Bina Thompson - Senior Vice President, Investor Relations Ian Cook - Chief Executive Officer

Dara Mohsenian - Morgan Stanley Wendy Nicholson - Citi Research Steve Powers - UBS Bill Schmitz - Deutsche Bank Jason English - Goldman Sachs Ali Dibadj - Bernstein Joe Altobello - Raymond James Caroline Levy - CLSA Bill Chappell - SunTrust Lauren Lieberman - Barclays Javier Escalante - Consumer Edge Research John Faucher - JP Morgan

Good day, everyone, and welcome to today’s Colgate-Palmolive Company's Fourth Quarter Full Year 2015 Earnings Conference Call. This call is being recorded and is being simulcast live at www.colgatepalmolive.com. Today’s conference call will include forward-looking statements. These statements are made on the basis of the company’s views and assumptions as of this time and are not guarantees of future performance. Actual events or results may differ materially from these statements. For information about certain factors that could cause such differences, investors should consult the company’s reports filed with the Securities and Exchange Commission and available on Colgate’s website, including the information set forth under the captions Risk Factors and Cautionary Statements on Forward-looking Statements. This conference call will also include a discussion of non-GAAP financial measures, which differ from the company’s results prepared in accordance with GAAP. Colgate will discuss organic sales growth, which is net sales growth excluding foreign exchange, acquisitions and divestitures. The company will also discuss gross profit, gross profit margin, SG&A, SG&A as a percent of net sales, operating profit, operating profit margin, net income and earnings per share on a diluted basis excluding the impact of the items described in the press release. A full reconciliation of the corresponding GAAP measures is included in the press release and is posted in the For Investors section of Colgate’s website at www.colgatepalmolive.com. Just a reminder, there may be a slight delay before the question-and-answer session begins due to the web simulcast. Now for opening remarks, I would like to turn the call over to the Senior Vice President of Investor Relations, Bina Thompson. Please go ahead, Bina.

Thank you, Chanel. And good morning, everybody, and welcome to our fourth quarter 2015 earnings release conference call. With me this morning are Ian Cook, Chairman, President and CEO; Dennis Hickey, CFO; Victoria Dolan, Corporate Controller; and Elaine Paik, Treasurer. We’re delighted to have finished 2015 with continued strong organic sales growth in the froth quarter. The 5% growth was well within our targeted growth rate of 4% to 7% and is impressive coming on top of strong growth in the year-ago quarter. Our gross profit margin was up 20 basis points despite continued pressures from foreign exchange related transaction costs. And although down on a year-over-year basis, our advertising as a percentage of sales was up sequentially from the third quarter. As you will hear in more details as I go through the divisions, our market share around the world are growing. Innovation has played an important role and will continue to do so as we enter 2016. Our global growth and efficiency program is on track and our ongoing funding-the-growth initiatives continue to deliver substantial savings. Our balance sheet is strong and working capital is under very good control. And as you read in this morning’s press release, we have taken the decision effective December 31, 2015 to change our accounting method for our Venezuelan operations. And as a result, in future periods, we will no longer include the results of our Venezuelan operations in our consolidated financial statement. As we stated in the press release, we expect the EPS impact in 2016 resulting from the change in accounting for our Venezuelan operation will be about a negative of $0.10 for the full year. And we’d expect this impact to be negative $0.02 to $0.03 per quarter. So let’s turn to the divisions, first with North America. We’re pleased with the continued solid organic sales growth in this region. And as mentioned in the press release, our market shares increased year-to-date in toothpaste, manual toothbrushes, mouthwash, liquid hand soap, body wash, liquid cleaners and fabric conditioners. And as you’d expect, innovation was an important contributor to these excellent results. In the third quarter of 2015, we launched Colgate Total Daily Repair toothpaste. This toothpaste remineralizes weakened enamel to help prevent cavities and maintain stronger teeth, as well as kills bacteria that cause gingivitis for healthier gums. In addition, we engaged in a targeted outreach to consumers with diabetes. People with diabetes are two times more likely to develop gum disease. We reached both dentists and consumers and developed retail partnerships. And as a result, our overall market share for Colgate Total toothpaste grew to 10.3% from 10% at the beginning of 2015. Our Colgate Optic White toothpaste franchise is growing as well, up to 5.7% at our last period of 2015, thanks to the launch of Colgate Optic White Platinum Express White. With the help of a comprehensive IMC plan, support from dental professionals and strong in-store activities, Colgate Enamel Health toothpaste has grown share as well. And toothpaste innovation will continue in the first quarter. Building on the success of our whitening franchise, we’re launching Colgate Optic White Platinum High Impact [ph] White which provides four shades visibly whiter teeth in six weeks and starts working in just three days. Also, we’re introducing premium-priced Colgate Enamel Health Mineral Repair toothpaste with an accompanying mouthwash and whitening toothbrush. The toothbrush and mouthwash help replenish natural calcium for stronger enamel. To bolster our toothbrush business, we’re launching Colgate Kids Interactive, the only talking-powered toothbrush featuring kids’ favorite licensed characters which coach you to better brushing. The brush features a two-minute timer to help ensure effective brushing. Also in the first quarter, Tom’s of Maine is launching Tom’s Natural Rapid Release Sensitive toothpaste with a clinically proven arginine and calcium carbonate formula to provide rapid release and long-lasting protection. With no artificial dyes, sweeteners or preservatives, it will be premium-priced. Our liquid hand soap share was up 90 basis points year-to-date. And our year-to-date body wash share increased 80 basis points. More innovation in this quarter should help maintain this healthy momentum. In liquid hand soap, we’re launching Softsoap Foaming Hand Soap for kids that makes handwashing fun, as well as Softsoap Pure Foaming Hand Soap with a simple formula that is dye-free, alcohol-free, has 100% natural fragrance, yet effectively cleans and purifies. And in body wash, we’re launching Softsoap Luminous Oils, one variant with avocado oil and iris and the other with macadamia oil and peony, designed to leave skin feeling soft. Turning then to Europe, South Pacific. We’re delighted with the return to positive organic sales growth in this region. Across Europe, our market shares increased - toothpaste, toothbrushes, body wash, underarm and fabric conditioner. In the toothpaste category, we’ve seen strong results. In France, our market share is up 80 basis points year-to-date to 22.4%. In Poland, we grew share 160 basis points to 47.6% year-to-date. And in Italy, we increased share 30 basis points to 24.6% year-to-date. Similarly, in manual toothbrushes, our market shares increased year-to-date. Overall in the region, our market shares are up 120 basis points to 24.7% year-to-date with excellent results in areas such as the UK, which is up 340 basis points to 39.3%; Germany, which is up a full point to 21%; and Italy, which is up 60 basis points to 16.4%. And as in the U.S., our innovation grid for the first quarter in Europe is very full. In the toothpaste category, we’re introducing Colgate Total Deep Clean, which features high cleaning prophy-silica, the same ingredient dentists use for in-office cleaning. The product provides a deep-cleaning user experience and is unique among the current variants in the Colgate Total portfolio. In addition, we’re restaging the Colgate Total toothpaste premium line with a new design that better communicates higher quality, healthier and scientific and therapeutic benefits. New icons visually convey the variant benefits, enhancing differentiation, relevance and shopability. In the toothbrush category, we’re launching Colgate 360° Expert White Toothbrush Plus Pen, the toothbrush and whitening pen that has helped increase market shares here in the U.S. under the Colgate Optic White name. And in personal care, we’re relaunching Palmolive Gourmet shower gels with high-density creamy formulas and a new packaging technology that provides a premium look with high quality satin finishing and very strong shelf impact. Vanilla pleasure, chocolate passion, peach delight and strawberry touch will enchant consumers at point of sale. Also in personal care is the Palmolive SKIN GARDEN line, a premium offering with a regimen approach. The shower gel, bath foam, liquid hand soap, bar soap and body lotion contain irresistible fragrances, natural ingredients rooted in the garden such as violet and honey, peony, pear and Mirabelle plums, sensorial [ph] and vivid textures and cutting-edge packaging, all reinforcing the Palmolive regimen. And as we told you last quarter, our Sanex business is performing well and we have new news to report here as well. Our line of Sanex Advanced shower oils is bringing the shower oil trend from pharmacy to mass. The shower oils provide a feeling of comfort in the shower and are formulated to minimize the risk of irritation. These are even suitable for children, a new consumer target. Also inspired by the pharmacy channel are our new Sanex Advanced body bombs [ph] in a new stand-up tube format with a thicker, richer formula and premium pricing. Sanex Manual will also be launched, which is the first mask [ph] personal care range truly focused on men’s skin health. As you know, we have a very strong market-leading homecare business in this region. And an exciting innovation in this category is a line of Ajax specialty sprays which facilitate difficult everyday tasks in the kitchen. Priced at a premium, individual variants tackle different surfaces - the oven and microwave, MicroCeramic and stainless steel. So turning then to Latin America. Despite some macroeconomic challenges in certain countries such as Brazil and Venezuela, the division delivered solid organic sales growth. Severe devaluations across the region have necessitated fairly significant price increases. But despite that, our regional market shares are solid and increase year-to-date in toothpaste, manual toothbrushes, mouthwash, toilet soaps, shampoos and liquid cleaners. In Brazil, our toothpaste market share continues to climb up 100 basis points year-to-date to 72.4% with the most recent lead at 73.4%. Innovations across our portfolio have contributed to this success. In Mexico, despite continued competitive pressure, our market share is up 120 basis points to 80.8%. One of our newest innovations, Colgate Maximum Cavity Protection with Neutrazucar increased 70 basis points and is now almost at 2 points. Our market-leading manual toothbrush share is up 350 basis points year-to-date across the region. This excellent performance has been driven by innovation in the Super Premium category with products such as Colgate Slim Soft and Colgate 360. In toilet soaps, we increased our leadership share 40 basis points to 30.9% year-to-date. Protex and Palmolive continue to hold the number one and number two positions in the region. And we achieved record shares in Mexico, Colombia and Guatemala. More innovation is planned for this year. In oral care whitening category, we have three exciting launches. In toothpaste, we’re launching Colgate Luminous White Advanced Expert, which delivers three shades whither teeth; A companion Colgate Luminous White mouthwash with an alcohol, free zinc and anti-tartar salts formula that helps deliver an anti-stain white smile; and Colgate Luminous White Advanced toothbrush and whitening pen with a claim to provide whiter teeth in two days will both be launched later this year. In mouthwash, a graphics relaunch of Colgate Plax 2-in-1 mouthwash clearly explains the benefits, see the [ph] removed bacteria for a fresh and clean mouth and to drive growth for the category. In personal care, under the Protex name, we’re launching a range of bar soaps, shower gel and liquid hand soaps. Protex Pro Hydrate, developed from the consumer insight that to have healthy and moisturized skin is necessary to deeply clean skin before moisturizing, this innovation has a formula that eliminates 99.9% of bacteria and has a macadamia oil complex that glides over your skin for a soft sensation. A similar range under the Palmolive equity will be Palmolive almond and omega oil with a nourishing formula. In underarm, a relaunch of premium-priced Lady Speed Stick Clinical and Speed Stick Clinical will provide the benefits of superior sweat protection, neutralizing the source of bad odor, hypoallergenic, anti-stain technology and advanced skin care. Turning then to Asia. While organic sales growth was somewhat muted in this region in the fourth quarter, we’re pleased that volume increased in our largest businesses - Greater China and India. And this, despite some overall slowing in category growth rates. And as elsewhere, innovation has helped drive growth. In India, our toothpaste share is up to 54.7% year-to-date. Colgate Sensitive Pro-Relief Repair and Prevent and a relaunch of the rest of our sensitivity line have met with success. In addition, Colgate Total Charcoal with a unique antibacterial formula which reduces bacteria on 100% of your mouth’s surfaces has added market share. Elsewhere in the region, our toothpaste shares were a little soft on a year-to-date basis but market shares for the fourth quarter increased versus fourth quarter 2014 in China, Thailand, The Philippines, Singapore, Taiwan and Pakistan. Our year-to-date toothbrush shares are also up in India, The Philippines, Malaysia, Taiwan, Hong Kong and Pakistan. A particular success has been Colgate Slim Soft Charcoal Gold toothbrush with less than 0.01 millimeter charcoal gold slim tip antibacterial bristles for deep, gentle cleaning. In the most recent period, it achieved 2.1, 3.6 and 2.2 share points respectively in Malaysia, Hong Kong and Singapore. In the fourth quarter in Hong Kong, we launched our Colgate Optic White toothbrush and whitening pen and it has a 6.4% share in the latest read. Our mouthwash business is strong. Across the region, our market share is up to 25.7% year-to-date, up 70 basis points year-on-year with the most recent lead at 26.5%. And we have some exciting innovation launching this quarter. In China, where natural ingredients resonate very strongly with the consumer, we will be introducing Colgate Naturals toothpaste. There are five variants - tea tree oil gum care, lemon zesty radiating white, jasmine and chamomile healthy refreshing, lotus jade green soothing gum and seaweed salt pure white. The packaging visually communicates the different ingredients. And we have a number of new products in the toothbrush category. Colgate Slim Soft Sensitive, a silky soft brush for sensitive teeth and gums; Colgate Super Flexi Black, with a flexible neck and improved handle; and a line of mid-tier brushes for kids with tapered bristles. To maintain our momentum in mouthwash, we’re launching in China Colgate Plax Extreme Icy Mint mouthwash, which delivers long-lasting prevention of bad breath with dual mint essence as well as an antibacterial protection. Then going to Africa, Eurasia. As you know, currency headwinds in this part of the world have necessitated some significant pricing in countries such as Russia, but market shares are solid and growing. Our year-to-date regional toothpaste market share is at 33.2%, up a full point from a year-ago period. In Russia, our share is up 260 basis points year-to-date to 34.5%, reaching a record-high of 35.2% in the most recent period. In South Africa, our market share is up 80 basis points year-to-date to 49.6%. And our recent launch of Colgate Maximum Cavity Protection with Sugar Acid Neutralizer in both these countries has contributed to these strong results. In manual toothbrushes, our market shares are up in many countries across the region. In Russia, our year-to-date share is up 260 basis points to 48.4%. Excellent in-store execution has played an important role in these results. In Israel, two new products, Colgate Extra Clean and Colgate Slim Soft, helped increase our year-to-date share by 300 basis points to 51.2% with the most recent share read at a record 55.6%. Our bar soap business is strong as well, up 80 basis points to 21.7% on a year-to-date basis. And in South Africa, the Protex brand is helping grow the business and our market share is up 20 basis points on a year-to-date basis. In Russia, Palmolive is leading growth driven by promotional support as well as strong in-store execution. Our year-to-date share is up 50 basis points. And we have some exciting innovations for this part of the world as well. This quarter, we will be launching Colgate Total Pro Breath Health [ph] toothpaste across the division. The differentiated packaging with icons on the pack clearly explains the benefits, which include a unique breath-freshening technology, ON12 [ph] complex. Another toothpaste launch will be the Colgate Sensitive Pro-Relief Repair and Prevent line extension. This premium-priced toothpaste repairs the cause of sensitivity and prevents further sensitivity from gum recession. And an innovation for the Russian market is Colgate Altai Herbs Ginseng, with an exclusive blend of Altai herbs and ginseng. In the personal care category, we are relaunching our existing line of Palmolive Aroma Sensations body washes and adding two new variants, Feel Good and So Dynamic. Finally, with Hill’s. Hill’s finished the year with a strong quarter, both here and abroad. All three brands - Prescription Diet, Science Diet and Ideal Balance - are doing well. In fact, Hill’s Prescription Diet or flagship line of therapeutic pet foods became a $1 billion brand in 2015. In the U.S., superstore retail consumption is growing in both PetSmart and Petco, which contributed to our solid results. In Europe, our Ideal Balance line is now fully rolled out across all key countries and doing well. We’re seeing a steady build of distribution and volume. Our integrated marketing campaign is focusing on trial and repurchase. And we’re very excited about our upcoming innovation. Just launched at the North American Vet Conference is Prescription Diet Derm Defense for dogs. This diet is the first and only nutrition formulated to reduce signs of environmental allergies by helping to disrupt the internal allergy response and create a barrier against future episodes in dogs. It’s available in dry and delicious new [ph] forms and of course will be supported by a full IMC campaign to engage the increasingly millennial vet population. Hill’s will also be entering the wearables space. Hill’s has formed a strategic alliance with AGL to advance veterinary healthcare with the development of a wearable sensor for dogs that is sophisticated enough to distinguish the acts of scratching and shaking from running. Coupled with a robust data and analytics platform, it’s designed to more quickly alert veterinarians and pet owners to potential health concerns as part of an ongoing monitoring program. It will be recommended for dogs that need to be regularly monitored, including those with dermatological conditions, arthritis, or obesity. New news in the wellness category is premium-priced Hill’s Science Diet healthy cuisine for dogs and cats, which uses our new Algenec [ph] technology to deliver superior-looking, tasty wet food. The new formulas are loaded with tasty morsels, tender vegetables and savory sauce. So before I wrap up quickly, I want to cover two more housekeeping items relative to your models. Net interest in 2016 should be between $30 million and $45 million to quarter with a loss of interest income in Venezuela. Average diluted common shares outstanding were 896.5 million for the three months ended December 31, 2015. Because we had a GAAP loss in the fourth quarter of 2015 due to the one-time charge with Venezuela, this number excludes 6.6 million of net incremental common shares outstanding assumed issued from the exercises in the money stock options as they’re anti-dilutive. We’d expect the 6.6 million shares to be included in diluted common shares outstanding in the first quarter of 2016 as they should not be anti-dilutive in this period. So in summary, we’re extremely pleased with the way that we finished the year. Organic sales growth was strong around the world, our gross margin increased and our market shares are healthy. Colgate people around the world are all focused on our strategies and priorities, thereby delivering these consistent strong results. Our global growth and efficiency program is on track and these are ongoing funding-the-growth programs. Our innovation pipeline is full and we’re excited about the many products and initiatives we just told you about. So we expect this momentum to continue into 2016 and look forward to sharing our progress with you as we go throughout the year. So, Chanel, that’s the end of my prepared remarks. I should like to turn it over now to Q&A.

Thank you. Today’s question-and-answer session will be conducted electronically for the telephone audience. [Operator Instructions] And we’ll take our first question from Dara Mohsenian with Morgan Stanley.

Hey, good morning. So, Ian, you had very strong pricing in the quarter both at the corporate level and in Latin America but the volume reaction looked more severe than what we’ve seen traditionally in your business, particularly in Latin America. So I was hoping you could just discuss consumer demand elasticity in this current macroenvironment if you’re seeing any different behavior versus past with the macro slowdown we’re seeing in Latin America and then how that may impact your desire to take additional pricing going forward to offset incremental FX pressure. And then that’s at the consumer level, but at the competitor level, what are you generally seeing from your competitors? Are they following and can you characterize the competitive environment that you’re seeing? Thanks

Yes, thanks, Dara. And before I jump in, let me just take this belated opportunity to wish everyone on the call a happy, healthy and safe 2016 in this volatile world. And when we turn to that volatile world, we’re actually very pleased with the results in 2015, as Bina said, with consistent 5% organic top line growth in the quarter and in the year and with our gross margin building from the second quarter to 59% in the fourth quarter, which is the highest in two years in that environment which positions us well to see margin expansion in 2016. And I’ll come back to that when we no doubt talk about margin. But turning to how we think about the business in the environment everybody is operating in, first of all, we seek to have clarity and consistency of strategy. And we have that for the last decade with a simple and focused strategy that starts with consumers and ends with the leadership development in the company to deliver our products to those consumers. Then you have the balance between the consistency of the results by quarter and our ambition of the longer-term which are captured in the global growth and efficiency program in terms of building the organization we want for the future. And then, of course, the decisions we make on the ground and the agility that’s required to deal with events as they unfold. Now, if you look at Latin America to this specific question, obviously, the foreign exchange headwind there as it was in Africa, Eurasia, was the most severe we experienced in our world for 2015. And when we think about the consumers, we think about the brands and the health of our brands and the development of the market share of our brand. But obviously, we need to be focused on rebuilding the margin which is the fulcrum for investment in a business. So in both those divisions, we took conscious decision to take pricing to help recover gross margin and suffered the volume decline you see. We feel, however, very comfortable because of the performance of our market shares whether you look at the value market share and local currency as Bina talked specifically to Brazil or whether you look at the volume market shares in that region, they’re up. So the consumer is staying with us and the consumer is staying with us across the portfolio of brands that we have. And as we think forward into 2016 now, I guess a couple of things to say. And it relates to the gross margin. First of all, the enormous translation headwind we faced in 2015 will still be there in 2016, but it will be at a lesser level. Second, the general commodity pricing environment year-on-year will be flat to modestly down. Third, we have our funding the growth program which we talk about every call, which we expect to build the same way it has done for the last several years. We have the global growth and efficiency program. And on top of that, we have pricing. But we have less pricing in 2016 than we had in 2015. And half of that pricing without Venezuela is still rollover pricing into 2016. So our planning expectation is that we will see the balance between volume and pricing move back a little bit more to volume and less to pricing. And that will include Latin America and we expect our market shares to continue to grow. So the consumer behavior hasn’t changed. We haven’t seen down trading. And we’re confident about the reversal back to volume more and price less in 2016 for Latin America and the overall business.

And we’ll take our next question from Wendy Nicholson with Citi Research.

Hi. Can I just follow-up on that last one just in terms of the outlook maybe in the near-term to manage expectations? I know the comps in Latin America on the volume, so either really tough in the first half of ‘16. So do you think we’re going to see negative volume growth maybe for the next quarter or two, potentially even worse than we just saw in the fourth quarter in Latin America? But then broadly, I also wanted to ask more strategically, Asia, the slowdown in category growth that you’re seeing there, it surprises me that we’re seeing a slowdown in category growth given the very low per capita consumption levels. I get in Latin America, but not so much in Asia. So can you talk about Asia, specifically China and India? I think you called out - do you think there’s something more structural there? Do you think that it’s going to take a longer time? Do you really think it’s an economic factor that’s leading to the slowdown of the growth? If you could talk about that, that would be great. Thanks.

Yes. I think in Latin America, the expectation is to see - not to see the kind of volume negative that we had in the fourth quarter as we set our way into 2016. Obviously, it will build across the year. But no, we don’t expect to repeat of that level. When you turn to Asia, and if you look at the emerging markets in general, the local currency growth rates in category is still mid-single digits, maybe slightly off that in the fourth quarter. We haven’t seen anything dramatic in terms of a change in behavior thus far. We’re obviously very focused on that, Wendy, as you would suppose we would be. And pleasingly, I can report that the market shares in China and India has been mentioned with India, are both out nicely in 2015. So we stay close to it. Right now, we continue to see cash agreements growing around mid-single digits in local currency terms.

And we’ll take our next question from Steve Powers with UBS.

Great. Thanks. Just one more on the volume if I could just to clean it up. Ian, can you just talk away to the volume softness that you’ve seen in response to pricing has been at all more pronounced on the personal and home care side of things versus oral care or if it’s about equal? And then a few months ago you’d indicated that you saw traditional advertising ratios would be up again as a percentage of sales in 2016. And as we’ve talked about, good deal has changed, since then the macroenvironment, so I’m just curious if that’s still your expectation in terms of what’s embedded in your outlook, the Super bowl ad notwithstanding. Thanks.

The answer to your first question on volume is no, not really. It has more to do with the short-term slowdown in relation to the level of increase in pricing you take regardless of which category you’re taking pricing in. On the advertising side, I won’t repeat too much of an old story. But I would say, back to this notion of marketing mix, when we think about advertising, we think about everything from educating kids in schools to get dental professionals and veterinary professionals to make a recommendation before the consumer has even purchased a product, to engaging with consumers to the various different media that we can avail ourselves of increasingly digital, but also the so called traditional media and then of course a strong belief in making that engagement carry through to the retail level where we think that expenditure can build a brand health and value as well. But as we said on the last call, we expected as we got into our budgeting process that our innovation flow would be such that we would expect to see coming into 2016, an increase in the traditional advertising while still using the in-store lever as well. And indeed, as you might imagine, given richness of innovation that Bina went through in her prepared remarks, that is exactly where we have ended up with our plan. And so I can say that our advertising, the traditional advertising, for 2016 is up both on an absolute basis and of course on a ratio basis as well given that strength of innovation.

And let’s go to our next question from Bill Schmitz with Deutsche Bank.

Hi, good morning.

Hey, Bill.

Hey, a couple of things. How do you define strong organic growth? Because I’m trying to figure out how that sort of plays out relative to Venezuela. So can you tell us how much Venezuela contributed to organic growth now that kind of the cat’s out of the bag on the earnings side? And then sort of how you think organic growth is going to play out next year?

Yes. Well, let me just say, Bill, in response to your question, when you say how do you define strong organic growth, I think we would say in the environment wherein the range we had 4% to 7% bookends strong organic growth and 5% for 2015 in that regard is therefore strong. And the way we’re thinking about 2016 without Venezuela is exactly the same way which is to say our target for organic growth is to grow in that 4% to 7% range without Venezuela. And I can report that I have to say from a top line point of view, the year is off to a bright start.

And we’ll take our next question from Jason English with Goldman Sachs.

Hey, good morning, folks.

Hey, Jason.

Thank you for the question and happy New Year to you as well. I want to come back on Venezuela real quick just to make sure we understand the math. I think in the last Q, you filed that you listed around 4% of sales, 2% of EBIT, clearly more UPS with interest income that you talked about. But on the EBIT side, the math I know on very rounding numbers suggest that removal of Venezuela is going to be about a 50 basis point contribution of EBIT margins. Is that sort of directionally right? And if so, can you comment sort of bigger picture on how you are thinking about margins overall next year both with and without that tailwind?

Yes. Well, we don’t tend to talk about EBIT margin, Jason, so let me turn to gross margin which as you know we regard as the fulcrum of everything. So as I said, gross margin, up 20 bps to 59 in the fourth quarter. And perhaps I should take the opportunity now before Lauren comes on and chides me of going through the row fort for that fourth quarter gross profit. So if you go to the gross profit in the prior year, was 58.8. Pricing, our strongest showing for the year, up 1.6 percentage points, so positive 1.6 points. Restructuring and funding the growth, 290 basis points, positive 2.9. Material prices, 420 negative, of which 240 was transaction, modest negative with all other and you get to the 59. Now, as we roll that forward to 2016 and the plans we have, we feel good about our ability to meaningfully increase gross margin in 2016. And we would say that we expect to have gross margin expansion in 2016 to be in that 75 to 125 range. Part of the reason, as I said earlier, is the less aggressive foreign headwind. But as I also said earlier, we have pricing less, but half of it rollover, we have funding the growth which you know very well. We have the global growth and efficiency program. And we expect to see that gross margin expansion begin in the first quarter of 2016.

And we’ll take our next question from Ali Dibadj with Bernstein.

Hi guys.

Hi Ali.

I wanted to drill down on two things. One is SG&A and then just a broader question on SKU proliferation. First on SG&A, I know we’ve talked a lot about ad spend, you know, it is the seventh quarter in a row we’re seeing ad spend as the percentage sales go down. But your point earlier, your shares aren’t moving as you confirm both volume and value. It doesn’t like it’s moving. So how much more of a shift do you think you can do from ad spend to in-store? And kind of what are you watching just to make sure you don’t go into the olden days’ fear of just hurting the brand and it becomes a risk from that perspective? So kind of what are you watching? How much more you can go? And on non-advertising, ex-advertising SG&A, I thought we would see more benefit because of the hubbing and the restructuring and everything that we talked about there. Why are we not seeing there? So that’s the SG&A question. And then on the SKU proliferation or innovation question, how do you guys - so every quarter we hear really interesting things, being briefly out of breath describing them at the start of every quarter. How do you guys deal with SKU proliferation? Is there a very clear discipline of put one in, take on out? Or how do you deal with that? And if you give us a sense of your number of skews you guys sell over the years and how much that’s gone up, it’s just something that struck me listening that again. Thanks.

Yes, yes. Well, thanks to your one question as usual. But let’s turn to the advertising. And I mentioned in the introductory comments the word of balance. And you and I had this conversation on the last call. We don’t view this as either/or, we view this as what do we need to do to create the trial and repeat of our brands, build health over time and ultimately build market share with more consumers using our products. And I wasn’t quite sure what you meant when you said your market share is not moving. It is moving and it’s moving up. And Bina went through some of those examples. And when we think about advertising, we think about, as I said earlier, marketing mix from the school room to the dental office, to the store and all of the other media through which you can reach people including digital, including television, including magazine and advertising and the like, even billboards in Africa. And we think about that balance all the time to make sure that our brand health doesn’t weaken over time. And I said that the advertising would be up absolutely and as a percent to sales in 2016. And we have quite a list of measures that we look at from trial to repeat to various brand health measures which we prac over time so that we don’t get to a point where you start to, shall we say, take more out of a brand than you are putting back into a brand. And that’s back to that word, balance. We think we’ve kept the right balance in 2015. When we go into 2016 with the portfolio and the brand objectives that we have for 2016, we’re taking up the traditional. We will continue to use the in-store as part of our marketing mix and we will monitor very, very closely the trial and repeat measures we have in terms of the new innovation and the brand health measures that we have in terms of the brands Colgate, Sonic, et cetera, that we have around the world, because we’re a marketing company. And that’s what we do. So I think you can be reassured that it’s not one or the other. We’re not trying to push from one to the other. We’re just trying to register the point that we have to think about the mix of all of the engagement points we have with consumers. And as I said before, you have a 74 share in Brazil. That’s how much of the shelf you have. You can have an enormous impact with the consumer in the store. Your SKU proliferation point of view is spot on. It is always a risk that you end up in the hunt for innovation of this risk of over proliferating. I can’t say that we have a strict one in, one out policy. That would not be correct. I can say that as a company measure, from the top of the house, we monitor our SKUs by division, by business and overall as a company. And thankfully, our SKU count has been coming down. And now, within that, you have cycles when you’re replacing and you’ve got a double count. But it’s something we watch really at the top of the house. And it’s a central part of our simplification initiatives because it touches everything, the factory, the inventory, you could imagine all of the touch points. So it’s a fair question. I don’t think we’re at risk of over proliferating with the innovation we have because we have a discipline to bring the overall numbers down year upon year.

And we’ll take our next question from Joe Altobello with Raymond James.

Thank you. Good morning. Hey guys. I guess I just want to go back to gross margin for a second and the 75 to 125 bps expansion outlook for this year. That seems to be your evergreen target. And I was looking at my model and if it’s right, you guys haven’t done that since 2009. So it’s been a while and I understand there’s been a lot of external factors that have kind of crept up here. But how much confidence do you have in that? And I guess how do we think about raw materials ex the transactional impact of currency in that? And how do we think about the exclusion of Venezuela in terms of the dynamics of that gross margin expansion? Thanks.

Yes. Well, how you think about it - I mean first of all, there is no one more keenly aware of our gross margin plateaus than us, number one. Number two, when we think about it, again, as I mentioned a little bit earlier, from that transaction point of view, although foreign exchange continues to be a negative, it is less of a negative than what we endured in 2015. Now, of course, that improvement builds over the year, but still overall it is less negative. As I also mentioned earlier, underlying commodity cost with [indiscernible] even at 35, are basically flat to modestly down. That’s favorable. Third, we have the funding, the growth program that we have had every year and we track through quarter by quarter. And you will see the history and you now know the history for 2015. And that’s our goal and objective for 2016. And as I said, we have pricing lesser than last year, of which 50% is rollover. Now, Venezuela clearly adds benefit to gross margin. But I would say that we definitely feel that 2016 is the year we need to raise our gross margin and the proof will be in the pudding when we talk next at the end of the first quarter. Everything that we know we feel confident about that.

And we’ll take our next question from Caroline Levy with CLSA.

Thank you so much. Hi, Bina and Ian. Ian, just a more commentary if you wouldn’t mind walking around a couple of big markets - China, Brazil, Mexico, Russia - just the state of the consumer. I mean from where we sit sometimes, things can sound really dire. But what are you hearing from your country leaders and people on the ground about the consumer sentiment? And is it significantly worse in any one of those areas than in another?

Well, it is difficult to find anybody with anything optimistic to say about much of anything these days. Without being overly general, I would say that the underlying consumer sentiment and behavior in China and India is okay. I would say that the underlying consumer sentiment in Mexico is okay. I would say that the underlying consumer sentiment in Russia is not great. And that would be English understatement. And I would say in Brazil, the underlying sentiment in Brazil is not great. And we have said before that again, our objective is to grow market share for our brands in those environments. I think we have said before that we think Brazil is not an overnight fix. And we will stay the course. But again, if you take this generalized view, I think there are still more of the emerging countries where the underlying consumer sentiment is okay. Russia and Brazil would not be in that group in 2015. And we don’t believe in 2016 either. And although it’s a smaller part of our business, that would also apply to some of the African countries, but they are smaller.

And we’ll take our next question from Bill Chappell with SunTrust.

Thanks, good morning.

Hey Bill.

Just a follow-up, could you quantify what the organic growth was last year ex Venezuela? And then the other question, on share repurchase, I’m not sure if you commented on that on what it was in the quarter. But is there any thoughts with kind of stock, where it’s been? And in the past, you’ve certainly used opportunities to step up and use a little more cash? Is that a though right now?

Okay. The answer on Venezuela is polite no. So I repeat, we delivered 5% organic growth in the fourth quarter and in 2015. And we are guiding that we will deliver the same organic range between 4% and 7% excluding Venezuela in 2016. As we think about the share repurchases, one has to be thoughtful about capital structure in the environment wherein given the foreign exchange impact on cash profit. And as we have gone through our capital structure right now, and we have not made this decision yet, but I think it would be fair to say as a company that we have been for since 1895 I think committed to paying dividend and have increased it for the last 50 plus years. So that’s a decision yet to be made, but that is obviously a use of cash so is capital expenditure which is very focused on supporting our global growth and efficiency program. And then we turn to share buyback. Right now, our capital structure would say our gross share buyback for this year would be in the 1 billion to 1.3 billion range.

And we’ll take our next question from Lauren Lieberman with Barclays.

Great, thanks. I would never chide you in, first of all.

I did it already.

I had a question on Europe. When I spent some time with panels, middle of last year, we talked quite a bit about premium innovations and it struck me that sort of newer direction, a different way of dealing with the longstanding deflationary environment in Europe. So if you could talk a little bit about how those efforts are going on premium innovation, if it’s a strategy you’re thinking about taking a more significant way into other markets, that would be really helpful. Thank you.

Yes. Well, it is well underway. I mean as we went through our 2016 budget program, I think you may have had a sneak peek on stuff we haven’t yet seen here. But that is very much underpinning the European plan for 2016 and some of those products are moving into the marketplace as Bina mentioned as we speak right now. And it would be fair to say that depending on the market, depending on the condition of the consumer, that is the model that is under serious study and indeed has already been adopted in certain parts of the world. But to the extent that it can be deployed, you expect that it will be.

And we’ll take our next question from Javier Escalante with Consumer Edge Research.

Good morning everyone. My question has to do - hello, how are you? My question has to do with reports on the British press that Glaxo is considering to sell off its consumer division. And I would like to hear your thoughts with regards to whether this asset which includes Sensodyne, is something that you would consider as strategic for Colgate on one end? On other, to what extent with the restructuring savings ending in 2016, whether financially will of interest as well as a means to generate savings? Thank you.

Well, first of all, I’m hesitant to comment on the British press, Javier.

Okay, I understand. But what about Glaxo consumer? Is it something that - is it kind of - I know that you are very choosy and very financially disciplined, but do you think that this is something that it would be of interest to Colgate to consider?

The only proper answer to that question is that we don’t comment on market speculation and rumor or the British press.

And our final question comes from John Faucher with JP Morgan.

Thank you very much. Two questions here. The first is, a lot more discussion about the local brands and things like that. Yet as you said, your market shares are generally increasing. Can you talk about what you’ve seen from them from a transactional pricing standpoint? And then the second question is probably, it’s a little bit of a devil’s advocate question and probably not one you’re expecting, which is when you talked about having the flexibility of sort of the touch points, right, advertising versus trade and in-store, what have you, and given that dialogue you’ve had over the last 6 to 12 months, wouldn’t that argue that longer-term that the gross margin expansion which we’ve been looking for is less relevant, right? It seems as though if you have that marketing mix flexibility, it should be about the operating margin, not the gross margin. So I guess sort of putting it back in your court in that regard, doesn’t the gross margin lose some of its importance overtime if you’re moving these buckets around more? Thanks.

So let me answer the question of the local brand pricing. I guess for those materials that are dollar-denominated, they say it’s the same pressures that we do. And many of these local brands are not classic cheapies. They are reasonably well-priced products. I must say I can’t give you a chapter and verse review on have they mimicked the pricing we have. But we certainly haven’t seen them going the other way. So either they are premium in many cases and they stayed there or I think I could say that they will have moved their pricing. We haven’t seen them trying to go the other way. On the marketing mix comment, I would be careful to argue about the flexibility. I think what it gives us is against the objectives we have for a brand or an innovation or against a particular consumer, what is the best way to think about all of the touch points in terms of reaching them. I made the comment on the last call that over half of moms today in Latin America are Millennials that Facebook and YouTube are enormous connection points for that community. So that’s a great place to go to touch those kind of consumers. And I think personally, gross margin remains as important because what you’re trying to do there, I think, is to create value in a product that the consumer sees and is prepared to pay for back to Lauren’s point about premium by innovation. And it’s off that fulcrum, everything else comes because otherwise from an operating point of view, you’re only leaving yourself really leveraged overhead and advertising to deal with. So I think a gross margin focus should be an un-remising focus in a consumer products company in our types of businesses.

Okay. Well, I’m pleased and surprised pleasantly by the duration of the call. Thank you for all of the questions. And we look forward to keeping you updated as the year unfolds. Thank you very much.

That does conclude today’s conference. Thank you for your participation.