Jon Moeller - CFO

John Faucher - JPMorgan Dara Mohsenian - Morgan Stanley Wendy Nicholson - Citi Research Bill Schmitz - Deutsche Bank Chris Ferrara - Wells Fargo Olivia Tong - Bank of America Nik Modi - RBC Capital Markets Ali Dibadj - Bernstein Michael Stieb - Credit Suisse Jason English - Goldman Sachs Steve Powers - UBS Connie Maneaty - BMO Capital Markets Javier Escalante - Consumer Edge Research Joe Altobello - Oppenheimer Bill Chappell - SunTrust Alice Longley - Buckingham Research Mark Astrachan - Stifel Jon Andersen - William Blair Caroline Levy - CLSA

Good morning, and welcome to Procter & Gamble's quarter-end conference call. Today's discussion will include a number of forward-looking statements. If you will refer to P&G's most recent 10-K, 10-Q, and 8-K reports, you will see a discussion of factors that could cause the company's actual results to differ materially from these projections. As required by Regulation G, P&G needs to make you aware that during the call, the company will make a number of references to non-GAAP and other financial measures. Management believes these measures provide investors valuable information on the underlying growth trends of the business. "Organic" refers to reported results excluding the impacts of acquisitions and divestitures and foreign exchange, where applicable. Free cash flow represents operating cash flow less capital expenditures. Free cash flow productivity is the ratio of free cash flow to net earnings. Any measure described as "core" refers to the equivalent GAAP measure, adjusted for certain items. P&G has posted on its website, www.pg.com, a full reconciliation of non-GAAP and other financial measures. Now, I will turn the call over to P&G's Chief Financial Officer, Jon Moeller.

Thanks, and good morning. Our January-March results came in as we had expected, keeping us on track to deliver our fiscal year objectives. All-in sales were unchanged, versus the prior year, including a three point headwind from foreign exchange. Organic sales grew more than 3% in a very challenging macro environment, with significant market level events in places like Venezuela, Argentina and the Ukraine, declining levels of market growth in both the developed and developing world and weather-related issues in North America. Organic sales were at or above prior year levels in each of our five reporting segments. Organic sales growth was driven by strong organic volume growth of 3%. Volume was at or above prior year levels in each of our five reporting segments. Pricing added one point to sales growth and mix reduced sales growth by one point. Fiscal year-to-date, we deliver between 3% and 4% organic sales growth, leaving us on track to deliver 3% to 4% organic sales growth for the fiscal year. : Core gross margin declined 110 basis points, cost savings of 200 basis points, pricing and volume leverage were offset by product category and geographic mix of 150 basis points, foreign exchange headwinds of 100 basis points and higher commodity costs. Core SG&A improved 130 basis points driven by marketing efficiencies and overhead productivity savings. Importantly therefore, core operating margin increased 20 basis points. Core earnings per share grew 5% to $1.4, leaving us on track to deliver 3% to 5% core earnings per share growth for the fiscal year. Foreign exchange was at $0.12 per share headwind for the company on the quarter. Excluding foreign exchange, core earnings per share grew 17%. The effective tax rate on core earnings was about 20%. Tax accounted for roughly $0.03 of earnings per share benefit on the quarter versus the prior year. We generated $3.2 billion in free cash flow, achieving 119% free cash flow productivity, and remaining on track to deliver free cash flow productivity of about 90% for the fiscal year. As planned, we returned to 1.7 billion of cash to shareholders in dividends. We also announced a 7% increase in our dividend. P&G has now been paying a dividend for 124 consecutive years since its incorporation in 1890. This is the 58th consecutive year the company has increased its dividend. We repurchased $1.5 billion in stock bringing year-to-date share repurchase to 5.5 billion. Stepping back, we are satisfied with our top line growth, particularly against the difficult macro backdrop. Constant currency earnings progress was very strong. We're reliably converting earnings to cash, and are building on a strong track record of cash returned to shareholders. As we move forward, value creation for consumers and shareowners remains our top priority. Operating TSR is our primary business performance measure. Operating TSR is an integrated measure of value creation at the business unit level, requiring sales growth, margin progress and strong cash flow productivity. Operating TSR drives focus on core brands and businesses, our leading, most profitable categories, and leading, most profitable markets. Our strongest brands and business units and total company positions are in the U.S. We need to continue to ensure our home market stays strong and growing. The actions we've taken over the past two years to restore consumer value, expand our vertical product portfolios and horizontal regimens, and lead innovation have enabled us to restore value creating share growth in more parts of the business. We still have a lot more work to do, and the competitive environment is intense, which leads to choppy results on a quarter-to-quarter basis, but we're making steady progress. We'll continue to grow and expand our business in developing markets, with a focus on the categories and countries with the largest sizes of prize and the highest likelihood of winning. This is where the world's babies will be born, and where more new households will be formed. Developing markets will continue to be a significant growth driver for our company this year and for years to come. We'll continue to focus the company's portfolio allocating resources to businesses where we can create value. Over the past six years, we exited businesses that have accounted for over $6 billion in sales, including coffee, pharmaceuticals, snacks, kitchen appliances and water purification. Last quarter, we announced our exit from the bleach business. Two weeks ago, we announced our plan to exit the pet food business. Mars will buy our business in the Americas and several other countries. We expect to sell the European business to a different buyer. The $2.9 billion purchase price Mars has agreed to pay for the nine European business represents a 1.8 times multiple of sales and an 18X multiple of EBITDA on an average of the past two year's sales and profits for the global pet food business. We'll begin the process of selecting a buyer for the European market in May; early interest in this asset is strong. We'll continue to exit businesses where we determine that potential buyers with difficult capability sets can create more value than ourselves. Consistent with our focus on operating TSR, we're continuing to drive productivity and cost savings. We made solid progress over the last fiscal year and a half. We have strong productivity plans for fiscal 2014, and we're accelerating some 2015 savings into 2014. Versus a target run rate of $1.2 billion, we are now forecasting about $1.6 billion of cost of goods productivity savings this fiscal year across materials, logistics and manufacturing expense. Versus a going-in target of 5%, we expect to improve manufacturing productivity by at least 6% this year. We're up more than 7% fiscal year-to-date. At the CAGNY conference, we announced the complete redesign of our end-to-end supply chain in North America. We operated 35 manufacturing facilities in North America today, only six of which are multi-business or multi-category. We're consolidating operations into multi-category sites, located closer to the customers and consumers we serve, allowing us to respond quickly to their needs and provide better service at the best possible cost. We're examining the potential for similar improvements in Europe. At the same time, we are converting to common manufacturing and technology platforms for faster innovation, qualification and expansion. We are designing supply systems to allow for more online product differentiation and customization. We're also transforming our distribution operations, consolidating customer shipping and product customization operations into fewer distribution centers, which are strategically located closer to key customers and key population centers, enabling 80% of the business to be within one day of the store shelf and the shopper. All of this would drive step change improvement and responsiveness, reducing out of stocks, taking down inventory and lowering cost. It leverages the scale and scope of our production and distribution network in a way we've never done before. Savings from this transformation will accrue over three to four years, and should be in the range of $200 million to $300 million annually, which will be incremental to the $6 billion of cost of good savings we previously communicated. We expect additional top and bottom-line benefits from improved service levels. Turning to overhead, we have exceeded our 2014 fiscal year non-manufacturing enrollment reduction goals, and have accelerated over a thousand role reductions originally planned for fiscal 2015 into 2014. Through March, we're down 8000 roles or 13%. Our strict objective is to get substantially to our end of 2015 objectives by the end of 2014. This would put us close to, or within, the 16% to 22% reduction goal we've established one to two years ahead of target. Underpinning this progress are some important and fundamental changes in our organization structure and focus. We've organized into four industry-based sectors or global business units. The businesses in each sector are focused on common consumer benefits and needs. They share common technologies. They partner with common customers and common trade channels, and they face common competitors. These sectors or global business units are big enough for scale and small enough to stay in touch with consumers and markets and move with the agility and flexibility to consistently grow value. We've made a significant clarification in roles and announced a significant de-duplication of effort between the GBUs and the go-to-market operations. GBUs will create design, manufacture and market our brands and products. They will be the focus of brand building at the global, regional and local levels. Brand franchise building resources will be in the GBUs. We've changed the name of our go-to-market organizations from MDO to SMO, Sales and Market Operations. This is more than a name change; it clarifies the work SMOs need to do in the work they do best, superior, effective and efficient, selling, distribution, shelving, pricing execution and merchandizing; every day, every week and every store. Selling resources will be concentrated in the SMOs. We're aggregating the SMOs to be more logically focused on the consumers, channels, customers and markets we serve. We're merging western, central and eastern Europe into one European organization. We're merging India, the Middle East and Africa into one IMEA region. We're more fully integrating Greater China, ASEAN, Australia, New Zealand, Japan and Korea into one Asia SMO region over the next year. Within the SMOs, we'll aggregate countries at a higher level, reducing the number of geographic country clusters to about 25, a 20% reduction versus today. And back in the GBUs, we're moving from four disaggregated brand building functions; design, consumer and market understanding, communications and marketing into one integrated brand building or brand management organization. We have embedded resources that are required to win in the GBUs and SMOs, reducing the size of the standalone support functions, following those resources to work and outsourcing more of their activities. The changes I just described are significant. They will reduce interfaces and transaction costs, clarify who is accountable for what, de-duplicate effort and simplify operations. These changes will enable us to operate with more agility and speed, to operate with clear accountability and effectiveness, and to operate at a lower cost that will also enable further enrollment reduction. Moving next to marketing expense, we continue to drive marketing effectiveness and productivity through an optimized media mix with more digital mobile search and social presence, improved message clarity and greater non-advertising marketing efficiency. We expect marketing spending to come in below prior year levels, due to productivity improvements in non-working marketing and advertising cost. Importantly, the overall effectiveness and the consumer impact over advertising spending will be well ahead of the prior year. While acknowledging the progress I've just described across cost of goods, overhead and marketing, you maybe asking yourself "Where have all the savings gone?" This year, a disproportionate number of them have gone to offset FX. We have leading positions in some of the markets where currencies have soften the most, Japan, Venezuela, Ukraine, Russia and Turkey. As I mentioned earlier, January to March earnings per share would be 17% ahead of a year ago on a constant currency basis. Year-to-date, constant currency core earnings per share is up 11%. Partially as a result of devaluation or the same significant wage inflation in developing markets, which we also need to offset, and we're making targeted investments and innovation and then selling covers drive growth. The majority of the offset though has been FX, which hopefully will annualize and will be partially offset by pricing. As more savings come online and we see several more years of significant opportunity, we will get a greater percent reinvested in growth or brought to the bottom line. We're committed to make productivity a core strength and a sustainable competitive advantage. We're equally committed to maintaining innovation leadership in our industry. Innovation and productivity are the two most powerful and sustainable ways we can drive value creation for consumers and shareholders. The IRI Pacesetter results for calendar year 2013 demonstrate our commitment to leading innovation. P&G launched seven of the top 10 non-food U.S. consumer product innovations in 2013 with Tide Pods topping the list. In addition, six P&G innovations were included in their list of rising stars. Innovation is creating value on building cumulative advantage in the fabric and home care sector. Our breakthrough of proprietary three chamber unit, those laundry technology launched as Tide Pods, Ariel Pods and Gain Flings has reset that the life of consumer usage experience, product performance and convenience store. Unit-dose detergents are currently available in over 20 markets around the world, and have generated well over $1 billion in retail sales. The recent launch, Gain Flings is going extremely well, reaching nearly a 3% value share in the U.S. laundry category in just two months. Unit-dose now represents 11% of category sales of which we have an 80% share. The balance of the fabric care innovation bundle that we launched in North America in February is also off to a good start. And so, our execution of Tide Simply Clean and Fresh has gone very well. Total pricing share was up more than half a point over the past three-month period, an indication that so far Tide Simply Clean and Fresh is attracting incremental users to the brand. Improved scents and new sizes of Downy Unstoppables and Gain Fireworks in Wash Scent Beads have helped accelerate growth in this new product segment. The broad range of baby care innovations launched in the U.S., last fall, continue to deliver excellent results. Nearly every diaper across all sizes and price tiers was improved to deliver better absorbency, comfort or design. Overall, P&G U.S. baby care share was up two points with share growing in 90% of retail customer. This has led to our largest market share in the past 20 years, enabling us to retake market leadership from Kimberly-Clark. The extension of the Swagger's form in the sizes four and five has been particularly successful. Swagger share is up three points to a 10% value share of the U.S. diaper category. At the CAGNY conference in February, we announced we will be launching two new innovations in blades and razors. The first was the launch of Gillette BODY, which is moving well. The second and more significant innovation will be announced next Tuesday, April 29th. Men have told us they prefer the new innovation two to one versus the best selling razor in the world. More information will be coming to you soon on how you can watch the unveiling of our newest male shaving system. Product innovations like the one I've just described at laundry, baby care and grooming are critical to drive in strong sustainable top line momentum and delivering superior consumer value. We're also working to improve execution and operating discipline. We're seeing this improvement play out in the supply chain, in the execution of innovation launches in stores, and then the effectiveness and efficiency of our marketing programs. We are performing better, but there is still more to do. Operating discipline and execution have always been and must continue to be a core capability for Procter & Gamble. We believe that the focus we are bringing to these four areas; operating TSR, productivity, innovation, operational excellence, along with targeted reinvestment will enable us to continue to improve results even as it work to address several remaining opportunities. We remain on track to deliver our 2014 guidance, top line, bottom line and cash. We're maintaining organic sales growth range of 3% to 4%. Foreign exchange is expected to be a sales growth headwind of two to three points, which leads to all-in sales growth of approximately 1% for the fiscal year. We're maintaining our forecast for bottom line core earnings per share growth of 3% to 5%, offsetting stronger headwinds from foreign exchange and softer market growth rates with productivity savings. We currently expect foreign exchange to be roughly nine point headwind to core earnings per share growth. As a result, our guidance translates to constant currency core earnings per share growth in the range of 12% to 14%. Recall that with the planned sale of the pet care business, we are restating pet care earnings from continuing operations to discontinued operations. This will reduce core earnings per share by approximately $0.03 and $0.04 per share for fiscal years 2013 and 2014 respectively. All-in earnings per share growth remain the same. We have included a table in the press release this morning, which provides an estimate of the quarterly restatements. Please pay attention to this when you adjust your models as the impacts vary across quarters. On an all-in GAAP basis we now expect earnings per share to grow approximately 1% to 4%. This range reflects the non-core impacts from foreign exchange policy changes in Venezuela, approximately $0.15 of non-core restructuring cost in fiscal year 2014, and the restatement of pet care earnings into discontinued operations on both the current and prior fiscal years. The fourth quarter earnings growth that's implied within our guidance is driven by a combination of operating growth, driven by productivity savings and devaluation-related pricing, a low tax rate of about 21% on core earnings and $0.03 to $0.04 of small brand divestiture gains. We expect to deliver another year of about 90% free cash flow productivity. Our plans assume capital spending in the range of 4% to 5% of sales and share repurchase of about $6 billion. This comes to the assumptions included in our guidance; we want to continue to be very transparent about some key items that are not included. The guidance that we're confirming today is based on last week's FX spot rates. Further currency weakness is not anticipated within our guidance range. We continue to monitor and invest on several markets, the Middle East for example, and Ukraine, Venezuela and price controls access to dollars for imported products and devaluation present risks as do import restrictions and price controls in Argentina. Finally, our guidance assumes no further degradation in market growth rates. Our year-to-date results are in line with what we expect to deliver, putting us on track to deliver our goals for the fiscal year and make progress towards our long-term objectives. We continue to operate in a volatile environment with uncertainty in foreign exchange, deceleration in market growth rates and a rapidly developing policy environment. Against this backdrop, we have maintained a top line growth, and improved constant currency operating earnings growth. We launched a strong round of innovation in the third quarter and have significant new innovation coming in the fourth quarter, which will be complemented by further savings from productivity. We're making targeted investments in our core business, most promising and developing markets and biggest innovation opportunities, and are aggressively driving productivity and cost savings. Above all, we remain focused on value creation for consumers and for our shareholders. That concludes our prepared remarks. As a reminder, business segment information is provided in our press release and will be available in slides which will be posted in our website www.pg.com following the call. I'll be happy now to take any questions.

(Operator Instructions) Your first question comes from the line of John Faucher with JPMorgan. Please proceed. John Faucher – JPMorgan: Yes. Thank you, good morning. Jon, as we look at the cost savings, particularly on the gross margin line, they're not really flowing through at this point. Obviously some of that is the big transactional impact, but you have also got this very big mix impact, which is really offsetting a lot of the work you're doing there. How should we think about that over the next couple of years? And is this going to continue to be a massive drag? Or is it -- should it dissipate as you get more local manufacturing in place? And just give us a little bit of an update there. Thanks.

So, there are two things as you rightly pointed, John, and as we talked about in prepared remarks that are offsetting the cost savings on the gross margin line, and one is FX, which is significant. Hopefully that annualizes, and as I mentioned we're committed to price we are legally allowed to help mitigate that effect as well. So, hopefully that portion of the dynamic dampens going forward. The other dynamic as you rightly point out is a mix dynamic, which has two components. One is -- two primary components. One is the category component. In the quarter, we just completed -- we had a great quarter of growth, both volume and sales in our home care segment, which is very profitable overall, but which does have lower gross margins than the balance of the business. By contrast, we had relatively soft quarters in our healthcare business and our grooming business, which are higher gross margin. I look at that as one quarter's impact. I don't think that sustains itself going forward. Some quarters, it will be positive; some quarters, it will be negative. The second component of that is the geographic component made up as you all know by faster growth in developing markets, which have lower gross margin. That impact will continue to exist. I don't see a scenario in the near-term where developed markets grow faster than developing markets. We will make progress on the margin in developing markets as manufacturing is localized as we build scale, but it's going to continue to be a component of drag. Do I think we can get to a place where this mix dynamic is only partially offsetting cost saving such that we're growing gross margin? Absolutely, and I expect that absent -- other big foreign exchange event, that would characterize the future.

Your next question comes from the line of Dara Mohsenian with Morgan Stanley. Please proceed. Dara Mohsenian – Morgan Stanley: Hey, good morning.

Good morning, Dara. Dara Mohsenian – Morgan Stanley: I was hoping you could discuss the sustainability of the gap between organic sales growth of 3% or 4% this year, and the local FX, core EPS growth of 12% to 14% particularly with a negative geographic gross margin mix impact. Do you think that gap is sustainable as you look out the next year in longer term? Then, just on a related note, I know you are not going to obviously give guidance on EPS next year, but given as a company that's in difficulty hitting the initial EPS targets over the last few years, I'm just wondering if conceptually there might be more of a need to bake in some conservatism as you set guidance going forward, particularly given the royalty, it's more volatile and obviously there had been a lot of external issues that have pressured results and could going forward, and if that's part of your thought process as you look to next year's guidance?

Thanks, Dara. In terms of the spread between organic sales growth and constant currency earnings per share growth, for successful in delivering basically the $2 billion of savings per year that are implied in our $10 billion five year goal; that by itself is 11 points of earnings per share benefit. You add that to 3% to 4% organic sales growth and you're in the ballpark of the spread that we are talking about for this fiscal year. We have no intention of letting up our cost savings and productivity efforts and see several years of significant savings ahead of us. So, I think that relationship is representative of the work that's going on. How much of it actually gets to the all-in bottom line numbers will be a function of FX, and also a function of some degree of reinvestment is good, opportunities present themselves. In terms of philosophy on guidance, obviously we haven't spent a lot of time focusing on next year yet, but in general what we are going to try to continue to do is be incredibly transparent or as transparent as we can. If you look at the year that we just went through, the one reduction in guidance we made midway through the year was due to currency in Venezuela. The way we handled that in the initial forecast of the year was by communicating that we didn't have anything assumed in the numbers. We didn't know when or what the devaluation was going to be. We wanted to provide full transparency, so that you and other could in essence use your own understanding and knowledge to come to a form point of view what you thought the result was going to be. At minimum, we will continue to be very transparent, tell you what's in, tell you what's not in, and generally we like making our goals. We don't like not making them, and that will be reflected in our approach as well.

Your next question comes from the line of Wendy Nicholson with Citi Research. Please proceed. Wendy Nicholson – Citi Research: Hi. Could you talk a little bit more about the comment that marketing efficiencies helped sort of generate all that SG&A leverage? How much of that was a shift from advertising to promotion? How much of that is just part of AGs long-term, "Hey, we want to lower advertising by 100 basis points?" Is there a risk that in some of these categories given how competitive the market is; is there a risk you are underinvesting or maybe just comment on all of that. Thanks.

Sure, Wendy. So, the SG&A offset to gross margin, which resulted in operating margin accretion is driven by both overhead productivity and marketing effectiveness and efficiency improvements. Within marketing effectiveness and efficiency, a significant portion of that is a reduction in non-working dollars, tighter operations, if you will, and the design and creation of marketing programs. And another big portion of it is the work I mentioned to get to more effectively target consumers through new capabilities that are available to use new forms of media and consumer engagement to generate more effective communication, as well as more efficient communication with our targeted consumers. So, it's really all of that. As I tried to say in the prepared remarks, we are very focused on assuring that the overall impact of our advertising program, the number of consumers that we are reaching, the quality of that interaction grows, does not decline. I think there is -- we are at a point where simply looking at dollars, it's just not representative of the strength of a marketing program in a rapidly changing marketing landscape. We do -- to your question of underinvesting; that is something that we look at very carefully. There have been some categories this year, where we have reduced spending as the years going on, and there have been some categories where we have increased spending as the year going on. We are not going to underinvest, but we are going to be effective and efficient in our investment.

Your next question comes from the line of Bill Schmitz with Deutsche Bank. Please proceed. Bill Schmitz – Deutsche Bank: Great, thank you. Good morning, everybody. So, a couple of questions; first one is, can you just break down the growth in emerging markets versus developed markets? And then I know we really talked about it, but can you talk a little bit about family care, because I think they are like your second and third largest businesses in the U.S., and clearly that slowed quite a bit. I know you cited some competitive promotional activity, but maybe yelling for that business and kind of how you respond to it, because it is obviously a decent chunk of the U.S. business. Thanks.

First of all, the breakdown between developing and developed; developing in the quarter was plus five, developed was plus one. We are in here with a total of plus three. In terms of family care, you rightly pointed to the issue, Bill, which is a -- which heightens competitive activity reflected in the amount of promotion that's going on in the category, primarily driven by Georgia-Pacific. I'm not at liberty to talk about future actions that we might take, but I'll assure you that that's a category that we intent to be competitive in and will be.

Your next question comes from the line of Chris Ferrara with Wells Fargo. Please proceed. Chris Ferrara - Wells Fargo: Hi, thanks. So, just first real quick, Jon, I think you mentioned that there were gains coming in the fourth quarter -- you said three to four points. I just wanted to confirm that, but the real question is, look, obviously you face a ton of headwinds this year. And when you talk about productivity, you guys are using a term pull forward savings, right? You brought fiscal '13 savings into '14. You are almost at your 16 to 22 target on non-manufacturing roles. Can you talk about what that leads for '15? What do you need to sustain that pace of productivity? You need some of the supply chain stuff to start to come through? Or do you still see incremental runway from the sort of blocking and tackling savings that you are doing already? Thanks.

So, first on the small brand divestiture gains in the fourth quarter, those should be between $0.03 and $0.04. Those are things we've talked about before; which is primarily the closure on the bleach sale, which we announced at CAGNY. That isn't a certain event we are going to have to wait to see how the regulators proceed. I think it is a certain event in terms if it's eventually happening, but the timing that is uncertain, but that's what's assumed in those numbers that I gave you. In terms of productivity going forward, as I mentioned, I see -- we see several more years of significant productivity opportunity. I wouldn't take the acceleration of savings into last year, or this year as an indication of reduced savings potential next year or the following year. And I can assure you that as our leadership team discusses this topic, that's not the mindset that we have. So, I would expect similar levels of savings for the foreseeable future.

Your next question comes from the line of Olivia Tong with Bank of America. Please proceed. Olivia Tong – Bank of America: Great, thank you. I appreciate it. First, is it possible to parse out the impact of mix from a country perspective versus a category perspective considering that you think that the country will continue to be in a case of developing (indiscernible) developed versus the category which may flow overtime? Then, can you also update us on the percentage on market share that you are holding or gaining in overall also for the U.S? Thanks.

In terms of the components of mix, it's about half-and-half, Olivia, between the two drivers that you cited, and of course that varies quarter-on-quarter, but think of it as roughly 50-50. And then, yeah, the market share question, sorry. We are about flat on the quarter, the market is growing about 3% and that dynamic is true and our aggregate basis both globally and in the U.S.

Your next question comes from the line of Nik Modi with RBC Capital Markets. Please proceed. Nik Modi - RBC Capital Markets: Yeah, thank you very much. Just a quick clarification, Jon, the organization design changes that you talked about, is that a function and output of what Jorge Uribe was working on, and if there is any more work to do in that area? And then, the actual bigger picture question is, can you just give us an update on the OTC business? And it seems like a scalable business where P&G can win with their brands. Any appetite for M&A; I know there is a lot of assets out there that potentially could kind of get unlocked for purchase. So, I just wanted to get a philosophical viewpoint on that. Thank you.

Sure, Nik. First, as it relates to organization design, some of the changes that I talked about are very much a product of the work that Jorge Uribe and others have been leading. Most of it is just been put in place now or in the summer. And I fully expect that as that happens, not only our operations going to improve as we reduce duplication and increase clarity of accountability, but I expect that we will identify additional opportunities from those new ways of operating. That's very much what we saw when we set up the sector organizations a year ago. We had an estimate for savings that could be possible, but as we got into it, it became clear that there were additional savings possible. This is again something we are going to keep grind in way at day-after-day, week-after-week, and create an organization that's not only more efficient, but is more effective that has a broader range of job responsibilities and is a funner, easier place to work.

Your next question comes from the line of Ali Dibadj with Bernstein. Please proceed. Ali Dibadj – Bernstein: Hi, guys. Do you want to go back to pick a few things; one is on the negative 75 basis points roughly of the mixed element on gross margin that should dissipate? Can you give us a sense of kind of over what timeframe you think that will happen, given all the investments you are making to grow the categories, but also frankly on a geographic piece as well I think your plans etcetera like the one in Brazil? The second thing is, you mentioned on the release in the beauty section, the sales declines in salon and skin care, primarily in Asia. So, that mean you are getting better skin care stability in the U.S. And then, the last question is want to understand better the grooming negative 4% mix that we saw in the quarter. Thanks.

Okay, let me first -- I apologize, Nik, I breezed by the second part of your question. Let me go back to that first, and then come back to you and if I continue my trend this morning forgetting the second part of the question, you can remind me what they were. Nik, in terms of OTC, it is a space that we like, and certainly demographically advantaged, it's an area that we feel we have strength in within select product treatment areas. As we have said for several years, it is a place that we would consider adding to our business both organically. Clearly, the Teva joint venture has enabled us to accelerate our progress internationally quite significantly. We added the new chapter asset recently. So, it is a space that we will continue to look for opportunities in, but we are also going to be choiceful and value-driven as we pursue and evaluate those opportunities. Only on the glide paths for mix, the developing/developed split is so much informed by foreign exchange. I mean, there is a constant FX cost differential. I'd say that's -- I think we have talked before probably a three to five year glide path, it's not overnight, but we will get there just as we have in China, just as we have in Russia, just as we have in Saudi and places that we have been operating for longer periods of time. How much of that actually gets to the bottom line is going to be a function of FX, which is why I hesitate to say definitely it's going to be X period of time. The second piece on skin care, we had a reasonably good quarter on both U.S. skin care, which was up mid single-digits, and on U.S. Pantene, which was also up mid single-digits. We continue to have opportunity in Asia. I wouldn't say that we have necessarily fully rounded the corner on either U.S. skin care or U.S. Pantene, but certainly are making a significant progress. Then on Gillette mix, large part of that is geographic as you're probably well aware. We have some category growth challenges in the U.S., so the size of that market is down, and that's the most profitable piece of the business. That's something as category leaders were responsible for managing and we are actively doing that. We certainly like the position that we start from in that task. We have 70% of market share, the most profitable segment, huge levels of consumer loyalty, very high, especially relative to other participants in the category, net promoter scores. We offer really a significant value to consumers. A man can use Gillette Fusion ProGlide for a cost of about $1 a week. For that he gets uncompromised quality from a brand that spanned over a century developing the best shaving products for men. We have significant innovation coming to market in the shave care space as well, which should help both market growth and mix going forward. We have launched the body product that we talked about at CAGNY. On the 29th of April, we will be revealing the next major innovation for Gillette, and well, I can't give details of that today. All of that will be revealed on the 29th. What I can tell you -- what man are telling us, which is that they prefer this product two to one versus the world's best selling razor currently. So, we are active in terms of managing the category challenge in the U.S. and are excited about some of the innovation that we are bringing the bearer to do that.

Your next question comes from the line of Michael Stieb with Credit Suisse. Please proceed. Michael Stieb – Credit Suisse: Good morning, Jon. You mentioned earlier that emerging markets growth I think in the quarter was 5% if I understood that correctly. From memory, I think it was 8% in the last quarter. Could you just tell us where you are seeing most of that -- majority of that slowdown, please? And then on that note, could you also provide us an update on the growth that you are seeing in China, please?

Well, China continues to be a very attractive market. We have grown that business 50% over the last three years. And quarter-to-quarter there can be some chop, but it continues to be a very attractive market for us. Market growth in general in developing markets has slowed by one to two points over the last six months, and that's what explains most of the slowdown that I mentioned in our developing market business. Fiscal year-to-date were high singles, call it 7%. So, the 5% is two points lower than that. If you look at share as a measure of whether we are holding or losing ground, we built share in Brazil by more than half a point. We have built share value there for 22 consecutive quarters. We build share in India, where we have grown double-digits now for 47 consecutive quarters. We built a modest amount of share in Russia. China; frankly is very hard to read shares at the moment. There is a significant channelship that's occurring, for instance, to e-commerce where we are doing very well on share point, but which Nielsen doesn't measure. We have wholesalers that are shifting from Nielsen measured retailers as their source of volume to non- Nielsen measured distributors. It's a bit complex, but again, it's a business we feel good about. We have got good innovation coming to market there. We just launched a premium diaper which in its early days has done extremely well taking market leadership in three out of the four, major e-commerce platform is for diapers in China in its early entry period. So, as I said in our prepared remarks, I expect developing markets will continue to be a disproportionate source of growth across the board for many years to come.

Your next question comes from the line of Jason English with Goldman Sachs. Please proceed. Jason English - Goldman Sachs: Hi, good morning, folks. Thanks for the question. Two questions, first, a small housekeeping item. Can you give us a sense of what sort of gains you expect on the pet care business once it's sold, just as we think about modeling into next year? Then, back to my other question, I want to go back to the organizational changes that you talked about in prepared remarks and a little bit in Q&A. I get the cost efficiency benefit of reducing role redundancy and merging countries into fewer SMO clusters, but I was hoping you could help me on your agility comment. How does further centralization and decision making in an already heavily centralized organization make you more agile? As you move forward with this, how do you ensure that local execution doesn't falter? Thanks.

Good question. First relative to the gains, I think if we go back to the press release we issued moving out to the sale, we said we expected very little impact, positive or negative from a one-time gain standpoint from the sale of the pet business. John, can give you more specifics there later today, but generally it shouldn't be a major impact. In terms of the organization question, I think there is couple of things that we can do a better job explaining. One is that there seems to be a notion that when we talk about global business units, that by definition moving work into global business units centralizes that work and moves it to a global level. I understand completely why one would have that conclusion, because when we describe it that's just what it sounds like, but that's not what happens. So, we have GBU resources at a global level, at a regional level, at a local level. We have brand managers at a global level, at a regional level, at a local level for each of our major product lineups. So, what we are trying to do is just clarify that the work of brand building belongs with those people, locally, regionally and globally. It shouldn't be done by other organizations in addition to those resources. We need those resources focusing on one of the most strategic things we do, which is sell and build joint value creation with our customers. And you can imagine if you have two different organizations working on the same thing, from an internal standpoint how that can create a lot of complexity, if you're in an executional role in the organization, it's hard to know what to execute when you're getting multiple sources of direction. And so, clarifying this, de-duplicating it, should have both, I think, cost, opportunity associated with it, as well as enabling us to be more agile, be clear, be more decisive, be quicker in terms of the action that we take. And to-date, over the last roughly two years, we reduced the number of overhead roles by 8,000 people. We've done that without significant business disruption, without significant organization disruption. It doesn't mean it's all done easy, but it gives us confidence that we can continue to improve here without being overly concerned about business disruption.

Your next question comes from the line of Steve Powers with UBS. Please proceed. Steve Powers - UBS: Hi, Jon. Good morning. Regarding your North American and potential western European supply chain restructuring programs, do you have any estimates for the costs, whether cash or non-cash associated with those programs in the 200 million to 300 million savings you mentioned? I guess how should we be expecting the flow over the three to four year life of the program? Will there be non-core charges, elevated CapEx; will it show up another area, etcetera? That's my main question. Then just if I can tag on one more, which is related to taxes, I think the quarter and your guidance for next quarter imply kind of a tax rate for the year in the 21% to 22% range, if my math is right, I just wanted to get your update on whether you think that rate is sustainable going forward and what the risks are in either direction to sort of the more normalized tax rate as we look ahead? Thanks.

On supply chain, there will be costs, there will be capital; those will be significant, so obviously we wouldn't do this if we weren't running a significant return on those. We'll try to detail those for you at some level when we provide guidance for next year. As I mentioned earlier, we are still working through ordinary exploratory process of this in Europe. We would like to come to you with total package, which we will do as we provide our guidance for the year. Within that though capital spending I don't see going -- I see it's staying in kind of 4% to 5% range as we execute this program. We'll continue working very had on working capital reduction as an offset to this. We've been able to do that successfully over the last three or four years with our whole build out program in developing markets, really maintaining our free cash flow productivity targets despite somewhat higher capital spending, and that's certainly the objective going forward. So, I wouldn't consider it net of major change to the cash profile of the company. There will be some cost to execute it. Some of those will be non-core, some of those will be core, and we will provide more contexts with guidance. Tax rates on the year, based on everything we know today should be 21%. We saw it a quarter ago. So that can change, but that's what we're seeing currently. This is going to continue to be a bit lumpy as we go forward. You're going to see quarters, where it's going to be lower that, you're going to see quarters, where it's going to be higher than. And that's a function of geographic mix, as you can appreciate. It's also a function of the timing of audits and reserve establishments and reserve reversals etcetera. We'd try to provide disclosure on the big chunks of that within our financial disclosures in our statements. In terms of what can -- what are the major drivers that could affect tax rate going forward, clearly, again geographic mix can affect it. That should be generally a net positive as we go growth, assuming that developing markets continue to grow faster than developed markets, and there are lower tax rates in developing markets. The other change of course that is unknowable and can affect us either positively or negatively is our policy developments, both in the U.S. and overseas. Well, to say those in general, there seems to be a lot of competitiveness on the part of governments to maintain business-friendly status in a slower growing economy. So, I think it would be somewhat unlikely that there would be a major adverse event that would affect our tax rate significantly, but of course that's completely unknowable.

Your next question comes from the line of Connie Maneaty with BMO Capital Markets. Please proceed. Connie Maneaty - BMO Capital Markets: Good morning. I just had a question for clarification on the supply chain savings. I think you were talking about $200 million a year, could you say if that is only for North America, and when you'd expect it to start?

The 200 million to $300 million range I gave you, which is a very off-range at this point, is inclusive of our early thinking on Europe. So, it's North America and Europe. We will start seeing some of those savings next year, particularly the distribution-related savings, as we consolidate distribution and customization centers into fewer distribution centers located closer to customers. That's a relatively smaller portion of the overall savings, which will accrue the major savings will start accruing in three and four years from now. So, it's something that -- we're changing our footprint so dramatically that we want to do it in a very disciplined, organized way to avoid business disruption. The savings will be significant, but they will be -- they are not immediate.

Your next question comes from the line of Javier Escalante with Consumer Edge Research. Please proceed. Javier Escalante - Consumer Edge Research: Thank you. Good morning, everyone. I will like to come back to the emerging market negative mix issue, and basically if you can help us, Jon, kind of like at least have an average emerging market gross margin and operating margin figure? And also, more philosophically, you have over $30 billion in sales in emerging markets, which is much -- these are much bigger than most your competitors combine, and essentially you have lower profitability, and then the question is, is it because you're leading with long categories, leading with categories that have low margins as opposed to leading with categories like beauty or healthcare, and essentially you're doubling down in the negative mix by leading with the legacy businesses, which is detergent and some paper as opposed to the high margin businesses, beauty, healthcare and grooming? Thank you.

Thanks, Javier. We'll give you some better gross and operating margin breakdown relative to company average for developing markets as part of our guidance for next year. The reason I'm not giving that to you right now is because it's all changing as we put in pricing for FX etcetera. And I'd like to get to a more stable situation, so I can give you something that's actually useful, but I understand the need and we can provide something that hopefully will help there. In terms of our developing market business profitability, it's really a tale of two cities, in markets where we have been for extended periods of time, where we've developed the scale to justify localization of the supply chain, where we've built local organizations, and where we've developed significant relationships with our retail partners, we have very good margins; in many cases, at the company average, and in some cases, above the company average. So I mentioned markets before, like Russia, like China, like Saudi; there are number of examples. And take China as an example, that's not only our second largest market in terms of sales, it's our second largest market in terms of profit. So, obviously it's a very profitable situation there. And I think that is more what needs to occur than altering the mix of product categories in the markets where we're earlier on in our journey, like Brazil and like India. We need to get the cost structure. We need to get consumer usage of premium products, which is happening -- it happened in China, it clearly happened in Russia; it's happening right now in Brazil, a little bit less so in India. Those are the things that will enable us to get margins to a place that I'm very confident that we'll get to, which is somewhere close to -- little bit below the company average. Your point though on other categories is an important one. I mentioned earlier that we are really through the joint venture with Teva for the first time, building out our healthcare business, which is very high margin across the globe, including developing markets. We've talked before about the less expansion in Russia and Eastern Europe. We have some things going on in Latin America. And so, we will continue to where there are smart value-creating opportunities, expand not just the paper and detergent businesses, but also the beauty and healthcare businesses.

Your next question comes from the line of Joe Altobello with Oppenheimer. Please proceed. Joe Altobello - Oppenheimer: Thanks. Good morning. Jon. I guess first question is in terms of the innovation strategy and how you're seeing it right now? Given that we've seen you go down market recently with Tide, also up market, it sounds like in blade razors, well, the emphasis still be on moving up market going forward and staying true to what has been a very successful trade-up strategy for you guys? Or given the environment, do you think the innovation going forward will be a little more balance between mid-tier and premium price points? And then secondly, in terms of the outlook for next year, I know it's very early, so I'm not going to ask for guidance here, but given that you're going to be anniversarying the FX headwinds and given that the manufacturing startup costs are behind you, what do you see as the biggest headwinds of you guys in fiscal '15? Thanks.

In terms of innovation, we'll continue to pursue a balanced innovation strategy. If you just think about the laundry bundle in North America now, it has lower priced components, deigned for consumers for whom prices are a biggest part of their personal value equation, it also has premium items. We generated more new sales on Gain Flings than we did on Tide Simply Clean and Fresh in the last quarter. And innovation decisions are going to be guided by consumers, their needs and wants. It's less about price point, and it is about value for a particular consumer. Value, as you know is a combination of pricing and product efficacy, consumer experience, our communication of that experience etcetera. So, we are going to continue to be focused on consumers with whom we can create value and to whom we can provide value. Relative to headwinds going forward, I think one of the biggest headwinds is market growth, both in developing and developed markets. The good news is we have a say in that, and we can create growth with innovation by trading in consumers, in many markets, trading consumers up in other markets, but that is -- it's challenging in a 3% growth world, and that's just the reality that we're going to have to adapt to. It is part and parcel of the combined productivity and innovation strategy. Those are the two things that are required to win in a slower growth environment. And the two things were committed to deliver.

Your next question comes from the line of Bill Chappell with SunTrust. Please proceed. Bill Chappell - SunTrust: Thanks for the question. I just want to go back to divestiture of the pet business, and I think we will go back few years when the divestiture of the coffee business, the plan was to take the proceeds and reinvest in actually restructuring and try to offset some of the dilution. And this divestiture, there is just for general corporate purposes. So, just trying to understand at what point, 2.9 million, 5 billion, I mean is there a philosophy change in terms of maybe reinvesting some of this money back into the business or reinvesting it to share repurchases or kind of a thought, because this doesn't seem to be one of the smaller divestitures you've done over the past few years?

A couple of things here; first of all, the 2.9 billion becomes 2 billion once we pay Uncle Sam. So that's the amount of cash that we're looking at this point. And really that cash that we'll earn next fiscal year, when the deal is likely to close; buyers have a nasty habit of not paying new until they have certainty on ownership of the asset. And so, we'll build that cash into our planning for next fiscal year, and we will be very clear with you how we're intending to use that. Relative to the Folgers situation, there are two things that are different with regard to restructuring. The first is that Folgers was much more dilutive than pet is going to be, and so the need was greater from that standpoint. Second, at the time that we announced Folgers, we didn't have a non-core restructuring program. And so, we chose to increase restructuring to accommodate that objective. We have a fairly robust restructuring program right now. We're not capped or limited. If there is more opportunity to generate return and create value by all means, we will. But again, this is a next year cash flow, and we will get back to you with the use of that cash as we describe plans for next fiscal year.

Your next question comes from the line of Alice Longley with Buckingham Research. Please proceed. Alice Longley - Buckingham Research: Hi, good morning. I have just a couple leftover housekeeping questions. You're 1% organic growth in the developed regions; can you break that out in terms of volume price and mix? And my other question is when you give us your EPS growth adjusted for currency, could you explain what you take out to get to that number? Do you take out the pricing that you're getting in emerging regions? Is there an offset to currency? Do you take out all the cost benefits, the local cost benefits you're getting as the result of currency as well? Thank you.

Developed market organic sales breakdown, we had 2% volume growth in developed markets, a minus 1 point price mix dynamic getting you to 1% organic sales growth. So that's the breakdown there. The currency numbers do not include pricing. They do include the total transaction impact on the cost structure. So, if there are local cost benefits that's in the currency number. We just take our currency exposures on the rate of change, and that's the number we're providing.

Your next question comes from the line of Mark Astrachan with Stifel. Please proceed. Mark Astrachan - Stifel: Yeah. Thanks, and good morning. I wanted to clarify a couple of things on the North America beauty business. Was there any benefit from restocking from destocking, a year ago, six months ago? And then, from the slowdown in developing markets, any commentary there about whether the categories or a category-specific has become more promotional as a result of the slowdown?

I think the beauty organic sales numbers are representative of the state of the business. I don't think they include any one-time, significant one-time impacts of any sort. So I think you should look at them as decent numbers. Relative to promotion levels, we're seeing increased promotion in North America in a few categories. We talked earlier about the family care category, where we have some increased promotion. We've seen increased promotion not surprisingly in response to our laundry innovation launches in North America. And we've seen increased promotion relative to -- in response to our innovation in the hair care space. But we look at those generally as temporary in nature, and it's not -- as I've said many time before, promotion is not high on our list of strategic choices to grow business, so it's certainly not a dynamic that we're going to be encouraging. If you look at price mix, inclusive of promotion, for the last quarter it was a positive impact on a global basis. It's been a neutral or positive impact for 13 consecutive quarters. It's been a positive impact for the last nine years. So, we're going to try to compete on the basis of innovation, make sure the base price of our product is as sharp as it can be as a result of our productivity efforts. We'll need to be competitive on promotion levels, but it's not (indiscernible) that we're going to drive.

Your next question comes from the line of Jon Andersen with William Blair. Please proceed. Jon Andersen - William Blair: Yeah. Good morning, Jon. You mentioned a significant shift to e-commerce in I think referring to China that you're seeing, but I guess, I suspect you are seeing a similar shift in perhaps developed markets as well. Should we think about this as a net positive for P&G manufacturers in terms of reach your ability to target consumers, even profitability? And if you could just discuss maybe that opportunity and any plans you have to capitalize on that channel shift over time?

We want to be available for consumers wherever they want to shop, and that includes the e-commerce space. Jon, you mentioned some very attractive aspects of that space. One is the ability to target -- to more narrowly target consumers, more effectively target consumers, and that's certainly relevant. There is also an opportunity to provide sometimes some more information as "E" in general becomes what we're calling the Zero Moment of Truth, and sometimes it's the zero and first moment of truth. In general, e-commerce shoppers represent a more attractive demographic. We're seeing larger basket sizes in some of the e-commerce channels than in bricks and mortar, not always, but in some cases. And we're working very hard to ensure that our share of both sales and profits is at least as good as the case and more traditional retail channels. And that currently is the case. But this is a channel that's been evolving fast, and we'll continue to change significantly in the next three to five years and it's something that we need to do and intend to be a significant part of.

Your final question comes from the line of Caroline Levy with CLSA. Please proceed. Caroline Levy - CLSA: Good morning, Jon. It's on margins, I'm just looking at the EBIT margin expansion in beauty and grooming, and I'm wondering if going forward you believe you will be able to sustain that, or if you actually see some pickup in margins in any other divisions?

Well, I think sustaining 17% earnings growth, which is what you see in the beauty segment in the last quarter, is not an objective we would have. We're happy with that growth. We want over time to achieve more balance between that top line and bottom line. We're still delivering a very strong bottom line. And the bigger margin improvement opportunity I think comes as we do three things; 1) get the higher margin categories growing at their rate of category growth, and that includes beauty. 2) Improve our margins in developing markets as we've talked about with several of you this morning, and 3) is continue focusing on growth behind innovation in developed markets where we have higher margins. And that's -- all three are very much part of our thought process and activity system presently.

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