Dennis D'Andrea - Vice President of Investor Relations Fabrizio Freda - Chief Executive Officer, President and Director Christopher Wood - Senior Vice President of Global Strategic Modernization Initiative Richard W. Kunes - Chief Financial Officer, Principal Accounting Officer And Executive Vice President

Christopher Ferrara - BofA Merrill Lynch, Research Division Neely J.N. Tamminga - Piper Jaffray Companies, Research Division Mark S. Astrachan - Stifel, Nicolaus & Co., Inc., Research Division David Wu - Telsey Advisory Group LLC Alice Beebe Longley - The Buckingham Research Group Incorporated Ali Dibadj - Sanford C. Bernstein & Co., LLC., Research Division Faiza Alwy - Deutsche Bank AG, Research Division Caroline S. Levy - Credit Agricole Securities (USA) Inc., Research Division Lauren R. Lieberman - Barclays Capital, Research Division

Good day, everyone, and welcome to The Estée Lauder Companies Fiscal 2012 Third Quarter Conference Call. Today's call is being recorded and webcast. For opening remarks and introductions, I would like to turn the call over to the Vice President of Investor Relations, Mr. Dennis D'Andrea. Please go ahead, sir. Dennis D'Andrea: Good morning, everyone. On today's call, we have Fabrizio Freda, President and Chief Executive Officer; Rick Kunes, Executive Vice President and Chief Financial Officer; and Christopher Wood, Senior Vice President, Global Modernization, Information and Efficiency. Christopher will review the substantial progress we've made with our Strategic Modernization Initiative, as well as future deployment plans. Since many of our remarks today contain forward-looking statements, let me refer you to our press release and our reports filed with the SEC, where you'll find factors that could cause actual results to differ materially from these forward-looking statements. Except when noted, our discussion of our financial results and our expectations are before restructuring and other charges. And as noted, our discussion will also be before sale shifts attributable to our Strategic Modernization Initiative. You can find a reconciliation between GAAP and non-GAAP figures in our press release and on the Investor Relations section of our website. And I'll turn the call to Fabrizio.

Thank you, Dennis. Good morning, everyone, and welcome to our fiscal 2012 third quarter earning call. I am pleased to report that the successful implementation of our company's strategy continue to drive our strong performance. We reported 4% sales growth, which was ahead of our forecast. Earning per share were $0.38 before restructuring, which was also higher than we anticipated. The increase was due in part to greater cost savings and better-than-expected currency trends, which helped us further leverage our sales gains. Product mix and pricing contributed to our gross margin improvement of 140 basis points to 79.1%. Sales from our underlying business were even stronger, rising 9% in local currency, after adjusting for sales shift for SAP implementation and a charge for anticipated sales return related to new SPF regulations. Our gains spanned all regions and major product categories, illustrating the broad strength of our business. We believe this performance was greater than the growth of global prestige beauty. Around the world, except for a few countries, prestige beauty has been outperforming mass, showing particular strength in the U.S. and China. As the global industry leader, we continue to drive this demand through our effective advertising strategy and improve our retail position. We have proved we can gain share or growth not only in robust emerging markets such as China but even in more mature ones such as Germany and Italy. Importantly, we are uniquely positioned to continue benefiting from these encouraging trends since our business is solely focused on prestige beauty. The company's solid performance this quarter reflects our ability to manage our business effectively and sustain our commitment to creativity and innovation. Our employees' talents are evident in hundreds of highly desirable, locally relevant products, an effective advertising strategy across various media platforms that attract customers into stores, and our High-Touch service that creates a pleasurable shopping experience and generates loyal consumers and repeat business. Our portfolio luxury brands, including La Mer, Jo Malone, Tom Ford, achieved excellent sales growth. Across the globe, affluent consumer are spending more on brands they covet that offer good value, especially when combined by superb service. As a result, these high-end brands continue to thrive. In the Americas, our greatest growth this quarter was in the high-margin skin care category, where we have put much of our focus since we began our strategy 3 years ago. In prestige department and beauty specialty store in the United States tracked by NPD, we gained an impressive 1.6% share in skin care, led by 3 of our brands: Clinique, Estée Lauder and La Mer. Our skin care lineup is so powerful that in the quarter, our brands had 8 of the top 10 SKUs and 20 of the top 25 products. Importantly, our skin care sales in these channels expanded 23% at retail in this recent period over the same quarter last year. Estée Lauder, in particular, had great results, with its skin care business rising 21% at retail in the United States. But our success isn't just in skin care. Our makeup sales in U.S. prestige department and beauty specialty stores were 8% higher than last year, while our fragrance sales expanded nearly 4%. Our ongoing strategic collaboration with North America department stores to reinvigorate the beauty floor is reaping many benefits for us and for them. Virtually all our brands showed good growth in the channel. Overall, prestige beauty continues to outpace mass in industry-wide prestige beauty sales, up nearly 14% in the quarter compared with just 1% for mass brands. In Latin America, Brazil remains our fastest-growing market, driven largely by M-A-C, which is expanding its presence and investing in more advertising and promotion. Our DKNY and Tommy Hilfiger fragrance brands showed nice gains in Brazil, and we brought Zegna into the market. The total Brazilian beauty market is growing at 10%, but our sales growth is more than triple that rate. Although the economic climate in much of the European region has been sluggish, it was our strongest this quarter, adjusting for the SAP shift. Part of that success can be attributed to our intense focus on being locally relevant. Estée Lauder's new Revitalizing Supreme Global Anti-Aging Creme, which was created specifically for European women, was supported with a widespread TV campaign and reached the #1 position in France, Germany, Italy and the Netherlands in prestige facial skin care during the quarter. Travel retail also fueled our region sales, as yet again the channel enjoyed healthy double-digit gains worldwide. Global airline passenger traffic grew, led by Asia/Pacific region, which helped our company gain share in the channel. Overall, China was travel retail top country in the quarter, due to the higher traffic related to the Chinese New Year. Additionally, the Beijing and Bangkok airports are among the fastest-growing high-volume airports globally. In the Asia/Pacific region, our performance was mixed. Sales in China grew double-digits. We opened 23 new points of distribution for our brands, expanded into 2 new cities, and Bobbi Brown launched e-commerce. We have also seen a growing trend of Chinese consumers buying our product outside of their home market. For instance, many Chinese traveled during the New Year in January and purchased our products and other luxury goods in travel retail shops as well as in Greater China, Paris and other popular international destinations. The World Luxury Association reported that Chinese consumers spent $7.2 billion on luxury goods in Europe, the U.S., Hong Kong and Taiwan during the Chinese New Year, 29% more than last year. In comparison, sales in Korea and Singapore declined due to softness at retail. While Japan sales were still somewhat soft, they came in better than we expected. Looking at our business by category. We had a terrific result in skin care globally, largely from several recent innovation that were backed by compelling advertising, including Estée Lauder cream for Europe and several products from Clinique. In Asia, our skin care sales rose on the heel of several launches, such as Origins, Dr. Weil's Mega-Bright and Youthopia Lift firming cream and Clinique Moisture Surge Intense. The category accounted for approximately 65% of the region's sales. Our advertising strategy for skin care has been so successful, we are taking a similar approach to makeup. Next week, for the first time, Clinique will start running national TV ads for a color cosmetic product in the U.S. We expect this creative commercial for Chubby Stick Lip Colour to attract many new consumers, particularly younger ones. Our other makeup brands are also leveraging this pull strategy. Tom Ford Beauty is investing behind its new color cosmetic line. Smashbox advertised its eye shadows in Camera Ready BB Cream using print and digital during the quarter, which generated strong growth for the brand. Smashbox is one of a number of our brands that have introduced BB creams, one of the newness beauty trends, which first become popular in Korea. These all-in-one products, which incorporate moisturizer, foundation, sunscreen and antiaging properties, have recently become a hit in the U.S. and in Europe. Aveda's newness innovation, its Invati collection for thinning hair, is having a terrific reception and helped boost our hair care category. Bumble and bumble expansion in Sephora is raising brand awareness and helping to drive consumers to Bumble network of salons. In fragrance, Jo Malone and Tom Ford, our high-end brands, continued to perform well. And our Aramis and Designer Fragrance division had good sales increases globally, lead by our Donna Karan franchise and Tommy Hilfiger. However, our U.S. fragrance sales weren't as strong as we hoped, and we lost share this quarter. We expect our results to improve with the recent global rollout of Zegna, continued success of Coach and upcoming launch activities before the holiday season. Across all categories, our online business had a positive showing in every region, with particularly strong results for our retail partners. We continue to accelerate our social activity, engage our consumer through blogs, tweets and Facebook posting and build our digital talent pool. We are confident in our ability to maintain our steady growth and generate incremental sales for expanded distribution. For example, Bobbi Brown recently opened in Israel and sees potential for new doors, brand-building and greater growth in many of its other 58 markets. M-A-C plans to open 68 doors in the fourth quarter, all but 4 of each will be outside of United States. Even our most established brands continue to seek strategic opportunity to reach consumers. In Japan, Clinique, Estée Lauder and Bobbi Brown opened in Isetan [indiscernible], a new multibrand beauty store, and Aveda launched e-commerce. Origins opened in 4 [indiscernible] store in Netherlands, as well as on the retail and e-commerce [ph] side and expects to open 5 more doors there in fiscal 2013. As part of its continued expansion, Smashbox plans to launch in many international market in the next year. Now let me discuss 2 other important developments. First, to enhance our efficiency, we made a strategic decision to streamline our manufacturing operation and create a state-of-art facility in our Melville, New York, location for fragrance filling and skin care. This move supports our ongoing commitment to innovation and global competitiveness and should create increased synergies and collaboration between production and R&D. Over the next year, we will transition fragrance filling to Melville from Oakland, New Jersey, and close the Oakland plant. To make room for the manufacturing expansion, this month, we are relocating distribution operations from Melville to our North America hub in Pennsylvania, which will enable us to better serve our retailers by centralizing our distribution. These moves are expected to save several million dollars annually. Secondly, this fiscal year, we have substantially increased our global advertising spending to continue fueling our brand strengths and support major launches. In the fourth quarter, we plan to continue increase this spending over last year to build our momentum as we enter fiscal year 2013. For the full year, our incremental advertising spending should exceed $275 million, primarily behind our best innovations. We continue to fund the additional advertising spending through higher sales and by reducing promotion and non-added value cost. As we approach the 3-year mark of our strategic journey, we have complete confidence in the soundness of our vision and our ability to execute with excellence. Our goals are to ensure that we anticipate consumer desires, build upon our leadership role in global prestige beauty and deliver sustainable, profitable growth to stockholders. Through this fiscal year, every quarter, we have obtained consistently higher sale. With just 2 months left in the year, we are confident we will achieve sales growth of about 10%, marking our second consecutive year of double-digit constant currency sales gains. With a winning business model that leverages our sales growth into greater profits, we expect our operating margin to improve by about 120 basis points and EPS to climb approximately 20%. I'm pleased to say that we are raising our full year EPS estimate to a range of $2.22 to $2.26. We also expect to generate record cash flow that will fund investment in business-building activity to maintain our strong performance for the years to come. Now I will turn now the call over to Christopher, who will discuss our Strategic Modernization Initiative and how it is enabling the long-term sustainability of our success.

Thank you, Fabrizio, and good morning, everyone. Let me start by giving you some background about myself. I've worked in the prestige cosmetics industry for nearly 25 years and came to The Estée Lauder Companies in 1993. Since then, I've spent most of my time in brands and running international businesses, most recently heading up our Korean and Japanese affiliates. Two years ago, Fabrizio asked me to return to New York to lead the implementation of our global Strategic Modernization Initiative or SMI and join the executive leadership team. Last September, I assumed additional responsibilities for the oversight of our global IT organization and the Program Management Team, which is responsible for aligning, prioritizing and pacing all major corporate projects, as well as leading the company's cost-savings initiatives. I've been fortunate to have worked in all 3 of the company's regions and have gained broad business experience over the past 20 years. This has proved to be invaluable as we've rolled out SMI to our brands, affiliates and global operations since I understand how these areas operate and what's required to adapt to the new way of working. Simply put, SMI is a catalyst for transforming our company in many different ways. It's streamlining our operations today to make us an even more formidable competitor tomorrow. As we roll out new systems and processes to our brand functions and affiliates, we're integrating our disparate operations, creating transparency and modernizing all facets of our business. When fully implemented, SMI will enable us to be more agile and make decisions faster, which will be critical to winning in the fast-paced global environment of the next decade. Lastly, SMI will create new efficiencies and eliminate non-value added costs, allowing us to invest greater resources in innovations and growth opportunities. Prior to my arrival, we had successfully deployed SMI in our North American and U.K. manufacturing sites and created the North American financial foundation. During the past 2 years, we've expanded the SMI deployment globally, adding affiliates and brands to existing sites. Working with my team and in collaboration with hundreds of employees in affiliates' brands and functions around the world, we've made solid progress. Currently, we're well past the midpoint of the program and are preparing for another large deployment next January. More than 60% of the company's sales are now SMI-enabled, which includes most of our global brands and more than 1/2 of our affiliate sales volume. About 8,000 employees and vendor partners are using the new SAP software. We've experienced no major service disruptions or problems during 5 waves of deployment so far, and expect over 90% of our business to be SMI-enabled by the end of fiscal 2014. The areas of our business using SMI processes and SAP technology include our manufacturing facilities in North America and the U.K, as I just mentioned, as well as 15 affiliates including Italy, Spain, Germany, Singapore, Korea, Australia and Thailand. In our most recent implementation, in January of this year, 13 sites went live, including 8 affiliates, 2 global brands, Bumble and bumble and Smashbox, some third-party manufacturing, as well as key account planning for North America. The next wave, which is scheduled for January 2013, will include Greater China, France, our Belgian manufacturing plant and global supply network planning. Also included will be our regional corporate offices in Paris and Hong Kong. We've chosen a high-touch, low-risk approach to our SMI roadmap so as not to adversely impact our strong sales and profit growth and to ensure that we execute with excellence. We've emphasized change management, process adoption, since these are keys to a successful transition to SMI and leveraging the benefits that are expected. Additionally, this deployment model leverages the collaboration and transfer of knowledge from process experts in existing SMI sites and affiliates to those in upcoming deployments, with the goal of creating communities of SMI expertise and best practices. The multiyear investment in SMI involves much more than installing new systems and software. It is a fundamental enhancement to the way we operate. There are 3 critical elements at its core: our people, who must adapt to new ways of working; our processes, which entail new systems and capabilities that focus on speed and agility; and technology, which includes new SAP software to automate tasks, reduce manual work, provide transparency and enable efficiencies and sharing of information. There are 9 key processes that are driving our SMI implementation and its benefits. The processes enable standardization, collaboration, alignment, visibility and sustainable ways of working across the company. SMI is interdependent with our other global and regional initiatives, including procurement, demand planning, distribution center optimization and regional PMT programs. Our SMI program is one of the largest investments the company has ever made, and its outcome is significant. It's transforming our business by creating unified, more efficient processes in a highly integrated, sustainable global organization. Its scope reaches across all brands, regions and functions, and this naturally involves a different organizational design and ongoing change management and communications. Before we embarked on the SMI program, our functions, brands and affiliates largely operated independently and had adapted different systems and processes over the year. Now we are streamlining literally hundreds of local practices and work habits into a set of clearly defined and similar processes that allow us to retain local relevance while leveraging scale, speed and agility on a regional and global basis. At the same time, we are reducing the complexity of our IT environment to provide a common foundational IT platform or a single source of truth in SAP. SAP aligns the company from an information point of view and provides common access to the same information across regions, brands and functions. For example, when an SMI-enabled affiliate closes its books at month's end, the results are immediately visible to executives in New York. Similarly, global brands are now beginning to have visibility into their worldwide inventory and are able to move products around as needed. Prior to incorporating SMI, it wasn't always apparent if there was too much of a certain product in one market and not enough in another. Some specific benefits we've seen already include greatly improved productivity in Korea. Customer ordering has improved fourfold. Labeling is nearly 30% more efficient, and picking accuracy has improved from 97% to 98.6%. At Smashbox, the time it takes from receiving a retail order until delivery averages less than 6 days, versus 10 days or more before it went live with SMI. Overall, we're also enjoying more efficient purchasing execution, improved service to customers and consumers, better analytical tools and enhanced skills for our employees. Over time, SMI should provide a platform for growth by enabling us to be both flexible and decisive due to greater transparency and information around the world. As the program continues, we expect to further lower our costs by reducing inventory, obsolescence and continuing to improve cost of goods, productivity and financial discipline while creating a platform of enhanced capabilities for future growth. The SMI program will be a net expense to the company through fiscal 2013. But in subsequent years, we expect to see a net benefit with significant savings and efficiencies. In our current strategy, our PMT initiatives, some of which have already been enabled by SMI, are expected to save up to $750 million through fiscal 2013. After that period, SMI should create greater opportunities in those existing cost-savings initiatives, as well as leverage capabilities for future value-creation by giving us greater visibility into all aspects of our business around the world. I want to thank everyone in the company who has been or will be involved in deploying SMI for your hard work and dedication to this important program. It is truly leadership from every chair. We are committed to continuing our SMI journey with excellence as we advance the adoption of our processes and leverage SMI's capabilities to drive growth, deliver value and ensure sustainability of a long-term business platform. With SMI, the company is embracing new ways of working that will vastly improve our day-to-day business, give us greater insights to quickly improve our local relevance, and lastly, eliminate unnecessary costs, so we can successfully pursue our mission to create sustainable and profitable growth. Now I will turn now the call over to Rick. Richard W. Kunes: Thank you, Christopher, and good morning, everyone. A quick reminder, my discussions on the quarter and the outlook exclude restructuring and other charges. As Fabrizio discussed, we had another solid quarter. In local currency, sales rose 4%. Currency translation was not significant, and reported sales also grew 4% to $2.25 billion. Net earnings for the quarter rose 5% to $149.2 million compared with $142.6 million in the prior year, and diluted EPS was $0.38, $0.06 higher than the top end of our guidance. The third quarter sales growth comparison was affected by the pull-forward of $30 million in orders through the second quarter this year, ahead of the January launch of SAP. The prior year quarter reflected an additional $42 million in sales, ahead of an April launch of SAP. These 2 factors reduced third quarter sales growth by about 3 percentage points and EPS by $0.09. Additionally, this quarter, we established a provision of about $16 million in anticipation of returns related to the repositioning of makeup products containing sunscreen due to changes in U.S. regulations. This charge adversely affected sales growth by about 70 basis points and EPS by $0.03. Our reported figures for regions and categories and a reconciliation between GAAP and non-GAAP measures can be found in the press release issued this morning. While our financial statements are prepared according to GAAP, we consider non-GAAP measures useful for analysis. With that in mind, in order to help you understand the underlying growth of our business in the various segments and countries, as well as the components of our P&L and margin progression, our discussions adjust for the sales and income shifts for the SAP rollout. All regions and major product categories grew on a local currency basis adjusted for the SAP shifts. Our skin care category, in particular, continued to thrive, with sales up 13% in local currency. The launches of Estée Lauder's Revitalizing Supreme Creme in Europe and Clinique's Repairwear Uplifting Firming Cream led the innovation pipeline, and both brands continued to support existing products. La Mer grew double-digits globally, contributing nicely to skin care growth. In makeup, local currency sales rose 3% against a tough comparison, with 22% growth last year. Results were driven by M-A-C, Smashbox and the rollout of Tom Ford Beauty. Additionally, foundation launches from Estée Lauder and Clinique helped to solidify our lead in this high-loyalty subcategory. The returns provision reduced makeup sales growth by approximately 2 percentage points. Our fragrance business rose 5%, excluding currency. Luxury brands, Tom Ford and Jo Malone continued to perform well. Additionally, recent launches from our other brands more than offset lower sales in certain existing fragrances. In Hair Care, sales rose 5% in local currency, led by solid growth in Aveda. The launch of the brand's Invati line is an unprecedented success, and helped drive overall sales growth. Bumble and bumble continued to do well at retail, but reported sales were up against a tough comp with the pipeline fill for the Sephora rollout last year. On a geographic basis, our sales in the Americas grew 5% in local currency. Nearly every brand contributed with particular strength from our 3 largest as well as our luxury group. The United States rose 7%, Latin America grew 10%, led by strong results in Brazil and Chile, while Canada was up 6%. The returns provision reduced the Americas region's sales growth by about 2 percentage points. From a channel perspective, online rose 13%, salons and spas grew 10%, department stores and multibrand specialty beauty stores rose high single-digits and our own stores were up mid-single-digits. These prestige channels once again outpaced mass channels in the U.S. In Europe, the Middle East and Africa, sales climbed 12% in local currency. Travel retail was up 23%, reflecting 7% growth in international passenger traffic, especially in the Americas and Asia, strong underlying trends in our business, as well as select new door openings for Aveda, La Mer and M-A-C. Our U.K. sales rose double-digits, reflecting a strong online business and good results from TV advertising behind Clinique's Even Better Makeup. Additionally, our luxury brands continued to perform well. We saw outstanding double-digit growth in the Middle East, India and Turkey. Germany also rose double-digits, while Italy and Spain delivered single-digit growth, which was respectable given the difficult market. Russia declined modestly, as continued destocking at a major account more than offset strong retail elsewhere. Brands gained at retail, but net sales were softer this quarter due to both the late receipt of orders and warehouse consolidation by a major retailer. And Greece remains weak. Asia/Pacific region sales rose 7% in local currency. China grew 14% on like-door growth and expansion of brands, doors and cities. Many Chinese traveled over the New Year holiday, helping to fuel 22% growth in Hong Kong. Also growing nicely were Taiwan, Thailand and Malaysia, while Japan and Australia rose low single-digits. Just to remind you, the margin discussions and analysis have also been adjusted for the shifts for SAP. Our gross margin improved by 120 basis points to 79.1%. The increase was primarily due to positive mix and pricing of 140 basis points, manufacturing variances and currency of 10 basis points each, partially offset by higher obsolescence charges of 20 basis points. These figures include the benefit of cost-savings initiatives of $21 million. Operating expenses as a percentage of sales declined 90 basis points to 67.5%. Advertising, merchandising and sampling expense increased 130 [ph] basis points, reflecting the planned incremental support behind the company's biggest innovations. This increase was more than offset by the favorable comparison to prior year impairment charges of 170 basis points and lower administrative costs of 40 basis points. These figures reflect savings of $19 million from our cost-reduction programs. As a result, operating income rose 31% to $263.5 million and operating margin grew 210 basis points to 11.6% of sales. We realized total savings of $40 million in the quarter from our cost-savings program and now expect to save $140 million to $160 million for the full year, and between $700 million and $750 million for the full program through fiscal 2013. Net interest expense was approximately $15 million this quarter, below prior year, reflecting the replacement of $120 million in 6% senior notes with commercial paper. Our effective tax rate was 33.5%. We recorded restructuring and other charges of $28.8 million or $0.05 per share in the third quarter. For the full fiscal year, we expect to record charges of about $45 million. For the 9 months, net cash flows from operating activities rose 20% to $870 million, compared with $720 million -- $728 million last year. We spent $272 million in CapEx, $550 million to repurchase approximately 11.2 million shares of our stock and paid stockholders $204 million in dividends. Our days sales outstanding at March 31 were unchanged from last year at 52 days, while inventory days fell by 3 to 166 days. Let me now talk about our outlook for the rest of the fiscal year. Our forecast reflects strong global demand in prestige beauty. For the year, we forecast local currency sales growth of approximately 10%. Our estimate reflects weighted average rates of $1.34 for the euro, $1.58 for the pound and $0.79 for the yen. Using these assumptions, the currency impact on our full year sales is expected to be negligible. The operating leverage from higher sales and cost savings, partially offset by substantial increases in advertising for the second year in a row, as well as investments in new systems, should translate to operating margin improvement of about 120 basis points for the year. We are tightening the range and raising the top of our full year EPS forecast before restructuring to between $2.21 and $2.26. We expect to generate more than $1.1 billion of cash flow from operations and invest about $425 million for capital expenditures. We still expect our effective tax rate will be between 31% and 33%. A few items will cause unusual comparisons in sales and profits in our fourth quarter. First, the prior year fourth quarter was understated by $42 million in sales pulled into the third quarter ahead of an April launch of SAP. This is expected to increase fourth quarter sales growth by about 2 percentage points and EPS by $0.05. Second, our business in Japan suffered from the effects of the tsunami on the fourth quarter of last year, providing a somewhat easier comparison. Lastly, we expect to increase our advertising spending in the fourth quarter, some of which is carried over from the third quarter. This growth is on top of the substantial increase in the prior year and should help us maintain our sales momentum into fiscal 2013. Therefore, our fourth quarter sales growth is expected to be between 10% and 11% in local currency. Reported sales could be negatively impacted by about 3 percentage points due to currency translation. These figures include the 2% positive impact of the SAP shift I just mentioned. We anticipate EPS for the fourth quarter to be between $0.11 and $0.16. And that concludes my comments. And we'd be happy to take your questions now.

[Operator Instructions] Our first question today comes from Chris Ferrara of Bank of America. Christopher Ferrara - BofA Merrill Lynch, Research Division: I wanted to ask about, I guess, the timing of the returns on the investments you're making. Because obviously, you guys are putting a lot of advertising back behind the business, which is great, and the top line growth has been pretty robust. But if you look going forward, it looks like you're throwing more advertising at the business, but you're getting to, adjusting for SAP and other timing, a little bit slower growth rate. And understanding all of the macro factors, can you at least parse out what your take is on that slight slowdown in top line relative to the advertising you're throwing at it? And also in relation to that, what's the timing of the return on that? Right? It's just that -- is this going to result in a lagging sales acceleration or a sustaining of sales as you move out into the beginning of fiscal '13?

Yes. Chris, first of all, I think we are getting very solid returns, in the sense, we -- if you look at after adjustment, which are technical adjustment, our quarter this fiscal year will be all between 9% and 11%, even 14% the first. So in this quarter, 9%, we've been growing. And next quarter, we will probably go between 10% and 11%. And the total year between will be a second year in a row at double-digits. Frankly, I believe this is the result of increased advertising. And we are increasing advertising to levels that we need, frankly, in the long term to sustain in order to deliver this kind of growth also in soft markets and in good markets. Because the second way, I think, you should judge the results is that we -- thanks to this strategy, we are growing in high-growth market like China, but we are growing also in soft markets like Italy, for example. Also the third way to judge the results is that we are growing market share consistently quarter-over-quarter globally and going in the right direction. The last way I would judge the advertising investment, that, anyway, we are increasing -- this fiscal year is interesting. We are increasing advertising for a total of $275 million versus previous year while at the same time growing margin up 120 basis points. So it's not that we are investing without return in the short term. I think we have even short-term returns in the way we are investing. So anyway, you should not assume that this increased advertising will continue forever. There is a moment where we'll reach what we believe is sustainable level of advertising to grow the business. Christopher Ferrara - BofA Merrill Lynch, Research Division: That's perfect. And I guess, just a quick follow-up. Can you -- is it possible to benchmark your share of voice, just your advertising relative to the peers, and like, in other words, your share of voice relative to your market share in the major regions?

Yes. We do this. And I tell you, we have a -- frankly, the level of advertising that we do is very different by region and reflect the market dynamics. As you can imagine, we have higher share of voice in advertising in countries like U.S., where we have a very big market share, in countries like China, where we have the biggest growth opportunity. While on the contrary, in more mature markets, where the market is not growing very fast and we do not have very high market share, obviously our share of voice tend to be much smaller. So it's a mixed picture, but we have these data. It would be a bit complicated to share all of them, and I think some of them are pretty confidential. But the important concept here is we are now investing more and more. But as a next step, we are also doing a lot of internal work to become more effective and efficient in the way we spend our advertising money. So you should expect in the next couple of years us to also being able to improve what we get out of our advertising, improving our targeting capabilities in the company, improving our understanding of the new medias we are using, particularly digital and TV, and improving the quality of our advertising from a creative standpoint, which, by the way, I believe is one of the key strengths we're exploiting in this moment, and finally, addressing and focusing our advertising on the areas of highest return that clearly appear to be our outstanding innovation.

The next question comes from the line of Neely Tamminga with Piper Jaffray. Neely J.N. Tamminga - Piper Jaffray Companies, Research Division: For retail, a related question here on advertising spend. Could you give us a little sense in terms of the complexion of that spend, kind of where you've been from a print, TV, social media perspective to know where you're headed? And I guess, related to that, we're looking a little bit more for your strategy around the social media. And then just wondering how much of the increase in advertising spending is related to just overall pricing going up in an Olympics and election year versus actual dollars going towards impressions, et cetera. It'd be helpful.

Okay. So first of all, the -- our -- we are investing in all 3 big media that you mentioned. The -- we continue to invest. obviously, in print, in magazine advertising around the world. And this investment is gradually continuing to grow, but it's not the area of maximum growth. The area of maximum growth is digital and television advertising in some selected markets. So in a nutshell, we are increasing gradually magazine advertising around the world, we are very strongly increasing digital and social media investment, and we are selectively increasing TV advertising only on the brands and on the markets where TV advertising makes sense. So that's basically our strategy. The pricing of media -- frankly, the pricing inflation on media is very different by markets. As you probably know, it's pretty high in markets like China and pretty moderate in markets like Europe that today are in a sluggish economic situation. But overall, the large, large majority of our increase in advertising is more advertising, more effective advertising and is not driven by pricing. Actually, with our new media purchasing activity enabled by a global media agency by SMI, we are getting better in purchasing media rather than worse.

Your next question comes from the line of Mark Astrachan with Stifel, Nicolaus. Mark S. Astrachan - Stifel, Nicolaus & Co., Inc., Research Division: One quick housekeeping. How much was China up in the quarter? And then not to ignore Christopher, I guess, could you talk a bit about more about how SMI will help build on the $750 million of anticipated cost savings? In particular, maybe try to help us quantify what some of the additional benefits you're talking about. I recognize you can't really talk about dollars, but just in terms of trying to frame it for us, that would be pretty helpful, including SAP implementation and also the benefits there. Richard W. Kunes: First, so Mark, in the quarter, China was up 14% on a comparable currency basis.

And before Chris will answer your question on SMI, just to frame it. In a sense, you have seen us restructuring the company and delivering in these areas what I believe is a very successful plan for $700 million -- up to $750 million savings by the end of 2013. SMI is basically supposed to enable Phase 2 because SMI, as Chris in his prepared remark explained, has a peak of cost in reality for us in 2012 and '13. So to be very clear, this year, we are delivering 120 points of margin improvement despite being at the peak of SMI cost, and also in '13, will be a similar area of high SMI cost. And so this is an investment. While on the contrary, starting '14, SMI will start being a saving and will generate and enable the second phase of savings in the company that will allow us to continue both the margin improvements and obviously generate growth. Chris, please?

Thank you, Fabrizio. And thanks for the question, Mark. Obviously, we expect savings to continue to grow and be significantly higher than we originally estimated. One, because the scope of what we're doing within SMI has expanded. And as we gain more and more insight into the opportunities that are unleashed by either the process efficiencies or the visibility that we get through business intelligence, we just basically are looking at better and faster ways to leverage the existing savings. So let me give you an example. Right now, we think we can save about 3x the amount we originally expected from indirect procurement simply by having visibility into what we buy, where we buy, at what price and with what vendors. At the same time, we're building capabilities as we go through SMI, both from an informational point of view, whether it's our financial systems or our reporting systems, but also transactional systems. In Europe, we've implemented a tool called Vistex, which gives us visibility into the terms and conditions that we have with all our retailers. So just having that information across the European region helps us to negotiate better, helps us to leverage deals with pan-European retailers, et cetera. And just on a small point, I'm not a logistics expert, but moving to pick to voice in our distribution system centers, we have 30% to 40% more efficient picking and shipping. So all these things add up to basically give us a turbo boost on top of the savings areas that we've already identified under the PMT. So I guess, in a nutshell, you could say we're moving from kind of sourced savings to leveraged savings over the future.

Your next question comes from the line of David Wu with Telsey Advisory Group. David Wu - Telsey Advisory Group LLC: On Europe, sounds like Germany and the U.K. are still strong. You're obviously gaining share there and benefiting from Revitalizing Supreme. But can you perhaps talk about sort of what you're seeing there in terms of the environment and whether you've had to be more promotional at all, particularly in the U.K., to drive sales and how the sell-in versus sell-out rates are trending, if you are concerned at all about the inventory levels?

Yes. No, actually, we are growing very strong. In Europe we are growing 11.7% in markets which are pretty sluggish. And definitely not driven by promotion. To be very clear, our promotion spending is down significantly in the quarter in every single country around the world. So this is driven by what I was explaining before. This is driven by our new strategy, where we have some amazing innovation which increased advertising. And even in markets which are soft, we come in with innovation supported by strong advertising, and consumers react. For example, it's interesting to see that even in these markets like U.K., we see prestige growing faster than mass because at the end, in a soft market, all competitors tend maybe to advertise less. And on the contrary, we come up with a great innovation and stronger advertising in the prestige area, which actually moves consumers to our area. So it's a pull strategy, not a push strategy, which is driving our growth in this moment also in soft markets. And obviously, this is giving us interesting market share gains.

Your next question comes from the line of Alice Longley with Buckingham Research. Alice Beebe Longley - The Buckingham Research Group Incorporated: A couple of questions. Was the timing of Easter -- did that affect your shipments in the U.S.? And would that possibly create a slowdown from the third quarter into the fourth quarter? And then also, a similar kind of question about China. You said the Chinese New Year created a move by consumers to other parts of the world. China was a significant slowdown in growth from the first and second quarter. Will we get a pickup going ahead? Or is that -- should we expect continued slowing in China?

Okay. Let me start. From the U.S., our underlying business strength is really strong. Our U.S. business is very strong, and we believe we continue to be very, very solid. By the way, our estimate of sales growth for the last quarter is about 10%, and we've been growing about 9% in this quarter. So independently how festivities or things fall, we are consistently growing very close to double-digit. Around the world and U.S. we continue to be strong. In the U.S. also, we have a particularly strong growth in skin care, so far, where we're building impressive market share, as I was explaining in my prepared remarks. In makeup also, we are doing well, particularly when you add to the NPD number our sales in the free-standing store of M-A-C, which are significant and doing well, while we are temporarily losing market share in fragrance, where as I explained, also because part of the strategy is just we want to avoid being too promotional, as I explained. We are deciding not to try to buy all the promotional volume that was particularly in the fragrance category pretty heavy. And so we are still paying the consequence of getting out of a more promotional game and in a more sustainable sales game. But we believe we'll do better when we'll be at the end of this process, also growth in term of growth in fragrances. So that's as far as North America. China. China is growing at 14%, which is very, very solid overall. And you should also assume that this includes the fact that there was Chinese New Year in the middle of this quarter. Now what we see more and more in these big festivities like Chinese New Year, that there are enormous amount of Chinese traveling in these periods. And they buy very high amount of volumes of our business, frankly, in general, luxury in travel retail and in the countries that they visit. As you know, the majority of Chinese travels to Hong Kong, to Taiwan, to Paris, to New York, and finally, in the various airports around the world. So yes, China was plus 14%. But travel retail was plus 23%, Hong Kong had a terrific year, France was growing, et cetera. In other words, there is an impact of Chinese consumers which is well beyond the numbers of Mainland China. So I believe that in this moment, we are doing very, very well and continue to do very, very well with Chinese consumer. The last piece of information. The China growth is a bit changing in term of dimension. China growth is -- the growth is not as strong as it used to be in the big cities like Shanghai and Beijing, but is very much accelerating in the Tier 2, Tier 3 and even Tier 4 cities at this point of time, in domestic airports, in the new vacation places of China, where now Chinese are having more and more vacation time. So China is evolving but is very strong, and I believe will continue to be pretty solid.

Your next question comes from the line of Ali Dibadj with Bernstein. Ali Dibadj - Sanford C. Bernstein & Co., LLC., Research Division: A few things. One is, we were just looking at your earnings progression on a quarter-over-quarter basis when you look at it versus the annual. And kind of in this what we call the pre-Fabrizio era, the first half was only slightly above 50% of annual earnings per share on average. But since that time, it's gone up pretty significantly, so the first half was about 3/4 or 75% of your annual earnings. And I'm just trying to understand whether that's a pattern of business, whether that's the fact that you're underearning in the back half to prepare for the first half of the fiscal next year. Or is there something else that we're missing? Richard W. Kunes: Ali, a couple of quarters ago, I think we talked about a business model that we're using to drive our business from a top line perspective but also to be sure that we're taking advantage of opportunities that present themselves during the year and to protect our bottom line. So we start the year with what we believe is a pretty reasonable and above-market growth rate in sales. But we also build in contingency monies and monies that we have corporately that we use to protect profitability if need be, if sales do not come in as expected. Or as we start to see the year unfold and we overachieve, we take those monies and target them to selected opportunities of high growth or the biggest opportunities for the company. So effectively, what happens is if things go well, we achieve a reasonably high level of profitability in the first half of the year, we have these extra funds to drive opportunities in the second half of the year. That's why our spending is a little higher in the second half of the year. But it then targets, if you will, a continuation of that high growth going into the next fiscal year. So it's a -- we think it's a very effective business model because it gives us protection on the bottom line in case there's disruptions. But it also gives us great opportunities to see how the year unfolds and where the opportunities and what products and regions and countries are doing the best and focus resources into those best opportunities.

And, Ali, I just want to add, that we talked this -- about this in detail a couple of meetings ago. I believe this is really a new financial model that we are using that's generating enormous competitive advantage, also because allow us to direct funds to the biggest opportunity in a pretty significant way when they appear as opposite to a historical model where everything was incremental, meaning incremental spending every single country, on every single brand of a little bit. Now we can decide there are those 2 big opportunities in this brand, in this region and go for it and win big, and then move to the next one. And we have created this internal flexibility, which is, frankly, a strong competitive advantage.

Your next question comes from the line of Bill Schmitz with Deutsche Bank. Faiza Alwy - Deutsche Bank AG, Research Division: This is Faiza calling in for Bill. We just wanted to talk a little bit about Korea. You talked about a decline in that market, and there are some signs about a macro slowdown. And with Korea being one of the top beauty markets in Asia, I just want to get a little bit more your perspective on that market and what your strategy is going to be going forward. And also if you expect with Japan, as the tsunami is lapped going forward, if you expect that to sort of mask some of the decline in Korea?

Yes. On Korea -- frankly, Korea is a market that oscillates, is -- goes up and down over the years. And also to read Korea, you should also read what's happening in travel retail in Korea. Because depending on the current situation or the pricing situation, Koreans tend to buy more in Seoul or in their travel, and there is a phenomenon [ph]. On Japan, yes, we believe that, obviously, we have the tsunami teetering [ph] the base, so we'll believe we have a high single-digit growth potential in the next month in Japan. And in Japan, we are doing slightly better than what we anticipated. But in the end, the market remains pretty flattish, apart from obviously the different base period in the case of the tsunami. But since we have Chris in the room today, which was the General Manager of Korea, just want to make sure if you want to add anything on Korea.

Yes. I just think, Fabrizio said it, it can be cyclical, it's not predictive. But if you take from 2000 until now, I think we've had 3 or 4 periods of lasting between 1.5 to 2 years where the luxury market slowed down. By no reason was it stagnant. I think Korea is growing in the 6% range right now. And I think it's a phenomenon of uncertainty surrounding the elections. I think it's a calming period with real estate prices increasing [ph] and Koreans basically uncertain about what's going to happen in the future. So I think the market will come back. It always does. The biggest concern today for us should be the mass market because we see very large growth in the mass market in Korea with very high-quality products, and we shouldn't take our eye off the types of investments and the high-touch approach that we've taken in the past. So we're obviously looking at it very, very carefully. But I think that there's no time like the present to be devising our strategy for the next 6 to 12 months because the market will definitely come right back up again.

Your next question comes from the line of Caroline Levy with CLSA. Caroline S. Levy - Credit Agricole Securities (USA) Inc., Research Division: Couple of questions. Given that the Chinese consumer is such a big part of travel retail consumption, have you given any thought to reclassifying travel retail, either breaking it out or putting it into the Asia business? And can you give an estimate as to what you think your sales to the Chinese consumer are? I think at one point, you said $1 billion, if that's changed. And then on SMI -- and forgive me if you've already been specific about this, but I'm just wondering if the gross margin upside potential, if that's something you could quantify, and maybe even on the SG&A line. Obviously, you're going to spend a good deal of that back. But what do you think is the margin opportunity out of SMI over the next 3 or 4 years? Richard W. Kunes: So certainly, if you want to start with the SMI piece first, without quantification, right, because what we're saying is we have guidance out there through fiscal 2014. But if you look longer term, where will the benefits come from, from SMI in a little bit more specificity? Certainly, from improved service levels. We know, as Christopher alluded to, that we did not have always the right products in the right place at the right time. So we'll improve our service level, which will result obviously in less returns as well. We'll have a leaner and more responsive supply chain in an operations organization. So both of those 2 items will certainly generate a greater gross margin. We'll have better inventory management, which will result in lower levels. We currently turn our inventory about twice a year, and we should turn it about 3x a year. That will reduce obsolescence and destructions. Again, those expenses aren't part of gross margin. But then as you go down into operating expenses, Christopher mentioned just a few moments ago that we already see probably 3x what we originally anticipated saving in indirect procurement. We're going to close points of distribution, so we'll have less warehouses, lower distribution costs and better efficiencies in the warehouses that we keep open. And I think, again, Christopher mentioned some statistics of greater efficiencies in distribution. We'll have improved processes throughout our organization. So we're in the process of actually transitioning from an implementation phase of SAP into a value-creation phase. And we mentioned that, that transition happens in the '12 to '13 point. And Fabrizio said in '14 and beyond we'll begin to see some of these efficiencies. But we are actually developing key performance indicators by process and building those into our budgets for the individual operating units to be able to drive those efficiencies and make sure that we get them. And lastly, is just better information and faster information. And with better and faster information, we can make smarter decisions and we can react quicker, and all of those will drive improved profitability.

Yes. On the travel retail one, no, we are not considering any major reclassification on travel retail. However, we made transparent all the specific information on travel retail. And so you can read through travel retail what's happening in retail. And yes, the Asian consumers are more and more important, particularly the Chinese consumer, for travel retail, but it's also true that skin care and makeup are becoming more and more important, also for travel retail. And we look at this in this way internally. We do start these P&Ls in what happen if we invest more in China without the returns that we get in travel retail. By the way, we study also what happens when we invest in China in term of returns in travel retail, Hong Kong, the Taiwan, Paris. Or we study what happens when we invest in M-A-C Brazil in term of return in travel retail Brazil or New York sales or Miami sales. So we are becoming more and more sophisticated in understanding the result of our investment across horizontally all our system. And again, this is because of the new way we work together and also because of what SMI enabled us to do it in term of information sharing.

We have time for one more question, please. Your last question comes from the line of Lauren Lieberman with Barclays. Lauren R. Lieberman - Barclays Capital, Research Division: I just wanted to follow up on pricing because you guys mentioned that price and mix together were really a big contributor of growth, but that there was outsized growth in the super luxury end of the portfolio. And knowing that strategic pricing had been something you'd said you were going to tread lightly on but saw as a big opportunity, can you talk a little bit about how that's going, how broadly you're pricing and in what market, if it's market-specific?

Sure. And so yes, we have started this fiscal year, so the fiscal year '12 is the first year. We have started implementing the results of our strategic pricing initiative. And the result of this, that this fiscal year, on average, the input of price on our sales will be up 2 points versus an historical average of about 1 point. Obviously, with the exception of a few years, where the average was 0, but in general, it was about 1 point. And now we have doubled that this fiscal year. And we believe we have potential to continue having good input from -- good increases from prices in the future. That is -- that's about [ph] the ranges, 2, 3 points versus 1 historically, is the potential, because anyway, prices is pretty selective. That's why it's strategic. We are selectively pricing where it's possible on innovation. We are selectively pricing some countries to adjust our corridors, international corridor. We are selecting pricing on where we discover opportunities. And we are pricing up or down. In some cases, we are pricing down certain SKUs or certain markets. In the case of SKUs, we may be pricing down because we have discovered that this brand, this SKU is sourcing from us and there is a specific price point where this sources increases. Or we may price down in a certain market because of the corridor versus other market to limit the phenomenon of people buying outside of the market or being -- comparing prices and being demotivated by these comparisons. So that's the work we are doing, and that is all included in our strategic prices concept.

That concludes today's question-and-answer session. If you were unable to join the entire call, a playback will be available at 1:00 p.m. Eastern Time today through May 18. To hear a recording of the call, please dial (855) 859-2056, passcode 67408180. That concludes today's Estée Lauder conference call. I would like to thank you, all, for participating, and I wish you all a good day.