basis points higher than the first quarter of last year. Looking forward, we're continuing to target investments at approximately 11% of net sales in line with our evergreen model. Q1 adjusted SG&A increased 110 basis points year over year. As we noted in our January investor day, SG&A in the first half of the year is primarily growing versus last year due to the inclusion of Touchlands SG&A and amortization expense. Adjusted other expense increased by $5.2 million due to a lower interest income compared to the last year. In Q1, our adjusted tax rate was 20.3% compared to 21.8% in Q1 of 2025, 150 basis point year-over-year decrease. and our expected adjusted effective tax rate for the year remains at 21.5%. Let's now turn to cash flow. We delivered strong cash results in the quarter, as cash flow from operations was $174.8 million. Our higher year-over-year cash earnings were partially offset by an increase in working capital and supported growth. And capital expenditures for the period were $31.9 million, and we continue to expect full-year capital expenditures to be approximately 2% of sales. Let's now turn to our 26 outlook. While the macro environment remains dynamic, we remain encouraged with their path forward. The strength of our brands, our strategic portfolio actions in 2025, and our growth initiatives continue to provide us confidence. And as we noted in our press release, the situation in the Middle East is fluid and is creating some incremental volume and inflationary pressure on commodities and transportations. For example, we currently are estimating $25 to $30 million of incremental inflation pressure. Our teams across the globe are responding to these developments and are taking actions across the P&L. As a result of our mitigating actions, we are reiterating our full-year 2026 outlook. We remain on track to deliver full-year organic growth of approximately 3% or 4%, and we continue to expect reported sales growth to decline approximately 1.5% to 0.5%. as a result of the strategic portfolio actions taken in 2025. We continue to expect four-year gross margin expansion of approximately 100 basis points versus 2025. And this outlook reflects the breadth of actions we discussed in January and the balance of incremental headwinds and actions that we've identified since the Middle East conflict began. Marketing as a percentage of sales remains at approximately 11%. SG&A as a percentage of sales will be higher than last year, reflecting the impact of the touch and acquisition in the first half of the year and our focused growth investments. Our adjusted EPS expectation for 26 remains at 5% to 8% growth. And if we turn to the second quarter, we expect reported sales to decline approximately 1%, with organic sales growth of approximately 3%. And we anticipate gross margin expansion of approximately 50 basis points reflecting transportation cost pressures ahead of the mitigation efforts that will take effect later in the year. And in the quarter, we continue to expect higher marking in SG&A. And in 2Q, the investment in marketing and higher SG&A will more than offset the gross margin expansion, resulting in an adjusted EPS of $0.88 per share for the quarter. Recall, we continue to expect flattish EPS growth in the first half of 2026. To conclude, remain confident in our 2026 outlook. We began the year with strong execution and are taking the steps to ensure continued success this year. And my final preparative work is for the Church and Dwight Associates. Thank you for all your efforts in the first quarter and congratulations on the robust execution. Well done. Carly, we are now ready for questions.
Operator: At this time, if you would like to ask a question, Press star followed by the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Your first question is from the line of Chris Carey with Wells Fargo Securities.
Chris Carey: Hi, good morning, everybody.
Rick Durker: Chris.
Chris Carey: Rick, you mentioned that distribution gains were number one in CPG. Not exactly sure of the timing of those gains, but nevertheless, a very strong number. When you think about your Q1 delivery How important are those gains to what we're seeing today? I'm really speaking to the durability of some of the volume growth that we are seeing relative to perhaps some of the tailwinds that may have been caused by some inventory reductions in the base. So I just wonder if you could contextualize the quarter as you see it. and what the Q1 means for kind of, you know, go-forward, top-line, volume-driven results, and then I have a follow-up.
Rick Durker: Yeah, sure, Chris. You know, Q1 was phenomenal organic growth, and more than anything, it was great to see our categories were growing around 3%, and we grew faster than that a little bit. And we talked a year ago about inventory and retail inventory dynamics. And so we had a tailwind of a couple points from that as well. So that's how we get to kind of five for Q1. Now, all this distribution gains, that's really just hitting now. And so it depends how you look at the metric. If you look at it on an average basis over 13 weeks, I think it's like a 7% TDP lift. If you look at it as in more recent time, as these resets are happening in a more recent time, It's closer to 10% or 11%, which is about double what most of the CPG peers are getting. And that's not just their breath and hero. That's across laundry and litter and personal care. So it's across the whole portfolio. So we just believe that's a great tailwind to our business, and it's really a payoff of all the innovation that we're doing. So anyway, it's a tailwind as we look forward, and it gives us confidence.
Chris Carey: Okay, great. A follow-up on Touchland, you did note that consumption slowed on year-ago activity that was strong in the base period. Can you just give us an update on how you're thinking about growth of the business, the sustainability of growth, and whether you think that it has the kind of runway to sustain perhaps double-digit growth into the back half of the year and into next year? Thanks.
Rick Durker: Yeah, sure thing. And when we look at consumption that kind of shows up for you folks, we understand it shows consumption for the quarters down 20%. When we look at consumption that is all in, including on track channels, we were up about 12 or 13%. So there is a difference in what you see versus what the entire picture is. But it has slowed, and it slowed partly because of all these holiday gift sets that and also because of the club class channel. Overall, we believe that we still are going to have double-digit growth for Touchland for the full year. The good news is we have great ratings, we have low household penetration, and we're just starting now to advertise. A lot of our activations with either collaborations or just partnerships are happening in the back half. So we feel good about Touchland.
Chris Carey: Okay. Thanks, guys. Thanks, Chris.
Operator: Your next question is from Anna Lazul with Bank of America. Hi.
Anna Lazul: Good morning. Thank you so much for the question. Your portfolio actions, I think, from last year helped drive the outperformance here in Q1. Just wondering how you're looking at the portfolio now, given the changes on the VMS business and others that you have exited. And then just to follow up on patchland if you didn't comment on where it's performing best in terms of the channels and further on m&a where are you now more focused in this more challenging consumer environment thanks so much.
Rick Durker: Yeah, so there's three questions. Let me see if I can remember all of them. The first one is how we're, you know, on M&A, I'm not really going to comment. I would just say that the team is always hard at work. The leadership team spends an inordinate amount of time on looking for great businesses and brands to buy. And we've gone through our criteria again and again and again. And I would say the team is hard at work. And it's just not in the U.S. It's also internationally. It's not an or, it's an and. And that's some of the highest and best use of our time. So I continue to be optimistic there. On Touchline, I think you're asking, hey, what channels are doing well? I would say the channels that are doing better than most are ones that aren't necessarily tracked. The club class trade did extremely well. Amazon does well. I think some of the beauty classes of trade, because of the timing of promotions and also some of the innovation, doesn't look as good. But again, some of the other channels that you don't necessarily see are doing better. And your third question, Anna, just remind me what it was.
Anna Lazul: Yeah, I was just wondering, I guess, in terms of portfolio, you've exited certain categories and wondering how you're viewing the entire portfolio here based on those changes.
Rick Durker: Yeah, I love our portfolio is the short answer. I mean, to be in a world, you know, remember, a lot of growth, a lot of categories out there are not growing or they're going backwards. And we've got to choose and select our categories over many, many years as we've bought businesses. And the fact that our categories grew 3% this quarter, we grew like we typically do, faster than that, bodes well. And I think when we did the portfolio decisions last year, it provides nothing but tailwinds for us as we look forward.
Anna Lazul: Okay, great. Very helpful. Thank you so much.
Operator: Your next question comes from Rupesh Parikh with Oppenheimer.
Rupesh Parikh: Good morning, and thanks for taking my question. Just, I guess, just going back to organic sales growth expectations, I know you typically give it by segments. I'm just curious, updated thoughts for the year by segment, including for international.
Lee McChesney: Go ahead, Lee. Yeah, so to your point, we're maintaining the outlook of 3% to 4%. You know, similar to what we talked about back in January, you know, we still have the U.S. in kind of approximately a 3% zone. You know, international is probably approximately 7%. It's a little bit softer because of the Middle East situation, and then SPD is still sitting at about 5%. Again, it's a range. The U.S. hits their number. There's others that end up in the higher end, but we'll see how it goes. There's only one quarter so far gone.
Rupesh Parikh: Great. And then my follow-up question, just as you look at the consumer out there, just curious if you're seeing any changes in consumer behavior. And then as you look at your portfolio historically, when you see these spikes in gas prices, do you see any parts that typically benefit?
Rick Durker: Yeah, no, it's a good question, Rupesh. I think in my prepared remarks, and this is the second quarter in a row I've said it, but I'll just emphasize it. Promotional levels are up in laundry, as an example, for the category. We're hitting all-time share highs, and our promotional levels are down. All three competitors besides us are up. The value segment of laundry is growing. So that is a... Not only do we deliver great cleaning and efficacy, but we do it at a great value. That is hitting the mark right now in this economy. I think the same concept for litter. Some of our competitors are promoting very heavily. We're promoting a little bit more, but we're gaining share again and again. For those two areas of household products, which are more respondent to promotions and stuff, that is...
Javier Escalante: um a good sign okay great thank you your next question comes from javier escalante with evercore isi hey good morning everyone uh my questions have to do with uh the commodity backdrop right i personally was expecting uh a more muted kind of like uh outlook for gross margin given all derivatives going into detergents. So if you can go back and explain us how much oil derivatives goes into your COGS. And I believe that you mentioned that the impact is like $25, $30 million. Is that a full year number? So anything that can help us explain The gross margin, you know, expansion going into calendar 2026 and I have a follow up.
Rick Durker: Yeah, I'll start and then Lee if you want to add a couple comments. It is a full year number Javier for that 25 or $30,000,000 and and it's primarily as you would expect oil based derivatives like diesel and resin and surfactants. And. That's not atypical. Remember, in any given year, we always enter a year about 60% hedged as well. And so all these are kind of net impacts for us. So hopefully this is transitory and it's not permanent, but we have good coverage for an extended period of time, especially in the foreseeable 2026. The team is laser focused on productivity really to offset many of these things. And yet there will be some RGM and promotional adjustments, but it's largely productivity. And that's really been the hallmark of the company. We've transformed this place on being able to get gross productivity year after year after year. And in a perfect world, if that doesn't happen, great. Then we continue to spend on marketing even higher and spend that money back that we would have saved. And then it drives the top line even faster behind our innovation. So, Lee, any other comments you have?
Lee McChesney: Yeah, I'll just put it in perspective. Keep in mind, we had to have about 160 basis points of inflation in the outlook back in January. You know, we got this 25 to 30, so that now brings you up to, you know, 200 basis points. But to Rick's point, you know, we have these additional offsets we're going after, and this is what you see from us. You know, you saw it last year when we did our work on tariffs. You know, we got that number down to a similar number, and we worked it down. And, you know, that's what we're doing here. So, you know, I think we're in a good spot. And, you know, that's why we reiterate our outlook for the year.
Javier Escalante: And a follow-up. This is very, very helpful. It's very positive. I feel that it's idiosyncratic to you. But in terms of if this externality continues and and commodities remain very high. Would you expect then, you know, value players, say the guys in Germany, to lead first calibrating the promotional environment and then potentially leading price increases? Is that a good assumption? Thank you.
Rick Durker: Yeah, I think it's probably a better question for those competitors, Javier. Like in my kind of comments back to Rupesh for laundry, despite all these other competitors promoting a bit more in laundry, which is still kind of within the range of historical numbers. It's not crazy. But they're up. We're down. We're getting share. The value segment's growing. So that's a great position to be in because there's a huge macro. When consumers are pressed to the gas tank, they want to make sure their dollar goes further. And one way they can do that is they can buy Arm & Hammer laundry detergent. It's half the price. of the leading detergent. And it's great efficacy, great value, and that's true not just among laundry, but many of our brands. And so that's a great question. I think it's a more pertinent question for kind of the competitors.
Javier Escalante: Congrats.
Rick Durker: Thank you.
Operator: Our next question is from Olivia .
Olivia: Great. Thanks. Good morning. First question, just relative to your expectations, obviously a very nice beat on the top line. Where did you see the biggest positive surprises in your view? Was it more volume? Was it more price mix? It seems pretty broad-based. I'm just kind of curious how you're thinking about that, and then I have a follow-up.
Lee McChesney: Yeah. So, I mean, as you talked about, it's – is a broad-based improvement across the globe. I mean, really, the only pressure point we saw was international was Middle East. And so, you know, I got the question earlier, just what do we think about for the year? We're generally the same type of view we shared back in January in terms of how we thought growth was going to play out across the globe. I still reached it today.
Rick Durker: Yeah, and I said the volume. It was a volume-driven beef is what I would do.
Olivia: Yeah. Got it. And then... more and more business consolidates into club and online. It feels like the move online should be good for you, or at least not a hindrance for you, whereas club typically keeps brand count pretty tight. So given those dynamics, how do you think about your ability to grow in these channels, whether disproportionately relative to your peer set, and then ability to sort of stand out in both club and online. Thank you.
Rick Durker: Yeah, I would say there's no grand new strategy. We're performing really, really well online and in the club class of trade. Remember, we started in 2016 as 2% of sales. We're at 24%. We went from a laggard leader. We moved really quickly. But you've got to start even further back than that. We have great brands, especially after the portfolio realignment we did. We have number one, number two brands. Consumers love them. I gave you the quote in our, uh, in our prepared remarks, even our new launch for Arm & Hammer liquid laundry with a baking soda, 10X. It has a 4.9 review. We're in the average portfolios of 4.5. That, that story is playing out across all categories and many of our brands. And so, um, that's the, that's the starting point. And when we do that, then we have to make sure we can win with the right pack sizes and the dollar class of trade, the right pack and offerings and the club channel. the right pack and offerings online. And we've proven time and time again that we can move faster. That's one of our competitive advantages, move quickly in order to give the customer what they want, where they want. And so we plan on trying to win not just in one class of trade, but all classes of trade.
Operator: Great. Thank you. Your next question is from Lauren Lieberman with Barclays.
Lauren Lieberman: Great, thanks so much. So I just want to talk a little bit maybe about your perspective on the consumer's ability to absorb pricing, not necessarily in terms of how you'll deal with mitigating cost inflation. You've been pretty clear on that front. But in general, I feel like a lot of companies are, there's a mixed bag, let's say, in how companies are factoring in the current state of the world in terms of inflation, expectations for the second half, And everyone seems to be treading very lightly on whether they will or whether they won't price. And so I was just curious on your perspective broadly on the consumer's ability to absorb pricing, should that be where the industry ends up going? Thanks.
Rick Durker: Yeah, I think that's a great question, Lauren. And our personal view is the consumer is pressed. And if they were pressed, three months ago or six months ago or 12 months ago, they're pressed even more today because gas costs show up immediately. And when that happens, they're going to retrench. And the worst thing to do in an environment like this, so we have no plans to try to price through this $25, $30 million offer. We're going to go offset it with productivity. There's just no appetite out there for the consumer to bear something like this. So that's our plan. I think companies who do that will be more successful than companies that don't.
Lauren Lieberman: Thanks so much.
Operator: Your next question comes from Steve Powers with Deutsche Bank.
Steve Powers: Hey, thanks. Am I live? Yep. Okay, great. Um, I guess, I guess building on that, um, to extend, I mean, I guess two questions, you know, is there, is there any kind of heuristic you could offer as to, you know, you know, if we see, um, volatility in the Middle East, we see, we see further rises in the price of oil or more extended, more extended duration and higher costs of oil, you know, um, you know, what would make that $25 to $30 million grow and at what pace, like how we can gauge external dynamics and apply it to Church and Dwight is kind of one question. And the second question that follows from that is that if that $25 to $30 million grows over time, Rick, and you kind of run dry on the ability to kind of press incremental productivity, Do you approach pricing across different parts of your portfolio with a different mindset? When I think about value versus premium, is there more ability to push price to the premium and less on the value? How do you think about pricing in a scenario where you're forced to at least contemplate something beyond productivity?
Rick Durker: Yeah, no, it's a fair question. We're not going to go through the details. What does every $5 or $10 of oil translate into an impact on Church and Dwight? I think that's a little bit too nuanced. But I will say, you know, my answer to Lauren was based on the question of kind of the current scenario, $25 to $30 million. We think that's just like many things in life. We can handle something like that. If it becomes a lot more meaningful, call it $50 million or $100 million or $150 million, who knows where it stops, then you have to solve a different problem with different solutions. And so the first stop on the train is productivity. The second stop on the train is RGM on promotions, and that's usually through household. That's where a lot of our promotions are. The third step on the train would be pricing. And you're right. Many of our premium products are extremely, you know, premium and high priced and the consumer loves it, but you've got to do that behind innovation. And so as we're launching our innovations, to really look with a fine-tooth comb on what the price point really should be is also something that we would look at. But for today, my answer would be if it's in this range, and we all hope that it is, and we hope that it's transitory, then that's how we would solve it, through productivity. If it becomes something else and bigger, then we have other tools in the toolkit if we need to.
Steve Powers: Yeah. Okay. Very, very fair. And I guess the only follow-up I have is that, you know, if it is transitory, and as you say, hopefully it is, is the productivity you're putting in place, is it structural or is it more belt tightening such that if it rolls over, maybe some of it gets reinvested, but some of it, you know, some of it just kind of backfilled, you loosen the belt back up.
Rick Durker: Yeah, I wouldn't call it belt-tiding. I would call it we kind of accelerate projects. We have a three-year pipeline of productivity projects, just like we have a three-year pipeline of innovation. And so at any given time, we can choose to fast-forward certain projects or slow down other projects, whatever we want to do. And we can influence timing. If the productivity happens but costs also continue to drop, perhaps we slow some of it back down, or we take that money and go reinvest it in marketing. and build the virtuous cycle all over again.
Steve Powers: Yeah. Okay. Fair enough. Thank you.
Operator: Our next question comes from Andrea with JP Morgan.
Andrea: Thank you for taking my question. Good morning, everyone. I was just hoping to see if you can comment a little bit, Rick, On what you said, you had some, I wouldn't say pull forward, you had an adjustment, you called out for the fact that you outperformed on the organic sales growth. The comparison, I think, from an inventory dynamic from against last year. So hoping to see, and we saw what you guided for the second quarter, more aligned with the consumption you called out. So is that something to think, like, that 2% extra that you got in the first quarter It was more an adjustment, not a pull forward from the second quarter. That's my first question. And then just a follow-up. So if I understood it correctly, you're going to take potentially some price actions to mitigate the $20 million to $30 million, I believe you called out, to be the impact of the costs or the Middle East war, or you are just saying potentially you're going to take some pricing?
Rick Durker: Yeah, so let's take that that second one first. No, I think I was super clear the 25 to $30 million headwind that. The Middle East. Conflict has created in terms of higher commodity costs and inflation. We believe we can offset that with productivity. OK, when we do that, that's that enables us to keep our outlook where it's at. The question that Steve just asked was, well, what happens if that doubles or triples? Can you still just do that with productivity? And the answer was no. With that amount, we can do it with productivity. If it goes a lot higher, then we would look at RGM-type actions on promotions. If it goes a lot higher from there, then we would look at potential pricing. So that's kind of the normal sequence of events. And I just said before, at those types of levels, the consumer is pressed to And so we don't plan on raising prices at this point, okay? So that's the price point.
Andrea: And just to fine point that the midpoint, and I'm sorry if I missed that, the midpoint of that scenario is oil at which price because, you know, what is that, 100 per barrel or is it 110? Different companies are using different assumptions on their own.
Lee McChesney: Yeah, we're using a reasonable average of what we've seen in the last couple weeks. Obviously, it changes daily, but it's a good, safe bet. So, you know, $95 to $100 is a good base point.
Andrea: Okay. Thank you, Lee.
Rick Durker: Okay. And what was your first question, Andrea?
Andrea: Yeah, sorry to second part, but the first question was the fact that you came out as 5% and you did comment... The two percentage benefit from potentially like inventory dynamics, just wondering if that's going to come out of the second quarter. It doesn't look like because you're guiding in line with category growth, but I guess, I mean, with market share gains and distribution gains, all of that.
Rick Durker: Yeah, so just rewind the clock 12 months and remember Q1 of 2025, every quarter, CPG manufacturer said, what's going on? And there was a retail inventory pullback, right? Because of all the agita around tariffs and the consumer and whatnot. And everyone called out a number back then. This earnings cycle, most folks aren't talking about it as much, which is fine. We're just trying to be transparent. We called it out a year ago and we said, hey, that means a year later, then that's worth a 2% help. And so we grew our business around 3%, and we had that 2% help. That's 5% organic. And categories are growing well. We continue to take share. We're getting distribution gains. And that's why we gave an outlook, we think, that's really strong for the full year and really solid for Q3. I mean, Q2.
Andrea: Okay. That's fair. Thank you.
Operator: Our last question comes from Peter Grom with UBS.
Peter Grom: Great. Thank you, and good morning, everyone. So, I was hoping to get some perspective on category growth. I think you mentioned 3%, but some of your peers have touched on growth showing signs of improvement as you move through the quarter. So, can you maybe comment on what you've seen from a category standpoint, exiting the quarter, quarter to date? And, Rick, related, you've always had a pretty good pulse on what to kind of expect from a category standpoint. So just, you know, given the many things the consumer is dealing with right now, curious how you see that evolving from here.
Rick Durker: Yeah, good question, Peter. You know, for us in the quarter, and I just talk about our major categories. I think it's just easier to talk about our seven. uh we were around three percent for the quarter uh three in january three in february closer to three and a half in march uh so that bodes well it came down a little bit a little bit in april but we're doing extremely uh well in april so i i would tell you um it was better than we expected you know when we were when we were starting the year we were expecting closer to maybe two two percent category growth um now this is only 90 days But I am more enthusiastic than I was many days ago, despite everything else that's happened in the world. Because again, not every company, you can't paint every company with the same brush. The categories really matter. And many of our categories, it's not just one category driving a 3% weighted average. It's almost all the categories are growing two and a half, at least two and a half to 3%. So that's just a great thing.
Peter Grom: Great. Thank you so much. I'll leave it there.
Operator: There are no further questions at this time. I'll now turn the call back over to Rick Durker for any closing remarks.
Rick Durker: All right. Well, thank you very much, and we'll talk to everybody in July.
