Dennis D'Andrea - Vice President of Investor Relations Fabrizio Freda - Chief Executive Officer, President and Director Fabrice Weber - President of Asia Pacific Region Tracey Thomas Travis - Chief Financial Officer, Executive Vice President, Member of Corporate Risk Management Committee, Member of Fiduciary Investment Committee and Member of Investment Development Committee

Jason English - Goldman Sachs Group Inc., Research Division Lauren R. Lieberman - Barclays Capital, Research Division Dara W. Mohsenian - Morgan Stanley, Research Division Wendy Nicholson - Citigroup Inc, Research Division Ali Dibadj - Sanford C. Bernstein & Co., LLC., Research Division Alice Beebe Longley - The Buckingham Research Group Incorporated John A. Faucher - JP Morgan Chase & Co, Research Division William Schmitz - Deutsche Bank AG, Research Division Constance Marie Maneaty - BMO Capital Markets U.S. Christopher Ferrara - BofA Merrill Lynch, Research Division Caroline S. Levy - Credit Agricole Securities (USA) Inc., Research Division Mark S. Astrachan - Stifel, Nicolaus & Co., Inc., Research Division

Good day, everyone, and welcome to The Estée Lauder Companies Fiscal 2013 Second 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 are Fabrizio Freda, President and Chief Executive Officer; Tracey Travis, Executive Vice President and Chief Financial Officer; and Fabrice Weber, President, Asia/Pacific. Fabrice will give a strategic overview of this fast-growing region. 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. 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 over to Fabrizio.

Thank you, Dennis, and good morning, everyone. During the second quarter of fiscal 2013, we continue to constantly steer our strategy on a successful course through varying market conditions. This resulted in solid sales growth at the high end of our -- of the range we provided. Sales grew 7% in local currency, while diluted earnings per share were better than we anticipated. Around the world, prestige beauty continues to grow but at a slower pace than a year ago. While this reflects the reality of the markets, our brands and high-quality products are winning with consumers, thanks to our diverse portfolio that gives us a presence in a full range of prestige channels. With effective advertising that promotes our outstanding innovations, we pull consumers to our counters, and then generate sales with High-Touch personal service. In the recent quarter, all 3 of our geographic regions contributed to our highest sales, despite some soft market and specific challenges. Sales in all of our major category also rose. Continuing a recent pattern, the fastest brand growth came from the high end of our prestige portfolio. The affluent consumer is spending freely for a product she desires. As a result, our luxury brands including Jo Malone, Tom Ford and La Mer are striving, each up more than 20%. We believe these brands have terrific growth potential, and we plan to continue to invest in them over the next several years, so they become more formidable players in the beauty landscape. Our emerging markets continued to deliver the most rapid growth. Sales rose 24% in the quarter, and they accounted for 40% of our total business. In China, our largest emerging market, our retail sales climbed 28%, enabling us to gain market share. We continue to push into new cities and add counters for our brands and also increase our advertising on TV in advance of the Chinese New Year. We foresee further expansion opportunities into smaller cities in China for several years to come. Other emerging markets showing strong local currency sales growth included South Africa, Turkey, the Middle East and Brazil. And many of our brands in those countries gained share, thanks in part to their success in being locally relevant. Our brands continuously seek to reach new consumers, and one way is being -- expanding geographically. M-A-C, for instance, is deepening its presence in Sub-Saharan Africa. It recently began selling in Zambia, Nigeria and Botswana. In Russia, ongoing distribution challenges continue to impact our 2 largest brands, yet our luxury and makeup artist brands are growing very fast and resonating with consumers. To compensate for the overall soft results, we are working to accelerate our innovation, marketing and online opportunities. Turning to our established markets. We enjoyed a solid sales increase in North America as prestige beauty growth continued to outperform mass brands. In the past, our performance in our core market was largely dependent on our biggest brand. But this quarter, it was also due to healthy sales for several of our smaller and midsized brands, especially luxury and specialty ones. For example, gains in Bobbi Brown stemmed from successful products and special events. From a distribution perspective, in North America, our fastest-growing channels were e-commerce and special [indiscernible]. Sales of our products in prestige department store outpaced mid-tier ones. Our North America results were positive despite the impact of the Hurricane Sandy tragedy, which affected a large portion of the Eastern U.S. Several challenging markets in Europe, particularly Spain, Italy and Greece, impacted our overall results in the region. Still, our sales rose high single digits, as compelling advertising attracted consumers to our counters for the latest launches and other best-selling products. As a result, we gained share in several well-established countries. In France, our brands grew faster than competitors in the key skin care and makeup categories. In the U.K. retail sales were healthy, led by e-commerce, Jo Malone and M-A-C. We are proud that our Estée Lauder and La Mer brands won the prestigious Marie Claire Prix d'Excellence award that honored the most innovative products of the year for the Revitalizing Supreme Anti-Aging Creme and The Moisturizing Soft Cream, respectively. Our total business in Asia/Pacific expanded nicely, driven by double-digit gains in skin care. This region posted the best sales growth this quarter. However, Korea remained a difficult market where sales declined. But we are aggressively working to remedy the situation. Fabrice will elaborate on our Asian business in a few minutes. During the quarter, employees across our regions prepared for the next wave of our Strategic Modernization Initiative in advance of the January 7 launch. The latest implementation occurred in China, Hong Kong and France, among others markets. It also involved several business processes. I'm very proud of the dedication of our SMI teams and the strength of our organization. The preparation went smoothly and the go live was a success. As more continued countries and function [ph] starts using SAP, the overall initiative should unleash further efficiencies and thereby, cost savings in the coming years, particularly in cost of goods, indirect procurement and advertising and promotional spending. Currently, approximately 75% of our company sales are SMI-enabled, and we continue to gain better visibility into all facets of our business. Leveraging our SMI capabilities is a major priority to create further value and enhance our growth. Looking at our categories. Innovations continue to drive the growth of skin care. Globally, the Estée Lauder brand focus on skin care continues reaping benefits, with skin care sales up 14%, driven by new products, strong core businesses and continued robust demand in China. La Mer global sales rose an outstanding 25%. In the United States, our skin care sales grew solidly, and we gained share after adjusting for facial cleansing devices, demonstrating our strengths in this category. Our brands held 17 of the top 20 prestige skin care SKUs in the quarter as measured by NPD. Our makeup business grew on the strengths of our makeup artist brands. M-A-C opened 42 new doors globally, including a flagship on Fifth Avenue, which has surpassed its Times Square store for the highest average unit sales in New York City. Bobbi Brown sales increased double digits globally. And we expect Katie Holmes, its new celebrity spokesperson, will continue to increase brand awareness and sales. Smashbox also had strong double-digit gains, fueled by more than 200 new doors opening globally. We are aggressively expanding the brand distribution, confident that it has strong global appeal and fantastic potential, particularly with young consumers. Our luxury brands drove our fragrance business. Jo Malone and Tom Ford generated strong double-digit sales due to organic growth, successful launches and new distribution. Contributing incremental sales this quarter was the introduction of Coach Love, which initially rolled out in Coach boutiques. In hair care, Aveda Invati line, which was launched about a year ago remains a success. Aveda used TV for the first time beginning in September to promote the franchise, and the investment paid off. A 3-product Invati set was popular for the holidays. Looking ahead, using our successful launch-and-leverage approach to major product introductions, we have additional Invati product planned, and Aveda intends to run TV commercials in the U.K. in the second half of fiscal 2013. Our brands grew online and our e-commerce business continues its double-digit advance again this quarter. Cyber Monday was our biggest day ever for online sales in the U.S., up 17% over previous years. Holiday sales from our brand size grew much faster than overall online sales in the U.S., and retailer sites gained as well. We continue to develop our important mobile commerce business, and we were encouraged that in our home market, our m-commerce sales more than doubled. We were also extremely pleased that the Estée Lauder brand earned the top ranking in a recent Digital IQ Index for the China beauty market by L2, a leading research group that explores digital innovation. The study measures the digital competency of 20 global beauty brands based on websites, digital marketing, social medias and mobile. It said that Estée Lauder brand has established itself as a digital leader in China. Our retail sales in the travel channel continued to climb double digits, driven by a surge in China. The destocking issue we had been experiencing primarily in Asia/Pacific and Americas slowed towards the end of the quarter. Our travel retail net sales rose high single digits, exceeding the growth of air passenger traffic, which remained strong. Our sales were up sharply in Europe, the Middle East and Africa, driven by emerging market travelers. Clinique in particular benefited from a new campaign featuring products from its Even Better franchise. To support innovation and key brands, we increased our advertising, merchandising and sampling by approximately $75 million, with a large portion spent in some of our biggest markets to capture the most promising opportunities. In China, advertising on TV is helping us to attract thousands of new middle-class Chinese consumers, who come to our counters when they start buying their first prestige beauty products. Clinique's TV campaign behind the launch of Even Better Clinical in China helped fit -- lift the brand sales there more than 30% at retail in the quarter. We have many exciting developments across our brands coming in the third quarter, including M-A-C's newest flagship that will open this month on the Champs-Élysées in Paris. The store in high-traffic shopping destination popular with tourists should fully express the brand and build further awareness. In terms of anticipating the products and drawing on our strategy of being locally relevant, M-A-C is introducing a makeup collection for Chinese consumer called the Year of the Snake to coincide with the country's New Year's celebration. And 2 brands are extending best-selling franchises. Estée Lauder recently launched a new eye serum as part of its Advanced Night Repair line, and Origins is adding an antiaging cream to its Plantscription collection. Both products should generate further interest in the brands. Additionally, our Aramis and Designer Fragrance division has a busy season planned with the launch of Marni and Zegna Essenza collection and the further rollout of Coach Love. On January 1, we introduced an enhanced organization structure to recognize our top executives, expand senior leadership positions and prepare us for future growth by providing [indiscernible] resources for growing brands. We believe these strategic changes will strengthen our company and provide additional development and career opportunities for current and future leaders. Our dynamic organization is constantly evolving. And to be competitive, we must be agile. Our people and our brands are our greatest assets. By realigning responsibility, we believe we'll continue to leverage the company's amazing strengths across our world-class brands and more of our most talented leaders. This organizational design should enable us to be more locally relevant, better focused on global opportunities and strongly positioned for sustainable profitable growth. This year, we are rebalancing our marketing spending. In the second and third quarters, we led the biggest increases. In the past few years, the highest amount of incremental investment occurred in the fourth quarter. The different cadence this year is skewed to the launch dates of innovations and determine the best times to invest in growing markets and support our business in soft markets. The combination of the advertising rebalancing, the SAP shift and the changing dynamic of global markets makes it very difficult to read trends by quarter. More than ever, we encourage you to focus on our full year performance. For fiscal 2013, we expect the macroeconomic climates to be mixed with continued growth in many countries, such as United States and China. But challenges will remain in several international markets, including Southern Europe and Korea. We expect recent trends in the demand for global prestige beauty to continue and our company growth to exceed the industry once again. For this reason, we reaffirm our top line local currency growth of between 6% and 7% for the full fiscal year. And at the same time, we are raising our full year earnings per share forecast to between $2.51 and $2.59. Now I will turn the call over to Fabrice, who will discuss our Asia strategy.

Thank you, Fabrizio, and good morning, everyone. I have worked in the beauty business for over 25 years and joined the Estée Lauder Companies 12 years ago. For the last 6 years, I have led the Asia/Pacific region and previously served as President of our Aramis and Designer Fragrances division and oversaw our travel retail business. Our company began selling products in Asia/Pacific in the early '60s. And soon thereafter, we opened our first affiliates in Australia, Japan and Hong Kong. Today, we sell in 13 countries and our brands have a presence in travel retail locations in 24 markets. The region is very wide geographically and extremely diverse in terms of cultures, ethnic groups, consumer expectation, skin types and beauty regimes and routines. Asia/Pacific closed fiscal '12 with net sales of $2 billion and achieved compound annual growth of more than 15% over the last 5 years. In Asia/Pacific, we estimated we are the leading prestige beauty company in our distribution, and the Estée Lauder brand is the #1 brand in each distribution after several years of significant growth. We currently sell 20 of our brands in the region, although not all are sold in every country, so we still have expansion opportunities. Our travel retail business in Asia/Pacific has also grown significantly in recent years, and today comprises over 50% of our global travel retail sales. Due to the high demand for skin care products in this part of the world, the category represents 62% of our region's total sales, twice that of makeup. Fragrance comprises 5% of sales and hair care, 2%. Distribution formats vary across markets, but 86% of our sales are to department stores. We have been rapidly expanding into beauty specialty stores and freestanding store formats in most countries over the last few years, and e-commerce is the fastest-growing distribution channel. Let me now say a few words about 3 of our largest countries in the region, namely Korea, Japan and China. Korea has the most prestige-centric beauty markets among the large countries of the world, with prestige representing nearly half of total beauty. Prestige beauty is nearly exclusively sold in department store. And historically, our company has a leading position, with 24% share in our distribution at the end of fiscal '12. Korean prestige beauty has experienced a sharp reversal during the last year as consumers have been cautious with their discretionary spending due in part to excessive mortgage debt. This has had a significant impact on prestige beauty, with a noticeable trend of young consumers trading down. However, Korea remains a critical focus for us, as Koreans are passionate about high-performance beauty products, luxury brands and the quest for flawless skin, making this market a driver of innovation and product competitiveness. In this challenging climate, we're investing in innovation and focusing our in-store execution on High-Touch experience. We are cautiously optimistic that Korea will stabilize or rebound as it has done before following periods of uncertainty. In Japan, the beauty business remains challenging. And in fiscal 2012, prestige beauty is estimated to have grown only marginally in our distribution. Fiscal year-to-date, prestige beauty remains relatively soft, although we are encouraged by our recent performance, with growth across most of our brands and share gains in our distribution in the last few months. Japan remains a strong strategic focus for our company because we believe that the country will remain the largest worldwide for prestige skin care and makeup combined 10 years from now. It is also home to the most educated and discerning skin care consumers, leading to innovation in product performance, services and package design. We have the largest share among foreign prestige beauty companies, although Japan remains dominated by local brands with significantly wider distribution. However, a credible network of prestige beauty specialty retailers is developing in high-traffic train station and malls, offering younger consumers open-sale shopping with assisted sales service. We are very encouraged by this recent development as it will help strengthen our ability to recruit new consumers. We created our own affiliate in China slightly over 10 years ago, although we have been a presence in the market since the mid '90s with the Estée Lauder and Clinique brands. We now sell 14 brands in China and have over 3,000 local employees. China today represents about 30% of the region's business, and has grown an average 33% annually over the past 3 years. The Estée Lauder brand is the largest prestige brand in China in its distribution. And our combined portfolio had a 26% share in fiscal 2012, an increase of 340 basis points from fiscal 2009 according to external sources. Beyond the expansion of our brand portfolio in China, we are increasingly capturing consumers eagerness for prestige beauty brands and services across new distribution channels like Sephora, freestanding store and e- and m-commerce. Online capability spans about 350 cities. And both this geographic reach and our online sales are expanding rapidly. Since fiscal 2009, we have doubled the number of Chinese cities where we have a brick-and-mortar presence, from 33 then to 66 cities to date. This has come from department stores, the fast-expanding Sephora distribution and increasingly, our own freestanding stores. In fiscal 2012, our growth in China was 8% inorganic, like-door sales, while an additional 16% was contributed by distribution expansion. Large numbers of emerging consumers are entering the prestige category in secondary and tertiary cities, while consumers in tier 1 and mature tier-2 cities migrate increasingly towards buying online and when they travel. Traveling Chinese consumers will remain a strong source of growth for our business across Asia, in many other high-street destinations around Europe and North America, as well as throughout our global retail -- travel retail network. In the second quarter, our retail business in China remained healthy, with like-door growth of 6% and total growth of 28%, including distribution and expansion. This performance also reflects increased TV advertising behind key franchises for Estée Lauder and Clinique as part of the company's commitment to continuously invest in important growing markets. The Esteé Lauder Companies is focused on winning with consumers in the Asian markets. Skin care and face products command the lion's share of prestige beauty consumption, with an estimated 80% of the prestige beauty sales in the region. This is clearly a priority and one of our strengths. Our significant capabilities in product development and blue sky innovation, particularly at our R&D centers in Tokyo and Shanghai, are focusing on creating more products in these segments, with a strong emphasis on local consumer relevance backed by increased investments in consumer insights. Although we started long ago offering Asian consumers specific products that meet their unique beauty regime expectations, like brightening and spot correcting solutions, we have reinforced this commitment by significantly increasing the depth of our Asia-centric product assortment across all our brands. As an example, in fiscal 2012, 20% of the Estée Lauder brand's Asian sales came from franchises developed for the region, such as Nutritious and Cyber White. And more recently, we went a step further by creating a locally researched and produced premium skin care brand, Osiao, which was launched in Hong Kong this fall. The predominance of our demonstration-led distribution model in the region offers us another strong opportunity, namely to leverage our expertise in High-Touch and in-store experience especially against mass competitors. Asian consumers have taken the lead in adopting the digital space to actively engage in social media and beauty blogging, as well as buying online. We are currently the leading beauty company in terms of the number of marketing, e-commerce and mobile sites across Asia. Also, our brands are actively connecting with consumers via Facebook and Twitter and also on local social media sites. Over the last few years, we've greatly expanded our regional capabilities. And we believe our proficiency in R&D, product development, consumer insights, High-Touch service and retail expertise positions us well to capture a greater share of future growth. We're focused on our biggest opportunities, with a clear priority on pursuing various prestige channels of distribution, emerging middle class consumers, geographic expansion to mid-tier cities, locally relevant innovation and new ways of connecting with younger consumers. We also remain focused on hiring and retaining regional and local talent, and we want to become the employer of choice in Asia/Pacific. We believe the focus on talent is critical to succeed in this highly promising part of the world, just as much as we have historically done in our home market. Our strategy in Asia/Pacific closely mirrors the company's priorities. So by winning in critical, high-growth areas, we will help the company achieve its financial goals. Asia/Pacific's particular focus on skin care innovations, China, emerging market consumers, travel retail and fast-growing channels will benefit some of the most critical, global, overarching strategic goals. Over the long term, we believe we are optimally positioned and well prepared to continue to fully capture the massive growth in demand forecasted in this part of the world for prestige beauty products. With rapidly growing emerging markets expected to drive extraordinary growth in Asia, coupled with our strong leadership team and strategic vision, we expect to win across consumer segments, geographies, brands and categories. Thank you. And now, I will turn the call over to Tracey.

Thank you, Fabrice, and good morning, everyone. As a quick reminder, my commentary on the quarter results and the outlook for the remainder of this fiscal year excludes restructuring and other charges. As Fabrizio mentioned, we delivered sales growth during the second quarter at the high end of our expectations. Reported net sales were $2.93 billion, a 7% increase over the prior year period. The effect of foreign currency on total net sales versus the prior year was de minimis in the quarter. Net earnings increased 14% to $457 million compared with $401.1 million in the prior year quarter and diluted EPS was $1.16. Our EPS was higher than our previous expectations, primarily due to favorable foreign exchange impact on EPS, a higher-than-anticipated SAP order shift into the quarter and a nonrecurring gain associated with the settlement of the remaining terms related to the 2007 sale of Rodan + Fields, one of our product brands at that time. As we anticipated, some retailers accelerated their orders into our second quarter that otherwise would have occurred in our third quarter, in advance of the January launch of our third wave of the rollout of SAP, which is part of our overall Strategic Modernization Initiative, as you're well aware. The impact of this shift in this year's second quarter was an additional $94 million in sales and $78 million in operating income, equal to approximately $0.13 per share. The prior year second quarter also included an SAP impact and reflected a pull forward of $30 million in sales and $23 million in operating income with the same quarterly timing effect on the third quarter. Excluding the SAP-related order shifts in both this year and last year, local currency sales would have grown 5% in the second quarter and the related EPS would have also grown 5%. Please refer to the schedule included in today's press release for more details of these shifts by both region and product category. Sales of skin care products rose a robust 10% in local currency, and we generated strong growth in every region. New product launches from Estée Lauder, Clinique and La Mer, in addition to continued strength in our core franchise skin care products, supported this category growth. In makeup, local currency sales rose 7%, driven by solid growth from our makeup artist brands, as well as new and existing products at Clinique. Our fragrance business rose 5% in local currency. Double-digit growth in the Europe, Middle East and Africa region drove the overall increase with new product launches and expanded distribution of our higher-end fragrance brands. In hair care, sales rose 9% in local currency, as Aveda benefited from the continued success of both the new products that Fabrizio mentioned earlier, as well as expanded distribution. Regarding our geographic performance in the quarter. Sales in our Americas region increased 6% in local currency. And within the Americas, the United States rose 6%, while Canada and Latin America each grew double digit. From a channel perspective, our North American sales to department stores grew mid-single digits. Online sales and multi-brand specialty stores rose strong double digits. Salons and spas grew in line with the overall region and our own stores grew low-single digits. In the Europe, Middle East and Africa region, sales increased 7% in local currency. We achieved double-digit increases in France, Switzerland, the Nordic region and several developing markets. This growth was partially offset by continued economic difficulties, primarily in Spain, Italy and Greece, as we've mentioned previously, as well as continued declines in Russia. Our travel retail net sales rose 9%, as trade destocking in the channel began to subside and retail sales growth rose to solid double digits in the channel, driven in part by passenger traffic increasing within the quarter. Our Asia/Pacific region sales was 9% in local currency. Fabrice just shared with you some of the highlights of this region. But during the quarter, China grew sharply, driven by accelerating same-store sales growth and new distribution. During the quarter, our brands added 17 doors and entered 2 new cities in China. Our business rose double digits in Hong Kong, while Japan growth accelerated to mid-single digits. We continue to experience weakness in Korea, as challenging economic conditions impacted sales across most of our brands. Our gross margin increased 80 basis points to 80.7%. The increase came primarily from 40 basis points related to favorable pricing and 40 basis points related to manufacturing variances, favorable mix and other items. The gross margin also reflects savings of $10 million from our cost-reduction programs. Operating expenses were flat in the quarter as a percent of sales, primarily as a planned increase in advertising, merchandising and sampling expense of 100 basis points was offset by a decrease in general and administrative costs and the impact of an out-of-period adjustment of 70 basis points combined. Foreign currency transactions were 30 basis points favorable in the quarter. And our cost-savings initiatives reduced expenses by $16 million in the quarter. Operating expenses rose 11% to $667.7 million, and operating margin rose 80 basis points to 22.8%. We realized total savings of $26 million in the quarter from our cost-savings programs and still expect to save $50 million to $75 million for the full year. In December, we recognized $21.3 million in other income, which effectively represents the sale of our contingent interest from the 2007 disposition of the Rodan + Fields brand. This was not included in our original guidance for the quarter. We recorded $14.6 million or $0.02 per share in restructuring and other charges during the quarter, as we identified and finalized new activity under the program. The restructuring program closed as of December 31, 2012. For the full fiscal year, we now expect to record charges of approximately $25 million. For the 6 months, net cash flows generated by operating activity increased 7% to $655 million compared to $610 million last year. We invested $205 million in capital expenditures, $327 million to repurchase approximately 6 million shares of our stock and paid our shareholders $280 million in dividends, which was $76 million higher than the prior year. As we have previously mentioned, we transitioned to quarterly dividends beginning with the current third quarter. Days sales outstanding increased to 47 days compared to 45 days at the end of the second quarter last year. Inventory days to sell rose to 163 days compared to 148 days last year. The planned increase reflects the inventory that was anticipated to maintain service levels in advance of the SMI go live in January. And that concludes my remarks regarding our second quarter and year-to-date results. As we turn to our outlook for the balance of the year, we do expect to experience continued market weakness in certain Western European countries and Korea. However, this should be more than compensated by the strong sales growth we are experiencing in other markets. For the year, we continue to forecast local currency sales growth of 6% to 7%. We now estimate a negative currency translation impact of about 1% on our full year sales growth. Our estimate assumes weighted average exchange rates for the full rates for of 1.28 for the euro, 1.59 for the pound and 84 for the yen. The benefits that we will continue to experience from pricing, cost savings and operating leverage are expected to drive operating margin performance improvement of approximately 70 to 90 basis points for the year. Therefore, we are raising the full year non-GAAP EPS forecast to reflect the nonrecurring gain related to the Rodan + Fields settlement. We now expect EPS will come in between $2.51 and $2.59, equal to growth of 11% to 14% versus last year. Our EPS range excludes the charge of $0.03 related to the repurchase of debt, as well as $0.04 for restructuring charges. For the year, we continue to expect to generate more than $1.2 billion of cash flow from operations. We still estimate our effective tax rate will be between 31% and 33%. With the impact of our order shift, the third quarter sales growth is forecasted at 3% to 4% in local currency. The foreign currency translation impact on this sales growth is expected to be minimal. We anticipate EPS for the third quarter to be between $0.28 and $0.32. As a reminder, this third quarter sales growth comparison is affected by the SAP-related pull forward of $94 million in orders that we spoke about earlier into the second quarter this year, and of $30 million in orders with the same timing last year. These shifts are expected to reduce normal third quarter sales growth by approximately 3 percentage points. EPS for the current year quarter will be impacted by $0.13 due to this year's sales shift versus a $0.04 impact in last year's third quarter. We recognize that these shifts related to both EPS as well as the cadence -- SAP as well as the cadence of our quarterly advertising spending this year make year-over-year quarterly financial comparisons difficult. We believe our full year outlook in terms of both sales and EPS growth is a better reflection of the overall trends of our business. And that concludes my prepared remarks on the quarter and the guidance for the balance of the year. We'll be happy to take your questions at this time.

[Operator Instructions] Our first question today comes from Jason English with Goldman Sachs. Jason English - Goldman Sachs Group Inc., Research Division: Two questions. First, travel retail destocking. I'm encouraged by what you guys said about it abating throughout the quarter. Do you think that's at an end?

Yes. We see it abating in the quarter. I think that soon retail sales and net sales will get aligned again. That's our expectation.

Our next question comes from Lauren Lieberman with Barclays. Lauren R. Lieberman - Barclays Capital, Research Division: Just one housekeeping was I think Fabrice said that China was 30% of Asia. I was curious if that includes travel retailers, such as -- as reported China number. My real question was more about launch activity. And I know that the strongest growth was coming from the ultra premium brands of the super high luxury. But is innovating and spending more money on those brands versus on Estée and Clinique, is that less impactful overall? Because the halo effect of a hit product in Tom Ford is going to be smaller than the halo effect of having a big winner in Clinique or Estée brand.

I'll first answer the second question and let Fabrice answer then the first question. No, we will continue to focus on Estée Lauder brand and Clinique as much as we can. We have a fantastic innovation program for both brands in the future 3 years, which is leveraging our compass analysis, meaning the areas of fastest growth in the world and leveraging our best technologies. So there is no -- in no way our investment in building Tom Ford, Jo Malone, La Mer to the next level will dilute our focus on Estée Lauder and Clinique. Fabrice?

Yes. Lauren, the 30% was actually excluding travel retail. We were talking China domestic sales only.

Your next question comes from Dara Mohsenian with Morgan Stanley. Dara W. Mohsenian - Morgan Stanley, Research Division: Fabrizio, I was hoping you could give us a review of your market share performance in the U.S. during the holiday season. It looks like some of the share gains from the last couple of years dissipated a bit based on some of the market data. So wanted to get your thoughts around holiday performance and also what you're expecting in the back half of the year from a market share standpoint in the U.S.

Sure. So first of all, our -- if you look at the calendar year '12, we continue to grow market share in skin care in a very solid way, and that's been our main focus. Obviously, you need to exclude devices from the way the market is reported by NPD because it's like putting electronic brushes in the toothpaste market. So looking at skin care, we are growing skin care, and that will remain our focus. Looking at makeup, we are also growing in makeup very solidly. Because, again, in the market number you see, they're not included all our online business and all our freestanding store that represents a big and fast-growing part of our M-A-C, particularly, business. So we are very satisfied with makeup. And we continue to grow skin care and makeup in the future and to grow market share. Yet a positive aspect is that the prestige in general is growing faster than mass, so we'll continue to grow market share versus mass, meaning market share to the total market. On our fragrance business, we had a tougher year in term of market share. This was in part designed because we had focused on improving the model and profitability of the sector and also reduced the promotional level in a very big way in order to improve profitability. This is particularly tough in the October-December quarter because as you probably know, the October-December quarter is the quarter of the year in the U.S. where fragrances are the biggest part of the market. While in the other 9 months of the year, skin care and makeup are much bigger proportion of total cosmetics. So yes, growing market share without a strong fragrance innovation program and eye promotion in October-December is tougher, and we have experienced that. But in next fiscal year, we have an outstanding fragrance program and we plan to come back with a more important ability to grow fragrance as well on the new better profitable way.

Your next question comes from Wendy Nicholson with Citi Research. Wendy Nicholson - Citigroup Inc, Research Division: The first question for Fabrice. Can you give us a sense, the 6% like-door growth you saw in China, is that the right run rate for the business, do you think? Because I know it's been a little bit weaker than that over the last couple of quarters but maybe that's just China specific and macro-related. So was 6% a good run rate for us to forecast? And then, I guess a question for Tracey. The guidance for the third quarter, I think everybody assumes, is pretty conservative. But if we take you at your guidance, that implies, I think, like 10% or 11% organic growth or like-door growth or whatever, local currency growth in the fourth quarter, which seems high given the tough comp. So are there a particularly strong number of new products launching in the fourth quarter that's going to make that quarter so good?

Wendy, let me first remind you that the 6% like-for-like growth in Q2 comes after 2% in Q1. We certainly expect to see on average the like-for-like sales remains single-digit range. And the rule [ph] that the growth is clearly expected to come from new consumers in new cities across the country, that's simply the reflection of the fact that the mature cities in China, tier 1, if you want, actually are very close in terms of consumption per capita with what you see in neighboring countries, like Korea, which are very developed in terms of beauty industry. So consumers are also, in those markets, starting to shift towards e-commerce and the travel consumption as we have noted before.

Yes. On the total business, I just want to say that we believe the number is absolutely our goal in the last quarter, and is doable. First of all, in the last quarter, we have a easier base period last year because our 2 biggest problem, which are Korea and Russia, were already in the numbers at the point in time of the year. Second, because we have a very strong initiative program and great new launches on our main brands, Estée Lauder, Clinique in the period. And third, again, the increased advertising spending that would also continue in the third quarter, we believe, will impact strongly the last quarter of the year, where in the past, we were increasing advertising also in the last quarter. There would be also further impact in the first quarter of the year after. I don't know, Tracey, if you want to add.

No, that's it. Your assumption is correct, Wendy.

Your next question comes from Ali Dibadj with Bernstein. Ali Dibadj - Sanford C. Bernstein & Co., LLC., Research Division: Guys, I had a question related to the pull forwards in a couple parts. First is just to get a sense on the level of confidence you have in kind of estimates for the pull forwards. Because it's often underestimated, it seems, and I'm trying to understand whether that's actually bad or could that actually be interpreted as good? And in fact, if your level of confidence is high -- but I do want to go back to this share question, the 5% underlying top line growth. Because actually they'd be at best maintaining share, but likely losing share globally versus your peers. And I'm trying to get a sense of whether that's a shift in luxury competition or a shift between mass and prestige growth rates. And then the second related part to this pull forwards is -- and Tracey, you mentioned this, there's the chart that is at the back. I think it's like the fifth from the back of the table that talks about the company's top line and EPS, excluding returns and charges and as well SAP adjustments. It was in -- it's in this quarter. It wasn't in the last quarter. It was in the quarter before. And this quarter it says, "Look, 5% EPS growth is what we believe the underlying growth is." A couple of quarters ago, it was 0. And absolutely get it that you're not a quarter-by-quarter company. I totally get that. But I'm trying to understand when that actually normalizes. So when should we expect that to be at a normalized run rate going forward? So lots of stuff in there, but if you could help on any of those that would be helpful.

Okay. I -- that was definitely more than one question. But let me take the pull forward questions and -- because we certainly can appreciate, as we said earlier, that it can get a bit confusing, especially since this is the second year in this quarter that we've had this phenomena. So as it relates to the pull forward and the pull forward actually being more than what we had originally anticipated, so it was indeed above the high end of our range. That actually is a good thing, I think, especially since, as Fabrizio said, the SAP go live thus far has gone quite smoothly. So the fact that our customers were willing to take advance orders from us and we were able to get those shipments out, I think is certainly a good thing. It speaks to the relationship that we have with our customers both -- and many of those orders actually were in Fabrice's region, in the Asia/Pacific region, some in Europe and then some here in the U.S. So I think that was a good thing. And the fact that the SAP go live went well, we are now bringing down the inventory levels related to some of the extra inventory that didn't get shipped out in the quarter that certainly will be shipped out over the next few months. We do have another go live next year, so -- unfortunately, it won't be as big as this year's go live in terms of advance shipments. But it is the last major wave for us of SAP, what we call release 4. So you will see this phenomena one more year. The normalized, as we mentioned, is really the full year. So looking at the second and third quarter is very difficult. And again, we can appreciate that. The full year, I think, gives you a better indication of the normal growth rate of the company, and the same will be true next year as we have this phenomena again this -- next year.

And I would just -- to add one point as Tracey said, normal is the full year, which is 6% to 7%. And we estimate the global market to be in this moment about 3% because there are many markets which are actually declining. To be very clear, France, Italy, Spain, Greece, Portugal and Germany have been on a declining trend and Korea as well as we explained. So yes, we believe the global market in this moment is at 3%. We are growing at 6% to 7%. So we are definitely continuing to grow share.

Your next question comes from Alice Longley with Buckingham Research. Alice Beebe Longley - The Buckingham Research Group Incorporated: My question is can you update us on the outlook for your ad ratio for the whole year and your selling ratio? Will those ratios be up, flat or I assume not down for the year?

We don't have that information handy and we typically don't speak to that information. So if there's another question that we can answer for you as it relates to advertising, we're more than happy to. I'm not sure if -- the base of your question is related to the shift in the advertising spend that we've had, which follows a different cadence of innovation and promotions this year. But we typically don't... Alice Beebe Longley - The Buckingham Research Group Incorporated: Well, I'm trying to smooth out that shift and see if your advertising ratio is actually going to be up for the year overall. And if your -- maybe you could talk longer term, if your idea is to generally increase your advertising ratio and more than offset that with your perhaps stability improvements?

Okay. So our advertising spend will be up this year, and I think we had communicated that that was the intent at the beginning of the year. What has changed this year slightly is just the timing, the double-digit increase in the second and third quarter that we're having in advertising spend which will not be -- which will be more normalized, again, when you see our full year results in terms of advertising spending. But it will be up this year for sure.

And I will -- just to add that as we said several times in the last years, we are doing a lot of work to eliminate cost, we do not add value in the company, and to reinvest custodies [ph] in improving our advertising and our ability to influence the consumer. And on top of what we're doing this year, we are focusing this advertising spending on the biggest growth opportunity in the world, namely some categories in the U.S., China, mainly growth in emerging markets. And building share in some of the important soft markets around the world like France, where the market is declining, we are growing 8%. And so that's what we're doing. And so the answer is yes, we are going to keep investing in absolute, more in advertising as we take other cost out of the company.

Your next question comes from John Faucher with JPMorgan. John A. Faucher - JP Morgan Chase & Co, Research Division: Just following up on that last question there. So the investment levels are going up. Can you talk a little bit about what you're seeing from a competitive standpoint? So on an absolute basis, spending is higher. Do you think that you're increasing your share of voice in the category at the same rate maybe as you were before? Or are we seeing a bigger increase from your competitors? And then one housekeeping adjustment. Tracey, I believe you mentioned something about an out-of-period adjustment in the SG&A for the quarter. Was that material? Or can you give us just a little bit of color on that.

So first of all, we believe we are increasing our global share of voice on average in [indiscernible] with the market. But there are some of our competitors which are also increasing their spending. And so the competition is pretty tough, particularly in the big, growing markets. So this increase of advertising spending is essential. However, I want to verify [ph] that independently from share of voice. The real important thing that we see in the business is just the ability to spend because this is bringing new consumers and transfer [ph] people from us to prestige, and in turn is what is behind the growth of the entire prestige sector in the main markets we operate in. So share of voice is not necessarily the key measure of the success of advertising that we're using in this field. Tracey?

And the out-of-period adjustment, we've had a few this quarter obviously, Rodan + Fields. But the one that you're referring to was related to an accounting adjustment, and it was about $0.02 in EPS.

Your next question comes from Bill Schmitz with Deutsche Bank. William Schmitz - Deutsche Bank AG, Research Division: I just want to try to squeeze in 2 questions here. I think you said you were going to spent $80 million of incremental advertising in the quarter originally. And then I think in the prepared comments, you said that advertising is up 100 basis points. So that's $30 million. I just want to make sure that's correct and maybe why you decided to push some of them forward, if my math is right. And then just on a housekeeping item, just the sales growth x SAP for Clinique and Esteé Lauder brands in the quarter?

I'll take the first one. So the -- no, we said we spent $75 million advertising extra in the second quarter. So not $80 million at the end but $75 million. So your math on the $30 million is wrong. I don't know where this came from, but happy to reconcile it later with Dennis.

And while we don't disclose specifically Clinique and Esteé Lauder, in the press release, we do show adjusted growth numbers by category i.e. skin care, makeup, et cetera, excluding the impact of SAP. We also show it by region. So I will refer you to that.

Your next question comes from Connie Maneaty with BMO Capital Markets. Constance Marie Maneaty - BMO Capital Markets U.S.: If I heard you correctly, you said that the restructuring program closed on December 31. So could you give us what the total cost in savings of the program were and how much they exceeded the going in expectations? And also what the benefit of the savings you've gotten out of that program, how they will affect 2014?

So we will still incur some restructuring charges in the balance of the year. I called out in the guidance that -- what the third quarter impact would be and then the full year will be $25 million. So we only incurred a portion of what we had identified in the second quarter in the financial results for the second quarter. The total restructuring charges under the now closed program will end up somewhere between $325 million and $350 million. So that is consistent with what we have discussed previously. And our restructuring savings related to that program are still in the area of $7.60 million to $7.85 million.

Your next question comes from Chris Ferrara with Bank of America. Christopher Ferrara - BofA Merrill Lynch, Research Division: Just a clarification and then another question. So the clarification is can you talk about what China's growth was? I think the numbers you cited, maybe you said retail, maybe I got that wrong. But what was China's growth x the SAP adjustment? And I mean, selling not necessarily retail takeaway. And then can you just talk about some of the Western European markets? Obviously, there have been pockets of weakness there. Can you talk about the cadence there? Are those pockets of weakness getting weaker, getting stronger, have they stabilized? And then have the places that have been more resilient in Western Europe, have you seen any deterioration there at all? Or are they staying strong?

I'll just take the China net sales growth. You're right, that I was actually referring to retail sales. So taken as net, the actual growth is 23.6% and this is adjusted excluding the SMI impact.

In term of the -- sorry, what was -- the second question was about European markets? Christopher Ferrara - BofA Merrill Lynch, Research Division: Talk about how they've progressed. Like, the weak markets, have they stabilized? And then the markets that have been more resilient on an x SAP basis, have they remained resilient? Or are you starting to see some of those markets get a little bit weaker as you move through?

Okay. So in term of the markets that -- I need to divide into 3 blocks. So the Southern European market, the European market, the markets are definitely getting weaker. The markets in the October-December has been negative. Many markets, France, Italy, Germany, Greece, et cetera. And so the markets -- we have been growing in most of these markets with the exception of Spain and Greece. And so we are gaining market share. Now the best example is France, which has been a market on the negative in total, where we've been going 8% basically based on Estée Lauder and Clinique great successful trend and our smaller brands successful trend. So we are doing well. The key idea here is that we seems to be able to grow and progress also in soft market and not only in strong markets. Now the exception to the story is Russia, where the market is strong, and we are not doing well because of distribution issues. And we are -- we believe we have a plan to come back and restart positive trends in the next fiscal year.

Your next question comes from Caroline Levy with CLSA. Caroline S. Levy - Credit Agricole Securities (USA) Inc., Research Division: Would love to just think about the dynamics going on in China with online and the potential for that to be much, much bigger than it is in other parts of the world. I'm trying to understand the margin impact. Is it purely positive? Is there any expense in building that out that makes the margin anything less than stellar? And also, just to understand if same-door sales are negative in the first tier and some second-tier cities, what the impact of -- on returns and margins is from that? And finally do you have any sense of how many consumers you're reaching in China?

There's a lot of questions. I will give you, first of all, the -- start with online and let Fabrice answer the rest of the question. So our online sales in our own sites in China is growing and is an important asset to penetrate more than 300 cities, as Fabrice explained in his prepared remarks. And we believe this has a strong future. We'll continue to grow. But to be clear, we are strong, growing fast, but it's the beginning of the journey. It's still a relatively small part of our sales in China at this point. Fabrice?

Yes, I just like to add that we are already 6 brands that in China are active with our own e-commerce sites. This is e without m. We are actually working on launching m as well. But the point that Fabrizio made is correct. We have seen a very, very active expansion of the demand to the channel. Regarding your point about the tier 1 negative retail growth, we actually have a fair amount of brands with positive retail trends in tier-1 cities. So I don't think we should go that far in terms of cataloging tier 1 as a declining market. It's just not growing as fast as the rest of the country. Because basically, as I said before, it has reached levels of maturity, which are very close to neighboring countries. So that's expected. In terms of the audience we reach, I can maybe share with you the fact that through our CRM activities and our willingness to create loyalty and work harder at retaining consumers in a market where they're still educating themselves very, very rapidly but still educating themselves in the industry, we think that annually, we're looking at 7 million to 8 million women and a few men, we hope, buying our products across the country in the domestic context. Remember that we sell probably twice as much to Chinese people outside of China in terms of value, certainly.

We have time for one more question. Your last question comes from Mark Astrachan with Stifel Nicolaus. Mark S. Astrachan - Stifel, Nicolaus & Co., Inc., Research Division: I'm still trying to reconcile the fourth quarter guidance. What gives you confidence that increased ad spend can drive that kind of acceleration on the top line? And then maybe sort of related to that, what are your expectations for category growth? Is there something underlying that in terms of an anticipated acceleration? Or do you anticipate still at the low end of that 3% to 4% for the year?

As I said is yes, as the increased advertising spend in the third quarter, it should happen in the fourth quarter. But it's also the fact that we have a very strong initiative program in the fourth quarter on our core brands and on all our brands. And because the fourth quarter, some of our softer markets started being soft actually in that quarter a year ago. So we have easier base on this one to beat. And finally, we know there are some markets which are started recovering, and we see an accelerated growth that we are also planning to exploit at best. Tracey, you want to add anything?

No, other than category, without giving specific information, I mean, the -- what is driving the bulk of that growth from a category standpoint and giving us confidence to Fabrizio's point is skin care and actually, fragrance. So we talked about some of the strength of our fragrance launch performance, as well as some of the newer products that are continuing to expand and grow with Jo Malone and Tom Ford. So those 2 from a growth standpoint are driving a good chunk of the growth in the fourth quarter.

That concludes today's question-and-answer session. If you were unable to join for the entire call, a playback will be available at 1 p.m. Eastern Time today through February 19. To hear a recording of the call, please dial (855) 859-2056, and enter passcode: 86189449. That concludes today's Estée Lauder Conference Call. I would like to thank you, all, for your participation, and wish you all a good day.