Bina Thompson - VP of IR Ian Cook - President, CEO and COO

John Faucher - JP Morgan Wendy Nicholson - Citi Investment Research Bill Pecoriello - Morgan Stanley Ali Dibadj - Sanford Bernstein Alice Longley - Buckingham Research Filippe Goossens - Credit Suisse Chris Ferrara - Merrill Lynch Bill Chappell - SunTrust Robinson Humphrey Bill Schmitz - Deutsche Bank Lauren Lieberman - Lehman Brothers Connie Maneaty - BMO Capital Alec Patterson - RCM Andrew Sawyer - Goldman Sachs Jason Gere - Wachovia Capital Markets

Good day and welcome to today's Colgate-Palmolive company first quarter 2008 Earnings Call. This call is being recorded and is being simulcast live at www.colgate.com. Just as a reminder there may be a slight delay before the questions and answers session begins due to the web simulcast. At this time for opening remarks, I would like to turn the call over to the Vice President of Investor Relations Ms. Bina Thompson. Please go ahead ma’am.

Thanks Matt. Good morning everybody and welcome to our first quarter earnings release conference call. With me this morning are Ian Cook, President and CEO, Steve Patrick, CFO, Dennis Hickey, Corporate Controller and Ed. Filusch, Treasurer. We will discuss the results for the first quarter this morning excluding charges relating to the 2004 restructuring program and certain other items in the first quarter for 2007. The reported GAAP results with reconciliation to the results, excluding the restructuring charges and other items in the first quarter of 2007 are included in the press release and accompanying financial statements and are posted on the Investor Relations page of our website at www.colgate.com. Comments about expectation will also exclude restructuring charges. But during the Q&A, we will answer any questions including or excluding these items as you wish. We were very pleased with our first quarter results, particularly given some of the external pressures that both we and our competition have been facing, a slowdown in the US economy and worldwide increases in raw materials and commodity costs. We continue to see that our global strategies with which you are all familiar are working. Getting closer to the consumer, our customer and the profession and effectiveness in the efficiency in everything we do, innovation everywhere and a focus on developing our leaders of today and more importantly tomorrow. We are delighted that a very strong top line has allowed us to continue increase advertising by a meaningful amount, while at the same time delivering earning per share ahead of our and your expectations. Advertising was up both absolutely (inaudible) of sales. And that, along with our strong new product program has resulted in increased market share in many categories around the world. And as you would expect, the competition of our top line is consistent with our strategy of focus prioritization on high margin categories. Oral Care, Personal Care and Pet Nutrition volumes grew nicely, while our Home Care volumes remain relatively flat. So, we expect volume and pricing increases to accelerate in the coming quarters so that we continue to feel comfortable with double-digit EPS growth. Clearly the raw material and commodity cost environment is as we said in our press release unprecedented. If you recall when we spoke to you in early February on our year end conference call, oil prices was about $90 a barrel and we told you that although we had budgeted $75, we had revisited dollar assumption and had a plan based on $90, which still allowed us to deliver gross profits within our targeted range. Since then, oil prices have steadily and relentlessly climbed to a current level covering near $120. In addition, agricultural commodity costs in our Hill's business have increased over 30% on average from what we projected at year end 2007. In fact, excluding the Hill's business, our gross margin was up 20 basis points in the quarter. As you can see from our results, ongoing funding growth programs and other cost-saving initiatives are still strong and we have increased prices across our businesses to offset this increases. Our implementation of Colgate business planning is continuing and its on track to deliver the $100 million savings we told you about on previous call. As with all areas of the P&L and the balance sheet we have very disciplined contest regarding pricing worldwide. We have a very specific plan developed, operating executive for each category worldwide works out a plan country by country and then make sure that plan is implemented. As a result, you see in the first quarter a price increase of 3%, the highest in a long time. Importantly, despite this price increase, our volume worldwide exceeds solid mid single digits compared to the highest volume increase in 2007. Some of our price increases have only been recently announced and will not take effect in the market for several months. So while we expect gross margins to be relatively flat in the next quarter, we should see improvement in the back half of 2008. And as Ian mentioned in the press release further improvement in 2009. In addition to good results on the P&L, our after-tax operating cash flow is strong, up 17% year-over-year and our working capitol decreased 0.8%. That coupled with expert market shares around the world gives us confidence that our business is assumed very healthy. So let's turn to the division to look into that in a bit more detail. Starting with North America, I know that there have been concerns regarding the health of the US economy however, I am pleased to report our business grew nicely. In fact, volume in the US alone increased almost 6% due to both good market share growth and category growth as well. As previously noted, raw materials processing affected our gross margins however, solid decreases and overhead expenses allowed us to increase advertising and still deliver an increased operating margin. Market shares in the US are very healthy and as reported by A C Nielsen increased in 8 out of 10 categories. Our toothpaste share was up over 50 basis points year-over-year with strong performance behind Colgate Total Toothpaste as referenced in the press release. Irish Spring bar soap reached its highest share ever at almost 12% and in a liquid hands soap category, our share reached its highest quarterly level in over a year and a half behind successful new product introductions. Our share performance in both the African-American and Hispanic markets was good in the quarter as well. For the Hispanic markets we’ve had for some time dedicated Hispanic TV, Fridge and online creative with the same as Cuban-American journalists and TV show as hostess. And just recently we signed on Holly Robinson Peete, an actress, author and radio personality to do the same for the African-American market. So looking ahead, we expect volume in North America to increase mid-single digits in the second quarter and full year. Operating profit is expected to increase mid-single digits in the second quarter and full year as well. Turning to Latin America, our Latin American business continues to be very solid. We saw higher increases in both sales and in volume in the first quarter than the fourth quarter of 2007 indicating good, continued momentum in this region. Volume in Mexico and Brazil increased high single digits and other countries had good growth as well. A particular note is they are about volume growth even after price increases of 6%, up from 2.4% for full year 2007 were implemented across the region. Our Toothpaste business remains strong. In Mexico for 85.4% share referenced in the press release includes a 17.3% share of Colgate Total. Colgate Total professional theme was an important growth driver and that variant alone now has 3.2% share. In Brazil we achieved a new record share at almost 70%, and this is an increase of 3.3 points over the year-ago period. With our toothbrush shares reached a record as well increasing almost 3 points year-over-year We told you last quarter about our successful progress in the mouthwash category. We had achieved volume leadership in Brazil and value leadership in Argentina. This quarter we achieved value leadership in Brazil as well with almost 40% of the market. Two years ago we had a gap of 20-share points between Colgate and the previous number-one competitor. In Argentina, we consolidated our number one position with a 10-point share gain year-over-year to well over 50% of the market. Our personal care businesses across the region are doing well also. In bar soap, new products in both the Palmolive and Colgate equities are doing very well. In April of last year, Palmolive became the number one brand in Mexico and we have steadily been widening the gap between our nearest competitor in each successive share reading. And in the first quarter of this year we launched a new line of deodorant with new form in the spray and roll-on segments supported by a very powerful integrated marketing campaign and early results were quite promising. So, looking ahead, we expect volume growth in Latin America at the first quarter level or higher for the second quarter and full year; an indication again of continued strong momentum in the region. Operating profit is expected to grow double-digit for the second quarter and full year as well. Europe, as with the US, there has been some concern regarding the health of the European economy and its effect on consumer buying behavior. Beside both the oral and personal care categories overall have shown consistent growth similar and even ahead from recent years. For Colgate specifically, both oral and personal care volume was good in the quarter and we saw share gains in toothpaste, toothbrushes, mouthwash, shower gel, bath salts, and bar soap. New products as always have helped grow our market share. Our overall Europe and South Pacific share of toothpaste is up at 35.1%, up almost half a point in this highly competitive market and our toothbrush share is up over half a point to 20.5% for the most recent lead at 21.1. In the South Pacific alone we reached over 70% of the toothpaste market, a new record. That region set a record in its manual toothbrush shares as well. We have seen good momentum in our shower gel business fueled in part by some of the new products referenced in the press release. Our market share for the region is up at 12.1% on a year-to-date basis with the 12.5% lead in the most recent period. In fact, with the launch of Tahiti Pearl, a shower gel with innovative new packaging and premium pricing, our share is up almost a full point year-over-year. So, looking forward, volume in Europe should increase mid single-digit for the second quarter and full year, slightly ahead of the first quarter. Operating profit is expected to exceed high single to double digit for the second quarter and full year. Greater Asia-Africa; the results in this region really were excellent. Our overall toothpaste share is up year-over-year. In addition to the strong performance in China mentioned in the press release, our toothpaste share in India is up 20 basis points, approaching 50%. We entered 2008 with good momentum in this country and that has continued with strong advertising support behind products such as Colgate Active Salt, Colgate Max Fresh, and our lower price brand Cibaca. In Russia, where we have maintained the number one position in toothpaste for almost a year with a share just over 33%, we have just launched our GABA products in the pharmacy channel. As you know, the GABA model is just to cure our strong share and presence in this town before we introduce the whole system of toothpaste, toothbrushes and mouthwash to the mass market. In the toothbrush category our share in India reached a high of 37%, up 220 basis points versus a year ago. We launched Colgate's Super Flexible in November of last year and on the ground support is excellent in-store and professional activities had sustained the momentum in the business. Our toothbrush share in Russia reached a record 49.2%, up 340 basis points versus a year ago. In the Philippines, our toothbrush share has increased every quarter for the past 11 quarters and this quarter reached almost 58%, up 780 basis points from the year ago period. In the shower gel segment, we've achieved share leadership across the region. In Russia, due to new product such as Palmolive Skin Essentials, we hold 29.4% of the market, up almost three full points from the prior year. So looking ahead, we expect volume in Greater Asia, Africa to increase at first quarter level, for the second quarter and the full year. Operating profits should increase several digits for the second quarter and full year. In Hill's, sales continued to grow consistently and solidly even as we increase prices to offset rising commodity cost. Operating profit was a strong double-digit. As you know, as with dental recommendations in oral care, veterinary recommendations are critical for the continued success of this business. So with the continued driving growth Hill's announced in January 2008 a new partnership with the American Veterinary Medical Association to form the alliance for healthier pet and obesity awareness and prevention program. This program is a national campaign aimed at educating pet owners about the dangers of pet obesity and associating veterinary health professionals with the tools necessary to facilitate successful weight loss program for their pet patients. This program has generated over 112 million consumer impressions via community events, pet retailers, veterinary clinics, veterinary conferences and local and national media coverage. The program tool kits have been highly accepted and are being utilized in over 11,000 veterinary hospitals. In addition, this February-March is our 14th year of sponsoring our National Pet Dental Health Month Program for the veterinary community. This program encourages veterinary healthcare teams to talk with their clients about scheduling regular dental appointments for their pets, while also increasing consumer awareness of the need for pet dental care. Program such as these help ensure that no products are recommended 7-1 over competing products. Looking ahead, the volume in Hill's is expected to increase mid single-digit for the second quarter and full year. Operating profit is expected to increase double digits for the second quarter and full year as well. So in summary, we are very pleased with the way 2008 has started. Clearly the momentum in our business which we enjoy as we exited 2007 is continuing into this year. Our strategies are working. Ongoing funding the growth program, our structuring savings, as well as our worldwide program of selling price increases all happen to offset significant worldwide raw material and commodity cost increases. Our worldwide focus on increasing advertising is resulting in excellent sales and volume growth. Our market shares are indeed healthy and increasing around the world. So we look forward to sharing our progress as we go through the remainder of the year. Now, Matt we would like to turn it over to questions.

(Operator Instructions) And we will go first to John Faucher with JP Morgan. John Faucher - JP Morgan: Yes. Thank you very much. Bina, you talked about the discrepancy in the gross margin performance sort of the Hill's versus rest of the company, two questions to follow up on that. Is that the type of split we should expect going forward? And then also can you highlight how things trended in the quarter, because obviously it didn't seem though that you guys were as concerned about this level of cost pressure earlier in the quarter? Thanks.

John, good morning, its Ian. Thanks for the question. Let me just say a couple things before I come directly to that two part question. First, to underscore that we are actually very pleased with that performance in the first quarter, good sales growth, good profitability growth, both market share increases in major countries around the world, and as I say with that top line growth, 5.5% volume with 3% pricing on top. Second thing to say, we continue to be very comfortable with the strategy that we have been deploying over the last four years now focusing on building that connection with the consumers supported by innovation with a continued focus on effectiveness and efficiency and of course developing the leadership of the company. Turning to the gross profit, let met talk first to the quarter then to the year and give you some thoughts on 2009. So the quarter John, when we last spoke in February at conference call Cagney . As I said at the time, we had gotten off to a strong start for the year from a sales point of view and we are comfortable we would be ahead of forecast. The Colgate gross profit had expanded quite nicely. The Hill's gross profit was modestly down, but within our forecasted estimate. Two things as the quarter unfolded hit us very hard. Pets and orals prices grew very quickly on an impacted our core business to the tune of about 500 basis points. More importantly, as you said John, the agro costs on our Hill's business grew significantly beyond what we had forecast by some 30% and we ended up with a drag on the gross profits at Hill's of over 400 basis points, between 400 and 500, which took the gross profit for that business down on the quarter by some 200 basis points with the Colgate as Bina said up some 20 basis points, largely impacted by those pets and orals. When we forecast Hill's we came into the year with good pricing already in place in the fourth quarter of last year, between 6% and 8%. You saw the 7.5% SPI gain on Hill's with good volume growth, not withstanding that, and we of course we have had to revisit that business in a very disciplined way for the balance of the year, and since we last spoke, we now have in place a double-digit price increase on that business, which will take effect at the very end of the second quarter, beginning of the third, and that will see improvements in the gross profit margin on Hill's for the balance of the year, should see us exiting the year flat, down on the full year but exiting the year flat. Now turning to 2008 from a gross profit point of view in totality, obviously again since we last spoke we now, see oil at a $120 and what we have done in a very disciplined way is address the impact of that on our business for the balance of the year, the year full cost of what the commodity impact, what our savings programs will be, and what additional pricing we will need to take across the balance of this year to offset that, which we will finalize during our mid-year review process, which is just about now, to take place. We have further spent time thinking about the cost profile for 2009 and have taken, I think, some conservative forecasting assumptions, specifically oil at around $130 a barrel which as you know is significantly beyond most, if not all external forecasts, continuing across the head wins and pricing, new pricing at about half the level we expect to put in place this year and we see ourselves substantially improving gross profit next year. To step back from an overall point of view, very comfortable with our efficiency strategy and we’ll talk about that in more detail I am sure later, surprised in the first quarter as it unfolded largely approaching to Hill's, but plan is in place for the balance of this year and preliminary planning in place for 2009.

We go to Wendy Nicholson with Citi Investment Research. Wendy Nicholson - Citi Investment Research: Hi, I guess I am just frankly in a state of shock that only three months have passed and yet the gross margin expansion target has changed so entirely. And I guess my shock comes from the fact that even when you guys have been in tough years like 2004, 2005 you still manage to expand your gross margin. So I guess on the forecast for flat gross margins this year, this doesn't sound right to me. I mean do you think there was a problem internally where you guys were caught sort of flatfooted on your forecasting? Do you think you have been too slow just figure out how much more pricing you need to take? You have taken a ton of pricing in health but do you think that you need to take it in the US, but we just can't because the consumer is kind of weak? It strikes me as though not Colgate like to see such a big miss relative to what you told us three months ago. And I guess then my second question is what you think is going to happen this year from an operating margin perspective because if your volumes only continue to grow in the mid single digits and let’s suppose currency doesn't continue to give you the same kind of benefit that you have, I don't know how you re consensus estimates for 13% earnings growth?

Let's come back to the margin, Wendy, and where we sit on the businesses. I think we took you through what we were estimating in terms of oil and the impact of oil on commodity pricing for the year. We told you where we had started. With the 75, we responded the last time to what we thought would be a 90 average, and now we are planning to 120 average for this year, which is the elevated level that oil sits at today. There is, of course, as I just explained with Hill's and the agro prices a lag in terms of your ability to take pricing and make it play in the marketplace. And in the case of Hill's we made estimates, we took pricing to respond to those estimates, and the agro costs surprised us significantly in the first quarter, which we have responded to with pricing that will take place at the end of the second quarter. Since we last spoke, importantly in the United States, we have announced a 9% price increase on our toothpaste business, which will reach the marketplace at the beginning of the third quarter. And relative to the consumer, so far we are not seeing a slowdown in terms of the consumers purchasing of our products. The category growth in the United States remains positive. They may be down 50 basis points from historical highs but they are still running about 2.5% to 3% across the board. And in Europe they are running about 2% to 2.5% higher on our personal care and oral care businesses. So, we think we have responded appropriately to unprecedented cost movements in the marketplace and have pricing in place now going forward that reflects that and accounts for that and has not been tampered by any concern relative to the consumer because we have not seen that elasticity in our categories. So, I would add that as we have priced, we see private label brands pricing as well. We have not seen an increase in private label shares in our businesses, certainly not at our expense. So, I think that answers the pricing and the cost factors. Wendy, I think we are moving steadily to address it but some of the changes of the commodity pricing clearly have been extraordinary and unprecedented in the marketplace. With many of the forward curbs on these costs lower than the prices in effect in the market today and yet we are planning at those elevated prices. Relative to the operating margin, we see the operating margin for the balance of the year at around the same level as the prior year, and we see from our exchange point of view, I think the first quarter was something like 7.5%, we have on the average for the year about 4% favorable exchange gains for the company. You know, well, that we tend to take a conservative view on exchange as we have done here. So feel with our top line growth very comfortable with the double-digits earnings per share increase on the year, Wendy

We'll go to Bill Pecoriello with Morgan Stanley. Bill Pecoriello - Morgan Stanley: Good morning.

Hi, Bill. Bill Pecoriello - Morgan Stanley: If you could give us the gross margin to walk through in the quarter and then just in terms of the components as the year goes on, is the main difference going to be whatever that pricing contribution, obviously, is going to go up based on what you are saying? Any other major changes in the contribution on commodity impact, restructuring, funding the growth etcetera, once you give us that walk through on the Q1?

Yeah, let me do that, Bill. Obviously, in the prior year our gross profit was 54.7%. We had material 57.3%. We had a pricing headwind of some 320 basis points, materials costs increases of some 320 basis points that offset by funding the growth savings around 90 basis points, restructuring benefits of 80 basis points, the balance in price and mix getting you to the 57.3% down to 10 basis points year-on-year. As we look forward, Bill, for the rest of this year you see a greater pickup indeed due to pricing that is forecast with both the material price headwind as I said, being held at the current level and our funding the growth savings and restructuring, offsetting the balance. Bill Pecoriello - Morgan Stanley: Thank you.

We'll go to Ali Dibadj with Sanford Bernstein. Ali Dibadj - Sanford Bernstein: Hi, guys. A couple of questions.

One question, please, Ali. Ali Dibadj - Sanford Bernstein: Sure. I will try to tie it into one big one. Around margins, certainly just trying to get a more of the clarification on the lag effect on pricing and if that modified in any way your kind of seemingly to most people, an unstoppable march to 50% by 2010. And then on the operating margins part of that, what is your confidence in keeping up operating margin safe? I am just looking at one of your star region Latin America here. With great pricing growth you are still down on operating margin there and how that build confidence for the rest of the business having to take pricing and not getting ahead on operating margins?

Yeah. So the first question relative to gross profit, as I said at the beginning, we are very comfortable with the overall strategy we have in place in terms of the effectiveness and efficiency. Obviously, we focus on many things. We focus on our Colgate business planning which is on track, and we are still looking to get $100 million from Colgate business planning this year. We focus on providing value-added offerings to the consumer. So the consumer is prepared even in this environment to pay a premium price. Well, and of course, we continue to be focused on advancing the higher gross profit oral care and personal care businesses, which handily led the pack in this quarter. And then on top, we are, of course, taking pricing. Now, we are still focused in 2009 and going forward, against the targets we have from a gross profit point of view and also 75 basis points. And as we have done some about preliminary thinking in 2009, I think I have already said we have confidence that we will be substantially up, even with some fairly conservative assumptions built into that. But I think it is fair to say, Ali that in terms of delivering 60% you said 50%, it was actually 50% by 2010. We may miss that by a quarter or two, given this unprecedented top profile that we are meeting and overcoming in 2008. So that's the answer on the gross profit, growth confidence going forward, and I think in terms of the prevailing cost environment, we are assuming that will worst and dealing with that. Secondly, back to Latin America, I think we had this discussion on the call the last time, Ali relative to Latin America. This is a terrific business that we got volume growth in Latin America of around 7.5%. And we have seen our advertising investment in that division up meaningfully year-on-year, and still we have a profit increase of plus 14%. So we like the profile of that business and we are making a choice to drive our brand growth and penetration and trial and market share in a favorable environment. So, I repeat volume growth about 7.4%. As Bina said, shares in some of that key market in Latin America and find high with an opportunity to drive them further and maintain that top line volume growth in the high single-digit area as we have said before.

We go to Alice Longley of Buckingham Research. Alice Longley - Buckingham Research: Hi. I just wanted to check at one statement you said earlier. Did you say that you assumed operating margins for the year would be flat?

It's actually flat with prior year, yes. Alice Longley - Buckingham Research: And that’s just for the year overall. Okay. And on you gave us some projections that you are assuming for some of the variables like FX, what is the assumption that we should use for pricing for the year overall? You had 3% in the first quarter.

I think we will see pricing for the year overall in the 3.5 to 4.5 range.

We will go to Filippe Goossens with Credit Suisse. Filippe Goossens - Credit Suisse: Good morning, Ian and Bina. My question is on the emerging markets in general in Brazil specifically and maybe first the Brazilian component. Obviously another great performance by Peter particularly on the mouthwash side, but I was hoping if you could give just give us a little bit more of a color in terms of how you are looking at the new value-added packs that was implemented February 1 in the state of Sao Paolo, how that is impacting your business in this, if there is any initial read on whether other states may follow the lead of Sao Paulo. The other emerging markets question Ian, has to do obviously with rising Cuban inflation in many emerging markets. Your initial read, any impact on your volumes or peoples willingness to also pay higher prices as you had just accordingly, thank you very much.

Thank you, I think Filippe good question. Let me take the second one first. We are keeping a very close eye on food items in emerging markets and downtrend distribution particularly cooking oil, which is obviously a very important family purchase. The answer would be no. We have not seen an impact on our purchases. And I think to go back a little bit to the strategy that we deployed with our businesses, and that is for those emerging markets, we have packaging forms, namely sachets and small tubes which permit us to bring our thoughts into that channel of distribution at a very affordable cash outlet price for that consumer that is buying on a daily basis, and we made sure from a distribution point of view, obviously that we are very strongly represented in those channels and as I say, affordable from a cash outlet point of view. So no impact but we are keeping a very close eye both on our businesses as we indicate the foodstuffs, as I say, like cooking oil. Turning to your first question, that the tax exchange did not have an impact on us in the quarter, because we managed complex negotiations and the implementation of the government with the industry association, with early communication and therefore avoided any disruption order. We do not have any information that would suggest this could expand elsewhere, but were to do so we would obviously manage it with the same attention and discipline to avoid the disruption as we did in Sao Paolo.

We go to Chris Ferrara with Merrill Lynch

I just wanted to get to the advertising line. I think last quarter, I guess you said presumably with some conviction that you would get 12% of sales on advertising for this year. I think if I might have misheard you earlier you said you expect to be flat year-over-year. Is that right? And why? I guess where is the advertising coming from versus what you previously expected if there was a change?

I just wanted to get to the advertising line. I think last quarter, I guess you said presumably with some conviction that you would get 12% of sales on advertising for this year. I think if I might have misheard you earlier you said you expect to be flat year-over-year. Is that right? And why? I guess where is the advertising coming from versus what you previously expected if there was a change?

Then if I did say that Chris, I apologize. I don’t think I did. We are actually very pleased that our advertising on this first quarter is up double digits year-on-year and the ratio is up year-on-year and I think we said that our aspiration and our goal was to get to a 12% advertising to sales ratio by the end of 2008 and that very much remains our goal and our forecast. We are committed to appropriate advertising behind our business to do trial for the brand that we have.

We'll go to Bill Chappell with SunTrust Robinson Humphrey. Bill Chappell - SunTrust Robinson Humphrey: Good morning. On a couple of commodities, you haven’t talked about corn and soybean. I assume that was as big a surprise over the past few months for the Hill's business. Is there any change to your hedging policies on a go-forward basis? And maybe what you are expecting for prices of those products going into ‘09 for your pricing?

Yeah Bill. It’s Ian, sorry. Bill Chappell - SunTrust Robinson Humphrey: You're okay?

Yeah. I guess the water went down the wrong way here. I would like to respond. We on our Hill's business, we hedge about a third of it and that would include the corn and I don't have soybean specifically on this list, Bill. I am sorry. Is there somebody who has it around the room? Bill, I think we’re going to have to get back to you after the call. I am sorry, let me correct that, I can say that soybeans for us in terms of our assumptions this year is up between 40%, and 45% and corn because of the hedge it's basically the same. But the soybean is up and we will, as we look forward, be hedging those like materials in 2009.

We’ll go to Bill Schmitz with Deutsche Bank. Bill Schmitz - Deutsche Bank: Hey, good morning.

Hey Bill. Bill Schmitz - Deutsche Bank: Hey, a couple things. The SG&A cost in the quarter seemed like they came down pretty considerably which is impressive obviously and that’s even with the shipping and the handling cost in the SG&A line. So, what happened in the quarter? Did you adjust spending or change some things given the input cost environment?

Yeah, good question Bill. From our point of view essentially overhead came down and was offset by advertising going up. It’s that simple and in that overhead line and also putting investment behind, our go-to-market capability in terms of professional selling, organizations and on the ground merchandising and sales capability. So, the overhead costs came down on a ratio basis, offset by advertising going up.

We will go to Lauren Lieberman with Lehman Brothers. Lauren Lieberman - Lehman Brothers: Thanks. Good morning.

Good morning Lauren. Lauren Lieberman - Lehman Brothers: I have a question about funding the growth. My understanding is that one of the buckets of cost savings within funding the growth is purchasing related. First of you mentioned that funding the growth was only about 90 basis points this quarter. It’s the lower rate of savings this quarter and maybe what is the lower rate of savings expected through the year because you are less able to get purchasing type savings in this commodity cost environment?

Lauren, the answer to your question is we are forecasting at the first quarter rate going forward for precisely the reason you said.

We'll go next to Connie Maneaty with BMO Capital. Connie Maneaty - BMO Capital: Hi. Good morning. I understand the sensitivity of the Hill's business to agricultural commodities and I understand the top down was going along the 120, but I really don't understand the sensitivity of toothpaste to commodities. So, where is the link between toothpaste and the 9% price increase you are taking? What justifies the price increase of that nature? Is that a price increase worldwide and have your major competitors followed you on it?

It is cost justified Connie in the United States, a combination of war and packing materials. And yes, my understanding is that the principal competitors in the United States have both announced price increases on those businesses.

We'll go to Alec Patterson with RCM. Alec Patterson - RCM: Yes, good morning.

Good Morning, Alec. Alec Patterson - RCM: I just want to get a feel for the margin algorithms, as you are taking pricing now up to, you said 3.5%-4.5% level and how that is going impact the way we should look at gross margin. I presume it's about a 200 basis points positive impact and things like the advertising and the sales ratio mentioned before, obviously, you are taking pricing up. Are you trying to match that with an advertising list? I am just trying to get a sense of how pricing is affecting the way the margin structure plays out.

I would say, as I mentioned in going through the gross profits for the first quarter, Alec that's about 130 of the gross profit with the offset material prices was in pricing. I expect that, given that the rate of pricing increases on the balance of the year to increase somewhat in that 150 to 200 range for the balance of the year to offset the prevailing 300 odd basis points of material price list and see the start to rebuild gross profit over the balance of the year and the advertising falls out of that in our planning.

We'll go to Andrew Sawyer with Goldman Sachs. Andrew Sawyer - Goldman Sachs: Two quick ones. First, I am just wondering if you could help us through why you're looking for an acceleration in volume growth in Latin American region for the balance of the year and second, kind of building on Alice's question, and I guess about adding up a lot and look at gross margins instead of looking on a percentage basis, if I look it in dollars, it seems to me still with foreign exchange the way it is, you are looking at may be low double digits to low teens to gross profit in dollars and first of all is that correct? And second, I guess with that level of funding, I guess how should we think about operating leverage against that kind of dollar growth in gross profit? Thanks.

Let me talk about Latin America first, Andrew. If you profile 2008, you got a probably the easiest, in fact the easiest comparisons of the toughest comparison, I am sorry, of the year, quarter-to-quarter, first quarter of 2007 was approaching about 14% and, obviously very healthy 7.5% in 2008, it was terrific on top of that. Now the range has increased, we are looking at in Latin America for the year in that 7 to 8.5 volume range, is activity driven and comparison against prior year quarter. So we feel very comfortable about that. Turning to your question on gross margin

We will take our final question from Jason Gere of Wachovia Capital Markets. Jason Gere - Wachovia Capital Markets: Good morning. Sorry I got cut off there. I was wondering if you could just provide little more color on Hill's, the volumes, may be in the US, some of the specialty channels were very aggressively promotional during the period, I am just wondering if you could talk a little bit about what they are doing during this time when you are taking pricing and obviously you are facing a lot of cost inflation and the impact on the consumer?

Yeah. Good question Jason, interestingly we saw, as you saw very good volume for Hill's in that 3% to 4% range. And we sold that in the United States and that was with the 7.5% pricing. I think when we talked the last time, I had mentioned though when we took pricing in the fourth quarter of last year, we saw a slight slowdown in terms of the up take in the specialty channel, when the pricing was initially introduces and that we had seen that come back towards the end of the year. And that has continued into the first quarter of this year. So, we are seeing, from a dollar point of view in the specialty channel, growth rates around 4.5% to 5.5% through the first two months of this year. And I would just comment generally not related to Hill's that the overall business sales growth, started this quarter quite strongly as well. So we see the consumer buying and the kind of initiatives remember we are focused on with Hill's is building loyalty and use because of the clinical benefit with professional recommendations. It is not a price dealing price sensitive business. So far the consumer is staying with us. Hello? Jason Gere - Wachovia Capital Markets: And advertising, looking to be stepped up in year end and operating margins looking to be flat, can you, are you just quantify that SG&A, you are going to see continuation of the improvements that we saw during the year? So, we hadn't seen those improvements in the last two years?

As we look at the year, we're going to see SG&A overall basically flat, which will see a slow reduction in overhead and an increase in advertising for the year. I think I said the last time when we were on the call; we had put some good capability in place as we had gone through the restructuring program, we are getting benefits in terms of our overhead cost structure and we will be investing some of that. And I think I said that we expected that to start to tail off towards the end of 2008 on the overhead line and that is what we're planning.

And now do we have any more questions?

That was the final question.

Thanks very much for joining the call. We thank you for your support and we look forward to catching up again at the end of the second quarter.

And that does conclude today's call. Again, thank you for your participation have a good day.