寶潔 (PG) 2011 Q3 法說會逐字稿

Good day, ladies and gentlemen.

At this time, all participants are in listen-only mode.

Later, we will conduct a question-and-answer session.

(Operator Instructions).

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 impact of acquisitions and divestitures and foreign exchange, where applicable.

Free cash flow represents operating cash flow less capital expenditures.

Free cash flow productivity is the ratio of free cash flow to net earnings.

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

The effective tax rate on quarter earnings represents the effective tax rate on continuing operations, less noncore impacts.

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.

Thanks.

Good morning, everyone.

Bob McDonald and Teri List join me this morning.

I will begin today's call with a summary of our third-quarter results.

Teri will cover business highlights by operating segment.

And I will conclude the call with guidance for the fiscal year and the June quarter.

Bob, Teri and I will take questions after our prepared remarks, and as always, following the call, will be available to provide additional perspective as needed.

I thought it might be helpful before getting into the details to step back for a minute and start our discussion this morning with a broad view of the state of our business and several of the key factors that have been impacting it, positively and negatively, this quarter and fiscal year.

There are many more positives than negatives.

Our innovation and expansion efforts have created strong, broad-based organic volume growth momentum.

Fiscal year to date, five of six business segments, 15 of our top 17 countries and 21 of our 24 billion-dollar brands have grown volume versus the prior year.

This has translated into sales growth ahead of market rates, and in-line or higher market share in businesses representing over 60% of sales.

Year to date, market share is in-line or higher in all geographic regions and 14 of our top 17 countries and for 18 of our 24 billion-dollar brands.

Our top line growth in developing markets has been particularly strong.

Volume was up double digits through the first three quarters.

We are growing sales ahead of underlying market rates and building market share broadly.

Another positive is the early progress we are making to fill in white spaces in our business portfolio across geographies, price tiers and channels.

So far this year, we've introduced roughly 30 products into new category country white spaces, 70 products into new category price tiers and have entered 80 new category channel combinations.

Pricing, as we said it would at the beginning of the fiscal year, has turned positive, and is now adding to organic sales growth.

We know that there have been investor concerns about either our pricing math or our pricing attentions.

Hopefully, the positive pricing impact in this quarter's results and in our guidance for the fourth quarter will resolve any remaining concerns.

We have delivered solid cost savings of about 150 basis points on average per quarter.

Cost savings have and will continue to be a key focus for us as they help us buffer higher input costs and provide the fuel for investment and innovation and expansion opportunities.

We've continued to enjoy favorable tax audit outcomes.

These are further validation of the sustainability of the organization structure we established several years ago.

They enable us to release tax reserves to profit and reduce our ongoing tax rate due to lower reserve requirements.

Likewise, the continued mix shift of our business toward developing markets is a sustained change that is resulting in a lower ongoing average tax rate, which I will talk more about later.

We continue to be a very strong cash producer.

Over the past three years, we've generated about $35 billion in free cash flow, and we've returned essentially 100% of that value back to shareholders in the form of dividends and share repurchase.

We've taken meaningful steps to focus and improve our portfolio of businesses.

We are working to finalize our partnership arrangement with Teva Pharmaceuticals, which will enable us to expand both the categories and the markets in which we participate in the consumer healthcare space.

We've also announced plans to exit the Snacks business, our last remaining food and beverage category.

We expect both of these transactions to be completed toward the end of this calendar year and for both to be value accretive for shareholders.

These positives all point to a strategy that is working and to a healthy business with positive momentum.

We are, though, managing several headwinds.

The first is slower than expected market growth in developed markets.

These markets account for about two thirds of our sales, and their underperformance has reduced our total Company growth rate by nearly a full percentage point this fiscal year.

The best response to slow market growth is innovation.

We are very well-positioned here, which is enabling us to grow faster than underlying market rates.

In Western Europe, for example, we've grow market share for 15 consecutive months.

This compares to retailer brands, which offer less innovation, and have lost share for nine consecutive months.

In the US, we've held or grown market share for 13 consecutive months.

And retailer brands, while flat last month, lost share the five previous months.

We are also facing rapid and significant increases in commodity costs.

Since the beginning of the fiscal year, the year-on-year impact from higher costs has more than tripled.

We now estimate that materials and energy costs will be up roughly $1.8 billion before tax for the year.

In the March quarter alone, input costs are up more than $400 million before tax versus prior year, or about $0.10 per share.

We are taking a holistic approach to the commodity cost increases we are facing.

First, we are turning up the dial on our productivity and cost-savings initiatives.

As I mentioned earlier, for the first three quarters of this fiscal year, we have generated an average of 150 basis points of cost savings per quarter.

Second, we are using feedstock and raw material alternatives at lower prices.

Third, we are reducing our dependency on commodity and energy costs through our sustainability efforts.

We just launched compacted powder detergents in the US, for example.

These use less packaging material and require less energy to transport.

Fourth, where necessary, we will look to price.

We will couple pricing with innovation wherever possible to positively impact consumer value.

In the US, we increased prices on Gillette shaving cartridges and disposable razors in February.

In March, we increased prices on Duracell batteries.

We've announced several additional price increases.

In early June, price increases will go into effect on laundry detergents, hand and auto dishwashing products, Iams pet nutrition, Head & Shoulders and Metamucil.

Effective in late June are price increases on Bounty and Charmin.

And effective in early July are increases on Pampers diapers and wipes.

Outside the US, we've raised prices on select products in Western Europe, Eastern Europe, Latin America and parts of Asia.

Most of these pricing actions will go into effect in June or July, so we will see the vast majority of the benefit in fiscal year 2012.

A third headwind has been negative market events in Egypt and the Middle East and Japan.

These are large markets for Procter & Gamble.

We are overdeveloped in these markets compared to nearly all of our multinational competitors.

While our businesses are fully operational, these disruptions reduced organic sales by about half a point on the quarter versus our going-in expectations.

The last challenge we are managing is supply, where we face shortfalls in the Blades and Razors, Pet Care, personal cleansing, Skin Care, Hair Color and Oral Care categories.

We underestimated the strength of new initiatives such as Fusion ProGlide, Crest 3D White and Old Spice Body Wash, and have proactively made interventions to improve reliability and ensure quality in several categories, which temporarily reduced supply.

We are back in full supply across most of these businesses, but are still working to catch up in several.

In summary, we are executing our strategy, and it's working.

Top-line growth fundamentals are strong despite the challenges presented by slow developed market growth and crises in the Middle East and Japan.

We are growing core earnings per share, but the rate of operating earnings growth is being held back by commodity cost increases.

We are offsetting these cost impacts with positive tax developments in the near term and with pricing going forward.

Hopefully, this provides helpful overall context as we discuss our results, which I will move to now.

Our third quarter was another period of solid volume and market share growth.

Volume increased 5%.

The growth was broad-based, with all six business segments, 16 of our top 17 countries and 20 of our 24 billion-dollar brands increasing volume versus the prior year.

We've built market share broadly, holding our growing share in businesses representing approximately two thirds of global sales.

Share was in line or higher in all geographic regions and 14 of our top 17 countries, five of six reporting segments and for 18 of our 24 billion-dollar brands.

The strong volume and share progress continues to be driven by innovation and expansion programs.

We are serving more consumers by expanding our portfolios to higher and lower price points, with new product launches, such as the mid-priced Olay Age Protect line and the restage of Pantene Shampoo sachets to the 1 rupee price point in India; Downy Single-Rinse in Thailand; Fusion ProGlide in Germany, France and Japan; Tampax Pearl in France; Naturella Pads in Holland; Era Ultra-Powder Laundry Detergent in the United States; and the launch of the Wella Pro Series Hair Care line in Western Europe.

We are expanding our portfolio to more parts of the world and entering new country category combinations with initiatives such as the launch of Downy Fabric Enhancers in Indonesia; the introduction of Olay skin care in Venezuela, Finland and Slovakia; and the expansion of Olay Men Solutions to Australia and New Zealand.

Many of these new price tier and country expansions also give P&G new presence in retail channels.

For example, the Olay expansions give us our first skin care presence in the perfumery channel in Venezuela and Slovakia.

In addition to these portfolio expansions, we are serving consumers more completely, with improvements to existing products, such as powdered detergent compaction in North America; Nice 'n Easy foam haircolor in North America; Pampers diapers and wipes upgrades in the CEEMEA region; and the launch of Pantene Nature Fusion in new markets in Latin America and Asia.

Our innovation and expansion program is supported by a strong, multiyear pipeline.

Two examples.

Early next fiscal year, we will launch Oral-B Pro Expert toothpaste in the UK, entering a very large and important market and taking a significant step forward in the globalization of our Oral Care portfolio.

We will also launch revolutionary Tide PODS in North America, a highly-concentrated, new unit dose, three-in-one laundry detergent that offers consumers great Tide cleaning, brightening and stain fighting in an ultra-convenient form.

Getting back to the March quarter, organic sales grew more than 4%, about a point ahead of global market growth rates.

This result included a half point headwind from the market disruptions in Egypt, the Middle East and Japan, and roughly another half point headwind from supply shortfalls.

All six reporting segments delivered organic sales for the quarter that were in line or higher than prior-year levels.

Global market growth remained at about 3% on a constant dollar basis.

We continue to see healthy growth rates in developing markets, in the range of 6% to 8%.

Developed markets grew about 1% for the quarter, which was a modest improvement versus the December quarter.

However, growth remains very choppy from month to month.

For example, the US market grew nearly 2% in the month of January, but was essentially flat in March.

Pricing and mix combined to reduce sales by less than a full point for the quarter.

Pricing added 1% to organic sales growth; mix reduced sales by approximately 2 points.

The mix impact was due to a combination of geographic and product mix.

All-in sales grew 5%, including the 1 percentage point benefit from foreign exchange.

Earnings per share were $0.96, an increase of 16% versus prior-year GAAP earnings per share of $0.83, and up 8% compared to prior-year core earnings per share of $0.89.

Recall that our all-in results last year included $0.06 of non-core charges, primarily related to the passage of the Health Care Reform Act in the United States.

Our core earnings per share growth was driven by a combination of organic sales growth, cost savings, a decline in the effective tax rate and a reduction in shares outstanding.

These benefits were partially offset by negative impacts from higher input costs, higher marketing and portfolio expansion investments and the impact of the market disruptions I mentioned earlier.

Gross margin decreased 140 basis points due to higher commodity costs.

Higher year-on-year commodity costs reduced gross margin by more than 200 basis points.

This equates to over $400 million of higher costs year-on-year, or about $0.10 per share.

Compared to our going-in guidance for the quarter, commodity costs were a hit of about $100 million before tax, or about $0.03 per share.

We highlighted the worsening commodity cost impact at the CAGNY conference in late February.

We indicated we were comfortable with our earnings per share guidance range, but that we were not going to abandon our strategy and chase commodity costs simply to deliver a top-of-range or consensus number.

Geographic and product mix reduced gross margin by approximately 150 basis points.

The higher input costs and mix impacts were partially offset by pricing and strong savings programs, which contributed roughly 230 basis points positive to gross margin.

Operating margin declined 210 basis points, due mainly to lower gross margin.

SG&A spending as a percentage of sales increased 70 basis points versus prior-year levels due to higher investments to support our innovation and expansion plans and foreign exchange impacts.

The increase in investments more than offset roughly 50 basis points of overhead cost savings benefit.

Our effective tax rate was 21.1%.

This rate is below historic levels due to a combination of favorable audit resolutions and the benefit of the mix impact from faster growth of our business in developing markets, where tax rates are generally lower.

The validation of our structure on audit and the continued mix shift of our business towards developing markets are sustained changes that affect our ongoing tax rate.

As a result of these two factors, we now expect our long-term underlying tax rate will be in the neighborhood of 26%, which is down from our historic rate of 27% to 28%.

We generated over $3.2 billion in free cash flow in the quarter, with free cash flow productivity of 113%.

We continue to return value to shareholders at an aggressive pace.

Fiscal year to date, we've paid $4.2 billion in dividends to shareholders and repurchased over $4.5 billion in stock.

Earlier this month, we increase the quarterly dividend by 9%, making this the 121st consecutive year in which we've paid a dividend and the 55th consecutive year in which the dividend has been increased.

In summary, despite several headwinds, the growth fundamentals of our business are strong.

We are delivering broad-based volume, sales and market share growth across businesses and geographies.

Core earnings per share increased 8% and we increased the dividend by 9%.

We are continuing to advance our purpose-inspired growth strategy behind our innovation and our portfolio expansion programs.

Now I will turn the call over to Teri to review highlights of the business segments.

Thanks, Jon.

Beginning with the Beauty segment, organic sales increased 4% versus year ago behind 6% organic volume growth.

One point of positive pricing from increases in Latin America and Prestige were offset by three points of geographic and product mix.

Value share for the segment was consistent with prior year.

Retail Hair Care volume grew high single digits, with developed markets up mid-single digits and developing markets up double digits.

Asia led the growth, with both Head & Shoulders and Rejoice shipments increasing in the mid-teens and Pantene shipments increasing over 20%.

In Latin America, Brazil was particularly strong, with Pantene volume up over 40% behind the successful Gisele Bundchen celebrity endorsement, and Head & Shoulders, which was introduced in November, delivering ahead of target.

In developed markets, Western Europe shipments were up double digits and value share grew nearly half a point.

The growth was widespread across multiple countries and brands.

Pantene volume increased double digits in the UK, Germany and Spain.

And Head & Shoulders volume increased mid to high teens in the UK, Italy, Spain and France.

The new Wella Pro Series that was introduced in several countries across Europe is shipping ahead of expectation.

North America Hair Care volume was flat, with strong growth in Head & Shoulders offset by soft Pantene shipments.

Upgrades to the Pantene product lineup and communication have recently been implemented.

Female Skin Care shipments were flat on a global basis.

Developing markets increased high single digits, as the geographic and portfolio expansions of Olay continue to deliver strong growth.

Latin America grew nearly 30% behind the expansion into Brazil and commercial innovation in Mexico.

In Asia, both the Philippines and India more than doubled shipments versus year ago as we expand the Olay portfolio horizontally in the markets.

Developed markets Skin Care shipments declined high single digits.

North America volume declined double digits due to a temporary stop shipment of the Olay UV line in advance of a reformulation and restage, which we expect to launch in the next few months.

Partially offsetting this, Western Europe grew low single digits, with a combination of strong growth in the UK and Germany and declines in Italy and Spain.

Prestige organic volume grew mid-teens.

Prestige Fragrances was up mid-teens, with strong growth across all regions.

Initiatives such as Gucci Guilty, BOSS Bottled Night and Lacoste were strong contributors to the growth.

Prestige Skin Care volume grew high single digits behind continued SK-II strength and overall market growth.

Salon Professional shipments were down high single digits due to market softness in Western Europe and continued streamlining of the portfolio.

In Grooming, organic sales increased 7% on organic growth volume growth of 2%.

The benefits from list price increases and lower year-on-year promotional spending contributed an additional 5%.

Global value share was up slightly in a growing market.

Male Blades & Razors shipments increased low single digits.

Asia and Latin America led to growth, both up mid-teens.

In Asia, India Blades and Razors volume increased over 25%.

India Mach3 volume grew nearly 40% behind the Mach3 Sensitive Razor, and Gillette Guard continued to perform well.

In Latin America, Mexico Mach3 volume grew nearly 50% behind our sensitive skin initiative, and Brazil Mach3 volume grew more than 50% behind the multi-category Gillette Megabrand commercial innovation.

In developed markets, Western Europe and North America volume was down mid-single digits.

Western Europe volume decreased as volume gains from the launch of Fusion ProGlide were offset by blade market contraction and a volume shift between quarters, as expected, due to a January price increase.

North America volume was down, as strong volume growth in Fusion was offset by softness in Mach3 and Gillette legacy Blades and Razors, per our business model of trading up consumers to premium systems.

Full supply capacity for Fusion was online March 1 and full commercialization begins in April.

Male Personal Care shipments increased high single digits.

North America volume grew double digits behind strong deodorants growth and full supply capacity for Old Spice Body Wash.

Latin America volume grew over 20%, with Brazil up more than 40% behind the Gillette Megabrand and Guy Aisle executions and expansion in deodorants.

Appliances volume was down high single digits, largely due to softness in Europe.

Healthcare organic sales increased 5% behind 4% volume growth.

Price increases in developing markets added 1% to sales, and mix was neutral.

Global value share was up nearly half a point.

Global Oral Care unit volume increased mid-single digits, and global value share increased more than a point to 23%.

North America shipments were up mid-single digits and share increased over 2 points.

The main driver of the growth was the 3D White initiative, including the 2-Hour Express Whitestrips, which launched in December.

Western Europe volume was also up mid-single digits, and share increased nearly 2.5 points.

Toothbrush share grew more than 3 points across the region, driven by the powered brush business.

In Belgium and the Netherlands, Oral-B toothpaste continues to perform ahead of target, with share above 12% in both markets, up more than 4 points versus year ago.

Developing markets increased mid-single digits.

Latin America shipments were up mid-teens and value share was up nearly a point.

Brazil Oral-B paste and brush volume increased more than 30%, and value share was also up nearly a point.

Mexico Crest volume increased more than 10%, and value share was up nearly 4 points.

In Asia, both the Philippines and India volume increased nearly 25% behind successful toothbrush initiatives.

Feminine Care volume grew low single digits.

Naturella brand shipments increased nearly 20%, up high teens or more in all regions.

All recent expansions, including Greater China, Brazil and most recently Holland, continue to perform well.

The Always and Whisper volume grew low single digits.

India Whisper volume increased over 40% behind the Whisper Choice restage.

And Germany volume was up mid-teens behind the CEVA endorsement and a product restage.

Personal Health Care shipments increased high single digits, with developed markets up double digits and developing markets up low single digits.

North America volume grew double digits, and value share was up nearly 1 point, mainly behind Vicks growth from a strong cough and cold season and product initiatives.

Snacks and Pet Care organic sales were flat versus year ago.

Organic volume growth was offset by geographic and product mix; global value share was down slightly.

Snacks volume increased double digits, with all regions growing, and share was up.

Developed market shipments grew high single digits, with both Western Europe and North America gaining strong retailer support.

Developing market shipments were up nearly 25%.

In the CEEMEA region, Turkey and Russia increased shipments more than 80% versus year ago behind increased distribution within the markets.

Pet Care shipments, excluding the Natura acquisition, were down mid-single digits.

Full supply capacity was restored within the quarter and merchandising support began in March.

We expect it will take several months for customer and consumer support to return to normal levels.

Fabric and Home Care organic sales were up 3% behind 5% organic volume growth.

Pricing was neutral and mix was negative 2% impact.

Global value share increased half a point.

Fabric Care volume increased mid-single digits and global share was up nearly half a point.

Western Europe volume was up mid-single digits and share grew nearly 1 point.

In France, Ariel Liqui-Tabs shipments grew midteens, and in Italy, Dash Liqui-Tabs shipments grew nearly 25% behind commercial innovation and customer support.

In the UK, Ariel volume increased over 30% due to the laundry additives launch, and Lenor increased over 25% with the introduction of a new large size and increased customer support.

North America volume was up slightly, and share increased nearly 1 point.

Strong growth in Downy was offset by a declining laundry market.

In developing markets, the BRIC countries had strong performance, growing volume more than 15% on average.

In Brazil, Ariel volume more than doubled behind strong support of liquids.

In Russia, Tide volume increased more than 15%, and Downy volume increased more than 35% due to Fabric Enhancer compaction and increased media support across Fabric Care.

In India, Tide volume grew more than 60% with the continued success Tide Naturals.

And in China, Ariel shipments increased nearly 25%, driven by the strong growth of both liquids and powders.

Home care organic shipments grew high single digits, with volume up across all regions, and global value share was up nearly 1 point.

North America volume increased mid-single digits, and value share was up nearly a point.

Febreze shipments grew mid-single digits behind the Febreze Set & Refresh and Noticeables initiatives.

And Gain Hand Dish volume shipped more than double expected levels.

Japan volume increased double digits as the expansion of the Febreze portfolio into aerosols continues to drive growth.

Developing market organic shipments grew high teens.

The Central and Eastern Europe, Middle East and Africa volumes increased more than 30%, with a large portion of the growth coming from Dish Care expansion into markets including Turkey and Morocco, and the balance from the Ambi Pur acquisition.

Asia volume was up over 40%.

The growth was a combination of volume from the Ambi Pur acquisition and organic increases.

Batteries volume was flat on a global basis and value share grew nearly 1.5 points.

Developing market shipments increased high single digits.

India volume more than doubled through increased distribution and marketing support.

And Russia volume increased nearly 20% behind recently introduced product upgrades and strong focus on in-store sales fundamentals.

Developed markets declined low-single digits, driven North America lapping a high base period, driven by the introduction of value pricing in March of last year.

Baby and Family Care organic sales grew 5%.

Organic volume increased 7%.

Pricing increases in Latin America added 1% and product mix was a negative 2 impact.

Global value share was up over half a point, on top of global market growth of approximately 3 points.

Baby Care shipments were up high single digits and global value share increased nearly a point.

Developed market volume was up low single digits.

North America shipment trends reflect the lapping of the pipeline volume from the Dry Max launch in fiscal year 2010.

This was more than offset by mid-single-digit growth in Western Europe and more than 30% growth in Japan.

Western Europe growth was broad-based across Germany, the UK and France behind the Dry Max initiatives and the new Golden Sleep commercial innovation.

Japan growth was a combination of increased customer support, a new consumer loyalty program and some pantry-loading driven by the natural disaster.

Developing market volume increased high teens.

Latin America shipments were up more than 20%, and value share grew over 2.5 points.

Venezuela volume increased more than 40%, benefiting from local market production.

And Brazil volume increased over 25% through distribution gains and commercial innovation.

Greater China shipments were up over 25%, and India shipments were up nearly 50% behind strong market growth and the Golden Sleep commercial innovation.

Family Care volume grew mid-single digits, and value in share increased half a point.

US Charmin shipments were up mid-single digits and share grew nearly 1 point in a growing market.

The base Charmin business volume was up due to product upgrades and commercial innovation, and Charmin Basic shipments were up more than 20%, mainly from distribution and shelf space gains.

That concludes the business segment review, and now I will hand the call back over to Jon to discuss guidance for the June quarter and for the fiscal year.

Thanks, Teri.

The perspective I provided at the beginning of the call is relevant to both our results and our outlook for the balance of the year.

Starting with guidance for the June quarter, we're estimating organic sales growth in the range of 4% to 6%.

We continue to expect to grow volume and sales ahead of underlying market growth rates, building market share.

Market growth itself remains a key source of volatility in our top and bottom-line results.

Our fourth-quarter outlook is based on 2% to 3% constant currency global market value growth.

We expect all-in sales growth of 8% to 10%.

This includes a benefit from foreign exchange of approximately 4 points.

Earnings per share are forecast in the range of $0.80 to $0.85, up 13% to 20% versus prior-year earnings per share of $0.71.

The very strong bottom-line growth is expected to be driven by a combination of solid top-line growth and modest operating profit margin expansion.

The bottom-line comparison also benefits from high advertising investment levels in the base period.

We are keeping a wide earnings-per-share guidance range to reflect ongoing volatility in market growth rates from crises affecting large markets and in commodity and energy costs.

Moving to the fiscal year, we are tightening our organic sales growth guidance to a range of 4% to 5%.

This compares to underlying global market growth for the year of about 3% and reflects our expectation to grow 1 to 2 points ahead of market levels and grow market share.

We expect all-in sales growth of 4% to 5%.

This includes a roughly neutral impact from foreign exchange and the net effect of acquisitions and divestitures.

We are also tightening the core earnings-per-share guidance range to $3.91 to $3.96, which equates to growth of 7% to 8% versus prior-year quarter earnings per share of $3.67.

This compares to our previous outlook for 7% to 9% growth and reflects the impacts of higher commodity and energy costs, market disruptions, and our intention to maintain strong investment levels behind our innovation and expansion growth opportunities.

For perspective, the disaster in Japan will affect fiscal-year earnings by about $0.02 per share, with a large majority hitting the fourth quarter.

Our revised energy and commodity cost outlook results in roughly a negative $1.8 billion before-tax impact on fiscal year 2011.

This is about $500 million worse than we predicted at this time last quarter, which equates to roughly $0.13 per share.

About $0.03 of this hit in the March quarter and the balance will affect the June quarter.

As I mentioned earlier, we've announced a large number of price increases in markets around the world to help offset these cost increases.

The majority of these recently-announced increases will go into effect in June or July and will primarily affect fiscal year 2012.

All-in GAAP earnings per share is now expected in the range of $3.89 to $3.94.

This range includes the impacts of the non-core tax benefits and legal charges from earlier in the fiscal year.

As I mentioned earlier, we're now projecting a long-term underlying effective tax rate of around 26%.

We expect to end this fiscal year with a core tax rate of around 24%.

This is lower than the long-term rate due to the large number of favorable audit results we received during the year.

Free cash flow productivity should be around 90% for the fiscal year and we continue to expect share repurchases to be within our $6 billion to $8 billion target range.

We've already received some questions on when we might provide guidance for fiscal 2012.

Our plan is to provide our 2012 outlook on our next earnings call, which is scheduled for Friday, August 5.

We are currently in the midst of our detailed financial planning process for next year.

While we are not in a position to provide an outlook today, our eventual targets for sales and earnings per share growth will be driven by a combination of base business growth and investment choices to support our innovation and portfolio expansion plans.

They will also reflect our emphasis on cost savings and productivity.

We want to assure investors that our overriding objective remains to simultaneously grow market share and operating profit to deliver leadership levels of value creation for the owners of this Company.

We are confident that our growth and operating strategies are the right ones to deliver top and bottom line results that we and our shareholders expect.

Now Bob, Teri and I would be happy to take your questions.

(Operator Instructions) Nik Modi, UBS.

Good morning, everyone.

It strikes me as one of the key issues that P&G has been facing over the last few years has been some of the higher-margin businesses have been struggling, whether it be the US, Beauty, Grooming and China, which is obviously one of your highest-margin emerging markets.

Can you just provide any perspective on those three businesses and kind of where we are right now and where you expect it to be, and the challenges you face and if you are correcting those challenges?

Thanks.

Relative to the higher-margin businesses, as you describe them, in North America in particular, the issue in North America is the lack of market growth rate.

Jon talked about the fact that the market growth rates we've seen in North America have been below our going-in expectation.

And that actually, in the last -- in the quarter that we are reporting, the market growth rate has actually decelerated throughout the quarter.

We are growing market share in North America, and many of those market share increases are on the businesses that you describe as higher-margin.

So we are happy with the fact that we are growing market share, even though we wish that there were more market growth.

For perspective, we've grown -- held or grown market share for 13 consecutive months in North America.

Having said that, within that, one business that we are working hard to improve is our Pantene business.

We've talked on previous calls about Pantene North America and that our restage earlier in the fiscal year did not go as well as we wanted.

We've had a few design and assortment issues that we are working to correct.

And in mid-February, we launched seven new two-in-one SKUs and five new large-sized SKUs with a new marketing campaign, which have all gotten good, strong consumer support and customer support.

The brand is going to continue to strengthen plans in the US over the coming months, and we have a breakthrough commercial innovation that will hit the market in the September quarter, reinforcing Pantene's health equity.

So in terms of the US, I'm expecting North American Pantene, which has been the hole in the bottom of the bucket, so to speak, to improve.

Relative to China, we continue to have accelerating top-line growth rates in China.

In fact, through the last quarter, we actually have grown our Asia business substantially.

We've grown our Asia market share 0.6 points, and our top-line growth in Asia has been double digits.

So we are happy with what is happening in Asia.

What we need to do there is we need to get our Olay business and our Olay market share growing more strongly.

And we are working very hard on that as we speak.

So I expect you are going to see over the next few months improvement in the North America Pantene business, improvement in the China Olay business, and that will lead to better results for the Company.

Bill Schmitz, Deutsche Bank.

So you broke out the volume kindly, developed versus developing markets.

Can you just take a stab at what the total sales growth was by both regions?

And then the real genesis of that question is why is the promotional environment still so intense, when you have all this pricing coming through, but it seems like most of it is being mitigated by extremely high promotional levels, which I think are chunky categories?

Relative to the volume in sales by region, Bill, let's start with North America.

We grew our organic volume in North America 1%.

We grew organic sales -- organic sales were basically flat.

In Western Europe, we grew organic volume 4%.

Organic sales were up 4%.

In Japan, we grew organic volume 8%.

Organic sales were up 7%.

So in the developed markets, as we consider them, we grew organic volume 3%, organic sales were up 1%.

In the developing markets, in Central Europe, Middle East and Africa, we grew organic volume 3%; organic sales were up 3%.

Latin America, organic volume up 9%; organic sales up 19%.

Asia, excluding Japan, organic volume up 15%, organic sales up 12%.

As I alluded to in the answer to Nik's question, China is a big part of that.

So in the developing markets, organic volume was up 9%, organic sales were up 10%.

Total Company -- total quarter organic volume up 5%, organic sales up 4%.

Price/mix, minus 1 point.

Relative to promotion spending, I am not seeing the acceleration in promotion spending that you are describing.

In fact, what I am seeing is a deceleration.

And in terms of the pricing that we are seeing, we are seeing that some of the deceleration in promotion is resulting in higher pricing -- higher effective pricing in market.

So I am not seeing the effect you describe.

Just to build on that, Bill, our volume sold on promotion in the last quarter was 3% lower than year ago.

Wendy Nicholson, Citi Investment Research.

My first one is just a little follow-up to Nik's question.

Because, Bob, you talked about Pantene.

And one of the things you said that caught my ear was the large size was going to be reformulated.

And I don't think you called out Pantene as one of the brands that was going to have a price increase.

So I'm wondering if just you are trying to narrow the price gap and make that less of a sort of premium, superpremium brand, in an effort to gain share.

But my bigger question is on the SG&A spending, because that was up, it seems like a lot more -- certainly a lot more than I expected.

And I am trying to figure out how much of that was plain old advertising.

Was there something else in there that was sort of unusual this quarter?

And I guess specifically, did you know that the tax rate was going to be a lot lower than we had all modeled and so you threw stuff in there to sort of depress the operating income growth so your EPS came in line with the target?

Thanks.

On Pantene, Wendy, there is no intention to reduce pricing on Pantene or anything like that.

Really, the reaction was that when we did the relaunch last year, we went to a new architecture for Pantene that was around hair type.

And when we did that, we took out -- in North America we took out SKUs that were two-in-one SKUs or that were large-size SKUs.

So we are, in essence, replacing those.

And we are doing that with a new marketing campaign, as we described, because the previous marketing campaign wasn't effective enough.

So we think that these are going to strengthen our plans in the coming months and will lead to growth in the future.

Jon?

The SG&A question, it is largely advertising, which is in support of our innovation and portfolio expansion plans.

There is a small amount of that X impact in there as well, but simplistically it is advertising.

I talked at CAGNY about the fact that our operating margin -- our operating earnings progress was going to be skewed towards the fourth quarter.

And we talked very explicitly, I think, in the Q&A session at CAGNY about a lower tax rate.

So yes, we were aware of the lower tax rate.

We planned on that basis.

And we, as we said we would, adhered to our strategy, despite the increasing commodity costs, and spent to support our innovation programs.

And that is the reason we are holding or growing share in two thirds of our business globally.

Lauren Lieberman, Barclays Capital.

First is a follow-up on the advertising question.

Because I think one thing that has been interesting so far in the few earnings reports we have from both your direct kind of competitors and others within staples is that companies are tapping into their advertising budgets as a source of offsetting cost inflation.

So can you (inaudible) say at this point that as we look -- I know you're not giving guidance for fiscal '12 -- but is it safe to assume your advertising budget will be sacrosanct as we look ahead over the next 12 months?

Lauren, if you look historically, our advertising spend, our media spend, has been generally around 10% of our sales.

And I don't expect that to change.

I mean, we are going to continue to invest in our brands.

Now, as we do that, you have to understand while the gross percentage will stay to be about 10%, which is what it has been, 9% to 10%, the internals change quite dramatically as we move more and more to our advertising spend to digital and other forms of media which may be more effective and more efficient.

So we are actually getting a lot more for our advertising spend than we ever have before.

And we have a marketing mix modeling technique that tells us the ROI of each medium.

And as a result, we can move money to the more effective medium.

So we are getting a lot more for the money that we are spending, but the amount we are spending as a percent of sales is about the same.

Obviously, given the size of our Company, we have a scale advantage versus our competitors who may be smaller and spend less money.

I think the notion of sacrosanct is probably right on, Lauren.

I think you see strong evidence of that in this quarter.

We are going to execute our strategy.

It is working.

And I am not going to worry about a penny below consensus on earnings per share, cut back advertising and affect the long-term health of this business.

That is not what we are about.

John Faucher, JPMorgan.

As I look at this, Jon, you and Bob have talked about profitable share growth as the metrics.

And I think as we look at it, the share growth has been there and the profit hasn't.

So -- as much as we would have liked, at least.

So as you look out over the last sort of 12, 15 months in this change in strategy, can you talk about maybe what iterations you need to make, what changes you need to make in terms of how it is implemented?

And then also talk about that in the context of, well, we don't need to make changes; it is simply the category.

The category growth hasn't been there, which has basically kept us for having this virtual cycle of being able to fund the reinvestment more from upside as opposed to through the lower tax rate, like you've mentioned in the last couple of comments.

Thanks.

I think, John, there is one variable which has kept us in the last couple quarters from having very strong top-line and very strong bottom-line progress, and that is the commodity cost increases, which have just been significant.

Obviously, as we articulated our plan, we knew there would be volatility in commodity costs.

We didn't expect this kind of runup.

I mentioned it in my remarks that the amount of increase we've seen this year is triple what we expected going into the year.

And it simply takes some time to get the pricing in place to offset that and bring through the cost savings that we are very focused on doing.

You do see, at least from a guidance standpoint, very strong top- and bottom-line growth in the fourth quarter.

And we tried to acknowledge at the end of our remarks that we are very committed to delivering both of those.

Chris Ferrara, Bank of America.

I know you just talked about balance, Jon, in particular, I guess, around when you started talking about 2012 a little bit, in that you expect to grow both top and bottom line.

And I guess I just wanted to understand, without delving too far into fiscal '12 -- it does seem like there has got to be somewhat of a prioritization, right?

Because with commodity costs, to your point, doing what they are doing and the fact that the pricing is going to lag that pretty significantly, I guess, can you talk about conceptually how you think about the commitment to the reinvestment you guys have been making and the strategy that has been working, and the commitment you made to investors to deliver that high-singles to low-doubles number?

Because it just seems like both would be pretty difficult next year, especially with a 3-point drag from the tax rate normalized.

Thanks.

I would say a couple things.

One, the tax rate will continue to be lower, as I talked about.

So it won't be a full annualization the benefit from this year.

The question behind the question in terms of are we willing to make priority calls to be able to deliver both the top and bottom line, the definitive answer is yes.

We have many more things that we'd love to spend on that we are not simply to try to be -- to try to deliver both top- and bottom-line growth, and I expect that will continue to be our approach going forward.

And you also have to be careful about looking -- as I know you know -- at just one variable, which is commodity costs.

We also have, on the other side of the equation, relatively favorable foreign exchange development as well, which should enable us to deliver both top- and bottom-line growth and support a number of investments, though not all we'd like.

Chris, I would say that one of the reasons that Procter & Gamble is one of the most admired companies in the world for the development of leaders, and that many Procter & Gamble leaders lead Fortune 500 companies around the world, is because of their ability to lead during times of uncertainty and deliver balanced results, both on the top and the bottom line.

And any leader at Procter & Gamble knows that they have to deliver top-line growth and bottom-line growth.

And the way to square that circle is to make sure that we are constantly and consistently working to make the Company more productive.

And over my 30-year career, every year, we have increased the productivity of the Company 4% to 6%.

So we got to have the cost-savings programs in place.

We've got to go after headcount.

We've got to reorganize the Company.

We've got to do the things necessary to make sure we can deliver that bottom- and top-line growth.

Remember, our overarching objective is to be in the top third of our peer group in terms of total shareholder return.

It is really that simple.

So a simple focus on a single metric is obviously not sufficient for the leaders of our Company.

Joe Altobello, Oppenheimer.

First, one question on the new Tide PODS.

How patent-protected is this?

What has been the response from retailers, competitors?

And what is sort of the margin pickup versus baseline Tide?

And then maybe another question on the relaunch of Fusion ProGlide, how is that going?

Relative to the patent protection on Tide PODS, Joe, you can imagine it is quite strong.

If you look at our dishwashing business and you see what we have been able to do with the single unit dose in dishwashing, you look at what we've been able to do introducing automatic dishwashing on top of the strong hand dishwashing businesses we already have, it is one of the reasons our Home Care business has been one of our fastest-growing businesses around the world.

And Teri reviewed those results.

All of that patent protection exists in the laundry form as well, not just on the chemistry and the film and how that is done, but also on the manufacturing process.

Because many of our manufacturing processes are also patented and protected since there is intellectual property there.

So I don't imagine that this is going to be able to be copied in any way that it will become a threat.

We are expecting this form to be a big success.

We think it will be up to 30% or more of the volume in the United States.

And importantly, even though we didn't mention it in our remarks, this is really a good thing for the environment and it is a good thing for retailers.

The liquid form within the pouch, within the packet, is twice as concentrated as liquid laundry detergent.

So you are going to do a lot better for the environment, a lot better for retailers, a lot better for homemakers in terms of using this product.

Your question on Fusion ProGlide and the relaunch there, we really just began that.

So we expect very good things, but it is too early to quote a result.

I was at Boston yesterday, and I reviewed the relaunch plan, and I am very excited about it.

We've gotten great customer support.

The inventory is back in the stores.

We've restarted advertising back at the launch weight.

And we have some new campaign executions which you will be seeing very soon that I think you will really like.

So please continue watching.

Connie Maneaty, BMO Capital Markets.

Could you give us your perspective on these declining category growth rates, when the last time was that you saw them, how long you expect it to continue?

And with a flat to down birth rate in the US, what is the likelihood that the categories can pick up without that?

Connie, I think that what we are seeing is, at least in part, the effect of the increasing gas prices.

I think what -- the volatility that Jon talked about month to month from January to March is in part, at least, affected by gas prices.

I also have to say I think it is affected by consumer confidence.

And as you see, for example, the S&P rating of the United States being lowered, as you hear politicians fighting with each other rather than getting after what the problems are, that affects consumer confidence.

And as Larry Summers once told me, consumer confidence is the cheapest stimulus that can be bought.

So we are all hopeful that we will get back to a situation where the markets will be growing at past rates, and we are ready for that.

Relative to birth rates and other things, I continue to believe the US is a growthful market, and it is up to us to make it that way.

We have to do that through our innovation.

I think you are going to see that Tide PODS, as an example we just talked about, will return market growth to the laundry category.

I think you will see that Fusion ProGlide will return market growth to the Blades and Razors category.

And so we take responsibility for delivering market growth.

Relative to birth rate, the birthrate of the United States is shifting.

The minority will become the majority by 2040, 2050.

And we are still counting on a growing Baby Care business.

Bill Chappell, SunTrust.

Just one quick follow-up and then one question.

On the tax rate, Jon, did you say you don't expect the tax rate to get back to 26% next year?

And then the actual question was just trying to understand pricing, as we look into next year.

And with so much of the pricing being weighted towards kind of the June/July timeframe in terms of passing it through, do you expect accelerated purchases from some of your retailers in front of that, or should that pretty much even out over the next three, four months anyway?

Relative to the tax question, you are right.

The rate will increase from 24% this year to 26%, roughly, on a going basis.

I don't know exactly what it will be next year.

We haven't gotten that far in our planning process.

My previous answer referred to it not going back to the historic rate.

So I'm sorry if I caused any confusion there.

Bob, do you want to talk about pricing?

We are pricing broadly across all regions and across all brands.

Basically, the pricing that we are taking is not as much as it was in the 2008 period.

But nevertheless, it is still across many brands and across many categories.

Our intention, obviously, is to take price increases to offset increasing commodity costs, where we can't cost saved.

We've already implemented new price increases across US Batteries and Blades and Razors in J/F/M, as Jon and Teri talked in their remarks.

And earlier this month, we announced to our customers that we are taking price increases across many businesses in North America -- powdered detergents, Bounty, Charmin, Pampers, just to name a few.

Taken together, we have implemented or announced price increases across brands representing about 50% of our US sales this calendar year.

And we are also taking foreign exchange price increases, which is what we normally do to protect the fundamental financial structure of our business, and -- such as in places like Venezuela.

And we've increased prices where necessary in emerging markets.

We've talked, for example, about Tide Naturals, and Tide Naturals in India, where we increased the price 8% in the quarter that we are reporting on.

I wouldn't expect the pricing moves to have a dramatic impact on the year-to-year volume trends.

Jon Andersen, William Blair.

I just wanted to touch quickly on some of the supply constraints that you've been experiencing.

It sounded like that was a drag of about 0.5 percentage point to the top line in the current quarter.

Where are you still working to get supply back online, how quickly can you do that, and does that drag diminish going forward?

Thank you.

The drag clearly diminishes going forward.

As I mentioned, we are back in full supply on most of the items.

There are a few we are still working on.

And you can imagine from a competitive sensitivity standpoint why I might not want to get into the specifics there.

But that should be a tailwind going forward.

Jason Gere, RBC Capital Markets.

Just going back to the pricing front -- and I know your comment now is you don't really see the price increases that you are taking to have much of an impact of the volumes.

But I was just wondering in terms of the conversations you're having with retailers, some of them, we are hearing, are a little hesitant about taking price increases with the consumer still pretty strapped.

So I was just wondering about the merchandising side, if you think all that pricing is going to stick, if you think there is going to be a little bit more incremental merchandising.

I was just wondering if you could give a little perspective on that.

Jason, as we referred to earlier, the pricing gets executed in many different ways.

Some of it is a deceleration of promotion spending.

And I said that we've seen some of that from our competition already.

Some of it gets executed in new items.

For example, if you buy a Fusion ProGlide, there is a pricing impact of that versus regular Fusion.

Some of it gets executed in different sizing and pricing.

We've reduced -- we've condensed our powder laundry detergents.

We have Tide PODS going out.

So this isn't just like you walk up to the shelf and you see the same old package and suddenly the price is a little bit higher.

As a result of that, we are able to get these price increases through, we are able to get them to the shelf.

And I actually don't expect them to affect merchandising very dramatically at all.

The key is we've got to continue to innovate.

Doug Lane, Jefferies.

Getting back on the margin question, we've seen the core operating margins down a couple hundred basis points for two quarters now.

So I guess should we look at this as potentially a reset of some sort on the margins off of recent peaks in the 20% to 21% range?

Or are you fairly confident you can get back to holding operating margins in the next couple of years?

We would expect to hold or build operating margins over the next couple years.

It is basic leadership of our Company, Doug.

There is a difference between our guidance on the top line and our guidance on the bottom line.

And in order to square that circle, you've got to improve the productivity and the profit margin quarter to quarter.

And if you are an effective leader of Procter & Gamble, you do that, and if you are not an effective leader at Procter & Gamble, you don't do that.

Tim Conder, Wells Fargo.

Just a couple here.

Just maybe a little bit of clarity.

Can you talk a little bit more about the Female Beauty part, the volumes here?

Was that impacted by the decreased shipments ahead of the North America Olay reformulation and restage launch, and especially in light of your international expansion with that product?

And then secondly, pricing in Asia, you gave some color there.

To what degree you can or want to comment about China specifically, and how those pricing actions are holding.

Specifically on the Female Beauty and the Skin, Teri talked in her remarks -- I have to find it -- but that we had to withdraw a number of products that were in the North American market because of the UV protection technology that we were using.

We withdrew those products, and that had a big impact on the volume for Olay for the quarter, as well as for North America for the quarter, as well as, obviously, for the Olay North America combination for the quarter.

We have worked very quickly to reformulate those products at a record pace, and we are in the process of getting them back into the market and -- to mitigate the impact of this.

But that was a very big impact on the quarter.

But overall, I think it is important just to repeat that we grew organic volume in Beauty on a global basis 6% on the quarter.

So that total business is really accelerating.

In terms of the question on China pricing, we obviously can't talk about pricing plans that we haven't announced, and we haven't at this point announced anything in China.

Alice Longley, Buckingham Research.

I have a follow-up question to the comment that you made a few minutes ago that you would expect operating margins to hold or increase for the next two years.

In this third quarter, did you expect the SG&A ratio to be up as much as it was, or did you have to increase your marketing more than you originally planned in order to generate that 4% organic sales growth?

Because this was the first of the easy comparisons for intensified marketing before, and it raises questions about whether you can generate that 4% to 6% top-line growth rate without continuing to increase the marketing ratios.

The SG&A number isn't significantly different than what we would have assumed.

And again, I tried to be very clear about this during our dialogue at CAGNY, saying that we didn't expect to see operating margin growth -- or operating earnings growth in the quarter, that that would be skewed to the back half.

And as I mentioned earlier, this entire dynamic is driven really by commodity costs, and we've talked about the multi-pronged approach both increasing productivity, increasing pricing where we need to to offset that commodity cost increase.

And I don't want to get into should have, could have, would have, but if you step back -- if we didn't have $1.8 billion in commodity cost increases this year, we would have a fantastic bottom line.

And it is our job to deal with that and we are doing that, and doing that successfully should lead to operating earnings growth in the future.

Ali Dibadj, Sanford Bernstein.

Just, I guess, two very quick follow-ups and then a kind of core question.

One of the follow-ups was just around commodities.

Jon, you said commodities, particularly for this quarter, were a little bit higher and we were unexpected.

I guess I am still confused about why that keeps happening -- not just to you, but to everybody -- given that there is such a -- call it three-months lag on commodities, and so you kind of knew it three months ago.

So that is one.

Number two is, from an advertising spend perspective, is this year going to be higher than your typical run rate, and so there is some room there as you go forward?

And then my core question is from the sounds of the call and from your last answer, it sounds like if it weren't for commodities, if it weren't for some of these really horrible things happening around the world in some places, things are great.

The strategy is working.

But even if you back those out, the growing share and profitably growing share, that last part, doesn't necessarily seem to be coming through.

And look, it may be temporary.

And maybe in response to the first two questions, you can kind of clarify this part.

But I guess as you look forward, are there any elements of the strategy you have been implementing that you are changing, that you are modifying?

Because one could say the ROI hasn't been there.

Sure, it's been there from a volume perspective.

But you are kind of -- particularly on a stacked basis, top-line growth is slowing a little bit.

And I think most importantly for the audience on this call, investors are saying this is not enough for us.

So thanks for the two quick ones up front, but then the core question is, again, are you changing anything going forward, given of the some feedback you've gotten, both from your results and also from the marketplace?

Thanks very much.

In terms of first the commodities question, not everything runs through three months of inventory.

So for example, one of the biggest increases and one of the biggest surprises was the escalation in diesel costs quarter-to-quarter and as we went through the quarter.

And that flows pretty much straight to the bottom line.

And some of the increases, as well, are in businesses where we historically carry less inventory; for instance, our Fabric and Home Care business.

And those have come through to the bottom line of the quarter as well.

But it's really things like diesel.

And if anybody on the line can help me with how to forecast commodity costs, just give me a call; I would be glad to talk.

Advertising this year will be in line, in terms of the percentage of sales figures that Bob quoted earlier.

And then in terms of what we are changing to ensure that we deliver both top and bottom line, I will provide some commentary and I'm sure Bob will want to provide some perspective as well.

But we are trying to get even more productive, as Bob mentioned, in everything we do.

And that is a very intentional discussion that we have at all levels of the Company.

And I would argue, as I mentioned in my remarks, that we are turning up the dial on that, and that will give us the ability to do what we need to do here.

I think what we call our purpose-inspired growth strategy of more consumers, more parts of the world, more completely, is working.

I think we have evidence of that in the market share growth and in the improving profitability of the business, as we've guided for the next quarter.

And I think, as Jon says, every year, we make changes to our strategies.

Every year, we get together, we review what we've done in the past and then we make changes going forward.

Certainly, the intentionality around cost savings and productivity is high and will be heightened because we've got to be able to deal with the volatility that we face in commodity costs and in lack of market growth.

But I think we are on track.

I think we are on track with where we want to be, given to headwinds that we've seen.

We may be delayed from the kind of profitability we want to deliver quarter to quarter -- we may be delayed by either the lack of market growth in developed markets, the commodity cost increases or some of the natural disasters that have occurred.

But I think we are on track, and we are going to continue to pursue the track that we are following and be able to have greater agility in dealing with these one-time disasters that occur.

Javier Escalante, Weeden & Company.

With organic growth volume growth of 5% lapping 7%, which is very respectable given the environment, I would like to dive a bit more in the offsetting being the negative mix.

Would it be possible to revisit this negative mix and to the extent possible quantify a breakout of the mix between growth in emerging markets and consumer tradedown in developed markets, mainly the US and Europe?

I think that you mentioned in the call that you entered 70 new price tiers.

Are these tiers more in the value tiers, I would suspect?

If consumers are trading down, I guess you would rather have them trading down within your portfolio.

But if you could please comment on mix -- basically, emerging markets versus developed markets, how much is tradedown in developed markets, how much is volume expansion in developing markets?

That would be very helpful.

Sure.

About half the mix impact is the faster growth of the business in developing markets.

The other half is really product category form mix.

It is really not driven by consumer tradedown.

The 70 price tiers that we are entering, category price tiers, are split between higher-price entries and lower-price entries, so it is not all lower-price entries.

And the best data I can give you to show you that we're not seeing a lot of tradedown right now is the marketshare contrast, us growing market share and private label largely losing market share.

That is not symptomatic of an environment in which a lot of tradedown is occurring.

So it is really just driven by a different combination of products and categories growing at different rates.

Linda Bolton Weiser, Caris & Company.

One little simple question.

Do you have any forecasts about what the other nonoperating income might be in the fourth fiscal quarter?

Do you think it would be over $50 million?

I apologize -- I'm not operating at that level of detail.

But why don't you give Jon a call following this and he can help you with that?

Mark Astrachan, Stifel Nicolaus.

Are there specific categories, like Oral Care, where you guys are a bit more constrained in your ability to take pricing?

Or put differently, will you take pricing based on how much input cost you are seeing on a specific product?

And if that's not the case, can you give a bit of color on what factors you take into account before taking pricing?

Well, I apologize for kind of repeating what I said before, because the answer is not going to be very different.

Certainly, the input costs are in an impact in deciding whether or not to take pricing.

Whether or not you have innovation, what the consumer value impression of your current offering is, what the sizing and pricing differences might be.

There are a whole number of things that we take -- what the competitive situation is -- whole number of things that we take into account.

But they really don't differ category by category or even country by country.

I would say that it is a relatively common algorithm that gets used everywhere and in every category.

If you look at Oral Care as one category you mentioned, we've actually taken a lot of pricing in Oral Care behind strong innovation.

So the Crest 3D White line, as an example, is a premium price line.

Bob talked earlier about pricing taking many different forms.

It is not all list price increases on existing products.

Crest Pro-Health or Oral-B Pro-Health is a price premium to the other items in the line.

When we introduced Oral Care paste in Brazil, we introduced four different price points, with Pro-Health or Pro-Sante on the top.

So we take pricing in a lot of different ways.

Ladies and gentlemen, that concludes today's conference.

Thank you for your participation.

You may now disconnect, and have a great day.