Operator: Good day, and welcome to today's Colgate-Palmolive Company First Quarter 2013 Earnings Conference Call. Today's call is being recorded and is being simulcast live at www.colgate.com. Just as a reminder, there may be a slight delay before the question-and-answer session begins due to the web simulcast.
At this time, for opening remarks and introductions, I'd like to turn the call over to the Senior Vice President of Investor Relations, Ms. Bina Thompson. Please go ahead.
Bina H. Thompson - SVP, IR: Thank you, Melissa. Good morning everybody, and welcome to our first quarter 2013 earnings release conference call. With me this morning are Ian Cook, Chairman, President and CEO, Dennis Hickey, CFO, Victoria Dolan, 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. So, 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 Statements on Forward-Looking Statements.'
This conference call will also include a discussion of non-GAAP financial measures which differ from our results prepared in accordance with GAAP. We will discuss organic sales growth, excluding foreign exchange, acquisitions, and divestitures. We will also discuss gross profit, gross profit margin, SG&A, operating profit, net income and earnings per share excluding the impact of the certain items described in the press release. And the full reconciliation with the corresponding GAAP measures is included in the press release and is posted in the For Investors section of our website at www.colgatepalmolive.com.
We're very pleased with the way the year has started out continuing the momentum with which we finished 2012. Our organic sales growth was robust, up 6% and even more satisfying considering the strong organic sales growth of 6.5% in the year-ago quarter. Our worldwide market shares are up across all oral care categories. An improvement in gross margin has allowed us to support new and existing products with increased advertising while still delivering a healthy bottom line.
Macroeconomic challenges continue to present themselves, particularly in the more developed parts of the world and of course, more recently in Venezuela. But despite that, our business is strong both from a P&L and a balance sheet standpoint with excellent cash generation.
Our global growth and efficiency program is on track. Just this quarter we announced several initiatives. First, in Europe, we are creating an oral care center of excellent by moving our consumer innovation center, our category management group and our consumer insights group, all to Basel, Switzerland where they will be combined with our professional affairs and technology groups already based there. As you know, Basel has been the headquarters for our GABA business. So this newly formed organization will be able to benefit from GABA's longstanding expertise in the areas of professional affairs and technology.
Also, announced this quarter is further progress in the area of Colgate business services. Applying our learnings from our existing center in Warsaw, we will be establishing a global center in Mumbai and a regional center in Mexico City and we will be migrating additional financial functions to all three locations.
As you know, another element of our global growth and efficiency program is to expand our commercial hubs. Just this quarter, we announced our intention to hub Romania with Poland, Czech Republic, Slovakia, Hungary and the Baltic countries to create the Central Europe east hub. The hub center will remain in Warsaw, Poland, and this hubbing will allow us to be more efficient, drive smarter and faster decision making, strengthen capabilities on the ground while improving our cost structure. And as of course, as we generate savings from these projects, we can provide funds for reinvesting to sustain our growth opportunities around the world and especially in the fast growth emerging markets.
So, let's turn to North America. We're very pleased with the strong results in North America. The strong organic growth sales growth of 5.5% was a good balance of 3.5% volume growth and 2% pricing, because as you know, pricing excellence is a key focus for us around the world. We told you about a number of new product launches last quarter which had contributed to the strong results and which helped drive our oral care share as referenced in the press release. Our shares are also up in body wash and in fabric conditioners. As you know, in the U.S., we only sell fabric conditioner in Hispanic markets but it is now reached a national share of 16.3% on a year-to-date basis, up almost 1.5 points in the year ago period. We're very excited about the significant launch in this quarter of Colgate Total mouthwash, our second entry in the U.S. in the mouthwash category after Colgate Optic White mouthwash. This is a very exciting opportunity to offer a complete regimen solution under the Colgate Total brand.
The new mouthwash offers a number of benefits; 12-hour protection even after eating and drinking, kills 99% of germs, fights formation of plaque and gingivitis, and has no burn of alcohol. Trade reception has been very encouraging and the product will be supported by a very robust integrated marketing campaign with both in and out of store activities. Our off-shelf displays are at record levels. Along with Colgate Total toothpaste and toothbrushes, the complete regimen is being backed by a compelling new claim; improve your mouth health in just two weeks.
You may already be aware that we have engaged Kelly Ripa to be our new spokesperson for the Colgate Total brand. Kelly has extremely high appeal among consumers and our ad with Kelly as the face of Colgate which aired in February tested extremely well. She will be an integral part of our launch plan for Colgate Total mouthwash as well.
The other categories; we will be launching spring and summer seasonal hand soaps under the Softsoap brand in both foam and liquid. Consumers enjoy decorating their homes with these fun designs which provide everyday specialness and variety. New product activity will of course continue as go through the year.
Turning then to Latin America – I'm sorry, turning then to Europe and South Pacific, we're also pleased with the modest growth in this region given the extremely challenging macroeconomic conditions across Europe. Countries such as Greece, Spain, and Portugal are experiencing negative GDP growth and high unemployment, but we do see a few bright spots Germany and the U.K. for example where GDP is growing. Given this environment it is critical that we provide the consumer with value added products that meet their needs and this has indeed been happening. A number of new products were referenced in the press release across categories which contributed to our good results in the first quarter.
Our regional market shares are solid. Our leading toothpaste share of over 33% and manual toothbrush share of over 22$ both on a year-to-date basis are even with a year ago period. Market shares in battery toothbrushes and mouthwash are up year-over-year. Market shares are also up in underarm protection and in fabric softener where we reached a record 26.4% on a year-to-date basis. More new products will be launched in the second quarter. In toothpaste we will be launching a number of new products across sub-brands.
In the Whitening category we are launching Colgate Max White One Luminous, a toothpaste with SmartFoam, which whitens teeth all around. Under the Max Fresh brand we are launching Colgate Max Fresh ActiClean which penetrates between teeth for intense brush of clean. We told you in the fourth quarter about our first ever launch in the rechargeable electric toothbrush market. Colgate ProClinical was introduced in the U.K. in September of last year. This quarter we have launched in the Nordic countries and in Germany under the Elmex brands and we are quite encouraged by our results so far with good support from both the trade and the professionals.
Dabur continues to perform well essentially in Italy where sales of Dabur products are up several digits year-over-year. To help continue our strong results we are launching two new products under the Elmex brands, Elmex Sensitive Professional Mouth Rinse with effective and lasting relief from tooth sensitivity and Elmex Erosion toothbrush which provides superior clean while also being gentle on tooth enamel.
In Personal Care, we are launching new body wash products under both the Palmolive and the Sanex brand; Palmolive Mediterranean Moments which nourishes your skin and delights your senses and Sanex (indiscernible), which helps restore the skin's natural moisturizing level.
As you know Home Care is an important business for us in Europe and we will introduce new products in this category as well. One interesting one leverages the consumer preference in natural and traditional ingredient. Ajax authentic cleaners with freshness of Aleppo soap and sweet almond oil.
So a lot of activities support this business.
Now let's turn to Latin America. We're particularly pleased with the strong organic sales growth in Latin America, given the challenges we happen to face in Venezuela. Market shares are strong across the regions. In addition to increases in manual toothbrushes and mouthwash, our shares are up year-over-year in both underarm protection and bar soap.
In bar soap, we are at a record year-to-date share of over 32%, up almost 1.5 points year-over-year, and we are now the market leader in nine countries in the region. Both our Palmolive and Protex brands have contributed to this strong result.
In the first quarter, we did a relaunch of Colgate Total in Brazil and Mexico and will roll this out to other countries in the region in the balance of the year. Part of this includes a compelling new marketing campaign based on the fact that Colgate Total 12 continuously protects you from bacteria for up to 12 hours. And we'll have more innovation in oral care in the third quarter.
In the second quarter, we have some exciting activity across Personal and Home Care. In Mexico, we just introduced two new underarm bundles. The first is for men; Mennen Speed Stick Neutro Power, which provides protection that doesn't interfere with a man's fragrance. And for women, we've launched Lady Speed Stick (Pro 5-in-1), which offers five benefits for complete protection dry, fresh, soft, no irritation and no white residue. Our share of the Mexican underarm market is approaching 20% and increased 120 basis points on a year-to-date basis. In Brazil, we are launching Palmolive Naturals Body Cleansing Luminous Sensation soap, with hydrating Argan oil and oil complex to help soften skin. Our bar soap share in Brazil increased 110 basis points on a year-to-date basis, which put us behind the market leader by less than 1 point. This new product should help further boost our market share.
Also, in Mexico, we launched Axion Oats and Vitamin E dishwashing liquid, which combines the proven performance of Axion with the natural ingredients, oats and vitamin E. Our market leading share in the dish category is almost 50%, up 490 basis points year-to-date.
Turning then to Greater Asia/Africa. This part of the world continues to exhibit strong top line momentum with organic sales growth of 10%, the fifth consecutive quarter of double-digit organic sales growth. Macroeconomic environment across the region is for the most part quite buoyant and our categories are growing mid to high single-digits. Market share is strong around the region. In addition to the countries referenced in the press release, toothpaste shares are up in Russia, South Africa and Turkey. In fact, in Turkey, with a year-to-date share of over 30%, we have now taken market leadership for the first time. Shares are strong in toothbrushes as well.
In India, our market share of almost 41% is up 320 basis points year-over-year, further widening our gap with the nearest competitor. In Russia, our year-to-date toothbrush share is now over 50%, up 160 basis points, as a result of successful new product launches, and in turkey our year to-date toothbrush share is up 130 basis points to 29.3%.
Our mouthwash business continues to grow nicely as well. In Russia, our market share is up strongly to almost 26%, driven by the launch of both Colgate Plax Tea and Colgate Optic White. In China, our mouthwash share is over 33%, up 250 basis points year-over-year, again driven by successful new products activity and we'll continue our new product activity in the second quarter.
Colgate Total Pro Gum Health toothpaste introduced into the Indian market in the first quarter where our market share is up 110 basis points over 53% will be launched in China. Colgate Optic White toothpaste, which has driven share in Thailand, is now being launched in India and Vietnam. And in the toothbrush category, we will continue the rollout of Colgate SlimSoft charcoal toothbrush across Asia. The tapered toothbrush segment is the fastest growing segment in that category. Charcoal resonates very well with the Asian consumer and is widely used in consumer goods throughout region for its renowned antibacterial properties.
Now, turning to Hill's, as expected Hill's organic sales growth in the quarter was very modest and as told you on our last conference call, our expectation is that this business should return to volume growth in the second half of the year. Our confidence is buoyed by the excellent early performance of three initiatives here in the U.S.; a complete relaunch of our Science Diet line, the launch of our Naturals product and the introduction of Hill's Prescription Diet Metabolic. Sales of our new Science Diet are tacking well and acceptance and shelving by the two largest U.S. retailers are excellent.
We supported this relaunch with media starting at the end of February on national TV and that media support is continuing in the second quarter, supplemented with digital media. In addition, we will be implementing a sampling program along with a 'Vets Know Best' tour capitalizing on our strong veterinary endorsement. As a result, we've seen an increase in consumption at both PetSmart and Petco in recent weeks versus a year ago. The new Ideal Balance is performing well and we've achieved a 100% distribution of all items in the superstores. The transition to Natural shelf is taking place and should be completed by the end of this quarter. As you expect, this also is being supported by a fully integrated marketing campaign, with TV, digital media and high impact displays in store.
Hill's Prescription Diet Metabolic is meeting with successes as well, both here in the U.S. and in Canada. In addition, we launched it as (Metabolics) in Japan where it exceeded budget (indiscernible). This complete line of great tasting dry food, wet food and treats ensure a safe, easy and healthy weight loss without making the pet parent feel like they are depriving their pet. Weight problems in dogs and cats are common here and overseas. Social media has been playing a clear role in driving awareness of the product as well as brand recommendations. Many veterinary clinics have been advertising it on their websites and Facebook pages with photographs of before and after examples. So these launches do bode well for continued strength in the business particularly as they roll out in other markets.
So in summary, we are pleased with how we have started off the year. Our organic sales continue to be strong and our market shares are healthy around the world. Our clearly enunciated strategies are being well executed by Colgate people around the world. In addition, our global growth and efficiency program is on track. So, while we are mindful of the difficult economies in some countries, we think we have the right plans in place, coupled with a strict financial discipline and we continue to deliver solid results as we go through this year.
So, Melissa, that's the end of my prepared remarks and I'd like to open it up now for questions.
Operator: Alice Longley, Buckingham Research.
Alice Longley - Buckingham Research: My question is about the impact of the devaluation of the bolivar on Latin American margins and then overall on your bottom line. So, if you could just tell us how many cents you took off the bottom line, aside from the one-time charges? We know what those are, but the effect on the bottom line aside from that in terms of cents, and then also margins in Latin America?
Ian M. Cook - Chairman, President and CEO: I think we framed early on the impact of the devaluation. As you say, there is the one-time charge from the remeasurement of the balance sheet, and then we have said that the ongoing quarterly impact of devaluation on the impact on EPS would be $0.05 and $0.07 a quarter, and that has been the impact in the first quarter. Now, when we focus on gross margin, why don't I perhaps take this opportunity to run through our gross profit reconciliation and put it in the context of the full year. So for the first quarter prior year gross profit of 58.2% and we benefited this year from 60 basis points of pricing. No benefit from restructuring thus far, you will remember we expect the restructuring benefits this year to come in the second half. Funding the growth continued to be very, very strong; 140 basis points of benefit at the beginning of exactly the same curve that we enjoyed last year in 2012 and a material price negative of 180 basis points. Now if you break down that material price negative within that there is 120 basis points of negative that has to do with the impact of the devaluation in Venezuela. You pick up 20 basis points essentially of mix and we end up with the 58.6% gross margin that we have this quarter up 40 basis points. To put that in a year context we came in the year saying that we thought our gross margin might expand between 50 and 100 basis points. But we said very clearly in CAGNY after the devaluation of the Venezuelan currency that we now expected in 2013, our gross margin to expand between 30 and 70 basis points, since so that 40 basis points gain benefit in the first quarter is exactly within that range.
Operator: Dara Mohsenian, Morgan Stanley.
Dara Mohsenian - Morgan Stanley: Ian, your emerging markets business has held up well despite comments from a number of companies that emerging markets are slowing not just in household products, but across CPG in general. Are you seeing any consumer spending pressure in emerging markets and particularly in Latin America, given concerns seem to be cropping up there over a Brazil slowdown, and issues spreading potentially out of Venezuela and Argentina, can you talk about Latin America specifically? And then why do you think your business has held up better than peers in emerging market so far?
Ian M. Cook - Chairman, President and CEO: Dara, we continue to be quite pleased and bullish on the emerging markets. And in our categories, the data we have seen in the first quarter would support that. If one focuses on Latin America, category growth rates continue to be in the high single digits. If you talk about Brazil, our business in Brazil was up 17% on an organic sales basis. If you go around the other emerging markets, the category growth rates are increasing very, very nicely and we see in the Greater China region, our organic sales up just under 10%. In Russia, you see us low double-digits in terms of growth. The Latin American number that you have already seen, and I have mentioned Brazil and even South Africa was up double digits on an organic basis. The sentiment, I'm just back from Southeast Asia, and when you look at the data and you talk to consumers, one gets the same optimism and confidence in the future that I got the last time I was in that part of the world. Our market shares likewise in these emerging markets continue to be quite strong. Brazil, our toothpaste share now up, just under 72%, our market share in Russia approaching 33%, nearest competitor is flat at 15%. That 33% is up 1 point. China, we're at about 35% market share and our nearest competitor is down under 18%, we're up 1 point, they're down 2.5 points. So, I think both in terms of the consumer, their consumption and our ability to grow and then on top of that, our continued share progress, we feel good about those emerging markets.
Operator: John Faucher, JPMorgan.
John Faucher - JPMorgan: In terms of looking at the pricing result, a little bit of a dichotomy here, but I really wanted to take a look at the North American results where the pricing came in better, despite the fact that volume really sort of accelerated against the difficult comps, so, I'm wondering, a lot of companies, it seems like we're seeing no elasticity as pricing growth decelerates a little bit. You're not getting the volume pick up. Can you talk about sort of changes in pricing and where you're seeing elasticity net out in your different categories and regions?
Ian M. Cook - Chairman, President and CEO: To your pricing question, I think it's been said, we have and we continue on a journey to make pricing a core competency of our Company so that we can best understand the sensitivities, the elasticities and how we manage pricing in the mix of all the marketing variables that we are managing around the world. We put a lot of pricing model attention to where we take pricing, what specific variance, what SKUs in those variance, how we take that pricing to try and minimize the impact on volume. I think we are very, very pleased with what we have been able to accomplish, particularly as you say in North America where we have managed to take price without prejudicing the volume growth to the top line and clearly that is both an objective and hopefully a capability that we can continue to build in the out years.
Operator: Javier Escalante, Consumer Edge Research.
Javier Escalante - Consumer Edge Research: I would like to touch open on sales. I would have expected volumes to pick up a little bit more given that you are launching three new lines. Basically is it an issue that because this volume mix that the price points are lower and that's why we are seeing the declining volumes? What gives you the confidence that they are going – that volumes are going to accelerate given that you have very strong competition in the natural segment?
Ian M. Cook - Chairman, President and CEO: I think the answer and we appreciate everybody's exuberance and enthusiasm that the volume pick up would come sooner. But the answer I think is same as the answer that certainly I gave most recently at CAGNY, but I think many of us have been giving over the last several months. The two big initiatives that we have are the re-launch of Science Diet with the more Naturals profile. As Bina said in her prepared remarks, that product is now fully in distribution. Media started at the very, very end of February. So essentially, March and the sampling and trial program for that business is really commencing now. To the heart of your question, is our response directly to and within the Naturals segment and that is captured by the Hill's Ideal Balance line. Again, as Bina said, we have completed distribution, and the two major retailers, remember, we have a limited distribution profile for this business, are PetSmart and Petco and their shelf set adjustments are basically going in place right now. The media on the Ideal Balance line basically started right now as did the sampling program and the consultants, in-store behind the product. As we said at CAGNY, A, our consumer testing, both the parents and the pets love the product. We know the packaging and appetizing engages and communicates, and the support we are getting from the retailers, the pet stores and the vets behind these two significant initiatives is very strong. That's what gives us the confidence, and to repeat what Bina said, we remain convinced that this business will return to volume growth in the second half of this year.
Operator: Chris Ferrara, Bank of America Merrill Lynch.
Christopher Ferrara - Bank of America Merrill Lynch: Can we talk about that 17% number you just threw out there on Brazil? That was pretty big, I guess. And could you maybe breakout what the drivers of that were, especially as you lapped, I think, the first full quarter of Luminous in Brazil and Mexico? And then, I guess sort of follow-on, can you just talk about the pricing environment in Brazil, because we've been hearing some stuff? Obviously, there's a change in tax structure. The government's been increasingly concerned about inflation, so just any color on that would be great as well.
Ian M. Cook - Chairman, President and CEO: Yeah, again, and I think we have articulated this many, many times on these calls; our focus is on innovation-led growth. To the extent that we can make premium innovation-led growth that the consumer will accept, we do, and that most certainly applies to Brazil in terms of a line extension on the back of the Optic White product, continued innovation in oral care and across our other businesses, and you're right, Chris, that is after dealing with the removal of the tax on products which lowered pricing to both retailers and to consumers and created a little bit of temporary disruption in the marketplace for a couple of weeks. But it is really engaging with our consumers through marketing where we are using increasingly marketing mix modeling to decide how we best engage with those consumers and deploy our funds accordingly. It is innovation behind the full portfolio of products that we have in the Brazil and then of course the on the ground execution by a very experienced management team in Brazil not just with the modern trade but all the way through the down trade in that large and complex country.
Operator: Ali Dibadj, Bernstein.
Ali Dibadj - Sanford C. Bernstein & Co.: Just had a quick follow-up on pricing and then a real question. On pricing it looks like the ratio between kind of your reported pricing (in the sense) of the mix element which is in your volume obviously from innovation and stuff but from a pricing, the ratio between that and currency in Latin America has almost always been quite close. But past couple of quarters it's not been that close. I want to just understand a little bit more kind of continuing on the theme of pricing, is that really all Venezuela or are you seeing things from competition or retailers or consumers or some of this macro spheres that kind of put that ratio out of whack? That's kind of the clarification. But the real question to me is, I think you are a good Company of assets because you essentially trounced all your peers in terms of top line growth. But we are also noticing for you and others that it's just getting tougher to grow so more expensive to grow? If I understand how much of that is short-term, so macro issues in the U.S., macro issues in Europe versus long-term – kind of secular drivers related to these categories or related to a tougher competitive environment that will be with us for quite some time. How do you guys think about this both internally, and because from the data, externally does look like the ROI is going tougher for everybody.
Ian M. Cook - Chairman, President and CEO: Thanks for the one question Ali. Starting with your clarification, it is exclusively Venezuela. The rest has to do with difference in timing of when we choose to take pricing in Latin America or in any other emerging market, so nothing structural or fundamental there. I would challenge the secular notion and I would challenge this inevitable creep of cost of doing business theory, I would start by saying you will know well that our return on invested capital is fairly elevated, certainly compared to our peer group and to the S&P 500, but I guess our philosophy starts with the consumer, as it should do with all packaged goods company and the theory that as marketers, we are paid to create innovation, the consumers feel they get a value paying for and from our point of view, we seek to make that value a premium for a premium benefit. We adjust access to our products by sizing and the pricing related to sizing, but we don't and we have never subscribed to the notion that price promotion is a way of sustainably growing business. We respond to it where we need to, but we have always put a very large premium on innovation and engaging with consumers around that innovation, what we have been doing over several years is recognized the fact that you can engage with consumers very well and build brand equity very well at the retail level and using our marketing mix modeling, we are deploying a lot of in-store techniques that maybe we weren't deploying 10 years ago and some of that funding comes from broader commercial spending which you don't see captured in the below the line appetizing. So, we are putting increased money in that space as well, and the affordability comes from the benefit of premiumization, our sharp focus on funding the growth and the choice we made in the fourth quarter of last year to reorganize with our global growth and efficiency program to make sure in perhaps a medium term choppy world, we were generating adequate funding to make sure we could sustain the top line growth of the Company, which on this call, we would reaffirm for this year as being between 6% and 7% from an organic point of view. So, it's essentially a focus on premiumization that the consumer values and a relentless focus on funding the growth and now our global growth and efficiency program to provide the funding that drives top line and also bottom line.
Operator: Wendy Nicholson, Citi Research.
Wendy Nicholson - Citi Research: Two small questions I think. But number one, Bina, you called out the customer development initiatives in Hill's, and I understand what that is because you had all the new product activity going on. But in Asia, specifically, what is that? Why is it accounted for in SG&A as opposed to gross margin and is that a function of more competition? And then just a housekeeping item, with the relaunch of Total in Brazil and Mexico, can you just remind us how big Total is as a percentage of your oral care portfolio? And when you relaunch Total, how meaningful can it be in terms of incremental market share? I think you relaunched Total in Europe maybe a year ago. So is that a big deal or maybe you can frame that?
Ian M. Cook - Chairman, President and CEO: The issue on customer development in SG&A is increased sales capability on the ground in emerging markets, most especially in Asia, a choice made to make sure we can continue to build world-class distribution in those countries and not simply have the product present, but to make sure that we have the product visible and organized on the shelf in the way we would want our brands to be presented. And as regards Total, we don't give that level of segment detail, but it is a big business. And there is concerted effort behind Total here in the U.S. as a complete equity as we bring the mouthwash to the marketplace in the second quarter.
Operator: Joe Lachky, Wells Fargo.
Joe Lachky - Wells Fargo: I guess I wanted to kind of take a step back in and get your opinion on how you see the vision for your company evolving over the long-term? And I guess you've got really strong execution in your current markets and I guess in the near-term I see a strong runway, penetration market share, opportunities riding category growth in your current markets. But how long can you ride that trend within your current markets, I guess the fear being you reach saturation in those markets or there is a slowdown in developing market growth rates? And then the second part of that is, then what's the next step beyond that and this may be like a 10, 15-year type vision, but how do you see the product portfolio evolving? Are there any new markets to enter? How do you keep that growth going in the long-term?
Ian M. Cook - Chairman, President and CEO: I guess this sort of saturation notion is kind of overblown from a theory point of view. We still have lots of growth opportunity in our existing oral care businesses, penetration in some markets, per capita consumption in other markets, and we intend to mine that vigorously certainly for the next decade and more. Around that, we have the opportunity to expand existing businesses that we have that may be pretty nascent to those categories in some of these emerging markets; think liquid body cleansing; think underarm, we can bring to these markets at the right time with the distribution prowess we have in these markets and continue to expand our portfolio quite meaningfully. So, I think when you get below the sort of 20,000 foot theory of it and get into the planning detail of actually making a vision concrete and agreeing what it is we should focus on and get done, we still think there is enormous growth, and remember, if you take a 25-year view, and take category definitions that are Oral Care, Personal Care, Pet Nutrition and Home Care, within Personal Care, we got into the underarm business by acquiring Mennen. We got into the liquid skin cleansing business in the U.S. by acquiring Softsoap. We expanded our footprint in body cleansing in Europe by acquiring Sanex, so even within the category definitions we have, once we've taken every one of them global there is still the opportunity to broaden our representation in segments of categories in which we do business, oral care by bringing total to the U.S., we've just established a global position in mouthwash and we're just beginning that journey on powered toothbrushes, so there is still, we think a very bright future for the categories that we have today, well beyond the time frame you mentioned.
Operator: Jason Gere, RBC Capital Markets.
Jason Gere - RBC Capital Markets: Just going back, I got the context of your two pillars of growth hitting the 6 to 7 organic sales and obviously returning back to 10% EPS growth. So, as you see the next wave of restructuring cost savings, how do you ensure that you have the right level of reinvestment in there to kind of meet both objectives? So I guess I am talking a little bit more about the advertising side and just as this quarter you have hit kind of that 11% level which I think is closer to the highs that you have had. Can you just maybe walk through whether some of the factors as you look at that reinvestment rate of the savings that should be coming through and helping you over the next couple of years?
Ian M. Cook - Chairman, President and CEO: Well clearly we take a very strategic view on how we choose to reinvest that money. Frankly we did that before we embarked upon the program and we will be making together as a management team with the involvement of our Board some choices in terms of where and what the significant aspects of strategic investments will be. When you bring it down to the notion of the advertising investment, yes, we have taken it up absolutely on this ratio in the first quarter and we said – we stand by the fact that we plan to do that in 2013. I repeat the point, because I think it is important to register it that with the capabilities available to companies like ours today, both analytically and in-store technique wise. We are quite consciously doing more and more at the store level to engage with consumers because the ability to do that in a very effective return on investment and executional way is significantly greater than it was five, 10 years ago. So the investment choices we make when you just talk about advertising will be, yes, in the traditional advertising engagement areas, which you will see from the line, but also in the so-called gross to net trade spending, which kind of comes off the top line, but is nonetheless investment funding that we deploy to grow the business. Then I think you can rest assured, at least, I hope you can rest assured that as a Group here we will be doing the right thing in terms of global growth and efficiency, plus our ongoing funding the growth programs to make sure that we fund the growth while delivering a return.
Operator: Bill Chappell, SunTrust Bank.
William Chappell - SunTrust Robinson Humphrey: Can you just talk a little bit more about just what you're seeing in especially Western Europe, I mean in terms of consumer trends? Has it just stayed, are we bouncing still along the bottom? Are you seeing any signs of hope or any uptick as we move to the back half of the year?
Ian M. Cook - Chairman, President and CEO: We're seeing a lot of exuberance, Bill. I would say, certainly the way we have planned this year and the way we have thought about our strategic planning over the next five years, we are still assuming low growth in Europe. We think that's the prudent thing to do, low single digit category growth in our case. You do – if you want to sort of then go to the next level of detail, you do see some buoyancy or greater buoyancy, obviously I think in Northern Europe, compared to Southern Europe. We were quite pleased that our Southern European businesses basically performed at the same level that they did in the fourth quarter of last year. So, we did not see a further deterioration, but I would say that we're talking about a low growth environment, certainly for the next strategic cycle if we are proven wrong and there is greater buoyancy, then that would be terrific, but we're not planning on it.
Operator: Joseph Altobello, Oppenheimer.
Joseph Altobello - Oppenheimer: I did want to go back to North America for a second, because I thought it was particularly impressive. This quarter, you guys seem to hit the trifecta if you will. The volumes are up very nicely, pricing was very strong and you also had pretty good margin expansion. I think you mentioned earlier to the question that pricing is becoming a core competency for you, but if you look at volumes, you see your stocked volumes in North American were as high as I've seen them in quite some time, so, if you could give us a little more color on what drove the volumes, was that pantry loading or trade load and what drove the margins as well?
Ian M. Cook - Chairman, President and CEO: Well, I think a few things to say. Number one, and being already referenced, we saw some nice share growth across a broad array of categories, which means we were growing faster than the rate of category growth. That was one thing. Secondly, the timing of promotional events that we have in the first quarter of this year was different than the first quarter of last year, which you may recall was really the expansion of Optic White. Thirdly, we have begun to build distribution of the Total mouthwash that we referenced in our remarks. As far as the second quarter is concerned, I'm pleased to say that we have started off maintaining the pace that we had in the first quarter. So we feel good about that.
Operator: Ian Gordon, S&P Capital IQ.
Ian Gordon - S&P Capital IQ: I wanted to ask about your EPS guidance. I know it's early, you only have quarter under your belt, but you did come in at the high end of the 5.5% to 6.5% growth target for the year. Currency looks to be a little bit more benign for the rest of the year based on today's rates, the comparisons look balanced a tad, a bit easier; Hill's should ramp and you have the restructuring savings starting to flow through. So what's the missing piece and why shouldn't we expect something maybe little bit north of 5%, 6.5% dollar growth?
Ian M. Cook - Chairman, President and CEO: I think you have to kind of go back to pre-Venezuela and coming in to this year. When we came into this year, we talked about EPS growth double-digit on a dollar basis and many people at the time frankly, even with the restructuring savings which are relatively modest this built in, people felt there was too much optimism on the top line and questioned our ability to deliver that. When the Venezuelan devaluation occurred, I think we were quickly very clear (indiscernible) about the impact. Obviously, the one-time balance sheet revaluation, you know well, and we said that the EPS impact would be between $0.05 and $0.07 to quarter and we kind of reaffirmed the math this quarter in saying that that would translate to a narrow range of 5.5% to 6.5% increase and we stand by that for the year.
Operator: Bill Schmitz, Deutsche Bank.
William Schmitz - Deutsche Bank: So I have four clarification questions and one real question – just kidding. So, Latin American margins, do you think they bottomed this quarter? And the reason I ask that is I think the inventory – the expensive inventory that was flowing through in dollars probably goes away. So, is there any reason to believe that this isn't kind of as bad as it gets in terms of Latin American margins?
Ian M. Cook - Chairman, President and CEO: I think the answer to that, Bill, we have been through these things many, many times before, devals, price controls, and the like. And I think it would be fair to say that our expectation is that we would begin to rebuild margin going forward, yes.
Operator: Michael Steib, Credit Suisse.
Michael Steib - Credit Suisse: Just a small point from me, Ian. Why was pricing negative in Asia?
Ian M. Cook - Chairman, President and CEO: It was to do with pricing adjustments, Michael, that we took largely in Africa relative to some uncompetitive market positions.
Operator: Linda Bolton Weiser, B. Riley Caris.
Linda Bolton Weiser - B. Riley Caris: It's our understanding that you may have another major massive taste innovation, new product breakthrough type thing coming. Do you want to give some more information about that? Our understanding is then this may start to be educated on it this summer, and so when would be the launch – potential launch of it? Would be it late this year or next year? And then just a clarification on your interest expense line; it had become an interest income – net income, two quarters ago in the fourth quarter. Going forward, will that now revert to being interest expense and would $5 million to $10 million per quarter be a good rough estimate for that, of interest expense?
Ian M. Cook - Chairman, President and CEO: The answer to your second question is yes. The answer to your first question is we are always actively pursuing, as I mentioned earlier in talking about the innovation point, innovation that brings real benefit to consumers and adds value. And on the assumption we do meet with these professionals in the middle of the year, we will be glad to have one of them talk to you.
Operator: Lauren Lieberman, Barclays Capital.
Lauren Lieberman - Barclays Capital: Wonder if you could talk a little bit about Europe, just in terms of margins actually, because the margin performance is obviously great, and so you're getting really good cost savings there leveraged on new volume growth. So talk about, where these savings are coming from and even before you have really gotten going on this latest restructuring program?
Ian M. Cook - Chairman, President and CEO: The benefits come from a more benign commodity environment. The benefits come from traditional funding the growth savings programs and obviously the continued introduction of innovation which we seek to be premium which is therefore accretive to margins and as you rightly suggest Lauren and has been I mentioned very clearly I think in our prepared remarks and as we suggested we might, a lot of the structural work that we will be doing around the world has begun in Europe for obvious reasons.
Operator: Connie Maneaty, BMO Capital Markets.
Connie Maneaty - BMO Capital Markets: A question on Venezuela. Can you help us understand what the new mechanism, the auction mechanism how it's likely to work and what you know about it at this point?
Ian M. Cook - Chairman, President and CEO: We continue to work with the government in Venezuela to get approval for CADIVI funds for the importation of product and have started the year quite nicely in fact in that regard. The new auction market mechanism, that is, replacing SITME whilst we will work with it, we understand so far that the tranches of opportunity in that market are basically about $2 million. So whilst we will look at it I think in the main we will be staying with the CADIVI process.
Operator: John Andersen, William Blair.
John Andersen - William Blair: Just a quick one Ian, on the advertising spend, it was up both absolutely and as a percent of sales in the quarter, so you're presumably approaching about 11% of sales. Is that a level kind of where you see some plateauing going on or potentially some leverage going forward? And the incremental spend that you are doing there, could you just talk a little bit about the focus? Is it more oriented towards new products and developed markets or more investment behind your emerging markets?
Ian M. Cook - Chairman, President and CEO: Yes is the answer, John. It really is all of the above. I mentioned earlier the increasing focus we have on marketing mix modeling, in terms of both our engagement marketing with traditional consumers and indeed our trial and awareness generating advertising for new products in the developed countries. As you would expect, we are moving some of that investment into digital in terms of it being a strong engagement vehicle in the emerging markets. More traditional vehicle continue to remain both affordable and effective. And again, as I mentioned earlier, as we think about the advertising going forward, don't forget that we are also putting a focus on what we call commercial spend, which is this trade spending, which is allowing us to do programs at retail, which are not just engaging and persuasive to consumers, but also help to build our brand equity and loyalty over time. So, we're managing all of those things. We do this not on a ratio basis I have to say John, we do it from the ground up, market by market against what activities we have in countries as we get into each planning cycle, so the ratio is an output, and the split between the traditional advertising on what we do on trade spending is an output of that planning rather than a set ration going into the planning.
Operator: Mark Astrachan, Stifel Nicolaus.
Mark Astrachan - Stifel Nicolaus: Trying to get a sense of operating margin progression. So, it was up a lot in all segments, not including Lat-Am and Pet Nutrition. I think in Lat-Am the margins are still down excluding Venezuela, currency related devaluation. So, is there something apparently different on the cost front whether wages, inflation or spending that makes Lat-Am different from the others? Then also, how should we think about progression in those markets like Europe or North America where margins improve nicely?
Ian M. Cook - Chairman, President and CEO: As you know, we don't talk about operating margins going forward Mark, but I can say from a gross margin point of view, we stand by that 30 to 70 basis points and the EPS that we have guided to that drives from that and Latin America, I mentioned on the margin, roll forward that within the walkthrough on gross margin that was a negative of 120 basis points year-on-year for the world, based on Venezuela and therefore Latin America and that said we still increased our gross margin by 40 basis points. So the Latin American gross margin is entirely to do with Venezuela, entirely. It is our (trust), geography by geography as you know, to expand our gross margin around the world and then to make choices as to how we invest the funds, but that flow from that. So, given that the Venezuelan impact on the world was 120 basis points, you can imagine the impact in Latin America.
Operator: That does conclude our question-and-answer session for today. I'd like to turn the call back over to our presenters for any additional or closing remarks.
Ian M. Cook - Chairman, President and CEO: Thanks to all of you on the call. Thank you very much for your questions, and as always a big thank you to the Colgate folk around the world, who get done what it is we agree we're going to get done. So, thank you.
Operator: That does conclude our conference for today. Thank you for your participation. You may now disconnect.