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 and objected for after tax impact of major divestitures. Adjusted free cash flow productivity is the ratio of adjusted free cash flow to net earnings, excluding divestiture gains. 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. Good morning, everyone. I am here this morning with Bob McDonald and Teri List-Stoll. Our third quarter results were on track with our plan on the top line, market share showed broad based improvement and strengthened as the quarter progressed. And we’re ahead of plan on operating profit, earnings per share, and cash flow. We announced an increase in our dividend and we’re increasing our share repurchase projection on this call to the top end of our target range. In the March quarter organic sales grew 3%. Sales came in at the lower end of the guidance range due in part to lower market growth. Underlying global market growth was choppy month-to-month and was down about half a point in the March quarter versus the December quarter. Organic volume grew 2% and pricing added one point to organic sales growth. Product and geographic mix was neutral to sales growth. Foreign exchange impacts lowered sales growth by one point resulting in all-in sales growth of 2%. Global market share trends have continued to improve. We held or grew market share in businesses representing over 50% of sales in the March quarter, with third consecutive quarter-to-quarter improvement from 30% in the June quarter, to 45% in the September quarter to just below 50% in the December quarter and now over 50%. Within the quarter we saw a sequential market share strength ending the period with a strong month in March. In the U.S. we held or grew value share in businesses representing two-thirds of sales in the March quarter. This is up from 15% in the June quarter of last fiscal year and about 55% in the first half of this fiscal. As with the rest of the Company results strengthened as the quarter progressed with businesses representing over 70% of…

(Operator Instructions) Our first question comes from the line of Lauren Lieberman from Barclays. You may begin.

I was hoping you guys could talk a little bit more about Beauty Care, I mean clearly very good news to hear about how the U.S Hair Care portfolio is performing in the U.S. especially given how competitive it's been, but Beauty Care volume down one, organic sales down one, there’s obviously a lot that you didn’t talk about most notably probably Skin Care and I’m guessing also the overall China business. Thanks.

Lauren, I think in Beauty & Grooming we have three key points. Number one is we’ve got a strong portfolio of leading brands. Number two is we’ve got clear plans and sufficient innovation to address these near term opportunities you’re asking about. And number three, there’s a significant opportunity to expand and grow our Beauty & Grooming business beyond where it is today. Let me deal with the clear plans and sufficient innovation piece since I think that’s where your question is coming from. As you suggested in Hair Care we’re expanding the portfolio vertically with innovations like Vidal Sassoon Pro Series in the Salon Affordable Segment and Pantene Expert Series in the Super Premium Segment and this has returned U.S. Hair Care to share growth with value share of one point in March as Jon mentioned. In the U.S. Expert Collection shipments display and trial results are all at or above expectation, and Vidal’s shampoo and conditioners quickly approaching a 2% value share and shipments are nearly double our pre-launch estimates. In Blades and Razors our sensitive skin innovation across Fusion and MACH3 blades and razors and shave preps is leading to improve share results. We’re holding or growing value share in the U.S. on Fusion, MACH3 and Disposables, and we’re also growing share on Venus blades and razors. In cosmetics share trends have improved sequentially over the past two quarters behind three exciting COVERGIRL innovations. Clump Crusher Mascara by Lashblast, Outlast Stay Brilliant Nail Gloss and Stay Fabulous 3-in-1 Foundation. In Salon Professional we returned the growth behind the launch of ILLUMINA Color which is delivering sales more than 50% above going in estimates. Billion Dollar beauty & grooming brands I have talked about the strength to them. And then in Skin Care which was the point you asked about Skin Care in China, we’ve launched several new innovations including upgrades to our existing lines and new innovations would address key segments that we have portfolio gaps. Examples in the United States, new Olay Regenerist Micro-Sculpting Cream, Total Effects CC Cream, Olay Fresh Effects. In China Yu Lan You Naturals, Pro X Whitening a restage of the Olay brand, new counters and the launch of a new mid-tier brand. So results are improving sequentially and I expect that sequential improvement to continue.

I think if you look at, as I mentioned in the share comments Lauren, versus a year-ago you’re absolutely right that Skin Care continues to be a drag in terms of market share being down versus year-ago. We have more work to do there but as Bob indicated, there have been a number of things that have been just recently put out on the market that we hope to drive that behind.

China beauty shipments grew double digits this quarter.

Your next question is from the line of John Faucher from JPMorgan. Please begin.

Yes, thanks. As we look at lower raw material inflation over the course of calendar 2013, you're going to see less pricing in the category and I guess we're not seeing a volume bounce back which is what's leading to deceleration in overall organic top line growth maybe in these categories. So, can you talk about what you're seeing from an elasticity standpoint as we look at less pricing and how you think that maybe plays out over the course of the year? Thanks.

Well, to me John, Jon talked about the fact that in the quarter we saw a half a point reduction in growth versus the previous quarter. I think the economic recovery is going to continue to be choppy as we alluded to in our remarks. And to me the ultimate response is growth through innovation and growth through productivity improvement. We're going to continue to work on the productivity improvement. Jon talked about the fact we're ahead of the pace that we expected to be at this point in time. Some of that productivity improvement will fall to the bottom line, some of that productivity improvement will fuel the launch of the new innovations and the new market category combinations. And as Jon said, we're not pulling back. We've introduced 30 new category country combinations this year and we're going to continue to do that. Jon went through a litany of those including the broad global expansion of our oral care business. So we're expecting sequential improvement in the top line driven by innovation. And we're expecting continued sequential improvement in market share just as we tried to indicate with this quarter's report.

You're next question is from the line of Dara Mohsenian from Morgan Stanley. Please proceed.

Hi. Bob, I just wanted to focus on the top line. The two-year average organic sales growth decelerated in the quarter versus Q2 and last year despite the higher marketing and the greater innovation. And it looks like it was even rounded up to get to 3%. I know you mentioned weaker market growth, but how comfortable are you that you're getting a solid ROI on the investments you're making in marketing and innovation and the other areas given the lack of a top line payback this quarter? And second more importantly to broaden out the question longer term, it seems like in recent history you've been a bit at mercy of variances in market growth of the competitive environment from the top line perspective, obviously that will impact any company but market share has only improved modestly here sequentially in the last couple of quarters despite the price adjustment. So, can you take us through some more detail on what you're doing internally from a market share standpoint to manage through the external environment and you're level of confidence that you can sustainably turnaround market share as we look out over the next couple of years here?

Yeah, Dara, I'm very confident in our sequential improvement and market share driven by innovation. I would differ with your characterization. I think we've made substantial progress in increasing the percent of our business growing market share and I think that ties pretty directly to the innovations you've seen. I mean a classic example is the fact that the Tide PODS is helping us grow laundry market share in the U.S. and it's only on one brand and one country, and it's worth $0.5 billion of top line. I think we're on the early days of seeing these innovations have a broader impact globally and that will translate to an accelerated growth on the top line. We're continuing to invest in innovation, we've increased the spending on research and development the past three years, we're going to continue to make sure that we're building the capability to keep that innovation going. And the results in the marketplace are demonstrating that we're executing with excellence today more so perhaps than the previous periods you were talking about. So I'm confident we're going to continue this sequential improvement and you'll see it in the share and you'll see it in the top line.

I share Bob's confidence. If you just step back over the last couple of years as we’ve discussed many times from a geographic standpoint the one market that we weren’t growing and that we needed to grow in was North America, and that's obviously a large part of our business. And if you just look at the percentage of businesses holding or growing share there, growing from 15% in the June quarter to 55% in the first half of this fiscal year to two-thirds in the March quarter to over 70% in the month of March, that gives us a lot of confidence that we are on the right trail here.

The next question is from the line of Wendy Nicholson from Citi Research. You may begin.

Hi good morning. My question is on …

Hi. Wendy.

…the gross margin and the expansion slowed significantly I think on a sequential basis and you called out sort of the start-up cost within new production facilities. So is that all of the plans coming online in the emerging markets for is that also just innovation stuff that's launching in the U.S.? And if it is the emerging markets, is that something that's going to be here to stay for the next couple of quarters or do we think gross margins going to re-accelerate with the better commodity backdrop? Thanks.

Thanks, Wendy. It is both of the things you mentioned. It's emerging market, start-up of localized manufacturing in emerging markets, it is also the start-up of manufacturing operations to support our innovations in developed markets for example the POD start-up in Europe. Both of those will be with us next quarter and it's one of the reasons that you see some of the trends that you do, but I don't expect this to be an ongoing dynamic. This should be another quarter or two.

One of the things we have worked hard on Wendy is ramping up our process reliability as vertically as we can when we start up a new plant and process reliability is in a sense the amount of throughput that you get from a plant versus what you expect and our process reliability as a Company is now at the highest level it's ever been. And that is what's leading, helping to lead to some of the productivity improvements you see in manufacturing productivity, because as we increase the throughput of every single plant we then don't need to buy additional capacity in essence that capacity comes with the productivity improvement. So we're going to continue to work as we start-up these new plants to get the process reliability curve as vertical as possible to minimize those expenses.

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

Thanks. Good morning, guys. Hey, can you just talk about the sort of fourth-quarter guidance and all the reinvestments, you think about you did 3% organic growth in the year-ago quarter, you’ve announced a massive restructuring, you reinvest all this money back into the business, but it seems like organic growth is just going to be flat, so is it really just sort of category growth contraction? And then what would happen if we really did have some commodity inflation, because I think you have like 260 basis points of productivity savings in the quarter and I think that kind of carries forward. So, what sort of the puts and takes in, how long is this negative mix impact going to last? And I know that was a long question, so I apologize.

Wow! I’m not quite sure how to cut through that. I will try. So, first of all just let me step back on our guidance philosophy, since your question started with guidance. Last quarter we over delivered our guidance. We increased guidance a little bit, but invested a lot of the money back to ensure that we continue to leverage innovation pipeline we have an sequentially build market share. Effectively this quarter we have done the same thing. We have over delivered by a little bit, we've taken up the bottomline – the bottom end of the guidance range, but are going to continue to invest to get the share where it needs to be going forward. As we invest to do that and drive higher profitability through productivity I'm confident that the returns will be there, because each case we are growing, it’s worth more and the – I expect from a commodity standpoint if anything may be a little bit of fairly benign. I don't expect a big impact going forward and so these productivity savings should begin to impact both gross margin and operating margin as they have in prior quarters, particularly when we get beyond the start-up of these new manufacturing facilities that Wendy was describing. So I see accelerating top line based on continued market share progress, kind of irrespective of market size and the productivity savings over time enabling us to both fuel that and drive our earnings per share growth.

Your next question is from the line of Chris Ferrara from Bank of America. You may begin.

Thanks. Guys, I guess I wanted to try to pull together some of the comments you've made on your confidence in the market share recovery, the timing of the build out of the innovation pipeline, right, because it seems like there's been no shortage of new products at the second half of '13 yet a couple of things. In the Q4, organic guidance implies only flattish markets here at 3 to 4. You're saying momentum was building through the quarter but the Q4 outlook is not even an acceleration from Q3 when you came in at the low end of your organic range. So I get that you're saying it's early days and some progress is made, but wouldn't you have expected that share recovery to have kicked in a little bit more by now and if so, why do you think it has? And if not, why not?

Obviously the market share is affected by many factors, Chris, some of which are external, but I would say that all-in-all, as we step back from it, we're on track with what we want to deliver in terms of sequential improvement in market share and we expect that to continue. We expect that to continue in the fourth quarter and we're looking forward to the next fiscal year. The innovations, many of which we've talked about, are one country, one brand and they're supported by a technology platform that we will put across more countries and more brands. I mean we talked about PODS and we talked about the entry of PODS into parts of Europe and the parts of Latin America and the parts of Africa. This is only now starting. We're just now shipping those cases, taking those orders. You're not seeing the impact in the marketplace at all yet. I think by the end of the quarter, you'll obviously see that impact and just like this quarter, it will ramp up through the quarter. And as we've said, March was a much stronger month than the beginning of the quarter and that's why we grew share at the 70% plus of the U.S. business, grew and held share at 70% plus.

Your next question is from the line of Nik Modi from UBS. You may begin.

Yeah, just quickly on all the innovations to just on how you guys are thinking about the FTU complexity across the business, especially at a time where you're trying to also reduce the cost structure and can provide any thoughts on that? And then just a housekeeping, can you just talk a little bit about the health care business and what was driving such strong growth? Was it just the flu season or was there something else going on there?

Well, in terms of innovation and SKU proliferation, our point of view is one where we work with customers and retailers and create joint value creation. We have scorecards that we work with customers and part of that is working efficient assortment where we don't bring an innovation to retailers that we don't think will command or attract a large number of consumers. And while we go in with that new innovation and expect to or try to sell a certain amount of shelf space, at the same time we help retailers pull out, eliminate some of the innovations that other competitors or even we have launched that may not have worked. So we try to keep the SKU proliferation under control. I think I would point to our manufacturing productivity. Our manufacturing productivity and our work on inventory which is turning in great cash results wouldn't be where it is if there was evidence that we were [prolifering] SKUs. At the same time, I'd encourage you to look at some at the new items that we launched by some of our competitors that haven't done well and we'll be working with retailers to try to get the shelf space back, so the retailers can make money off that shelf space.

In terms of health care, there are really three drivers, Chris. So one you rightly cite which is the strong cold flu season. The second is the expansion of the Vicks line up in Eastern Europe that we've talked about before. And the third is a real strong quarter on the P&G (indiscernible) business as we continue to drive the products of that joint venture. So those are the three main drivers of our health care progress.

Do you mention ZzzQuil? I would also mention the launch of ZzzQuil which is multiples beyond our expectation and success. It's already the number one branded sleep aid, it's expanded the category. ZzzQuil is off to a tremendous start and I would recommend it for all of you who may suffer jet lag if you travel internationally.

Your next question is from the line of Ali Dibadj from Bernstein. You may begin.

Hey, guys. So, I think like a lot of other people on the call, I’m kind of struggling with the dichotomy between the positive tone of your press release, the confidence you’re clearly exhibiting on this call, all the very, very enticing innovations that are out there. First is, essentially I think disappointing top-line results at least from investors, analyst and I think you’re seeing that on the stock reaction probably. So, I got a few things; one is how is your share gain related to the slow down in the market growth? Two is; I guess, if everything is going to plan, why is it pretty impossible to get to the high-end of your top-line growth range for the year? And then three is, you say there’s more to come. I’m trying to understand what's -- like are there other bigger things you’re expecting to happen whether it be an incremental reinvestment that you need to make, whether be an acceleration to the chart changes or structure changes or in census structure. What else can get us to feel better to tie in this dichotomy to your confidence and frankly somewhat disappointment when everybody on this call so far asked questions in some of the market right now. Thanks.

Well our top-line growth delivery was within our guidance range, Ali. And I think maybe part of the dislocation that you’re perceiving between our confidence and your lack of confidence may be just in time sequence. I mean the innovations we’re talking about as I responded to Chris’s question, are all future oriented and future related and you’re looking at past results. I think that we’re going to continue to do what we’re doing. We’re going to continue to invest in innovation. We’re going to continue to bring out a large number of innovations. We’re going to continue to fuel that with productivity improvement and with investments in innovation. I’m really excited about the work that we’ve done around productivity both in the manufacturing area where we’ve offset the headcount that we need to run 20 new factories, but also in the area of non-manufacturing where we’re ahead of target. And the work that we’ve done already in the productivity area with Jorge Uribe team and his leadership is suggesting that we can get to the 2% to 4% reduction which by the time we get to 2016 could have us down 16% to 22% of enrollment. And I think that’s terrific progress and it gives us a lot of confidence that we’ll have the fuel to then spend behind innovation and get those sequential market share growth goals that we talked about without regard to choppiness of the global economy.

Your next question is from the line of Joe Altobello from Oppenheimer. You may begin.

Thanks. Good morning, guys. I guess, since you just mentioned choppiness again Bob, I’ll start there. You guys have talked about that a lot this morning. We’ve heard that from other companies as well. Could you give us a little more color or past anecdotes in terms of what you’re seeing from your customers, where they’re buying and what they’re buying, how often they’re buying, how that’s changed in the quarter perhaps. And then secondly the market share trends obviously are improving, but I think your overall market shares are still down year-over-year, so when would you guys expect to see those overall market share start to grow overall? Thanks.

Well let me deal with the year-over-year first, the year-over-year varies by category, by country. For example, year-over-year now in North America we’re obviously seeing growth because we’ve got 70% plus of the business holding or growing share. So obviously with the sequential improvement over time with 50% plus now holding or growing share globally we’re going to expect to see a year-over-year growth sequentially in the coming quarters. Relative to the choppiness of the economy it's more of an evolution I think then a cathartic revolution. What we’re seeing is obviously retailer’s concerned about their level of inventory and their cash investment. We see them worrying about attracting traffic to their stores, but we don't see extraordinary levels of promotion like we may have in 2009, 2010, but there are times where there are extraordinary levels of promotion. For example when we launched Vidal Sassoon and Pantene Expert and one of our competitors launched a new brand, the third competitor who did not have very strong innovation program this quarter put instantly redeemable coupons on all of their hair care offerings in every store. So you do see choppiness in that regard. The promotion spending when you don't have innovation, but the rest I would see as evolutionary but an improvement in the way retailers are operating. Another point that you see is the move to online or ecommerce. We've been working hard to understand what our market share is in ecommerce. We've been putting a lot of resources against it. I'll just give you the U.S. example, if you take our U.S. market share, our ecommerce digital market share both through bricks and mortar and through digital players is 20 points higher than it is through regular retail. And this was a fast growing channel, so that may lead to also some of the choppiness that you may see because most of that, that sale is not transparent to the marketplace.

But if we're going to continue to operate in an environment that is a little bit choppy, I think we're extraordinarily well positioned from a standpoint of both the productivity program and the innovation program which are the antidotes to this kind of market environment.

Your next question is from the line of Connie Maneaty from BMO Capital Markets. Please begin.

Good morning. Another question on market shares. If U.S. shares are growing in 65% to 70% of your businesses and your shares are growing in 75% of businesses in China, but your worldwide shares are growing 50% -- and 50% worldwide. In which international markets are you losing share and why? And when would you expect to turn?

Well, Connie, first of all we said that holding and growing share not just growing. And that's a significant difference. Places we're losing market share, frankly we've talked about the work we're doing on skin care globally and trying to improve our [VT] business. That's a major focus for us. Brush laundry, we were losing some share and we've put a plan in place to regain share. So we have pockets like that around the world, but believe me we are all focused on turning those shares around and doing it through innovation.

Your next question is from the line of Javier Escalante from Consumer Edge Research. You may begin.

Good morning, everyone. I would like to come back to beauty and the choppiness and again, the market in a spending and the innovation that you're talking about. If you step back, you did major launches in the U.S. in Olay, in hair care, in makeup with COVERGIRL and yet we don't see any traction from it. So I understand that L'Oreal did a competitive launch but under the same choppiness, they grew 5.5% in the quarter on GVU contracted minus 1%. So what I'm hearing is doing the same thing, spending more and doing the same innovation, blaming competitive activity in terms of the lack of traction that shouldn't you be thinking about doing things differently so that there is more effectiveness in the A&P spending and on the innovation? Thank you.

Javier, we understand. We see it a little bit differently than you do. We launched these items, recently they’re making sequential progress. We talked about Vidal Sassoon already approaching a two value share which is double our pre-launch estimates at this point in time. These things are making progress period-to-period. Pantene Expert for example has a higher repurchase rate than our competitor’s new brand. So we’re seeing progress period-to-period and we think that will be reflected in the market share results and the top-line growth sequentially as we said.

And your next question is from the line of Jason Gere from RBC Capital Markets. You may begin.

Thanks. Good morning. Just, I mean, I’m not going to use the word complexity, because I think it's been over used a little bit. But I guess, I’m just trying to figure out when you’re looking at all the innovation that you’re bringing out and the top-line growth that’s coming through. Can you talk about some of what I would consider as the non-core businesses in the portfolio. Obviously we know its for the 2010 the area that you’re focusing on and where you’re playing to win. But it just seems like there is some volatility with some of these non-core businesses that you guys, I think are not continuing disposing at time. So I was just wondering when you see the results that are coming through and the great innovation that you’re getting and some of what I would consider more core businesses, does that change your outlook in terms of keeping other brands in the portfolio or kind of, I think one of the last questions was on the SKU complexity, kind of eliminating that so you can put up healthier numbers and seeing the results of better innovation in some of the core brands? Thanks.

Jason, as you know we have quite a robust process for weeding and feeding our portfolio and we have divested businesses in the past. We are happy with our portfolio that we have today. And any item in our portfolio, there is an expectation that we innovate. Jon, went through the innovation for example that we have in Pet Care coming to market, good for you and the (indiscernible) item. We have innovation in Duracell another category that you’ve asked us about in the past, in (indiscernible) with a 10-year guarantee on Powermat. So, we expect to innovate into every one of our businesses. There maybe a different cycle of innovation, a need for that, but we expect to innovate in every one of our businesses and that’s the primary way that we attract consumers and grow our business.

Your next question is from the line of Bill Chappell from SunTrust. You may begin.

Good morning. Just wanted to dig back into the PODS in the U.S. and certainly half a billion in sales and improving market shares in great, but just if you could give us some color of after being out in the market for a year, I mean, is the six household penetration, where you expected better or worse, and I mean can you get to 10 in the near term and do you need to have gain PODS or something else to really kind of jumpstart the category even further? Thanks.

Thank you, Bill. With the technology like Tide PODS, we usually start with the leading brand and then we expand that technology across countries and across brands. What we’ve seen with PODS is that it's a preferred form of laundry detergent. And people who move from a powder to a liquid historically now move from a liquid to a POD, and they typically don’t go backwards. Once you start using a POD you don’t go back to a liquid. Once you’ve moved to a liquid you don’t go back to a powder and that just is the generational shift in the laundry category. I think one of the things that’s been interesting about PODS is its attracted users even though it has a higher cost per load. It's attracted users across the entire spectrum of users, across the entire spectrum of income. So, there are many, many people who are forced to over dose their laundry detergent today because they aren’t getting satisfactory cleaning and they buy a low priced brand, that brand doesn’t work, it has a low level of actives, has a lot of water and so they overdose. And they move to this form which cleans better and they find it more economical even though it has a higher cost per use. The reason the cost per use is higher is you’re not paying for water, you're paying for active ingredients. So, I think it surprised us a little bit to see where the source of volume has come from. If you look at the track of what percent of the business this has become, we said that we think we'll get to 30 eventually because of what we've seen in dishwashing over time and automatic dishwashing, and we have no data to refute that. This is – it's going to be an evolution over time but as we expand the form about the world, you'll see a higher proportion of our laundry business go into PODS and eventually I think we'll get near the 30% number that dishwashing has.

And don't forget that we were constrained in terms of supply until just recently, so we'll be increasing the levels of marketing of in-store support. So to your point of driving a higher household penetration, that's still ahead of us.

Your next question is from the line of Mark Astrachan from Stifel Nicolaus. You may begin.

Thanks. Good morning, everybody. So I wanted to go back to the underperformance in beauty and try to think about it a little bit differently. What do you think has led to some of the underperformance? And when do you think the innovation-based strategy potentially needs to shift or how do you sort of evaluate the efficacy of what you're doing? And then sort of related to that, how do you think about supplementing the internal innovation with acquisitions externally? And then sort of related to that, how do you think, Jon, about the optimal leverage structure on an overall basis for the business? And does the cost savings program limit the acquisition appetite overall?

Well, we've been working to strengthen the organization, strengthen the business now for some time. We're starting to see progress. As we reported in this quarter, we've launched a number of new innovations and the innovation program looks even stronger in the future. We have more what we call bigger change innovations coming in the future and we're excited about that. So I expect – as I've said, I expect the performance of the beauty organization to improve quarter-to-quarter and sequentially and we're going to continue to invest in it both in terms of innovation and in terms of marketing.

And we've said before that we're interested – we continue to be interested and fill in acquisitions, that would be true in beauty as well. I don't think there's anything that holds us back from that at this point except asset availability and asset attractiveness, but that's something that we'll continue to look at. There's really no constraint within either our leverage targets or our earnings projections to the activities should something attractive present itself.

Your next question is from the line of Alice Longley from Buckingham Research. You may begin.

Hi, good morning. I have a housekeeping question and then my real question. My first is could you just tell us why you're category growth rate was by region, emerging markets, U.S. and Europe? And then my real question is on Tide in the U.S. I know it's not suffering the price reversal in powders that some of the others are. Could you tell us how much Tide as a brand overall was up or down in the quarter if you include powders, liquids and PODS together? Thanks.

Let me take the first one, Alice. In terms of the market growth rates, developed markets in our categories grew about 1 point. Developing markets were up about 7 points leaving us with a global total of about 3.5 points which compares to 4 points in the prior quarter. Now within that, you asked about the U.S., the U.S. was up about 2.5 points with Europe down and Japan essentially flat.

And Tide?

Hi, Alice. Jon Moeller here. Tide was down in the quarter from a shipment standpoint. If you recall that this is the quarter that we're comping the PODS launch, so the underlying trends again from a market share standpoint are very strong, shipments are down year-over-year only because of the pipeline.

Your next question is from the line of Joe Lachky from Wells Fargo Securities. You may proceed.

Thank you. I was wondering if you could outline your opportunities and efforts you're making on working capital specifically inventory I think you mentioned that briefly, but also payables and receivables and remind me if you’ve quantified how much opportunity you see there and how you plan to use that cash either reinvest in your business or potentially return additional cash to shareholders?

So we’re actively working on inventory days on hand, and our goal is to be able to reduce working capital by sufficient levels to be able to offset the increase in capital spending behind the developing market expansion such that we continue to deliver 90% free cash flow productivity, which gives us ample cash to return to shareholders and that's exactly what we're doing now. We are on target in terms of a pretty significant reduction in inventory days on hand this year. We're targeting again the same next year and I'll let Teri briefly talk about what we’re doing on payables.

Yeah, so there has been some press recently about a new program that we've introduced with suppliers, how supply chain finance. We were partnering with some of our world-class banking partners to be able to present what we think is a win-win solution to suppliers. As part of that, will be extending our payment terms which obviously frees up cash for us, so we are offering lower cash financings and actually a rear access that cash to our suppliers as part of that program. So that’s something that we think over time and we are implementing it over time so it is not disruptive to suppliers. That will free up a tremendous amount of cash starting next year and then over the next two, three years.

Your next question is from the line of Michael Steib from Credit Suisse. You may proceed.

Good morning. You made several references towards investing behind marketing spending, could you be a bit more specific please? What does that mean, does that mean that ad spent for example is up sequentially in absolute terms and as a percentage of sales?

Yes.

Yes.

Okay.

It also means we are investing in things like sampling – door to door sampling, selling, things that will generate trial and awareness of the new innovations.

And your next question is from the line of Linda Bolton Weiser from B. Riley Caris & Company. You may begin.

Hi. My question is on cash flow. You had 20% year-over-year growth in operating cash flow in the first half of the fiscal year and it was only up slightly in the third quarter. So is there – is your working capital performance actually deteriorating a little bit or is there some other strange comparisons that happened in the quarter? And also, it looks like in the quarter you pay down, reduced debt by about $800 million or so. Is there any reason why you cant just maintain the debt that you added into the balance sheet in the first half and use, instead of paying down debt in the second half just do more share repurchase. Would that put you over – would that not allow you to maintain your credit ratings as you would like or what’s the reason that you cant just maintain that a little bit additional leverage and repurchase shares, because other companies have levered up a little bit here and are repurchasing more stock. So can you just kind of explain that? Thanks a lot.

Sure. Well, stepping way back again, 10 years $98 billion of cash return to shareholders, that’s clearly a focus area. Generated $3 billion of cash in the quarter, so a strong quarter of cash flow, the IR team can take you through the line item comparatives versus the base period. We’ve been using that increase in cash flow to increase our share repurchase. You may recall when we first started talking about share repurchase for the year was $4 billion to $6 billion. We increased that range based on cash over delivery the $5 billion to $6 billion last quarter, this quarter we increased a range again to $6 billion based on cash over delivery. So, we’re very much focused on that objective. And we increased the dividend 7% at the same time as you know.

And your final question comes from the line of Caroline Levy from CLSA. You may begin.

Good morning. Just wondering if you look at your base businesses it may be where a lot of the problems arising, you launch new products in Hair Care, but the base Pantene must be where the weaknesses I’m assuming similar with liquid Tide and the Olay product. So is this something with all the innovation as we talk about and do is there some way one can address the base business to make sure that there isn’t that kind of erosions, that’s my first question. I was also wondering if you could just talk about your diaper share in the top few markets there, I’m not sure I quote what trends alike in diapers anywhere in your big markets?

Caroline, we’re very focused on growing the base business. Without growing the base business, there is no growth. And I think evidence of that is the fact that we’re holding or drawing share in 70% of the U.S. business in the month of March. The innovations are helping, but you couldn’t do that without growing the base business. And so we evaluate people on drawing the base business, its important to us and we know we cant grow without growing the base business and that’s particularly true in developed markets like the United States, but its also true in developing markets. So, we’re focused on that and that’s why market share is such an important measure for us.

And at this time, we have no other questions in the queue. Ladies and gentlemen that concludes today’s conference. Thank you for your participation and you may now disconnect.