Procter & Gamble Co PG
Q3 2013 Earnings Call Transcript
Transcript Call Date 04/24/2013

Operator: Welcome to Procter & Gamble's Quarter End Conference Call. Today's discussion will include a number of forward-looking statements. If you will refer to P&G's most recent 10-K, 10-Q, and 8-K reports, you will see a discussion of factors that could cause the Company's actual results to differ materially from these projections.

As required by Regulation G, P&G needs to make you aware that during the call the Company will make a number of references to non-GAAP and other financial measures. Management believes these measures provide investors valuable information on the underlying growth trends of the business.

Organic refers to reported results excluding the impacts of acquisitions and divestitures and foreign exchange where applicable. Adjusted free cash flow represents operating cash flow less capital expenditures and adjusted for after-tax impacts of major divestures. Adjusted Free cash flow productivity is the ratio of adjusted free cash flow to net earnings excluding divesture gains. Any measure described as Core refers to the equivalent GAAP measure adjusted for certain items. P&G has posted on its website a full reconciliation of non-GAAP and other financial measures.

Now, I will turn the call over to P&G's Chief Financial Officer, Jon Moeller.

Jon R. Moeller - CFO: Thanks. Good morning, everyone. I am here with this morning with Bob McDonald and Teri List-Stoll. Our third quarter results were on track with our plan on the topline. Market share showed broad-based improvement and strengthened as the quarter progressed and we're ahead of plan on operating profit, earnings per share and cash flow. We announced an increase in our dividend and we're increasing our share repurchase projection on this call to the top-end of our target range.

In the March quarter, organic sales grew 3%. Sales came in at the lower end of the guidance range, due in part to slower market growth. Underlying global market growth was choppy month-to-month and was down about half a point in the March quarter versus the December quarter. Organic volume grew 2% as pricing added one point to organic sales growth. Product and geographic mix was neutral to sales growth.

Foreign exchange impacts lowered sales growth by one point resulting in all-in sales growth of 2%. Global market share trends have continued to improve. We held or grew market share in businesses representing over 50% of sales in the March quarter, with third consecutive quarter-to-quarter improvement from 30% in the June quarter to 45% in the September quarter to just below 50% in the December quarter and now over 50%.

Within the quarter we saw a sequential market share strength ending the period with a strong month in March. In the U.S. we held or grew value share in businesses representing two-thirds of sales in the March quarter. This is up from 15% in the June quarter of last fiscal year and about 55% in the first half of this fiscal. As with the rest of the Company results strengthened as the quarter progressed with businesses representing over 70% of sales holding or growing share in the month of March.

We have more work to do, but trends are continuing to improve. Moving to the bottom line, all-in earnings per share were $0.88. All-in earnings per share include an $0.08 non-core impact from the devaluation of the Venezuelan bol�var and $0.03 of non-core restructuring investments to drive productivity improvement.

Core earnings per share were $0.99, up 5% versus the prior year and $0.03 above the high end of our guidance range. Better than expected earnings were driven by strong cost savings and productivity progress, particularly in SG&A, where we are exceeding enrollment reduction targets. One of the objectives of our productivity and cost savings plan was to create financial flexibility to maintain strong investment levels and long-term growth, while delivering on our bottom line commitments, even when we face a weaker microenvironment or other challenges.

This quarter was a good example. We over-delivered our going-in guidance despite slower market growth. Core operating profit margin grew 10 basis points, including 260 basis points of productivity improvements and cost savings. Core gross margin improved 20 basis points. Cost savings and productivity helped gross margin by 170 basis points. Pricing and volume leverage improved gross margin by roughly 80 basis points. These benefits were partially offset by 120 basis point negative impact from a combination of product and geographic mix. Innovation and new production capacity startup costs lowered gross margin by about 70 basis points. and commodity costs and foreign exchange were a combined negative impact of approximately 40 basis points.

Core SG&A costs increased 10 basis points. Overhead cost savings of approximately 90 basis points and top line leverage were offset by higher marketing spending, increased plans and benefits costs, and foreign exchange impacts. On an all-in basis, including restructuring costs and non-core impacts from Venezuela, gross margin improved 50 basis points and SG&A costs increased 40 basis points. All-in, operating profit margin improved 20 points.

As we highlighted on our last earnings call, the March quarter tax rate was reduced by the true-up needed to reflect the extension of U.S. corporate tax law benefits by Congress in early January. The core effective tax rate for the quarter was 22.2%, about a point below the prior year level and consistent with guidance. We generated $3 billion in free cash flow in the quarter, which was also ahead of our initial forecast. We delivered adjusted free cash flow productivity of 114% for the quarter, which brings fiscal year-to-date adjusted free cash flow productivity to over 90%. This compares to a year ago year-to-date cash flow productivity figure of 76%.

During the quarter, we repurchased $1 billion in stock. This brings fiscal year-to-date repurchases to $5 billion compared to our estimate of $5 billion to $6 billion for the full fiscal year. We returned $1.6 billion of cash to shareholders in dividends. Earlier this month, we increased our quarterly dividend by 7%. This marks the 123rd consecutive year in which we've paid a dividend, and this is the seventh consecutive year in which the dividend has increased.

At the new annualized dividend of $2.41 per share, our current dividend yield is about 3%. We remain committed to returning value to shareholders through dividends and share repurchase. Fiscal year-to-date, we've returned $9.8 billion to shareholders; $4.8 billion in dividends and $5 billion in share repurchase. Over the past 10 years, we've returned nearly $98 billion of cash to shareholders, over 90% of net earnings.

Stepping back, we're continuing to make good steady progress on our plans. We're on track on the topline despite choppy market conditions, with improving market share driven by innovation. Productivity savings are strong, enabling us to beat our bottom line commitments, while maintaining strong investment levels for long-term growth. We're generating solid cash flow and aggressively returning cash to shareholders.

As we complete fiscal 2013 and finalize our plans for fiscal 2014, our priorities remain unchanged; maintaining strong developing market momentum, strengthening our core developed market business, building and leveraging the strong innovation pipeline, and aggressively driving cost savings and productivity improvements to fuel growth. I'll briefly step through the progress on each of these four priorities.

First, maintaining strong developing market momentum; organic sales in developing markets grew 7% in the March quarter, consistent with the growth rate in the first half of the fiscal year, despite a modest deceleration in market growth, particularly in Brazil and China. Our business in India grew organic sales more than 20%, the 43rd consecutive quarter of double-digit sales growth.

Organic sales in Brazil were up 8%, as we grew market share for the 36th consecutive month.

China organic sales growth improved versus first half growth rates, with businesses representing roughly 75% of sales sequentially improving market share. We’re growing beyond the BRIC markets. In Argentina and Venezuela, local currency sales were up about 20% in the March quarter, and West Africa sales were up in the high teens.

Portfolio expansion continues to be an important component of our developing market plans. This fiscal year we’ll expand our portfolio to over 30 new category country combinations. Portfolio expansion is enabling us to build scale and improve profitability in these markets. We’re localizing production, which lower supply chain costs and improves customer service. And we’re improving the productivity of our SG&A spending as these businesses grow. These are two important drivers of significant profit improvement we expect to deliver in our Top 10 developing markets this year.

We’re improving profits while increasing marketing spending and accelerating the pace of innovation. While we’re being prudent with the pace of our expansions, we are in no way pulling back. By the end of this fiscal year, developing markets will represent nearly 40% of annual sales in over 45% of shipments. Sales and after-tax profit in developing markets have both increased four-fold over the last 10 years.

We remain committed to strong profitable growth in developing markets. At the same time we’re working to strengthen our core developed market business with a focus on the 40 largest category country combinations. Most of these businesses are in developed markets and account for about 50% of company sales and 70% of operating profit.

In the U.S. we held or grew value share in businesses representing two-thirds of sales in the March quarter with over 70% of sales in the month of March. This is up from 15% in the June quarter of last fiscal year and about 55% in the first half of this fiscal. We’re now growing share in Laundry, Diapers, Family Care, Dish Care, Oral Care, Blades and Razors, Hair Care, Feminine Care, in Antiperspirants and Deodorants. While shares are below year ago in skin care and cosmetics, recent innovations have helped drive sequential period to period share trend improvement. We have strong innovation plans coming soon on pet care and personal cleansing that should help us return these businesses to share growth.

In Western Europe the percentage of businesses holding or growing share is up to 40% from lows of around 25% earlier this fiscal year. And constant dollar share is improving sequentially on the past 12- to six- to three-month basis. Japan results have also improved steadily over the past few quarters returning to share growth during the March quarter. Improving developed market trends are being driven by stronger innovation, vertical portfolio expansion, and more effective marketing, including strong performance in value claims as well as targeted consumer value corrections.

Innovation underpins all of our growth efforts as does our work to drive greater productivity in everything we do. It would take a long time to go through each of the innovations we’re leveraging, expanding or introducing, so I thought I’d focus on just five today. First, Tide PODS. Tide PODS now hold the 6.5% value share of the U.S. detergents market and over 75% share of unit dose form. We expect PODS will generate about $500 million of sales this fiscal year and one brand and one region.

With additional supply now online, we’ll soon to be able to increase our levels of advertising and in-store display to drive more consumer trial. There’s been a lot written and said about the impact of PODS on the U.S. detergent category. There are several base period impacts that are often conveniently or inconveniently being ignored in these comparisons. These include our 15% price correction on powder detergents, the impact of increasing high-efficiency washing machine penetration, and unusually high market growth leading up to the PODS launch due to competitive pantry loading. By the end of the summer most of these impacts will be fully into or out of the base period and category growth rate should be more stable.

Tide PODS are great for consumers. They provide consumers with a super-concentrated exceptionally performing detergent, brightener and stain remover at just the right dosing level, all in one convenient package and product from a brand they trust. Tide PODS deliver as much cleaning power as the sixth next leading competitive unit those products combined; Tide PODS are great for our retail customers. They offer customers a super-premium innovation on one of the strongest brands in the world that sells for roughly double the category average price per load in a shelf space return-friendly compact form.

Tide PODS are great for the environment. They're the most concentrated detergent available in the market, significantly reducing packaging materials and energy usage making each load a more sustainable one. Finally Tide PODS are great for P&G shareholders. P&G PODS are a consumer preferred product, delivered through a proprietary formula, made on proprietary equipment using a proprietary manufacturing process. It's a disruptive innovation that creates a significant competitive advantage for our brands. ARIEL 3in1 PODS started shipping in Western Europe earlier this month, in France, Belgium and the Netherlands.

Next month, we'll begin selling PODS in Poland and the Baltic countries. Distribution results are excellent and week one market shares are outstanding, already over a three-share in France and at a two-share in Belgium. We began the launch of ARIEL PODS in Latin America with initial shipments starting in Mexico in the March quarter and we'll start shipping in Brazil in a few weeks. We're just entering the laundry category in South Africa with shipments to customers beginning in just a few weeks. Offerings will include a full range of detergent forms including ARIEL 3in1 PODS.

Next, innovation in our Shave Care business. Gillette's sensitive skin innovations across Fusion and Mach3 blades and razors and shave preps are leading to improved share results. 70% of men believe they have sensitive skin and these innovations leverage the fact that our ProGlide products have been recommended by dermatologists in the U.S. as the best shave percent of the skin.

In the March quarter, we held or grew value share in the U.S. in all three major elements of male blades and razors; Fusion, Mach3 and disposables. And we're also growing share on Venus blades and razors.

In the dry shaving category, we're in the midst of the global expansion of Braun CoolTec. CoolTec is the world's first dry shaver with integrated active cooling technology, which is clinically proven to show a noticeable reduction in skin irritation. Consumer response to Braun CoolTec has been outstanding in our testing and early in market experience.

Next, we have a strong innovation bundle on pet care. In the March quarter, Iams launched a rephrase of its ProActive Health premium dry dog and cat food lines. The restage includes new packet size and consumer preferred price points and new marketing messages that remind pet owners that their dogs and cats are not vegetarians. Some pet foods add plant proteins like gluten. Iams has 50% more animal protein than competitive products and includes no added gluten.

Over the next two months, Iams is launching several very exciting new product lines; IAMS SO GOOD will be the brands first entry into the mid-price tier of dry dog food. Unlike other leading brands, SO GOOD uses tasty wholesome ingredients like chicken, fruits and vegetables with no dyes, no added sugar and no artificial preservatives.

Iams WOOF DELIGHTS are our first significant entry into the wet dog food segment. They use high-quality real meats and fish like turkey, chicken, beef and lamb with no added gluten, no fillers or no artificial flavors. These innovations are healthy alternatives for pets and pet owners and have been extremely well received by our retail customers. IAMS SO GOOD starts shipping next week and WOOF DELIGHTS will start shipping in late May.

We also have a strong program on U.S. hair care that has returned us to share growth with value share up nearly 1 point in March. Our hair care innovation bundle launched in January spans the vertical portfolio. Pantene Expert Collection includes two super premium lines; Age Defy and Advanced plus Keratin Repair. Age Defy leverages a new formula based on our hair biology science yielding hair that acts 10 years younger by thickening hair as 6,500 new strands were added. Pantene Advanced plus Keratin Repair formula leverages a breakthrough in new conditioner technology to repair two years of hair damage in two minutes. The early results of Expert Collection have been very good, delivering shipments, display and trial results at or above our going in plans. We've started the expansion of Pantene Expert Collection in Latin America with the launch in Brazil in March.

We've also launched Vidal Sassoon Pro Series in the U.S., a complete hair care line offering shampoo, conditioner, styling and permanent color to give consumers, salon genius brilliantly priced. Vidal Sassoon Pro Series is priced in the salon affordable, value-oriented segment. Vidal shampoo and conditioner are quickly approaching a 2% value share with shipments nearly double our prelaunch estimates.

We're especially pleased with the results of the Pantene and Vidal Sassoon innovations considering the high level of competitive promotional activity during the quarter, which included 'buy one, get one' offers and high-value instant coupons. We've also delivered strong hair results in many developing markets, including Wella Pro Series in Brazil and Mexico, Head & Shoulders in Russia and Saudi Arabia, and across Pantene, Head & Shoulders, and Wella in India.

On the salon professional side of the business, Illumina Color from Wella Professional leverages a new patented micro-light technology and as well as biggest innovation in the last 20 years. With Wella, consumers experience hair that appears lit from within. Results in Europe and North America have been outstanding, delivering sales more than 50% above the internal launch commitments. We've just completed the global rollout of the Illumina Color from Wella Professional in the March quarter, with the expansion to Latin America and Australia and New Zealand.

Last category I'll cover today is Oral Care, where innovation is driving strong market share trends in many markets. Toothpaste, all outlet value share is up over one point in the U.S. to more than 37%, behind the continued strength of innovations across the 3D White, Pro-Health and Crest Complete lines. 3D White which includes toothpaste, brush, rinse, floss and whitestrips is driving strong share growth in Mexico and the U.K. Mexico reached an all-time high toothpaste value share of nearly 14% for the quarter, up about three points versus prior-year.

In the U.K the compilation of 3D White, Oral-B Complete and Oral-B Pro-Expert drove value share to over 10%, up nearly three points versus the prior year. China market shares are also improving. We've entered the toothpaste category in more than 40 markets over the past four years, including recent expansions in markets as diverse as France, Australia, Senegal and Cameron. All of our expansions are delivering results at/or above the expected levels. For example, in Australia, we have reached nearly an 8% value share of toothpaste just one month after launch.

In Latin America, Oral Care sales will be up about 50% this fiscal year. We are going through expansion, but are also growing strongly in established markets behind innovation. In Mexico, Oral Care sales are projected to be up nearly 40% this fiscal year. In Brazil, a market we entered four years ago, local currency sales are forecasted to grow by more than 60% and shares up by nearly four points. Now as you know innovation is not just about invention. It's also about execution. We're delivering improved results across all of our innovations by strengthening our execution with both consumers and retailers. Our communications contain stronger performance and value claims, on air, in digital media, on the package, and at the shelf that demonstrate the superior value our brands provide.

We are improving customer service levels, which along with improved innovation are being recognized by our retail partners and in third party evaluations. For example, Kantar Retail recently released China PoweRanking named P&G the overall winner by a wider margin than last year. We are increasing distribution in our top emerging markets, like China, Brazil, Russia, India and Africa. We are also gaining new distribution with key retailers in developed markets, based on the strength of our leading brands and commitment to lead innovation.

We are growing share and distribution for example in the Discounter Channel. We grew sales double-digits in the channel for the quarter and our increasing distribution with new and existing retail partners. We have also been successful in expanding distribution of Duracell batteries across several important accounts, as we continue to strengthen Duracell results in the coming quarters. So we have a very strong innovation program that we are working to execute well globally.

Like innovation, productivity also underpins all of our developed and developing market efforts, and here too we are making strong progress. The overhead reduction plan we announced last February call for a reduction in non-manufacturing staffing of 10%, or roughly 5,700 roles by the end of this fiscal year, so by June 30th.

As of the end of March, we’ve reduced 6,250 roles putting us 550 roles or about 10% above the fiscal year commitment with a full quarter still to go. Exceeding our goals, this year gives us a running start on our announced plans to further reduce non-manufacturing enrollment by an additional 2% to 4% each year over the next three years, bringing the total reduction to between 16% and 22% by the end of fiscal 2016.

We're making good progress on the organization design work being led by Jorge Uribe and a team of senior business leaders, and we’re feeling confident in our ability to deliver the additional enrollment reduction objectives. We are on track to deliver more than $1.2 billion in savings this fiscal year on cost of goods sold. Our efforts in this area include a targeted 5% net productivity increase across our manufacturing operations, even as we add new manufacturing capacity and enrollment in developing markets. This will allow us to add about 20 new manufacturing operations with no increase in headcount. So far this year we are tracking well ahead of target at nearly 7% manufacturing productivity improvement.

While we're still early in the planning process, we already have line of sight to at least $1.3 billion in additional cost of goods savings for next fiscal year. We're also achieving efficiencies and marketing spending and are reinvesting these savings to strengthen plans to support our innovations and expansions. We're shifting a greater portion of media spending to digital, which offers a higher return on investment. We're also making good progress on cost savings in non-media marketing spending.

As we embrace our cost savings work, we will continue to keep our eye on the overriding objective of shareholder value creation, with growth being an important part of this. In our efforts to cut costs, we will not compromise our growth prospects or capabilities. We are building and executing our strategy with the objective of getting this savings and growth balance right.

Now let me turn to our updated outlook for fiscal year 2013 in the April-June quarter. Starting with the fiscal year, we're holding our organic sales growth guidance range, which we improved last quarter at 3% to 4%. Given results in the first three quarters, it's likely we'll be closer to 3% than 4% for the full year. We expect all-in sales growth in a range of 1% to 2%. This includes a foreign exchange headwind of two points based on year-to-date results and mid-April spot rates for the fourth quarter. We're raising the low end of our core earnings per share guidance range by $0.02 to $3.96 to $4.04 equate into an increase of 3% to 5% compared to prior year core earnings per share of $3.85.

I want to repeat what I've said on several previous occasions relative to guidance. We set a guidance range for a reason. We're committed to deliver a plan that creates long-term value for our shareholders. We will not chase commodities or currency out the window just to deliver a top of range guidance number. We will execute our plan and we'll do it in the most fiscally responsible way we know how. We believe that our core earnings per share guidance range is realistic not conservative, given several profit headwinds we're facing.

As I mentioned earlier market growth rates have weakened. Dynamics in countries such as Venezuela, Argentina, Egypt, Syria and South Korea continue to be very volatile. Foreign exchange has moved against us in markets such as Japan, Brazil, Argentina, and of course Venezuela. We're incurring pre-production expenses in cost of goods sold as we start up several manufacturing operations simultaneously around the world and we're investing in marketing to drive our strong innovation pipeline.

We're adjusting our all-in earnings per share range to $3.90 to $3.98. This range reflects the improvement in core earnings per share expectations, updated estimates for non-core restructuring costs, and the non-core impact of Venezuela currency to valuation. The all-in earnings outlook now includes approximately $0.19 per share of non-core restructuring investments, an increase of $0.04 since our last estimate, due mainly to higher than expected enrollment reductions this fiscal year.

One risk not included in our all-in earnings guidance is the potential impact from revaluation of Venezuelan Bolivar's earmarked for foreign currency transactions through the former SITME market.

Venezuela has created a state run SICAD auction market to replace SITME. At this time, this is no official information available on the details or planned frequency of the auction process or the underlying rates. So far we've measured all of our Venezuela exposures at the official exchange rate of 6.3 bolivar to the U.S. dollar. If it becomes clear as the SICAD market forms that it will operate in a liquid and transparent manner, at a different rate, we may need to adjust our balance sheet which will result in additional non-core impact on earnings. We'll keep you updated on this as we learn more.

We continue to expect free cash flow productivity of 90% of net earnings for the year. We increased the dividend by 7% earlier this month and increasing our share repurchase target to 6 billion which is at the top end of our prior guidance range of 5 billion to 6 billion. For the April and June quarter, we're estimating organic sales growth in the range of 3% to 4%.

Foreign exchange is expected to be at two point headwind to sales growth which leads to all-in sales growth guidance in the range of 1% to 2%. On the bottom line, we expect June quarter core earnings per share in the range of $0.69 to $0.77. We expect the effective tax rate for the June quarter to be somewhat higher than the previous year's rate. On an all-in basis, we estimate earnings per share in the range of $0.67 to $0.75 including non-core restructuring charges of approximately $0.02 per share.

In summary, our third quarter results were on-track with our plan on the top line, market share showed broad-based improvement, we're ahead of plan on operating profit, earnings per share and cash flow. We've announced an increase in our dividend, our increase in our share repurchase target and have modestly tightened our fiscal year earnings per share guidance range. Having said this, we still have more work to do.

The next piece of this work is planning for 2014 which we’re starting now. We plan to give guidance for 2014 on our next earnings call which is scheduled for Thursday, August 1st. This will give us appropriate time to develop strong plans and more fully assess macro-dynamics like foreign exchange and commodities, market dynamics like Venezuela and Argentina, and internal dynamics such as pension cost, new category expansions, and new innovations before providing our outlook. We remain confident that our focus areas, maintaining momentum in developing markets, strengthening our core developed market business, building and leveraging a strong innovation pipeline and aggressively driving cost savings and productivity improvement are the right ones and that executing these with excellence should generate over time the kind of earnings progress that will put us among the best in our industry. This combined with strong cash flow and a track record of capital return to shareholders should enable us to generate superior levels of shareholder return.

That concludes our prepared remarks. As a reminder business segment information is provided in our press release and will be available in slides, which will be posted on our website, following the call. While Teri and I would be happy to take your questions, the IR team will be available after the call to provide additional perspective.

Transcript Call Date 04/24/2013

Operator: Lauren Lieberman, Barclays.

Lauren Lieberman - Barclays Capital: I was hoping you guys could talk a little bit more about beauty care, I mean clearly very good news to hear about how the U.S. hair care portfolio is performing in the U.S., especially given how competitive it's been, but beauty care volume down one, organic sales down one, there’s obviously a lot that you didn’t talk about most notably probably skin care and I’m guessing also the overall China business?

Bob McDonald - Chairman, President and CEO: Lauren I think in Beauty & Grooming we have three key points. Number one is, we've got a strong portfolio of leading brands. Number two is we've got clear plans and sufficient innovation to address these near term opportunities you're asking about and number three, there's a significant opportunity to expand and grow our Beauty & Grooming business beyond where it is today. Let me deal with the clear plans and sufficient innovation piece since I think that's where your question is coming from. As you suggested in Hair Care we're expanding the portfolio vertically with innovations like Vidal Sassoon Pro Series in the Salon Affordable Segment and Pantene Expert Series in the Super Premium Segment and this has returned U.S. Hair Care to share growth with value share of one point in March as Jon mentioned. In the U.S. Expert Collection shipments display and trial results are all at/or above expectation and Vidal's shampoo and conditioner is quickly approaching a 2% value share and shipments are nearly double our pre-launch estimates. In Blades and Razors our sensitive skin innovation across Fusion and MACH3 blades and razors and shave preps is leading to improve share results. We're holding or growing value share in the U.S. on Fusion, MACH3 and Disposables and we're also growing share on Venus blades and razors. In cosmetics share trends have improved sequentially over the past two quarters behind three exciting COVERGIRL innovations. Clump Crusher Mascara by Lashblast, Outlast Stay Brilliant Nail Gloss and Stay Fabulous 3-in-1 Foundation. In Salon Professional, we've returned the growth behind the launch of Illumina Color, which is delivering sales more than 50% above going in estimates. Our billion dollar Beauty & Grooming brands I have talked about the strength to them and then in Skin Care which was the point you asked about Skin Care in China, we've launched several new innovations including upgrades to our existing lines and new innovations that address key segments that we have portfolio gaps. Examples, in the United States, new Olay Regenerist Micro-Sculpting Cream, Total Effects CC Cream, Olay Fresh Effects. In China, YuLan You Naturals, Pro X Whitening, a restage of the Olay brand, new counters and the launch of a new mid-tier brand. So results are improving sequentially and I expect that sequential improvement to continue.

Bob McDonald - Chairman, President and CEO: I think if you look at, as I mentioned in the share comments Lauren, versus a year-ago you’re absolutely right that Skin Care continues to be a drag in terms of market share being down versus year ago. We have more work to do there but as Bob indicated, there have been a number of things that have been just recently put out on the market that we hope to drive that behind.

Jon R. Moeller - CFO: China beauty shipments grew double-digits this quarter.

Operator: John Faucher, JPMorgan.

John Faucher - JPMorgan: As we look at lower raw material inflation over the course of calendar 2013, you're going to see less pricing in the category and I guess we're not seeing a volume bounce back which is what’s leading deceleration in our overall organic top line growth maybe in these categories. So, can you talk about what you're seeing from an elasticity standpoint as we look at less pricing and how you think that maybe plays out over the course of the year?

Bob McDonald - Chairman, President and CEO: Well, to me Jon talked about the fact that in the quarter we saw a half a point reduction in growth versus the previous quarter. I think the economic recovery is going to continue to be choppy as we alluded to in our remarks. And to me the ultimate response is growth through innovation and growth through productivity improvement. We're going to continue to work on the productivity improvement. Jon talked about the fact we're ahead of the pace that we expected to be at this point in time. Some of that productivity improvement will fall to the bottom line, some of that productivity improvement will fuel the launch of the new innovations and the new market category combinations. And as Jon said, we're not pulling back. We've introduced 30 new category country combinations this year and we're going to continue to do that. Jon went through a litany of those, including the broad global expansion of our oral care business. So we're expecting sequential improvement in the top line driven by innovation. And we're expecting continued sequential improvement in market share just as we tried to indicate with this quarter's report.

Operator: Dara Mohsenian, Morgan Stanley.

Dara Mohsenian - Morgan Stanley: Bob, I just wanted to focus on the top line. The two-year average organic sales growth decelerated in the quarter versus Q2 and last year, despite the higher marketing and the greater innovation. And it looks like it was even rounded up to get to 3%. I know you mentioned weaker market growth, but how comfortable are you that you're getting a solid ROI on the investments you're making in marketing and innovation and the other areas given the lack of a top line payback this quarter? And second, more importantly, to broaden out the question longer term, it seems like in recent history you've been a bit at mercy of variances in market growth of the competitive environment from a top line perspective. Obviously, that will impact any company, but market share has only improved modestly here sequentially in the last couple of quarters, despite the price adjustment. So, can you take us through some more detail on what you're doing internally from a market share standpoint to manage through the external environment and you're level of confidence that you can sustainably turnaround market share, as we look out over the next couple of years here?

Bob McDonald - Chairman, President and CEO: Yeah, Dara. I'm very confident in our sequential improvement and market share driven by innovation. I would differ with your characterization. I think we've made substantial progress in increasing the percent of our business growing market share and I think that ties pretty directly to the innovations you've seen. I mean a classic example is the fact that Tide PODS is helping us grow laundry market share in the U.S. and it's only on one brand and one country, and it's worth $0.5 billion of top line. I think we're on the early days of seeing these innovations have a broader impact globally and that will translate to an accelerated growth on the top line. We're continuing to invest in innovation. We've increased the spending on research and development the past three years. We're going to continue to make sure that we're building the capability to keep that innovation going. And the results in the marketplace are demonstrating that we're executing with excellence today, more so perhaps than the previous periods you were talking about. So, I'm confident we're going to continue this sequential improvement and you'll see it in the share and you'll see it in the top line.

Jon R. Moeller - CFO: I share Bob's confidence. If you just step back over the last couple of years as we have discussed many times from a geographic standpoint the one market that we weren't growing and that we needed to grow in was North America, and that's obviously a large part of our business. If you just look at the percentage of businesses holding our growing share there, growing from 15% in the June quarter to 55% in the first half of this fiscal year to two-thirds in the March quarter to over 70% in the month of March. That gives us a lot of confidence that we are on the right trail here.

Operator: Wendy Nicholson, Citi Research.

Wendy Nicholson - Citi Research: My question is on the gross margin and the expansion slowed significantly, I think, on a sequential basis and you called out sort of the start-up costs within new production facilities. So is that all of the plants coming online in the emerging markets, or is that also just innovation stuff that's launching in the U.S.? And if it is the emerging market stuff, is that something that's going to be here to stay for the next couple of quarters, or do we think gross margin is going to re-accelerate with the better commodity backdrop?

Bob McDonald - Chairman, President and CEO: It is both of the things you mentioned. It's emerging market, start-up of localized manufacturing in emerging markets; it is also the start-up of manufacturing operations to support our innovations in developed markets, for example, the POD start-up in Europe. Both of those will be with us next quarter and it's one of the reasons that you see some of the trends that you do, but I don't expect this to be an ongoing dynamic. This should be another quarter or two.

Jon R. Moeller - CFO: One of the things we work hard on, Wendy, is ramping up our process reliability as vertically as we can when we start-up a new plant, and process reliability is in a sense the amount of throughput that you get from a plant versus what you expect. And our process reliability as a Company is now at the highest level it's ever been. And that is what's leading – helping to lead to some of the productivity improvements you see in manufacturing productivity, because as we increase the throughput of every single plant, we then don't need to buy additional capacity. In essence, that capacity comes with the productivity improvement. So we're going to continue to work as we start up these new plants to get the process reliability curve as vertical as possible to minimize those expenses.

Operator: Bill Schmitz, Deutsche Bank.

William Schmitz - Deutsche Bank Securities: Can you just talk about the sort of fourth quarter guidance and all the reinvestments? If you think about it, you did 3% organic growth in the year ago quarter. You’ve announced a massive restructuring. You reinvest all this money back in the business, but it seems like organic growth is just going to be flat. So is it really just sort of category growth contraction? And then what would happen if we really did have some commodity inflation? Because I think you had like 260 basis points of productivity savings in the quarter. I think that kind of carries forward. So, what sort of the puts and takes and how long is this negative mix impact going to last? And I know that was a long question, so I apologize.

Bob McDonald - Chairman, President and CEO: Wow, not quite sure how to cut through that. I will try. So, first of all, just let me step back on our guidance philosophy, since your question started with guidance. Last quarter we over-delivered our guidance. We increased guidance a little bit, but invested a lot of the money back to ensure that we continue to leverage the innovation pipeline we have and sequentially build market share. Effectively, this quarter we've done the same thing. We've over-delivered by a little bit, we've taken up the bottom end of the guidance range, but are going to continue to invest to get the share where it needs to be going forward. As we invest to do that and drive higher profitability through productivity, I'm confident that the returns will be there, because each case we are growing is worth more. I expect from a commodity standpoint if anything maybe a little bit of – those are fairly benign. I don't expect a big impact going forward, and so these productivity savings should begin to impact both gross margin and operating margin as they have in prior quarters, particularly when we get beyond the startup of these new manufacturing facilities that Wendy was describing. So, I see accelerating top line based on continued market share progress, irrespective of market size, and the productivity savings over time enabling us to both fuel that and drive our earnings per share growth.

Operator: Chris Ferrara, Bank of America.

Christopher Ferrara - Bank of America Merrill Lynch: Guys, I guess I wanted to try to pull together some of the comments you've made on your confidence in the market share recovery, the timing of the build out of the innovation pipeline, right, because it seems like there's been no shortage of new products for the second half of '13, yet a couple of things. The Q4 organic guidance implies only flattish market share at 3 to 4. You're saying momentum was building through the quarter, but the Q4 outlook is not even acceleration from Q3 when you came in at the low end of your organic range. So, I get that you're saying it’s early days and some progress is made, but wouldn't you have expected that share recovery to have kicked in a little bit more by now, and if so, why do you think it has, and if not, why not?

Jon R. Moeller - CFO: Obviously, the market share is affected by many factors, Chris, some of which are external. But I would say that all-in-all as we step back from it, we're on track with what we want to deliver in terms of sequential improvement in market share and we expect that to continue. We expect that to continue in the fourth quarter and we're looking forward to the next fiscal year. The innovations, many of which we've talked about, are one country, one brand, and they're supported by a technology platform that we will put across more countries and more brands. I mean, we talked about PODS and we talked about the entry of PODS into parts of Europe and the parts of Latin America and the parts of Africa. This is only now starting. We're just now shipping those cases, taking those orders. You're not seeing the impact in the marketplace at all yet. I think by the end of the quarter, you'll obviously see that impact and just like this quarter, it will ramp up through the quarter. And as we've said, March was a much stronger month than the beginning of the quarter and that's why we grew share at the 70% plus of the U.S. business, grew and held share at 70% plus.

Operator: Nik Modi, UBS.

Nik Modi - UBS: Just quickly on all the innovation, how you guys are thinking about the FTE complexity across the business, especially at a time where you're trying to also reduce the cost structure. And can you provide any thoughts on that? And then just a quick housekeeping, can you just talk a little bit about the healthcare business and what was driving such strong growth? Was it just the flu season or was there something else going on there?

Bob McDonald - Chairman, President and CEO: Well, in terms of innovation and SKU proliferation, our point of view is one where we work with customers and retailers and create joint value creation. We have scorecards that we work with customers and part of that is working efficient assortment where we don't bring an innovation to retailers that we don't think will command or attract a large number of consumers. And while we go in with that new innovation and expect to or try to sell a certain amount of shelf space, at the same time we help retailers pull out, eliminate some of the innovations that other competitors or even we have launched that may not have worked. So we try to keep the SKU proliferation under control. I think I would point to our manufacturing productivity. Our manufacturing productivity and our work on inventory, which is turning in great cash results, wouldn't be where it is if there was evidence that we were proliferating SKUs. At the same time, I'd encourage you to look at some at the new items that were launched by some of our competitors that haven't done well and we'll be working with retailers to try to get the shelf space back, so the retailers can make money off that shelf space.

Jon R. Moeller - CFO: Moeller In terms of health care, there are really three drivers, Chris. So, one, you rightly cite, which is the strong cold flu season; the second is the expansion of the Vicks lineup in Eastern Europe that we've talked about before; and the third is a real strong quarter on the P&G Teva business as we continue to drive the products of that joint venture. So those are the three main drivers of our health care progress.

Bob McDonald - Chairman, President and CEO: Should we mention ZzzQuil? I would also mention the launch of ZzzQuil which is multiples beyond our expectation and success. It's already the number one branded sleep aid. It's expanded the category. ZzzQuil is off to a tremendous start and I would recommend it for all of you who may suffer jet lag, if you travel internationally.

Operator: Ali Dibadj, Bernstein.

Ali Dibadj - Bernstein: So, I think like a lot of other people on the call, I’m kind of struggling with the dichotomy between the positive tone of your press release, the confidence you’re clearly exhibiting on this call, all the very, very enticing innovations that are out there. (First is) essentially I think disappointing top line results at least from investors, analyst, and I think you're seeing that in the stock reaction probably. So, I got a few things; one is how is your share gain related to the slowdown in the market growth? Two is; if everything is going to plan, why is it pretty impossible to get to the high-end of your top line growth range for the year? Then three is, you say there's more to come I'm trying to understand what's -- like are there other bigger things you're expecting to happen whether it be an incremental reinvestment that you need to make, whether be an acceleration to the chart changes or structure changes or incentive structure. What else can get us to feel better to tie in this dichotomy between your confidence and frankly somewhat disappointment when everybody on this call so far asked questions in some of the market right now?

Bob McDonald - Chairman, President and CEO: Well, our top line growth delivery was within our guidance range, Ali and I think maybe part of the dislocation that you're perceiving between our confidence and your lack of confidence, maybe just in time sequence I mean the innovations we're talking about as I responded to Chris's question are all future oriented and future related and you're looking at past results. I think that we're going to continue to do what we're doing. We're going to continue to invest in innovation. We're going to continue to bring out a large number of innovations. We're going to continue to fuel that with productivity improvement and with investments in innovation. I'm really excited about the work that we've done around productivity both in the manufacturing area where we've offset the headcount that we need to run 20 new factories, but also in the area of non-manufacturing where we’re ahead of target. And the work that we’ve done already in the productivity area with Jorge Uribe's team and his leadership is suggesting that we can get to the 2% to 4% reduction which by the time we get to 2016 could have us down 16% to 22% of enrollment. And I think that’s terrific progress and it gives us a lot of confidence that we’ll have the fuel to then spend behind innovation and get those sequential market share growth goals that we talked about without regard to choppiness of the global economy.

Operator: Joe Altobello, Oppenheimer.

Joseph Altobello - Oppenheimer: I guess, since you just mentioned choppiness again Bob, I’ll start there. You guys have talked about that a lot this morning. We’ve heard that from other companies as well. Could you give us a little more color or past anecdotes in terms of what you’re seeing from your customers, where they’re buying and what they’re buying, how often they’re buying, how that’s changed in the quarter perhaps. And then secondly, the market share trends obviously are improving, but I think your overall market shares are still down year-over-year, so when would you guys expect to see those overall market share start to grow overall?

Bob McDonald - Chairman, President and CEO: Well let me deal with the year-over-year first, the year-over-year varies by category, by country. For example, year-over-year now in North America we’re obviously seeing growth because we’ve got 70% plus of the business holding or growing share. So obviously with the sequential improvement over time with 50% plus now holding or growing share globally we’re going to expect to see a year-over-year growth sequentially in the coming quarters. Relative to the choppiness of the economy, it's more of an evolution I think than a cathartic revolution. What we’re seeing is obviously retailers concerned about their level of inventory and their cash investment. We see them worrying about attracting traffic to their stores, but we don't see extraordinary levels of promotion like we may have in 2009, 2010, but there are times where there are extraordinary levels of promotion. For example, when we launched Vidal Sassoon and Pantene Expert and one of our competitors launched a new brand, the third competitor who did not have a very strong innovation program this quarter put instantly redeemable coupons on all of their hair care offerings in every store. So you do see choppiness in that regard. The promotion spending when you don't have innovation, but the rest I would see as evolutionary but an improvement in the way retailers are operating. Another point that you see is the move to online or ecommerce. We've been working hard to understand what our market share is in ecommerce. We've been putting a lot of resources against it. I'll just give you the U.S. as an example, if you take our U.S. market share, our ecommerce digital market share, both through bricks-and-mortar and through digital players, is 20 points higher than it is through regular retail, and this was a fast growing channel. So that may lead to also some of the choppiness that you may see, because most of that sale is not transparent to the marketplace.

Jon R. Moeller - CFO: But if we're going to continue to operate in an environment that is a little bit choppy, I think we're extraordinarily well positioned from a standpoint of both the productivity program and the innovation program which are the antidotes to this kind of market environment.

Operator: Connie Maneaty, BMO Capital Markets.

Connie Maneaty - BMO Capital Markets: Another question on market shares. If U.S. shares are growing in 65% to 70% of your businesses and your shares are growing in 75% of businesses in China, but your worldwide shares are growing in 50% worldwide. In which international markets are you losing share and why and when would you expect to turn?

Bob McDonald - Chairman, President and CEO: Well, Connie, first of all, we said that holding and growing share not just growing and that's a significant difference. Places we're losing market share, frankly we've talked about the work we're doing on Skin Care globally and trying to improve our beauty business. That's a major focus for us. Russia Laundry we were losing some share and we've put a plan in place to regain share. So we have pockets like that around the world, but believe me, we are all focused on turning those shares around and doing it through innovation.

Operator: Javier Escalante, Consumer Edge Research.

Javier Escalante - Consumer Edge Research: I would like to come back to beauty and the choppiness and again, the marketing spending and the innovation that you're talking about. If you step back, you did major launches in the U.S. in Olay, in Hair Care, in makeup with COVERGIRL, and yet we don't see any traction from it. So I understand that L'Oreal did a competitive launch, but under the same choppiness, they grew 5.5% in the quarter and your GVU contracted minus 1%. So what I'm hearing is doing the same thing, spending more and doing the same innovation, and blaming competitive activity in terms of the lack of traction. But shouldn't you be thinking about doing things differently so that there is more effectiveness in the A&P spending and on the innovation? Thank you.

Bob McDonald - Chairman, President and CEO: Javier, we understand. We see it a little bit differently than you do. We launched these items recently. They’re making sequential progress. We talked about Vidal Sassoon already approaching a two value share, which is double our pre-launch estimates at this point in time. These things are making progress period-to-period. Pantene Expert, for example, has a higher repurchase rate than our competitor’s new brand. So we’re seeing progress period-to-period, and we think that will be reflected in the market share results and the top line growth sequentially, as we said.

Operator: Jason Gere, RBC Capital Markets.

Jason Gere - RBC Capital Markets: I’m not going to use the word complexity, because I think it's been overused a little bit. But I guess, I’m just trying to figure out, when you’re looking at all the innovation that you’re bringing out and the top line growth that’s coming through. Can you talk about some of what I would consider the non-core businesses in the portfolio? Obviously, we know with 40/20/10 the areas that you’re focusing on and where you’re playing to win. But it just seems like there is some volatility with some of these non-core businesses that you guys, I think, are not considering disposing at the time. So I was just wondering, when you see the results that are coming through and the great innovation that you’re getting in some of, what I would consider, more core businesses, does that change your outlook in terms of keeping other brands in the portfolio or kind of – I think one of the last questions was on the SKU complexity, kind of eliminating that, so you can put up healthier numbers and seeing the results of better innovation in some of the core brands?

Bob McDonald - Chairman, President and CEO: Jason, as you know, we have quite a robust process for weeding and feeding our portfolio, and we have divested businesses in the past. We are happy with our portfolio that we have today. And any item in our portfolio, there is an expectation that we innovate. Jon went through the innovation, for example, that we have in pet care coming to market, (Good For You) and the new WOOF item. We have innovation in Duracell, another category that you’ve asked us about in the past, in Duralock with a 10-year guarantee on Powermat. So, we expect to innovate in every one of our businesses. There may be a different cycle of innovation, a need for that, but we expect to innovate in every one of our businesses, and that’s the primary way that we attract consumers and grow our business.

Operator: Bill Chappell, SunTrust.

William Chappell - SunTrust: Just wanted to dig back into the PODS in the U.S., and certainly $0.5 billion in sales and improving market shares is great. But just maybe you could give us some color of after being out in the market for a year, I mean, is the six household penetration where you expected, better or worse? I mean, can you get to 10 in the near term and do you need to have Gain PODS or something else to really kind of jumpstart the category even further?

Bob McDonald - Chairman, President and CEO: With the technology like Tide PODS, we usually start with the leading brand, and then we expand that technology across countries and across brands. What we've seen with PODS is that it's a preferred form of laundry detergent and people who move from a powder to a liquid historically now move from a liquid to a POD, and they typically don't go backwards. Once you start using a POD, you don't go back to a liquid. Once you've moved to a liquid, you don't go back to a powder, and that just is the generational shift in the laundry category. I think one of the things that's been interesting about PODS is it has attracted users, even though it has a higher cost per load it's attracted users across the entire spectrum of users, across the entire spectrum of income. So, there are many people who are forced to overdose their laundry detergent today because they aren't getting satisfactory cleaning and they buy a low priced brand, that brand doesn't work, it has a low level of actives, has a lot of water, and so they overdose and they move to this form, which cleans better, and they find it more economical even though it has a higher cost per use. The reason the cost per use is higher is you’re not paying for water; you're paying for active ingredients. So, I think it surprised us a little bit to see where the source of volume has come from. If you look at the track of what percent of the business this has become, we said that we think we'll get to 30 eventually because of what we've seen in dishwashing over time in our dishwashing, and we have no data to refute that. It's going to be an evolution over time, but as we expand the form around the world, you'll see a higher proportion of our laundry business go into PODS, and eventually I think we'll get near the 30% number that dishwashing has.

Jon R. Moeller - CFO: And don't forget that we were constrained in terms of supply until just recently, so we'll be increasing the levels of marketing events or support. So to your point of driving a higher household penetration, that's still ahead of us.

Operator: Mark Astrachan, Stifel Nicolaus.

Mark Astrachan - Stifel: So, I wanted to go back to the underperformance in beauty and try to think about it a little bit differently. What do you think has led to some of the underperformance? And when do you think the innovation-based strategy potentially needs to shift, or how do you sort of evaluate the efficacy of what you're doing? And then sort of related to that, how do you think about supplementing the internal innovation with acquisitions externally? And then sort of related to that, how do you think, Jon, about the optimal leverage structure on an overall basis for the business? And does the cost savings program limit the acquisition appetite overall?

Bob McDonald - Chairman, President and CEO: Well, we've been working to strengthen the organization, strengthen the business now for some time. We're starting to see progress. As we reported in this quarter, we've launched a number of new innovations, and the innovation program looks even stronger in the future. We have more, what we call, bigger change innovations coming in the future and we're excited about that. So I expect – as I've said, I expect the performance of the beauty organization to improve quarter-to-quarter and sequentially, and we're going to continue to invest in it both in terms of innovation and in terms of marketing.

Jon R. Moeller - CFO: And we've said before that we continue to be interested in fill-in acquisitions. That would be true in beauty as well. I don't think there's anything that holds us back from that at this point, except asset availability and asset attractiveness, but that's something we'll continue to look at. There's really no constraint within either our leverage targets or our earnings projections to that activity should something attractive present itself.

Operator: Alice Longley, Buckingham Research.

Alice Longley - Buckingham Research: I have a housekeeping question and then my real question. My first is could you just tell us what your category growth rate was by region, emerging markets, U.S. and Europe? And then my real question is on Tide in the U.S. I know it's not suffering the price reversal in powders that some of the others are. Could you tell us how much Tide as a brand overall was up or down in the quarter, if you include powders, liquids and PODS together?

Bob McDonald - Chairman, President and CEO: Let me take the first one, Alice. In terms of the market growth rates, developed markets in our categories grew about 1 point developing markets were up about seven point leaving us with a global total of about three and a half points, which compares to four points in the prior quarter. Now within that you asked about the U.S. the U.S. was up about two and a half points, with Europe down and Japan essentially flat.

Alice Longley - Buckingham Research: And Tide?

Jon R. Moeller - CFO: Tide was down in the quarter from a shipment standpoint. But recall that this is the quarter that we're comping the PODS launch. So, the underlying trends again from a market share standpoint are very strong, shipments are down year-over-year only because of the pipeline so.

Operator: Joe Lachky, Wells Fargo Securities.

Joe Lachky - Wells Fargo Securities: I was wondering if you could outline your opportunities and efforts you're making on working capital specifically inventory I think you mentioned that briefly, but also payables and receivables and remind me if you've quantified how much opportunity you see there and how you plan to use that cash to either reinvest in your business or potentially return additional cash to shareholders?

Bob McDonald - Chairman, President and CEO: So we're actively working on inventory days on hand, and our goal is to be able to reduce working capital by sufficient levels to be able to offset the increase in capital spending behind the developing market expansion, such that we continue to deliver 90% free cash flow productivity, which gives us ample cash to return to shareholders and that's exactly what we're doing now. We're on target in terms of a pretty significant reduction in inventory days on hand this year. We're targeting again the same next year. And I'll let Teri briefly talk about what we're doing on payables.

Teri L. List-Stoll - SVP and Treasurer: So there has been some press recently about a new program that we've introduced with suppliers, called supply chain finance. We were partnering with some of our world-class banking partners to be able to present what we think is a win-win solution to suppliers. As part of that, will be extending our payment terms which obviously frees up cash for us, so we are offering lower cash financings and actually earlier access to cash to our suppliers as part of that program. So that’s something that we think over time and we are implementing it over time so it's not disruptive to suppliers. That will free up a tremendous amount of cash starting next year and then over the next two or three years.

Operator: Michael Steib, Credit Suisse.

Michael Steib - Credit Suisse: You made several references towards investing behind marketing spending, could you be a bit more specific please? What does that mean, does that mean that ad spent for example is up sequentially in absolute terms and as a percentage of sales?

Bob McDonald - Chairman, President and CEO: Yes. It also means we are investing in things like sampling – door-to-door sampling, selling, things that will generate trial and awareness of the new innovations.

Operator: Linda Bolton-Weiser, B. Riley Caris & Company.

Linda Bolton-Weiser - Caris: My question is on cash flow. You had 20% year-over-year growth in operating cash flow in the first half of the fiscal year and it was only up slightly in the third quarter. So is there – is your working capital performance actually deteriorating a little bit or is there some other strange comparisons that happened in the quarter? And also, it looks like in the quarter you pay down, reduced debt by about $800 million or so. Is there any reason why you can't just maintain the debt that you added to the balance sheet in the first half and use, instead of paying down debt in the second half, just do more share repurchase. Would that not allow you to maintain your credit ratings as you would like or what’s the reason that you can't just maintain that a little bit additional leverage and repurchase shares, because other companies have levered up a little bit here and are repurchasing more stock? So can you just kind of explain that?

Jon R. Moeller - CFO: Sure. Well, stepping away back again, 10 years $98 billion of cash returned to shareholders, that’s clearly a focus area. We generated $3 billion of cash in the quarter, so a strong quarter of cash flow. The IR team can take you through the line item comparatives versus the base period. We have been using that increasing cash flow to increase our share repurchase. You may recall when we first started talking about share repurchase for the year was $4 billion to $6 billion. We increased that range based on cash over delivery to $5 billion to $6 billion last quarter, this quarter we increased the range again to $6 billion based on cash over delivery. So, we’re very much focused on that objective. And we increased the dividend 7% at the same time as you know.

Operator: Caroline Levy, CLSA.

Caroline Levy - CLSA: Just wondering if you look at your base businesses, maybe where a lot of the problem is arising, you launch new products in hair care, but the base Pantene must be where the weakness is I’m assuming, similar with liquid Tide and the Olay product. So is this something with all the innovation that you talk about and do, is there some way one can address the base business to make sure that there isn’t that kind of erosions? That’s my first question. I was also wondering if you could just talk about your diaper share in the top few markets there, I'm not sure I quote what trends are like in diapers anywhere in your big markets?

Bob McDonald - Chairman, President and CEO: Caroline, we're very focused on growing the base business. Without growing the base business, there is no growth. And I think evidence of that is the fact that we're holding or growing share in 70% of the U.S. business in the month of March. The innovations are helping, but you couldn't do that without growing the base business. So, we evaluate people on growing the base business. It's important to us and we know we can't grow without growing the base business and that's particularly true in developed markets like the United States, but it's also true in developing markets. So, we're focused on that and that's why market share is such an important measure for us.

Operator: At this time, we have no other questions in the queue. Ladies and gentlemen that concludes today's conference. Thank you for your participation and you may now disconnect.