Welcome to today's Colgate-Palmolive Company third quarter 2008 conference call. Today's call is being recorded and will be simulcast live at www.colgate.com. Just reminder there will be a slight delay before the question-and-answer session begins due to the web simulcast. Now, at this time, I would like to turn the conference over to the Vice President of Investor Relations, Bina Thompson. Please go ahead.

Thank you, Dwayne, good morning, everybody, and welcome to our third quarter 2008 earnings release conference call. With me this morning are Ian Cook, President and CEO; Steve Patrick, CFO; Dennis Hickey, Corporate Controller; and Ed Filusch, Treasurer. We will discuss our results and expectation, excluding charges relating to the 2004 restructuring program and certain other items in the first nine months of 2007. In addition, we will also discuss organic sales growth, which is sales excluding the impact of foreign exchange, acquisitions and divestitures. A full reconciliation of these measures with their corresponding GAAP measures is included in the press release and the company's financial statements, and is posted on the Investor Relations page of our website at www.colgate.com. So we will be glad to answer any questions you may have, including or excluding these items, as you wish. We are very pleased to report a solid quarter, especially given the current uncertain external environment. Market shares are healthy around the world; business continues to be robust in the high growth markets, such as Latin America and Asia, which is helped to offset some of the slower growing economies in Western Europe and North America. Organic sales were strong across most divisions, up 9.5% worldwide. This is the best organic quarterly sales growth in over 10 years. As you know, we have taken meaningful price increases in the third quarter, to offset the unprecedented increases in commodity costs we have seen throughout the year. This, as you would expect, has resulted in some temporary slowdowns in volume as consumers have worked down their pantries. Our experience is that this type of slowdown generally last for a quarter or so. Accordingly, we expect volume to be up somewhat more in the fourth quarter than in the third, particularly at Hill's…

(Operator Instructions) Our first question will come from Nik Modi with UBS

Good morning, everyone.

Good morning, Nik

My question is on the pricing, given the magnitude of some of the price increases. How are you protecting your market share in your key markets? Are your competitors are following? Can you just give us some prospective around that? Thank you.

Well, let me make a few comments, Nik. First of all, relative to competitive pricing moves, yes, these commodity cost impacts are affecting all manufacturers in the categories in which we do business, and we are seeing competitors take pricing at similar levels to us across the board. Obviously, there can be a little bit of a lead-lag, 30 days, 60 days, 90 days, in terms of the pricing getting to the shelf, competitor-to-competitor versus ourselves, but we are seeing everybody take price to similar levels and we are seeing that pricing move to the shelf. What we have experienced is that you do see some slight pantry destocking by the consumer as they wait for the pricing to settle on the shelf and then they come back into the marketplace. That is the flow we have been seeing.

Ian, just to follow up on that, correct me if I am wrong, but are you pricing to offset some of the currency devaluations in some of your key emerging market, and in that environment how does the competitive pricing look with your key competition?

That is always been a factor for us in parts of the world where currency devalue impacts. So that is a normal course of business and that effect is felt by all people in those markets. So the answer is yes, in both cases, but relative to our pricing so far if year, we have offset through pricing the dollar impact of the raw materials. It is our savings and other initiatives that have allowed us to limit the pressure on our gross profit through this year.

Thank you.

Sure.

Our next question will come from Bill Schmitz with Deutsche Bank

Hi, good morning.

Hi, Bill.

You have obviously been through this a number of times in emerging markets, but can you just talk about how the consumer environment differs from the commodity environment, stock market environment and the currency environment down there, and how it relates to emerging middle-class and people's consumption rates? I know it is a big question.

Yes, that is an economics question, Bill. I think the answer would be it is always interesting to me as I travel the world into those parts of the world, how attuned consumers are to marketplace events relative to currency and how that will affect pricing in the marketplace. You know, we have very well-established processes in place, honed in Latin America in terms of how we respond to devalue in taking our prices up, how we have elevated list prices for many of our products, so that we do not get caught in price freezes, if that is where governments end up going. We find consumers very well in attuned to managing in those environments.

Okay. How about the emerging middle-class? Have you seen a slowdown in people entering that consumption class or not yet or you do not expect to see it?

We certainly do not see it yet, Bill and we certainly do not see them stepping out of the trade-up strategy that we have been putting in place. So the Colgate Total of this world continue to do well in Brazil, our market share continues to do well in Brazil, so, no signs at this time.

Great. Thank you very much.

Sure.

Our next question is from Ali Dibadj with Sanford Bernstein.

Hi. How are you?

Hi, Ali.

A question about SG&A, down 90 basis points, it looks like you probably were aggressive on overhead reduction. I know we talked about that earlier. Could you help us to segregate that 90 basis points, in terms of the overhead versus maybe not growing your advertising spend as quickly as your top-line is looks like? Just flush that out a little bit, if you would please.

Sure. If we take the quarter, the SG&A for the third versus prior year, as you say, down 90 basis points, we see the majority of that coming from advertising, overhead was down about 20 of those, and the rest was advertising, which is a reflection of two things, Ali. What we have seen around the world is that if you break it into its geographic components, we are seeing traditional advertising spending weaken in Europe and the US, particularly if you take out the presidential spending. I think that would be intuitive to many. We are seeing advertising spending, the traditional advertising spending continue to increase in the emerging markets of Asia and Latin America, although at a decelerating rate while still quite healthy. That is how our advertising spend has profiled, so that we remain competitive in those markets in our categories. I think the second point that is important to make here, and Bina mentioned it in part with Hill's, there is no question and we have talked about this several times that we have increased our focus on in-store communication, which is the place where, depending on the category, 60% to 80% of final purchasing decisions are made, and in some cases, added a value message to that communication through these times. So spending, consistent with what we are seeing in the market and a shift in communication focus to retail with a value message added as Bina exampled.

That is helpful. In my context, just as a follow up, if you zoom in a little bit on North America margins, looked down obviously year-on-year and I would assume that it was from some of the new product launches that you mentioned in the press release and certainly Bina kindly went through earlier on in the call. Is that not the case, then? Or is there something going out in the margins in North America beyond increased advertising for the new products? So maybe it is just commodities? I just want to get an understanding of that one in particular, please.

You captured it in your question, Ali. It is the commodities impact directly in the US marketplace.

Okay. Thanks very much, Ian.

Sure.

We will next go to Wendy Nicholson with at Citi investment research.

Hi, good morning.

Hi, Wendy.

My question has to do with the pullback in raw material prices as we go into 2009. I know you reflected the outlook for gross margins to reflect that, but are you expecting, particularly on something likes the Hill's business where commodities are a particularly important part of the cost, to have to either roll back pricing or simply increase promotional levels? Have you begun to do that or see that in any of the big categories?

To start with the last part of the question first, the answer is no. Working back from that, we are in the midst of our budgeting process right now. So, we have not fully finished. I think I have said before that if the commodities come back and indeed the visibility we have says that they are, then we will certainly not be in a position of needing to take new pricing at the levels we have seen this year, which if you go back three to four months were still part of our planning. So, I think that comes off the table. The question then, Wendy, is what will be a compelling value communication at retail and how will you continue to keep the categories that are still growing in the United States, growing at healthy rates? I think that will be a combination of promotion and other in store communication techniques.

Your confidence in putting out the target for double-digit EPS growth in 2009, even though foreign exchange has moved as quickly as it has in so many of your big countries, I assume, comes from that expectation of being able to drop those gross margin savings to the bottom line?

It is all a balance, Wendy. Obviously, as we think about foreign exchange for next year, we are thinking about it through the lens of what we have seen over the last week or so. Today we are thinking about oil in that $70 to $80 range for next year. But, yes, I think we feel we will capture the benefit and we will manage our promotional activity as we see fit across the year.

Terrific. Thank you very much.

Sure.

Our next question is from Alice Longley with Buckingham Research.

Hi, my question is about pricing in Latin America. If you look at history where there have been big devaluations, the local currency pricing accelerates. That does not seem to be in your guidance because you have guided to organic sales up in the mid teens in the fourth quarter and for '09 and then you actually have a little acceleration in volume. So could you comment on that?

We talked about organic growth holding at about the same levels as we saw this quarter for the balance of this year and into next. As we look at pricing in Latin America, our current look at next year for all of the Colgate divisions has the Latin pricing higher than all of the other divisions. So, I think we are reflecting it. We will finalize it when we complete our budget process.

So your local currency, your organic sales growth in Latin America should be accelerating, right, to offset the worsening year-over-year currency hits?

I think we have seen some of that in the pricing that is already in this year that will roll over and it will be again, a balance between volume and pricing in Latin America is probably not unlike this year's level, maybe a little bit ahead.

Okay and then my other question is about the destocking in North America. Are you seeing it by consumers and retailers? Then also, does there come a point next year when that is done with and we face comparisons against quarters in '08 when that was happening. So, we get a little volume acceleration in North America?

Well, I think that, Alice, relative to retailer destocking, as we have said many times before, that is an ongoing aspect of business, obviously, heightened during these times. Worked through in partnership and there is nothing we have yet seen that is a significant dislocation in that regard. In the consumer case, what you see and we have seen it both with Hill's and in some of our other consumer categories, is consumers work down pantry inventory until the pricing stabilizes at shelf and then comes back into the category. I think that is what we will going into next year.

Thank you.

Our next question is from Chris Ferrara with Merrill Lynch.

Hi. Would you talk about what your actual currency assumptions are? Because obviously it looks like your top line impact for '09 can hit you by anywhere as much as 8% to 9% to 10%, and just trying to understand what the bottom line impact of that currency might be, given that you do not really hedge a lot of currency?

We have got a spread looking at next year, Chris, of about 6% to 8% on currency. We are seeing volume in the 3% to 4% range as we said, the difference will be price.

Right, given your US company, your costs are probably more balanced or more exposed to the US dollar than your revenues are, maybe that is wrong, maybe you can clear that up. I would have expected the EPS or the earnings impact from currency to be at a greater percentage than the top line impact. Is that right?

It is about the same, Chris. No, it is not right. It is about the same.

Okay. Thank you.

Our next question is from Bill Chappell, SunTrust Robinson.

Good morning.

Hi, Bill.

Just a follow up on the Hill's pricing and the volumes in current quarter. Do you have a sense or is there any way to gauge market share changes? Is there any worry about pricing consumers out of the category or out of your products with some of the recent price increases that you put through?

Bill, the market shares have been okay and we have seen consistent with what we saw in the fourth quarter last year, the beginnings of a dollar comeback in terms of consumption at shelf. I think the additional step we have now taken, given all of the pricing that we and others in this segment have put into the marketplace, is the communication program at retail and direct-to-consumer that talks about the clinical nutrition of Hill's and the real value of that for consumer's pets on a relatively low day-to-day outlay basis. So that is the answer.

It sounds like the price gaps are not that different than they were before the price increases we put through?

On a relative basis, although as a leader, we lead in pricing. As I said before, you sometimes get a little bit of a lead-lag before all competitors have fully moved their pricing as well, but ultimately, relative levels stay about the same.

Got it. Thanks.

Our next question then is from Lauren Lieberman with Barclays.

Great, thanks. Good morning.

Hi, Lauren.

The first thing was on the value message advertising for Hill's. I was curious if you were doing anything similar with any of your other brands in any markets at this point?

Sometimes at retail levels, but not in the same way, given the relative cash outlay.

Okay. Then the more real question was about Europe. Just thought it was interesting, volume down in France, Italy, UK, and for GABA, if you could talk a little bit about category trends, is it more Personal Care, Home Care, or Oral Care, is it the category or just Colgate who is gaining share. At some point, one would think Europeans will start buying this stuff again and talk a little bit about the outlook there.

Yes, sure. Well, let's do a little bit of a world roundup, but come back to Europe. As I said earlier, still seeing categories, now, this is specifically a profile of the categories in which we do business, not the overall market growing on a dollar basis in that 2.5% to 3.5% range, which is probably half a percentage down on a dollar basis year-on-year. This is the combined Western and Central or Eastern Europe, we are seeing categories continue to grow down a little bit on prior year, and it is more helpful to go into the breakdown. From a Western European point of view, we are seeing in constant currency, we are seeing category growth rates across the businesses in which we do business. So, again it is prevailing 3% growth rate running at about 1.5%. Interesting, the profile is more favorable to Oral Care, which continues to run in a 2% to 3% range. Personal Care, which is in a 1.5% to 2% range, and Household Care more flat. In Eastern Europe, we are continuing to see double-digit growth rates, again, favoring more Oral Care and Personal Care. So the consumer is staying with us, although at a more muted level, and I think going forward, they will continue to stay with us and hopefully we can stimulate the market enough to see that growth rate tick up a little bit.

Okay. Then in the markets where you said your volume was down in the press release, Italy, UK, etcetera, who is it then that is gaining share?

Well, the categories profile is pretty much like the countries profile. So, that was a broad average. So the categories are down more steeply in those markets.

Okay. Would you expect category growth to resume? It looks like you are actually now getting some pricing. So one would think volume, I mean at some point has got to be more toothpaste being sold or household cleaning or…?

Certainly that is what we will be working through in our budget cycle, how do we stimulate that return to the market, but the markets are still growing, but at a lesser rate.

Okay, that is great. Thank you.

Sure.

Our next question is from Connie Maneaty with BMO Capital Markets.

Good morning.

Hi.

I was wondering if you could talk specifically about the fourth quarter, where you start to get the big currency impact, but not yet the benefit of the lower raw material costs. So how does the quarter shaping up from where you see it right now?

Well, I think quite well. We talked about the organic growth continuing to be in the same range that we have seen in the third quarter, and you are right, Connie, you do not get the full benefit of the commodity given inventory etcetera, but we will see a little bit of improvement. Obviously we are very focused on our overhead area, as we go forward into the fourth quarter. Our advertising spending will be competitive with what we are seeing in the marketplace, but continuing to see a strengthening shift to the in-store, and keeping our consumer advertising competitive with what we are seeing in the markets in which we do business, but the focus is a little bit of benefit on gross profit and a continued sharp focus on overhead.

So the mid-teen sales growth that you have seen on a year-to-date basis, does it slow to something low to mid single-digits in the fourth quarter? That is on a reported basis, not organic.

On a reported basis, it will probably be in the 2% to 4% range.

Okay. You would expect at this point to still see operating profit growth; right?

Yes.

Okay. Thank you very much.

Sure.

Our next question is from Alec Patterson with RCM.

Hey, Alec.

Yes, good morning. Firs t of all, the obligatory gross margin breakdown, I am sorry, did you give that already?

No, we did not, I would be delighted to give it to you especially, Alec. The prior year gross profit, this is just the walk-through now. The prior-year gross profit at 57.3 for the quarter, material price is negative 5.5 points, benefit from pricing around 2.5% hedge points 2.5, and the balance then from restructuring and mix leading you to the 56.4, down the 90 basis points.

I am sorry; funding the growth is a part of that?

I am terribly sorry, funding the growth is 170 basis points, 1.7 and then the balance is restructuring and mix.

Okay. Then, on the big chunk of the SG&A line is the shipping and handling. Is that going to be following more or less the price of oil, so to speak? Are there other factors at work here as we try and get a handle on that trend, on that line item?

Yes, that probably is the one area obviously we are very sharply focused on, because as we all see at the palm that is an area that is translating through more quickly than other commodity prices. We have seen a bit of a pickup, the ratio to sales of that is 10 basis points down versus prior year at 7.7% to sales. It is been coming down every quarter and we obviously will be hoping to continue that trend into the fourth and certainly into next year.

It is been coming down every quarter, meaning even though the diesel and energy markets have been up over the past several quarters?

Yes, the dollars have been going up. It peaked at nearly 8% in the first quarter, down slightly in the second and then 7.7 in the third.

Okay, great. Thank you very much.

Sure.

Our next question will be from John Faucher with JPMorgan.

Thank you very much. Just a follow up on a couple of questions we have seen before. Given the focus on the raw material pieces and offset to currency, can you talk a little bit about how the rest of your commodities are trending. Procter mentioned some commodities were still up dramatically year-over-year. Most of the companies seem to be saying that it is taking a little bit longer than at least I think Wall Street expected for the lower prices to flow through. So can you give us just a little bit of commentary on both of those issues? Thanks.

Yes, we are seeing obviously the impact in the third quarter was a little bit more than we were expecting. I think we have talked about that the third quarter would probably be the toughest quarter. I must say, as we look at the most recent pricing on our key raw materials, we are seeing it pretty generally across the board, down on quarter three levels, whether it is fats and oils, whether it is resins or of course the input to energy costs. So what we are looking at is down from the third quarter. Now, what you say is right, John, obviously there is a lead lag between the spot and what we can negotiate at and when you will see that in the income statement. As we have been looking at it we think we are going to start seeing that benefit in the first quarter of next year, given the work through.

Great. Thanks.

Sure.

Our next question then is from Linda Bolton Weiser with Caris

Hi, thank you. Looking back at your earnings growth in the early part of the decade when there was some turmoil in Latin America, you actually had really strong earnings growth. It was like in the mid teens, I think. When you look at how you achieved that, there was a steady decline in your advertising and promo spending ratio over that period of time. So, you managed to have earnings growth, but the decline in A&P spending, some would argue ended up in not a good situation five years later. So, can you just comment on that and your current thoughts about will a decline in A&P ratio contribute to the earnings growth in '09?

Well, the way we are thinking about the earnings growth next year is obviously double-digit growth. We have not suggested mid teens growth. Secondly, our current look at 2009 shows an increase in advertising behind the business, both in absolute dollars and on a ratio basis. We will have to be attentive to what is happening in the various categories in which we do business around the world, but our thinking and planning assumption is that that will go up. So, our planning intention is to deliver good quality, double-digit earnings growth through times that we have managed through before with advertising spending up.

Okay. Thank you very much.

Sure.

Our next question is from Jason Gere, Wachovia.

Thank you, good morning. I was just wondering if you can give us an update on CBP, just in terms of the outlook for the savings in '09, where we stand in terms of the completion? Thank you.

Sure. Going along very well, it continues to roll out around the world. We expect, as we leave this year to have about 70% of our global net sales covered by CBP. We have, again, a myriad of new examples, learning examples from new markets that we have gone into that we are transferring to benefit other markets and our go-to-market approaches and strategies. We still have a savings goal in place for 2008 of $100 million pre-tax and are looking at delivering north of 150 in 2009. In the first quarter of 2009 will actually bring two important markets live. They are China and Brazil, along with Malaysia and some others. China and Brazil will go live in the first quarter of next year. So, continued progress in terms of the shared learnings that can drive the business and a 150 goal for next year.

Okay. Thank you.

Sure.

We return to Ali Dibadj with Sanford Bernstein with for a follow-up.

Thanks for taking the follow up. Two questions, one a more specific and one just a little bit cost strategic thinking about the overall business. Again on advertising spend, you mentioned that you expected to be going up or that is what you are thinking in terms of planning for '09. Can you talk a little bit about ratio between in store or trade spend versus advertising spend? Do you see that shifting back and forth a little bit going forward? How are you imagining that?

That is really something, Ali, I can not answer at this stage. We literally start our budget review processes here next year. I will know about a month from now.

Do you expect a total of those two to go up? Can you even help answer that question? Or is that still yet to be determined?

Well the way we are looking at the advertising for next year, we see total advertising going up. Some of the in store stuff is captured between gross and net and so it is not improbable that both could go up.

You can not say right now growth to net expanding or contracting at this point.

I cannot.

Then my other question is, over the years and certainly more recently, there is still an idea among your distribution or among your manufacturing network of bigger scale, more localized plants, more consolidated big-scale plants to improve some of your scale leverage. Does that change at all in a way you foresee or in this current environment right now, where currency is a little bit different? So, you have a little bit of a friction there? Or oil prices may not go down to where they used to be. How do you think about that going forward because it is really been one of the big drivers of your success or is that several years as a lot of that consolidation in getting more scale? Does it change at all going forward?

I do not think so, Ali. We obviously revisit it and we will revisit it again during our budget cycle, but we did a lot of sensitivity planning before we made those decisions. While you say that in the broadest sense, the answer is yes, for oral care and personal care businesses. Indeed there is efficiency and it has a lot of sensitivity around it to take advantage of these highly efficient, state-of-the-art, environmentally friendly facilities in providing our product worldwide, although it is a wild world. Worldwide, based on the likeness of the product. For our home care businesses, we continue to have local facilities servicing regions of geography because obviously the shipping and transportation aspects of those kinds of homecare businesses demand that a supply chain network. So, maybe our business profiles a little bit differently than some others, but that would force a reevaluation. In our case, we did a lot of sensitivity analysis around it and we are quite comfortable with that strategy going forward.

Okay, thanks.

We do have a follow-up from Alec Patterson with RCM.

Yes and just to clarify on '09, the tax rate is expected to be roughly the same, around 33?

Yes, Alec, indeed.

Okay, thanks.

Yes.

With that, there are no further questions. I would like to turn the call to Ian Cook for our closing comment.

Well thanks very much for being on the call and we look forward to catching up with you again January of next year. Thank you.

This does conclude today's conference call. Again, we would like to thank everyone for your participation and wish everyone a good day.