Procter & Gamble's CEO Discusses Q2 2012 Results - Earnings Call Transcript

 |  About: The Procter & Gamble Company (PG)
by: SA Transcripts


Good day, ladies and gentlemen. [Operator Instructions] Good morning, and welcome to Procter & Gamble's Quarter-End Conference Call. Today’s discussion will include a number of forward-looking statements. If you will refer to P&G’s most recent 10-K, 10-Q and 8-K reports, you will see a discussion of factors that could cause the company’s actual results to differ materially from these projections.

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

Organic refers to reported results, excluding the impacts of acquisitions and divestitures and foreign exchange where applicable. 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. Core operating margin and core operating profit growth refer to operating profit and margin excluding certain items. Core effective tax rate refers to the effective tax rate adjusted for certain items.

P&G has posted on its website,, a full reconciliation of non-GAAP and other financial measures.

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

Jon R. Moeller

Thanks, and good morning, everyone. Joining me this morning are Bob McDonald and Teri List.

I'll begin today's call with a summary of our second quarter results, and Teri will provide highlights for some of our largest product categories. I'll provide some perspective on our revised outlook for the second half of the year, and I'll conclude the call with guidance for fiscal year 2012 and the March quarter. We'll take questions after our prepared remarks and we'll be available following the call to provide additional perspective. We will also be posting slides containing business segment information on our website,, following the call.

Our second quarter underlying results were in line with our going-in expectations. Organic sales came in at the midpoint of our estimates, with core earnings per share towards the high end of our guidance range. All-in sales growth was 4%. Organic sales growth was also 4% as foreign exchange had essentially neutral impact on the quarter. Top line growth was broad-based, with all 6 reporting segments growing organic sales for the second consecutive quarter.

Organic volume was up 1%. This was on the low side of our expectations, due mainly to a mid-single-digit volume decline in developed markets. Developed market volume was negatively affected by weak economic conditions and pricing taken to offset higher input costs. We continue to see strong growth in developing markets, which are delivering high-single-digit volume growth for the quarter.

Pricing contributed 4 points to organic sales growth, making this the third consecutive quarter where pricing has added at least 3 points to sales growth. Pricing was up in all 6 reporting segments. Mix reduced sales growth by 1% due mainly to the disproportionate growth from developing markets.

We're pleased with these top line results, particularly given the developed market dynamics. There's been little to no growth in our categories in developed markets. In fact, market sizes are actually down in several big category/country combinations, such as laundry detergents in the U.K., diapers in the U.S. and Japan, and shampoos in many Western European countries. We've been able to offset this with the progress we're making in developing markets. We've consistently delivered high-single to low-double-digit organic sales growth in these markets and their importance to P&G's global business is increasing rapidly.

Just 5 years ago, developing markets represented only 27% of our global sales. They grew to 35% last year and they should reach about 37% of sales and about 45% of volume by the end of this fiscal year. Importantly, they've accounted for more than 80% of our organic sales growth so far this year.

We're growing share and building scale in these fast-growing countries. Our BRIC markets have averaged double-digit top line growth for the past 2 years. Our top 11 emerging markets have added about 0.5 share points for the past 12-, 6- and 3-month periods. We've expanded our portfolio to roughly 40 new category/country combinations in developing markets over the last 18 months, with 10 more scheduled for the balance of this fiscal year. Recent expansions have included Safeguard in Africa, Downy in Indonesia and Oral-B in Nigeria. And we'll be continuing our Oral Care expansion with Oral-B toothpaste in Colombia, Chile, Argentina and Peru in the next few months.

Despite the macro challenges, we have numerous opportunities for growth in developed markets. As I mentioned, some big categories are declining, but others such as toothpaste and shampoos in the U.S. and U.K. are still growing at a mid-single-digit pace.

The antidote for slow market growth is innovation. We'll continue to leverage successful innovations such as Crest 3D White, Downy Unstopables and Fusion ProGlide. We'll also drive growth with commercial innovation such as our global multi-brand Olympics campaign. We'll continue to field strong marketing programs. In addition, we will continue to fill in white spaces in our developed market portfolios to compete in both more super premium and value-priced tiers.

Our objective is to continue growing share, and through this, growing sales in developed markets, but we're realistic about the challenges that exist.

Global market share for the quarter was essentially in line with prior year levels. We held or grew share in 9 of our top 15 countries, 3 of our 6 reporting segments and on 11 of our 24 billion-dollar brands. Market share was in line or higher in businesses representing about 45% of global sales. This is a reduction from the roughly 60% level we've seen over the last several quarters. As we've noted on many occasions, we expected a fair amount of market share volatility, given the amount of pricing we've been implementing and considering that P&G has often been the first manufacturer to raise prices in many categories.

In most cases, we expect the share impacts to be temporary as our competitive price gaps are now slowly narrowing. In a few cases, such as auto dishwashing and laundry powder categories in the U.S., we have announced corrective actions to ensure our brands continue to be an excellent value for consumers relative to competitive offerings.

Shifting to the bottom line. Core earnings per share were $1.10, towards the top end of our guidance range. This represents a decline of 3% versus the prior year as the impact of higher commodity costs and a significant tax rate headwind more than offset the benefits from solid sales growth and cost savings. Results also included the impact of a divestiture of the PUR business.

All-in earnings were $0.57 per share. This includes $0.53 per share of noncore charges, primarily to write-down, goodwill and certain intangibles in the Appliances and Salon Professional business. The impairment charges are onetime and noncash in nature. They are the outcome of the annual discipline process we undertake to assess the goodwill and intangibles carrying value of all of our businesses and brands.

In each of the last 2 fiscal years, we've highlighted in our Annual Report -- in last year's report it's on Page 49 -- and in our 10-K, that the Appliances and Salon Professional businesses had a heightened risk of future goodwill and intangibles impairment. Both of these businesses have been negatively impacted by the weak economic environment. Both businesses are in high-priced discretionary categories where market sizes have been declining. And both have a portfolio mix skewed very heavily toward the Western European market. In fact, around 50% of sales from each business are from Western Europe, about 2.5x more than the average business in our portfolio.

While still positive, we've reduced our forecast for out period growth, which leads to reduced intangibles and goodwill value. These charges do not diminish the strategic attractiveness of these businesses or our commitment to them.

Moving back to the drivers of our core results. Gross margin declined 210 basis points. The combination of pricing, cost savings and fixed cost leverage improved gross margin by roughly 310 basis points. These benefits were more than offset by a 300 basis point negative impact from higher commodity and energy costs and a 220 basis point negative impact from geographic and product mix.

SG&A costs were down about 50 basis points on a core basis, due mainly to sales growth leverage and a reduction in overhead spending.

Core operating profit margin declined 160 basis points due to the reduction in gross margin.

The effective all-in tax rate for the quarter was 36.7%, an unusually high rate due to the nature of the noncore charges affecting the quarter, the majority of which are not tax deductible. Excluding the impact of noncore items, the effective tax rate on core earnings was 24.9%, which can pays -- excuse me, compares to a base period core tax rate of 22.3%. This difference equates to a $0.04 per share headwind on core EPS growth for the quarter.

We generated $2.4 billion in free cash flow and we returned $2 billion of cash to shareholders this quarter through dividends and share repurchases. At the current annualized dividend of $2.10 per share, our dividend yield is approximately 3.2%.

Now I'll turn the call over to Teri to review some of the highlights of our business results.

Teri L. List-Stoll

Thanks, Jon. Similar to last quarter, I won't be covering all of the details of our 6 reporting segments. But instead, we'll review highlights from some of our larger businesses. For more information on business segment results, please refer to the press release we issued this morning and slides that will be posted on our website,, at the conclusion of this call.

Starting with the Beauty segment. We delivered organic volume and sales growth of 2%. Retail Hair Care led the growth, with organic volume up mid-single digits and global value share up slightly. Asia growth was strong and broad-based, with volume up mid-teens and value share increasing behind -- nearly 1 point. India Pantene shipments increased over 80% behind sachet distribution expansion into 2 million stores in the first 5 months of launch. China Head & Shoulders shipments were up over 25%.

In developed markets, North America Hair Care faced high levels of competitive promotional spending, leading to a mid-single-digit shipment decline. We launched both product and commercial innovation on Pantene and Head & Shoulders this month, which have generated a positive response from customers and consumers.

Global retail Skin Care shipments were about flat. Asia volume increased mid-single digits, fueled by growth in our recent expansion markets including India, South Korea, Vietnam and Malaysia. The North America business continued to face challenges with high levels of competition, predominantly in the mid-priced tier, where Olay has less shelf presence. The brand is introducing new products to better compete in this fast-growing segment of the brand -- of the market.

In the Grooming segment, blades and razors volume increased low single digits. Central and Eastern Europe, Middle East and Africa shipments increased double digits, largely behind expansion of Fusion ProGlide, which is now available in over 30 markets around the world. In Western Europe, value share was flat, but volume declined high single digits in a contracting market. In North America, Fusion delivered strong results, growing share by over 1 point. This gain was offset by losses in Mach3 in the legacy Gillette business as we continue to face high levels of competitive promotional activity. We recently began conversations with customers regarding how we will support all tiers of our blades and razors portfolio.

In the Health Care segment, Oral Care volume was down low single digits. North America volume was about flat as the business indexed against a very strong base period and faced significant competitive pressure. We're very encouraged that despite the highly promotional environment, Crest 3D White continued to grow, with value share up over 0.5 points versus year ago.

Globally, our Oral-B toothpaste expansion markets delivered results ahead of expectation. Brazil toothpaste value share grew for the 11th consecutive quarter. U.K. toothpaste share is over 7% and Belgian toothpaste value share is over 18%, up 6 points versus year ago. All of our wave one markets have achieved double-digit shares, and as Jon mentioned, we're continuing the Oral-B toothpaste expansion. We started shipping in Colombia earlier this month and we will launch in Chile, Argentina and Peru in the near future.

In the Fabric and Home Care segment, we delivered organic sales growth of 5% behind flat volumes, mix rate of 1% and a pricing benefit of 6%. Global Fabric Care shipments were flat, with developing markets growing mid-single digits and developed markets declining mid-single. Asia led the growth as India delivered a second straight quarter of laundry shipments increasing over 25%, with growth across the portfolio. China also delivered a strong quarter, growing share behind the Ariel upgrade and relaunch in November.

Fabric Care developed markets were a story of mixed results. On the positive side, French volume grew high single digits and Ariel delivered record value share of nearly 25%. U.S. Downy grew value share nearly 1 point behind Downy Unstopables. However, both the U.K. and U.S. laundry market lost share as we faced consumer value disadvantages from price increases we took last calendar year. Pricing intervention plans in powder detergents have been announced to the trade, and we expect to regain volume and share growth with a strong innovation program planned for laundry over the next 6 to 12 months.

As many of you know, we'll begin selling Tide PODS in less than 1 month. Due to a combination of increased customer demand and manufacturing challenges, we're beginning with a shelf-only launch and we'll add merchandising during the back half of the calendar year. We expect Tide PODS will be one of our top initiatives this year and potentially the biggest launch in the U.S. consumer product industry.

Global Home Care delivered solid results. Shipments increased low single digits and we held global value share with 4 of 5 regions flat or growing. The main challenge for the business is the U.S. auto dish category, where we increased prices last June by 8% on average. Since this time, the consumer value versus competitive products has been outside of our tolerance range and we've seen share losses of more than 7 points. This is not something that we are willing to accept and we have taken corrective actions. In December, we announced to the trade that effective in February, we will be reversing our price increase on the Cascade business. This is disappointing but necessary to protect our competitive position. We will aggressively pursue cost savings to help maintain structural profitability and future innovation plans.

Finally, the Baby and Family Care segment increased organic sales by 6%. Volume and mix were flat and pricing contributed 6%. Global Baby Care delivered strong results, with value share up nearly 1 point as we leveraged the strong portfolio we have established. Central and Eastern Europe, Middle East and Africa grew value share by nearly 1.5 points by focusing on a strong 3-tiered portfolio, supported by equity building and commercial and product innovation.

Asia also had strong growth, with share increasing nearly 2 points. India Pampers shipments grew 50% behind a combination of market growth and the most significant product upgrade since we introduced the brand in 2007. In developed markets, North America volume declined modestly due to a contracting market. However, U.S. value share grew over 1.5 points, led by the premium tier.

Overall, our large businesses delivered solid results in a tough environment. We're taking the necessary steps in developed markets to restore growth in categories where consumer value issues or portfolio gaps have led to market share decline. Our progress in developing markets is offsetting these issues. While this creates a near-term mix headwind on the top and bottom line, the scale we're building in developing markets, through innovation driven growth and category expansions, will help improve the profitability over time.

I will now turn the call back to Jon.

Jon R. Moeller

Thanks, Teri. Before I get into guidance, I want to talk a little bit about what we're seeing and the environment that we're operating in. As you saw in our press release, we've tightened our fiscal year sales guidance and reduced our earnings per share guidance. Foreign exchange has been a strong headwind. When we set our initial guidance for the year, we expected foreign exchange to add 2% to 3% to top line growth. This range has declined by 3 to 4 percentage points, which equates to roughly $3 billion in sales or a negative earnings impact of $0.15 to $0.18 per share.

Since the beginning of the year, the ruble, the zloty, the real, the peso and the Turkish lira have all moved significantly, depreciating between 10% and 20% against the dollar. These currencies, along with the pound, account for the vast majority of the earnings impact since our initial guidance for the year.

Historically, when foreign exchange rates have moved significantly in a negative direction, we have received a meaningful offset from declining commodity costs. This has not been the case this year. Across our total basket of material and energy exposures, we've seen little change to our going-in expectations of $1.8 billion, before tax, of higher input costs. We have seen prices soften for some commodities, like pulp and natural gas, but these benefits have been largely offset by increases in other materials, such as surfactants, alcohols and other chemicals, and direct costs such as diesel fuel.

The overall economic environment in developed markets is weak. On a unit basis, market growth has decelerated over the past 12-, 6- and 3-month periods in both Western Europe and the U.S. With Europe now -- Europe is now likely in recession, growth in Japan is negative and GDP in the U.S. is growing but slowly.

A related dynamic that's having an impact is the disproportionate growth coming from developing markets. While after-tax margin levels for our developing markets are only modestly lower than the developed average, the absolute profit per unit is lower. The resulting mix impact on profit per unit is contributing to our revised outlook.

We're also facing some market-specific impacts, including government pricing interventions being made in Venezuela. Because of the uncertainty leading up to an eventual announcement, some retailers have stopped ordering for fear that they will end up with inventory that costs more than the price the new laws may allow them to sell those inventories at. We've also had to pull out of Syria following the tightening of U.S. sanctions, and we continue to monitor developments in other Middle Eastern and North African countries.

As we've seen these dynamics unfolding, we considered a number of actions that could have helped us maintain our prior guidance range. For example, we could have delayed Oral-B toothpaste expansions in Latin America, we could have cut advertising aimed at building consumer awareness of Tide PODS this quarter, we could have significantly reduced our marketing and in-store investments behind the Olympics, or we could have delayed important R&D investments.

However, as we've said many times, we're going to balance our objective of making meaningful near-term improvement and operating profit growth with our objective of maintaining the investments necessary to sustain growth beyond just the next few quarters.

That doesn't mean we're standing still. To help manage the dynamics I've just discussed and to ensure we can meaningfully grow operating profit, we're strengthening our commitment to the 4 priorities we set for the organization at the beginning of this year:

Our first priority is maintaining our top line growth momentum. Overall, we're pleased with our results here. Against the backdrop of a weak macroeconomic environment in developed markets, we have averaged 4% organic sales growth over the last 9 quarters. As we look forward, we expect continued growth with developing markets like Latin America and Asia leading the way, offsetting lackluster growth in developed markets.

Our second priority is to execute our pricing changes with excellence. We're also pleased with our progress in this area. Overall, we've implemented about 80% of the pricing we expect to take this fiscal year. There are still several new businesses and markets in which we'll be taking price increases to offset higher input costs or foreign exchange impacts. Also as I mentioned earlier, there are a few categories where we will be making some corrective adjustments, but these adjustments will have a minor impact compared to the $3.5 billion of increases we will take this year. Pricing will continue to be a significant driver of organic sales growth for the next several quarters.

Our third priority is improving productivity in all that we do. Our productivity and restructuring work are focused on 3 main objectives: ensuring we have the right resources in place -- excuse me, the right resources in the right places; increasing our agility and speed to market; and driving cost savings. We're taking an aggressive design-based approach to drive productivity improvement. This approach is necessary to get resources in the right places and increase our agility.

Several recent decisions we made flow directly from this design work. We are reducing the number of technical centers we operate globally and are opening new technical centers in developing markets, such as the new facility we're building in Singapore and the expansion of our R&D center in Beijing. These steps expand the number of technical resources operating closer to the sources of growth in our industry.

We're consolidating our supply-planning activities into central hubs, including one we opened earlier this year in Cincinnati. We just announced an outsourcing arrangement for U.S. in-store detailing work to several partners who are experts in this area. These efforts will improve speed and agility, improve supply chain efficiency and ensure our brands continue to have excellent presentation during promotions and on shelf while reducing costs.

We're examining all areas of costs in every business, including product design, manufacturing, logistics and marketing spending. We're also reducing travel costs by leveraging technology and conducting more virtual meetings as we coordinate work across regions of the world.

One of the largest opportunities to better leverage our scale and drive simplification is in the overhead organizations that account for slightly more than 40% of company-wide enrollment. Our organization design work has identified the opportunity to reduce enrollment in these areas by about 3% or 1,600 roles by the end of this fiscal year. We'll achieve this objective through the combination of selective hiring, normal attrition and our restructuring efforts. The reductions this year should yield annual savings of around $240 million before tax.

Our efforts to reduce costs in nonmanufacturing portions of the organization will go beyond this fiscal year. We'll share more specifics on the overall scope of the productivity improvements and resulting savings at the CAGNY conference in 3 weeks.

We're committed to work to get the right resources in the right places, improve our agility and speed, and deliver meaningful cost savings. This savings work will be -- will deliver the fuel for reinvestment and innovation and portfolio expansion, and it will be an important driver of high-quality earnings growth.

The first 3 priorities focus on top line growth and productivity improvement, leading directly to our fourth priority, which has been to restore solid operating profit growth. As a result of the pricing we've taken, as a result of easing commodity cost comparisons and as a result of our productivity and cost-savings effort, we expect second half core operating profit growth of 10% to 15%.

Let me now turn to guidance. On the fiscal year, we're tightening our organic sales guidance range to growth of 4% to 5% versus our prior range of 3% to 6%. This tighter range reflects the fact that we're halfway through the fiscal year. We estimate the net impact from pricing and mix will contribute between 2 to 3 points to sales growth for the year. Within this, we expect pricing and lower promotion levels will add roughly 4% to sales growth and that mix will continue to be a headwind of 1 to 2 percentage points. We expect foreign exchange will be a negative 1% to sales growth for the year based on current rates. This brings our all-in sales growth guidance to a range of 3% to 4% for the year.

On the bottom line, we're adjusting our guidance range for core earnings per share to $4 to $4.10 versus our prior range of $4.15 to $4.33. Our new range equates to core EPS growth of 1% to 4% versus prior year core earnings per share of $3.95.

We're maintaining a relatively wide core earnings per share guidance range due to several uncertainties including underlying market growth rates, input costs and foreign exchange impacts. This range does not include a potential impact from the Venezuelan review of industry pricing levels, as it's still very unclear what degree of effect this may have on our results.

We now expect all-in earnings per share in the range of $3.85 to $4.08. This range includes the expected gain from the Pringles divestiture of $0.55 to $0.65 per share, as we're maintaining estimates on the assumption we will close the transaction within this fiscal year. All-in earnings per share also includes noncore restructuring cost in the range of $0.15 to $0.80 per share and the $0.52 per share of noncore charges for the impairments and the legal item in France.

We continue to expect capital spending in the range of 4% to 5% of net sales, which may result in free cash flow productivity somewhat below our typical 90% target level.

Our plans to utilize our free cash flow remain unchanged. We expect to pay around $6 billion in dividends and we estimate share repurchases will be in the range of $4 billion to $5 billion for the fiscal year, a modest reduction in the range, consistent with our new earnings outlook.

For the second half of the fiscal year, we expect significant improvement in operating profit and operating margin, though we're now planning for a more gradual improvement than we predicted earlier this year because of the macro factors I talked about earlier.

On the top line, we expect organic sales growth in the range of 4% and 5% for the second half. We're forecasting strong growth in developing markets, driven by our innovation and expansion plans. We're continue -- we're continuing, as we've talked, to globalize our Oral Care business with new launches in Latin America. We're investing to expand distribution to more stores in developing markets and improving the quality of that distribution. We have a major Bounty initiative launching in February and we remain very excited about Tide PODS, which will be available nationally in 3 weeks.

We also recently kicked off the first elements of our global marketing and in-store plans for the Olympics, and you'll see more and more multi-brand advertising and promotional activities as we get closer to the summer games in London. Our objective for the Olympics is to generate $500 million in incremental sales.

Finally as I mentioned, pricing will continue to be a significant contributor to sales growth in both developed and developing markets.

On the bottom line, our new guidance translates to back half core EPS growth of 4% to 9%. This includes roughly a 600 basis point earnings per share growth rate headwind from the difficult tax comparison. At an equalized tax rate, core earnings per share growth would be in the range of 10% to 15% in the back half.

As I mentioned, operating profit growth is also expected to be in the 10% to 15% range, which translates to core operating margin growth of 150 to 250 basis points for the second half. The primary driver of the improvement is the combined benefit of higher year-on-year pricing and much more favorable commodity cost comparisons. For perspective, we expect year-on-year gross margin to swing from a significant negative in the first half to a significant year-on-year positive in the fourth quarter. Also, the benefits from our productivity and cost savings work will accelerate in the second half.

Moving to the January-March quarter, we're expecting organic sales growth in the range of 3% to 5%. We expect a continued strong benefit from pricing in the March quarter, similar to what we delivered in the December quarter. Foreign exchange is expected to reduce sales growth by approximately 3 points, which leads to all-in sales growth in the range of flat to up 2%.

On the bottom line, we expect to deliver a meaningful improvement in operating profit and operating margin despite lower gross margin and a negative impact from foreign exchange. The year-on-year commodity costs challenge will begin to dissipate in the March quarter. To be clear, input cost will still be up in the third quarter, but we're beginning to catch up to the high base period levels. This dynamic, along with the recent pricing we've taken and our ongoing cost savings efforts, will help reduce the pressure on gross margin.

Solid operating profit, essentially, will be fully offset by a difficult tax rate comparison. The effective tax rate in the March quarter of last year was 21.1% and we expect the comparable rate to be between 500 and 600 basis points higher this year. This equates to roughly a 7% headwind on earnings per share growth for the quarter or about $0.07 per share.

We expect March quarter core earnings per share in the range of $0.91 to $0.97 or down 5% to up 1%, versus base period core earnings per share of $0.96. At an equalized tax rate, this equates to core earnings per share growth in the range of 2% to 8%. On an all-in basis, we estimate earnings per share in the range of $0.81 to $0.87. This includes expected noncore restructuring charges of approximately $0.10 per share for the quarter as we expand the implementation of our organization design work.

In summary, we're making progress in a difficult economic and competitive environment. We expect sequential improvement in operating profit growth from the second to third quarters. We'll see an even larger improvement as we move from the third to fourth quarters behind the easing of input cost comparisons and the full benefit of pricing. We are continuing to make the investments necessary to deliver our long-term growth objectives while also increasing the urgency to deliver near-term improvements in our cost structure.

That concludes our prepared remarks, and now Bob, Teri and I would be happy to take your questions.

Question-and-Answer Session


[Operator Instructions] Your first question comes from the line of John Faucher of JPMorgan.

John A. Faucher - JP Morgan Chase & Co, Research Division

Jon, in terms of looking at this, this is the second year in a row where you guys have sort of back end loaded the year and then had to sort of take a step back and sort of reduce some of the profit growth estimates. And I understand it's a volatile market out there. But can you talk a little bit about how you're viewing the role of productivity going forward in terms of maybe sort of minimizing some of these shocks? And I guess, are there any lessons learned from this as we look out in terms of sort of your ability to sustain, let's say, a certain growth rate? Or do you think it's just more of the macro environment?

Jon R. Moeller

The link between heightened efforts on productivity and the desire to be able to deal with the kind of volatility that we're managing through is the right link to draw. We are -- we're going to stay focused on this. We think there's significant savings to come from this. Again, we'll talk more in detail about that at CAGNY. And that should give us the ability to deal more effectively with the volatility that we're experiencing. In terms of predicable growth rates, I think we've grown very productively on the top line. The bottom line really, as you indicate, has been a function of macro effects, whether it was commodities last year, the combination of commodities and foreign exchange this year. We'll work hard to offset them through increased productivity, but what we can't do is reduce spending to offset these costs in a way that harms the long-term trajectory of the business.


Your next question comes from the line of Nik Modi of UBS.

Nik Modi - UBS Investment Bank, Research Division

Just wanted to get some thoughts. The guidance reduction seems heavily obviously FX related, but I'm kind of haunted by the last time you guys took a lot of pricing and the competitors either didn't follow or you took too much, and it kind of had to come in reverse several quarters later. So can you just talk about that dynamic and how much flexibility you have to deal with that, just in case you need to close price gaps more broadly?

Robert A. McDonald

Nik, we talked about the fact we've taken about $3.5 billion of pricing and that there were 3 category/country combinations where competition didn't follow and we felt the need to react to that to regain the value equation. And in Jon remark -- Jon's remarks, we talked about those reversals or reactions not being material to the $3.5-billion increment. And so that's what we've seen so far. So I think you'd have to say that, overall, we were successful in executing the pricing that we wanted and we feel good about what we were able to achieve. Having said that, there are these 3 instances where we've had to take some action to return the value equation.

Jon R. Moeller

I'll just add 2 things. One is that the -- while it's a significant amount of pricing, the percentage increase that we're talking about this time around is much less than occurred last time. So the pricing gaps as they open are nowhere near as significant. The second important difference between this cycle and last cycle, if you recall, as soon as we got prices up, commodities started to roll over. That's not what we're seeing now. So in terms of both kind of the macro dynamics and in terms of what we're seeing in the marketplace, we feel like we're in reasonably good shape.

Robert A. McDonald

Yes, I think -- the only other thing I would add is, as Jon said, we're growing share now. Our in-line share was about 45% of our business. Back in AMJ of 2009, that number was more like 25% of our business. So we've been able to continue to hold the market share. Certainly, we'd like to be up to 60%, which is what we hold ourselves to. But 45% is not bad, given that we've always said that the October-December quarter would be the most volatile and would be the most difficult during this fiscal year.


Your next question comes from the line of Chris Ferrara of Bank of America.

Christopher Ferrara - BofA Merrill Lynch, Research Division

Just -- I guess, developed category volume continues to be weak, right? You guys are clear about that and not really getting better. And obviously, emerging markets have helped. But in the context of developed markets' weakness, can I -- just can you talk a little bit about what the top line growth composition might look like in the long term? Just specifically, absent volume growth. And can you use pricing as a tool in a more proactive way than you have? Or does a weak economic environment and competition really make that unrealistic? I guess, can you break out what you think pricing versus volume will look like, avoiding even giving an absolute range? Just what do you think the composition of that top line could look like as we go 3 to 5 years out?

Robert A. McDonald

Well, we're going to continue to grow the top line and we're going to continue to grow the market share, Chris. I mean, as you know, our top line goal is to grow 1 to 2 points above the market. And the antidote, the way to do that is to have a full portfolio of offerings from premium priced to low priced. I think our laundry category in the U.S. is somewhat instructive of this, where we've got Tide TOTAL CARE, the best aggregation of technology you can get in the laundry category at a price index of about 160 versus average Tide, all the way down to Era, which can be anywhere from an index of 65 to 85. And we're innovating on that business by introducing PODS and doing a number of other things on other brands. So for us, we want to grow 1 to 2 points above the market. We want to do that with a full portfolio and there's indication that -- there's certainly indication, for example, on Crest 3D White is a good example, that even though you're premium priced, if you're offering a superior value to consumers, they will continue to buy it. So innovation becomes very critical to the future.

Jon R. Moeller

I think if you think about a more normalized environment, remember the volumes are being impacted by a significant amount of pricing. I'd see volume as a bigger contributor going forward than it has been certainly in the last quarter, call it 2 to 4 points. And I think there is some inherent pricing power in many of our businesses and we're going to be working on more routine discipline in terms of pricing, so hopefully that'll continue to contribute positively going forward. And then we're going to continue to have some mixed drag just from the disproportionate growth in developing markets. So I think, if you go back to our historic range of 4 to 6, or call it 4 to 5 top line, a good 3 to 4 points of that will be volume on a going basis and then we'd have some mix and pricing help. And that's of course a global number.


Your next question comes from the line of Lauren Lieberman of Barclays Capital.

Lauren R. Lieberman - Barclays Capital, Research Division

Just wanted to follow up on the, I guess, commentary, that you said some of the -- you saw some of the price gaps starting to narrow and the expectation that this is somewhat temporary because -- I couldn't help it. I went in the press release and I counted and 7 times you guys mentioned competitive activity or value differences. And that, combined with the mid-single-digit volume decline in the U.S., it just feels like a pretty significant expectation of things getting better pretty quickly and then again with the 45% of businesses holding or maintaining share. So can you just give me a few more examples on like what really changes sequentially? Or are you -- where are you already seeing things getting better from a competitive standpoint that can make you comfortable with that outlook?

Robert A. McDonald

Well, I think, Lauren, as I said earlier, the fact that we've taken so much pricing, $3.5 billion, and that we've got these very isolated discrete instances where competitors haven't followed price increases -- maybe if I get granular on those, it will show you how the balance seems to be going well. In some -- in most of the markets, competitors are raising prices. Certainly, pricing is at the discretion of retailers, but in others they haven't. So in the U.K., for example, we've continued to see deep discounting from Unilever on both the hair care and laundry categories. In U.K. laundry -- and remember, we came from behind in the U.K. in laundry. U.K. is Unilever's home market. We were up to 55 plus share. Unilever's average retail price is now down about 5% over the past 6 months, where our average price is up about 4%. In U.S. auto dish category, Reckitt's not increased prices, and again we're the market leader. In fact, they've increased their trade spending in track channels by more than 40% versus the prior year since we increased prices in June of 2011. In U.S. laundry, our average Tide powder pricing is up double digits versus year ago, while Church & Dwight's average powder pricing is down low single digits. On liquids, we continue to see heavy promotional activity from competitors, while the average Tide Liquid pricing is flat versus year ago. While we can't discuss unannounced plans on particular brands, we're closely monitoring these situations and we're going to react. In fact, we've already announced, as Jon said in his remarks, a price increase rollback on Cascade in North America to deal with the situation on Reckitt. And we have plans moving forward on the other disparities I discussed.

Jon R. Moeller

And if you think about the timing of when we've taken pricing, Lauren, a lot of this occurred September-October window, and we've talked before about needing really 6 months to understand how it's going to sort out. We've seen a number of competitors, and I won't name country/categories, recently take pricing, so that gives us encouragement going forward. I think if you listen to the remarks of both Colgate and Kimberly, which you obviously have, they continue to -- those remarks are indicative of an environment that requires pricing. And we've actually had some competitors, Energizer as an example, take another round of price increases, which we're now following. So it's -- I mean, it would take me a long time to take you through obviously category by country across the world, but we are seeing positive development in the last month or 2, which does give us confidence.


Your next question comes from the line of Bill Schmitz of Deutsche Bank.

William Schmitz - Deutsche Bank AG, Research Division

You're kind of blaming the categories in the U.S., but it's a little bit frustrating because your market shares are so high and the old P&G would have sort of committed itself to expanding the categories, and I know it's a different environment partially, but what do you think the issues are, the challenges in actually driving category growth through real discontinuous innovation, because it doesn't seem like we've seen a lot of that recently?

Robert A. McDonald

Well, Bill, I agree with you that discontinuous innovation is important to grow categories in developed markets. I would argue with you in a bit that we -- that you're not seeing it. In fact, we just announced the launch of Febreze auto product, which gets us into a category in fragrances in automobiles that we've never been in before. And this product takes advantage of our proprietary superior technology in fragrance that I think will be a big hit and will remake the category, so we're really excited about that. But certainly, we have dedicated more resources to discontinuous innovation because we recognize the importance of that. Of course, Tide PODS is another example where we're in the midst of the introduction of Tide PODS, which will be expansive to the laundry category in the sense that it's priced higher in a per-use basis as well as it's the most condensed laundry product you can buy. So it's going to be much better for the environment. And as we said earlier, we expect it to be about 30% of the category. But we're working on more innovation as well.


Your next question comes from the line of Connie Maneaty of BMO Capital Markets.

Constance Marie Maneaty - BMO Capital Markets U.S.

I'm having a really hard time reconciling the $0.15 to $0.18 hit from FX. The -- when the fiscal year started, you were looking for 2% to 3% positive and in the last quarter you went to neutral without changing the outlook. Now, it's down 1% for the year and it's $0.15 to $0.18. Somehow it doesn't make sense. I'm wondering if you can give us the breakdown between the transaction and translation impact, because a lot of us have been adjusting for FX as rates have changed and a change of this magnitude is just not gelling, so some help there would be appreciated.

Jon R. Moeller

Sure. The dynamic that you described, which is having reflected, if you will, a significant amount of the FX decline in our top line estimates in our last call, is correct. At that point, we felt that there were things that were going to able us -- enable us to offset the bottom line impact of FX, so we didn't adjust our bottom line guidance at that point. But for instance, in the last quarter, as has been alluded to by others, we had much more growth in developing markets as a percentage of our total than we were expecting, which is positive on one hand but has a negative P&L impact. We also had assumed, as I alluded to in my remarks, that with those -- with that stronger dollar, we would see some rollover in commodity costs and that turned out not to materialize. And that's the reason we're now reducing guidelines, so obviously -- or guidance. So obviously, there's a lot of moving parts, but at the heart of issue is FX. And to help you get to the $0.15 to $0.18, which I realize can be hard, I'd suggest we follow up offline and we can take you through that in broad strokes.


Your next question comes from the line of Ali Dibadj of Bernstein.

Ali Dibadj - Sanford C. Bernstein & Co., LLC., Research Division

One just quick clarifying and then the real question, but can you give us a sense of advertising spend on the quarter given your SG&A change? And then real question is, we understand the macro backdrop and we've heard it from many people, but I guess it's a little -- I don't know what the right word is, frustrating, bothersome maybe, but it seems that there's things that P&G itself could do better as well. So like Tide PODS is one of maybe 9 supply chain issues. The volume and market share elasticity maybe were underestimated a little bit. Cost cutting is improving. But you know we'd like you guys to do it faster and it's great news that we're going to hear more, it sounds like, at CAGNY. Is that a fair assessment, that there are many things P&G could do more, could do better in terms of kind of self-help? And if that's the case, we scratch our heads sometimes and say, okay, so why? And one response that comes up a lot when we talk to clients is, "Gosh, it's just too complex for the business." And there's some support for that belief as Beauty and non-Beauty are diverging in terms of growth as Colgate and Church & Dwight and Kimberly-Clark are more focused or arguably even better. What do you think about that argument, that it's just too complex to manage P&G as is and it'll be better managed broken up?

Robert A. McDonald

Well, obviously, we think there's tremendous advantage to having the scale that we have, and we've said repeatedly that we've got to demonstrate to you that we can take that scale and turn it into accelerated growth. Our goal is to be in the top third of our peer group in terms of total shareholder return and anything that detracts from us being there is unacceptable to us. We're the company who was just rated by Chief Executive Magazine, through some research they did, as being the best company for the development of leaders, and it's now time for all of us as leaders of this company to step up, get the company back into the top third of our peer group and stay there in terms of total shareholder return. And we're in the process of building the capability to do that. Improving the productivity is going to be part of it, to give us possibility when these kinds of short-term impacts occur, continuing to innovate, continuing to build brands. But I think you're going to continue -- I think you're going to see some good evidence. We're going to obviously talk about it at CAGNY. But in the balance of the year, I think you'll see good evidence that we're on track to achieve those goals I just talked about, and we will point them out to you along the way so that you don't miss them.

Jon R. Moeller

And we're all for appropriate portfolio discipline and ensuring that each part of the portfolio's value gets maximized. I've gotten asked, similar to your question many times recently, would we consider doing something like Kraft? I would argue that's exactly what we've been doing as major portions of our business, whether it's pharmaceuticals or coffee and now snacks, lead the portfolio.

Robert A. McDonald

The question is, can a company with a scale like ours win versus the more focused company that you talked about, and we will help you see evidence of that along the way. But I think the fact that we're making good progress in Oral Care and we, as Jon said in his remarks, I think, and Teri said in hers, we're expanding our Oral Care offerings to the balance of Latin America, you're going to see further evidence of this.


Your next question comes from the line of Dara Mohsenian of Morgan Stanley.

Dara W. Mohsenian - Morgan Stanley, Research Division

First, a detail question. Jon, what's your tax rate expectation for the full year? I'm not sure if I missed that. And what's your expectation on an ongoing basis beyond this year? And then, Bob, I just wanted to get an update on your viewpoint of attention between gaining market share and driving profitability going forward. We saw a pretty pronounced focus on market share if you go back a year, 1.5 years ago and that shifted here the last couple of quarters to more of a profit focus with the higher pricing, but now it looks like you're losing some of the market share momentum you had. So I just want to get an update over the next few quarters here, if you're willing to cede little bit of market share and you're not too concerned by the share loss given you led pricing, or if you anticipate taking more aggressive actions beyond the selective adjustments you outlined today.

Jon R. Moeller

So first, Dara, on the tax rate. The range for this year is, call it, 25% to 26%. And of course, the going rate is one of the biggest questions we have right now. It's a policy-based question, but assuming status quo, we'd expect a rate of around 26% on a going basis.

Robert A. McDonald

Our leaders are rewarded for building both market share and profit. The overarching goal is, as I said, is to be in the top third of our peer group in total shareholder return. We talk about and in our leadership, not or. At the time where you -- I think you and others interpreted what I was saying as being a focus on share. That was after the AMJ quarter of 2009 and A.G. and I reported that our market share was growing or in line in about 25% of our business, so it was critical at that time to regain our market share. We had gone through a period of, as Jon said earlier, tremendous pricing and we had lost quite a bit of market share. We had to regain that. Today's situation is very different. As Jon indicated earlier, we're in line or growing market share of about 45% of our business. We know where the issues are. We're working on those issues. But our job going forward is to improve the profitability of the company and to grow market share at the same time and to be in the top third of our peer group in total shareholder return, and we're not going to stop until we're there and we're even not going to stop once we are there.


Your next question comes from the line of Javier Escalante of Consumer Edge Research.

Javier Escalante - Consumer Edge Research, LLC

I wanted just to focus more on the savings side. My understanding is that the pretax savings is going to be $250 million and this is all related to Pringles, if I understand correctly. But given that there is this margin dilution from an emerging market that is now going to go away, and you commented also that the growth profile in the U.S. and Western Europe is surprising on the low side, and I understand that there is a significant cyclical aspect to it. But shouldn't you be more proactive thinking about resizing the SG&A side and basically try to be more aggressive on the savings side, because $250 million in a company that is well over $80 billion in sales seems to be rather modest?

Jon R. Moeller

So first, just a clarification. The $250 million savings is not related to Pringles. It's related to enrollment -- a non-Pringles enrollment reduction that we're targeting this year of 3%. Second, we agree with you that we need to be even more intentional in this area, and as we said, we're going to talk about that a little bit more when we're together in 3 weeks at CAGNY. But what one thing I want to also talk about is the developing market dynamic. If you look at the last 10 years, we've grown -- we've tripled the size of our developing market business. And over the last 6 years, we have had to deal with about 650 basis points of commodity cost increases, over $6 billion. And over that same period of time, while we're growing our business disproportionately in developing markets and while we're dealing with these commodity costs, we increased our operating margin 200 basis points. I realize the last couple of quarters haven't looked like that. But I think that's more indicative over longer periods of time, as you smooth out the volatility, of the kind of performance that we're capable of delivering and we'll target to deliver.


Your next question comes from the line of Jason Gere of RBC Capital Markets.

Jason Gere - RBC Capital Markets, LLC, Research Division

I guess just following up with the cost cutting and understanding that you'll talk more about, I guess that 350 to 450 basis point at CAGNY. I guess the question is the use of the cost savings and the role of advertising. I think you've said before that where you ended 2011, I think, it was a little over 11%. It was probably a good level. But just given some of the softer trends we're seeing in developed markets and obviously trying to find the balance between share gain and driving profitability, do you think that you're going to need to see a bigger step-up maybe over the next couple of years as that plays out in order to kind of reengage consumers back in some of the premium categories that maybe you haven't seen over the last year?

Robert A. McDonald

Thank you, Jason. As we've said historically, the 9% to 11% range has been what we have spent. Actually, I believe that over time, we will see the increase in the cost of advertising moderate. There are just so many different media available today and we're quickly moving more and more of our businesses into digital. And in that space, there are lots of different avenues available. In the digital space, with things like Facebook and Google and others, we find that the return on investment of the advertising, when properly designed, when the big idea is there, can be much more efficient. One example is our Old Spice campaign, where we had 1.8 billion free impressions and there are many other examples I can cite from all over the world. So while there may be pressure on advertising, particularly in the United States, for example, during the year of a presidential election, there are mitigating factors like the plethora of media available.


Your next question comes from the line of Bill Chappell of SunTrust.

William B. Chappell - SunTrust Robinson Humphrey, Inc., Research Division

Just a quick question on the Pringles business. Obviously, you kept in the divestiture -- or the gain from the divestiture by fiscal year end. Just any color you can give us in terms of, with an SEC investigation, how you're confident this can happen in the next 3, 4 months.

Jon R. Moeller

Well, it all depends on what's determined, first in the internal investigation and then others that may be occurring. And we're just, at this point, following Diamond's public representations that they're going to have concluded the internal investigation in the middle of February, and we'll obviously be able to talk with them in more detail about that at that time. And then we'll go from there.


Your next question comes from the line of Alice Longley of Buckingham Research.

Alice Beebe Longley - Buckingham Research Group, Inc.

I have a housekeeping question and my real question. You broke out volume for developers -- the developing parts of the world. Could you break out pricing? And also, could you tell us if volume is down more or less in the U.S. than in Europe? And then my real question is back to this -- to innovation, which you seem to agree is critical to doing well over time. When are we going to start seeing more large-scale innovation in developed regions so that you can start gaining share? And as an example, you cite Fusion as gaining share, which is great, but overall you're losing a share in blades. And I think we heard 9 months ago that you're going to start supporting some of your legacy brands, but now I'm hearing that you're just now beginning to talk to retailers about how to support value. I'm just -- you seem slow to innovate and I'm wondering if you're going to step it up.

Jon R. Moeller

So first, Alice, let me just handle the housekeeping, and then I'll turn it over to Bob. We can help you with that information. We will help you with that information. I don't have it here with me at that level of granularity. But if you call Jon after the meeting, we'll help you out there.

Robert A. McDonald

Alice, if you look over -- since the year 2000 and you look at the number of IRI Pacesetters, those have been the biggest sellers in the categories in which we compete. Half of them, since the year 2000, have been Procter & Gamble's. We expect to keep that kind of pace of innovation up and that's the way we look at it. This year, we've introduced Downy Unstopables, which created a new category. We've introduced Olay Facial Hair, which created a new category. We're just now introducing ProGlide Styler, which created a new category. I talked about the fact we're going into automobiles with Febreze for the first time. We've got a couple of other new category creators later this fiscal year. And then as I look at our program going forward, we have other discontinuous innovation as well. But discontinuous innovation is something we're working very hard on and we recognize that there's obviously a correlation between our North American business and discontinuous innovation. You talked about blades and razors. If you look at the way we've grown our business in Latin America and in Asia on blades and razors, it will be instructive to the growth that we will have in Western Europe and North America, because we have historically supported all forms of our blades and razor offering in Latin America, for example, and that business is one of our strongest, if not our strongest, globally. It's growing share and all forms are growing. And that's what you'll have happen here. I don't think that we started this 9 months ago, but certainly we're moving very quickly to do it. And you're right. A lot of the business, the share that we've grown on Fusion, we've lost on Mach3, and that's why we need to support Mach3 and we've got some significant innovations coming on Mach3.


Your next question comes from the line of Tim Conder of Wells Fargo Securities.

Timothy A. Conder - Wells Fargo Securities, LLC, Research Division

Just to go back to the sort of the broader issue, and again, it sounds like you are going to address this at CAGNY, but as it relates to the balance, I think, in what has long been somewhat focused on of your SG&A spending relative to your peers, is the balance between ongoing restructuring and developing market investments. And thank you again for the clarity of the pointing out that, that's grown from 27%, now to 45% of your sales. Can you talk about how much is on the developing market investments, how much you're spending there? And then a timetable or path to where you see those hitting the inflection points to start to positively more contribute to operating profit growth?

Jon R. Moeller

First, just a clarification. The 45% is a volume metric. From a sales standpoint, we expect by the end of the year to have 37% of our business in developing markets. And I think we don't have the detail you're looking for here with us right now, but this is something I think we can also talk a bit more about at CAGNY in a couple of weeks, in terms of what the investment and inflection paths would look like in general in developing markets.

Robert A. McDonald

Your -- the spirit of your question, Tim, is true, that while we -- Jon did talk about the fact that we're reducing enrollment by 3%, overhead enrollment by 3% or 3 percentage points this fiscal year, that at the same time we are shifting the footprint of the company to take advantage of the growth where the growth occurs. Examples of that, Jon mentioned the fact that we've closed technical centers in Western Europe, North America. We've expanded -- doubled the size of our technical center in Beijing. We broke ground on a new technical center in Singapore. Of the roughly 19 plants we have under construction over the last 6 months, one was in the United States. It's our Box Elder, Utah paper facility. But the others have all been in developing markets. So while it may look somewhat more static from an overall standpoint, underneath those numbers is quite a dramatic shift in the resourcing of the company to the areas of growth. And that's one of the reasons, for example, our Baby Care business is so strong today. Roughly 40% of the babies are being born in Asia. I think if you add the Middle East and Africa and maybe parts of Latin America that, you'd be up to 70%. And that's why our Baby Care business is strong despite the fact that the number of births in the United States is declining.


Your next question comes from the line of Mark Astrachan of Stifel, Nicolaus.

Mark S. Astrachan - Stifel, Nicolaus & Co., Inc., Research Division

Curious the thought process on what makes you reconsider current pricing and promotional actions, particularly given slowing share gains. And then sort of related to that, curious about the last 20% of pricing you have not taken. Are you planning to take it? What categories is it in? Have you already taken pricing in some of those categories? Or is it in categories that you've held off on? So just a bit more color there, too, would be helpful.

Jon R. Moeller

In terms of the future pricing, obviously, we can't comment category specificity. What I would tell you is that some of it is related to the currency devaluations that we've talked about in developing markets, so it's catching up with that. But there is also pricing in the developed world, both in categories where we've already priced and in some where we're still -- that's still ahead of us. So I really can't get into anything more specific than that.

Robert A. McDonald

Mark, I'm not sure I totally understood your first question. But one of the things we do is that after we announce pricing and we take pricing, we obviously watch to see if competitor prices. And if they run a buy 1, get 1 free instead of pricing, that suggests to us that they're not going to price, and we wait to watch their reaction over time and when they don't react, then we react to resume the value equation we had when we were growing share.


Your next question comes from the line of Linda Bolton-Weiser of Caris & Company.

Linda Bolton-Weiser - Caris & Company, Inc., Research Division

Just another question on innovation and how you think about it. Are kind of all categories kind of equally deserving of innovation? Or how much do you think about the inherent growth rate of categories in terms of demographics or birth rates or whatever in terms of looking at where you want to put your investment? Or is it that inherently declining categories like diapers in developed markets might actually need more investment, because you need to work at some kind of innovation that could enhance category size or something? Can you just talk about how you think about it in terms of the return on investment?

Robert A. McDonald

Sure. Renovation is our lifeblood, Linda. I mean our purpose is to improve people's lives and the primary way we do that is through innovation. We spend over $2 billion a year on research and development. That's about double our next largest competitor. And we spend about $0.5 billion a year on consumer research, which obviously tells us where to innovate. We then look at our innovation spending and resource allocation by category. We look at it by category relative to the sales of that category and we look at it relative to what -- where competitors are spending. And we look to get a rate of return higher than our competitors because of our scale, because we're able to identify technologies that become platform technologies across categories, and this is a little bit back to Ali's question of why you should expect more from us. For example, our knowledge of bleach and laundry led to Crest Whitestrips, which leads to our competitive advantage in hair color in Perfect 10, which leads to other uses of bleach across our portfolio. So those platforms become very critical to us to being able to get more for the $2 billion in R&D spending than our competition, which may be more singularly focused on an individual category. Secondly, back in 2000, when A.G. was our CEO, we announced a program called Connect + Develop, where we want to get 50% of our ideas from outside the company. We've been successful in doing that. In fact, today, about -- over 80% of our innovations have some kind of external partner. We even have joint development laboratories with our suppliers and we spend a lot of time working with outside universities, suppliers, partners in order to improve our rate of innovation as well as the impact of our innovation. We're one of the few companies in the world that has an Innovation & Technology Committee of our Board of Directors. We meet with that committee frequently. And we lay out our innovation program because it's so -- is so critical to our company.


Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.

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