Operator: Good day, and welcome to the Edgewell Personal Care Company's First Quarter Fiscal 2016 Earnings Conference Call and Webcast. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Chris Gough, Vice President of Investor Relations. Please go ahead, sir.

Chris Gough: Good morning, everyone, and thank you for joining us for Edgewell's First Quarter Fiscal 2016 Earnings Conference Call.

As a reminder, for comparative purposes, fiscal 2015 first quarter results -- 2016 first quarter results -- '15 first quarter results include both the Personal Care and the 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, nor will it be comparable in the second and third quarters of fiscal 2016. To partially address this, we have provided normalized first 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, www.edgewell.com. 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 costs related to restructurings, changes to our working capital metrics, currency fluctuations, commodity costs, category value, future plans for 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 reports 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 not 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 the business.
With that, I would like to turn the call over to David.

David Hatfield: Thanks, Chris, and good morning, everyone. Before Sandy begins, I'll briefly comment on Edgewell's performance in the quarter and the status of the ongoing actions we're taking to best position the business going forward.
From a top line perspective, we had a positive start to the new fiscal year for Edgewell. Organic sales were up 50 basis points. Excluding the impact from go-to-market changes, underlying growth was up nearly 3%.

North America returned to growth, and the international underlying sales grew nearly 4%. However, currency continues to be a major headwind. And the global macro environment is concerning, particularly the slowdown in some international economies. While delivering these improved results, we continued to execute on our key strategies and initiatives and remain on track with our expectations for 2016. Turning to other key accomplishments in the quarter.

Our team's continue to manage go-to-market and a functional group realignment initiatives around the world, and we are tracking to our milestones. In our major commercial initiative, the execution of changes in our international go-to-market model, we remain on plan and expect these changes will be fully completed by the end of the third quarter. We estimate that the impact to sales this quarter from these go-to-market changes was 2.4 points, in line with our forecast. Last quarter, I mentioned that temporary transitional issues impacted both the top and the bottom lines. While we had some of these issues continue into Q1, the impact was on far fewer markets and was significantly less material.

I expect those issues are primarily behind us and should not be a material factor going forward. The investment in our brands over the past several quarters is a contributor to our sales growth in this quarter. Spending in support of several of our new product launches, including the Sport pads and liners launch in the U.S. and the Hydro Silk trimmer and the Groomer launch in several markets, resulted in improved performance in the Wet Shave and the Feminine Care businesses compared to last quarter.
The focus we've put on solidifying our U.S.

business showed through in the results this quarter with solid organic growth up 3.5%. We continue to see improving metrics in the baseline shares, along with a strong holiday sales in women's systems, new distribution in shave prep, improved Feminine Care and an early start to the Sun Care season. Outside of the U.S., we continue to see solid underlying growth in most markets across Wet Shave and Sun Care. And we continue to drive innovation. We're excited to be shipping our next-generation Hydro line this quarter.

With the new Hydro, we've upgraded almost all aspects of the mechanical cartridge, from a redesigned guard bar and reduced blade spans to a dramatically upgraded hydrating gel reservoir that is not even comparable to competing lubrication strips. The sum of all these improvements is a shave that is significantly superior to current Hydro's already excellent shave on all measures of comfort and advanced skin care. Looking forward, we still have work ahead of us this year on the actions we're taking to transition the company. We are encouraged by this positive start, which gives us continued confidence in our outlook for the year, and it reinforces our view that we're taking the right steps to position Edgewell for future growth and success. Thanks.

And with that, I'll hand it over to Sandy.

Sandy Sheldon: Thanks, David, and good morning, everyone. I would like to turn to our performance in the quarter, beginning with net sales. Net sales decreased 7.9% as we again faced significant currency headwinds, which accounted for 4.6% of the year-over-year decline. Excluding the currency impact and the impact of Venezuela and Industrial, organic net sales grew 50 basis points.

In addition, impacting our year-over-year comparability, we estimate approximately $13 million sales decline in the international markets where we're making significant go-to-market changes, including exits and transitions to distributors. Underlying sales, excluding this go-to-market impact, were up almost 3%, of which about 1 point could be attributed to shipments ahead of consumption due to Sun Care early-season shipments and shave prep distribution builds. Growth was driven by Wet Shave and Sun & Skin Care. Wet Shave sales were primarily driven by growth in North America and Asia, and Sun & Skin Care's increases were led by strong performance in Asia-Pacific.
Both North America and international had solid underlying growth this quarter.

Organic net sales in North America were up 2.7%, while organic net sales in international were down 2.1%. But underlying sales were up approximately 4%, excluding the $13 million negative impact from go to market. Gross margin decreased 180 basis points to 46% in the quarter. 90 basis points of the decline came from translation. Let me walk you through some of the key drivers for the balance of the decline.

On the plus side, margin benefited from global volume growth and improved mix as well as restructuring savings. Price mix was essentially flat as some net price improvements were offset by promotional investments in the quarter. Commodity and material prices were both generally flat to the prior year overall, with some positive and negatives at the segment level that generally balanced out. On the negative side, the majority of the decline was due to transactional currency effect on product costs as we buy or shipped materials and products in USD in our international plants. This should diminish as we move through the year with the largest impacts in Q1 and Q2.

The remainder came primarily from higher onetime production costs in Sun Care related to operating levels in our plant. Our go-to-market initiatives do impact gross margin rate negatively, but this impact in Q1 was largely offset by the benefit of the Industrial exit. And finally, there was a small impact from promotional costs related to higher holiday packs shipped in the quarter versus last year. We continue to expect gross margin as a percent of sales for the full year to be generally in line with fiscal 2015 with improved comparatives in Q3 and Q4. A&P expense was $46.6 million in the quarter or 9.4% of net sales.

This was consistent on a percent of net sales basis with the prior year and in line with our plan for the year. The decline in absolute spend was mostly attributable to currency, go-to-market changes and some shifts in timing as investment in A&P can fluctuate by quarter as we support new products. Turning to SG&A. Excluding spin, acquisition and integration costs, SG&A as a percent of net sales was 18.8%. When we adjust last year's SG&A for the costs associated with supporting the Household Products business that were not eligible to be reported in disc ops, SG&A as a percent of sales was up 70 basis points, which was due in part to expected dissynergies in this transition year.

We continue to work on focus areas of cost reduction to overcome the impacts as the year progresses. First quarter adjusted EBITDA was $94.4 million versus a first quarter 2015 normalized EBITDA of $117.4 million. The decline was primarily due to currency of $10 million and Venezuela Industrial of $4 million, and the remaining $9 million from lower gross margin and higher SG&A discussed earlier. The year-to-date effective tax rate was 22.8% as compared to a 4.2% benefit in the prior year. The tax rate from the prior year reflects the tax benefit of higher charges related to separation and restructuring, which occurred in higher tax rate jurisdictions.

Excluding the impact of the separation and restructuring, the adjusted effective tax rate this quarter was 27.7%, consistent with the prior year quarter.
Now turning to Other items. Net cash used by operating activities was approximately $59 million during the first quarter of fiscal 2016. The quarter was negatively impacted by the seasonality of our business primarily related to Sun Care as well as the timing of payments for year-end accruals and other payments such as interest, which is paid biannually.
Given the seasonality of our business and the timing of our fiscal year, operating cash is expected to be primarily generated in the last half of the year, with Q1 generally negative and Q2 breakeven to slightly positive.

This year, however, the company expects operating cash flow to be negative for the second quarter of fiscal 2016 due to the discretionary funding of certain international pension plans. For the full year, we expect to generate positive operating cash flow and generally meet our full year objective of 100% free cash flow conversion. Now let's move on to the segment results. Wet Shave organic net sales increased 1.1% in the first quarter. Underlying growth was up approximately 4.5%, excluding the impact of international go-to-market changes of $11.5 million.

This was driven by volume growth in North America behind shave prep distribution gains and strong promotional programs, volume gains in Xtreme3 and private label disposables and strong holiday pack sales of women's systems. Asia and Latin America also drove volume growth and favorable price mix across the portfolio. Organic segment profit declined 14% or $12.7 million, driven by lower gross margins and higher SG&A. The majority of the gross margin decline was due to the currency effects on product cost in our international plants, which should diminish as we move through the year. Turning to the category.

The global manual shave category, as measured by syndicated services, was relatively flat in the latest 12-week data, and we had modest share gains. The U.S. manual shave category was down 2.8% in the latest Nielsen 12-week data, with growth in women's systems and declines in both disposables and men's systems categories. Versus a year ago, our share was up 60 basis points in manual shave, with gains in men's systems and disposables driven by our investments behind Hydro and Xtreme3. We also posted solid share gains in shave prep category, where the overall category was down by about 1%.

Note that our U.S.-branded market share results will be impacted over the next several quarters as we transition our opening price point-branded product offering in a major retailer to a private label product line which we supply. Moving on to Sun & Skin Care. Organic net sales were up 4.4%. Growth was driven by strong international Sun Care sales in Oceania and other emerging markets in Asia as well as modest growth in North America due to some early-season inventory builds in select customers. Skin Care sales declined in North America as competitive pressure continue to impact volumes.

Organic segment profit declined $1.1 million or 30% as higher sales volumes and lower SG&A were more than offset by lower gross margin due to lower production volumes versus a year ago, related to temporary changes in plant operating levels.
Within the U.S., the category grew nearly 5%, but keep in mind that this quarter represents less than 5% of the overall consumption in the year. Category results in key international markets continue to be favorable with growth across most key markets.
Feminine Care organic net sales decreased $2.2 million or 2.3%, driven by go-to-market impacts in Asia and Latin America, which accounted for 1.5 points of the decline. Sales in the U.S.

increased 1% as volume gains in Sport pads and liner business were partially offset by declines in legacy products due to competitive pressure and timing of promotions. Organic segment profit was up $3.1 million or 20%, driven by lower A&P spend and improved gross margin due to restructuring savings.
The Feminine Care category grew approximately 3% versus a year ago, with our share largely flat as share gains from our recent launch of Playtex Sport pads and liners were offset by declines in legacy brands. All other organic net sales decreased $1.1 million or 2.4% as lower volumes in infant cups and bottles related to competitive pressure and share loss were partially offset by increased sales of Diaper Genie. Organic segment profit increased $1.9 million or 28% due to lower operating costs, including favorable products and SG&A costs, which more than offset the impact of lower volumes.

Turning to our outlook. As David mentioned up-front, operationally, we are on track with our key initiatives. This quarter, we continue to make solid progress on those initiatives, including executing our go-to-market changes, stabilizing North America, driving innovation and continuing to invest in our brands. However, we, like everyone else, have a close eye on macroeconomic challenges and the headwinds from currency. We estimate that currency will have a larger impact on both our top and bottom line for the year than we projected last quarter.

But given our starts for the year and sizing some additional opportunities such as commodity upside, I think we can offset a moderate level of additional currency impact. Therefore, we're maintaining our outlook for organic net sales, adjusted EPS and adjusted EBITDA, although continued strengthening of the dollar will have to be monitored closely. For the full fiscal year 2016, organic net sales are expected to be flat and will be negatively impacted by go-to-market changes through the end of the third quarter of fiscal 2016. For the full year, the go-to-market changes are estimated to impact top line by approximately 1.5%. Therefore, underlying sales growth, excluding these go-to-market changes, is expected to increase by low single digits.

Unfavorable foreign currency impact on net sales is expected to be in the range of $50 million to $60 million for the full fiscal year versus the prior outlook of $40 million to $50 million. Reported net sales are expected to decrease by mid-single digits. Adjusted EBITDA is projected to be in the range of $440 million to $460 million for fiscal '16, including $20 million to $25 million of negative currency impact for the full fiscal year versus our prior outlook of $15 million to $20 million. Adjusted EPS is projected to be in a range of $320 million to $340 million for fiscal 2016, including $20 million to $25 million of negative currency impact for the full fiscal year. The adjusted tax rate is now expected to be in the range of 30% to 32% for fiscal 2016.

This reflects the change since our previous outlook based on the lower rate this quarter, which is due to the favorable mix of foreign versus U.S. earnings.
Gross margin as a percent of sales is still projected to be generally in line with 2015 as cost savings and lower material costs will help offset translation and transactional exposures. SG&A as a percent of net sales will be in the range of 15% to 16%, excluding amortization of intangibles, which are expected to be approximately $15 million for the year. A&P and R&D as a percent of net sales will be roughly in line with 2015 for the full year.

Finally, restructuring-related costs are anticipated to be $40 million to $45 million for the full fiscal year. 2016, we expect incremental savings of approximately $15 million and an additional $40 million to $50 million in fiscal 2017 and 2018 combined. Our restructuring projects are tracking as expected and encompass the closure of our Montréal plant as well as other footprint rationalization and asset optimization projects. The savings on these larger projects will lag costs and be achieved largely in 2017 and 2018.
To conclude, during this quarter, we made solid progress in achieving our goals by managing our go-to-market changes, stabilizing North America, driving innovation and continuing to invest in our brands.

Looking forward, we will continue to execute on these strategies in order to realize improved results and best position Edgewell for long-term growth and success. This completes our prepared remarks for this first quarter earnings call. David and I will be happy to take your questions.

Operator: [Operator Instructions] Our first question comes from Bill Schmitz of Deutsche Bank.

William Schmitz: Is there going to be any benefit from the shipments and maybe some additional spending behind the Hydro launch in the first quarter? I just don't know how big that pipeline still might be.

David Hatfield: Yes. There was very, very little Hydro -- or new Hydro shipments in the quarter. We're actually beginning to ship as of early January almost everywhere around the world.

William Schmitz: Okay, great. And will that have a material impact in organic growth in the March quarter?

David Hatfield: Yes.

To make a point about this, versus some other launches, this is more of a flow-through because -- except for some limited markets, this is not a segmented launch; it's actually a flow-through. So there won't be quite as much pipe. There won't really be any pipe per se. Now there will be promotional merchandising and that kind of thing. So we do think that it will benefit men's systems for the quarter, but it isn't like a normal segmented launch where we get pipe also.

William Schmitz: Okay, great. And then if it's part of the Analyst Day, I think a big part of the use of cash was M&A. So I just want to know, are you guys still kind of looking aggressively for deals? And kind of what kind of stuff are you focusing on?

David Hatfield: Yes, we continue to look and emphasize M&A. And as I've mentioned before, we generally look close to the core. So we're looking at things like Sun Care, Skin Care, that kind of thing.

Operator: Our next question comes from Ali Dibadj of Bernstein.

Ali Dibadj: I want to get your perspective on the North America Wet Shave top line momentum here because certainly last quarter, your ex-currency top line growth in North America Wet Shave was kind of below the Nielsen numbers. And this quarter, it looks like it's caught up a little bit. But if one looks at the Nielsen numbers, December and January Nielsen data for Wet Shave looks like it's a pretty sharp negative turn. So I mean, you've seen the numbers as well, probably your negative 8%, negative 13.5% all in sales, and that's mostly driven by volume declines.

So I'm sure you've seen that. I just want to understand how you explain the gap relative to your expectations. Should we just rip up the Nielsen and throw it out? Are there shelf space losses you're seeing? I mean, what's driving this big gap between your expectations and this sharp, sharp turn downwards in terms of volumes for Wet Shave according to Nielsen, which isn't perfect, but typically has been indicational?

David Hatfield: Yes, yes. Thank you, Ali. The first -- the major part of, I think, what folks are seeing in our numbers for the quarter ending January 9, Schick-branded disposables consumption actually grew 5% for the Schick brand behind strong baseline shares and promotional support.

However, you're right also. The total Edgewell disposable consumption actually fell 8%. And if you look at the 4 weeks ending January 9, Edgewell is down 20%. What's happening here is we're working with a major customer to transition from one of our opening price point brands, namely Wilkinson-Sword, to an owned brand of -- which we supply. So what you're seeing actually for that 4-week period is that Wilkinson-Sword is down 80%, and that's really driving it.

The net will actually be that for the next year, you're going to see Edgewell-branded share negatively impacted as the Wilkinson-Sword brand goes away. However, we're actually confident that our private label sales and consumption will more than make up for that loss once the transition is done, which should be by springtime. We actually believe this is good for the customer and their category, and it will be good for our sales and our profits, too. It's an example of us leveraging the full portfolio, not only trading up the premium end, but also making sure that we deal with the full category, and in this case, optimizing the value segment to satisfy their shoppers.

Ali Dibadj: So this is very helpful.

So you're shifting away from the OPP Wilkinson-Sword brand and this retailer going to your private label. And just to replay so I understand. So the impact on your top line is already in your guidance and the impact on margins would actually be positive. Is that how you're describing it?

David Hatfield: No, no. I mean, it's in the plan also.

Yes.

Ali Dibadj: Okay, but it's in the plan. Okay. Okay. And then does that have anything to do with the ad spend at least for the quarter being in line with what it was last year, even though the end-of-year target is still kind of this 14%, 15% type range? Has that anything to do with it? Or is it very much just that's the cadence of the new Hydro initiatives, the new Hydro launch? And so we're just going to see ramp-up based on innovation as opposed to any of the shifting around on the brand spend?

David Hatfield: Yes, you're right.

Yes, it's more the latter. It's just timing. We held the A&P as a percent of the sales for the quarter, and that's just phasing of our launches and our innovation. We'll say that it was down a little absolutely just because of go-to-market changes.

Ali Dibadj: Okay.

And then just, if I may, my last question is on gross margin and the decline in gross margin. 90 basis points decline in gross margin. I'm trying to understand that. Clearly, a lot of commodities are much lower. I get your supply chain, much of the production is outside the U.S.

on handles and such. Is that currency mismatch really the driver of the problem? So when you say 90 basis points ex-currency gross margin, that doesn't include kind of the currency impact on commodity costs. Is that right? Or could you just help me figure that out?

Sandy Sheldon: Right. So 90 basis points was translation, and really virtually, the balance of that, the rest of it was this higher transaction costs in the international plants. And that impacts our raw material costs, our component costs as they move into the international plants because a lot of them are in U.S.

dollar.

Operator: Our next question comes from Bill Chappell of SunTrust.

William Chappell: Just a quick clarification on the currency since you last reported in November. Is it safe to say most of the change was on the Canadian dollar? Or was there another thing that we should be kind of looking out for as we move through the year?

Sandy Sheldon: Yes. I would say the Canadian dollar was a big piece of it, but we also have issues in some of our Latin America currencies.

Yes, so those are the 2 biggest pieces.

William Chappell: Okay. But you don't know have much room or much exposure to, like, Argentina, do you?

Sandy Sheldon: No. No, Argentina...

William Chappell: Got it.

And then second, as you look at the Wet Shave landscape, I'm just trying to understand if -- as we talk about step-up of advertising and promotion in this next quarter, is that more around Hydro 5? Or is it kind of part of the, not go-to-market, but just it seems P&G has a new product out. They're taking the offensive as well. Is that just more kind of trying to play ball on the whole category?

David Hatfield: Well, I think we -- like we've done over time, we support innovation. The new Hydro launch was -- has been planned for several years, and we plan to support it accordingly. We're actually very happy with the product.

It's a significant upgrade, and we think it will position Hydro very well going forward.

William Chappell: But you're not seeing P&G become any more aggressive than you originally thought with their new product launch?

David Hatfield: It's early days. I can't really speculate. I would think that they support their innovation also. I should think that it's good for the category to have innovation.

And I don't really think this is a 0 sum. I think both -- we're both trying to trade up our user bases. So I think this is good for the category, and we're going to compete and grow Hydro.

Operator: Our next question comes from Steve Powers of UBS.

Stephen Powers: Great.

So a question on your guidance. It looks like FX is modestly worse, as you called out, but you're seemingly offsetting that within your EBITDA guidance. And at the same time, you bought back some stock, and the expected tax rate has ticked down a bit. If I'm -- I think you described that. So should we be implying from all that, that your EPS should shy towards the upper half of that $3.20 to $3.40 range? Or is there something else that I'm missing?

Sandy Sheldon: Well, I would say, given the currency impact, I would say, we're still sort of in the mid- to the low end of that range, but there's still a lot of year ahead of us.

We're still working on all the levers to help offset this currency impact. And there's -- again, there's a lot ahead of us in the year, so...

Stephen Powers: Okay. And then looking to that year, I think, David, last quarter, you had framed Q1 as likely one of your softer quarters from a top line perspective. And yet all-in organic growth came in up 0.5 point, which is right in line with the full year guidance.

So would it be wrong to still be expecting improving results as the year progresses? Or has something changed in the cadence?

David Hatfield: Yes. We're actually pleased with the quarter, the underlying growth, the nearly 3%. It was solid. I think that we're tempering it somewhat. We think that we might have shipped over consumption by about 1 point.

So I think that while we're on track for the year average, we might have pulled a little bit forward. So Q2 might actually be a little softer, but I think that we'll finish the year somewhat stronger.

Stephen Powers: Okay. That's great. And then if I could, just kind of a broader question on Fem Care.

Obviously, it's a business that you've tried to grow, I mean, including your predecessor company, for the better part of a decade. And we've seen several innovation pushes and several advertising pushes. And I think recently, there's some signs of progress. But at the same time, it doesn't -- when I look at the consumption data, it doesn't seem to be sticking as consistently as I like. And I just -- I'm interested in your perspective on that.

Am I looking at it wrong? And if I'm not, what is the missing link? And how do you actually make that business stick and become a source of growth as opposed to almost a distraction from Wet Shave and Skin Care?

David Hatfield: Yes, thanks. For the quarter, we solidified share and consumption trends on both pads and particularly liners, and the U.S. sales were actually up modestly this quarter. That said, Fem Care is a very, very competitive category. And we've seen increased competitive spending negate some of our programs on the pads and liners front, and it impacted us on our legacy tampon business.

I mean, stepping back more broadly to answer your question, the brands that we get from J&J were in a harvest mode and were weak. We've spent time over the last year, 1.5 years to invest in equity trial and then sampling, and we're seeing some improvement. I actually think it's -- that it will take a while over the medium term to get where we want to be. And namely, that's really just to stabilize the business and to hold share. The main goal with our fem business really is to grow profitability, and we have plans over the coming couple of years to really grow the bottom line.

So it's less of a top line game, but we think that it's a solid business and one that we can operate profitably.

Operator: Our next question comes from Javier Escalante of Consumer Edge Research.

Javier Escalante: I wanted to come back to the gap between what we see in measured channels and what you reported. And I know that you had mentioned that 1 point is pull-forward from distribution. But could you give us a sense of how much essentially the growth that you showed in North America has to do with nonmeasured channels and private label consumption? That is one question.

So if it was a point in terms of pull-forward, how much the other 2 contributed versus what we track in measured channels? The other has to do with a bigger-picture question with regards to disposables, and it has to do also with precisely your -- the delisting of Wilkinson-Sword in one of your retailers. So to what extent -- could you talk about your private label strategy and to what extent you are tackling the share losses in disposables that you are having vis-à-vis BIC as opposed to Gillette and whether this is caused by a price gap versus branded BIC products? Or is it because retailers see a bigger business and better margins by delisting branded Edgewell disposables into private label disposables?

David Hatfield: Thank you. Taking your second question first. This move from Wilkinson-Sword, which was positioned as an opening price point brand to a private label, is just an example of what we're doing, trying to leverage the full portfolio, and there's a lot of talk about the high end. And certainly the news that we have with our Hydro launch shows that we're committed to grow the premium segment and the category there.

But with our full range, we sit down with our customers, and we really talk about their -- all their shoppers. And where there's only arguably 20% of the units up in the super-premium segment, there's a full 80% of the users and shoppers that go through the middle tier and the value tier. This example, we work with the customer, and we tested what was the best option for them to best capture shoppers and to generate profits. And we found that the transition from this opening price point brand to a private label made the most sense. So that's how we do it kind of all the way through the category and with all of our customers.

You also asked about nonmeasured channels, and I don't really want to divulge that for competitive reasons, but I'll say that in those channels, we under-indexed as a share, but we've been growing rapidly over the last couple of years. Private labels, from a similar point of view, I would rather not divulge for competitive reasons, but we've seen solid soft [ph] growth there also.

Javier Escalante: David, if I could follow up on your strategy again. Because you seem to be focusing a lot on Gillette, but the competitor that is doing more damage to your business is actually BIC, and it's certainly cheaper than Gillette. So any thoughts about how you can hold these market share losses, how can you -- or even correct them?

David Hatfield: Thank you.

I think the way that we're going to win is to leverage the full portfolio. So we plan to grow branded Schick disposables and then also use private label, where it makes sense from a category point of view. So we're actually committed to building our brands, and we think we can leverage the full portfolio to grow total Edgewell sales and profits.

Operator: Our next question comes from Kevin Grundy of Jefferies.

Kevin Grundy: Two unrelated questions.

First, for Sandy, if you could talk about productivity and specifically quantification of that, so not just for '16, but kind of beyond. Because I think investors who would certainly help them in this environment, where the U.S. dollar continues to strengthen, I guess, there's risk, particularly in Wet Shave, that the environment becomes a little bit more competitive. So it would be helpful if we could sort of better understand what that opportunity is, what kind of cushion and what sort of flexibility that Edgewell has. And Sandy, you also mentioned the opportunity as you sort of work through your productivity and restructuring program beyond just this year into '17 and '18.

So some commentary there would be helpful. That's the first question. Second question is for David on shave clubs, just an update there. PG -- P&G seems pretty focused on winning in that channel. They have increased their share.

They're now up to 6 points of market share in that channel. So maybe talk a little bit about -- and I know -- I understand that you guys are supplying in a smaller way to one of the players there. But what's inhibiting Edgewell from playing in a more meaningful way in that channel? And maybe talk a little bit more about that. That would be helpful.

Sandy Sheldon: Okay.

So Kevin, let me talk through some of our productivity initiatives. And I would think of them in 2 major buckets at this point. The first one relates to our 2013 restructuring plan and those actions that are related specifically to us that are still in motion. And those are Montréal plant, Wet Shave footprint, some insourcing of aerosols and some other insourced and CIP programs. We also had some commercial initiatives that we undertook, and those are largely complete and behind us.

So for the first quarter of '16, we incurred about $18.5 million of restructuring charges and estimate our incremental additional growth savings in the first quarter was about $3 million. And we have a full year estimate right now of about $15 million related specifically to these programs. So we recognize the size of the spend this year, which is about $40 million to $45 million. And the savings feels a little off, and that's because of the size of the projects we're undertaking and the significance of what that takes to actually move some major production lines out of Montréal and into our Dover plant. So the savings from those programs really lag into '17 and '18, and our estimate at this point to be about $40 million to $50 million.

So we see big savings coming, and we're spending this year in front of those savings to make sure that we hit those. So those -- so that's the major 2013 restructuring. The other buckets are the savings that we are -- and the initiatives we've taken to overcome dissynergies. These are somewhat less visible because they're designed to offset incremental cost and almost be cost avoidance-type projects. But just to give you a flavor of some of those, one of them is outsourcing our noncore transactional activities.

That impacts many of our functions, including accounting, IT, payroll, even a little customer service. These are mostly operational with plans to complete by the end of the year, and we think we've got some potential to expand. We are also centralizing back-office functions, and that impacts predominantly accounting and customer service. And I would say those are mostly operational with some limited potential to expand. And then the real big-ticket item, which is the go-to-market footprint, as we've talked about, those are mostly operationable -- mostly operational and will be complete by the end of Q3.

These have impacted market and area geographic functions and include not only exits and distributors, but also the structure and overhead we employ to manage those international businesses. So we would estimate that all of those actions combined have helped offset incremental costs and help avoid costs of the separation of up to $30 million on an annualized basis. So beyond those actions, we have a disciplined approach to cost takeout, primarily in our production facilities and in procurement. And we're looking at and finalizing our approach to indirect procurement cost improvement projects as well. We're very focused on it.

They're key to our goal of achieving a 0.5 point of annual margin expansion and helping to offset some of the currency issues. And then finally, I would say, we're implementing a new trade spend optimization tool later this year to help further drive efficiency in our trade investment. So broadly, those are most of the projects we're looking at, and I would say it's an area that we're all very, very focused on.

David Hatfield: Thanks. And then to the direct-to-consumer question, our stance right now is that rather than competing with our customers and our channel partners, we'd like to help them.

And whether it'd be that the brick and clicks or the direct-to-consumer businesses or the shave clubs, we think that we're well positioned to help them grow their total business. Certainly, with the super-premium Hydro. But also as I talked about, all the way down to private label solutions, we think that we have the full portfolio to help them. And I think private label allows us to maybe manage channel rivalry. I will also make a point that we're not only focusing on shave, but actually, all of our product lines, through direct-to-consumer and e-commerce channels.

Operator: Our next question comes from Wendy Nicholson of Citi Research.

Wendy Nicholson: I totally get that you don't want to disclose many numbers about how much of your business is either private label or direct to the shave clubs, et cetera, et cetera. But can you just kind of remind us what the margins are in that business relative to your branded products? Because it sounds like that sort of non-branded business is growing, and I just would love to understand kind of the impact on your overall profitability in Wet Shave. And then my second question is, just broadly, kind of from a high level, the go-to-market changes internationally, it sounds like everything is sort of proceeding to plan. But are there certain markets that are proving to be stubborn in terms of finding the right distributor or whatnots? Are there particular places where you say, gosh, this isn't working? Again, just generally, kind of update us on how that process is going.

David Hatfield: Sure. Sure. Thank you, Wendy. On your margin question, generally, branded products are more profitable at a gross margin level versus private label. But I will say that once you net A&P, which you have to spend to support the branded sales, and you don't -- for a private label, broadly speaking, the profitability or the direct product contribution from private label is broadly comparable to our average.

It isn't a major issue, I guess, is how I'd put it. And then from the go-to-market changes, we've been fairly pleased with our progress, and we're making good progress. We were executing those changes really beginning June. And so we have them all kind of behind us. And really, there's nothing notable to call out.

I think we're on trend just about everywhere.

Operator: Our next question comes from Jason Gere of KeyBanc Capital Markets.

Jason Gere: I guess, I was just wondering if you could talk about the balance between A&P spending and promotional spending as you think over the next year or 2, obviously with some of the changes in your international markets as well as just the ongoing, I guess, retail landscape changing in the U.S., too. So I was -- I wonder if you could just -- has anything kind of changed there that's forced you to rethink the strategy that you have in place, where you get the better ROI in order to drive the top line?

David Hatfield: Sure. Thank you, Jason.

Philosophically, we're really looking to try to drive more efficiency in our trade and our promotional spend, to manage a bit tighter and then better -- and over the medium term, move money to more equity spend, to more advertising and then digital spend. So that's the philosophy, and that's pretty true everywhere. Internationally, and in some of the markets with our change in our go to market, some of the A&P spend is now in the program with the customers and the distributors that we're using. So that's -- we'll have to manage that with our partners, but I think generally, the philosophy that I mentioned holds internationally also.

Operator: And it appears that we do have no one left in our question queue at this time.

And this does conclude our question-and-answer session. I would like to turn the conference back over to David Hatfield for any closing remarks.

David Hatfield: Thank you, everyone, for your time and your interest. Have a nice day.

Operator: The conference has now concluded.

Thank you for attending today's presentation. You may now disconnect.