寶潔 (PG) 2010 Q4 法說會逐字稿

Welcome to Procter & Gamble's fourth-quarter and fiscal year-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 the after-tax impacts of the global pharmaceuticals divestitures.

Adjusted free cash flow productivity is the ratio of adjusted free cash flow to net earnings, excluding the gains on divestitures of our Pharmaceuticals business.

Core EPS refers to earnings per share from continuing operations, excluding certain items.

P&G has posted on its website, www.pg.com, 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.

Go ahead, Jon.

Thanks and good morning, everyone.

Bob McDonald and Teri List join me this morning.

I will begin today's call with a summary of our fiscal year and fourth-quarter results.

Teri List will cover business highlights by operating segment.

Bob will then provide his perspective on our progress against our growth strategies and objectives, and I will conclude the call with our outlook for next fiscal year and the September quarter.

Bob, Teri and I will have plenty of time for questions after our prepared remarks.

Following the call, Teri, John Chevalier and I will be available to provide additional perspective as needed.

Last year when we provided our initial guidance for fiscal 2010 we shared our choice to invest behind a strong innovation pipeline and our continued commitment to simplification and productivity.

The plans we outlined were focused on executing our overarching growth strategy of serving more consumers in more parts of the world more completely with an objective of returning our business to profitable value share growth.

Our going in guidance for organic sales was plus 1% to plus 3%, reflecting both the slowdown in global category growth and our commitment to grow market share.

Our initial core earnings per share guidance was minus 1% to plus 3%.

We have delivered on each of these objectives.

Global value share is up nearly 0.5 point for the past three-month period.

We are growing share in businesses representing nearly 60% of sales, and momentum is building sequentially in essentially every region around the world.

All regions held or grew share for the first time in 11 quarters.

Organic sales grew at 3% at the high end of our going in expectations.

Importantly, the volume growth that underpins this accelerated each quarter from a reduction of minus 2% in Q1 to growth of plus 8% in Q4.

In conjunction with our cost and productivity efforts, our topline progress enabled us to exceed our core earnings per share targets.

Against our going in objective of minus 1% to plus 3%, core earnings pressure increased plus 6%, including a negative 2 percentage point impact from Venezuela.

We delivered record adjusted free cash flow of $14 billion.

Adjusted free cash flow productivity was 125%, well above our long-term target of 90% or higher.

In April we increased our quarterly dividend by 9.5%, making this the 120th consecutive year we have paid a dividend and the 54th consecutive year the dividend has increased.

In addition to raising the dividend, we increased our share repurchase levels as our year progressed, repurchasing $6 billion of P&G stock.

Consistent with our strategy, we have accelerated the expansion of product portfolios vertically, horizontally and to new geographies and launched significant upgrades on some of our biggest brands.

We have considerably strengthened our portfolio, divesting the Pharmaceuticals business, which did not fully leverage our core capabilities and acquiring Ambi Pur and Natura, which do.

We are operating more fully as one Company, coordinating and scaling our activities in markets and across categories.

Our overarching growth strategy of touching and improving more consumer lives in more parts of the world more completely is working.

Moving to April/June results, organic volume was up 8%, our strongest organic volume growth in almost six years.

All six business segments, all five geographic regions, each of our top 17 countries and 19 of our $23 billion delivered organic volume growth in the quarter.

Shipments also increased to 14 of our top 15 global customers.

All-in sales were up 5%, including a 1 point benefit from foreign exchange.

The foreign exchange impact and in turn all-in sales were somewhat lower than our guidance, due to the significant strengthening of the dollar since we provided guidance in April.

Organic sales were up 4% within our guidance range.

Pricing changes reduced sales by 1 point, consistent with the impact we saw in our third quarter.

Mix reduced sales by 3 points.

Geographic mix accounted for about half the total mix impact as shipments in developing markets grew at a 12% rate compared to a 5% rate in developed markets.

The balance of the mix was driven by category and price tier mix, about equally split.

EPS for the quarter was $0.71 in the middle of our guidance range of $0.68 to $0.74.

As you know, we intensively provide a guidance range versus a single point estimate and did not chase foreign exchange or commodities or back off on investments simply to deliver a top of range number or an external estimate.

Our actions are guided by a desire to advance our strategy and by our overriding objective of creating long-term value for shareholders.

During the last quarter, we chose, for example, to make value corrections in a few key markets in the Central and Eastern Europe, Middle East and Africa region to reduce price gaps that had widened due to increased competitive activity.

We could have waited to make this investment, but we felt it was right to address this issue right away.

We chose to increase our investment behind the Pampers Dry Max innovation, and we increased media and merchandising support across several other brands and markets.

We made the choice to call a bond, which created higher expense in the quarter, but will lower future financing costs and its value accretive.

These and other choices kept us from delivering at or above the high end of our guidance range, but with the right value accretive choices to make.

As we expected, operating margins were noticeably lower than prior year.

This was due to higher marketing and support levels behind the launch of important initiatives such as Pampers Dry Max, Fusion ProGlide, Crest 3D White, and the Pantene restage, which drove essentially all of the SG&A increase for the quarter.

The lower operating results were largely offset by a low tax rate, driven by a number of small items.

On the year, the effective tax rate for continuing operations was 27.3%, in line with our beginning of year guidance of 27% to 28% and above last year's rate of 25.9%.

As we have indicated in the past, quarterly tax rates can be more volatile as audits are resolved, as reserve balances are adjusted, and as geographic mix changes.

Stepping back, we are pleased with our fiscal year results and the trend of the business.

Volume growth and market share have accelerated throughout the year, delivering organic sales growth at the high end of our initial expectations.

Core earnings per share grew ahead of going in expectations.

We had a record cash year and return through dividends and share repurchase over 100% of net earnings from continuing operations to shareholders.

I will now turn the call over to Teri to provide some additional perspective on our quarterly results.

Thanks, Jon.

As Jon indicated, overall marketshare growth was positive with all regions flat or growing share for the first time in 11 quarters.

Volume growth was also strong across the Company, up 8% organically with developing markets up 12% and developed markets up 5%.

This geographic split was the primary driver of the mix effect on sales growth, and you will see how this impacted the business segments as we go through the results.

Starting with Beauty, organic sales increased 5%, driven by 8% organic volume growth.

Geographic and category mix reduced sales by 2% as developing markets grew disproportionately at 14%, and retail Hair Care and Skin Care grew faster than the Prestige and Salon Professional categories.

Price reductions, mainly in developing regions, impacted sales by 1%.

Retail Hair Care grew unit volumes low teens with share up slightly, led by the North America Pantene re-stage.

Pantene North America shipments grew over 30% behind the base brand re-stage, which shipped in May.

The launch is off to a good start with Pantene US all-outlet share up more than 0.5 point for the month of June behind strong awareness and trial building merchandising and consumer commercialization programs.

Head & Shoulders delivered high teens global volume growth led by our scalp care innovation in Asia and Central and Eastern Europe, Middle East and Africa.

Female Skin Care grew volume double-digit with positive share trends.

In the US Olay all-outlet value share of the facial moisturizer segment was up almost 2 points behind the continued strength of the Olay Pro-X line and the Olay Regenerist Rollerball eye treatment innovation.

Olay also had strong results in developing markets, more than doubling shipments in India, Saudi Arabia and the Philippines.

Female blade and razor global shipments were strong in both developed and developing markets with Venus volume up over 25% and global value share up over a point above 53%.

US all-outlet share is up over 4 points to almost 51% driven by recent initiative launches, including the introduction of the premium Embrace Disposable razor and the introduction of the Simply Venus razor, the entry level price disposable razor in the Venus lineup.

Professional Hair Care volume was down, reflecting continued market weakness and impacts from our actions to streamline the portfolio.

In Prestige Beauty, unit volume decreased mid-single digits due to initiative timing.

Grooming segment organic sales were up 12% on volume growth of 9%, positive pricing of 2%, and positive mix of 1%.

The male blades and razors business delivered double-digit organic volume growth with all regions contributing.

Fusion led the growth with shipments up 40% on a global basis, gaining 2 points of global marketshare and continuing to grow share in every quarter since launch in 2006.

In North America Fusion shipments increased over 70% behind the launch of Fusion ProGlide in June.

In the second week of launch, ProGlide became the number one razor in the category.

In Latin America strong blades and razor shipments were driven by commercial innovation, which included major sporting event advertising and product tie-ins with Mach3 and Prestobarba disposable razors.

In India strong customer programs and continued strength of the new and more affordable Mach3 razor increased shipments over 50%.

Male Personal Care unit volume was up mid-single digits.

Developing markets were up double-digits.

The US male body wash business delivered 45% share in June with both Gillette and Old Spice growing ahead of competition.

US Old Spice increased shipments high single digits, and market share grew almost a point to make Old Spice the number one male body wash brand.

This growth has been driven by the "Smell Like a Man Man" marketing campaign, which has generated almost 1.2 billion impressions since February 2010 and with the recent Twitter campaign became the number one all time most viewed sponsor channel on YouTube.

Volume in the appliances category was up mid-single-digits, driven by a combination of strong growth in developing markets where shipments increased over 20%, and global strength in the dry shave category, which grew share about 1.5 points.

Moving to Healthcare, organic sales increased 2% on a 5% increase in organic volume.

Mix reduced sales by 3%, due mainly to strong volume growth in developing markets where volume was up high single digits with the Central and Eastern Europe, Middle East and Africa region up double digits.

Oral Care shipments increased high single digits.

Western Europe delivered strong volume growth behind the continued success of Pro-Health toothpaste in Belgium and Holland, as well as on the base Crest and Oral-B franchises.

In the US Oral Care shipments increased behind recent initiatives and share increased almost 1 point.

Crest 3D White launched in March and is exceeding internal objectives.

The 3D White regimen has reached an 8% value share of the US Oral Care market.

In Mexico the Crest brand grew its toothpaste share by nearly 4 points to 12% behind the Pro-Health expansion.

Oral-B toothpaste shares in Brazil continued to exceed expectations, growing in all channels in which we compete.

In India Oral-B volume almost doubled behind our toothbrush distribution expansion program and entry point brush innovations.

Feminine Care volume grew low single digits, while global share declined slightly, the business grew in Western Europe behind vertical portfolio expansion in the UK and Belgium with the January introduction of mid-tier Always and premium tier Tampax Pearl.

Personal Healthcare shipments increased low single digits as we held marketshare.

Snacks and Pet Care organic sales were up 3% with organic volume up 7%.

Geographic and product mix reduced sales by 4%, but was partially offset by 1 point of positive pricing.

Snack volume increased high single digits with growth across all regions.

Western Europe and Latin America led the growth, increasing market share about a point each behind strong consumer and customer support of World Cup commercial initiatives.

Pet Care volume was up mid-single digits, driven primarily by solid growth in North America behind the Eukanuba and Iams with Prebiotics initiatives.

The Fabric Care and Home Care segment increased organic sales by 1%.

Volume grew 7%, led by double-digit growth in developing regions.

Geographic and product mix reduced sales by 3%.

Value corrections in North America, Western Europe and Central and Eastern Europe, Middle East and Africa impacted sales by 3 percentage points.

Fabric Care shipments increased mid-single digits for the quarter behind incremental pricing investments.

Tide led the category with double-digit growth.

US Tide gained over 1.5 points of market share behind strong retailer support.

Western Europe also had a strong quarter, increasing share over 1.5 points driven by the Actilift innovation and the Ariel Professional laundry additive launch.

Results in Germany were particularly strong and were driven in part by the endorsement of Germany's consumer testing group getting the StiWa seal of approval.

In developing markets, Fabric Care shipments grew high single digits.

Much of this volume was delivered in Central and Eastern Europe, Middle East and Africa markets where we invested in pricing corrections to reduce gaps versus competition.

Tide in India was also strong, almost doubling shipments for the quarter, driven by Tide Naturals, our value-tier powdered detergent launched in December.

Home Care delivered another strong quarter with shipments up high single digits.

Home Care increased US share points to over 30%.

Febreze US market share grew by more than 4 points with strong growth on the base business as a result of increased brand support and enhanced distribution.

Dawn grew US market share by more than 4.5 points and now has over a 46% share of the hand dishwashing category.

Western Europe shipments increased double-digits as we added more consumers to the Home Care portfolio through strong consumer-focused initiatives.

Developing market shipments grew close to 20%.

Turkey was a strong contributor to this growth with the recent successful launch of Fairy automatic and hand dish care.

Battery shipments increased double digits for the quarter.

Shipments in share grew across all regions with global marketshare increasing by almost 1 point to 26%.

Baby Care and Family Care delivered organic sales growth of 5% and organic volume growth of 9%.

Mix reduced sales by 3%, due mainly to strong growth in developing markets where unit sales grew close to 20% and faster growth of value tiered products.

Pricing decreased sales 2% behind value corrections in Russia, Turkey, Saudi Arabia and Japan.

Baby Care shipments were up high single digits, and global marketshare increased over 1 point with all regions growing share.

Developing markets increased shipments double digits with China delivering over 30% growth behind continued distribution expansion and a launch of a size stretch initiative in January.

The Central and Eastern Europe, Middle East and Africa region also delivered strong growth as countries such as Russia, Turkey and Saudi Arabia each increased shipments more than 15%.

Western Europe Pampers unit sales were up mid-singles, driven by the continued success of Pampers Simply Dry and the initial pipeline shipments for the Pampers Dry Max launch.

Pampers' share of the Western Europe diaper market continues to grow, up almost 3 points versus year ago to over 56%.

While Pampers shipments were relatively flat in North America as retailers adjusted inventory back to normal levels following the March launch of Dry Max, share increased about 1.5 points.

Family Care shipments were up double digits, driven by midteens growth of Charmin and high single digit growth of Bounty.

Charmin improvements were delivered through geographic and portfolio expansion.

Shipments of Charmin in Latin America increased over 75% as we filled out our presence in the Americas expanding into six countries in Central America.

Charmin Basic shipments increased almost 50% through distribution gains and the launch of Basic in Canada.

Bounty shipments were up behind the launch of product upgrades, coupled with the brand re-stage to focus on Bounty's clean benefits.

Charmin's all-outlet value share of the US toilet tissue category is up more than 1.5 points to almost 29%, and Bounty's share of the US paper towel category is up about 1 point to over 46%.

That concludes the Business segment review, and I will hand the call over to Bob.

Thanks, Teri.

P&G's purpose to touch and improve lives now and for generations to come is inspiring, and it is tightly and elaborately linked with our financial goals.

P&G's purpose informs our strategic choices.

It leads us to bigger and better innovation.

It drives quality of its execution.

It compels us to make a difference in areas like sustainability and social responsibility.

Last year we updated P&G's growth strategy to overtly connect it to our company's purpose.

Simply articulated, our overarching growth strategy is to touch and improve the lives of more consumers in more parts of the world more completely.

This strategy unleashes creativity, commitment and peak performance in employees.

It attracts talent and partners.

It builds goodwill with external stakeholders, and it ultimately drives financial returns and results.

We are executing against all three dimensions of this growth strategy in all of our businesses around the world.

In fiscal 2010 we reached an additional 200 million consumers, bringing the total we serve to 4.2 billion on track toward our goal of serving 5 billion consumers by 2015.

We increased global average per capita spending on P&G products by over 2%, roughly on pace with our annual goal of 3% per capita spending growth.

We increased global household penetration of P&G products by about 2 percentage points to nearly 61%, on track toward our goal of 70% by 2015.

And, as Jon summarized, we delivered organic sales growth, core EPS growth and free cash flow productivity at or above the high end of our initial guidance ranges for the year.

As I told you on the fiscal year-end earnings call last year, we are not going to accept sustained marketshare losses.

Last year at this time our global marketshare was down about 0.5 point versus prior year levels.

Today our global marketshare is up nearly 0.5 point and is accelerating.

Last year we were building market share in businesses accounting for only about 1/3 of our sales.

Now we are building share in brands and countries accounting for about 60% of sales, and, as Jon mentioned, global marketshare is up and accelerating.

Innovation has and will continue to be the heart of our success.

In fiscal 2010 we invested nearly $2 billion in research and development.

We, again, spent about 50% more than our closest competitor and more than most of our competitors combined.

This leadership level of investment is multiplied by our open innovation approach with external partners, which leads to an effective investment in innovation that far exceeds the reported spending.

One measure of the strength of our innovation program is the US IRI Pacesetter Report, the annual list of the biggest innovations in our industry as measured by sales.

Over the past 15 years, 125 P&G innovations have earned a spot on the top 25 Pacesetters list, more than our sixth largest competitors combined.

Based on this track record, IRI recognized Procter & Gamble as the most innovative manufacturer in the consumer packaged goods industry for the last decade, presenting the company with its Outstanding Achievement in Innovation Award.

We are leveraging innovation to expand our portfolio vertically, horizontally and geographically and to continually improve the efficacy of our existing product portfolio.

I will provide just a few examples of how innovation brings our overarching growth strategy to life starting with male grooming.

We continue to grow the Gillette Fusion brand and have now increased marketshare of this premium-priced offering for 18 consecutive quarters.

We recently launched Fusion ProGlide.

ProGlide offers a significant advancement in shaving performance and comfort.

Our consumer testing shows that men prefer ProGlide over Fusion by a wider margin than Fusion was preferred over Mach3.

ProGlide cartridges are priced 15% above Fusion.

After just two weeks in market, ProGlide has already taken leadership as the number one razor in the United States with an all-outlet value share of 37%.

We recently launched a new mid-tier Mach3 razor specifically designed to better meet the needs of emerging market consumers.

As a result, Mach3 shares are at record levels in India, Brazil and Argentina.

In India Mach3 razor value share has grown more than 10 points, and almost half of the incremental growth has come from consumers who have traded up from double-edged blades.

We continue to innovate at the low end, as well as to ensure all consumer needs are being properly served and to stimulate future systems growth.

Gillette Vector, Prestobarba 3, and Mach3 disposables are all performing well and are being expanded to additional markets.

Several important horizontal portfolio expansions of the Gillette brand in the Male Personal Care are also underway.

In February we launched a complete line of Gillette male grooming solutions in Brazil.

Based on early results, we are now expanding Gillette Male Personal Care products to more countries in Latin America.

In March we introduced a scientific face care regimen under the Gillette name in China.

In June we introduced Gillette Fusion Pro Series in North America.

Pro Series is an advanced lineup of Male Skin Care products, which fully leverages P&G's skincare technology for the first time ever.

After only the first few weeks of launch, Pro Series has an 11 share of the US Male Skin Care category.

Moving to Fabric Care, we're expanding our portfolio vertically with premium innovations such as Excel Gel in Western Europe.

Excel Gel is a new to the world gel that gives superior cleaning performance and saves energy because it cleans well in cold water.

It allows for control dispensing and is consumer preferred by a margin of two to one.

Excel Gel is priced to a 10% premium and continues to perform well with value shares growing in all major Western European markets.

Our newest laundry brand, Sarasa, was introduced in Japan in September and is off to a strong start.

Sarasa is priced at a 15% premium versus the category average and is designed for consumers who want a laundry detergent that cleans well but also provides natural and gentle benefits.

We introduced Tide Naturals in India in December quarter and Ace in Colombia in the September quarter.

Tide Naturals is priced 30% lower than regular Tide, enabling us to reach a much broader spectrum of Indian households.

Ace or Ace is a mid-tier laundry brand, which complements Ariel's stain removal equity and Bold's softness equity.

Innovation and expansion of the Ace brand in Latin America have delivered continual growth for many years.

In fact, we are pleased to announce that Ace has become P&G's 23rd $1 billion brand.

We grew our Fabric Care portfolio horizontally with Tide stain release and Ariel Professional in laundry additives and Bounce Dryer Bar in the fabric enhancer segment.

Both innovations continue to exceed our expectations.

In our lead market of Turkey, Ariel Professional is over a 15 share.

In the United States, Tide stain release release shares exceed 10%, and the year one retail sales will be about $80 million, while Bounce Dryer Bar shares are nearly 6%.

Finally, we expanded our portfolio geographically with the introduction of Ariel into Uganda and Senegal during the December quarter.

This follows the launches of Ariel into Kenya during the September quarter and is part of our strategy to dramatically increase our presence in East Africa.

We also continue to expand our Oral Care portfolio.

We extended our portfolio vertically in several key markets by leveraging our breakthrough and premium priced Pro-Health technology.

Crest Pro-Health is off to a strong start in China with initial shipments ahead of our expectations.

The equity benefit we have created is positively impacting other parts of our Oral Care business in China.

Blend-A-Med, which uses the Pro-Health formula, was recently launched in Germany and has pushed total Blend-A-Med value shares to nearly 11%.

In Mexico the Pro-Health expansion has helped the Crest brand grow its toothpaste share by nearly full 4 points to 12% of the market.

We expanded our Oral Care portfolio horizontally in North America with our launch of Crest 3D White.

3D White is a new premium price regimen comprised of toothpaste, brush, rinse and white strips that work in combination to clean, whiten and protect teeth while providing significant health benefits.

In fact, when these products are used together, consumers can start seeing results after just one day, a powerful claim for beauty-seeking Oral Care consumers.

Finally, we expanded our Oral Care portfolio geographically with the introduction of Oral-B toothpaste in Brazil, Belgium and the Netherlands.

In Brazil toothpaste and toothbrush shares continue to exceed expectations.

Based on the success of our launch in the Pharmacy channel, we started the nationwide expansion of Oral-B toothpaste in January.

The launch in Belgium and Netherlands is also going well with Oral-B toothpaste approaching double-digit shares and driving P&G to overall Oral Care marketshare leadership in both countries.

I've talked previously about 2010 being a year of big innovation, but this is just the beginning of an incredibly strong multiyear innovation program.

Many of our recent innovations including Pampers Dry Max, Fusion ProGlide, Crest 3D White, and the Pantene restage just launched in North America between March and June.

They will have a much bigger impact on fiscal 2011 than they had on 2010 as we continue to build trial and repurchase in North America and expand them to additional markets.

Dry Max will expand across Western Europe this year.

Our Fusion ProGlide plans call for a geographic rollout to over 40 countries over the next two years.

The new Pantene formulations will also follow a staged expansion over the next two years, and we will continue to bring new innovations to market.

In Fabric Care we have just launched Tide Actilift in North America.

The Actilift technology is designed to deliver deep cleaning of fibers, break up dry stains and provide a whiteness boost.

Actilift is rolling out to nearly all of Tide liquid detergent variants.

We are also launching an upgrade to Ultra Downy April Fresh fabric softener.

We have improved the formulation to provide an entire week of motion activated freshness.

This improvement lets consumers enjoy the clean sheet day experience for a whole week.

We're planning a 33% compaction across all of our powder laundry detergent brands in the US, as well as formula upgrades on Tide and Gain powders.

Compaction is beneficial for our customers, for our consumers and for the environment.

Customers will realize supply chain efficiencies.

They can use this as an opportunity to drive category growth.

Consumers will benefit from improved formulas and more convenience with a lighter, smaller carton.

Compaction is also better for the environment, using up to 33% less corrugate, nearly 6000 fewer trucks, and saving about 900,000 gallons of diesel fuel.

The compacted laundry powder product will begin shipping in February 2011.

We closed the acquisition of Ambi Pur in early July.

This will expand our Air Care footprint from 17 to 84 countries.

Oral Care is introducing a new Crest clinical line of products to treat two of the most common Oral Care problems, gingivitis and tooth sensitivity.

The Pro-Health Clinical Gum Protection toothpaste is our most advanced formula, clinically proven to help prevent and reverse gingivitis.

Crest clinically sensitivity toothpaste provides the maximum strength available over the counter.

Crest Clinical will start shipping in North America later this month.

These are just some of the innovations we will be launching this year.

We are supporting our innovation program with strong levels of marketing investment.

We delivered a 20% increase in consumer impressions this fiscal year with most of the increase in the second half behind many of the innovations I just described.

To invest, we must save.

We are strengthening our efforts in this area with a culture that continually simplifies the way we work and increases productivity.

A good example of how we are becoming more productive is the digitization of P&G.

We are standardizing, automating and integrating systems and data so we can create a real-time operating and decision-making environment.

We want P&G to be the most technologically-enabled company in the world.

We project a 20% to 25% reduction in spending areas that benefit from digitization, and we are targeting a sevenfold increase in real-time data availability.

By getting the right data to the right decision makers at the right time, we can become increasingly efficient and productive.

We are increasingly operating and competing as one company.

Our individual categories, brands, countries and functions are all critical, and each has the unique value to add.

But at the total Company level, we can create scale advantages by allocating resources more strategically and efficiently than any individual business can do on its own.

The combination of the individual components is greater together as one company than just the sum of the parts, and we are focused on maximizing this total value.

We're working across our businesses and markets to better coordinate the execution of our innovation program and leverage the scale and breadth of our brand portfolio.

P&G's sponsorship of the US Olympic team and the 2010 Winter Olympics is a great illustration.

Not only did we sponsor 16 team USA athletes with 18 leading brands, but we seized a unique opportunity to sponsor the moms who have dedicated their lives to nurturing their Olympian children.

The US program was both effective and efficient.

The proud sponsor of Mom's Campaign generated a record 6 billion consumer impressions for our brands, and the TV ads delivered 30% higher recall by our target consumers.

The program helped accelerate share growth and we estimated resulted in nearly $100 million in incremental sales.

Based on the success of the US initiative, we are taking this idea global.

Just last week we announced a worldwide partnership agreement with the International Olympic Committee, beginning with the sponsorship of the 2012 Olympic Games in London.

As part of this agreement, we are launching our proud sponsor of Mom's Campaign locally.

The international reach of the Olympics will expose consumers worldwide to P&G's full lineup of global leadership brands.

As Jon said, we are pleased with the progress we made this last year.

We delivered results ahead of our going in expectations in nearly every area, but we still have some significant opportunities for improvement.

Our results on some big brands and some big categories have been soft.

Downy fabric enhancer's share is several points below where it was two years ago.

We are launching innovations and making consumer value corrections that will reverse this trend.

The US Oral-B power toothbrush business has been under pressure for two years due to the economic crisis.

As the leader in that segment, it is up to us to get it growing again.

The Salon Professional business has been engaged in a multiyear integration and brand streamlining process.

We are near the end of that work, and it is time for that business to start growing again.

Battery shares have improved since the consumer value intervention we made in the US in January, but to build long-term value for shareholders, we need to accelerate innovation.

We need to continue our disciplined cost reduction and cash management efforts.

We need to take even more costs out because there are still more investments that we want to put in to better serve the world's consumers and keep driving profitable market share growth.

If we can build on our successes, address our shortfalls and implement our purpose-inspired strategy with excellence, we should continue to accelerate growth on both the top and bottom line and create leadership levels of value for our shareholders.

Thank you and now I would like to turn the call back over to Jon.

Thanks, Bob.

I will close with guidance for the current fiscal year and quarter.

We expect fiscal 2011 organic sales growth to accelerate with organic sales up 4% to 6%.

This is based on estimates of global market growth in the range of 3% to 4%.

Our market growth outlook assumes developed markets continue to grow at about 1% to 2% and developing markets grow at about 6% to 8%.

Included in our guidance is the expectation that mix will continue to have a negative impact on sales growth as developing markets continue to grow 3 to 4 times faster than developed markets.

Also included is an expectation that pricing will be neutral to slightly positive for fiscal 2011.

Pricing will likely still be negative in the first half of the year and turn positive in the second half as we annualize many of the strategic investments we made last fall.

We are largely on pricing strategy on our key brands and in our key markets, though we continue to monitor our price gaps versus competition.

Foreign exchange-related pricing will likely be positive due to Venezuela, and we expect modest changes in promotional spending.

Based on this, we expect all-in sales growth of 2% to 4%.

This includes roughly a 3% negative impact from foreign exchange rates and a 1% benefit from the net impact of acquisitions and divestitures.

We expect core earnings per share growth to accelerate to plus 7% to 9%.

This translates the fiscal year 2011 earnings per share in the range of $3.91 to $4.01 compared to prior year core EPS of $3.67.

This guidance assumes current spot rates for foreign exchange.

It also assumes we are able to continue to source sufficient dollars to fully support our operations in Venezuela.

We expect to deliver free cash flow productivity of at least 90% and are planning to repurchase between $6 billion and $8 billion of stock in fiscal 2011.

Turning to quarterly guidance, our quarter-to-quarter earnings growth will be heavily influenced by the base period trends, including marketing spending, commodity costs and foreign exchange rates.

As a result, first-half earnings per share growth rates will be lower than growth rates in the back half, the opposite of last fiscal year.

For the September quarter, we expect organic sales growth of 3% to 5%, reflecting continued strong volume momentum, partially offset by mix and to a lesser degree pricing.

All-in sales are expected to be up 1% to 3%.

This includes a 3% negative impact to net sales from foreign exchange and a 1% positive impact from the net of acquisition and divestiture activity.

Earnings per share are expected to be in the range of $0.97 to $1.01 per share, in line to up 4% versus prior year core earnings per share of $0.97.

As I mentioned, higher year-on-year marketing spending and commodity costs are two of the main factors affecting core earnings per share growth in the September quarter.

Compared to prior year, all-in GAAP EPS of $1.06 earnings per share will be lower by 5% to 8%, reflecting the pharmaceutical divestiture gain in the base period.

In closing, we are pleased with the progress we are making and excited by both the trend of the business and the opportunities that lay ahead of us this year.

Bob, Teri and I would now like to open up the call for questions.

(Operator Instructions).

Nik Modi, UBS.

Just a quick question, Jon, for you on the gross margins.

If you can provide some context on the 50 basis points in terms of cost savings and commodities and operating leverage and negative mix just to see how those all interact with each other, that would be very helpful.

Sure.

As you know, gross margin was up about 50 basis points.

Within that, there's about 200 basis points improvement in savings, which is consistent with what we have been showing in recent quarters.

That is -- and there is also volume leverage on top of that savings number.

So all-in that benefit was, call it, roughly 300 basis points.

And then offsetting that is the combination of mix and price, which is about 200 basis points, and commodity costs, which are up year-on-year at about 50 basis points.

I'm sure I have got one of those numbers not exactly correct, but directionally those are the trends that are affecting the gross margin and allowing us to improve it going this quarter, and I expect further gross margin improvement next fiscal year.

John Faucher, JPMorgan.

In looking at the organic revenue growth guidance, you guys put up 4% on a plus 2% comp this year, and you're looking for similar to better growth off of a tougher comp, especially with a weak start to the year in terms of what you have guided for for the first quarter.

So I guess it is a two-part question.

Is it just simply that price mix or at least the mix going from negative to neutral that drives that acceleration, and can you walk us through the year in terms of the path that is going to get you to that range given the weak start to the year?

Sure.

Let me try to answer two questions there.

One, explain the sequential improvement in organic sales growth rate year-to-year, as well as address your question on the quarterly trends within next fiscal year.

As we've said several times during the call, we are really seeing some pretty strong momentum in our business.

Volume we talked about growing sequentially from minus 2% in Q1 to plus 8% in Q4.

We are seeing, if you look at share growth trends sequentially 12, six, three, one-month improvements in literally every one of our regions.

So that gives us a significant amount of confidence going forward that we are going to continue to grow.

Then, when you layer innovation on top of that, and, as Bob said, most of our big innovations launched at the end of the year, we will be leveraging them for the full year next year.

So they would benefit 2011 to an even greater extent than they even benefited 2010.

And, as you indicated, we will start annualizing some of the price decreases that we took earlier this the school year, and as well the divergence in growth rates between the developing markets and the developed markets will annualize as well.

If I just give you some perspective there, if you look at the difference between developing market and developed market growth rates, Q1 of last year developing markets grew 1 point faster than developed markets.

Q2 it was even.

Q3 it was 5 points ahead.

Q4 it was 7 points ahead.

That is what has driven the increase in the negative mix.

That should annualize as we go through next year.

So that and the pricing annualization are the primary factors for why organic volume growth will accelerate sequentially quarter on quarter as we go through the year.

Hopefully that answers your question, Jon, and obviously we would be happy to provide any more detail after the call.

Further color on that is the fact that many of our initiatives as we talked about are doing better than we expected and are somewhat capacity constrained.

We are adding capacity as we speak.

We have got one of our most aggressive ever capacity adding programs going in place.

We have roughly 20 plants under construction, five on the drawing board, five getting ready to start up.

And we are adding all of that capacity and still keeping our capacity spending at roughly 4% or less of sales.

So the growth is good.

It is strong, it is accelerating, and we are adding capacity.

Lauren Lieberman, Barclays Capital.

I was wondering, Bob, I know in your prepared remarks, you talked a bit about launch activity in Fabric Care.

But I think a question in everyone's mind after looking at the results this quarter with the combination of price and mix, but let's just focus on price, so it was significantly negative.

What do gross margins look like in that business?

What is the outlook for profitability in Fabric Care and overall category dynamics?

Or was this the quarter where there are significant pricing adjustments, and here things kind of normalize to what is a more traditional performance to that business?

We are very bullish on our Fabric Care business.

We are the leading company in the world.

We have been growing share over an extended period of time.

Many competitors have chosen to exit that business.

If I step way back, when I joined the Company in 1980, we competed with Unilever and Colgate in the United States.

They are no longer in the business, and we are continuing to grow market share.

And in that business market, share and margin correlate.

So I feel very comfortable with the margins and the increasing margins in that business as we grow market share around the world.

Bill Schmitz, Deutsche Bank.

I'm just looking at the EPS guidance for next year, and I think you said there was negative 3% currency and then probably a 2% help in the base period from a lower tax rate.

Maybe I am wrong on that number.

So it looks like there is a 7% to 9% core EPS growth rate.

But if you added those two factors back in, doesn't that mean you're kind of doing 12% to 13% EPS growth rate?

I'm wondering what is driving that?

And then just your outlook broadly on consumer and if you are seeing pockets of strength anywhere relative to the last six months or so.

I will let Bob handle the consumer question, and then I will explain the math on the next fiscal year.

Well, as we talk, Bill, we are certainly seeing greater strength in developing markets than developed markets.

Our organic volume growth in developing markets was 12% above year ago, which is an outstanding result given the global economic recession.

In developed markets, our volume growth was 5%.

That was comprised with pretty even growth between North America and Western Europe, both up about 5% and 4% respectively North America Western Europe.

In Japan we grew 11%.

We talked about some of our new innovations in Japan.

So in a market that has been in an economic funk for nearly 20 years, we grew volume 11%.

The developing world, greater China was about double digits.

Central and Eastern Europe, Middle East and Africa over high double digits.

Latin America high single digits and the ASEAN region with Korea high double digits.

So the kind of growth we are seeing is obviously with stronger growth in developing markets and developed markets, and where we innovate and we innovate well we are able to grow.

And on core EPS, yes, we are guiding to 7% to 9% growth on core EPS.

There is an element of an FX headwind which we are overcoming.

We are overcoming that through a combination of factors.

One, hopefully continued significant volume leverage.

Also, as I mentioned in response to Nik, we continue to expect gross margin to improve as savings and productivity offset the impact of higher commodity costs, and remember we spent $1.2 billion the past two years in restructuring costs, and we do that to earn a return.

And so those savings as well should enable us to move forward with a program which continues to invest significantly behind our innovation and our strategy while delivering this kind of core EPS progress, despite the small FX and commodity headwinds.

Chris Ferrara, Bank of America.

The market growth rate you guys are assuming, the plus 3% to 4%, I think that is in line with what you have traditionally seen.

So does your outlook basically assume that we are at normalized growth rates across the globe in your categories?

I would say that the market growth centers more closely on 3% than it does 4% just based on what we are seeing today.

So it's still slightly below history, which tended more towards 4%.

But it is certainly getting better.

As we indicated in our prepared remarks, we see growth continuing to be disproportionate developing market-driven with only 1 to 2 points of growth in the developed world, which is lower than we have seen historically.

And when I answered Bill's question, I was talking about in a sense our volume growth rates by geography.

And what I should have also mentioned was it is important to remember that from a value standpoint, North America and Western Europe were basically up 1 point in Q4.

So we are obviously growing share in those geographies when we are shipping at 4% and 5%, and the market is only growing up 1%.

Japan was down 1%, and obviously with volume growth rate up 11%, we are growing share there.

So our share growth is strong behind our innovation, but the market growth rates, particularly in value terms in developed markets, are virtually flat.

Wendy Nicholson, Citigroup.

My first question is actually just a follow-up, Jon, to something you said.

When you walked through the gap between the developed and the developing market organic growth rate over the course of the year, had that been driven by a change in the rate of local market growth, or has that been a change in where you have seen more market share expansion?

And then my actual second question, my own question, is just the fact that the margin expansion -- or the margin contraction, if you will, was so severe in the fourth quarter, I would love to get a feel for actually how much advertising was up in the fourth quarter.

Because it strikes me that given how big the June launches were, May/June launches were, did you really spend that much that late in the quarter, and I'm wondering if that absolute number once we see the K advertising as a percentage of sales is actually going to have ticked up all that much?

So, first, the follow-up question on the divergence of growth rates in the developing markets and developed market, that is a function of both of the items that you mentioned, which is further divergence of actual market growth rates, as well as a reflection of our portfolio expansion program and, therefore, our share growth in those markets.

So it is both.

In terms of advertising, year-on-year advertising spending was up $1 billion.

We've talked about how that was back-half loaded.

In the fourth quarter, advertising expenditures drove a 400 basis point increase in SG&A, which explains essentially all of the operating margin -- the difference between gross and operating margin.

And put simply, we would have been crazy to do anything else.

If you look at the strength of the innovation program that was coming to market, we have literally took every resource available to us and put it behind those innovations because we believe so strongly in them.

And having said what we said about the increased spending in Q4, for the year advertising spending was roughly 10%, 11% of sales, which is historically what we generally do.

Of course, that is because we were growing the top line at the same time.

Joe Altobello, Oppenheimer & Co.

The first question, in terms of the tailwind you guys got this year from commodities and currencies, could you quantify that and what you are expecting in terms of the headwind from both of those two items in fiscal 2011?

And then secondly, Oral-B in Brazil, you sounded like you expanded the distribution on that pretty significantly in the first-half calendar 2010.

Are you now fully distributed on that line?

In terms of the commodity and FX benefits that we had last year, which certainly was part of our going in construct in terms of how we were going to fund innovation, we ultimately saw between those items a little less than $1 billion of year-to-year help.

Your question on Oral Care, I will let Bob answer.

Joe, the Oral Care, Oral-B pace launch in Brazil is going really well.

We are near full distribution now.

Shipments are ahead of expectation.

We continue to see distribution ahead of target after only about one year in market, although remember we just started the full distribution in January.

We are growing value share in all channels where we compete, and value shares in certain lead accounts are as high as 10% to 20%.

Manual brush shares have grown since the launch.

We have retaken and continue to hold share leadership versus Colgate, and we have a 1.6 value share advantage over Colgate.

Andrew Sawyer, Goldman Sachs.

I just had a quick one.

On the tax rate for next year, you guys are saying it will be in the normal 27%, 28% range.

And then quickly on levels of spending into next year, I think in the prepared remarks you said that you expect promo spending to be relatively stable.

With ad spending back up towards 11% of sales range, should we also expect pretty stable levels of spending?

And if so, I guess the point being that this is -- you have now returned spending levels to a point where you are comfortable that that will continue to drive the volume momentum?

In terms of tax rate first, yes, we would expect next year's tax rate to be the same as this year's, which is somewhere between 27% and 28%, excluding any big one-time items.

On advertising, you are right.

We will be holding promotion relatively steady year to year.

We will be increasing advertising, doing that in line with sales.

So the percentage should stay about the same.

I want to also remind everyone that the quality of the advertising is also important.

And, as you look at, for example, "Smell like a Man Man" which won a Grand Prix line at Cannes, when you look at, for example, creating shows like Secrets of the Mountain or The Jensen Project, where we know that advertising that airs in family-friendly programming is more effective than that that does not.

When you look at our shift from TV and traditional forms of media to other forms of media, we are not only talking about a spending level, but we're talking about a significantly increased effectiveness of the advertising.

All you have to do is look for example at our ad called "You Never Walk Alone," which supported the 2010 Winter Olympics in Vancouver, and generated 6 billion impressions that we did not pay for to see how effective that money is being spent.

I will just add one more thing.

We continue to work to coordinate activities, innovation and marketing, as was the case with the Olympic campaign across our businesses, and that yields both gains in efficiency, and, as Bob said, gains and effectiveness.

So we are very comfortable headed into next year in terms of both the level and the quality of the support that we have against the business.

Ed Kelly, Credit Suisse.

Could you discuss what you are seeing out of Wal-Mart recently?

It does not sound like their relationship with vendors have been all that great recently.

But there has been plenty of speculation about them pulling back on the aggressive rollbacks or SKUs coming back in the stores or even less of a push to private label.

So how has Wal-Mart impacted your business more recently, and do you see any change coming?

I am very excited about the changes at Wal-Mart.

We see Wal-Mart under the leadership of Bill Simon in the US getting back to the traditional way that Wal-Mart has grown their business.

We have, as you can imagine, a very strong partnership with Wal-Mart like we want to have with all of our retail customers, as evidenced by our coproduction of the movies, The Jensen Project and Secrets of the Mountain.

We know that Bill Simon has the complete trust of the leadership of the Walton family and of the leadership of Wal-Mart, and we see him doing things to make changes to things like project impact and the clean isles to make sure that Wal-Mart gets a topline growth growing and attracts more shoppers.

We have a very strong partnership.

We are working hard against aggressive growth targets, and we are very excited about and see the changes very positive.

One thing I want to add just to clear up any misconceptions is some of the historically low prices that you have seen from Wal-Mart in tabs and elsewhere have not necessarily been supported by spending by Procter & Gamble.

Oftentimes our retail partners decide to invest their own money in merchandising our brands in order to attract traffic.

It is a very common procedure in the industry to use leadership brands like ours to attract traffic.

But we are very excited about Bill Simon's leadership of US Wal-Mart.

International Wal-Mart is doing extremely well under Doug McMillan, and we are partnering with Doug and his team.

And Sam's Club is also doing well under Brian Cornell, and we are partnering very well with Brian and his team.

Bill Chappell, SunTrust Robinson Humphrey.

One housekeeping and then one question.

On the housekeeping, can you give us a little more color on the other income line in the quarter?

And then, on the main question, can you talk a little bit about where the advertising was spent, which you stepped up in the quarter?

I mean it seems like the men's shaving was the biggest area where we saw a lot of TV support, and I did not know if there were changes or if it was more reactionary to the success of Hydro year to date?

On the other income, really the year-to-year change is just a reflection of a difference in the presence of small divestiture gains.

We had none of those this quarter, and that is really all the difference.

On the advertising, basically any of the new brands we launch we raise the level of marketing spending in order to achieve certain awareness and trial objectives.

I think perhaps the reason you saw a disproportionate increase in ProGlide is that you are the target audience.

So I hope you went out and bought the razor and are using it.

Jason Gere, RBC Capital Markets.

In context of your outlook for that 1% to 2% category growth in developed markets and the 5% volume, I guess, one, the first question is, really, as you look at that breakdown, the 5%, can you talk about how much of it was really innovation-driven, whether that was pipeline sales, and then how much is really the consumer really getting attracted to lower pricing right now?

And just kind of thinking about the consumer, it just feels like maybe we are not hitting a double-dip recession, but consumers really are fighting back and they want to shop more on deals.

So I guess if you can break out between those two aspects and how you see that building over the next couple of quarters, thanks.

As we said in our remarks, we have had successful growth both on the high-end of our portfolio and in the middle and lower tiers of our portfolio.

So we kind of see in developed markets, we see a bifurcation where our new initiatives like ProGlide and others that are premium priced continue to do very well.

And I would say they appeal to the people with jobs.

At the same time, we also see and we talked about this in the reduction from our volume growth rate to our sales growth rate, we see a mix effect as consumers without jobs or in challenging positions trade down, and they may trade channels.

They may go to a channel where they think they can find a more competitive offer.

And so that trading down is an impact.

I, frankly, expect that to continue.

And that is why it is important for us to innovate all along our vertical portfolio, both at the high-end, the middle-end and the low-end, and that is why we talked about it so thoroughly in my comments, is that we have got to appeal to all consumers.

I think the economic recovery in the United States will be uneven.

I think we are seeing that already.

We don't expect a double-dip recession like you don't, but we have got to keep innovating and keep growing at all areas of our vertical portfolio.

Doug Lane, Jefferies & Co.

Just real quickly, not to read too much into four-week Nielsens, but back in June, the Pampers marketshare has dropped about 4 points versus May, and Huggies bumped up about 4 or 5 points as well.

It does not seem like that core category bounces around that much.

So I wonder if your all channel data showed the same thing and if you could give us some color on what was going on there?

Well, not to focus on four-week Nielsens data, but you will see a lot of choppiness in that data that is really driven by promotion cycle as much as it is anything.

If you look at the last three months and what we are seeing in July, we continue to be very happy with our progress both on a sales and a share basis for Pampers.

It just seemed like a four-point sequential change was just bigger than you usually see.

All outlet was much less than that.

I'm very excited about our Pampers business.

If you look, Pampers Dry Max is the biggest innovation since we launched Pampers.

It is now only a very small part of the brand.

We are going to be expanding it across the whole brand, and I think some of the changes we have talked about on this call in the retail environment you will see playing out in the marketplace that will strengthen the Pampers brand.

Connie Maneaty, BMO Capital Markets.

Could you talk about the compaction of powder detergents, what is driving that?

What is the impetus for it is?

It is easy to see compaction in liquids where you take out a lot of water, but what do you take out in the powder?

How big is that category?

I assume you are leading it.

And then finally, when will we get Excel Gels in the US?

I have been working on the compaction of powder laundry detergents in the United States since I joined the Company in 1980.

Basically in the beginning, we started by taking out fillers.

There are certain things in a powder laundry detergent that are required in order to process the product through the manufacturing cycle.

And, as we have invented newer and better technologies, we have been able to compact.

And, as I said in my prepared remarks, we are planning a 33% compaction, which as well will be a formula upgrade.

Meaning we have been able to improve the ingredients in the detergent, which has allowed us to remove some of the process fillers and other things.

This compaction like other compactions benefits everybody.

Because it means the product requires less shelf space per load, less transportation costs per load, and, of course, everyone in the supply chain saves money, and the consumer saves based on the space they save at home, and of course, they get a better product.

So there is going to be 33% less corragate, 6000 fewer trucks, and we are going to save about 900,000 gallons of diesel fuel.

So compaction is always a good thing and something that we want to do.

Because it improves life for everyone.

In terms of Excel Gel, Excel Gel is designed for the kinds of washing machines that exist in Europe, which are horizontal access washing machines.

We always are working on improving our technology for US machines, but it would require a different formulation in the US.

And you can rest assured we are working on that.

Similarly gel as a form is a form of compaction.

So it is also good for consumers, good for retailers, and good for us.

So stay tuned, please.

Caroline Levy, Calyon Securities.

Two quick ones.

Could you address Accounts Payable in the cash flow statement?

It just looked like that was a huge positive.

And also just given how the stock is trading, this was clearly a disappointment, but you sound very bullish on your business.

But I would like you, please, just to address where you did feel any disappointment in terms of the margin trends, not brand by brand or anything but on those big businesses?

You know, was it in any way disappointing that margins were down over 700 basis points in one area?

First, on the Payables, as we mentioned, we significantly accelerated our advertising spending as we went through the year, which resulted in a higher payables balance at the end of the year.

You will recall that some of our big innovations were launched in the month of June, which is driving that.

Relative to optimism or pessimism, I'm very optimistic on our business.

Our results in fiscal 2010 were ahead of our original expectations.

I'm really happy with the trend of the business.

Our fourth-quarter unit volume grew 8%, the highest growth rate in nearly six years.

Volume grew in every business segment, every region, every key country.

We also built marketshare.

We are growing marketshare now in about 60% of our business versus half of that a year ago.

All regions held or grew share, which is the first time in 11 quarters that happen.

We over-delivered our going in fiscal year core EPS growth objectives, and we generated $14 billion in free cash flow, and the Payables line is one of the reasons why.

We increased our dividends for the 54th consecutive year and repurchased $6 billion in P&G stock, returning more than 100% of our earnings to shareholders.

So I cannot be anything but optimistic realizing that these growth trends will continue.

Operating margins by definition are lumpy or choppy by quarter.

We expect to have continued operating margin expansion.

We expanded operating margins on the full fiscal year basis.

We will do that again next year.

So we don't really look at it, frankly, on a quarter by quarter basis.

Jon Andersen, William Blair.

I just have a quick one on cost savings.

Jon, you said earlier you've invested about $1.2 billion in restructuring the last two years.

That started to deliver in the neighborhood of 200 basis points of savings the last couple of quarters.

Looking ahead, do you have investment plans and expected benefits at those same levels, and can you just provide some color around some of the most important areas of focus within the organization?

Well, we will continue to continually restructure our business.

We feel it is part of how to do business in this industry.

So next year we will continue to invest in restructuring.

We are planning about $400 million of investment again next year.

Much of that is focused on productivity and simplification initiatives with the objective, as Bob described in his remarks, of creating a faster, more agile operation, and we will continue doing that.

Ali Dibadj, Sanford Bernstein.

I'm still hearing a lot from investors about a little bit of a lack of confidence in your guidance, particularly in the context that this is the second quarter in a row you have been very optimistic.

You've said things are getting better.

You have said most things are better than expectation.

You are actually showing stacked deceleration in topline growth and are actually barely at the low end of your topline guidance, especially in this quarter where you just spent so much back in advertising.

So when you get down to it, I guess, there are two pieces to it.

One is trying to understand more more about the topline and you're guiding to acceleration of organic sales, even though you're going to face tougher organic sales compares.

The consumer clearly is not getting any better.

Competition is really starting to push back, which may stifle a little bit of your share growth.

You are lapping at least in the back half of the year the best innovations in something like 20 years.

And then on your bottom line, you are talking about 2% to 4% net sales growth translating to 7% to 9% EPS growth.

I guess how do you build confidence in the investor base that you actually are guiding appropriately or in control to put it bluntly given some of what we have seen over the past couple of quarters?

The first point I would offer is in terms of confidence for next year, it goes back to what Bob was just describing.

It's just an incredible momentum that exists across the business that we fully expect to continue, and that is what gives us confidence in the top-line guidance.

From the bottom-line standpoint, I mean, first of all, we over-delivered on a fiscal year basis of our core earnings per share growth last year.

So the notion that we are somehow providing irresponsible guidance certainly does not resonate here.

We delivered the quarter right in line with our anticipated guidance range.

We would not be providing guidance of 7% to 9% next year if we were not comfortable in it.

We are.

One way to think about it simply is organic sales growth of 4% to 6%, take a midpoint of 5%, bring that down to the bottom line, add 2 to 3 points of benefit from share repurchase, which we are talking about at $6 billion to $8 billion, and you are home.

So I think it should be deliverable.

The hardest thing to do is to run a business where you are delivering balanced top-line and bottom-line growth and growing marketshare at the same time.

I think the fact that we are growing marketshare in 60% of our business and that growth rate is accelerating is proof positive that this business is strong and growing.

At the same time, we have the strongest innovation program we ever had, and we are operating more as one company than ever before.

And I think you can see the impact of our program in the marketplace.

Alice Longley, Buckingham Research.

My question is about negative mix in the quarter in the developed markets.

That is what was surprising to me given that shipments I thought were heavily weighted to these innovations, which are mainly premium price.

And I heard you say, well, a lot of consumers without jobs are trading down.

Can you tell us which of your value products, which products they created the negative mix shift in developed markets drove that?

There are two things going on.

First of all, it is price mix.

We have taken -- we made several price corrections in North America on things like batteries, on things like detergents, on things like paper towels earlier in the fiscal year, and those continue to impact until they annualize the price mix line.

We also continue to see significant growth on our, for instance, our basics offering, Bounty Basic, Charmin Basic, and some of the other items that we have tried to make available for consumers who are seeking a better price.

And now if I can just point out also, for example, retail Hair and Skin grew faster than Salon Professional or Prestige, that has an effect as well.

Linda Bolton-Weiser, Caris & Company.

I was wondering if you could just talk about innovation a little bit more in terms of you have talked about expanding into adjacent categories and representing that is like white space opportunity for you guys.

In FY 2010, it seems like Tide Stain Releases was one of the main launches that got you into kind of a new category.

Am I forgetting others, and do you expect more of that kind of white space opportunity growth in FY 2011?

And did you also say the number of innovations would actually be greater in FY 2011 than FY 2010?

It depends how you count innovations as to whether or not they are greater.

As Jon said, remember that we launched the big innovations this past fiscal year in the fourth quarter.

As a result, we only have a few weeks, frankly, of impact so far of things like the new Pantene, Fusion ProGlide and so forth.

So the full-year effect will be next year.

So, if you measure in terms of full-year effect, certainly next year's program will be stronger than this year's because of the carryover impact, if nothing else, in addition to the new items we are launching.

The biggest opportunity we have is to get all of our categories into all of our countries around the world.

We have about 36 product categories, and we are in all those categories in the United States where we have been for 172 years.

But in countries like China where we lead, we are just over a dozen, probably about 16 categories in China.

So we have work to do to adapt those categories for the Chinese market.

But that is a huge part of our white space activity.

That is why you see us rolling out things like Oral Care around the world.

That is why we did the Ambi Pur acquisition.

That is why we have rolled out Olay, our leading skin moisturizer, to about 15 new countries in the last year.

So we have got a lot of work to do to simply get the categories we are currently in into all markets.

At the same time, we're working to develop new categories such as Swiffer, such as the ones you have mentioned.

I cannot give you too much perspective on those since we would rather surprise the competition rather than let you know about them in advance.

I would just add to your list of horizontal portfolio expansion and adjacencies.

Last year, you mentioned Stain Release.

There was also the Bounce Dryer Bar, Gillette Pro Series in several countries, Olay skin care for men in China.

I talk next year about expanding Gain into the Dish Care segment, and we talked about Crest 3D White, which has really horizontal expansion into the scene between Beauty and Health.

So I don't want you to get the impression that it is a one-trick pony here.

Crest 3D White is an interesting one because we are in the Beauty business, unlike some of our competitors.

To the degree that there are Oral Care consumers who are beauty conscious, we have an opportunity to take her knowledge from Beauty Care and use it in Healthcare in order to meet that increasing need.

Victoria Collin, Atlantic Equities.

I wanted to speak a little bit about the advertising spend.

I know you spent a lot on new product support.

But with some of the additional spend you put through in the quarter sort of repositioning yourself in categories where you had lost share previously, maybe if you could split that out for me.

I wondered also if, at the start of the quarter, it was clear that you were getting a tax benefit, which kind of enabled you to ramp up the advertising spend higher than you would otherwise.

Because the way I'm thinking about it in terms of the operating margin, I wonder if you could steer me a little bit into -- Jon, you said that the operating margin, sorry, is going to be up year over year in full-year 2011.

But what are the main drivers of that?

Are we going to see a negative mix, or will higher average housing spend be a larger sort of pushdown on the operating margin as we look forward?

As we compare year on year, you would see a higher level of advertising in Q4.

If you remember Q4 a year ago, our top line actually declined.

We lost market share, and we said we were not proud of that.

In fact, when we announced the earnings, that was where we said we are drawing the line, and we are going to stop losing market share.

We are going to grow market share profitably.

So if you indexed our advertising in Q4 versus year ago, you would see a dramatic increase since we cut advertising in Q4 year ago in order to deliver the profit results we delivered.

So you would see higher levels of advertising on established brands, and that is the reason we're growing market share on 60% of our business today.

We are supporting it with advertising versus a year ago.

To your question on the tax rate as the quarter progress, I think you have it almost exactly right.

We started to see some benefits as we went through the quarter, both as a result of favorable audit settlements, as a result of geographic mix, and we invested that money in support of growth behind our big initiatives.

So that is exactly what occurred.

Mark Astrachan, Stifel Nicolaus.

Building on a previous question about cost savings, I'm curious, does the level of reinvestment make you reconsider the thought process behind increasing your cost-saving initiatives?

And then relatedly, could you just give us a refresher on how you make those decisions on what to fund?

Well, as Bob said toward the close of his remarks, we need to take more costs out because there is more investment we want to put in to further our purpose, our strategy and our financial objectives.

So if anything, the level of intentionality on cost savings continues to increase as we go forward.

We do not constrain funding for cost savings to any level.

If we have a good project, we will fund it.

That is why our restructuring spending varies from year to year, and it is a very fluid process, and we are constantly identifying new opportunities, evaluating them, and if they are smart, funding them.

I would say we have our strongest cost savings program that we have ever had during my career with Procter & Gamble the last 30 years.

I talked about it in my prepared remarks.

We are trying to simplify our operation.

We are reducing levels from 7% to 5% to the CEO.

We are reducing the number of ineffective product initiatives.

We are reducing the number of SKUs.

We are making ideas that we have larger so that we're spending behind larger ideas.

Simplifying the operation all the way down to simplifying the raw materials is a big idea.

The other big idea that we are working on is the digitization of the Company, and I talked about the potential productivity improvement of that.

Many of our new products today we design using simulation and modeling versus bench scale kind of prototyping that we did years ago.

That gives us a much faster cycle in innovation.

It also leads to a much more productive spend.

I know we talked about the fact that we spend about $2 billion a year on R&D.

But we did not talk about the fact that that $2 billion is much more productive because of our open innovation system with outside partners and also because we are using modeling and simulation and digitization a lot more than ever before.

John San Marco, Janney Montgomery Scott.

I get to 50 basis points of market share gains implied in the 4% to 6% organic growth.

I guess the first question is, do you thing that is a sustainable rate of market share gain over the long term?

And then in the more immediate term in fiscal 2011, can you characterize the possibility that your planned positive pricing as the year progresses would be at risk if the competition starts to play catch up and expand some of the price gaps that you have invested hard to close in the last couple of years?

I think the market share progress that we are on is sustainable.

I think it is sustainable because of our strong innovation program and our strong go-to-market activity.

Remember, as we bring these innovations to market, at the same time, we are working to increase the distribution of our product.

For example, right now we are working with the Chinese government in something called 10,000 Villages where we expand the distribution of our products into rural areas to reach more Chinese consumers and to create economies where economies never existed.

And, as we do that, that obviously creates more people to use our products and helps us get to the 5 billion consumers that we have targeted over the next five years -- four years that we now have remaining.

That is how we reached the 200 million extra -- more consumers this fiscal year.

So we are going to continue that, and I do think the market share gains are sustainable.

Thanks, everybody, for participating in our call this morning.

We are available the balance of the day and any other time you need us to provide additional perspective and hope you have a good day.

Thank you for your participation in today's conference.

This concludes the presentation.

Everyone, have a great day.