Good day, everyone, and welcome to today's Colgate-Palmolive Company First Quarter 2010 Earnings Conference Call. Today's call is being recorded and is being simulcast live at www.colgate.com. At this time, for opening remarks, I would like to turn the call over to the Vice President of Investor Relations, Ms. Bina Thompson. Please go ahead.

Thank you, Dana, and good morning, everybody, and welcome to our first quarter 2010 earnings release conference call. With me this morning are Ian Cook, Chairman, President and CEO; Steve Patrick, CFO; Dennis Hickey, Corporate Controller; and Elaine Paik, Treasurer. This conference call will include forward-looking statements. These statements are made on the basis of our views and assumptions as of this time and are not guarantees of future performance. Actual events or results may differ materially from these statements. For information about certain factors that could cause such differences, investors should consult our most recent annual report on Form 10-K filed with the Securities and Exchange Commission and available on our website, including the information set forth under the captions "Risk Factors" and "Cautionary Statement on Forward-Looking Statements." We'll discuss our results and outlook excluding the one-time charge of $271 million related to the transition to hyper-inflationary accounting in Venezuela as of the 1st of January 2010. We'll also discuss organic sales growth, excluding foreign exchange, acquisitions and divestitures. A full reconciliation with the corresponding GAAP measures is included in the press release and is posted on the Investor Relations page of our website at www.colgate.com. And we'll be glad to answer any questions you may have including or excluding these items as you wish. We are really delighted with our results. We started off the year with good momentum and strong financials. Our financial strategy, which we have been deploying for well over a decade, continues to deliver a healthy P&L, solid balance sheet and good cash flow with increased volume and gross margin while containing our fixed expenses, which has allowed us to invest generously in advertising, while at the same time, growing the bottom line. We had told you last year that 2009 would be a…

[Operator Instructions] We'll go first to Alice Longley with Buckingham Research.

Could you tell us, given what's in the news, what percentage of sales in the Europe, South Pacific regions are generated roughly in Spain, Portugal, Italy, Ireland and Greece altogether?

I don't have that number at the top of my head, Alice. I must say if I do this, it is relatively modest on a global basis. You'll have to connect with me separately.

But probably below 5% of sales?

It is modest. I prefer not to guess the number.

And then could you give us an update on your advertising or media ratio to sales plan for this year? And also, for your promotional activity coming off of sales, is that going to be a bigger chunk less sales or less than last year?

I mean just sort of taking a little bit of a step back, I think as we worked our way through last year and talked about this year, we said that we were very comfortable with the strategic initiatives that we had, starting with the consumer and obviously, driving growth with that consumer with new products and with advertising. And we said that we would be increasing our advertising both absolutely and as a percentage to sales in 2010. And of course, we have started quite strongly in the first quarter and been pleased, not just by the financial results, but if we look at our market shares around the world, as you may have seen in the release and heard from Bina's comments, we're seeing good share progress in all of our major markets, particularly in the emerging markets around the world. So as we look forward for 2010, we continue to estimate that our advertising will be up both absolutely and as a percent to sales in subsequent quarters, and of course, for the full year. As I said before, that really is media advertising, digital advertising and sampling and professional programs we have for quite a time, when we've spoken about it for quite a time, moved our advertising emphasis into activity at the store level. That continues to be very effective in terms of engaging and connecting with consumers, and we continue to increase our focus there. And as you say, that comes between the gross and the net line and is on top of the advertising I have just spoken about.

But that deduction from sales is going to expand a little bit this year?

Modestly.

You do tend to give some guidance for EPS growth, and you confirmed that you think EPS will be up double digits in share overall. Of course you have this big increase in the first quarter. Are willing to say that your EPS will be up double digits through the remainder of the year, in the latter nine months of the year?

Alice, I think we've been very clear on this since the Venezuela matter started in January of this year. And we put out, I think quite promptly, releases, both with the devaluation and when the accounting change happened. Focusing on the devaluation, this is a subject that we have encountered many times over many years in several of the Latin America countries. We planned for it from an operating point of view, and then we executed. That's what we did in the first quarter. It has always been, and it will continue to be, a combination of the remeasurement of the balance sheet and the ongoing translation impact that will affect the subsidiary. That's how we've always done it, positive or negative, and that's how we have done it in 2010. So as we said then, I would repeat now, that the double-digit progress assumes the way we have operated Venezuela this year, which is with all of the impacts of the devaluation in.

But your results, aside from that, were better at least than I thought in this quarter. So I think the general idea is your earnings will not be up double digits through the latter part of the year because of Venezuela. And should we be more optimistic than that?

Again, I repeat, Alice, what I said. Double digit with Venezuela treated the way we have treated it. And circling back to your very first question, the countries that you mentioned are less than 4% of our global sales.

And we'll go next to Joe Altobello with Oppenheimer & Co. Joseph Altobello - Oppenheimer & Co. Inc.: On pricing, it seems like that was most acute, at least it'd be downward pressure was in your developed markets, North America and somewhat in Europe. Which categories are you seeing the most pricing pressure on?

First let me back up a little bit on price there, Joe. Yes, pricing was essentially flat on the quarter. You will know by looking back at history that, that compares to a price up, 80% in the first quarter of last year. So over that timeframe, our pricing is indeed up, and the comparisons, as you work through the second half of this year, become easier given relative pricing in prior years. So putting it in an overall context, we're expecting pricing to be more favorable as the year unfolds, with the full year in our historical 0.5% to 1.5% increase worldwide. Secondly, the gross margin, as you know, was up in the first quarter, 170 basis points, notwithstanding flat pricing, and we expect that gross margin to continue to increase as the year unfolds. Now when we think about pricing, there are really three contributory aspects. One is those things that you do to create trial for new products, the coupons that are used in the United States which go to price. Second are the promotional activities that one adopts to manage our ongoing business. And third, any actions that needs to be taken to manage competitors. Our portfolio is very much focused on the Hill's, the Oral Care, the Personal Care and then our Home Care businesses. And if you take a snapshot around the world, you would see that the pricing of competitors in the more volume-oriented Home Care categories has been somewhat sharper. So if you focused on categories, it would, from a competitive point of view, be more in the Home Care area although we have responded in a targeted way to light activity in other categories as well. But the strong bias would be to the more volume Home Care businesses. Joseph Altobello - Oppenheimer & Co. Inc.: So it sounds like you expect a sequential improvement in pricing throughout the year?

We do. Joseph Altobello - Oppenheimer & Co. Inc.: It looks like gross margin, at least sequentially, was down a little bit. You've talked about a 60% gross margin this year. It sounds like some of that's going to come from pricing. But are you still comfortable given that we've got some headwinds in the back half of this year on the commodity side that, that 60% number is still doable?

We think by the end of the year, getting to 60% is still doable in 2010, Joe. And we continue to put great focus and get a great return from our traditional Funding-the-growth program, and that is the cornerstone of our progress for 2010. And that is having built into our forward-look projections with the rise in commodity pricing, and also the increases in oil. So pricing a bit, but more the traditional Funding the Growth initiatives.

And we'll go next to Bill Chappell with SunTrust.

It sounds like you're in Latin America, Europe and Asia or at least part, but can you kind of help us -- were you there kind of at the start of the quarter or was this more of it's roll-up period so we'd see the full benefit in 2Q? And then also any updates on where it will expand in maybe the second half of the year?

You'd almost have to go country by country. It is a -- there are lot of different timings, so that's not an obvious -- it all started in January or February. Secondly, I think we have made the point before that this is a long-term journey for us. We are very encouraged by the initial share reactions with the superior technology that is Colgate Sensitive Pro-Relief. We're particularly encouraged by the early trial and repeat data that we are seeing in some of the lead markets like the U.K. and Taiwan, but there is a very strong competitor in that segment. And we have said that this is going to be a multiyear journey to accomplish our overarching goal which is leadership in that $1 billion segment. In terms of our global expansion, we expect to be in about three quarters or shall we say the sensitivity world by the third quarter of next year. That's our plan and we continue to be on that plan.

Just to follow-up, so it doesn't sound like Pro-Relief was a meaningful driver of the top line this quarter?

No.

And we'll go next to Ali Dibadj with Bernstein. Ali Dibadj - Sanford C. Bernstein & Co., Inc.: You talked a little bit about the competition you're seeing in Home and Personal Care, we just heard from another one of your competitors, actually in oral care, talking about 40% growth in Mexico. And clearly, that's from a smaller base but large growth. Being the overall leader in oral care in Western Europe, Brazil being very successful and more push us benefits us but we believe potentially in India going forward. Can you comment a little bit on than that? What are you seeing? How are you reacting? How are you planning to react about what's out there?

Well, let me talk about the markets and give you our perspective and observations on what we see. India, as you saw in the release, market share up over 51% now and continuing to grow. And there is only one established competitor in India. China, our market share is up quite meaningfully over a point. Business was up double digits and our leading competitor in the number two position, their market share is down in China. In Russia, our market share is up over 33%. The number two competitor in Russia is less than half of that share and the market share is down. Turn to Mexico, our market share is up, competitor is flat to modestly up. In Brazil, we have the highest market share we have had in over 10 years, continuing into the first quarter of this year. I think as may have been said, the volume growth that is being talked about there is largely to do with geographic expansion in the country when we look at the market shares in whether it's the pharmacy, whether it's in Fortaleza, they continue to be around that 5% level that I have quoted before. In Western Europe, we continue to lead in every segment, with the exception of powered toothbrushes, which is the smallest Oral Care segment in Europe. Our toothpaste share is 3½x the competitor that you had mentioned. We lead in manual toothbrushes and we lead in mouth rinses. As you know, toothpaste and manual toothbrushes are by far the largest segments of oral care in any market in the world, certainly true in Europe. So we continue to comfortably lead that market in market shares in all cases. I'm talking here Nielsen market shares. And even here in the United States, we continue at least…

We will react to what we actually see in the marketplace. We have had a lot of experience of dealing with competitors in the oral care area, whether they are local, regional or multinational. We think we know what we are doing in this category in order to both growth it. And if we defend it, and we will react accordingly. So that would be my answer. Ali Dibadj - Sanford C. Bernstein & Co., Inc.: And I guess ask then in the context of -- what we saw on pricing this quarter and expectation of improved pricing going forward. I asked you in that context, I guess.

That's why I said it early on the call, we have clearly worked all of it. That's true. And are estimating and we feel comfortable with this dance we are taking on pricing in our categories. Ali Dibadj - Sanford C. Bernstein & Co., Inc.: Sensitivity, so probably it's in the U.S. If you mentioned it, I apologize, any update there?

No, none, Ali. We're in the normal process of reviewing this with the Food and Drug Administration, and that is proceeding as it does customarily and when we have any news, you will probably be the second to know behind our customers.

We'll go next to Doug Lane with Jefferies & Company. Douglas Lane - Jefferies & Company, Inc.: Is there any way you could quantify -- we've seen a lot of raw material cost movement and shipping rates looking to go up. Is there anyway you can sort of give us an order of magnitude on the cost side between shipping, energy and raw materials? What kind of headwind you're looking at now versus maybe back in January when we talked?

Well, what I can say, Doug, is that we have reflected in our go-forward estimating the prevailing oil prices at around the $85 level. And we have taken account of the headwind and now being faced with some of the key commodities that we buy. And that is built into our plan for the balance of the year. And that plan continues to see our gross margin continue to expand sequentially and for the full year. Douglas Lane - Jefferies & Company, Inc.: Are you up to your assumptions on the pricing front since January to try to recover some of these cost pressures?

As I said earlier, Doug, our pricing expectation for the year is between ½% to 1½% that we have historically seen from pricing. And the bulk of our gross margin expansion for the year is forecast to come from our funding the growth program, which has been the driver of gross margin expansion for us for many, many years. Douglas Lane - Jefferies & Company, Inc.: And then just lastly, looking at the U.S. specifically where we're looking at numbers where toothpaste market share is down a point or two. Is there a specific strategy in the U.S. to recapture lost toothpaste market share this year?

Well, the -- modestly down from an all outlet point of view. The strategy is innovation and reaching consumers where we have great loyalty, which in the U.S. is particularly the Hispanic consumers where we do very well. Douglas Lane - Jefferies & Company, Inc.: Do you expect to have the sensitive product out this year? Is that more of a 2011 event in the U.S.?

I can't really say, Doug. As I mentioned earlier to Ali, we're in active discussions with the Food and Drug Administration following normal models there. And I don't have any insight or projection to give you.

And we'll go next to Bill Schmitz with Deutsche Bank.

Can you just talk about that your category growth assumptions are as the year progress? I mean, you're expecting a category -- I know they never really slowed remarkably. But are we going to start getting back to those sort of like 4% to 5% growth rates we saw, maybe 2007-2008 timeframe?

Well, I think we're certainly going to see low- to mid-single digits on a constant dollar basis. And that is going to be led, Bill, by the emerging markets which we are seeing running at a double digit cliff. And the developed world is lagging, and they are running. And we're estimating low single digits for both Western Europe and the United States. And you know, pleasingly, when we look at our categories, we've seen our Oral Care business up organically double digits for the first quarter and our Personal and Home Care businesses up low- to mid-single digits, which we're quite pleased with in that context.

And then just in terms of some the price force going on, especially India, and obviously not PNG yet, but that's a speculation. Are there signs that you're starting abate a little bit because I think that's kind of how we picked up in the last couple of weeks?

Where? In India?

Yes.

Well, no, our Indian financial performance has been very healthy and our market shares continue to grow in both categories. So our pricing was -- there's a classification we're certainly not looking at in our categories in India, no.

And we'll go next to Andrew Sawyer with Goldman Sachs.

I wanted to follow-up on your guidance were flattish profit in Latin America for the full year. I just wanted you to parse out what portion of that was Venezuela and how it look without Venezuela? And is there things going on from a margin perspective outside of Venezuela that we should be aware of as well?

Andrew, it hasn't been our custom to get to that level of detail on a division basis. If I tell you Latin America in total, we continue to expect good growth as we have said. And our gross profit modestly impacted by Venezuela are in totality, maybe down 80 basis points or so.

A then just a quick follow-up on the second line, do you see that gross margin bridge that you typically do?

Yes, happy to do so. So this is first quarter gross profit, Andrew. And you saw first quarter 2009 with 57.5%. And then as you work your way through pricing 0.1%, funding the growth, a healthy 1.1%. Material prices favorable 0.4%. And then all other mixed investment and et cetera, 0.1% and that takes you to the 59.2%.

And we'll go next to Connie Maneaty with BMO Capital Markets.

In Venezuela, have you been able to price to recover the inflation impact?

We are moving forward with pricing, Connie. That does partially that. And that is in place and moving forward. And I would also comment that we are continuing to get access to dollars at the 2.6 rate for raw materials on our products with the majority of our products in Venezuela made in Venezuela.

And we'll go next to Lauren Lieberman with Barclays Capital.

You touched a little bit on pricing in Home Care. But I was curious, if you could talk a little bit more broadly about the competitive environment there? And then specifically, I maybe missed it when Bina was walking through some description of the equal friendly Home Care products. Is it a totally new brand or is it a sub-branded underneath your existing home care portfolio? How will it be priced? Kind of what's already in the Western European market in that category?

Yes, let's start with the second one because it's pretty straightforward. It is a sub-brand, but it basically ties together strong equities that we already have in Europe. So our fabric softener, our Ajax All Purpose Cleaner and our dish liquid. So it ties them all together. It is a modest premium and it is moving around Europe, but too early to comment on market share. Results, reaction from the trade has been really quite positive. So coming back to the subject of Home Care and activity in Home Care, again, you will remember that, I guess in 1988, we took the strategic view that HDD was a category that was not going to be a priority for the company globally and now have less than 3% of our business remaining in that category. And what we observed around the world that there is a lot of pricing activity in home care, specifically in the Laundry Care segment which we don't compete in. But we have also seen activity in fabric softeners and in dish liquid in some selected markets. And we have, where necessary, responded to do that. And as I mentioned earlier, we're quite happy with the mid-single digit growth rate that we have accomplished. And practically margins that are quite pleasing with category margins on our Home Care business are up healthily versus prior year.

And we'll go next to Wendy Nicholson with Citi Investment Research.

I just wanted to go back and follow-up to Andrew's question about the profit growth in Latin America. First, and I know that you don't like to comment on specific markets, but it's fair to say that the bulk of the pressure on the Venezuela profits this year, Latin America is in fact Venezuela, I mean profit are still going to be up, for example, Brazil, year-over-year, right?

It is strictly Venezuela.

My second question have to do with the U.S. business and the fact that there seems to be an increasing divergence, if you will from the results that you post and what you see from Nielsen. And I know there's always been a GAAP because of what's not tracked. But is there anything that's changed just from within the U.S. marketplace where the Nielsen measure accounts, grocery stores in particular are particularly weak from a pricing perspective that's where a lot of the investment has to go. And that the non-track channels are actually much more whether it's rational or robust, however, you want to put? Because it just seems you're doing a lot better on netting out volume and price in the U.S. than what we see from Nielsen?

Yes, I don't have a mathematical tie-in on that, Wendy. It is simply that there is a large part of the business in the United States that is non-tracked channels, which we do pick up in that so-called all outlet share, which as you know, a Nielsen sort of pantry tied measure. I guess the only thing that you could say in terms of the various channels is that the super -- the grocery stores, the supermarkets tend to have more of a high-low strategy from a promotional point of view than some of the other non-track channels. So you may see some more period-to-period choppiness there than you would in the other channels. But beyond that, I can't offer any other deeper insight.

And you don't see a marked difference, if you will, in terms of your market share performance given your relative category pricing in one channel versus another?

Not related to pricing, no.

Did you give guidance or have you given it for a targeted share level -- a share buyback level for the full year?

We have not. But now you asked, yes, you saw perhaps what we bought in the first quarter, which was around $500 billion, between $450 billion and $500 billion. And I think you could expect to see us buying forward at or around that level And this is in different quarters [ph].

Per quarter?

Yes.

And we'll go next to Jason Gere with RBC Capital Markets.

With the pricing, I think you're back in January, you're saying pricing was going to be 2½% to 3½% of sales and obviously, it's a bit lighter now. I'm not sure if you said this, but you're still comfortable with the 6% to 8% organic sales for the year?

Yes.

And just another question, more clarification I think, you're talking about the gross margins, it sound like you're saying 60% by the end of the year. And I think the commentary was around 60%. Is there anything in there? You're saying funding is going to be a little better. Is that just going to be the upside there or offset by some incremental commodities, so we shouldn't expect anything better or worse on the gross margin?

I'm glad you added the around, Jason.

And with that being said, I guess it leads to the next question, just on advertising, I think in the past, you were looking for advertising up 50 bps for the year. Obviously, the first quarter had a nice big upswing. How should we think about that going forward with the gross margin still expected to be a nice increase the rest of the year? Obviously not as great as the first quarter, but should we look at like half the rate of gross margin reinvested back into advertising?

I think what I would say, Jason, is that the advertising quarter-on-quarter versus prior year is going to continue to be up both on an absolute basis and a percentage to sales basis. And therefore, the same for the year. But I think, we stepped up in the first quarter to quite a healthy ratio in terms of our advertising spend.

And we'll go next to Chris Ferrara with Bank of America Securities.

I was wondering if you can comment a little bit about what you're seeing in the retail underwriting. Obviously, you're not going to comment specifically on retailers, but we're certainly see and hearing a lot of commentary about rollbacks at Wal-Mart. What kind of pressure or suggestion or anything that you're seeing from retailers with respect to increased promotional spending? Do you think the trade is trying to drive volume with increase promotion? Or do you feel like a lot of this, this sharper price points are coming more from competitors, if there's a way to parse that out?

Difficult, Chris. It becomes a little bit chicken and eggs, such a discussion. I think everybody is seeking two things. One, a better understanding of how to connect with the consumers in order to grow. And I think, things that can influence that our new products, advertising, sampling, professional recommendation and applied properly selective promotional activity. And I think we are seeing all of those at play in the marketplace. And I wouldn't like to try and parse out whether it's coming from a competitive through a retailer or from a retailer.

I guess putting it on another way, I mean are retailers approaching you guys now with the hope to generate more promotional spending more today than they have been over the last couple of quarters?

I think people are coming at us and others looking to grow and the question is, "What is the best strategic and tactical answer to that question?" Pricing is an answer, but pricing is often a non-sustainable answer. And I think it's the responsibility of manufacturers who understand brands and consumers to create growth where price is a component, but not the only driver.

And then just on another note, I mean, I think you said raw materials swung to being a positive impact on gross margin over the last couple of quarters. And I think you've also said in the past that your FX and the transaction dragged or helped associated with the commodity purchases in some of your international market has kind of lumped into that same line. Can you give us a sense for how we should think about the breakdown between commodities, like strictly raw materials inflation, deflation to that line versus the FX piece of it? And was FX transaction a positive this quarter? Is that a big part of why the swing went positive?

Again, Chris, I'm not sure I want to get into that level of detail. I think you could say from a macro point of view that material cost in and of themselves were a favorability in the first quarter and as we look to the balance of the year, the material prices themselves, we expect in some key raw material categories are going to go up. That is built into our forecasting. And also we have the obvious transaction drag from Venezuela, which is a component as well. So fuel costs are going to start -- raw material costs are going to start going up over the balance of the year.

And where does the Venezuelan hit come into play in the margin drag? Is there a hit in the raw material side from a change in parallel rate and how things are trending in Venezuela right now? Is that incorporated into that raw materials break out?

It's in raw materials. It's in cost, it's in margin.

And we'll go next to Caroline Levy with CLSA.

I'm not sure if you mentioned mix, either geographical product mix and the impact on the top line. And then the other is around your dividend handout strategy going forward. Taxes on dividends are going to be going up very dramatically next year. And is there something you're discussing in terms of looking at the balance between share repurchase and dividend?

Well, Caroline, we just discussed on the latter point, we discussed that all the time. We having just announced the 20% healthy dividend increase this year. We haven't yet turned out planning to what we will decide to do, assuming continues healthy cash generation for next year. But obviously, we would take that into consideration and put them in rediscussions, have already started on it. In terms of mix, I think I said earlier that our Oral Care business was up, outpacing our Personal and Home Care businesses, double-digit organic growth there compared to mid-single digits on the other two businesses. But we don't tend to go beyond that.

So geography, you wouldn't comment on what the impact of mix was geographically?

Yes, pricing is in volume. So we have a dollar weighted pricing, yes. And mix is in pricing in our case.

And we'll take our final question from Linda Bolton Weiser with Caris. Linda Weiser - Caris & Company: Just another question on Latin America and the pricing, I guess last quarter, in the fourth quarter, it was 12% positive and it was 6.5% this quarter. What is the reason for that? Is it just the general competitive situation or what exactly?

It's less Venezuela in the mix. The pricing towards the end of last year was very much driven by Venezuela. Thank you very much for being on. Thank you very much for your questions. Thanks to all the Colgate people around the world for the hard work. And we look forward to reconnecting after the second quarter. Goodbye.

Again, that does conclude today's presentation. We thank you for your participation.