The Procter & Gamble Company (PG) Q3 2017 Earnings Report, Transcript and Summary

And welcome to Procter & Gamble's Quarter End Conference Call. P&G would like to remind you that 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. Also, as required by Regulation G, Proctor & Gamble needs to make you aware that during the discussion the company will make a number of references to non-GAAP and other financial measures. Proctor & Gamble believes these measures provide investors with useful perspective on the underlying growth trends of the business and has posted on its Investor Relations website, www.pginvestor.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. Jon R. Moeller - Procter & Gamble Co.: Good morning. With three quarters of the fiscal year complete, we remain on track with our going-in plans for the top and bottom lines against a backdrop of difficult market conditions. We're maintaining top line guidance, we're reconfirming bottom line guidance and we're increasing our outlook for adjusted free cash flow productivity to approximately 95% for the year. In the January to March quarter, organic sales were up 1%. Core earnings per share were up 12%, up 15% excluding foreign exchange. We generated $2.3 billion in adjusted free cash flow. We increased our dividend by 3%, the 61st consecutive annual increase and the 127th consecutive year P&G has paid a dividend, every year since our incorporation in 1890. The quarter did present challenging macro dynamics. As we and other companies indicated at the CAGNY conference in late February, and as you've seen in the track channel data, growth in our categories decelerated significantly in the quarter. The categories we compete in were growing on a value basis at a global average of nearly 3% in the first half of the fiscal year. Growth slowed to below 2% in the third quarter. In the U.S., our largest and most profitable market, categories in which we compete, grew roughly 2% in the first half but were up less than a point in the March quarter. Several factors contributed to this dynamic including delayed tax returns, higher gas prices, bad weather, and what appears to be a drawdown of at-home inventory during the quarter. Developing markets were up about 5% in the first half but slowed to about 4% in the third quarter. India de-monetization continued to impact consumption in that market. In Saudi Arabia, one of our 15 largest markets, a prototypical household has endured a 20% income reduction, while utility prices have doubled and will more than double again by July as government subsidies are reduced. Economic crises in Egypt and Nigeria are dramatically impacting category size and markets in Russia, Argentina and Brazil are also contracting. Retail inventory levels, primarily in the U.S., also contracted. Retail inventory reductions had nearly a full point impact on third quarter organic sales growth. In addition to these market dynamics, P&G organic sales growth continues to be impacted by our work to strengthen and streamline product forms and SKUs in our ongoing 10 product categories. This activity created about a half a point drag on organic sales in the quarter. With these challenges as background, we again grew organic sales 1% in the quarter, which was about what we expected when we give our update on the markets at CAGNY and communicated that it would be our weakest quarter of the fiscal year. For the third straight quarter, sales growth continued to be fueled by volume growth. Organic volume grew 1% on the quarter. Pricing and mix were essentially neutral to organic sales growth. Organic sales were – sorry, online organic sales were up 30% for the quarter, significantly outpacing offline sales. Online sales now represent 5% of our total business. Moving to the bottom line, core earnings per share were $0.96, up 12% versus the prior year. Foreign exchange created a three point headwind on third quarter earnings growth, so on a constant currency basis, core earnings per share were up 15%. On a year-to-date basis, constant currency core earnings per share growth is up double digits, on track to extend our streak of high single or double-digit constant currency core earnings per share growth to five straight fiscal years. Constant currency core gross margin decreased 20 basis points. Productivity savings of 210 basis points were more than offset by headwinds from mix, commodities and product reinvestments. Including foreign exchange, core gross margin was down 40 basis points. Core SG&A costs as a percentage of sales decreased 30 basis points. Productivity savings of 50 basis points and benefits from nonrecurring other operating gains were partially offset by investments in advertising, sales and R&D. Constant currency core operating margin increased 10 basis points. Productivity improvements contributed 260 basis points of operating margin benefit. Including foreign exchange, core operating margin was down 10 basis points versus the prior year. The core effective tax rate was 23.4%. This included several discrete tax reserve adjustments and the impact of share-based compensation transactions. The core effective tax rate has been in the range of 23% to 24% in six of the last seven quarters and we're now expecting to finish this fiscal year near the middle of this range. All-in GAAP earnings were $0.93 for the quarter including $0.03 per share of non-core restructuring costs. We generated $2.3 billion of adjusted free cash flow, returning $3.8 billion to shareholders, $1.8 billion in dividends and $2 billion in share repurchase. Earlier this month, we increased our dividend 3% as I said earlier. Fiscal 2017 is a year of significant value return to shareowners. We expect to pay dividends of over $7 billion. We reduced outstanding shares by $9.4 billion in the Beauty transaction and we expect to purchase over $5 billion of our stock. In total, about $22 billion of value returned to shareowners. In summary, despite some significant unforeseen challenges and macroeconomic headwinds, from market growth to currencies to commodities, we currently expect to deliver our going-in forecast for the year and are maintaining our organic sales and core earnings per share guidance ranges. We're holding our organic sales growth range of 2% to 3%. After three quarters, we're obviously at the low end of this range. We expect fiscal 2017 all-in sales growth to be down a point to in line with the prior year. This includes a two- to three-point headwind from the combined impacts of foreign exchange and divestitures. We're maintaining our outlook for core earnings per share growth of mid-single digits. As I've said, we continue to deal with an unprecedented amount of geopolitical disruption and uncertainty which is affecting market growth, currencies and commodities and we're not immune from these macro dynamics. We're aggressively driving cost savings to mitigate these impacts, but as we said last quarter and at CAGNY, we're protecting investments in the business to maintain and accelerate organic sales growth in a sustainable, market constructive, and value accretive way, even if this causes results to ultimately end up below the current core earnings per share guidance range. All-in GAAP earnings per share are forecast to increase by 48% to 50% including the one-time gain from the Beauty transaction that we booked in the second quarter. We continue to make good progress on cash and as a result are raising our expectations for adjusted free cash flow productivity from 90% or better to approximately 95% for the year. Now looking forward, the external challenges we face: slow market growth, geopolitical and economic instability, foreign exchange impacts from a stronger U.S. dollar, rising commodity costs and retail trade transformation are all very real and aren't likely to do meaningfully better in the near-term. With this as a reality, we're putting even more emphasis on several strategic moves: on product and package superiority, executional excellence, cost and cash productivity and organization design, culture and accountability. We're meaningfully raising the bar by establishing an even higher standard of excellence, that of irresistible superiority, for our products and packages coupled with superior execution of communication, in-store fundamentals and consumer value. This is what will be required in the slow growth environment to grow markets and market share. It's what is required to present commoditization of our categories and minimize deflationary impacts. It reduces promotion needs and creates strong relevance for retail partners in all classes of trade. To achieve the outcome we desire, category growth, increased household penetration, strong share positions and winning sales and profit growth in this difficult environment, we must combine a foundation of irresistibly superior product and packaging experiences with superior execution in advertising, sampling and in-store fundamentals with winning value equations broadly defined. What do we mean by irresistible superiority, and how will we measure it? When a consumer has an irresistibly superior experience with our products and packages, it raises their expectations for performance in the category and makes it hard to go back to what they were using before. To assess irresistible product superiority, we're moving from a single metric: weighted purchase intent, to a body of evidence approach. This provides a holistic and transparent evaluation of the product at the second moment of truth and integrates technical tests, line tests, context aided tests, household panel data and in-market product reviews. It ads behavioral data, which is more reliable than the attitudinal data we've historically collected. One element of this, for example, is depravation testing. In deprivation testing, we ask consumers to score the product they currently use, say out of 100 points. We replace the product they're currently using, typically a competitive product, with the product we're testing and have consumers use it for several weeks. Then we give them back their original product and ask them to score it again. If their score of the original product has not changed appreciably after use of the new product, we've not made a significant difference in expectation or delight and therefore wouldn't rate the new product as irresistibly superior. If they rate their old product significantly lower after use of the new product, we know the new product has elevated the level of performance they expect in the category. Tide PODS and Downy Unstopables scent beads are great examples of products that deliver irresistible superiority. After using PODS and scent beads for a four-week test period, consumers consistently lowered their assessment of their current product by more than 10 points, a meaningful move. Using these products changed consumers' views of what's possible in the Fabric Care category. These products have been on the market for five years and are still driving category growth and are growing market share. Our unit dose detergents, Tide PODS and Gain Flings! have accounted for 90% of laundry detergent category growth. Unit dose products account for about 15% of U.S. category sales with P&G holding nearly an 80% share of the form. We expect this form to continue leading category growth. In 2016, just 16% of U.S. households had tried unit dose detergents. The forecast for 2017 is 23% household penetration, a 40% increase in just one year. We're driving the growth of PODS with increased washing machine sampling. We'll distribute 30 million samples of our best performing detergents in fiscal 2017, a 75% increase over fiscal 2016. Fabric enhancers are the fastest-growing segment in the overall Fabric Care category, growing 7% to 8%. And scent beads are the fastest-growing form, growing in a 20% rate. P&G's scent bead offerings are growing over 30%, and there's tremendous upside. Scent beads household penetration is only 14%, and beads are currently used in only 4% of laundry loads. We're going to continue driving consumer awareness and trial through advertising campaigns and sampling programs to grow the category and grow our share. Irresistibly superior products are ideally delivered in irresistibly superior packages. Irresistibly superior packaging attracts the consumer at the first moment of truth, provides integrity and protects the quality of the product and delights consumers during use and in its responsible disposable. Irresistible packaging also creates recognizable brand blocks at shelf, aides the consumer in selecting the best product for their needs, and reinforces the equity of our brands. We're developing a body-of-evidence approach, like we now have with products, to test packaging superiority. Superior products and superior packages drive market growth. They prevent commoditization. Market growth has been an incredibly important part of the journey of our brands. U.S. Fabric Care is a good example. Over the last 40 years, P&G sales have grown five times, or 500%. P&G share has only increased five points. Market growth, driven by P&G, has been the main source of growth. Irresistibly superior product and packaging benefits need to be communicated to consumers with superior brand messaging. Superior brand communication is advertising that makes you think, talk, laugh, cry, smile, act, and, of course, buy; advertising that drives growth for brands in the categories in which they compete, and is a voice for good by expressing points of views on issues that matter and where the brand matters; advertising that clears the highest bar for creative brilliance, sparking conversations, affecting attitudes, changing behavior, and sometimes even defining popular culture. We're raising the bar in advertising quality with a focus on superior brand performance claims that communicate the brand's benefit superiority to create awareness and trial. We're improving the quality of consumer insights, agency creative talent and production. We're applying a body-of-evidence assessment to advertising quality. To be assessed as proven effective, our highest bar, a campaign must drive awareness, household penetration, and share growth for at least one full year, and be determined by a panel of objective experts to be effective advertising. Brands currently achieving the standard of quality include Always, Like A Girl; Tide, If It's Got To Be Clean, It's Got To Be Tide; Dawn, A Drop of Dawn and Grease Is Gone; and SK-II, Change Destiny. We're improving media execution, increasing consumer reach by 10 points, and ensuring year-round continuity across top markets. We're increasing point-of-market entry trial coverage by 10 points, or more, on our top brands. We're working to lead the effort on media transparency, eliminating costs in the media supply chain created by poor standards adoption, too many players grading their own homework, too many hidden touches, too many holes, where criminals can rip us off, and unsafe places for our brands to have ads. We're letting our spending talk, buying media from those that comply with the new standards we're setting, so that we know our ads are experienced by consumers in the most productive and efficient way. In-store execution is another area, where we're raising the bar, redefining excellence to a higher standard. We're determined to make our go-to-market activities a consistent source of competitive advantage to grow categories in our brands. This requires having the right trade coverage with the right product forms, sizes, and price points, and the right in-store shelving and merchandising execution that requires getting the key business drivers right for each category and brand in every store across all channels every day. In Brazil, we've revamped our trade spending programs to reward these specific activities by brand and by channel that are proven to drive sales. On Pampers, for example, it's ensuring we have a full range of sizes available in each store, plus a secondary point of sale. On Gillette, it's ensuring we have the right shelf space, open sales on MACH3, distribution of our three-bladed Prestobarba disposable and Venus razors for women, and increasing the number of distribution points and visibility at checkouts. We're working to make sure our brands stand out in-store. We're demonstrating the value of long-term displays of our leading brands to top retailers. These displays are high quality and clearly communicate our brand equities and product benefits. They replace in-and-out promotional displays that were often low quality and inefficient, both operationally and financially for P&G and for our retail partners. We're tracking compliance versus category-specific key business drivers in over 7,000 individual stores. When we get it right, category growth accelerates. Our growth accelerates, and we deliver trade spending efficiencies that enable us to reinvest and improve sales coverage to achieve excellence in even more stores. Just as important, we're tracking results against these key measures for our salespeople, ranking and internally publishing these results. The team has embraced this transparency and accountability, and it's driving better performance. We're piloting new approaches and technologies including crowdsourcing, image recognition, and machine learning to obtain granular real-time data on store conditions to optimize our performance and coverage. This ensures we get a transparent, accurate and unbiased view of in-store execution to hold our own salespeople and our distributors accountable for execution. The last element of superior execution, but certainly not least, is winning consumer and customer value equations. Price is one element of a winning consumer value equation, but what we're really looking at is the superior value of the total proposition. A product that meets a need in a noticeable and irresistibly superior way with a package that's convenient to use, with compelling communication presented in a clear and shoppable way in-store. Margin is one element of the customer value equation, but so is penny profit, trip generation, basket size and category growth. Where do we stand against these new, higher standards of irresistibly superior product and packaging and superior execution? Where a win on each element is required for a passing grade, we currently earn a passing grade versus this new, much higher benchmark about 30% of the time. Achieving this higher standard of excellence more consistently will require investment in improved product formulations, packaging, sales coverage, advertising sampling, upstream R&D and consumer and customer value. This need for investment, the external realities we're facing, our historical productivity progress and future productivity opportunities all inform our plans to save up to another $10 billion this fiscal year through fiscal 2021. We've continued to refine our plans and want to bring them to a more granular level for you today. We've identified $7 billion of saving opportunities in cost of goods sold. This comes on top of the $7.3 billion of cost of goods savings we delivered over the previous five years, exceeding our previous goal of $6 billion. We aim to fully synchronize our supply network and replenishment strategy from our customers to our suppliers, leveraging our supply network transformation in North America and Europe. This holistic transformation will ensure that we have a supply network that will continue to be a demonstrable and sustainable competitive advantage for P&G. This will require continued investment over the next two to three years but provide an attractive payout in ongoing lower costs, lower inventories, better customer service and lower out of stock levels. Within this strategy, the largest opportunity, about $4.5 billion of the $7 billion, is raw packaging materials. These savings will come from strategic supplier partnerships, supplier consolidation and through an overarching simplification of our SKU lineups and manufacturing platforms. We've established joint business plans with our top suppliers focused on end to end supply network synchronization with a goal of reducing product cost year-on-year. To enable integrative thinking, we're co-locating suppliers at our sites with our product supply and R&D professionals to deliver upstream co-innovation that can improve both product performance and drive savings. For example, we already have 55 suppliers collocated at our planning centers, with an objective to expand this further. In the pursuit of consolidating our supplier base, we expect to reduce the number of suppliers by about 20% over the next two years. We have several innovations aimed at delivering better-looking, better-performing and lower-cost packaging. Better and cheaper not just cheaper. One example is Air Assist, our fit-to-delight new packaging designed for e-commerce. Air Assist was originally intended to fix the mess that can sometimes result from shipping liquids, like Dawn dishwashing detergent, as single units to consumers. We did much more than fix a distribution problem. Air Assist packaging delivers a significantly better shelf impression, improves consumer in-use experience and reduces plastic usage by 50%. Better and cheaper packaging that delights consumers and a CFO. We're driving savings in packaging using Imflux, a proprietary injection molding innovation. Imflux enhances existing injection molds and presses and builds new molds that increase throughput up to 100%, resulting in higher quality injected molded parts, improved speed to market, fewer presses and molds and significantly lower costs. So that's raw and packaging materials. Manufacturing is our second largest spend pool, and we're aiming for about $1.5 billion of savings from reduced manufacturing expense. We're on a continuous manufacturing productivity improvement journey. Over the previous five years we've delivered a cumulative 26% manufacturing productivity improvement defined as the change in head count per cases produced. We've established an objective to deliver an additional 30% of improvement over the next five years. Much is driven by five major pillars comprising a renewal of a proprietary manufacturing productivity methodology of integrated work systems or IWS, synchronization of our production to demand signals, leveraging our supply network redesign with multi-category production sites in North America and Europe, and reducing the number of manufacturing platforms from 275 to 150. We're digitizing our manufacturing operations and automating with robotics using, for example, collaborative robots to automate activities like palletizing, and autonomous vehicles to move materials and pallets within our operations. We see an opportunity for additional $1 billion of savings from transportation, warehousing and other cost of goods sold. These savings will come from work to improve warehouse productivity by as much as 25%, digitized algorithmic planning that reduces inventory and optimizes vehicle fill rates and rebidding regional transportation lanes based on our optimized manufacturing site and mixing center locations. Our North America mixing centers have driven customer service to an all-time high with on-time deliveries moving from 84% to 94% and the ability to resupply 80% of our sales within 24 hours. We're on track to deliver over $1.5 billion in cost of goods sold savings this fiscal year, ahead of the pace needed to reach the five-year, $7 billion savings goal. We see over $2 billion of savings opportunity in marketing spending with half or more coming from media rates and eliminating media supply chain waste. We're targeting up to $0.5 billion more in savings from reduced agency fees and ad production costs and we see about $0.5 billion of opportunity in spending for in-store materials, direct-to-consumer programs and improved efficiency in trial building and sampling programs, all of this while strengthening our overall program, increasing reach, increasing continuity and improving effectiveness. We're targeting about $1.5 billion of savings in trade spend. This is a $15 billion spend pool, so just a 10% efficiency improvement basically gets us there. These savings will come from improved execution against category and brand key business drivers like the example I shared earlier from Brazil. This will be enabled by new trade spending analytics tools including by SKU gross profit contribution metrics that will be available to each of our salespeople as they manage distribution and merchandising programs with our retail partners. And we'll better optimize investments by category as we implement the end-to-end management model with dedicated sales forces in more large markets. We're estimating we can achieve between $1 billion and $2 billion of additional overhead cost reduction. This will require a particular focus on reducing the cost of activities that are furthest away from consumers or customers and increasing end-to-end business accountability. It will also include further digitization and automation of work processes. So in total, we've identified $12 billion to $13 billion of savings opportunity across all cost elements. We've risk-adjusted this down to up to $10 billion to account for the uncertainty that exists in each piece of this work, especially when projecting out several years. We're making good progress this fiscal year through three quarters. We're averaging 220 basis points of gross margin savings and 50 basis points of savings in SG&A. Just as a reminder, where there's much still to do, we start in a fairly good place. We have the second highest after-tax profit margin in the industry. Only Reckitt is higher, largely due to category mix. We've improved core gross margin by about two points over the last three years. What matters more than aggregate margin is the competitive comparison for each category. As we compare P&G versus competitors on a weighted average basis, we're in line or ahead in nine out of 10 categories. P&G's category gross margins are higher than competition by an average of about five points and up to as many as 14 points. We hold similar advantages in overhead. When we compare P&G's SG&A overhead costs to a competitive average weighted by P&G's business mix by sector, our costs are more than 100 basis points lower. Over the last four years we've reduced P&G's overhead costs as a percentage of sales by 50 basis points. This has allowed us to grow our aggregate 22% top quintile operating margin by more than two points over the last three fiscal years despite three points of cumulative FX headwind over that same time. We have further advantages in below the line costs, we borrow at some of the most favorable rates in the industry, and we have a tax rate that is among the lowest in the industry. While we're currently competitive, we have significant opportunity ahead of us. Over the next five years, with the plans I just outlined, we'll make further advances in our cost and margin structure. In addition to establishing a new standard of excellence for product performance and packaging and commercial execution, and continuing to drive significant cost savings, we're further strengthening our organization, design, culture and accountability; deeper mastery, closer to consumers and customers, more agile, more accountable, more efficient and more effective. We're changing talent development and career planning to drive more mastery and depth in each of our product categories. The objective is simple: improve business results by getting and keeping the right people in the right places to develop and apply deep category mastery to win. P&G is fortunate to consistently source and develop very strong talent, but we recognize that there are times when the best talent for a role may not be with inside our organization. Going forward, we will supplement internal development with hiring from the outside to add the skill and experience needed to win and field the best team possible. This fits with the broad theme of connecting with external sources of value and ideas. Innovation, connect and develop external advisory boards and partners, technical experts, agency creatives. External hiring has roughly quadrupled across five different levels of management, including senior line management. And last week a new president level Chief Information Officer to help our very important digital efforts. We've invested in selling resources and category dedication. In the U.S. over the last two years, we've added approximately 140 salespeople, including experienced external hires and now have over 90% of our sales covered by dedicated, category-dedicated, profit aligned category experts. In large markets like the U.S. and China, we're moving to and end-to-end ownership and accountability approach. This approach focuses on category specialization in the markets. We previously focused too much on scale by managing the sales force for a country across all categories limiting the ability to focus on the unique needs of each category. We're moving to a model where decision-making authority for the number of salespeople serving a category in a particular country and which channels those salespeople cover is the responsibility of the regional category leader. Category is a point of competition. It's the point at which consumers engage with our brands. Category leaders can choose to add sales resources in a given market and channel and they have the responsibility to pay for them since they're the P&L owners for that business. There's no one-size-fits-all approach. The goal is to drive fast and agile decision making with each category leader focused on what it takes to win in their business through the lens of consumers, shoppers and retail partners. We first implemented this end-to-end approach, giving category leaders responsibility from the front end of innovation all the way through to the store in the United States last fiscal year. We brought four more markets into the model this fiscal year, and we plan to add five more markets next year. In total, these markets currently generate over 70% of company sales. In smaller countries where we don't have the scale to organize in a dedicated end-to-end model, we're implementing a new freedom within a framework approach. The objective is to enable these smaller markets to be faster and more agile, within a framework, to be accountable to execute and achieve financial goals. Regional leadership will establish a strategy, product plan and top and bottom line objectives. As long as the market is executing within the predefined strategies and are delivering the financial target set by the region, they have freedom, within pre-established executional boundaries, to make real-time changes, adjusting pricing, marketing levels and in-store merchandising programs as the situation on the ground dictates without the need for engagement with regional resources. In the markets where we've tested this approach, it's enabled us to cut the number of internal review meetings in half, reduce the number of people participating in meetings and it's importantly enhanced agility in market responsiveness. We're expanding this freedom within a framework approach globally starting July 1. We're aligning incentives at a lower level of granularity to better match responsibilities and to increase accountability. Salespeople in some of our largest markets who are now dedicated to selling one product category now have the majority of their incentive comp tied to the performance that category, versus what was previously a region average across all categories. Category leaders for a region now have their incentive comp tied to the performance of their category in their region versus a global average for that category. Bottom line, we're committed to getting, keeping, and growing the right people in the right places, dedicated to categories to drive better business results. We're putting more granular incentives in place to match the increased end-to-end responsibility we're giving leaders. We believe that by continuing to strengthen the plays I've just talked about, irresistible product and packaging superiority coupled with superior commercial execution, strong cost savings and continued strengthening of our organization, design, culture, and accountability, we will be able to further accelerate our progress even in the challenging market conditions we face. So to wrap up our comments this morning, we're striving to achieve a higher level of excellence in all areas that support the growth of our categories and brands. We're hopeful this work, enabled by strong cost savings and improvements to our organization, design, culture, and accountability will get us back to the levels of balanced growth that delivers our shareowner value-creation objectives. Also, in summary, as I mentioned earlier, for this fiscal year, we're maintaining organic sales and core earnings per share guidance despite the unforeseen and significant setbacks from FX and slowing market growth. We're just now starting our detailed forecasting for next fiscal year. We won't be sharing specific guidance for fiscal 2018 until our next earnings call currently planned for August 2, but our intent is clearly to deliver another year of sequential improvement on both the top and bottom lines. With that, I'd be happy to take your questions.

Thank you, sir. Your first question comes from the line of Olivia Tong with Bank of America Merrill Lynch.

Morning. Thanks. Your commentary around sort of irresistibly superior products was quite helpful, but it seemed to be targeted mostly at assessing existing product. Didn't really hear much about innovation, and more importantly, given the slowdown, particularly in emerging markets, what you can do to make products perhaps more affordable to consumers? And is there any thought on making even more meaningful changes in terms of either product formulations, or pack-out (35:38) sizes to bring the cash outlay for those consumers down? And then, in terms of this new focus area, does that mean that overall spending against sales needs to go higher, and maybe there's sufficient offsets in other buckets so that in aggregate, the margins are relatively unchanged? Thanks. Jon R. Moeller - Procter & Gamble Co.: That's a lot of questions, Olivia. I'll try here. First of all, innovation is the antidote to slow market growth, and so it is definitely something that we continue to focus on and invest in, and we want that to be guided by this notion of irresistibly superior products and packages, because we know that when we do that, we can affect the rate of market growth. I gave you the examples earlier of PODS and Downy Unstopables, which clearly do that, and that market growth is so important, as I described, explained in the U.S. laundry example. It, historically, has accounted for the majority of the company's growth. So we are very focused on maintaining our innovation leadership. If you look at the most recent IRI Pacesetters report, we had five out of the top innovations as measured by revenue in the last year, and that's a focus that will not go away. In terms of affordability, that's important, very important. There are multiple dimensions to that, including package size. I mentioned part of superior execution is ensuring we have the right package sizes in the right stores and channels, but one of the main endpoints there is affordability for consumers. Affordability, though, also is affected by efficacy and how well a product meets the need for which a consumer purchases that product. And that has to continue to be a significant part of our focus as well. Generally, we found when we can create superior value, holistically-defined, so combination of the experience, how well the product meets my need, the price of the product, how easy it is to find and use, that price isn't a barrier. That doesn't mean that we don't need to be sharp on our price points. We do, and you've seen us take several moves over the last year to get sharper on price points, but we're going to continue to be driven primarily by the concept of value and value superiority. You asked about spending on sales. We've talked for a couple years now of that being one of the reinvestments that we want to make, and there are two or three elements to that reinvestment. One is ensuring we have sufficient coverage across an increasing number of channels and formats. The second, and very, very important, is ensuring that we have, where it's economically possible, dedicated sales resources with experience and mastery in a category, serving a category on an end-to-end basis aligned with the profit owner of that category. And then the third is the capability to allow us to really step up our in-store execution. As I mentioned, both execution in-store but also the monitoring of that execution on a real-time basis to ensure that we get it right as frequently as possible. So hopefully that gets at the gist of your question.

Your next question comes from the line of Dara Mohsenian with Morgan Stanley. Dara W. Mohsenian - Morgan Stanley & Co. LLC: Hey, good morning. Jon R. Moeller - Procter & Gamble Co.: Morning, Dara. Dara W. Mohsenian - Morgan Stanley & Co. LLC: So Jon, you mentioned a few strategic moves or changes today that you highlighted on the call in light of the current difficult environment and I had two questions from that. A, what's the motivation behind all these tweaks? Is it just that the external environment is difficult and you're being responsive to that? And then B, the broader, more strategic question would be, obviously you've made some very significant strategy changes in the last few years from the productivity you discussed in more detail today to paring the portfolio, et cetera, et cetera. You also mentioned a few additional tweaks or areas of emphasis today. So I'm wondering from a forward perspective as we look out, are there other more sizable or really large strategy changes potentially ahead? Or is now it just more a matter of executing on the previously announced changes and tweaks mentioned today as you manage through that difficult external environment? Thanks. Jon R. Moeller - Procter & Gamble Co.: Thanks, Dara. Your question on motivation for change is, simply put, winning. Clearly, the current environment makes that an even bigger challenge so that also informs the choices here, but the motivation is, very simply put, winning. We view the changes that we've talked about today, some of which, for instance, productivity we've talked about before, but we've tried to give you a better sense of the kinds of things we're going after to give you more confidence that that is something that's well within our capability to deliver. But these other things we're talking about, while relatively simple conceptually, are significant interventions. They're not significant interventions in that they disrupt organizations, but they're very significant in improving our execution, the delight that a consumer experiences with our product and package. We just have to get even better at that more consistently across markets, across categories, across brands. And again, as I've mentioned, when we do that successfully, all of our history tells us that we can affect the market growth rate as opposed to become a victim of that market growth rate. And you can see it very clearly across the portfolio where we have achieved this much new higher standard. It's working exactly as I described in most cases, and generally where we haven't, it's not. We're just in a very tough environment, and parity doesn't cut it in that environment. As Olivia mentioned, certainly parity at a higher price doesn't cut it. In terms of what's around the corner, what we're talking about here today is significant, both in terms of the investment, the effort, but more importantly, the result that we think it'll have on the business. And really what you should view this as is taking this new 10 category portfolio, better positioned from a profitability standpoint for growth, and now executing and driving that growth while continuing to increase profitability.

Your next question comes from the line of Kevin Grundy with Jefferies.

Thanks. Good morning, Jon. Jon R. Moeller - Procter & Gamble Co.: Morning.

A question for you on Grooming, which was obviously soft in the quarter, down 6%. I was hoping you could talk – I have a handful of questions here, Jon. The negative price and unfavorable mix in the quarter, maybe you could discuss that a bit. Also Jon, the growth differential between the U.S. and international because more recently the company has been able to deliver some growth in that business despite the challenges or the much discussed challenges in the U.S., that would be helpful. And then two others and if you don't have this, I can follow up with Mr. Chevalier. With respect to Shave Clubs, are you still seeing penetration rates slow in the U.S.? Some of the more recent commentary suggested that. And then lastly, with some of the price cuts that you announced in the U.S. at the mid and lower end of the portfolio, is it your expectation you'll be able to offset that, or should we expect to see some margin erosion in that business? Thank you, and sorry for so many questions. Jon R. Moeller - Procter & Gamble Co.: No, good questions, Kevin. Thank you. In terms of the mix dynamic within that segment, that is largely geographic mix which gets to your second question. The sales outside of the U.S. were basically flat for the quarter, and I'll come back to that, so all the reduction is being driven by the U.S. and as you know, those are our most profitable cases and higher price cases. So that's simply what's going on there. In terms of the non-U.S. markets, and your point about them historically offering us growth is exactly accurate. Really what's happening is that we're annualizing a significant launch on the ProShield product in Europe, so Europe was down 5% with that in the base, but that's largely a base period dynamic. The way I would view Grooming broadly is pretty solid outside the U.S. Very strong progress on the female side of the business with Venus. We have a U.S. dynamic that's driven both by societal trends and by increased competition, which we're addressing very explicitly as you know. We've talked about that before. That's something that did not affect the results in the quarter, so that's still to come. But even before that, we're seeing, to your question on the Shave Club and other competitive dynamics, if you look at U.S. shave care volume shares, over the past 12 months, we're down 3.6 points. Over the past three months we're down 0.8 points. For the past month, we're up 0.7 points. And so part of that is annualizing a difficult period. I readily acknowledge that. But there's underlying progress that we're starting to see in terms of the share from a volume basis, and again, that's before the price reductions and the other interventions hit the marketplace. So again, very simply it's appropriately an area of focus, good business outside the U.S. Venus is going gangbusters. We've got a U.S. issue which we put plans in the market that have not yet taken place fully to address that.

Our next question comes from the line of Lauren Lieberman with Barclays.

Thanks. Good morning. First, Jon, I may have just misheard that, but did you say that non-U.S. sales were flat in the quarter? So then I'm guessing that means U.S. would've been up like two-ish? If you could just break those two out, that would be great for the first point. Jon R. Moeller - Procter & Gamble Co.: So sorry, Lauren. I was talking about Grooming.

Oh, okay. Jon R. Moeller - Procter & Gamble Co.: Yeah, so from a U.S. standpoint, total company, sales were down one point, and so the balance was up two to three points.

Okay. Jon R. Moeller - Procter & Gamble Co.: Especially in developed markets. Developed markets are flat, developing markets were up three points in the quarter.

Okay. Thank you. So just with that in context, a lot of interesting and really important commentary on the call, but we haven't talked a lot about the quarter itself. So share progress, right, share and approaching market growth rates and so on was something that you guys had talked about as being very important to gauging success for 2017. So can you talk about progress in that regard, I guess in the U.S. and China, kind of two biggest markets, and then in the four big categories you've highlighted as being critical to success in gauging where things stand? Thanks. Jon R. Moeller - Procter & Gamble Co.: So overall share is still a small decrease, about 0.3 points over the past three months. If you split that across developed and developing, we're largely holding share in developed. We're flat versus year ago over the past three-month period. Most of the decline is in developing where we're down 0.6 share points. The majority of that is in China as we've talked, and is primarily driven by the Baby category where we've lost significant share because we don't have a competitive product, much less an irresistibly superior product in the premium, taped segment of the market. We have an entry that we're very excited about that will launch in August in that segment in China that's being sold into the trade currently. The testing on that product against some of the metrics that I described earlier is very encouraging so we're hopeful to be able to address that. The other major area of share loss we've already talked about this morning which is U.S. Grooming. So there's a market dynamic, and there's a share dynamic. And again, we've talked there about the steps we've taken to address that. Now sorry for mixing questions here, but getting back a little bit to Kevin's question as well, that is going to have a negative impact on top line growth in our margins in the near term, but it should improve our volume share position and allow us to both increase consumption, or at least remove a barrier for consumption, and be more competitive, allowing us to restart the cycle of growth on both the top and bottom lines. If you look at top-50 category country combinations as another measure of share progress, we held or improved our share position in 36 out of those 50 markets, sorry, our share trends in 36 out of those 50 markets. So we continue to make progress, but we're not yet where we want to be. Two big items: Baby Care China, U.S. Grooming, we're on it.

All right. Our next question comes from Bonnie Herzog with Wells Fargo.

All right. Thank you. Good morning. Jon, I sort of have a follow-on question on your endeavor to strive for irresistible superiority as it relates to your retail partners. While a very noble strategy on your part, I guess does such a premiumization strategy work in an environment where retailers are primarily looking to lower prices and increase value as a means of driving foot traffic? I guess I'm curious if you've been getting any pushback from your retail partners just because it sounds a little counter to what they might be looking for. Jon R. Moeller - Procter & Gamble Co.: Thank you, Bonnie. First, an important point. Irresistibly superior does not connote more expensive. It may in some cases. In other cases, it may not. And remember, we talked about superior execution as well, part of which is superior value equation holistically defined. If you talk about the retail universe broadly defined, what's driving most of their behavior is a search for their own organic growth, and foot traffic is an important part of that growth. Frankly, irresistibly superior offerings drive that traffic, and our retail partners look for us to play that role in their portfolios. It drives typically market basket, which is also something that's very important to them. So you're absolutely right to refer to the transforming retail trade landscape as something that we need to manage with, and frankly, I think there's no better tool available to us than exactly what we described. If we can bring to the market indispensable brands and products at a superior value equation and provide an in-store experience that provides value and delight to the shopper wherever she chooses to shop, we're going to win and our retail partners are going to win. And if we don't do that, it's hard to see that the outcome will be positive.

Our next question comes from the line of Wendy Nicholson with Citigroup.

Hi. A couple follow-ups. Number one, you talked about packaging as being sort of a new area of emphasis or focus, whatnot. That surprises me a little bit because some of your competitors have talked about packaging maybe being less important going forward, particularly as consumers shop more and more online so how the product looks on shelves is less important. So I'd love your take on that and whether you're contemplating different packaging for products depending on which channel they're sold in. Second thing, the irresistible superiority concept I get, and I hear that it's working in detergent but I would question something like grooming where the consumer has clearly said, hey, and I think most reports say consumers agree that Gillette is the best performing products, but other things are more important, whether it's price, whether it's convenience, et cetera, et cetera. So can you gauge what percentage of your portfolio or what percentage of your categories you think sort of product performance and this concept of superiority from a product perspective actually matters to the consumer? Thanks. Jon R. Moeller - Procter & Gamble Co.: Great questions. To your second question first, we need to be day in and day out driven by the consumer, and what they want and prioritize. So the notion of irresistible superiority does not move for a nanosecond away from that focus. And remember, we talked about superior value equation as part of the dynamic and look at the move that we're making in the U.S. razor category. So I'm very concerned here that there's a misperception that a bar of irresistible superiority in products and packaging denotes higher prices or that we could get driven by a slogan and not by the consumer because that's not what we're all about here. And there's another aspect to irresistible superiority which is across the pricing ladder. So we want – take razor as the perfect example. Ultimately we want an irresistibly superior disposable razor that he or she believes is being offered to them with a superior value. We need an irresistibly superior product and package in the three-bladed systems segment of the market. We need the same thing at the high end of the market. So it's a very granular approach across, if you will, segments of consumers within an individual category who we're choosing to serve and each of those consumer groups that we're choosing to serve, we need to be relevant for and have that superior product. What is the number of categories that will respond to this? Remember, as we constructed the new company and the portfolio that we're going forward with, one of the screens, and it was a very intentional screen, is what drives purchase decision in that category? And we want to be in categories that are consumed on a daily basis and where purchase choice is driven by the ability of a product to meet a very specific need and where addressing that need is very noticeable and obvious to a consumer. And if you think across the product categories that we're in, if you're purchasing a laundry detergent, a baby diaper, feminine protection, anti-dandruff shampoo, deodorant, that's not an experiment for you. That needs to work. You're buying it for a reason. And if we can offer you a product that meets your needs in a superior way to other offerings, our categories tend to be very responsive to that. On the packaging piece, the increase in the amount of business that's done through e-commerce does not decrease the need for superior packaging. In fact, in some ways it increases it. There are product integrity challenges that are created by the e-commerce logistics channel that we need to address. And that's the Air Assist packaging I was talking about. That's one of the things that it's designed to address. There's also kind of a new moment of truth, if you think about it, in an e-commerce purchase. There's the first moment of truth which is on the site. There's the second moment of truth when you open that brown box and what's inside of it and how is that packaged. And that can be a delighter or that can be a detractor and we want that to be a delighter. And then of course there continues to be the next moment of truth which is the use of that product and it needs to perform in an irresistibly superior way. So also, 95% of the business that continues to be in bricks and mortars retail stores, that packaging is very important in terms of informing brand choice, educating, communicating with consumers, attracting her to the shelf. So I don't see packaging as being an area that should receive less attention going forward. If anything, it should receive more.

Our next question will come from the line of Joe Altobello with Raymond James. Joseph Nicholas Altobello - Raymond James & Associates, Inc.: Hey, guys. Good morning. First, just wanted to clarify something you mentioned earlier, Jon, on Grooming. How much of an impact, if at all, was there on order patterns from the price adjustments that you took given that they went into place I guess April 1? So maybe some delay in order patterns there. And then secondly, a little bit more color on one of the items you cited regarding slowing market growth which is retailer inventory reductions. How sustainable is this? Is this just a reflection of a new normal in terms of consumer traffic? Or was there some temporary component to it given that many retailers have a January fiscal year-end? Thanks. Jon R. Moeller - Procter & Gamble Co.: Thanks, Joe. Clearly there are dynamics around a major price change in a category, in a market, both as it relates to our brands but also as it relates to competitive behavior that a change to the dynamics within the window that perceives that period of time. I would have difficulty quantifying that for you, but there was certainly some impact associated with both order patterns and competitive behavior. The – sorry, I'm now forgetting – oh, slower market growth. The honest answer to your question, Joe, is I don't know. We think that the reduction in retail inventory levels was driven primarily by the consumer pattern that I describe in the U.S. that occurred in January and February, and we have seen a rebuild of some of those inventory levels as the consumer came back a little bit more strongly in March. April frankly is slowing a little bit. I don't know what that means. And you know, you have to realize we're talking about pretty small changes on the margins. They have a big impact on our results in any one quarter, but it's hard to look at that and understand therefore what the future looks like. There's nothing systemic that makes intellectual sense which would indicate why inventories should contract dramatically. Both retailers and ourselves still have significant out-of-stock opportunities to address. The last thing a retailer wants is a customer, once they've finally attracted her or him to their store, to not find the product that they want to buy. So I don't see anything systemic. I think this is more month-to-month volatility, management of cash positions as you rightly pointed out around quarter-ends. I expect that volatility to continue but I don't see a systemic trend one way or the other.

Our next question will come from (01:01:47) with Deutsche Bank.

Yes. Hi. Good morning. Thank you. So Jon, if you could just expand a little bit on what is going to drive the acceleration in Q4, because it seems to get to the midpoint of the guidance you need to do a 4%. And I know that you talked about some new innovation and it looks like the China diaper new product is now going to be in August. So if you could just remind us what are some of the things that are going to happen in Q4 to drive the acceleration? Thanks. Jon R. Moeller - Procter & Gamble Co.: First of all, relative to the guidance, there's a range for a reason. And I won't project where within that range we'll necessarily be. Time will tell. But I did mention in our prepared remarks that year to date, we were at the low end of that range. So I wouldn't necessarily assume a dramatic acceleration of the order of magnitude that you cite would occur in the fourth quarter. Having said that we certainly don't expect, given current market growth – it's all going to come down to market growth, quite frankly. And that's going to be the biggest driver in the difference between the fourth quarter and the third quarter. We progressed on shares in the third quarter but the markets were down. If we continue progressing on shares and markets continue to be soft, it'll be a soft quarter. If we continue progressing on shares and the markets pick up, it'll be a better quarter.

Our next question will come from Steve Powers with UBS.

Thanks. Good morning. I guess just stepping back, you've made a lot of incremental investment over the past year, Jon, and the quest for irresistible superiority in an increasingly difficult operating environment implies sustained if not increasing reinvestment in the years ahead. So I guess the question is, when does all this investment ultimately result in a true advantage for P&G so that we can get back to winning, as you said earlier? And has your timing or definition of winning changed at all with respect to that? Because I think the concern is what we're just seeing is that this is all just the added cost of keeping pace and that cost is going up in an environment where functionality gaps between high and low end products are getting narrower, price gaps remain wide, consumers are becoming increasingly discerning and hard to reach, et cetera. So I guess just to distill it down is, when does this result in winning, or is this just the cost of keeping pace? Jon R. Moeller - Procter & Gamble Co.: Good question, Steve. Let's step back a little bit. What we talked about doing this year was improving incrementally both the top and the bottom line, driving productivity to facilitate reinvestment, and we're right on track with those objectives. We're on track to deliver our going-in plan on the top line, our going-in plan on the bottom line. Going forward as I mentioned, we're still constructing the details of the plan for next year, but we would expect to improve again on both the top line and the bottom line. So sequential progress continuing to increase the number of category country combinations where we are winning. We've also talked very clearly about the need and our commitment to balanced top line and bottom line growth. And there's not a scenario here that we're anticipating that would violate that expectation, so the productivity facilitates the reinvestment. It also allows us to continue to increase the contribution from our bottom line. And in terms of the question of cost of competing, to the extent that we can continue to stay ahead of competition, where we are offering a benefit that the consumer prefers at a price that she sees as a significant value, there's no reason why these investments shouldn't pay off. But it's also why establishing this higher benchmark for how well these products need to perform and how effective the package needs to be against each of its objectives and how well we need to communicate those benefits, it's appropriate to do at this time.

And next we'll go to Nik Modi with RBC Capital Markets.

Yeah, thanks for the question. I'll keep it brief because most of my questions have been answered, but, Jon, you really provided some nice detail in geographic trends across your business first half versus second half. I was wondering if maybe you can give us some context around some of the categories, subcategories, in the portfolio. That would be really helpful. Jon R. Moeller - Procter & Gamble Co.: Well, I think you effectively have that through the segment data and the data that we provide you on the website. But each of the segments grew in the quarter with the exception of Grooming which we've talked a lot about, appropriately. So the growth is pretty broad-based. Our best performing businesses from a top line standpoint right now are ...

I'm sorry, Jon. I was talking about category growth. Jon R. Moeller - Procter & Gamble Co.: Oh, sorry.

Yeah, not P&G's growth. Sorry about that. Jon R. Moeller - Procter & Gamble Co.: Much prefer talk about our growth. Just kidding. I'll tell you what. I'm going to have John get back to you on that, okay? I don't have that sitting right here in front of me.

Okay perfect. Thank you. Jon R. Moeller - Procter & Gamble Co.: Thanks, Nik.

Our next question comes from the line of Andrea Teixeira with JPMorgan.

Hi. Good morning, everyone. Thanks for taking my question. Just going to be brief on basically the margin and reinvestment going back to Steve's question. On Beauty specifically, you had a huge decline on operating results, right? So I was wondering if this is temporary. I understand, of course, the Grooming is also had a big impact, but is there something about the reinvestment that we should continue to cycle through the end of, obviously, the fourth quarter and continuing through the beginning of next year? Fiscal year? Or how should we look at this in terms of the reinvestment in Beauty specifically, and a little bit of Baby as well? Thank you. Jon R. Moeller - Procter & Gamble Co.: We're making significant interventions in both Beauty and Baby currently. Beauty, our largest hair care and conditioner innovations in quite a while, were introduced into the marketplace in the U.S., for example, in the January-March quarter, so that's what you see being reflected there. Also investments in Olay. On Baby, we're making big investments both in improving product superiority, for instance, in China, as I talked about, but also participating and leading the rapid growth in the pants segment of the market, where we are now market leaders, and that's paying off extremely well. In terms of exact investments by category, that's what we're going to have to determine as we go through our planning process for next year, but let me remind you again, we are committed to a balanced approach to grow this business, growth on the top line, and growth on the bottom line with strong cash performance, and there's not a scenario that we would anticipate that would differ from that expectation.

Your next question comes from the line of Jonathan Feeney with Consumer Edge Research.

Thanks, Jon. You mentioned that extra moment of truth that comes from e-commerce. I mean, you covered this before, but it seems like every day we get closer to more and more disruption, more anecdotes about the importance of e-commerce, you guys having so much success in it. Where in your portfolio do you think, if any place, your business gets stronger in a post e-commerce, full-adoption world, wherever that gets? Like where do you feel like, wow, I'm sure glad e-commerce came along and we're competing there versus three or four years ago when it was a non-impact? And do you think, big picture, you're reaching a point anywhere globally? And do you reach a point in the future, where your margin structure your returns, however you think about it, your mode is bigger because of e-commerce versus the way you're going to market today? Thanks. Jon R. Moeller - Procter & Gamble Co.: That's a very interesting question. First, let me just comment on the progress on e-commerce. I mentioned earlier, organic sales grew 30% online in the quarter. It's now 5% of our business, maybe it's about a $3 billion business. It's primarily focused, but not exclusively, in the U.S., China, and in Northeast Asia, particularly Korea. China is about a $1 billion business online currently. I would expect that'll be 20% to even as high as 30% of our business within the next 12 to 18 months, so that's moving very quickly. Korea, it's 40% of the business today. The U.S. development in e-commerce is very different by category, with some of the bulkier and heavier products appealing to people online, so they're not having to fill up their shopping carts with those items, baby diapers, as an example, but also items were more specialized attention. Skin care, for example, is seen as a benefit. In terms of the broad statement on preference for development of this channel versus other channels, we want to be in a position to be agnostic. We want to serve consumers in a superior and delightful way wherever they choose to shop. There has been a lot of talk though about kind of the other side of your question, which is what happens to big brands, businesses like P&G in an e-commerce context, and is that good or bad? And we actually believe that it's good, that we can be very effective in an e-commerce world, and our market shares currently bear that out. Our online shares, on an aggregate basis globally, about equal to our offline shares, and as I said, the growth rates, not just from a growth standpoint but also from a share growth standpoint, are currently higher online than they are offline. There are two kind of discussions that occur relative to the online environment, and people who prognosticate the demise of big brands in that environment refer to lower barriers to entry, and they refer to what I'll call the land of endless assortment. And clearly, there are lower barriers to entry, which is a threat to our business but is also something we can benefit from if we're proactive about it just as well as anybody else can. From an assortment standpoint, if you actually look at shopping behavior, a typical shopper exposes themselves to a lower, smaller assortment online than they do offline. When they go to the store, they're exposed to what's ever there. Very few shoppers click through to the third or fourth page of a search, and what typically shows up on the first page of a search are the more popular offerings, the larger offerings. And then there are tools, whether it's subscription or other tools that allow us to increase the loyalty of those consumers to our brands. So there are many aspects of that environment, sorry for being so long-winded, that we see as real advantages and that we can exploit. But we also like our odds in brick-and-mortar environments, which continue to comprise 95% of purchases of our products.

Our next question comes from the line of Mark Astrachan with Stifel. Mark Astrachan - Stifel, Nicolaus & Co., Inc.: Thanks, and morning, everybody. Wanted to ask a different way on the Beauty question. So I guess given relaunches of certain hair care brands, certain SKUs of Olay, are you pleased with the performance, so far, I guess especially if you back out continued strong growth of SK-II? And what else do you need to do to really reinvigorate the business? Because even inclusive of SK-II, it would seem that the results are a bit below category growth. And then just one housekeeping question. What is the new breakout in COGS for product reinvestments? What is that? How should we think about that on a go-forward basis just given I think that was new this press release? Jon R. Moeller - Procter & Gamble Co.: Beauty care has been continually improving. I think this is our sixth quarter in a row of organic sales growth. We have some very strong brands within that. Certainly SK-II is one of them. Head & Shoulders is another one. Pantene, on a global basis, has been doing very well. Some of our personal care businesses have been doing well. So I don't want to give you the impression that it's – we're very happy with the progress on SK-II, but it's not carrying the show in its entirety. We still have opportunities in Beauty, as well, in the hair care line, some of the smaller brands. We just relaunched and re-staged Herbal Essence which is doing extremely well. That grew 6% in the quarter versus a year ago. But we still have work to do on Aussie and Rejoice as an example and within skin care, we're still making progress on Olay. But six quarters of growth we'll take, and we have very strong plans going forward.

Our next question comes from the line of Jon Andersen with William Blair. Jon R. Andersen - William Blair & Co. LLC: Hi. Good morning. Thanks for the questions. On the online organic growth rate of 30%, thanks for the color on that. I guess, could you provide a little more context around how that 30% compares to recent trends you've seen in your online business and how you think about that growth rate perhaps going forward? And then I was wondering if you could tie that into maybe the work you're doing on the supply chain network transformation? You've talked quite a bit about the cost savings and the productivity elements of the supply network transformation but is there – to what extent is that work also facilitating your ability to serve the e-commerce channel through different packaging configurations, faster time to market, et cetera? Thank you. Jon R. Moeller - Procter & Gamble Co.: Great question. Growth rates, not a significant change this past quarter versus recent quarters but continued strong. I'm really glad you asked the question on the supply chain redesign because it definitely enables us to improve our ability to serve the consumer in an e-commerce environment and to better serve both e-commerce retailers and bricks-and-mortar retailers. There are several aspects of this. One is getting the manufacturing facilities themselves and the distribution centers in the right places in the markets relative to population centers that allow us to bring products to consumers, whether it's in a e-commerce fulfillment environment or a bricks and mortar environment in a very efficient fast, and very efficient low-cost way. And the way that we were set up before with factories kind of all over the place, the design being simply an artifact of history, we were not set up well to do that, and that was one of the motivations that caused us to move to this new model. There are significant opportunities, and I mentioned actually I think perhaps in the last call, within that supply chain redesign to improve our ability again to serve e-commerce consumers but also bricks-and-mortars consumers. And the whole idea of being able to get kind of our lighthouse if you will, that's being able to produce eaches, so single packages in rotation. So as they're ordered, at the same cost that we're producing large batches of product today. And we have a lot of pretty exciting progress in that area with robotics and other things. We still have a lot of work to do, but that's where we want to be from a customer service standpoint and a consumer delight standpoint ultimately in the supply chain vision.

Our next question comes from the line of Ali Dibadj with Bernstein. Ali Dibadj - Sanford C. Bernstein & Co. LLC: Hey, guys. So I have two questions. One small, one big. The small one is just around the SG&A. I mean, you talk a lot about cost savings obviously, but without this 110 basis points from other operating income, it looks like you didn't cut enough relative to how much you sent back. So I just want to understand what the other operating income is. Sorry if you've already talked about it, and what we should expect going forward. But the bigger question, to me a really a big confusion point and I apologize, is I want to go back to winning and irresistibility that you mentioned because from a strategic perspective I just don't understand irresistible superiority because if you're saying that market share shifts aren't going to be the big driver of your growth and you quoted some numbers, Jon, that haven't been, and irresistible superiority isn't striving to premiumization, something you emphasized a couple of times to answering a couple questions, i.e. price mix isn't going to be driving category growth. I guess I'm confused as to what it is. I'm confused about how investing back into the business for no share gain and no pricing growth or limited pricing growth is a good deal for investors, and really toward the definition of what winning means to me, or more importantly, what it means to you. And instead, would it be better to admit like you did in Gillette in some sense and it looks like you did a little bit in laundry and a little bit in diapers right now given the pricing competition that's out there, that your categories are becoming diminishingly important to consumers, and actually investing in this irresistibility is actually the wrong strategy. It's not the winning strategy. So being premium in commoditized categories may not be the right strategy, and you're saying it's not premium. So I don't understand – for my question clearly, I don't understand if you're not getting share gain, if you can't go to pricing, how are to going to grow category growth, if that's what you want to do. Sorry. Thanks. Jon R. Moeller - Procter & Gamble Co.: No, don't be sorry. That's a good question. First of all, where we drive market growth, we almost inevitably build share. This is not walking away from share, and we've talked about the importance several times on this call about market share. What I'm trying to say is if that's all we do, if we gain a small amount of share of a market that's stable or declining, that's a small victory. A large victory is driving market growth and capturing a disproportionate amount of that growth, and there's huge value creation in that. So these are not separate concepts. They augment each other. And the sustainability of growth that occurs when we're driving market growth is much, much higher than if all of the growth is simply coming from somebody else. Because they have their economic realities, they have their investor realities, and the response to that is very predictable. So for example, when we went into the adult incontinence category, we had a very, very clear objective, which by the way is not just important for us. It's important for our retail partners. Imagine the presentation that occurs when you walk into a customer and say I've got this great idea. We think it's going to build two share points. Why do they care? They typically don't. What they care about is does this grow their business in total? So that when we launched into the adult incontinence business, we had a very clear objective that we communicated with our retail partners, that our job was to grow that category. And we basically doubled the growth rates in both the U.S. and Western Europe as a part of that launch and are doing very well. We've obviously, as a part of that, built our share from zero to meaningful share. So again, those concepts are not divorced. On the whole question of premium and consumer choice and preference, I would say a couple things there. First, we want to be irresistibly superior at all relevant price segments of the market, not just in the premium price segment. What that allows us to do, if we do it well, is offer products – razors is a good example, disposable products – at a slight premium to other disposable offerings, re-bladed systems, high-end systems. Each of those offerings, because that consumer segment defines itself, we want to be superior in. But that does not lead to a notion that we're going to focus entirely on premiumization of the business. We're going to focus on superiority. Relative to price sensitivity, there are very different things happening in different markets around the world and very different consumer behavior across segments. China is premiumizing rapidly. Our biggest problem in China is that we're not premium enough. And that's, for instance, what the Baby Care launch is designed to address in the Baby Care category. That's what the Oral-B toothbrush launch was designed to do and it's working very well. So this notion that the categories have become commoditized and that there's only one shopper and all she cares about is price, doesn't care about product benefit. It's just not true as we look at our business, both on a U.S. basis and on a global basis. In many parts of the world including the U.S, our fastest-growing offerings are some of the premium offerings. Now, I don't want that to be mistaken as that's where we're going to premiumize business. That's not the point. But where that consumer exists and wants to purchase, we need to be available and relevant. I mentioned the growth of the bead segment. Strong double digits. That's a premium price offering. Tide PODS and Gain Flings!, those are premium priced offerings. And again, I'm not referencing those to suggest that that's entirely what we we're focused on, but where there's a consumer that wants that, and I mentioned earlier, we want to keep the consumer very much entirely within our focus, we're going to serve that consumer. And I just don't see the environment that's being described. I see aspects of it and certain consumer segments for which price is a more important part of their value equation and we need to serve that consumer. But there are many different behaviors that are occurring across the world.

Our next question comes from the line of Bill Chappell with SunTrust.

Thanks. Good morning. Hey, Jon, just a commentary on the quarterly trends, the comment of late tax returns and weather and pantry de-loading. I think we all heard that and had questions about why the U.S. has been so soft. But I guess the question is, do you believe those really are the issues? Or is there something bigger? Have you seen some kind of improvement as we've moved past it in the quarter or even into April? Or is there something else going on that you've figured out? Jon R. Moeller - Procter & Gamble Co.: So as I mentioned to somebody earlier, I don't really know the answer here, Bill. What we saw, and that I do know, was significant decline in category growth rates, I'm talk about the U.S. now, in January and more significant in February with a rebound in March. And April is, by all indications, relatively soft. And I don't know what all the drivers are of that. And we're just going to have to see as we go forward. And as I said, that's going to have an impact, hopefully a positive one, but it will have an impact on our results both this year and next.

And your last question will come for the line of Jason English with Goldman Sachs. Jason English - Goldman Sachs & Co.: Good morning, folks. Thanks for making the time for me. Thanks for holding me out to be the closing act. I appreciate that. Two questions. First, I don't think you answered Ali's question, and I apologize if you did, on the corporate income, the 110 basis points of other income margin which I think equates to like $0.05. What was it? And then secondly, the bigger question, kind of going back to the theme of running hard to stand in place. Turning to margins, $10 billion of productivity right now, mix has sort of resurfaced and annualized, that rate will leak out $3.5 billion over five years. Inflation kind of running at sort of a similar offset or a similar drain, if you're not able to offset it. And then this reinvestment, if we annualize it, that tallies to around $3 billion over five years too. You just kind of gobbled up the $10 billion. Is that the right way to think about it? Or are there offsets that are going to allow you to let some of that $10 billion flow to the bottom line? Jon R. Moeller - Procter & Gamble Co.: Thanks, Jason. And thank you for reminding me of Ali's first question. I kind of got lost in the bigger question. Most of that benefit related to the gain on the sale of an office facility, and so that's what drove that. There were also some other impacts, but that's the most significant one. In terms of the question on mix, and the last question on savings flowing through to the bottom line, the mix impact in the quarter, the easiest way to contextualize that is that that is almost entirely driven by two things. One is the change in the growth rate in the U.S. which is our most profitable business. So we had a business that was down in the U.S. When that happens, just because of the relative profitability of the U.S. business, we're going to have a negative mix impact. That's not our plan going forward, so as that reverses itself, that mix impact should largely disappear. The second piece of that mix impact, think about it through a different lens, through a product lens, our U.S. grooming business is a very profitable business. And so when that is down, from a top line standpoint, that also creates a negative mix impact. We have the plans in place to address that. So I don't expect, course, I don't have a crystal ball, I don't know what relative growth rates of categories and markets are going to be for the next five years. But nothing that's happened in this quarter changes my view in terms of what the likely long-term result is, which, as we've talked about before, is balanced top and bottom line growth. I've told you that we can't get to where we want to get without – we can't get there entirely through the top line, we can't get there entirely through the bottom line, we need both. And margin expansion is a part of that. The amount of savings that ultimately come through, we'll be working that as we formulate our plans next year, but the productivity purpose is twofold. It's to support the investment in all the activities that we talked about today that drive the top line, and it's to provide opportunity to grow margin. Jon R. Moeller - Procter & Gamble Co.: So thank you very much for spending time with us today. I realize we went through quite a bit. I'm very happy to take time with you later today or over the balance of the week to answer any questions you have, or to go into more detail. Thanks a lot.

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