Bina H. Thompson - Former Vice President of Investor Relations Ian M.

Cook - Chairman, Chief Executive Officer and President

Christopher Ferrara - Wells Fargo Securities, LLC, Research Division Dara W. Mohsenian - Morgan Stanley, Research Division Ian J.

Gordon - S&P Capital IQ Equity Research Caroline S. Levy - CLSA Limited, Research Division John A.

Faucher - JP Morgan Chase & Co, Research Division William Schmitz - Deutsche Bank AG, Research Division William B. Chappell - SunTrust Robinson Humphrey, Inc., Research Division Ali Dibadj - Sanford C.

Bernstein & Co., LLC., Research Division Mark S. Astrachan - Stifel, Nicolaus & Co., Inc., Research Division Joseph Altobello - Oppenheimer & Co.

Inc., Research Division Michael Steib - Crédit Suisse AG, Research Division Alice Beebe Longley - The Buckingham Research Group Incorporated Lauren R. Lieberman - Barclays Capital, Research Division Olivia Tong - BofA Merrill Lynch, Research Division Constance Marie Maneaty - BMO Capital Markets U.S.

Jason English - Goldman Sachs Group Inc., Research Division

Thank you, Andrea. Good morning, and welcome to our Third Quarter Earnings Release Conference Call.

With me this morning are Ian Cook, Chairman, President and CEO; Dennis Hickey, CFO; Victoria Dolan, Corporate Controller; and Elaine Paik, Treasurer. This conference call will include forward-looking statements, and these statements are made on the basis of our views and assumptions as of this time and are not guarantees of future performance.

Actual events or results may differ materially from these statements. So for information about certain factors that could cause such differences, investors should consult our most recent annual report on Form 10-K filed with the Securities and Exchange Commission and available on our website, including the information set forth under the captions Risk Factors and Cautionary Statements on Forward-looking Statements.

This conference call will also include a discussion of non-GAAP financial measures, which differ from our results prepared in accordance with GAAP. We will discuss organic sales growth, excluding foreign exchange, acquisitions and divestitures.

We will also discuss gross profit, gross profit margin, SG&A, operating profit, effective tax rate, net income and earnings per share, excluding the impact of certain items described in the press release. A full reconciliation with the corresponding GAAP measures is included in the press release and is posted in the For Investors section of our website at www.colgatepalmolive.com.

We're very pleased to report another strong quarter, especially with the momentum that has continued throughout the year. Business is sound in the developed markets of the world and continues to be robust in our emerging markets.

Global market shares are healthy and growing in a number of our categories, including manual and powered toothbrushes, mouthwash, bar soaps and shampoos. Our simple financial strategy continues to serve us well.

Gross margin increased to 59%, approaching our near-term goal of 60%, and impressive in the face of a 180-basis-point increase in the year-ago quarter. Importantly, our gross margin savings, as well as the strict control of overheads, has allowed us to increase advertising, absolutely and as a percent of sales, and to increase operating profit.

And as you know, foreign exchange has been a headwind for us throughout the year. Our guidance for full year EPS growth of between 4.5% and 5.5%, which we provided earlier in the quarter, was predicated on more favorable exchange rates than what actually transpired, but we were able to offset this with a slightly lower tax rate.

For the full year, we expect an effective tax rate of 31.7%, well within our ongoing guidance of between 31% and 32%. Our Global Growth and Efficiency Program is nicely on track.

While the anticipated charges in savings associated with the 4-year program remain the same, due to an acceleration of certain projects, our current estimate for 2013 is that charges will now be in the range of $365 million to $390 million before tax, and savings projected to be between $45 million and $55 million before tax. We're just now starting to see the effects of these savings.

So a solid P&L accompanied by good cash generations and a strong balance sheet. So let's turn to the divisions.

North America. As referenced in the press release, U.S.

market shares are increasing in a number of categories. While category growth overall remains somewhat sluggish, we are growing ahead of the categories in virtually every retail environment, which is reflected in our market share gains.

We're particularly pleased with the launch of Colgate Total Mouthwash, launched in May behind record retail support. Our highly impactful in-store displays, highlighting the importance of an oral care regimen, were ahead of our initial goal and up almost 50% versus 2012.

Our overall mouthwash share in the most recent period was 7.3%, with Colgate Total Mouthwash achieving 4.2%. Shares in the Hispanic market were even higher.

Trial and repeat rates have outpaced other recent competitive launches, and a robust sampling plan has allowed us to reach 30% of mouthwash households so far in 2013. In addition, our professional plan has included sampling, ads in dental journals, digital communication coupons, dental detailing and communications with leaders in scientific affairs.

As mentioned in the press release, we're in the process of shipping Colgate's Slim Soft toothbrush into the U.S. markets.

As you may recall, this product was first introduced into the Asian market and has met with great success there, as you will hear later. Here in the U.S., the launch is proceeding well.

Beginning this month, we are on air with a consumer-validated television commercial. And in addition, our marketing campaign includes strong outreach to health and [indiscernible] magazine editors with over 40 million impressions to date.

Key retailers are providing strong display support. And in the social media space, we have had very positive consumer feedback.

We have more innovation slated for the first quarter of next year, which we will share with you soon. Turning then to Europe/South Pacific.

Results in this region were quite solid given the overall macroeconomic situation. There have been some very modest signs of improvement.

Consumer confidence in the Eurozone has progressed from being negative 23.7 in the first quarter to negative 16.6 in the second quarter to an early read for the third quarter of negative 10.5. Germany and France, where we have large businesses, have recently reported modest GDP growth, while Italy and Greece are still negative with continued high unemployment rates.

Innovation is key to driving share and category growth, and we referenced a number of successful new product launches across the region in the press release. Our regional market shares are up in toothpaste, toothbrushes, mouthwash and fabric conditioners.

Our toothpaste market share is up in both Western and Eastern Europe. In Eastern Europe, our share is up over 1 point to 37.8% on a year-to-date basis with the most recent share at 38.5%.

Across the region, our manual toothbrush share is up 230 basis points to 22.3% on a year-to-date basis with the most recent read at 22.7%. And in mouthwash, our share is up 40 basis points, 15.2% on a year-to-date basis with the most recent read at 15.5%.

New product activity is continuing in the fourth quarter. In Oral Care, we'll continue with the relaunch of our Colgate base business, as well as elmex Sensitive Gentle Whitening, which we told you about on our last call.

In addition, we are launching elmex ortho manual toothbrush. This toothbrush is designed to clean in and around braces and other orthodontic appliances.

With a V-trim bristle system, soft and long outer bristles gently clean the tooth surface and along the gum line, while medium-type, short inner bristles clean between and around metal braces. In Personal Care, we maintained the momentum in our Sanex body wash business.

We are relaunching the Sanex Dermo line, supported by a full integrated marketing campaign. The line will have new packaging and a formula with the Dermo Active 3 complex that delivers the 3 key benefits to keep skin healthy: deep moisturization, protection and pH balance.

As you know, we have a very strong Home Care business across the region. In France, the market-leading dish liquid is our iconic Paic brand, a new innovation for Paic is our dish and kitchen surfaces antibacterial with a unique double action benefit of both multisurface and antibacterial, supported by the strong claim, "Kills 99.9% of bacteria."

Turning then to Latin America. We're very pleased with the strong organic sales growth in Latin America in the third quarter, a sequential improvement from the second quarter and a good indication of the health of our businesses despite challenging external factors.

As you know, we put a great deal of focus on our on-the-ground execution here, as elsewhere, and that has paid off. Market shares are strong across the region.

In Brazil, we've consolidated our leading toothpaste share at almost 72%, up 20 basis points year to date. Successful premium products, such as Colgate Luminous White and a revitalization of our Colgate Total business, has contributed to these results.

In manual toothbrushes in Brazil, we continue to widen the gap with our nearest competitor, now over 5 points. Our record year-to-date share of 32.5% is up 20 basis points versus the prior year and, as with toothpaste, has been driven by the launch of premium toothbrushes such as Colgate 360º.

Our year-to-date toothpaste share in Mexico consistently remains over 80%. In toothbrushes, we reached another record year-to-date leadership share of 44.1%, up 170 basis points year-over-year.

In the direct trade, both high visibility and our focused regimen strategy have boosted share, while specific merchandising plans in the mini marts and mom-and-pop stores have driven results in the indirect trade. Our mouthwash share is up over 2 points on a year-to-date basis to 23.3%.

Exciting new products scheduled for the fourth quarter should help maintain the excellent momentum in this business. In Brazil, we will be launching Colgate Superior anti-cavity with Nutra Super [ph] Toothpaste.

Nutra Sucar [ph] or Sugar Acid Neutralizer is a breakthrough technology first introduced to the professional dental community at the Worldwide Dental Congress in Turkey in August. This is the first and only Colgate family anti-cavity toothpaste with Nutra Sucar [ph] to directly fight sugar acids in plaques, which are the #1 cause of cavities.

It reduces early tooth decay by half as compared to toothpaste with fluoride, which reduces it only by 32%. And it has 4x greater remineralization than regular fluoride toothpaste.

As you would expect with a major launch such as this, it will be supported by a fully integrated marketing campaign, reaching the consumer at many touch points: at home with TV, print, radio and digital, on the way to the store with sampling and street activations and in-store with impactful merchandising displays. In the Personal Care category, we're very excited about the launch of men's and ladies' Speed Stick Cool in Mexico.

These 2 new lines of underarm protection contain fragrances inspired and created by the world of fine fragrances. The spray variance have a new shrink sleeve packaging, which provides stronger differentiation on the shelf and a tangible feel that further communicates the Cool concept.

In Asia, we're very pleased with the continued momentum with widespread strong organic sales growth. As elsewhere, our consistent flow of new products has fueled this growth and accompanying higher market shares.

In India, our toothpaste market share is up 80 basis points year to date to a record 54.3%, as premium-priced products, such as Colgate Visible White, have met with great success. Similarly, premium-priced toothpastes have driven our year-to-date share in China to almost 34%, an increase of 30 basis points.

In the Philippines, our toothpaste share is up 220 basis points to 55.5%. And in Thailand, our toothpaste share is up 150 basis points to 53%.

And we told you previously about the division-wide launch of Colgate Slim Soft Charcoal manual toothbrush. That innovation continues to pick up incremental share in all the markets where it has been launched.

As a result, the year-to-date market share for both Slim Soft variants is now almost double digits in many countries, led by Hong Kong at 20%, Thailand at 17.9% and Taiwan at 10.1%. In India, our manual toothbrush share is up 250 basis points to a record 41.6% year to date with the most recent read at 42.2%, largely driven by the commercial strategy improvements implemented since the beginning of the year.

Our regional mouthwash share is up 40 basis points year to date to 19.6% with the most recent reading of 20.2%. More innovation is planned for the fourth quarter.

Two exciting Oral Care innovations are slated for the Chinese market, Colgate 360° Enamel Protects toothpaste, which builds on the success of the original Colgate 360º toothpaste, developed specifically for the Chinese consumers. The new variant adds the benefit of enamel protection with the whole mouth clean proposition of the original variant, which is important, as the Chinese consumer believes that enamel is the first layer of protection for their teeth.

In manual toothbrushes, to accompany the launch of Colgate 360º Enamel Protect toothpaste, we are launching Colgate 360º Interdental toothbrush, which addresses the consumer's desire for a clean mouth that she feels is unmet by her current toothbrush that can't get between her teeth. This brush has slim-tip bristles, which reach deeper between teeth for a whole mouth clean.

Africa/Eurasia. The momentum in this business is strong as well.

As referenced in the press release, successful innovations have resulted in good market share increases in some of the largest subsidiaries in the region. In Russia, for example, our year-to-date toothpaste market share is up 120 basis points to 33.2%.

In South Africa, it's up almost 4 full points to 50.6%. And in Turkey, it's up almost 2 full points, 28.7%.

Our manual toothbrush market shares are doing well also. In Russia, our year-to-date share is up 160 basis points to 49.2%, and in Turkey, it's up 80 basis points to 28.9%.

Similarly, in mouthwash, our 2 largest markets, Russia and South Africa, saw strong increases, 4 points and 3.8 points, respectively, while the whole division is up year to date almost 2 full points to 19.5%. We told you last quarter about the launch of Palmolive Gourmet Spa shower gel in Russia and Turkey.

Results have been strong in both markets. In Turkey, our market share is up from 34% prelaunch to 37.9%.

In the most recent period, the Palmolive Gourmet Spa shower gel adding incremental share and now at 7.3% of the market. This has helped solidify our market-leading position.

We're expecting more innovation in the fourth quarter. As mentioned earlier, we introduced our new Colgate Maximum Protection plus Sugar Acid Neutralizer toothpaste in August at the Dental Congress in Turkey.

Next month, we'll be shipping the product to the trade in Turkey with marketing support slated for December and into next year. In Russia, we're launching Colgate Altai herb toothpaste and mouthwash inspired by herbs, which are well-known natural ingredients in Russia believed to provide gum protection and which resonate well with the Russian consumer.

And in South Africa, we will be launching Colgate Active Salt toothpaste. In this market, rinsing with salt is believed to provide antibacterial protection.

And Hill's. We're delighted with the continued positive volume and organic sales at Hill's.

Here in the U.S., both our relaunch of Science Diet, as well as the launch of Ideal Balance are performing well. In particular, our Treats and Wet segments are strong.

The investment in store coverage we have made to support these launches is making a difference. For Science Diet, our focused, integrated marketing campaign is successfully delivering the message of natural ingredients.

Ideal Balance has received strong support from the large pet retailers, and market share has been building. Early reads on trial and repeat rates are strong and on par with some of the other brands in the natural segment.

The global rollout of our Prescription Diet Metabolic line has also done well. In Europe, our distribution is already above the target we had set for ourselves for the end of this year.

We will continue to support this launch with activities to increase awareness among pet parents about the problem of obesity in dogs and cats, as well as trial programs and testimonials. More new Science Diet products are slated for this quarter and 2014.

Science Diet perfect weight will feature break-through technology into the wellness category, with nutrition to help dogs and cats achieve a healthy weight and improve quality of life. Science Diet Oral Care provides clinically proven kibble technology to reduce plaque and tartar and helps clean a cat or dog's teeth with every bite.

New variants under the Science Diet Life Care umbrella includes Science Diet Sensitive Stomach and Skin, Science Diet Grain Free Salmon and Science Diet Grain Free wet for both dogs and cats. Under the Life Style umbrella, Hill's has introduced Science Diet Small & Toy Breed Lamb Meal & Rice Recipe.

Some new items in the Ideal Balance line include Ideal Balance Grain Free Cat. A good opportunity as this is the fastest-growing segment in naturals.

And another is Ideal Balance Hairball for cats, an offering which will be unique in the natural segment. In the dog category, we're expanding our large and small breed portfolios with line extensions.

These are just a few examples of the increased new product activity in the natural segment. So in summary, we're extremely pleased with our results for the third quarter, and we expect this good and increasing momentum to continue as we exit 2013.

This good performance is largely result of the strategies which we have in place to succeed in, what we call, winning on the ground. These strategies have us refocusing on the basics of our core business and allow us to get better and better at the fundamentals.

Around the Colgate world, all employees are well aligned with our strategies, and as many of you who have visited a Colgate subsidiary can testify, this results in a positive culture with a real can-do attitude. Our global restructuring program is on track.

Our market shares and volume growth are healthy worldwide and providing good momentum. And we look forward to sharing our results for the remainder of the year.

And now Andrea, I'd like to turn the call over for the Q&A, and I'll turn it back to you.

I wanted to -- volume, so -- I mean, sorry, price. And so volume was obviously good, but the other side is pricing, and I guess that was a little bit lighter than I would have expected, which is a little usual considering FX is sort of hitting a peak here on the drag.

And I guess, when you think about Latin America decelerating, and I know Venezuela is a piece of that, and then the U.S., I think last quarter, you said -- I think you noted it was a little bit of an aberration. And Q2 got a little better but -- or sorry, Q3 got a little better but not much.

Can you talk about how you're thinking about pricing specifically for Lat Am and for the U.S. going forward?

Well, obviously, I think the first thing I would want to say is that we're pleased with our overall organic top line growth. We think it reflects the strategic initiatives that we've been deploying for the last 8 years, including the innovation stream that Bina has talked to, including the fact that we have 53% of our sales in those emerging markets.

And obviously, as you imply, Chris, the expansion of gross margin is an important part of what allows us to invest behind the innovation we have, both in terms of media promotion, professional activities and of course, as I have said several times before, the retailer-led in-store shopper marketing promotions that build trial for our business. So at the end of the day, on a global basis, what we're looking to do is to maximize the organic rate of growth and continue to expand gross margin.

So if you look at our third quarter, we were very pleased with the expansion of gross margin globally, a combination of price and of course, a combination of our terrific Funding the Growth savings, and that has allowed us to invest in traditional advertising and the broader commercial investment to grow the top line. Now our objective in Latin America is, over time, to offset the transaction impact of foreign exchange, and there's always a lead lag of that transaction impact.

And as you say, the biggest drag on Latin America gross margin is Venezuela. We were really pleased with the volume-led top line growth we got in that part of the world.

And frankly, from a U.S. point of view, we're very happy with the progress of our business.

The second quarter, of course, was helped by the introduction of the -- the mouth rinse, but I think those of you that follow the Nielsen data will have seen, and it relates to the share growth that Bina mentioned, that our consumption, which is to say consumer purchases of Colgate products each month of the third quarter, has been higher than the rate of category growth and indeed, was accelerating towards the end of the quarter. And the gross margin expansion in the U.S.

was extremely healthy, as you know. So in the U.S.

case, any difference between the volume growth is entirely related to the timing of in-market activity. But I think, the way we manage our business globally gives us the ability to drive our innovation, step up the rate of organic growth and continue to build the gross margin.

And that's the way we think about it.

And just as a quick follow-up, I mean, is it fair to say that, relative to what you thought was going on a quarter ago or more, the best path to organic growth might come with less pricing and more volume? I mean, does that make sense?

Is that kind of what you're saying?

I think all these things are a balance, I guess, which is what I was trying to say in the remark. And as you weigh the innovation timing, the different geographies we have around the world, for this quarter, we believed that was the best balance to deliver what we think in today's world is a very strong level of organic growth as a global company, yes.

So Latin American margins have been compressing year-over-year over the last year here. Obviously, Venezuela has been a big piece of that, but can you help us parse through the underlying margin trends in Q3 x Venezuela?

And as we look out to next year, are you anticipating that margins in Latin America will start to re-expand at rates similar to your long-term history? Or are there some reasons why this weakness would linger?

And then also, on the other side, North American margins have expanded significantly recently. Can that continue going forward?

And what's driving that?

Yes. Well, as you think about this year, I think it's fair to say that Venezuela is the unequivocal driver of the margin pressure in Latin America.

And we have consistently said that. And you will remember, at the beginning of the year, we said that notwithstanding Venezuela, we still expected to expand our gross margin by some 30 to 70 basis points on the year.

And I think, based on the performance thus far, we feel very comforted if you take the 9 months gone, that we think we will be solidly in that gross margin range for the company for 2013. And of course, you can imagine that as we go forward into 2014, even though I said in the release that we have literally just started our budgeting process, but in the current more benign commodity environment that we have certainly seen this year and so far moving into next year, we're going to continue to expect and see progress on the gross margin line, both for the world and indeed, for Latin America, even including Venezuela.

On Hill's, I think, last quarter, you did say that you expected to get Hill's back to mid-single-digit organic growth, so check there. And you did also comment that you had a plan to rebuild margins over time.

I'm wondering if you can elaborate on that because while sales growth is good, I think profit growth is better.

Well, thanks for the question, Ian. The -- we rank sales growth and profit growth equal number 1.

Look, on the Hill's business, we're extremely pleased with the progress thus far. And I think when we first talked about seeing Hill's return to mid-single-digit organic growth, we talked about it on the back of some strong innovation, which would be well received and indeed, has been well received by the customers that we work with in this space.

And we said there was going to be an investment in formulation to accomplish that. So yes, to your point, check.

We have recovered the top line growth. We continue to get very strong support from those customers, indeed growing support, which is encouraging.

And I think that perhaps that growing support traces to the trial and more importantly, the repeat levels that we are obtaining for that innovation, which is quite robust. And most importantly, as Bina outlined in her prepared remarks, the pace of innovation on the Hill's business is now not episodic but indeed planned for and will continue out in time.

So the margin investment was a conscious one, but we have specifically said that we will rebuild the Hill's gross margin to the historic levels and are planning accordingly. And we will see that develop over the next several years, beginning in 2014.

A question on global toothpaste market shares. If you could just talk, I think the absence of any commentary on what they were in the third quarter versus a year ago suggests they probably were down, and I guess they were down.

But what were the drivers of the declines? And within China, your share was up.

Was your share of the Colgate brand up? Or was that all being driven by Darlie?

The market share for global toothpaste was 45%. It was modestly down because of market share declines in a couple of key geographies.

One was Mexico, although it's still over 80%. And the other one, which you see, I think, in the Nielsen data, is here in the U.S.

where we have selectively, but not completely, responded to in-market promotional activity. And in China, we manage both of our businesses to different consumer segments.

And I would say, from a recent market share point of view, the majority of the growth has been driven by the Darlie brand in China. And we're still thrilled to be approaching a 34 market share as a company.

Wanted to go talk a little bit about the advertising and get an idea in terms of, are you seeing most of the increase in the absolute dollar spend in advertising, is that mostly new product-driven, core, et cetera? And then can you talk a little bit about some of the geographical mix impacts?

Are the lower sales in Latin America because of the FX? I think that's generally a lower ad to sales market.

Is that impacting the number? So just a little bit of an outlook and where you think, also, your share of voice is now versus competitors.

Wow, that's a very broad question, John. Let me try and be as specific as I can.

First of all, when we think about brand engagement with our consumers, frankly, we think about it holistically. And as I've said before, even though it may not be popular because there's still this feeling that if it goes to trade spending, it's bad advertising and if it comes below the line, as we were all brought up, it is somehow good advertising.

The fact of the matter is with the techniques available to you today, you can foster some incredible engagement that is brand building and trial generating with our consumers at the retail level. So first of all, we do think about it holistically.

And yes, our advertising has increased, but so has our total commercial investment. The second thing, then, is we build our advertising from the ground up, which is to say behind the brand building and innovation programs that we have scheduled for any planning period and the advertising ebbs and flows behind those initiatives and obviously, strives to be competitive, as you say, from a market share and a share of voice, not totally mechanistically because there are some principles in terms of how you spend your money with competitors.

And we would say that our advertising, up 40 basis points for the company, is up where it needs to be up. It is very much growing in the emerging markets behind the rate of growth that we are seeing there but also in some of the key developed markets, depending on our business programs.

And as you know, from an A to S point of view, it can be misleading because cost of media varies greatly from country to country. And that is why sometimes the absolute-to-sales ratio differs.

But we're very pleased to be able to keep increasing our advertising to sales level in fairly solid ways, we believe. And we do believe, in terms of maintaining the base business and building trial on new innovation, we're spending the money smarter, faster and more efficiently.

Two quick ones. So CapEx was really elevated in the quarter.

Is there some sort of big initiative going on? Or do you just move stuff between the third and fourth quarter?

And then just on the advertising front, I think, you said that U.S. advertising was down like 130 basis points as a percentage of sales.

Is that like a permanent shift that just you talked about between sort of promotional spending and advertising? Or was that just sort of a seasonal blip in the amount of new product activity going on?

Let's answer the second one first because that is, I would say, more importantly, and the answer is, it is a seasonal blip, I assume that's a technical term, which is entirely related to the timing of activity. Obviously, we had very strong activity in North America in the second quarter, as we did last year.

But this year, of course, it was behind the mouth rinse that we brought new to the marketplace. So this is not a permanent change in strategy.

It is timing related. The CapEx, no, the CapEx is certainly not shifting between quarters, but it is a reflection, I think as we said at the beginning with our Global Growth and Efficiency Program, that we would see our traditional 3% to 4% CapEx move up into the 3.5% to 4.5%, probably at the higher end of that range in the near term, as we undertake some of our capital projects directly related to the Global Growth and Efficiency Program.

So planned for, part of the program and as Bina said earlier, very much on track.

Just on the North America, I know you're not communicating that, but can you maybe give us an idea, would the volume still be up without the mouthwash business? And are we still kind of early innings there?

Just trying to understand from a competitive landscape whether you're seeing kind of increased pressure. Unilever kind of cited that today, and the irrational activity that's tamping things down or whether you're not seeing that in your categories.

Well, I think a few things to say and we have said these things before. First of all, the absolute category rate of growth is low single digits.

That has not changed in the U.S. environment.

Secondly, we have seen and we have said this before, some levels of short-term activity that we choose not to pursue on the mouth rinse. It is early innings.

Actually, we're very pleased to be north of 7 in terms of market share, and we know on that business the trial and repeats are very good. So we have good ambition for the continued progress of that business going forward.

And I think the most important point to make is to reiterate the fact that for the entirety of the third quarter, the consumption, Colgate's consumption, which is to say consumer purchases from retail, was ahead for the entire quarter of the market rate of growth and again, towards the end of the quarter actually accelerated as we exited the quarter. So when you look at a volume number that is shipment-to rather than purchases-of, the variance there, as I said earlier, is timing of marketplace activity at retail with retailers.

The important number is the strength of the consumption number, which I know several of you have commented on in some of your Nielsen reports.

Actually, a couple of things. I wanted just to go back to the toothpaste share loss and just to get a better sense of why that is purely Mexico and U.S.

It sounds like it's competitive. And it also sounds like you think it's going to be short term and go away.

I'd like to ask also on that view, a better understanding of your double-digit EPS growth for 2014 as a company in dollar terms this time, not constant currency. And I just wanted to understand specifically, given the volatility in currencies, can you quantify the currency impact you're assuming in that?

And are you including anything for Venezuela or Argentina devaluation, which some companies are kind of prudently including in their thought process going forward? Those 2 things would be helpful, please.

Sure, sure. The -- let's take the second one first.

As we said in -- or as I said in the quote in our earnings release, we have basically just begun our budgeting process for 2014. And I made the comment that we are targeting double-digit dollar increase in EPS at current spot rates.

Now obviously, we're going to work through our budgeting process, but those are our goals for 2014. Clearly, what we see on the landscape is a slightly more benign commodity environment than we have seen historically.

And obviously, which is the reason we did it proactively when we announced it in the fourth quarter of 2012, we have a Global Growth and Efficiency Program that is running over a 4-year period that we said when we announced it, would provide a little bit of cushion or protection against events in the world. And so we have that as we go into 2014 and the out years.

And our current planning is that Venezuela will continue to be the -- in the position it is in today, which, as you will see in the Q, is about 4% of our global sales and about 3% of our operating profit. And we have not, and we did not previously, assumed a devaluation of Venezuela in any way because one doesn't know timing.

One doesn't know level. What we can say and what we have said before on these calls is that you can rest assured that business is being managed appropriately.

And I think we have always been prompt and timely and comprehensive in updating the market should an event occur in Venezuela. So that's the way we are thinking about 2014 as we begin our budgeting process in that regard.

Now coming back to your first comment, we're actually pleased with our overall market share progress on toothpaste. I think Bina spoke about Mexico, about India, about China.

Russia was in our remarks. Some terrific share progress; in some cases, very, very strong share progress, which we think portends for the long term.

In Mexico, and I was just down in Latin America, in Brazil and Mexico, we saw some short-term elevated promotional activity, which we reacted in part but not completely to. And I feel confident that, that will turn around.

And the same comment relative to the U.S., which you will see in the Nielsen data, and we believe innovation-led, that will turn around going forward as well. So we do not have any systemic concern about our share progress.

We know exactly where the short-term issues are, and it really is how dramatically do you want to go after promotional activity that you don't judge to be appropriate, shall we say, in terms of building categories for the long term. So we're in this business for the long term, and we believe that toothpaste share will continue to grow, as is our mouthwash share, as is our toothbrush share, where we're beginning to take more and more market leadership positions, Mexico, in the U.S.

in manual toothbrushes being of the 2 most recent. So we believe that we will recover that, and we believe that is consistent with our long-term strategy.

Thanks for the question.

Wanted to follow up on the input cost side. So I know it's early, but can you give us a sense sort of what you're budgeting for oil prices?

And then just given views that it seems relatively benign here, any rethinking of longer-term gross margin expectations or at least achievement of that 60% number sooner rather than later?

Well, we certainly -- you look at the gross margin we have this quarter and I think we feel pretty good about delivering that 60% near-term goal in the not too distant future. But actually, as you raised the question, why don't I take the opportunity, as we normally do, to give you a roll forward of the gross profit analysis for the third quarter.

The gross profit in the prior year, 2012, was 58.6%. Pricing in this third quarter of 2013 added 40 basis points.

Our Funding the Growth savings gave us 240 basis points, which was actually ahead of the third quarter pace last year. And you know well, Mark, that the Funding the Growth savings tend to build quarter by quarter over the year.

We had a headwind of 220 basis points of material price. That was split between the commodity costs and transaction costs because of foreign exchange as we have said before.

And then there were 20 basis points of ins and outs, which got us to the 59% or plus 40, which we're quite pleased with. And as I said earlier in the call, I think we would characterize the commodity environment as relatively benign, at least as we begin our planning process, which is a favorable.

And our going in position, which was determined a little while ago, was to peg oil at $110 for 2014. Now that's Brent.

Today, as you know, it's drifting around the $107, $108, but it's a brave man or woman that predicts the price of oil going forward. So we're quite happy with that projection going in.

Just a couple of quick questions. I guess first, staying on 2014 for a second and the per share outlook for next year.

You mentioned that you are seeing a little bit more benign commodity environment than you were expecting. Are you guys assuming that most of that drops to the bottom line next year?

Or do you think that could lead to a bit of a heightened competitive environment? And I guess, what's baked into that double-digit outlook?

And then maybe secondly, if I could follow on to that, a number of your CPG peers have talked about a slowdown in emerging markets, and obviously, you guys have not seen it or at least not seen it at a high level. Is that because you're in more growth advantaged categories, or is that more market share growth or a combination of the 2?

Well, let's take the second point first because I'm not going to answer the first point. The -- when we think about our businesses, as you rightly say, Joe, we think about it in terms of the categories in which we do business.

And as we have said for a long time, for a company that has 53% of its business in those higher-growth emerging markets, we continue to see category growth rates, our categories, in the mid to high single digits, sometimes a tad better than that but certainly, solidly, in the mid-to-high single digits. And we see the category growth in the developed world in the low single digits.

And I would venture to say, although I wouldn't want to take this as irrational exuberance, that there are some indications from the European environment that maybe we are reaching the bottom here. But still, our general thinking is that the Europe and North America will be growing low single digits.

Yes, we are growing market share, and that, on top of that mix of growth rates, we believe, puts us in the position to deliver the kind of growth this year that many, at the beginning of the year, did not feel was probable. And so we continue to look to drive next year based on our innovation plans category by category, and obviously, we'll be able to see -- to say more when we speak to you in the New Year once we have been through that process and closed out this year.

Now in terms of that commodity environment, we have literally just begun our planning process. As we have said many times, our belief is that you build categories by building brands, which is a combination of building your base business and adding relevant innovation.

We do not believe that the short-term pricing activity accomplishes that nor do we believe it is rational or sustainable. So I think the approach we have for 2014, which is the same as the approach we have for any year, is to build what we believe is a business-building program rich with innovation that will drive the top line of the company, and the bottom line as well, which is the start point for our budgeting process underway.

Just a quick question. Just curious, does the separation of the Asia and Africa regions, is that purely a reporting change?

Or does it have any implications for the strategy or the management of the portfolios within these markets?

Well, to answer directly the second half of the question, the answer is no, it does not change the strategy one iota. Frankly, Michael, as you are probably aware, all companies go through a process with the SEC relative to their 10-K filing where comments are made and a dialogue between companies and the SEC is undertaken.

And we ended up in a very constructive conversation about the growing importance of Africa and Eurasia in our world and concluded, in conjunction with the SEC, that it would be appropriate to separate those businesses purely from a reporting visibility point of view. And that is what we have done.

So you can now see that Latin America, Asia and Africa/Eurasia are growing high single digits from an organic point of view.

I have a guidance-related question and then something on toothpaste. You guided to EPS a share up 4.5% to 5.5% or you repeated that from the past.

If you use the midpoint of that, that implies a significant deceleration in the fourth quarter. So I'm wondering if you're actually more comfortable with the upper end of that guidance.

And then the other question is about the sugar acid toothpaste. Is there any chance that gets launched in the U.S.

in the reasonable near future?

Well, I think, to answer your second question first, the answer is that the acid-neutralizing toothpaste we initially launched in Turkey at the IADR that was held in Turkey. As Bina said, we have -- we're just going to market now in Brazil.

Frankly, given the prevalence of the disease condition, you will more likely see our global expansion go to the emerging markets first because that's where there is the greatest need and we believe, the greatest potential. So our planning would see us do that.

And relative to the EPS, yes, we would be comfortable with the upper end of that range.

I actually wanted to ask about -- I also wanted to ask a question on the anti-cavity toothpaste. Could you talk a little bit about how you expect the product to kind of impact your growth?

Is it going to be a matter of incremental share gain? Or is it a product you expect to accelerate category growth rates in that kind of lower end of the market where anti-cavity is priced?

Yes, it's a very interesting question, Lauren, and I don't have a precast answer for it. The way we're approaching this is, I mean, it remains the world's biggest oral hygiene condition.

And so our marketing approach here is a little bit different than a traditional innovation, which is to say we are working very diligently to engage both global and more especially, local health organizations and in countries, health ministries, to be able to inculcate good oral hygiene habit relative to cavity. Now in Brazil, for example, we are enrolling the support, and I won't mention how many because it's an impressive number, of community health people who are essentially government employees to help take this technology and the benefit it can provide to rural communities and schools to really make the superior benefit that this anti-cavity toothpaste can bring, 20% reduction shown clinically for the product, to try and boost oral hygiene.

Now whether that will lead to category growth by increased consumption or I mean, one would hope so, but I don't have any empirical evidence to suggest it, but certainly the marketing approach we are using is seeking to do things a little bit differently than we have done. We will learn our way from the initial markets and hopefully, be even more progressively stronger in terms of how we engage local education groups and health ministries to really make a push on advancing the reduction of cavities as a global problem.

I also wanted to follow up on the anti-cavity toothpaste. Given the positioning of that, would you expect that ultimately over time that could take over Big Red?

And then, what kind of implications would that have on margin?

Maybe, but I think that's going to be a long, slow, steady journey. And were it to happen, it would be accretive.

I was hoping that you would give us a little information on the projects you've undertaken in North America and Europe that have resulted in this year's operating margin expansion.

Well, I think in the main, those that relate to overhead, we have been very public about whether it is facility rationalization in Europe, whether it is regard to some of the co-locations that we have undertaken in Europe and, even though it doesn't affect our performance this year, including the relocation of our facility in Morristown, New Jersey, to Carolina, which won't actually provide a benefit this year but will in the future. So those are the principal changes that have taken place from the overhead point of view.

And then, of course, you have the very good growth that we have seen in the gross margin, which is a combination of our Funding the Growth programs. And they would be the 2.

And when I talked about co-location, I guess the other way we have talked about co-location is the notion of hubbing, which is this idea of grouping operating units around sort of a mother core, which we have been doing for 15 years now, starting in Central America. And we know it strengthens, as Bina called it, our winning on the ground capability, while at the same time saving us money.

I was hoping to go back to something you touched on in your answer to Lauren's question on engaging Brazilian government employees to take the product around. Are you essentially getting a government endorsement on this?

And then secondly, stepping back to another question on China, we're looking at the most recent China Nielsen data through July, August, and I know we're missing a month of the quarter there. But it does show a very rare share loss for your aggregate business, both H&H and Colgate, while P&G gets better and the category decelerates on lower price growth.

So I was hoping you could talk about the dynamics of what's happening in China and what maybe drove those share losses.

Wow. Well, to the second point, Jason, it can, and we have seen it in other markets, only be short-term promotional activity.

So I don't want to be flippant, but we're very comfortable with both our short-term performance in China and the combination of promotion and more importantly, innovation-led growth that will continue in all parts of the world. You may recall that our principal competitors saw their share drop from the mid-20s to below 18%, which maybe is why one sees short-term promotion reaction.

But I don't really have any additional comment to offer on that. Government endorsement, I think one has to be careful.

We clearly have endorsement from local dental associations. We have support from global health authorities, and we have the support of a whole cadre of key opinion leaders from many different geographies around the world who have been taken through in great detail the clinical prowess of the product.

In Brazil, we do indeed have an exclusive relationship with these government health workers to try and improve oral hygiene. We had done something similar in Granada.

So it is support and endorsement to eradicate cavities, but that is different from kind of a seal of approval endorsement that you get from a dental association. But I think it attests to the kind of collaborative stance we're trying to take to work to seriously attack a disease condition, in fact, the most severe disease condition in oral hygiene.

Oh, that's me. The -- so listen.

It was great to have the opportunity to share what we believe continue to be very, very good top and bottom line worldwide progress. I thank you for your questions and interest in the company.

And as we always like to say on these calls, we particularly thank, as Bina said, the Colgate people around the world, some of whom you meet, but these are the people that make all this happen, and we deeply appreciate it. So talk to you next year.