高露潔 (CL) 2004 Q1 法說會逐字稿

Good day, and welcome to today's Colgate-Palmolive Company first quarter 2004 earnings conference call.

Today's call is being recorded, and is being simulcast live at www.colgate.com.

Just a reminder, there may be a slight delay before the question and answer session begins due to the Web simulcast.

And at this time for opening remarks I would like to turn the call over to Vice President of Investor Relations, Ms. Bina Thompson.

Please go ahead.

Good morning, thanks Vicki and welcome to our first quarter 2004 earnings release conference call.

With me this morning are Reuben Mark, Chairman and CEO, Stephen Patrick, CFO, Dennis Hickey Corporate Controller, Ed Filusch, Treasurer, Ian Cook, Executive Vice President, Lois Juliber, Operating Officer and Javier Teruel, Executive Vice President.

As we noted in the press release we are really delighted with the way Colgate has started the year.

We exceeded external expectations on virtually every line of the P&L, and set many new performance records both on the P&L and the balance sheet.

Our increased focus on our core businesses here in the U.S. appears to be bearing fruit.

Also, the momentum we saw building late last year in the growth markets, Latin America, Eastern Europe and Russia and Asia-Pacific has continued into the first quarter, and our Hill's business remains very solid.

You all know about the difficult comparisons we faced in the first half of 2004 as a result of the strong sales of Simply White Tooth Whitening Gel here in the U.S. in the year ago period.

I think you'll see that even when that difficult comparison our global business is growing nicely, so let's look more specifically at the P&L.

Worldwide sales increased 7%.

Excluding divestment sales increased 8% on a volume increase of 4%.

Volume in all our international divisions, as well as Hill's, was excellent.

Here in the U.S., volume excluding Simply White Tooth Whitening Gel was good, and as expected showed sequential improvements from the second half of last year.

This improvement is expected to continue.

Worldwide, favorable currency added 5% to sales, and pricing be including impact of coupons and consumer promotion was -1%.

Gross profit increased 40 basis points to a record 55.7% of sales on top of a report level last year, as well.

And as we told you on our year-end conference call, we expect gross profit to increase within our target range of 50 to 100 basis points for the full year 2004, with the increases expanding in the second half.

This is indeed beginning to happen, and as Reuben said in the press release, gross profit came in higher than we had anticipated on both and including Simply White and excluding Simply White Tooth Whitening Gel basis.

In fact, excluding Simply White Tooth Whitening Gel, gross margin increased 70 point basis points in the first quarter.

This gross profit performance and what it says about our margin improvement plan is particularly gratifying given the recent intrend raw material costs.

The global programs that we reviewed with you on many occasions continue to drive our gross profit performance.

Specifically, shifting the mix of business to higher margin categories, saves from our factory oriented capital spending, and newer IT related opportunities.

The ongoing power behind these three worldwide initiatives continues to be demonstrated in our results.

Looking to the area of core brand support, total commercial investment increased substantially, up absolutely and as a percent of sales worldwide, and up absolutely and as a percentage of sales in every division as well.

As far as commercial spending, media was was up globally.

This healthy support of our brands worldwide is working to increase market share in many countries.

As reflected in the good volume growth of cost categories and divisions.

As Reuben said in the press release the commercial investment bodes well for topline increases during the rest of this year.

Operating profit increased 4%, and would have been up 8% including Simply White Tooth Whitening Gel.

Net interest expense was $28 million versus $34 million in the year-ago period entirely due to lower debt levels.

As you may recall, we've been using some of our strong cash generation to reduce our debt worldwide.

At the end of the first quarter, our net debt stood at $2.8 billion, down $600 million from $3.4 billion at the same time last year.

Net profit before tax increased 6%.

Our tax rate was 32.7%, 70 basis points above last year's first quarter rate of 32%, and above what we had originally planned, and this does require a bit of explanation.

As many of you remember, our global tax rate has little by little fallen virtually every year from 32.8% in 1999 to 30.4% last year.

This has come about by the excellent work of our global tax people as they pursue the concept of the continuous improvement that drives everything that Colgate does.

The regular reductions in the tax rate come largely from the number of specific tax projects completed each year primarily from the developed parts of the world.

We're now working on a tax and legal reorganization of parts of require European business which will result in a lower tax rate in 2005 and beyond.

However, while this is being put in place, the individual tax projects we would normally get are being purposely delayed.

In effect a slightly higher tax rate this year will facilitate a lower tax rate in 2005 and years to come.

Our first quarter tax rate has typically been higher than our full year rate due to the ongoing identification of tax savings initiatives throughout the year.

While history is not necessarily an effect everybody indicator of future performance, over the last four years, our full year tax range has been about a hundred points lower than the first quarter rate.

Also, and very importantly when Reuben says in the press release that we expect a good year in 2004, he's fully aware that the tax rate this year will be higher than last.

Moving on to net profit.

Net profit increased 4.5%, and EPS increased 5.5% on a somewhat lower share count to a record first quarter number of 59 cents.

The balance sheet and cash flow are solid as well.

Return on capital increased 90 basis points to 36.2% of sales versus the corresponding period last year.

Working capital reached another record low of 1.5%, driven in part by a continued reduction in accounts receivable day sales outstanding, and higher levels of payables and accruals.

While working capital is normally lowest in the first quarter and fourth quarters, we were pleased that it was a full a hundred basis points below the corresponding period last year.

Free cash flow before dividends increased 11% before the one time payment of taxes relating to last years sale of our European detergent business, and increased 3% as recorded.

So as we said for us at least, a very encouraging start to the year.

So let's turn to the divisions.

North America.

Volume in North America declined as expected 3.5 to 3%.

Excluding Simply White Tooth Whitening Gel, U.S. volumes increased 3.5%, driven bit the combination of good increases in toothpaste, manual toothbrushing and shower gels.

Exchanged in pricing was negative a half a percent resulting in an overall North America sales decline of 3.5%.

Total commercial spending increased for the division both absolutely and as a percent of sales.

Operating profit declined about 8%, a smaller decline than that initially anticipated.

Excluding Simply White Tooth Whitening Gel, operating profit in North America increased both absolutely and as a percent of sales up 5%.

We are encouraged that our business in North America seems to be gaining momentum.

Excluding Simply White Tooth Whitening Gel since the third quarter of 2003, sales, gross profit margin, and operating profit margin have all improved sequentially.

And this improvement is expected to continue as we move through the year.

As in year's past, we'll be launching a series of new products in North America in 2004, a process which has already begun in the first quarter, and we will support these launches with the appropriate amount of commercial spending.

You know one of these new products is Colgate Simply White Toothpaste.

We started shipping at the very end of last year, and advertising went on air late in January.

Our year-to-date for that product is measured by Nielsen is now almost 3%.

Our overall toothpaste share in the United States is up to 34.3 from 32.7 in the fourth quarter of last year, with a gap in between Colgate and our nearest competitor almost three points nationally.

Another new product this year is Palmolive Oxy Plus, a dishwashing liquid with a breakthrough formula, which has been proven to tech the toughest on grease versus our competition while still maintaining the mildness for hands for which Palmolive has always been known.

First launched in Europe is Palmolive Oxygen, Palmolive Oxy Plus is the first in the category to bring this truly superior oxygenating cleaning product though the U.S.

Strong advertising behind this launch started just a week ago.

In the toothbrush category, our manual toothbrush business grew strong doubling digit in the quarter.

Two new products in the premium category, Colgate Massager and Colgate Whitening Toothbrush contributed to this strong performance.

Many of you know about our success here in the U.S. being enjoyed by our Latin America fabric softeners, Suavitel, in the hispanic markets.

That is business continues to grow, and in the first quarter our national share jumped from a 7.2 to a 9.3, over two full points.

Our share of the hispanic market now stands an 35.1%, only a point or two away from the market leader.

You'll be hearing about more exciting new products slated for introduction here in the U.S. over the months to come.

And we will encourage that the business here should continue to strengthen.

Volume in the second quarter should be essentially flat with last year, and up excluding Simply White Tooth Whitening Gel and should accelerate as we go through the year.

Operating profit should be down again in the second quarter versus last year's all time record high, and is expected to be up modestly for the full year.

Turn are now to Europe.

Volume in Europe increased 8.5%, excluding divestments, with a strong performance by both eastern and western Europe.

France in the UK both had particularly strong volume increases.

Virtually all of the eastern European countries grew at a double-digit rate in volume.

The net of exchange in pricing added 10.5%, resulting in an overall sales increase of 19%, excluding divestments, and 14.5% as reported.

Total commercial investment in Europe increased very strongly both absolutely and as a percent of sales and support of a number of successful new product launches across the region.

Operating profit increased 14%, and is roughly the same percentage of sales as in the year ago period.

In the UK, the launch of Colgate Sensitive continues to drive our toothpaste share.

Our share climbed to another record of 46% in the most recent period, and is at 44% year-to-date.

Over four full points from the year ago period.

Shares are up in toothbrushes, liquid soap, deodorant and shower gels as well.

In France, Colgate Total Plus Whitening as well as Colgate Herbal Plus Whitening has contributed to year over year share increase of half a point.

We told you last year about the launch of Soupline Hearts fabric conditioner, that product continued to meet with success.

Shares in that category are up by are up by 4 points years over year.

Firmly establish our market leading position.

Our Pan regional launch of Palmolive Thermal Spa Bath and Shower Gels has resulted in increased shares in virtually every country.

In this quarter we are now launches Palmolive Aroma Cream.

This latest line of bath and shower gels combines the nourishment of moisturizing creams with the experience of [ INAUDIBLE ] benefits.

This should help solidify with the number one position we achieved in shower gels across Europe with the launch of Palmolive Aromatherapy several years ago.

Another new product introduced this quarter is Colgate Oxygen Toothpaste.

This product leverages a new a modern way to address freshness with elements of pleasure.

Oxygen is known throughout Europe as a modern and trendy ingredient that stands for purity and pleasure.

Colgate Oxygen Toothpaste delivers a sensorial experience with natural ingredients.

And as I think you know, we've execute ad controlled launch of Simply White Tooth Whitening Gel in a number of European countries, including our two biggest subsidiaries, France and Germany.

Results are good despite modest spending.

As I said earlier, volume in central Europe and Russia was excellent.

Regional shares increased in six of eight categories, in toothpaste, toothbrushing, soaps, deodorants, shower gels and all purpose cleaners.

Colgate [ INAUDIBLE] Toothpaste continues to contribute to good share gains in Russia and the Ukraine.

Elsewhere we've launched Colgate Total Advanced Fresh, supported by a very effective dental and consumer testimonial media campaign.

In Russia specifically, toothpaste and toothbrush shares reached record levels.

As of the end of last year, that vast country is Colgate's largest subsidiary in the region and is exhibiting explosionist growth.

With respect to the GABA Oral Care acquisition, most regulatory approvals have been received, and we expect to close on the acquisition towards the end of this quarter.

You will remember that we original told you that our conservate estimates for dilution from the acquisition would be 6 or 7 cents a share this year with a break-even next year.

In response to questions on our previous conference call, we said that in line with our normal conservative and that these estimates were worst case and we would try to improve on them.

What has happened since is the following: A. Recent GABA actual results are somewhat better than expected.

B. Financing plans are further refind and at a lower interest cost, and intangibles to be written off are also lower, and C. The closing will take place in the second quarter as opposed to the first.

Our current expectation is that the 2004 dilutions directly attributal to the acquisitions will be left in our original worst case position of 6 to 7 cents per share, probably in the 2 to 3 cent range.

At the same time and as part of our ongoing strategic realignment of the European division, which is facilitated by the divestment of detergents and the acquisition of GABA, we are implementing certain restructuring programs which will provided additional European gross margin improvements and lower European overhead in the years to come.

These will result in additional restructuring costs in 2004.

As you know, we have historically endeavored successfully to absorb such restructuring costs into our P&L and may very well be able to do so in in in this case.

At this point in the year, however, we suggests that you still assume that the GABA acquisition and these related restructuring programs will cost the same 6 to 7 cents as previously discussed.

We are pleased though that our current calculations show that GABA will be accretive to earnings in 2005 by 1 to 2 cents a share.

Switching back to Colgate European operations, current expectations for the second quarter and full year are for continued solid volume and operating profit growth.

Turning to Latin America.

Volume in Latin America increased 5.5%, pricing at a 3% [ INAUDIBLE ] about a percent and a half, resulting in an over all 7% sales increase.

The volume performance was particularly note worthy when compared with a 7% increase in the year-ago quarter.

Total commercial investment in Latin America was absolutely and as a percent of sales.

Operating profit increased nicely up 6% -- 6.5%, essentially level with the year-ago period as a percentage of sales.

Volume was especially strong in Brazil, central America, and surprisingly Venezuela, despite the difficult macroeconomic conditions in that country.

Volume in Mexico was essentially flat with the very strong volume in the first quarter of 2003 and is expected to exceed last year and in the second and following quarter.

As elsewhere around the world, new products were important contributors to the excellent volume growth.

In Mexico our national toothpaste share is at 82% of the market, up slightly from the year end.

Our market shares are also up in shampoo, toothbrushes, liquid cleaners and dishwashing.

From a macroeconomic standpoint the situation in Mexico looks encouraging.

The exchange rate has been relatively steady, although we have conservatively planned for some devaluation by year end.

Current expectations for GDP growth in 2004 are at at about 3.35%.

Which is better than previous forecasts.

And recently will there has been a relaxation of credit in the country with most of the additional funds being used for housing and electronic goods.

So with continued new product activities scheduled for the balance of the year, the outlook for our Mexican business is quite good.

Volume should be up in the second quarter and beyond.

Brazil's economy also appears to be strengthening.

While full year GDP growth was minimal in 2003, the fourth quarter showed some revival with a growth of a percent and a half.

Current forecasts for 2004 are for 2% growth.

The government has successfully gotten inflation under control, and now is focusing on the path of returning to growth by decreasing interest rates, and took actions in that direction quite recently.

Clearly, recoveries in domestic demand are very sensitive to the availability of credit.

Our Colgate Brazil business in the quart reflected the gradual economic recovery.

Volume increased several digits.

Our leading market share in toothpaste remains strong, and our toothbrush share reached a new high of 22% of the market.

Sorriso Super Refreshing Toothpaste launched in 2003 continues to contribute to good growth, and just this quarter we also launched Sorriso with Jua and Baking Soda and Mineral Salt.

As I mentioned a moment ago, Venezuela continues to deliver really excellent results in the face of a challenging macroeconomic situation.

Volume growth was very healthy.

Market shares are up in toothpaste, toothbrushes, soaps and liquid cleaners and in the quarter we gained the number position in toothbrushes in both the manual and power segments.

Colgate Massager Toothbrush and Colgate Navigator Plus Toothbrush contributed to our success.

So all in all, we're extremely pleased with the start of the year ago across Latin America and remain cautiously optimistic that momentum should continue.

Second quarter volume growth should be at or above first quarter are levels, and we expect good growth for the year as a whole.

Operating profits should be up modestly in the second quarter with similar results for the year as a whole.

Asia-Africa perform volume in Asia-Africa increased 7.5%, excluding divestments, and this is on top of an 8.5% increase in the year-ago quarter.

The net of exchange and pricing adds another 5% resulting in a sales increase of 12.5% excluding divestment and 11% as recorded.

Total commercial up investment was up strongly both absolutely and as a percent of sales.

Operating profit increased 28% to a record level on an absolute dollar and a percent of sales basis.

This was really an outstanding quart for Asia-Africa.

Gross margin increased very significantly as a result of our ongoing effort to regionalize and streamline our manufacturing, as well as to due diligently work with the supplies to reduce raw materials costs.

In the quarter we closed two factories in Taiwan and initiated other programs to restructure our our supply chain operations.

Much of this manufacturing will now be moved to China and importantly, all of these cost savings efforts have not yet been realized in the gross margin, and bode very well for the future.

Volume growth was widespread throughout the division with China and the [ Iocane ] Group of [ INAUDIBLE ] all growing double digits.

In China, we continue to maintain market leadership in toothpaste with a solid 32% share of the market and we've just launched a new product, Colgate Herbal Salt, shipping this quarter.

In the Philippines, market shares increase in toothpaste, toothbrushes, shampoo and soap.

The launch of Palmolive Aromatherapy Shampoo has driven share in that category from 15 to 24%, and a new variant in the Colgate Fresh Confidence line-up, Citrus Blast, helped increase our already high toothpaste share by over a point.

The launch of Colgate Sensitive Toothpaste in Australia has contributed to a four point share gain from we're really encouraged about the health of the business across Asia-Africa, and expect volume and operating profits to be up in the second quarter and for the full year as well.

And finally Hill.

Hill's global volume increased 4%.

The net of currency and price added another 4.5%, resulting in a sales increase of 8.5%.

Encouragingly, volume was good both domestically and overseas.

Total commercial investment increased absolutely and as a percent to sales, and operating profit increased 9%, maintaining the high margin of the year-ago quarter.

Maintaining the high margin of the you're ago quarter.

Volume in the U.S. was particularly strong and the prescription diet line.

We may recall we launched Feline m/d, our petkins diet last year, and that continues to do well.

In addition the launch of Science Diet Advanced Protection last year added to our good volume performance, and as always, we will continue with our steady steam of new products both here in the U.S. and overseas.

Just launched here the second quarter is a canned verse of our very popular Feline Hairball Control, as well as new some new varieties in our regular canned feline diets.

We have additional exciting new products in the pipeline, which we will be telling you about as we go through the year.

In the internationality market, a number of European countries delivered particularly good volume growth.

We've just begun shipping our Prescription Diet Feline m/d and expect that it will meet with similar success as we've seen here in the United States.

And in Japan, where the economy remains sluggish and the overall category growth is slow, our Prescription Diet line outpaced category growth, and is exhibiting very, very positive momentum.

As we had mentioned earlier this year, commodity price necessary pet food business and spiked sharply this year.

We announced some modest price increase effective April 1, here in the U.S. to help offset these increases.

Volume at Hill's should continue to increase in the mid-single digit range both for the second quarter and full year, and operating profits should be up nicely, both absolutely and as a percent to sales.

So, in summary, we're pleased with the way we've started the year.

Our balance sheet and P&L are strong, despite macroeconomic challenges, our business in Latin America is gaining momentum.

Prospects for continued good volume growth elsewhere are excellent, and here The U.S., our base business help is requesting a strong focus and new investments.

We look forward to sharing our progress with you as we move to what we think will be another successful year.

And that's it for my prepared remarks, Vicki.

And now we are ready 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 so by pressing the star key followed by the digit one on your touch-tone telephone.

We also ask if you are listening to the conference on the Internet that you turn down the volume on your computer speakers when asking question, and once again, if you would like to and a question, please press star 1 at this time.

And our first question comes from Bill Pecoreillo with Morgan Stanley.

Please go ahead.

Good morning, Reuben and Bina.

First question on pricing in North America, it proved sequentially down only one and a half percent in the quarter.

As you look at rate increases, couponing, trade incentives, what was the key driver of the improvement that we saw?

Because we were expecting you to step investment coming into '04 in North America.

There is a stepped up with respect to investment, Bill, in North America.

At the same time, as you know, [ INAUDIBLE ] and various other things, it's really -- I'm looking for the figure that projection forward.

Hang on one sec.

And for the year, it looks like it's going to be about the same level as it is in this quarter, so that I think that will be reflected.

We're expecting it to be deeper in the -- a bit deeper in the second quarter because of -- there are a lot of coupons that hit, and a lot of other things that go on, and then it gets a little better in the second half.

When I say better, obviously, it translates into higher volume, and I think the volume expectations in North America, as I think Bina said, should show consecutive increases throughout -- well, actually the whole company.

Let me give you that -- the volume aspects, is that the North America, as Bina said, will be basically flat, and next quarter we expect, and up in the mid-single digits, 3 to 5, I would guess, in ex-Simply White, and in the third quarter, obviously, Simply White is less of a factor, or none of a factor, so going out the year, we believe will be 4 or 5 be expect in the second half without any conclusions, obviously.

But on an overall basis, speaking of volume.

The company's volume in the first quarter quarter is up 4 and 5 or 5.5 excluding Simply White.

It should be at our historic levels of 4 to 7%, I would guess for the rest of the year and looking ahead to 2005, and that looks quite promising.

And then just a second question on forth America.

The sequential improvement in profit growth besides and the easy compares on the Simply White in the back half, you referred to the prepared comments to innovation pipeline that has yet to be announced so you continue to be confident in that pipeline and what we're going to see on the balance of the year.

Yes, there have been going to be a couple of exciting new products which have not been formally announced in our key categories, but I think you'll see them as they come out.

Thank you.

And our next question is from Andrew Mcquilling with UBS.

Thanks very much.

Reuben, just a couple of questions on the marketing spending in both Europe and Asia.

Obviously, the pricing and couponing was -- Europe down 3.

What's the focus of the marketing effort in Europe these days?

What percentage of the increase marketing spending is going into oral care, and are their markets which are very competitive?

As you would expect, as always the propriation share is going into oral care, but actually our European shares are quite good, number one.

Number two, I think you have to look carefully, Andrew, at price in an area where currency is appreciating.

I think we discussed briefly in the last conference call, or maybe it was a separate meeting of one of the cell side meetings that in a situation where currency is against you, like it is historically in Latin America, you raise prices.

When, however, you're in a situation where this exchange is such, you essentially are reducing prices somewhat in order to make sure your prices stay within the range of people.

That has happened, but it is obviously now mitigated by the fact that the euro is relatively stable or actually down a built versus the dollar.

So, A. The market shares in oral care are good in Europe.

B. I don't think we're seeing extraordinary -- Javier is sitting here, ex-manager and current manager in Europe.

I don't think we're seeing anything extraordinary in Europe from a competitive point of view.

I think some some of our big countries our market shares, in fact are going up even pre GABA, and as you know, will get either 8 or 9 points whatever it is with GABA in this quarter.

Reuben.

Thank you.

Maybe -- just any thoughts on a GABA update, if there is anything you would like to talk about growth strategies, thoughts in the business, anything you would like to share.

Well, I think it's a little premature.

I think as Bina said, we expect to close this quarter, the only interesting bit of information which I think she conveyed is our indications -- they're closings as a private company are kind of -- take a lot longer than ours do, so we have information that is not precisely up to date, but it looked like last year was considerably better, meaningfully better than we expected, and this year, from a profit point of view, and this year all indications are good.

Clearly from both a distribution and technology point of view, I think we're going to take advantage of it, and I think what we have learned since we last talked to you makes us very happy with this very strategically oriented acquisition.

Terrific, thank you.

Thanks, Andrew.

Our next question comes from Ann Gillin with Lehman Brothers.

Thanks.

Reuben, could we just turn to Europe for a minute?

The EBIT margin in Europe contracted this quarter.

This was the first quarter where you didn't have lower margin detergent.

So could you chat about what happened this quarter, ask then give us a little color on the structuring plans?

Interestingly enough, EBIT in Europe went up, even in local currency, quite aside from the currency gain, and that's together with a very substantial increase in commercial spending.

I guess technical title is commercial investment, which is spending on and off the P&L, meaning in the media promotion lines and in -- I've seen gross and ethicals off the P&L.

Very substantial increase in spending, which is reflected in, I think, the shares I was mentioning, and the outlook and opportunity to spend heavily and drive our business.

The -- let me take you through the EBIT percentage.

The EBIT percentage in the first quarter was 21.4.

Last year, it was 21.5, and so my sense of that would be be about the same.

That was a darn high level, because last year 21.4 was the full year, and that was a record.

So we are now ahead of the 20% in the fourth quarter, and -- so, I mean, given the amount of spending which was up, you know -- what is it?

That's not triple digit, but anyway, its up 20% in Europe, my sense is that's a pretty good EBIT percentage, and as you know, that increase in commercial investment did happen, as I believe Bina said in every operating division around the world.

So we are very pleased that we're able to put in substantial amounts of spending, and as a result, we are looking forward to a continuing strong volume throughout the year.

Terrific.

And then just switching over to Asia-Africa.

There was a little bit of a hit from divestitures about $6 million in returns this quarter.

Not something I would be expecting.

Was it part of the Europe detergent divestiture or was there another divestiture specific to Asia?

[ INAUDIBLE ] which comes out of Europe, but is counted in the sales in Asia.

So it's the same detergents business?

Yes.

Terrific.

And then just lastly on Hill's.

Can you disclose what the price increases you proposed on April 1st, and did you get any advanced purchasing in the March quarter?

The price increases were in the range of 3 to 4%, and basically they were effective in April -- as of April 1, and that's the current status.

I would guess that we -- it's normally severely limit selling against price increases as a matter of policy.

Some of it sometimes sneaks in, but we would hope not.

Actually, I think that their business is historically well in the month of April, so my sense is that there's not much there.

Thanks.

But nonetheless, as you know, commodity prices that are used in Hill's products are up there more than most other things that we use around the world, and this an appropriate price increase, and we -- have it's the one area of the business that we have historically take an price increase essentially every year, whereas, of course, as you know in the Colgate business, we regional never take price increases.

Terrific.

Thank you.

Thank you.

And our next question is from Amy Chasen with Goldman Sachs.

Reuben, my first question is whether you have to pay a royalty to use the catkin's name?

Okay.

My serious questions.

We only -- we don't get stress, we give stress.

We don't pay royalties, we get royalties.

Okay.

You mentioned in the comments about GABA and the dilution that you may have to -- you know, that you may be doing the Europe restructuring, and you may be able to absorb that, but I sensed a little bit of a feeling that you may not be able to, and there may be a one-time restructuring charge.

Can you just talk about that process, when you'll know, what the decision is?

That's not the intent of that paragraph at all, Amy.

It is simply that people took their numbers down by 3, 4, 5 cents, 7 cents, whatever, as a result of that acquisition and the dilution are associated with it.

That is because of some good developments on both financing and the business itself, as everybody would have thought, and we -- I said we were very conservative is now expected to be several cents less than that, but we're saying that in conjunction with that in and the divestment of detergents, there are a number of projects in Europe which will benefit us in 2005, and that basically that paragraph would just say hey, you guys can obviously do what you want, but I'm not sure we're recommending that you take up your estimates by the difference.

There is no intimation there that we're planning to take a major restructuring charge and so on, it was just that whether or not those couple of cents might be used for the European restructuring, which have very short pay backs, but there was no intimation of that at all.

Okay.

Good.

My second question is just broadly on pricing and inflation.

Wondering whether aside from Hill's you see any other opportunities for price increases, and if you could also talk about where you're seeing the most cost inflation in your business.

Again, you know, taking Hill's aside.

Okay.

Let me do the second one first, Amy.

As you know, we have here what our budget was, and then what we think now, and let's leave Hill's asides.

We budgeted on raw materials up .7, and packing materials .3.

For our goal gate businesses, store an expectation for an increase of .5.

If you adjust that, that is to to say if you just do the straight calculation, the equivalent of the .5 is 2.5 to 3, but that has the effect of foreign exchange, which has a tendency to inflate that number for any foreign, especially European source of raw packing materials.

So when you interpolate the two, our feeling is that between 1 and 1.5%, versus the 5% in the original budget, which was down in the early fourth quarter of last year.

I'm sorry to interrupt you.

I'm totally lost.

You said raw materials up .7, packaging up .3, total up, then you said something about 2.5 to 3, I don't know what that number means.

Okay, actually you should have seen me, I was stand hearing with my hand clasped over my mouth to keep myself from making a wisecrack, but I have successfully done so.

I'm so glad.

Okay.

In the budget, we said that, as we still tell you each year, that the expectation is that costs were going to be up .5% versus last year.

Yep.

Okay?

Yep.

Based on the current estimate, just taking local costs and factoring them into that equation, you would come up with 3%, which is substantially above, but that doesn't take into account exchange, and so to make it an analogous number for you to draw conclusions from, I'm saying that our estimate is the .5 is now between .1 and one-three.

.1 and 1.3.

1.3.

Between 1% up versus the half a percent we budgeted, and 1.3, those are estimates.

And our expectation, given that, is that without incremental price increases over and above anything that is already in our estimate, that our gross profit this year will be up in our 50 to 100 basis point range.

Okay.

So -- okay.

Great.

And then the second part.

Even including the Simply White calculation which adds however many basis points

And just aside from that, I guess I'm just wondering where weather you see any opportunities, because I think it's widely known that raw material costs are rising, are there any opportunities to go to some of your retailers in some of your categories, and try to take some pricing?

There are always possibilities.

We have nothing specifically planned.

A lot depends on competitive situations, as you know.

We have not raised toothpaste prices in more than a decade in the United States, and yet we've gotten a very good share progress, and very good margin progress.

Again, my -- the -- this assumption that we're telling you about between 50 and 100 basis points does not assume any new price increases.

They come, that would be delightful, but we don't see them.

As you know, specially developing parts of the world, our margin growth does not come from price, simply because we really want to keep the prices at an affordable level for the local consumer.

You even thinking about it in the developed markets, or it's not on the radar screen?

I can tell you I'm not thinking about it.

I'm looking at Ian and Javier and Lois, they may be thinking about it or people below them might be thinking about it but we have a process that will take care of that when and if it comes about.

It would be great, obviously, to offset those costs, but we have historically offset them other ways, and expect to continue to do that.

Okay, great.

Last question, you comment that's gross margin in the quarter in most of of the markets was above expectations.

Can you talk about where the overage was relative to your expectations?

Okay.

The U.S. had higher gross profit and higher EBIT than we expected.

Actually, it was interesting in that on several occasions the EBIT expectation was raised.

We had higher gross profit in Latin America.

We had higher gross profit in Europe, and I believe we had higher gross profit in Asia.

And actually I was asking where -- you know, was it mixed, was it cost saving, was it IT spend?

Which bucket did it come from?

It came primarily this time from cost savings, and if you would like, I can give you, Amy, the breakdown of where it did come from, because as you know we talk about that on a regular basis.

Out of -- on a worldwide basis, pricing in the margin calculation, which is different than it is obviously in the sales calculation, because you have a different denominator, whatever the denominator is, that pricing is negative by a half a point.

Savings projects and purchasing savings combined are about 1.1, and that -- those areas are more than we would have expected, which translates into positive factoring variances in a number of locations, including the United States, and then Simply White is a negative 20 to 30 basis points, and together that comes out to 40 or thereabouts.

Great.

Thank you.

Okay.

Thanks a lot, Amy.

We'll now go to Bill Chappell with SunTrust Robinson Humphrey.

Yes, thanks.

Just a couple of housekeeping items.

On the tax rate, just give me little more color on what happened this quarter in terms of I guess projects came off, and then more important hire as I looked at 2005, are you expecting the tax rate to be blow the 30.4% it was in '03?

Okay.

Bill, as I think Bina said, but let me put it in my own words, our tax rate has gone from the mid 90s at 33.5, down last year to 30.4, little by little by little, like I guess she using actual words, which is a function of, I think, good tax management and the fact that we have people working on this in every country, and little by little we're able to chip away.

In Europe, what is going on is that there is a realignment or a reorganization of our tax and legal structure, which is going to generate some substantial savings ongoing, but that means since everything is -- as a result of that, everything is frozen in place for a bit.

The substantial projects that we would normally get from Europe don't happen, so that actually our tax people are saying that our rate for the year is going to be essentially at the same rate that it was in the first quarter, and we have hopefully provided for that, that 32.7, I'm saying that we will do better than that and so on, so I think that if you figured out what Bina said, not that it was confusing, but it was 90 or 100 basis points off the 32.7, she was projecting 31.7, or thereabouts, if you took 31.5 to 32 this year, that's fine.

Which is slightly, which is several cents, in effect, that we have to recover elsewhere, which we think we will.

Next year, I we obviously don't have any budget next -- for next year, but I would be very disappointed if it wasn't under 31%.

So you wouldn't get back to that 30.4% it was in 2003?

Well, I'm not sure whether 30.4 is under 31, but it's certainly included.

I'm sorry, I miss read.

I thought you were going to improve over the 2003 level, so it would be below there.

I would hope that would be true.

But don't forget, this is a double-edged sword, and this is true of everybody, when you come in with a lower tax rate, that's no good, and when you come out with a higher tax rate, that's no good either, so we want to be very careful.

We consistently get tax savings, and we will continue to get tax savings, and manage is something is in the works now that will give us substantial tax savings, but we don't want to project a lower tax rate -- a higher tax rate than a lower tax rate than we -- whatever.

You understand what I'm --

Yeah.

You know what I'm saying.

And it's in the one area in the P&L's that we've mentioned before, it's interesting.

We are in terms a conservative company, as you know, and it's the one area on the P&L and the balance sheet that when you are conservative, ie., you project a higher rate that developments, internally and externally, you get penalized for it.

Interesting, but nonetheless, it's a positive development to me any way you look at it, because we have basically made the earnings with a substantially higher tax rate.

Our tax rate will be somewhat higher this year, but we still intend to make what is expected by us and the people out there, and it will benefit us the longer term.

Fantastic.

Just a follow-up on the new product pipeline, you may have pension mentioned this one but kind of on the percentage of products that are going outside the U.S. versus U.S. this year, and if that is any change over last year in terms of focus?

No, traditionally most overseas companies which are generally speaking along that universally smaller than the U.S., have less -- have a less of a new product load, but there's no significant change.

As you know, the components of new product launches in many countries are -- include areas that we've already launched many years ago in Europe or the United States, so that as liquid soaps we're the world country leader move into X,Y and Z and Asia, as considered a new product, but it's a fully developed bundle that has been selling as a market lead are for many years.

Okay.

Thank you.

Thanks, Bill.

Your next question is from Wendy Nicholson with Smith Barney.

Hi.

My first question is when you take about all of these figures excluding Simply White, clearly you are excluding them from the U.S. business because that's where you're suffering the pain compared to last year.

But are you also excluding the benefit that you are getting from the pipeline fill outside the U.S.?

Yes.

Okay, so it's so it's a clean number apples to apples.

And are you implying that we would not do that, Wendy?

No, I'm just saying that since we now know how great the margins were in Simply White, I'm wondering how much they're contributing for example to the margin expansion outside the U.S.

I realize it's a small amount of products that you're selling to these products, I but still it's helping you the other markets just like it helped you in the U.S. last year.

True you are good governance and are good accounting.

I tried to sell that could be concept to the financial people sitting in things room and they threw me out of the office.

Okay, fair enough.

Could you tell us what gross margin would be up in '04, and you exclude the benefit from GABA?

In other words, how much benefit are you forecasting for the six months that you are going to own that business.

It is not in the estimate.

It is not in the estimate.

To so 50 to 100 basis points is going to be even higher once we pro forma in GABA.

One would hope so.

Okay.

But I can tell you having gone through that analysis, Wendy.

Having struggled to go through that analysis, the net between divesting detergents and buying GABA is a worldwide 30 basis point increase in gross profit.

Now, we won't get that all at one time, but over time, actually our margins in GABA may very well go up and detergents will go down a little further but we don't own them.

Okay, fair enough.

Switching back to the U.S., and I know people say don't use IRI or Nielsen Data for one month as any sort of whatever -- signal of market share trends, but the truth is that the March data showed a real reversal in a bunch of your businesses, and most notably in toothpaste.

Toothpaste was down, like 350 basis points sequentially.

Is that just an anomaly, or is there some shift in promotion or something like that that would explain that?

Yeah, I think -- well, I think Bina gave you those shares, didn't --

She she gave us them for the quarter, but if you look at them sequentially month over over month.

But you and I know if you make market shares when you brak them down.

If you look at them every week, you can make it even more.

Let me read you some numbers.

This is our Colgate U.S. business.

We normal he don't talk about sequential, but here are sequential shares from the third quarter of last year to the first quarter of this year.

Sequential shares. [ DentaFresh ] 32.7 in the fourth quarter of '03, 34.3 in the first quarter of this year.

Toothbrushes, same -- 12.3, 14.1.

Light duty liquid, 36.2,36.6.

Liquid fabric softener, 8.4, 9.3.

You have to be careful, Wendy, about using sequential shares.

No one is saying that the U.S. market is not going to be competitive.

The U.S. market is going to be very competitive, and it's conceivable that we we will have a one or threw two point lead, and then somebody else, maybe --- may have a lead in one period.

But I again I think you have spend enough time with Colgate people to know what is happening on the worldwide trend, unbalance is our business up, unbalance -- what's happening to market shares.

Our toothpaste business in the first quarter of this year, on a volume basis, was up 7% versus 4% for the whole company.

Our toothbrush business was up 17%, and that -- I think it is the worldwide trends, understanding that there are certain markets that are very competitive, this being one of them, but we're spending the money on our core business in the United States is going to be up spending and commercial spending is going to be up close to 20% this year, and that you watch it, you watch your figures, we'll watch our figures, and together we'll come to a conclusion.

But the net result is, what happens to overall volume translated to sales dollars and translated to EBIT gross margin EBIT and net profit after tax.

Our sales this year, for what our dollar sales given the Simply White comparison, all that stuff, everything in it, will be up -- when we grow more, obviously currency is with us, but will grow more in the combination of volume and currency, and selling price increase, we'll arrive more than any year in the last decade, and our gross profit is higher on top of that, which allows us to afford advertising spending and still produce the appropriate EBIT.

So I -- certainly I told you, and I believe it, that I our U.S. company needed to focus back on the basic core business.

That's what they're doing, the and the figures actually are -- the spending figures are more impressive than that they would indicate, because the totals in the U.S. are -- have gone up, but within those totals, the money has been, no pun intended, taken off Simply White and put on Colgate Toothpaste and Irish Spring, and Palmolive liquid, and so on.

But certainly you can interpret individual markets anyway you want.

But the U.S. is competitive, our business has historically been good, and will continue to be good.

Starting off this quarter, only a couple of weeks, I'm getting a frown from Ian and the Chief Financial people, but our business has started off well.

The whole world knows that.

I guess just in terms of the U.S. oral care business, the way, you know, whatever, I guess it could be interpreted is you launched a new product at the end of the fourth quarter, in Simply White Toothpaste, you had great share expansion in January and February and then, not to put to fine a point on it but, boom.

Proctor comes out with Vivid White, and they steal back all that you gained in March.

And now I see you coming out with two new products with the Cinnamon Spice and Mint Zing with hollow gram packaging that looks exactly and sounds exactly like to what Crest did last year with Whitening Expressions, and so it strikes me that it's just sort of a, inch forward, inch back, I'm just wondering what's going to break that cycle?

I agree with that.

In the United States, it's going to be -- we've been inching forward for a number of years, and since Proctor was reinvigorated we're just going to be inch forward and inch back in the United States.

But my sense is that the inches that we're going to gain are just not through flavor changes, but I think you low see as the year progresses, and you've got to give us just a bit of time, I just as I'm not sure that the up jog in our share in January, February, is terribly meaningful, nor is the down jog, the slight down jog in March, but I think you will see that there are new products in the U.S. market which are very substantive and very interesting, and there will be evident within a very short period of time of time.

And those are an '04 launch?

Yes, '04 launch.

Terrific, thank you.

Announced when?

Imminently.

Imminently, which will be anywhere between now and the end of the year.

Okay, looking forward to it.

Okay, good.

Go to Bill Steele with Banc of America.

Thank you.

One question.

One record number you guys didn't touch on today is your corporate expense line item, about $71.6 million.

I'm wondering what went into that number, and whether or not it's a sustainable number throughout the rest of this year.

When you say sustainable.

Should we be budgeting $71.6 million each quarter?

I mean obviously that's not right, but I mean just in terms of --

Let me tell you what is -- what is in there, and that -- as you know, we run restructure for the P&L.

That is to say we have to absorb restructuring and not take charges, going back to Amy's question.

In there is almost $6 million worth of restructuring.

In there are $4 or 5 million of a hedge on a swiss frank that we took to basically make sure we were protected on currency on the GABA acquisition and the way it happens to be accounted is that that is a current expense, and later we will get that savings in a price reduction off GABA, but that accounts for the bulk of this.

Also, some exchange contracts in there, which last year were positive, and this year were slightly negative, but it's -- as you would expect, at the end of each month and the end of each quarter, we go through those things pretty carefully, and I think don't there's anything that you would be over estimating that particular line if you used $72 million for the whole year.

Where was the $6 million for restructure?

Which region?

As we discussed last year, this is Steve Patrick.

As we said in the last conference call, restructuring spending in the first half of this year in Europe, which is a continuation of what we announced in the fourth, but we said it would have to to be expensed as we went, part of it had to be expensed as we went.

So it is in Europe.

So in the latter half of this year, you're just stepping up the European restructuring effort?

That's right, yes.

Okay.

Perfect.

Next is Connie Maneaty with --

Miss, could you speak a little louder, I can barely hear you.

Yes, I'm sorry, it's Connie Maneaty with Prudential.

Please go ahead.

Morning.

Could you talk a little bit about the project in Europe that the restructuring is about?

What you doing Europe?

And is it at all related to GABA, or once you acquire GABA, will there be more, other projects?

Okay.

There are simultaneously three things going on.

Number one, we divested detergents, which you remember, Connie, which impacts our factories and so on.

Secondly, we are in the process of acquiring but not yet have acquired GABA, which will affect how we distribute and sell our products in Europe.

And third, as Bina mentioned in regards to the tax rate, we are working on a legal and tax realignment of the relationship between the subsidiaries, and all of those things are going on simultaneously.

Clearly, we are not in a position to talk about which particular installations are affected.

Obviously unless -- until those have -- they are announced, or have been announced, but rest assured when we make estimates on savings from restructuring, having done it over many years, always coming with out of the P&L, we are A. Very conservative with regards to the savings, and B. Importantly are very concerned and pay attention to the people, and make sure that the people are treated as best as they can.

Great.

As the six cents or so between the restructuring and the GABA dilution, and the same through every quarter, or sit more back-end loaded?

More towards the second half obviously, because there was none in the first quarter, so it's go going to be more in the second half, but those things can move between quarter, but nonetheless our commitments are what we have budgeted, and what you guys have calculated, and I don't think -- you won't hear us say, gee, it will swing become of that.

Okay.

Colgate Oxy Toothpaste.

Pardon me?

The new Colgate Oxy Toothpaste in Europe, what's different about it is, and is it headed over to the U.S.?

It is.

Connie, this is Ian, it is a natural ingredient formulated product, which has a very different mouth feel, which imparts a different breath freshness to the product.

Very much a trend today in Europe.

And it may or may not come to the U.S.

That trend is not as developed here as it is in Europe.

Okay, and final question, just a little detail.

But Palmolive Wipes in the it's, are they successful, and will Palmolive Oxy just replace it as a product?

The Palmolive Wipes right now are running between 1 and 2 share business.

I think it's going to be a modest convenience segment, and the second question was the Oxy Plus introduction?

Yes.

I mean, do Palmolive Wipes really deserve shelf space, or do you think they'll be -- because we don't see many competitors coming in to follow.

The category is essentially a duopoly and the other competitor is in there with the wipes, so I think wipes will maintain as a segment, all be it modest, and the Oxy Plus will not replace Wipes, that will be incremental distribution.

Thank you.

Let me just add to that, Connie.

I the LDL market, the [ INAUDIBLE ] liquid market in this country is essentially split between Palmolive liquid and Dawn liquid by our major competitor, with Dawn having a historic edge, although there is a relatively small margin between, and that similarly, you said people haven't followed.

Between the two companies, they have about 80%, taking a interest income number roughly speaking, of the market, and we launched the wipes, and they launched the wipes, and so that's where it sits.

Great, thanks a lot.

We're now go to Laura Lieberman with Credit Suisse First Boston.

Thanks.

Two follow-up questions on Europe and then Asia-Africa.

First in Europe, 8.5% volume growth excluding detergent.

How does that compare to the historic volume growth ex-detergents, is there something special this quarter, or is that just how strong Europe has been in the last couple of quarter ex-detergents?

It is more -- last year, overall Europe grew about 3%, and that's, of course, including detergents, and we don't have that break out here, but I would guess it was a point or two higher without detergents, because detergent be were flat, at best, flat, so the answer is that it is higher by a considerable margin versus history, because, number one, volume that is been good in western Europe, country after country after country, and the strong growth in eastern Europe continues very nicely.

Okay.

And then western Europe, I know that the question was asked, but is your commercial business more behind oral care not in western Europe, I think proportionally it is, because it's a bigger business, but competitively looking at all of your categories in western Europe, are you spending more on any category year-over-year than you are just the absolute spending numbers?

And is anything showing stronger growth?

I know oral care shares, but what about the surface cleaning business?

This is Ian.

You know, the spending profiles across the business haven't changed materially in Europe.

We obviously put the investment behind the new products that we are launching, and as Bina said in Europe, that is -- there's been some toothpaste activity with Sensitive, the Total Plus Whitening product.

There's also been some body wash activity behind the leading Palmolive line, and we have some surface care activity underway now, and the spending goes behind the activity.

Lauren, to put some numbers behind that, I told you that oral -- that toothpaste worldwide grew 7%, which is quite healthy.

In Europe, it grew essentially double that.

And toothbrushing grew double digit, and personal care grew 7.4%.

So, again, you talk about focus, what we have to make grew grow a round the world are oral care, personal care, and Hill's, and that's what's certainly happening in Europe, is happening throughout the world, but note worthy Europe.

Okay.

That's great.

Thank you.

And then just on Asia, or Asia-Africa, are we at a selection point in terms of profitability in that business?

I didn't have a margin like 18% in that business until like 2006 in my model, so maybe it was my mistake, but is this one time, or is this now a new run rate.

I'm not sure what an inflection point is.

Is that like an epiphany?

It's like wow, this is great and it's going to keep on going.

You had a gross profit or an operating profit.

The operating profit historically, I mean long history in Asia has been very good, because we have big oral care franchises, and the costs of marketing people are relatively inexpensive, so we have had historically had good operating profit percentages.

And when the Asian crisis came about, that required some price adjustment, and volume pull off, but we predicted then and what seems to be happening now is when the business starts to rebound, which it did last year and it's continuing this year, it is a very profitable business, so that the EBIT to sales, which I don't -- maybe somebody can dig that up, but last year was 16%, this year is going to be between 17 and 18%, probably more, and that my guess is that it would go up again next year.

So the answer is, I don't know what you have in your model, but the outlook quite good.

Okay.

That's great.

Thank you.

Thank you, Lauren.

And we'll now go to John Faucher with J.P. Morgan.

Yes, good afternoon, everyone.

Quick question.

You mentioned in your press release in the first paragraph that total worldwide commercial investment on the core franchises is up 14%.

Two clarifications on that.

What would it have been in you look beyond the core franchises, and I guess what would be sort of differentiated?

I guess there's an impact from the divestiture of the European detergent, et cetera, so if you could give us a little detail on that, and then going back to Bill's question at the beginning of the call, how often of that increase, 14%, do you think came above the revenue line, and how much below the revenue line?

Okay.

I can answer the second question quite specifically, but let me -- I think that maybe you -- maybe we were careless in the wording, or your parsing the wording, if that's the right word, grow back to Lauren, is that the right, parsing.

I think parsing is the right phrase.

Because the 14% is the total increase in commercial investment.

Of that, you would expect that the only part that noncore businesses would get would be promotion expenditures I which would be in the gross to net, because they would not get media, they would not get any appreciable levels of couponing or sampling or anything like that, so yes, behind defining it your way, and that particular line really means behind our important businesses, because I guess we sort of internally take it for granted that we're so focus that had that we're not going to be spending money of any appreciable amount behind a noncore business.

Again, that's not a number we have, but I would guess if the total company is up 14%, that the core businesses are up 15, 16, 17, 18, in that range.

And that all three components are up, media is up, promotion aspect that is included in the P&L is up, and the promotion aspect that goes off the P&L, and, you know, doesn't appear, but is in that 14% is up, as approximately well.

Okay.

And the order of magnitude, in terms of fly well, the biggest number to start with by for is the net, for everyone, and so an on absolute basis that probably increased the most percentage,I don't have that.

Okay.

Great.

Thanks so much.

And we'll now go to Alec Patterson with RCM.

Yeah, Reuben, two questions.

Just on the gross margin, I know you've came at this a couple of times, but just to be clear, the 40 basis points you be said we had about about a negative 50 from pricing, negative 20 plus from Simply White, and you said savings and sourcing was 110 positive.

Where did the raw material trends fit into that, and what in any impact was there from the divestments or geography?

This is versus last year.

We start with 55.3, Alec.

Which is last year's first quarter.

Pricing is negative .5.

Purchasing -- savings projects, and purchasing are 1.1.

I left out a couple of, you know, finer things.

All other changes in mix are plus 1, raw packing materials, Simply White is minus 2, and raw packing as it nets out is minus 1, and that comes out to be 40 basis points, if my math is right.

When you say minus 1, do you mine minus 10 basis points or 100?

Minus 10 basis points.

Okay.

And then just quickly trying to understand the restructuring indications for Europe.

One, is this is going to flow through the corporate expense line when this really hits in the second half, and, secondly, let me understand this correctly, GABA, no GABA, whether it's there or not, this would be happening anyway, and there would be roughly a 4 or so cent hit from that restructuring initiative?

No.

When I say no, that's a little abrupt.

The answer is that it will go through the P&L as it historically does, and that -- and that basically I think what Bina was saying and I was saying is that we are comfortable with the estimates, knowing that it's coming and being able to cover it within the range of current external expectations and our own expectations.

But it is not accurate to say.

Do you remember a moment ago Alec I said there's three things going on in Europe.

It's not accurate to say that they would be going on without GABA, because don't forget, this is a longer term strategic move approximately that's -- I mean, we started with -- it's selling --- incidents and buying GABA, and as you know having followed the company for many years, that strategy started 15 years or so ago when we decided we were no longer going to actively support detergents around the world, we are going to try to make them profitable, essentially profitable enough so they could be sold appropriately, and that they have been made profitable, there are operating profit is not as high as the rest of the company, but it's not as far now, as compared to losing money on them back then, and that is part of the -- we are implementing the other shoe of the strategy, which we are doing methodically around the world, and that while the legal and tax realignment probably would happen without GABA, the other aspects probably would not have happened without the combination of selling detergents and buying GABA.

I'm sorry, Reuben, I wasn't meaning to imply -- I was going through the P&L flow through.

There was --- case from what was said that there of restructuring charges related to Europe happening this year, and that -- and I also wanted to see, is are we talking about three flowing that through the corporate expense line like you seem to do here in the first quarter.

Most of it probably would, even so projecting the company expense by 4 based on John's question is probably overstating that line.

All right.

Thank you.

Okay.

Thanks Alec.

Did that answer your question, or --

Yeah, I think so.

And if not, I know where to go.

Okay.

Good.

Thank you.

and next is Andrew Shore with Deutsche Banc.

Good afternoon, Reuben.

First you talked earlier about the tax realignment as parts of the the Europe were restructuring.

Ask that just sort of the move from the corporate headquarter from [ INAUDIBLE ] to Geneva, is that complete?

It's separate from that.

And is that complete?

No.

When will it be completed?

End of the year.

Okay.

And just to clarify.

I late to harp on what Amy was asking about the confusion about raw and pack.

In simple english did you not just -- that your costs now up twice as high as what you thought, right?

Yes, but our margins, our gross profit, in line with that, because of positive savings, and positive approaches to it, our margins are higher also than we expected.

And finally, Ian maybe you can answer this.

I'm waiting, and maybe you don't choose to do this, but where is the good quarter to comment that you used to make.

At the probably somebody else.

I usually don't say good quarter to anybody.

Okay.

Good.

I may tell you offline.

Okay, thank you.

Wait, wait.

I'm not done.

Ian?

Are you there.

Yes, I am.

Can you talk about simply white at home in Germany or France, are there other markets, or are those markets capable of being 10% trial markets?

Are they capable of being 10% trial markets you say?

Yes.

Yes.

The category has started off quite well in those markets.

Obviously, multiple competitors ended at about the same time, as you know.

We have invested cautiously in both countries, and, you know, the initial indications are good.

I think we have approaching a 50 share in France, and a 45 share in Germany, and we're just going to track the trial and repeat over time, and

And we are -- just to -- again to put that into context.

Our total Simply White worldwide business this year will be between $80 and 100 million.

The actual estimate is 77, but I think that's a little conservative, and my guess would we would be able to continue at that rate or improve a little on it.

It's in a number of colonels as you know, we are being very careful in our because of our U.S. experience as you are can imagine, so nowhere are -- regardless of what excess does, we are not at spending levels that will not allow us to regroup our investment and it does have a margin and operating percentage that are higher than the business as a whole.

What was the peak sales of Simply White?

I can tell you that in a moment.

Okay.

Good.

Javier is able to read my folders upside down better than I can read them right side up.

On a worldwide basis in 2002 -- we don't supply this normally, but lets supply it anyway. 2003 actually was $116 million, 2004 estimate is $77, as I said a moment ago.

Would you like anything else, Andrew?

I would like lots of stuff, yes, but I'll let you go.

Thanks.

No, what did you -- I'm stand hearing with that piece of paper in my hand.

Do you want anything else?

If you do the math, you say Simply White's operating margins were 67%.

The which?

Simply White's operating margins were 67%.

You said total operating profits would be up 8 instead of 4, total sales would be up 8 instead of 7.

Is that right?

I don't think that's accurate but let me--

Those are the numbers I think you gave.

This -- yeah, Simply White operating margin was higher than the company, I think is what I said, and yes I'm saying in each of the years it was higher on a percentage basis than it was -- than the total company.

For example, in the first quarter of this year, the operating profit percentage was north of 70%, but the sales level was 1/5 -- oh, I'm sorry.

It was 55.

Last year was 54.9.

This year was almost identical -- I'm sorry -- and the sales were -- wrong number.

No I'm not.

About 1/5.

But the sales level was about 1/5.

Gross profit was the original number, 77, and the EBIT is 54 or 55 both years, but the sales level is down 80%.

Great.

Thank you very much, Reuben.

Thanks Andrew

Well now go to Christopher Errow with Merrill Lynch.

Hi, I was wondering if you would be able to quantify in Europe what the growth rate was for -volume in central and eastern versus developed western and Europe.

Yeah, we don't break that out, but it was good in both, Chris.

It was up in the high single digits in western Europe, and double digits in eastern Europe.

Great.

And also, as you look at the market, sort of like Latin America, where your regional oral care share is so high, is it possible to sort of break out your growth between what's consumption growth like market growth, and what share gain is in a market like that, and how would you expect that to to be trending going forward?

We do obviously -- country by country, we have per capita consumption, although we don't get it very frequently, because it's a very difficult thing to get, but we have per capita consumption, we have the growth rate through the trade, and that will be a calculation that we have to do.

For what it's worth well my sense is, is that in oral care, a half of the business growth would come through changes in distribution patterns, and [ INAUDIBLE ]market growth, and market share, and then the third -- the other half would be in terms of per capita consumption.

But that's just an estimate.

We have some experts around the room.

Why don't we take a look at that, Chris, and see if we can come up with some numbers.

Great, I appreciate that.

Thank you.

What we do is we focus on the primary -- what we use is the per capita --- is versus the United States, which is Latin America, it's third now, it had been a quarter.

And make pretty strenuous efforts to increase that in developing countries around the world, and we focus on the improvement and don't really break down the business by those two mechanisms, but let's see if we can do it.

Thank you.

Okay.

Next is Art Cecil with T. Rowe Price.

Reuben, you know deserve a medal for staying with it for a hour and a half.

Art, maybe I could impose on you to say what Andrew was going to say or didn't say?

Well, I think I'm just proposing a medal for staying with the call for a hour and a half, and I hope you get some time off when it's over.

No, that's fine.

I would like to get away from the numbers for two questions, and you may not choose to expand on them at all, but this week unfortunately we've seen the very unpredict I believe succession timing that can affect a company's top management.

We've also seen examples over the last couple of weeks of maybe how not to do management succession.

Has your board changed it's thinking on succession?

Have you thought about the timetable any differently over the last week or two than you have before, as a result of what's going on?

In the position, Art without any levity of concerning anybody's guessing, but overconsumption of our products are not dangerous to your health, which is -- the looks I'm getting around the table say that's very inappropriate, so I will retract it.

All that being said, they spend a lot of -- the board has spent historically over the last five years a lot of time on this issue, and have I think you and other people know that the three announced possible successors happen to be sitting in this room as we speak, and there has been a lot of and there continue to be a lot of job rotation, a lot of experience in dealing with corporate matters in the board and outside constituents by each of them, and it's something that we take, as you would expect, very seriously, and has been discussed, I would say, in virtually every board meeting for the last several years.

In terms of since -- in terms of -- I assume you're talk about the Coke search, and you're talking about the --

McDonald's.

McDonald's thing, I don't think has any change in what they've been doing.

I think they think they're doing in the right way.

I think the management thinks they're doing it in the right way, so my sense is it will continue to push forward, and it will happen on a timely basis hopefully without too much of a blip.

It hasn't prompted you all to do anything differently internally or to accelerate the external schedule of making some sort of the disclosure.

No.

Perhaps I should start exercising a little more and eat less meat, but other than that not to my knowledge.

Now probably a more facetious question is -- and it also relates to the Coke search.

Have you dusted off your studies on Gillette?

Have you?

I never dotted them in the first place.

The answer is we keep all of our files on all of our competitors absolutely up to date.

Thank you very much.

All right.

Thank you very much.

That's also true of Procter & Gamble and you know Lever, and so on.

Again.

Thanks for staying with the call.

Okay, Art.

Appreciate it.

Thanks so much.

And we'll now go to Art Vascom with CIBC World Markets

Hi, jut just two quick questions.

Your share activity, share repurchase activity appear to be a bit higher than usual in the first quarter.

Is there any change in guidance for the year, which I believe is down from last year?

Yeah, you're right, the share purchase activity was higher than we expected, because the share price was low are than we expected, and that what we have historically done, as you know, that we have very strong cash flow, and when we think the shares are undervalued, we are in there quite heavily, and over the years it it has proved to be a very substantial means of improving the value for the shareholders.

And you're right, in 2004, so far in the first quarter we bought 3.7 million shares, which is on a quarterly basis is substantially higher than the rate, you know, last year, last year was about about 8.9 shares.

It's more or less at the level of the 2002 and 2001.

But what we will do is, obviously, and I think this is common knowledge, I think we are going to slow down after we transfer the money to GABA, because we have a strong double A rating, and clearly we want to maintain that, and all of our plans have been built around getting our debt to where we want it by the end of this year, just as we did that last year, we have certainly targets that we set for ourselves, and -- Okay?

Okay.

One other just quick question.

What do you expect the overall FX drag to be IN '04 at current exchange rates?

Okay.

Your guess is as good as mine, to be sure, but I guess we had paid a bid to do that, but last year we had about a 2.5% gain from an exchange point of view.

This year, more or less, and obviously, as I think a couple of notes this morning pointed out, that as this year goes by by definition we're going to have less of an advantage quarter by quarter from exchange, but of course that's been factored into our planning and thinking, is that for the full year it should be similar to what it was last year, depends clearly on aI mean, just the movement of the --

Uh-huh.

From the mid-120s down to 119, or -- .

Has an effect, but in the year, we expect a positive, but don't forget, you know, this is the -- whatever is the 8th or 9th year that -- up to this year, we've made 8 or 9 years of double digits, and I guess 18 out of 20 of makes estimates, and all of those years the currency was against us. [ INAUDIBLE ] Allows us to do things we would not normally do.

And Reuben?

Yeah.

Good quarter.

Good.

Thanks.

Okay.

If there are no more questions, and -- is there -- do you know if there are any more questions?

We do have two more questions if our queue.

Okay.

Why don't we deal with those and call it quits

All right, very good.

We'll go to Linda Bolton-Wiser with Oppenheimer.

Thank you.

I just have one little financial question.

You mentioned the item, the one time capital gains tax payment that affected operating tax flow in the quarter.

Can you just tell me which line item was an operating cash flow that appeared in?

Sure.

Taxes, taxes.

It's in the deferred income tax line?

Yeah, wouldn't be in the deferred income tax line.

It would be in working capital, as a negative.

But it's not contained in the P&L.

It's a balance sheet item, not a P&L item.

Right, so I'm asking where it is in the cash flow statement.

It's in working capital.

It's in accounts capable payable and other accruals, it would have shown --- as required as a current tax payable or in accruals, and would have been showed up as a current tax payable, and would have within paid this quarter, and even though it related to an investing activity, the sale of a business, we are required to show that as a negative with an operating cash flow.

And of course, of course, Linda, as you well know, that that is unrepresented totally to the 32.7 tax rate that we have in the quart person

Yes, I understand.

Thank you very much.

Thank you, Linda, appreciate it.

And there are no further questions at this time.

Thank you very much, everyone.

Look forward to dealing with you as the year goes by, and thanks for your patience.

Bye-bye.

Thank you, and that does conclude our conference for today.