高露潔 (CL) 2002 Q4 法說會逐字稿

Good day everyone and welcome to today's Colgate-Palmolive company fourth quarter 2002 earnings conference call.

Today's call is being recorded and is being web cast live at www.colgate.com.

There may be a slight delay before the question and answer session begins due to the web cast.

At this time for opening remarks I'll turn the conference over to Vice President of Investor Relations, Ms. Bina Thompson.

Please go ahead.

Good morning and welcome to our fourth quarter and year-end earnings release conference call.

With me this morning are Reuben Mark, Chairman and CEO, Stephen Patrick, CFO and Dennis Hickey, corporate controller.

I know you can tell from Reuben's comments in the press release we're extremely pleased to report an excellent finish to what has been a very solid year.

This was a record fourth quarter on virtually every line of the P&L and balance sheet.

And the full year results reached similar record levels.

We set a new record for sales, gross profit margin, dollar operating profit and operating profit margin, net profit and net profit margin and EPS.

Very strong new product activity around the world helped the continuation of market share growth, which in turn is reflected in excellent volume performance.

Our balance sheet is strong and continues to further strengthen with records achieved in working capital, cash generation and return on capital.

All the important ratios on the P&L and balance sheet moved in the right direction in the quarter.

As for our simple financial strategy, which we have followed for many years, you all know we focus on increasing gross margin while at the same time reducing our fixed overhead expenses.

This provides funds to boost our marketing efforts behind existing and new products as well as to increase operating profit.

And I think all of the 40,000 Colgate people around the world are pleased that in this time of global economic sluggishness, currency fluctuation and political instability, our long-term financial strategy continues to perform so effectively.

And we expect it to continue to perform in 2003 and beyond.

Turning to the P&L itself, worldwide dollar sales increased four % in the quarter, which is the strongest increase in 22 quarters.

Volume increased six %, with every division contributing healthy gains.

Pricing was up a half a % worldwide and exchange was negative two and a half %.

With Latin American currency weakness more than offsetting European currency strengths.

Excluding currency sales increased six and a half %.

Worldwide gross margin in the quarter increased one full %age point at the high end of our targeted range.

And this is on top of the very robust 130 basis point increase in the year ago quarter.

For the full year, margin increased 130 basis points, well above the top of our targeted range.

And this is the seventh 7th consecutive year of growth profit expansion for the company.

The continued excellent margin expansion is the result of our ongoing efforts to continually increase productivity and move our volume to higher margin, more consumer loyal franchises.

The worldwide implementation of SAP, most recently in Mexico and Brazil, is delivering significant benefits.

Our focused ongoing global capital spending projects are returning excellent after tax savings in excess of 40 %.

Our move to [regionalization] around the world are resulting in large cost savings as well.

As you're aware the cost of these programs have been absorbed into our ongoing P&L without any special charges or restructuring for the best part of the last decade.

As we begin 2003, all these programs are in place and are functioning very well and are being added to every month, giving us confidence that we will continue to deliver good growth margin increases at least within our 50 to 100 basis point targeted range.

Worldwide, total marketing spending was up in the quarter, both absolutely and as a % of sales.

Worldwide media alone increased double digit.

This was in support of both numerous new product launches around the world and ongoing support of existing products.

All this new product activity has resulted in further worldwide share increases in many of our key categories in which we are already market leaders.

Specifically, global year on year increases in toothpaste, tooth brushes, liquid and bar soaps, bath and shower gels, and fabric softeners.

The overhead portion of SG&A which we worked very hard to reduce again decreased as a % of sales, both for the quarter and for the year.

This is another example of our financial discipline and worldwide emphasis on continuous improvement.

Operating profit in the quarter increased 16 %, reaching a record fourth quarter level as a % of sales, 21 and a half %.

Excluding the impact of a one-time charge in the fourth quarter of 2001, operating profit increased 13 %.

For the full year, operating profit also reached a record level as a % of sales, 21.7 %.

The tax rate in the quarter was 30.2 %, almost 200 basis points higher than the year ago rate of 28.4.

And the full year tax rate at 31.1 was in our targeted range of between 31 and 32 %.

Net income increased 15 % to a fourth quarter record of 14.1 % of sales.

EPS increased 20 % to 59 cents, a penny above your consensus estimates.

Excluding the impact of the one time charge in the fourth quarter of 2001, the same 59 cents earned this year translates to an increase of 13 %.

The balance sheet and cash iteration statements are very solid as well.

Operating cash flow for the full year increased seven %, working capital was again reduced to another record at 3.2 % of sales at year-end, and receivables were at the lowest level in the last five years at 43 days.

And inventories were at an all time record low of 58 days.

Return on capital increased almost 500 basis points to a record 34.6 % of sales.

So as I said at the outset, a very strong finish to a very strong year.

Despite difficult conditions around the world.

Happily, this momentum appears to be continuing into 2003 and bodes well for this year as well.

Let's turn to the divisions.

Starting with North America.

Volume in North America increased a very strong ten and a half %.

Pricing declined about five % resulting in a sales growth of five and a half %.

And as we've indicated to you on previous calls, a significant amount of the price decline relates to increase couponing and other promotional activity related to our numerous new product launches.

The largest being Simply White tooth white gel.

These increases in promotional activity now register as price declines and reductions in gross profit under the new accounting rules.

Total marketing spending increased strongly in the quarter, with media spending alone up significantly in support of our new product activity.

Operating profit increased absolutely and as a % of sales, up almost 30 %.

And as we had indicated earlier last year, the bulk of the U.S. new product activity occurred in the second half of 2002.

Simply White has continued to be a great success.

Our market share for the fourth quarter was 40 % of the category, which is growing very fast.

More recent shares were over 40 %.

A new ad campaign has just been launched across the U.S., which should further boost shares.

Since the launch of Simply White in the third quarter of 2002, the category has doubled in volume.

However, household penetration is still even less than 10 %, indicating excellent potential for future growth.

Additionally, we just received trial and repeat numbers for the first four months of launch, which showed better performance on both measures than one of our leading competitors.

And you should be interested to know that we're now launching a new Simply White product.

Simply White night.

Simply White Night is an at home white anyone product that consumers apply only once at night.

It will make whitening teeth at home easily it applies to the teeth right before going to sleep.

Only takes a minute to apply no need to dry your teeth or keep your mouth open to allow the gel to dry.

Suggested retail price is $14.99.

The product should be in stores nationwide early in the second quarter.

Overall toothpaste shares as measured by Nielsen in outlets representing half of our U.S. business were at 34 % for the quarter, at the level of the year ago quarter.

And shares for the full year were at similar levels as well.

Five full points ahead of our nearest competitor.

New products across the business of helped maintain grow shares in other core categories.

Our new Irish Spring Icy Blast soap has contributed to a year-over-year share increase in bar soap.

And a series of new products in the liquid soap hand soap category has resulted in a share increase of almost one and a half points from 2001 to 2002.

We've talked to you on a number of occasions about our efforts in marketing to ethnic consumers, Hispanics and African Americans.

In both cases our shares are generally higher than they are in the overall marketplace, reflecting history and targeted marketing.

Taking advantage of the high consumer awareness for our products, we recently fabric softener in the Hispanic market across the country.

Its success has been excellent.

At the end of the December national share of the total softener fabric market, as measured by Nielsen, was 7.3 % and our shares of the Hispanic market was almost 30 %.

And in some of the non-measured channels our business in the fourth quarter increased very strong double digit.

Overall, we launched 22 new products in the U.S. in 2002.

And we expect to launch at least the same number this year.

You'll be hearing more about these as we progress through the year.

All of this gives us great encouragement for the North American results, for the first quarter and full year.

We expect good volume growth and EBIT should be up again absolutely and as a %age of sales.

Turning to Europe.

Volume in Europe increased three and a half % and sales increased ten and a half %, with currency benefiting by 10 % and pricing down about three.

Total marketing spending was up and EBIT was up strongly both absolutely and as a % of sales.

Volume was robust in a number of European subsidiaries.

France, Italy and the UK, three of our largest subs, and many of the smaller ones, including Greece, Spain and the Nordic group.

In Eastern Europe volume growth was particularly strong in Hungary Romania Russia and your Turkey.

Business is generally good across the region and market shares are healthy.

The one notable exception is Germany.

And as I'm sure you know, the macro economic situation in this country is extremely difficult, affecting all consumer goods companies.

Despite declining categories, our market shares for the quarter are up in seven of 11 categories, including toothpaste, liquid soaps, foam baths and window cleaners.

The launch of Palmolive aromatherapy and its newest variant, Tranquility, continues to drive shares in the bath and shower gel categories across the European region.

In France our foam bath share is up about three points.

In Italy up half a point.

And the UK, up about half a point as well.

In the Nordic group of countries our shower gel share is up almost three points.

New products in the toothpaste category have driven share as well.

Products such as Total Plus Whitening, Colgate Two in One, and Triple Action.

In Italy we reached our highest share ever in toothpaste.

In the UK our full year share now stands just shy of 40%, up two full points from the year ago period.

And in the Nordic group of countries, toothpaste share is at 37.6, up almost a full point from last year, and the most recent share read is 38.6.

Finally in Greece we further established our number one position with a 38.1 share, almost 10 full points ahead of our closest competitor.

We're planning more exciting new product launches for Europe in 2003.

These, coupled with the existing momentum in the business, give us encouragement that the division should post good volume in the first quarter and the year.

EBIT is expected to be up double digits for the first quarter and year as well.

Turning to Latin America.

Volume in the quarter increased four %, a terrific performance given the widespread economic turmoil occurring throughout the region.

Currency, as expected, declined 19 % and pricing was up seven %, partially offsetting the max seed evaluation in Argentina and Venezuela.

Dollar sales in the region declined eight % while local currency sales increased 11 %.

Total advertising was down somewhat as you'd expect.

As you know, extremely difficult macroeconomic conditions in Venezuela and Argentina have caused us to operate in our classic crisis mode in these countries, pulling back spending and only selling profitable volume.

But you'll hear in a moment how well this strategy has worked as market shares continue to reach record highs.

Operating profit in dollars was down a little over five %, but up in local currency and as a % of sales.

Volume was strong across the region.

Mexico, Brazil and Columbia all grew solidly.

Venezuela and Argentina the two countries operating in chaotic conditions declined.

But as I mentioned our performance in Latin America has been very good given all the macro economic challenges.

Regional shares are up in eight out of the ten categories where we compete.

Our strategy is emerging stronger after economic crisis is working.

In the toothpaste category, our share is the highest in the last five years at 73 % throughout the region.

Share growth is due in large part to the strong performance of the base business, the launches of Colgate Fresh Confidence Extreme Gel, Colgate Total Plus Whitening and [inaudible] and [inaudible].

And the continuous success of Colgate Triple Action and Colgate Purple.

Argentina has the highest share in almost a decade- close to eighty % despite macroeconomics.

Three subsidiaries, Venezuela, Columbia and Ecuador have has surpassed the 80 % market share in 2002 bringing the total number of subsidiaries with 80 % share or more to six.

Central America reached a record share of 77 % in the latest period.

In Brazil, the recent launch of [inaudible] continues to deliver excellent results of market share in that company back to nearly 70 %, the highest market share in several years.

The consolidated share leadership in other categories as well.

Our regional share of the dishwashing category now stands at just about 50 %.

New impactful graphics for AJAX and [inaudible] lines of liquid line of cleaners plus new fragrances have lifted our leadership share in that category to 27.5 % with record high shares in Columbia, Ecuador, the Dominican Republic and Central America.

Mexico had a good quarter with mid single digit growth this was the best quarterly performance of the year and follows a very good year-ago-quarter where volume was up over 10 %.

The pace of the Mexican economy still remains sluggish with modest pickup in consumer demand but mostly in the durable goods sector.

In light of this our volume performance is even more impressive.

As you know the peso has weakened considerably in recent months and weeks but despite of that they have exceeded their profit goal for the quarter.

The pace of business in Brazil is quite solid.

Volume in the quarter increased almost 10 %.

As I just mentioned our toothpaste share has been steadily climbing throughout the year both on the sorizo and Colgate brands.

In terms of the economy in general, it is expected that 2003 should be a relatively stable year with moderate growth, declining inflation and reasonable foreign exchange stability.

In market reaction to the new government so far has been positive.

And it appears that the country is on its way to meeting the IMS program targets.

So all this does bode well for a good year for our business in 2003.

In Venezuela, despite all the disruptions and strikes our market shares continue to grow.

In fact, they're up year-over-year in nine out of ten categories.

While we still remain somewhat cautious as regards to macro economic environments in Latin America as well as potential devaluation, we expect positive volume growth in the first quarter and for the full year.

Operating profit should be at least at last year's high levels for the first quarter and should be up absolutely and as a % of sales for the full year.

Turning then to Asia Africa.

Volume in Asia Africa increased five %.

Positive pricing as a % and positive of exchange of three and a half resulted in a sales increase of nine and a half %.

Total marketing spending was up absolutely and as a % of sales and operating profit increased over 30 %.

Fueled by a very healthy increase in the gross margins.

We have spoken with a number of you about the great potential for further gross margin increases, stemming from regionalization of our manufacturing facilities.

We've reached benefits in a number of areas, including Europe and Central America.

More recently we've been applying these principles in our Asia division.

We're sourcing toothbrushes regionally from our plant in [Sam Chow], China.

Toothpaste is being manufactured centrally in Thailand for the Asian countries.

These, plus other initiatives to reduce raw material costs, have helped increase gross margin in this part of the world.

Volume was good throughout Asia Africa.

In China, Hong Kong, the Asian [Cook] countries, Vietnam, South Pacific and many parts of Africa.

And as with our other divisions new product activity contributed to this healthy growth.

In China, Colgate Herbal Plus Whitening was launched in the fourth quarter lifting the year-over-year share of the Colgate brand by half a %age point.

Colgate still maintains a clear lead in the toothpaste market with twice the share of our nearest competitor.

Our launch of fabric softener in the Guam Don province continues to deliver successful results and introduction of two new fragrances have consolidated our leadership position in that market.

In Malaysia we launched our global product bundle, Palmolive Aroma Therapy, it's garnered a 12 and 15 % share in two major retailers after only one month in the market.

In Australia, where volume increased over seven %, the launch of Simply White significantly overachieved versus expectations, doubling original estimates.

We're very pleased with our results in Asia Pacific and are encouraged with momentum with which we enter 2003.

We would expect volume to grow at fourth quarter levels for both the first quarter and full year 2003, accompanied by double digit operating profit growth.

Finally, Hills.

Hills turned out an excellent fourth quarter, topping what has been a very good year overall.

Volume increased five %.

Positive pricing of three % and favorable currency of one % resulted in an overall sales gain of nine %.

Total marketing spending was up strongly, absolutely, and as a % of sales.

Operating profit increased almost 16 %, up absolutely and as a % of sales.

Volume was strong both domestically and oversees.

The rate of growth in the specialty pet food category increased in 2002 from 2001.

That, combined with an increase in our market share, has contributed to the healthy volume gains.

And as with the Colgate businesses, new products continue to play an important role at Hills.

The U.S. launch of Nature's Best continues to meet with success.

National advertising broke in November.

And we will be rolling out Nature's Best in Europe and Japan in 2003.

Overseas, new products have fueled growth as well.

In Europe, Indoor Cat and Canine Senior Large Breed in the Science Diet line have met with success.

Our Prescription Diet BD for brain aging in dogs, have been supported with a geriatric-focused program with the vets.

In Japan we've retained our number one position in dry dog food and overall number two position despite recent competitive entries into the market.

We expect that Hills will continue its pattern of mid single digit volume growth in both the first quarter and the year.

Operating profit should grow double digit for the first quarter and year as well.

So in summary, we are very pleased with the excellent quality of our fourth quarter and year 2002 results.

As you've heard, the fundamentals of our business in every division are very sound.

This gives us encouragement that the momentum with which we enter the year 2003 will continue throughout the year.

Our seasoned and well-focused global management team has the strategies and processes in place to continue our goal of driving growth, funding that growth and delivering value to our shareholders.

And now we'd like to open it up for questions.

Thank you.

Today's question and answer session will be conducted electronically.

For the telephone audience, if you would like to ask a question you may do is by pressing the star or asterisk key followed by the number 1 on your touchtone telephone.

We also ask that if you're listening to the conference on the Internet, that you please turn down the volume on your computer speakers when asking a question.

We ask that you limit yourself to one question and one follow-up question.

If you're on a speakerphone, please un-mute your phone so your signal will reach our equipment.

Once again that is star one to ask a question.

And we'll go first to Carol Wilke with Merrill Lynch.

Thank you.

I was hoping, Reuben, you could explain in a little bit more detail the negative pricing impact in North America, just what is in the different components that you guys discussed?

I know some of it is promotional activity such as couponing and then the 360-degree.

Could you talk about more specifically what the components are and what %age of all that was slotting fees and then the outlook of that for '03?

Thanks, Carol.

As you know, a lot of new products in the United States.

As per the chart that was sent out and as per the comments that Bina made, volume in North America was up 10, 11 %.

And selling price was negative 4.8.

As you say, Carol, that is primarily due to couponing, incremental over the previous year.

Listing fees for Simply White.

A number of other similar things, basically between couponing listing for Simply White.

That's roughly half of it plus some anti-Dawn activity on P&L, Irish packs and so on.

So, if, for example, the assessment rules had not been changed, I think it would have been interesting to see that volume would have still been up 10.3.

But the sales dollars would have been obviously substantially higher than 5.5 probably eight %.

And gross profit, I guess Bina didn't mention it specifically, but it was up over a hundred basis points in the U.S., would have been up 60 basis points or so higher had the accounting change not taken place.

So I think you're seeing acceleration as you're seeing in all the companies of trial producing devices in conjunction with new products.

And I think we're quite delighted that the gross profit grew 110 basis points even with that additional.

And obviously EBIT was up very strongly in the U.S. as well.

One quick follow-up.

Would the difference between the eight % ex-FAS and ten and a half % volume growth, was that mix?

You mentioned club packs, et cetera- would the remaining negative portion be mixed factor?

That would be also total commercial spending, because there's some things that have historically been degross to net and they play a role in new products in aggressive marketing as well.

Are you expecting the minus five % to be continued through the rest of the year or does it depend on the timing of the launches?

When you say the rest of the year.

For '03?

I think on a worldwide basis, we expect pricing to be slightly better than it was in the fourth quarter.

My recollection was it was positive a half a % in fourth quarter.

So on a worldwide basis it should be slightly better than that.

The U.S. is continuing their strong activity, but again they are looking, as Bina said, for strong volume, strong margin increase, and very substantial advertising increases.

So this should be another good year for the U.S.

Thanks.

Thanks Carol.

We'll go next to Wendy Nicholson, Salomon Smith Barney.

Hi.

Could you talk a little bit about your market shares in North America.

It sounds like you're spending a lot and there are lots of new products.

But the market share picture, at least according to IRI, doesn't just look that good.

I'm wondering-- I know it's not a complete picture because it doesn't include all of your distribution-- but I'm sure market share declines in any of your businesses don't make you happy.

So is it you're spending more but your competitors are spending more than that?

Has your share of voice gone down?

Or what do you think it is in the food and drug channel that just isn't working?

Well that's a pretty strong conclusion that it isn't working.

Ian Cook is here.

He's got a big frown on his face.

But I think if you look at, take toothpaste, again, the U.S. is the U.S. and the rest of the world is the rest of the world.

U.S. market shares in toothpaste are almost precisely on for the full year 2002 as they were literally within the couple of tenths they were the year before.

Five points ahead of our nearest competitor.

We went from zero share in the tooth whitening section to 40 %, that's of course on dollars.

And we're substantially cheaper on units with liter.

You look at each of our categories.

I'm not sure that I see a problem with market shares.

There's a lot of competitive spending.

Let me switch for a moment from U.S. to worldwide.

We've got some worldwide shares here and basically most of the categories are up very specifically.

Toothpaste is up very specifically overall.

Oral Care is up.

Underarm is up.

Lightning Liquid is up and Liquid Soap is up on a worldwide basis.

So my own sense is that, yes, that the U.S. market has become very much more competitive as a result of competitive spending.

We are holding our own very well and had a very good year, will have another one this year.

My own sense is that a lot of money is being spent, but fortunately we're generating the gross profit in order to spend that level of money but at the same time net it out so we're quite an EBIT more profitable on an operating basis.

Do you think that in 2003 --

Any good thoughts on the quarter or--?

I thought it was a great quarter.

And I loved your global market share.

Reuben it's hard for me to find anything that I don't like in the numbers but I'm just looking at the U.S. business and that's the only thing that sort of looks like it has a few lumps and bumps in it.

And I'm wondering if 2003 is going to see more new product activity.

I'm looking at areas like dish target where Dawn has been tough, liquid laundry looks tough, [inaudible] I know they're businesses they're not humungous but they don't look good either.

I'm not sure when you say it doesn't look good.

I think our shares in Lightning Liquid are, we came out of the year, the year average was 38 and exchange down a couple of points on the year on year average, but we came out of the year with over a 39 share on dish, with the beginnings of our Aroma Therapies.

As you mentioned our latest new product in that category for which all the marketing activity starts in the first quarter.

The same is true on underarm with 24/7.

The same is true on bar soap with our next Irish Spring variant and our body wash and liquid hand soap businesses with Icy Blast and Aroma Therapy and on those businesses we were up share on share.

So we're going to get a lot of flow through on the new products we had in the fourth quarter and, yes, you're going to see a continued pacing of new products in all of our key categories for 2003.

Wendy, let me give you some figures.

As you know, the U.S. has had a number of North America as a whole had a number of good years.

Our volume was up four and a half % in 2001.

It was up over six % in the year 2002.

And candidly our budget calls for it to be up about that or conceivably more.

But in -- Bina is frowning at me-- but nonetheless in 2003.

In terms of operating profit or EBIT, up six % in 2001, up 12 % in 2002 and budgeted up basically high single low double in the year to come.

Advertising up strongly in the fourth quarter.

Up strongly next year.

My sense is that it looks pretty good.

That sounds great.

That's helpful, Reuben.

Thank you.

We'll go next to Amy Chasen with Goldman Sachs.

First a real quick one.

Can you give us some idea how much Simply White contributed to the North American volume growth in the quarter?

That's quite reminiscent of the question you had in the last quarter.

It was substantial.

The way I answered you last time, which I will do again, if I might, Amy, is that I think what we tend to look at on a worldwide basis what has happened to our core businesses.

Because as you know we prioritize and Simply White is one new product which is now in one big country and two smaller ones and by the end of the first half it will be in 16 countries.

In the same fourth quarter oral care was up nine or 10 % worldwide, of which toothpaste was up between six and seven.

Personal care was up over four.

All these are all in order of priority of business.

Service care was up three N and detergents were down two.

So again, as you know, especially that's the way that the margins flow as well, is that that exactly, as we strategic ally want it, we want to build toothpaste and oral care and so on, and that's how we prioritize our spending.

We're quite pleased so far this year that toothpaste is doing so well, as of today anyway.

I saw some numbers this morning.

At any rate, --

Okay.

So can you just repeat where Simply White is in terms of its global roll out.

Simply White as we speak is being sold in three countries, the United States, Canada and Australia.

In this there's obviously a worldwide grid.

And in the next six months, somewhere being launched as we speak, there will be an additional 16 countries worldwide including actually European Latin American and Asian Cook.

So by the middle of the year we should be in 16 countries.

Okay.

And can you just comment on whether there's anything we should be aware of that might impact the quarterly flow of earnings in 2003?

And in particular I'm referring to the fact that your new product activity in North America was second half skewed this year and how that stacks up in terms of the comps for 2003.

We maybe want to read the line from your earlier report today and then I can answer it more specifically.

Do you want to do that?

No.

Okay.

The question is, obviously Bina is shaking her head at me.

Very good question.

In the fourth quarter, we had basically all of the Simply White that we had in the year because we launched it in the fourth quarter and shipped in the fourth quarter.

And that was-- my recollection was about $100 million or something below $100 million for the product.

In the United States, yes, there will be a difficult comparison.

My sense is the new products grid with a number of other products will balance it off.

And candidly we're selling at a rate that's quite substantial right now.

In addition, we will have Simply White from all the rest of the world and all of the rest of our new products.

Simply White in the United States, to put a very broad frame on it, will end up being somewhere between $100 and $200 business without Simply White Night, which I think Bina mentioned in her discussion.

Can I take that to mean you don't expect any major differential between the quarters?

My own sense is that U.S. will grow strongly throughout the year.

They have grown historically between four and seven % quite regularly and increased profit quite regularly.

My sense is that throughout the year you will see growth in that range, at least in the U.S.

Thank you.

We'll go next to Bill Chappell, Sun Trust Robinson.

Just a few follow-ups on Simply White.

Can you tell us where the expansion possibilities are for the first and second quarter or for 2003 for Simply White?

And then also just a housekeeping-- maybe give us a cash balance at the end of the quarter?

Why don't you give the cash balance.

Worldwide cash balance at the end of the quarter was $177 million.

Thank you.

Why don't I just give you the first quarter, because clearly I don't want to reveal where things that have not been presented to the trade.

But in Mexico, Arabia, that's interesting, a large market in China, but not a national move and on the continent of Africa, in the second quarter we will have a number of Latin American and European countries and Far Eastern countries, emphasis on Europe and Latin America.

Third quarter Eastern Europe, continuing Latin America and so on.

And also on Simply White, just trying to understand the impact in the U.S. versus other countries, are there other regions where you see a similar type of impact that you saw in the fourth quarter once it's eventually rolled out to the geographies?

It's all new territory.

That is to say, this is a whole new category.

We're very pleased with the results in Australia and in Canada.

Although, you know, Bill, that I've said for many years, we don't like to hang everything on a single new product.

And in the U.S. we launched 22 new products last year.

We'll launch a bunch more than that this year.

And what is important to us is the process starting at R&D, protecting intellectual property, and so on and to test market into international and global expansion that really makes the difference.

And that's why I think if you look at our historic volume worldwide, it has been quite consistent and we occasionally have a Total or Simply White or another big product, but nonetheless it is quite consistent.

I think you will see that over the last several years every single division, operating division, has been growing as it was in the fourth quarter last year and most probably will be in the first quarter this year.

Every one of the divisions grows.

That's a good balance.

Yes, one or another will take a bit of a jump when there's an especially hot new product.

But you have to look at the process over time that continues a stream of new products so it's not volatile and doesn't jump around.

Thanks.

We'll go next to Andrew McQuilling with UBS Warburg.

I guess imitation here is a sincere form of flattering.

You must be flattered about P&G launching the Simply White knock off.

Any chance you can beat them to market so they're targeting March April on the nighttime whitening product.

And I wondered if you'd share some preference data for Simply White versus white strips, if you'd be willing to do it because the journal seemed to love you guys?

I bumped into some salespeople coming in here this morning they're very excited they're selling at we speak.

We start shipping in March.

We start shipping in March.

Who knows when it will get there first, I think in the final analysis, ease of use and ease of use, pricing and dental recommendations are going to be very important.

The second question, Andrew, I missed it.

The second question is preference studies versus your current competitor, are you running two to one, three to one?

I couldn't tell you the ratio, that's fairly proprietary.

We're preferred.

They had been running an ad which you may remember which is somebody mumbling through their teeth.

We tend not to engage in that kind of advertising, but our consumers and our research tells us we have an extraordinary product that is indeed superior.

Any thoughts on the likely size of the whitening segment globally outside the U.S.?

A lot of [vain] Latin Americans, I wondered what your thoughts were for Europe, in terms of size internationally.

I'm asking Heather.

Heather.

There are a lot of specialized whitening -- that have prohibited the launch in a massive way in Europe.

Today it's only sold in pharmacies so it's very small.

When that changes, it will certainly have an impact.

My sense, Andrew, is that it will grow for a number of years.

The key aspect, of course, in anything in anything like this is to look at not just trial.

Actually we've got more trial in the first three or four months, I guess four months, than the general you've mentioned you got in the first year if my recollection of those figures are correct.

And we've got very good repeat and also the repeat at the four months suspended in the four months, but be that is eight may be.

My sense it will be going for some time.

The key question is whether people will buy it repeatedly.

We don't want to be in a business where you get one sale and the consumer never buys you again.

And it will develop over the next several of years and we'll see.

Can you talk about Asian gross margin improvement for the quarter 2002 overall and if you're willing to share your overall margin gains in Asia in 2003?

Bina is saying we don't share it.

She doesn't share it but maybe I do.

The gross profit was, as you say, substantial, but it was substantial not just in the quarter but for the full year.

It was up basically over 200 basis points for the entire year.

And we are looking at toward next year well above our normal range that I would be surprised if the full year for Asia didn't come in at 150 basis points or thereabouts and perhaps even better early on.

Thanks very much.

By the way, just Andrew, that's largely-- not largely-- but there's a China, overall, was very substantial part of that which is terrific because our market shares are going up in China.

And China's gross profit, even though we don't like to do it by country but it was up for the year north of 300 basis points.

And it's BUJD to be up again next year. .

We'll go next to Linda Bolton Weiser with Finestock.

Can you tell us how much you've spent in share repurchase during the year?

Sure can.

Last year we purchased a billion dollars worth of stock, which was essentially 20 million shares.

Average price of the share purchase was around 54 dollars.

So that was down a little bit year-over-year?

Let me take that back, 52, 43.

I'm right.

Go on.

Sales were down a little bit year-over-year both in dollars and number of shares.

Are you shifting your thinking towards maybe increasing dividends at a higher rate rather than emphasizing share repurchase as much?

Our dividend has gone up.

We have paid out a higher dividend every year for 41 years, which is 160 quarters or how many months or whatever.

And I think that will certainly continue.

Obviously we're following developments and we do have an excellent cash flow.

And we don't make acquisitions.

So that's not at all inconceivable.

Okay.

I would be surprised if you didn't see a dividend increase this year.

Secondly, can you just talk about why Proctor & Gamble views the laundry detergent category as attractive and you don't?

I can tell you in one word.

What's that song from tradition?

It's dominance.

That is to say-- and I know there are a lot of words in it-- but dominance is important.

As we dominate the worldwide toothpaste market they dominate the worldwide detergent market.

If you look at our worldwide market share we have maybe a ten share-- nine or ten-- and they have [inaudible] 50.

The ability to dominate a category country after country after country makes it enormously profitable.

We could spend all of our earnings per share for the next ten years and never change that strategic position.

So early on in eighties we determined, hey it's crazy to try and fight that battle, we'll just run that business and make as much possible, sell it when we can and move it to our areas of strength which were oral care and personal care.

Sounds like if you could acquire or buy dominance then you would view it as an attractive category?

Unless Proctor & Gamble is selling and selling very cheap, there's no way to do it.

We have say, eight or nine or ten, and the other competitors are Lever and Hinkel, and to a certain extent Dial in this country.

So there's no way you could acquire it.

Thanks too much.

Not to put too fine a point on it.

There were businesses that one would not take as a gift.

Thanks.

We'll go next to Alex Patterson with Dresner RCN.

Good morning.

Reuben, you guys throw out market share trends kind of by country and country and talk about global share trends in sort of a general sense.

I was wondering, do you have specific global value shares for your key categories, let's say toothpaste or personal care, that you can provide to just give us a sense of what level you're at?

I'm looking at here worldwide value share performance, 2001 versus 2002.

And this has all the categories on the left and you'll have to tell me how many countries this is, about 80?

It varies by category.

These are countries in which we compete.

They're value shares calculated and submitted either by the local Nielsen service or, if we use alternatives there.

They are then combined, come out, how frequently?

Bimonthly.

Every two months they come out they're shipped to the executives within the company and shipped to our board of directors.

I'm looking at this here and it has, for example, it has last year and it's literally a number.

For example, manual toothbrush in 1999 was 18.2 and 2002 year-to-date was 21 five.

Underarm 99 was 13 and a fraction.

Now it's 14 and a fraction.

Liquid soaps were 27.

Now they're 30.

What happened here more importantly, as we look at this on a long earn term basis we have a series of arrows under a heading five-year trend.

You look at the five-year trend to see where we are headed in the five-year trend.

Toothpaste is up, manual toothbrush is up, power toothbrush has two arrows-- that must mean stronger.

Shampoo is even flat.

The underarm is up and so on and so forth.

One time when we're visiting I could show it to you.

This is not something we show to the public.

But I can show you the format.

We keep ourselves low profile as you can imagine.

I'll get that another time, then.

But Reuban, just on the gross margin-- I apologize if it was on your initial comments-- did you give a breakdown on the gross margin as you normally do?

I didn't but I will, Alex.

It is up 100 basis points and given without the change in FASB it would have been 160 basis points, interestingly.

But so be it.

Of that savings, projects were plus .5.

Raw impacted material costs were up .7.

If you break down the raw packing material costs -- 70 basis points.

Is that of the point 7, 70 basis points, market forces accounted for point 2, this is again versus a fourth quarter year ago, at 2.7 and Colgate savings we think unique to Colgate accounted for .5 and the balancing figure is all those changes in mix and price of negative point 2.

Thanks very much.

Thank you, once again as a reminder that is star 1 to ask a question on today's conference.

We'll go next to Connie Maneaty with Prudential securities.

I have some questions on Simply White.

And a couple of things.

If consumers are going from twice a day to once a day just for convenience purposes, doesn't that suggest a slow down in category growth in there is no further penetration?

Secondly, is the price per unit up from the twice a day and what kind of cannibalization are you expecting of the twice a day use?

And then finally, how can you and Proctor are introducing this at exactly the same time?

Is this the technology that you initially licensed that maybe you didn't have a long-term -term exclusive on?

This is Ian Cook.

I think the most important thing about the category is the household penetration.

Bina said today it's less than 10 %.

In fact when we measure it it's more like five to seven %.

So even white strips are nice once a day product through the market penetration it's still very low.

The key thing with these products in order to generate trial and repeat, it's to fit into consumer behavior and how they choose to use these products, which is one of the big advantages of Simply White in terms of being able to use it conveniently and then get on with your life using a product at nighttime from an ideation point of view obviously leaves the product to work overnight.

So it's a case of fitting with the consumer behavior with the view being to continue to grow the category penetration, rather than cannibalize and substitute market share from an existing business.

And the premise of the night product.

The liquid, as we have said before, we got to from the consumer behavior in terms of ease of use.

It started with the same technology, [copolimer] technology that we have in total toothpaste, and we're simply building the night product out based on our consumer research.

So we think both products will continue to grow the segment.

The pricing is the same pricing as Simply White, around $14.99.

Is the volume the same?

Is it the same price per ounce?

Ian Cook Yes.

The Simply White technology, is that your own technology or is it licensed?

It is our technology.

Is Proctor infringing on any patents you might have?

We have not seen the details of their product.

One would presume not.

Thanks.

We'll go next to Ann Gillin with Lehman Brothers.

Most of my questions have been answered.

I wondered if Ian Cook or Javier could talk to us about how you're able to monitor your unit growth and make sure that it is responding to some of your price initiatives?

It's pretty clear in this quarter it did, but [inaudible].

Just an update would help.

This is Ian Cook, Ann.

You have the independent data sources which of course are Nielsen or our IRI and often we panel them that we can monitor, preen post.

But in a more direct basis, which is obviously confidential between retailers and manufacturer, there are available point of sales information directly on a daily basis that you can monitor to see the responsiveness to pricing and other activity and we take full advantage of that.

Ian Cook, how much visibility are you able to get on the daily for the category versus just the Colgate-specific.

Any of us in this room if they so choose to can go into SAP, go to our site and SAP and use the appropriate passwords and get daily detail for many of the major-- I don't know what %age-- but many of the major countries.

And ultimately they're all on SAP and right now most of them.

And so then of course locally they can do that very well.

But the more senior supervisory people here can do that as they wish.

That's why I made the crack today.

Because I do that with the United States and sum of Mexico.

If we think of the pricing in probably the Europe and the North America regions to highlight those two, maybe it's fair to at least from our perspective to think that you weren't beginning the quarter with those sorts, with down five and a down three or maybe you were.

And I'm just curious as to as the quarter progressed if you weren't thinking they would be that way, how you monitored the units to make sure that you were getting the obvious returns you got on the unit line.

A lot is based on competitive analysis.

There's a budget for promotional spending and so on.

And that varies as the year goes by depending on what competition does and what initiatives come along for us.

So there's a mechanism to look at volume, look at spending and determine whether there's any titration needed between them.

But despite more spending than was in the budget, volume was higher than the budget.

Gross profit was higher in the budget and EBIT was higher than the budget.

Right.

So the take away here is you're close enough to it that you can adjust this.

You wouldn't worry that despite pricing being worse that you couldn't catch the volume?

I don't know, you remember there was a company that was involved in stretch budgeting, that is spending the money before you got the volume.

We do not practice that.

And we keep very close to it.

I would say that one of the benefits of having been focused for so long and having, I think an extraordinary set of financial disciplines, is that all of our people are on top of it and are able to make fine tuning adjustments as we go along.

Great.

Thanks, Reuben.

We'll go next to Andrew Shore, Deutsche Banc.

I just want to know, which one of your 30 Colgate ties are you wearing today.

That's all I have.

I'm only kidding.

I'm wearing one with a blue globe.

One of the newest ones.

Matches my underwear.

Don't play with my emotions like that.

Reuben, you talked about the Spanish market.

I think you said you had a 30 share in fabric softeners, versus six average.

Let's say it's the most rapidly growing part of the population.

My intuition that you are far more overdeveloped in the hispanic population than most consumer non-durables given your strength in Latin America.

You're one of a few exclusively advertising on a lot of Latin media.

Do you think this is something like over the next five, ten 15 years as the demographic part plays out that this actually aids your unit growth because your shares are a multiple of what they are in Hispanic versus non-hispanic?

I think that is true.

Our shares are strong.

And they're not just in Hispanic, but also Reuben may have mentioned Latin America.

Ethnic consumers as a whole.

Partially due to the national origins of many of the people who came here as immigrants from Latin America and also because historically we spend a lot of money and time and effort in the black community advertising and promoting and working on dental health programs and so on.

For example, as you know, that our market share is about 34 % on toothpaste, 34, 35 % on toothpaste.

And our competition is 27 whatever it is. 28, whatever.

In the latest share in the Hispanic national Hispanic shares, where we have a 58.8 and that company as well has an 18.8.

And our trend is up slightly from the year before.

Similarly, with light duty liquids, our national share is 38, you said, 39?

Whatever it is.

And here it is, it's 55 versus 35 for our nearest competitor.

And these are our Hispanic marketing.

The same thing you would find it -- I'm not sure I have it here, but the same thing with African American market shares.

Underarm where we have 13 to 14 share in the home market we have a 20 share.

Here.

And so on and so forth.

Interestingly enough our Simply White share for what it's worth is 54 % in the Hispanic market.

So -- the answer is yes?

Yes, right.

Then a final thing, I was wondering did you by any chance happen to see the University of Florida's college of dentistry study on Simply White versus Crest White Strips?

It said Crest White Strips had five times the efficacy.

I'd have to look at that.

I didn't want to ruin your day.

I'd have to look at who funded it.

I think we have some studies that show the opposite, but such is life.

That's just part of the competitive landscape.

Thank you, Andrew.

Welcome back, by the way.

We'll go next to Neil Goldner with State Street Global.

Just two questions, first, last year in the fourth quarter, the charge that you took.

Part of it was you wrote off about $6.5 million of receivables from K-Mart.

I'm curious, did you actually receive that?

If you did, when was that charge reversed because I don't remember hearing about it since last year's conference call?

We haven't received it.

So that there's nothing to reverse.

But every case of our goods that they have in their warehouse has been paid for.

That is to say, we are on a current basis only so we have no risk.

Great.

And then if you could just give us more balance sheet stats besides the cash.

Usually you talk about days receivable, inventories payable, working capital, stuff like that?

As Bina noted we're at an all time record in working capital.

The days outstanding in the fourth quarter last year were 44.0.

This year, 43.1.

The inventories last year in the fourth quarter were 58.3 days coverage and now they're 58.0.

And our overall net working capital as a %age of sales last year in the fourth quarter was 3.7 % versus 3.2% this year.

And I could, Neil, if you want me to take you through all the various balance sheet ratios but you can call Bina.

But the net of that is that we have guidelines for essentially all of our balance sheet ratios.

We have been above those i.e., better than those guidelines and this quarter did nothing but enhance those.

So the degree to which we're better than the guidelines were double A minus rating.

We are better than.

Thank you.

There's one ratio where some reason is now subtracting working capital has a little different view but I don't think it's terribly vital.

Thanks, Neil.

Next to Amy Chasen with Goldman Sachs.

I want a little bit more about the nighttime product.

How is it different from your daytime product?

One thing, Amy, it is used at night as compared to during the day.

Thank you?

And based on the same technology but obviously formulated with the higher active delivery to provide the benefit with one use overnight.

But the only difference in terms of application is that you don't have to keep your mouth open for 30 seconds?

Yeah, it's the same as the base Simply White product in ease of use.

Thank you.

We'll go next to Carol Wilke, Merrill Lynch.

Two quick questions, Reuben.

Given that the Mexico peso is about 10.9 now, has there been any change for your assumption in '03?

The question has it been weaker.

Our assumptions, there's something interesting here, Carol.

Let me back away from the individual currency, I'll get back to it in a minute.

But to look at the overview of what currency historically has cost us.

If you go back to 1997, the negative for foreign exchange worldwide was negative, which affected obviously sales and profits was negative 4.4 %, 98.

Negative 5.5. 99.

Negative 4- [inaudible] then it starts going down 3.9 in 2001.

So strongly negative but not as much.

Last year, negative 2.5.

And this year negative less than one.

Which is good.

And for years we've talked about ultimately that was going to happen.

But what we are using specifically is for the year 2003, in first quarter we're using a 10.80 and for the year-end we're using 11.

That might be not conservative enough but on the other hand for the Euro we're using a 110 year-end going out, and as you know it's about 108 now.

We're pleased with the Brazilian currency which weakened and then strengthened again.

And who knows about Argentina and Venezuela.

But overall, however you cut it, it would look like on a full year basis, we will have an advantage over previous years this year because currencies will not be as negative.

We said that last year and indeed it happened and that will happen again.

One more quick question.

On raw materials, I know last quarter you talked that you were assuming about a two to three % increase this year.

Given the big recent increase in oil and energy, has there been any change to that expectation?

Well, 2000 versus 2001 that is to say last year versus this year before, we actually ended up with a negative 3.7.

We are expecting a positive in this case positive means bad and negative means good.

That is to say, raw packing materials we expect to be slightly under two % up.

There have been some adjustments for the oil price, but not fully yet.

But on the other hand we have some savings versus -- if, for your information, my recollection is every $2 in the oil price costs us a cent a share.

But we're not directly related to oil.

So it's not terribly important.

We are factoring in all of our forecasting, including considerably higher oil.

We expect our.

Gross profit to be up again this year, at least at the 50 basis points and more probably near the high end.

Thank you very much.

Thank you, Carol.

We'll go next to Andrew McQuilling with UBS Warburg.

I can't simply get off Simply White.

Can you talk about regulatory requirements in Europe and how that's going to affect launch and what countries you're restricted to pharmacy and what is the status in the UK?

This is Ian Cook again.

The headline answer is it varies by country relative to cosmetic or other definitions and we are in the process of review on a country by country and European basis.

And expect resolution within this quarter.

As a matter of fact, Andrew, in this list of who is going where-- because our formula will be different in locations depending on regulation-- that I see five substantial European countries in the second quarter, including what I call France, but Bina apparently calls France I heard.

Thanks.

And just Ian Cook, thoughts on improving the regulatory environment for a product like this through lobbying, do you have any hopes for it?

Yes is the headline answer.

Then one last one.

P&G picked up their promotion spending obviously in the December month a lot in the U.S. for the white strips.

Has that type of promotional activity continued into January or February?

We and P&G are both pushing this category very aggressively given the penetration potential.

So the answer is yes on both sides.

So Colgate picks up.

Terrific.

Thank you.

Thank you, we'll go next to Alex Patterson, Dresner RCN for a follow-up.

We'll take one more after this and then we'll probably cut it off.

Real quick.

China, how big is China?

And secondly, CAPEX for '03?

How big is China, square miles I can't tell you.

But people a lot. 1.2 billion.

But for us...

What is China at?

The China region last year was north of $300 million.

And has an operating profit lower right now than the company average because we're investing in it.

Has gross profit lower than the company average, because included in it is [SEN chow], you remember the below margin world source of toothbrushes but if you exclude [SEN chow], it's slightly higher than 55 and a half and [inaudible] Worldwide margin.

It's budgeted up next year in volume and profit.

Great.

Is that okay?

CAPEX?

CAPEX, basically the same as history.

In the high 300s range.

But an interesting thing-- I don't have the piece of paper but I recall when I was reviewing it that what's good is that last year for the full year, the rate of return after tax, which you remember from those charts that you and other people have seen, is in the 38 to 40 range, was actually 45 % after tax on our CAPEX program, on the savings projects and that's very encouraging.

That means that we are certainly not running out of projects.

So it's kind of a flat dollar amount?

Are you saying it's flat as a % of sales?

Flat dollar.

My recollection is $370 million or there.

We can give you the --.

But we normally budget about that and you see, since we're doing a lot of regionalization, that same amount of money goes farther because you're doing it in one factory instead of four or five or whatever it would be.

Thanks very much.

And ladies and gentlemen, there are no further questions at this time.

I'll turn the conference back over to Ms. Thompson for any additional or closing comments.

Thanks so much, everyone.

We appreciate IRNT and look forward to talking to you again soon.

This does conclude today's conference call.

You may disconnect at this time.

We do appreciate all of your participation.