Executive Overview

Colgate-Palmolive Company seeks to deliver strong, consistent business results and superior shareholder returns by providing consumers on a global basis with products that make their lives healthier and more enjoyable.

To this end, the Company is tightly focused on two product segments: Oral, Personal and Home Care; and Pet Nutrition. Within these segments, the Company follows a closely defined business strategy to develop and increase market leadership positions in key product categories. These product categories are prioritized based on their capacity to maximize the use of the organization's core competencies and strong global equities and to deliver sustainable long-term growth.

Operationally, the Company is organized along geographic lines with specific regional management teams having responsibility for the business and financial results in each region. The Company competes in more than 200 countries and territories worldwide with established businesses in all regions contributing to the Company's sales and profitability. This geographic diversity and balance helps to reduce the Company's exposure to business and other risks in any one country or part of the world.

The Oral, Personal and Home Care segment is operated through four reportable operating segments: North America, Latin America, Europe/South Pacific and Greater Asia/Africa, all of which sell to a variety of retail and wholesale customers and distributors. The Company, through Hill's Pet Nutrition, also competes on a worldwide basis in the pet nutrition market, selling its products principally through the veterinary profession and specialty pet retailers.

On an on-going basis, management focuses on a variety of key indicators to monitor business health and performance. These indicators include market share, sales (including volume, pricing and foreign exchange components), gross profit margin, operating profit, net income and earnings per share as well as measures used to optimize the management of working capital, capital expenditures, cash flow and return on capital. The monitoring of these indicators, as well as the Company's corporate governance practices (including the Company's Code of Conduct), are used to ensure that business health and strong internal controls are maintained.

To achieve its business and financial objectives, the Company focuses the organization on initiatives to drive and fund growth. The Company seeks to capture significant opportunities for growth by identifying and meeting consumer needs within its core categories, through its focus on innovation and the deployment of valuable consumer and shopper insights in the development of successful new products regionally, which are then rolled out on a global basis. To enhance these efforts, the Company has developed key initiatives to build strong relationships with consumers, dental and veterinary professionals and retail customers. Growth opportunities are greater in those areas of the world in which economic development and rising consumer incomes expand the size and number of markets for the Company's products.

The investments needed to fund this growth are developed through continuous, Company-wide initiatives to lower costs and increase effective asset utilization through which the Company seeks to become even more effective and efficient throughout its businesses. The Company also continues to prioritize its investments toward its higher margin businesses, specifically Oral Care, Personal Care and Pet Nutrition.

Consistent with the Company's strategy to prioritize higher margin businesses, in the fourth quarter of 2006 the Company announced its agreement to sell its household bleach businesses in Latin America and Canada. The transaction closed in Canada during the fourth quarter of 2006. In the Latin American countries, the transaction closed during the first quarter of 2007 with the exception of Colombia, where the transaction did not receive regulatory approval.

The Company's previously announced four-year restructuring and business-building program (the 2004 Restructuring Program) to enhance the Company's global leadership position in its core businesses is progressing on schedule and is expected to be completed by December 31, 2008. On April 24, 2007, the Company expanded the 2004 Restructuring Program to encompass additional savings projects identified by the Company during the course of implementing the program. Including the expansion, the cost of implementing the four-year 2004 Restructuring Program is estimated to result in cumulative pretax charges, once all the projects are approved and fully implemented, totaling between $1,050 and $1,075 ($760 and $775 aftertax). Over the course of the 2004 Restructuring Program, it is estimated that approximately 50%-60% of the charges will result in cash expenditures. Once all projects are fully implemented, savings are projected to be in the range of $460 and $480 pretax ($340 and $350 aftertax) annually, substantially all of which is expected to increase future cash flows.

While the Company expects market conditions to remain challenging for the remainder of 2008 and into 2009, the Company believes it is well-positioned for future growth. Higher material and commodity costs, although partially offset through selling price increases and cost-savings initiatives, have impacted gross profit margins in 2008. Additionally, while the recent strengthening of the U.S. dollar is expected to negatively impact the Company's results, benefits from recent declines in material and commodity costs, if sustained, should begin to flow through in early 2009 and, together with our cost-savings initiatives, should fully offset the currency impact for the full year 2009.

Moreover, difficult macroeconomic conditions and uncertainties in the global credit markets could negatively impact our suppliers, customers and consumers which, in turn, could have an adverse impact on our business. While, thus far, uncertainties in global credit markets have not significantly affected the Company's access to credit due to its strong credit rating, a further deterioration in global financial markets could make future financing difficult or more expensive. Over the long-term, the Company's continued focus on its consumer products business, the strength of its global brand names, its broad international presence in both developed and developing markets and its strong capital base all position it well to take advantage of growth opportunities and to increase profitability and shareholder value.

Results of Operations

Worldwide Net sales were $3,988.0 in the third quarter of 2008, up 13.0% from the third quarter of 2007 driven by volume growth of 3.0%, net selling price increases of 6.5% and a positive foreign exchange impact of 3.5%.

Net sales in the Oral, Personal and Home Care segment were $3,464.4 in the third quarter of 2008, up 13.0% from the third quarter of 2007 driven by volume growth of 4.0%, net selling price increases of 5.0% and a positive foreign exchange impact of 4.0%.

Net sales in North America increased 4.5% in the third quarter of 2008 to $717.8 driven by volume growth of 1.0% and net selling price increases of 3.5%. Products contributing to the growth in oral care included Colgate Total Advanced Clean, Colgate Total Advanced Whitening, Colgate Max Fresh and Colgate Sensitive toothpastes, Colgate 360°, Colgate 360° Sensitive and Colgate 360° Deep Clean manual toothbrushes and Colgate 360° Sonic Power battery toothbrush. Successful new products in other categories contributing to growth include Irish Spring Moisture Blast and Irish Spring Reviving Mint body wash, Palmolive Pure & Clear dish liquid and Softsoap brand Body Butter Coconut Scrub moisturizing body wash. Operating profit in North America decreased 4% in the third quarter of 2008 to $163.5, reflecting higher raw and packaging material costs, partially offset by increased sales and the benefits from restructuring and other efficiency programs.

Net sales in Latin America increased 21.0% in the third quarter of 2008 to $1,081.3 as a result of 4.5% volume growth, net selling price increases of 11.0% and a positive foreign exchange impact of 5.5%. Volume growth was led by Brazil, Mexico, Venezuela, Colombia and Argentina. Products contributing to the growth in oral care included Colgate Total Professional Clean and Colgate Max White toothpastes, Colgate 360°, Colgate 360° Sensitive, Colgate 360° Deep Clean and Colgate Max Fresh manual toothbrushes, Colgate 360° MicroSonic battery toothbrush and Colgate Plax Whitening and Colgate Plax Ice mouthwashes. Products contributing to growth in other categories include Palmolive Naturals Yogurt and Fruits and Protex Oats bar soaps and shower gels, Palmolive bar soap and shower gel with ingredients from the Amazon, Lady Speed Stick Double Defense multi-form deodorants, Palmolive Caprice shampoo and Suavitel Magic Moments fabric conditioner. Operating profit in Latin America increased 25% in the third quarter of 2008 to $312.4, reflecting increased sales and lower overhead costs, partially offset by higher raw material costs and higher advertising.

Net sales in Europe/South Pacific increased 8.5% in the third quarter of 2008 to $948.0 as a result of 1.0% volume growth, net selling price increases of 0.5% and a positive foreign exchange impact of 7.0%. Volume growth was led by Germany, Poland, Denmark, Greece and Australia, more than offsetting volume declines in France, Italy, United Kingdom and the GABA business. Products contributing to growth in oral care include Colgate Max Fresh, Colgate Max White and Colgate Sensitive Enamel Protect toothpastes, Colgate 360°, Colgate 360° Sensitive and Colgate Max Fresh manual toothbrushes, Colgate 360° Sonic Power battery toothbrush and Colgate Plax Whitening mouth rinse. Products contributing to growth in other product categories include Palmolive Naturals Cherry Blossom shower gel, Ajax Professional bucket dilutable and Ajax Professional glass cleaners, PAIC Desincrust dish liquid, the French version of Palmolive Scrub Buster, and Soupline Magic Moments fabric conditioner. Operating profit in Europe/South Pacific increased 3% in the third quarter of 2008 to $205.5, reflecting increased sales, benefits from ongoing savings programs and lower levels of advertising, partially offset by higher raw material costs.

Net sales in Greater Asia/Africa increased 18.0% in the third quarter of 2008 to $717.3 driven by volume growth of 10.5%, net selling price increases of 5.0% and a positive foreign exchange impact of 2.5%. Sales growth for the three months ended September 30, 2008 was reduced by 1.0% versus the comparable period of 2007 as a result of the Company's divestment of its fabric care business in Senegal. Excluding the impact of this divestment, Net sales increased 19.0% on volume growth of 11.5%. The strong volume growth was led by India, Russia, Ukraine, Malaysia, Thailand, Philippines, Vietnam, Kazakhstan, South Africa, Gulf States, Saudi Arabia, Gabon, Angola and the Greater China region. Successful new products driving the oral care growth include Colgate Total Professional Clean, Colgate Max Fresh, Colgate 360° Whole Mouth Clean and Darlie Salt White toothpastes, Colgate 360° Deep Clean and Colgate Max Fresh manual toothbrushes and Colgate Plax Overnight Herbal Sensations mouthwash. New products contributing to growth in other categories in the region include Palmolive Nutra-Oil shower gel, Palmolive Thermal Spa Nourishing Boost shower gel, bar soap and liquid hand soap, Protex Aloe shower cream and bar soap and Protex Icy Cool bar soap. Operating profit in Greater Asia/Africa increased 28% in the third quarter of 2008 to $115.9, reflecting increased sales and gross profit margins, partially offset by higher advertising.

Net sales for the Hill's Pet Nutrition segment increased 13.0% in the third quarter of 2008 to $523.6 driven by net selling price increases of 15.0% and a positive foreign exchange impact of 2.0%, partially offset by volume declines of 4.0%. Volume growth in Japan, Australia, Russia, Brazil, Romania, Mexico, Czech Republic, Chile, Hong Kong and Thailand during the quarter was offset by volume declines in the U.S. and Western Europe primarily due to timing differences of price increases taken in 2008 and 2007. New products contributing to sales in the U.S. specialty channel include Science Diet Canine and Feline Nature's Best, Science Diet Tender Chunks in Gravy Feline pouches and Science Diet Adult High Energy Canine. Prescription Diet Hypo Allergenic Canine and Feline treats contributed to sales in the U.S. veterinary channel. New pet food products contributing to international sales include Science Plan Canine and Feline Nature's Best, Prescription Diet Canine w/d, r/d and j/d Reduced Calorie and Prescription Diet Hypo Allergenic Canine treats. Operating profit increased 14% in the third quarter of 2008 to $133.3, reflecting increased sales partially offset by higher costs for agricultural commodities.

Worldwide Net sales were $11,665.8 in the first nine months of 2008, up 15.0% from the first nine months of 2007 driven by volume growth of 4.5%, net selling price increases of 4.5% and a positive foreign exchange impact of 6.0%.

Net sales in the Oral, Personal and Home Care segment were $10,091.5 in the first nine months of 2008, up 15.0% from 2007 driven by volume growth of 4.5%, net selling price increases of 4.0% and a positive foreign exchange impact of 6.5%. Within this segment, North America sales increased 6.0% driven by volume growth of 3.0% and net selling price increases of 2.0%, Latin America sales increased 21.5% on volume growth of 6.0% and net selling price increases of 8.5%, Europe/South Pacific sales increased 12.5% on volume growth of 1.5% and Greater Asia/Africa sales increased 18.5% on volume growth of 9.0% and net selling price increases of 4.0%, with the remainder of the increase in each region due to positive foreign exchange. The 2007 divestment of the Latin American household bleach business reduced sales growth for the nine months ended September 30, 2008 by 0.5% versus the comparable period of 2007 for the Latin America region. The 2008 divestment of the Senegal fabric care business reduced sales growth for the nine months ended September 30, 2008 by 0.5% versus the comparable period of 2007 for the Greater Asia/Africa region. Excluding the impact of these divestments, sales increased 22.0% for Latin America and 19.0% for Greater Asia/Africa on volume growth of 6.5% and 9.5%, respectively.

Net sales for the Hill's Pet Nutrition segment increased 16.5% in the first nine months of 2008 to $1,574.3 driven by volume growth of 2.0%, net selling price increases of 10.0% and a positive foreign exchange impact of 4.5%. Like most North American pet food producers, Hill's Pet Nutrition was affected by the U.S. Food and Drug Administration's pet food recall in March 2007. Hill's Pet Nutrition took the precaution of conducting a voluntary recall of a small number of its products that may have been affected. These products accounted for less than 0.5% of Hill's Pet Nutrition's annual 2007 Net sales. Hill's Pet Nutrition's Operating profit for the first nine months of 2007 does not reflect the impact of the recall as those costs have been included in the Corporate segment.

Operating profit (loss) related to Corporate increased slightly to ($162.2) in the third quarter of 2008 from ($160.0) in the comparable period of 2007. Operating profit (loss) related to Corporate increased to ($442.5) in the first nine months of 2008 from ($429.1) in the comparable period of 2007, primarily due to the gain on sale of non-core product lines included in the results for the first nine months of 2007, offset by lower restructuring and implementation-related charges in the first nine months of 2008. The changes in Corporate Operating profit (loss) are summarized in the following table:

                                            Three Months Ended          Nine Months Ended
                                               September 30,              September 30,
                                             2008          2007         2008          2007
 2004 Restructuring Program               $    (47.2 )   $  (51.1 )   $  (124.5 )   $ (152.4 )
 SFAS 88 pension charges                          -         (15.4 )          -         (15.4 )
 Gain on sale of non-core product lines           -            -             -          48.6
 Hill's limited voluntary recall                  -            -             -         (13.6 )
 Other Corporate                              (115.0 )      (93.5 )      (318.0 )     (296.3 )

 Corporate Operating profit (loss)        $   (162.2 )   $ (160.0 )   $  (442.5 )   $ (429.1 )

Restructuring and implementation-related charges are reflected in the following income statement categories:

                                                        Three Months Ended        Nine Months Ended
                                                          September 30,             September 30,
                                                        2008          2007         2008        2007
Cost of sales                                        $     11.1    $     37.4   $     48.0    $ 103.8
Selling, general and administrative expenses               20.9          11.8         54.8       32.9
Other (income) expense, net                                15.2           1.9         21.7       15.7

Total 2004 Restructuring Program charges, pretax     $     47.2    $     51.1   $    124.5    $ 152.4

Total 2004 Restructuring Program charges, aftertax   $     31.2    $     36.3   $     81.9    $ 107.9

For additional information regarding the Company's 2004 Restructuring Program, refer to Note 9, "Restructuring and Related Implementation Charges," of the Notes to Condensed Consolidated Financial Statements.

Worldwide gross profit margin decreased to 56.1% in the third quarter of 2008 from 56.2% in the third quarter of 2007 and increased to 56.4% in the first nine months of 2008 from 56.2% in the first nine months of 2007. Restructuring and implementation-related charges lowered the reported gross profit margin by 30 basis points (bps) and 110 bps in the third quarter of 2008 and 2007, respectively, and lowered the reported gross profit margin by 40 bps and 100 bps in the first nine months of 2008 and 2007, respectively. Excluding the impact of the 2004 Restructuring Program, gross profit margin was 56.4% and 57.3% in the third quarter of 2008 and 2007, respectively, and 56.8% and 57.2% in the first nine months of 2008 and 2007, respectively. For both periods presented the decrease in gross profit margin reflected increases in raw and packaging material costs, partially offset by higher pricing and a continued focus on cost-savings programs.

Selling, general and administrative expenses as a percentage of Net sales decreased to 35.5% in the third quarter of 2008 from 36.2% in the third quarter of 2007 and decreased to 35.9% of Net sales in the first nine months of 2008 from 36.2% in the first nine months of 2007 reflecting a continued focus on cost-savings programs and moderating levels of advertising investment. In the third quarter of 2008 advertising increased 6% to $437.9 as compared with $412.4 in 2007. In the first nine months of 2008 advertising increased 13% to $1,314.1 as compared with $1,159.8 in 2007.

Other (income) expense, net increased from $37.1 in the third quarter of 2007 to $52.4 in the third quarter of 2008. The third quarter of 2008 includes a $13.3 increase in charges related to the 2004 Restructuring Program from $1.9 in the third quarter of 2007 to $15.2 in the third quarter of 2008. The third quarter of 2007 includes $15.4 of SFAS 88 pension charges.

Other (income) expense, net increased from $55.1 in the first nine months of 2007 to $129.7 in the first nine months of 2008. The first nine months of 2008 includes a $13.0 provision in Corporate related to legal and environmental costs, an increase in minority interest expense of $13.5 and a $6.0 increase in expenses related to the Company's 2004 Restructuring Program from $15.7 in the first nine months of 2007 to $21.7 in the first nine months of 2008. The first nine months of 2007 includes a pretax gain of ($48.6) related to the sale of the Company's household bleach business in Latin America, $12.6 of charges related to the limited voluntary recall of certain Hill's Pet Nutrition feline products and $15.4 of SFAS 88 pension charges.

Operating profit increased 15% to $768.4 in the third quarter of 2008 from $668.8 in the 2007 comparable period, benefiting from a $3.9 decrease in charges related to the 2004 Restructuring Program compared to the third quarter of 2007. Restructuring and implementation-related charges were $47.2 and $51.1 for the third quarter of 2008 and 2007, respectively. Operating profit in the third quarter of 2007 also includes $15.4 of SFAS 88 pension charges. Operating profit increased 14% to $2,259.1 in the first nine months of 2008 from $1,977.5 in the 2007 comparable period, benefiting from a $27.9 decrease in charges related to the 2004 Restructuring Program compared to the first nine months of 2007. Restructuring and implementation-related charges were $124.5 and $152.4 for the first nine months of 2008 and 2007, respectively. Additionally, the first nine months of 2007 includes the negative impact of $13.6 related to the limited voluntary recall of certain Hill's Pet Nutrition feline products and $15.4 of SFAS 88 pension charges, offset by a $48.6 gain related to the sale of the Company's household bleach business in Latin America. Excluding the impact of the 2004 Restructuring Program and these other items, operating profit increased 11% in the third quarter of 2008 and 13% in the first nine months of 2008, determined as follows:

                                               Three Months Ended                Nine Months Ended
                                                 September 30,                     September 30,
                                                                 %                                    %
                                            2008      2007     Change       2008        2007        Change
Operating profit, GAAP                     $ 768.4   $ 668.8       15 %   $ 2,259.1   $ 1,977.5         14 %
2004 Restructuring Program                    47.2      51.1                  124.5       152.4
Gain on sale of non-core product lines          -         -                      -        (48.6 )
SFAS 88 pension charges                         -       15.4                     -         15.4
Hill's limited voluntary recall                 -         -                      -         13.6

Operating profit, non-GAAP                 $ 815.6   $ 735.3       11 %   $ 2,383.6   $ 2,110.3         13 %

Interest expense, net decreased to $22.9 and $82.0 for the three and nine months ended September 30, 2008, respectively, as compared with $38.5 and $121.6 in the comparable periods of 2007, due to lower average interest rates and higher cash balances.

The quarterly provision for income taxes is determined based on the Company's estimated full year effective tax rate, adjusted by the amount of tax attributable to infrequent and unusual items that are separately recognized on a discrete basis in the income tax provision in the quarter in which they occur.

The tax rate in 2008 was impacted by discrete period items including the Company's 2004 Restructuring Program and the reversal of tax reserves following the completion of tax audits and the expiration of statutes of limitations, resulting in a 32.9% rate in the third quarter and in the first nine months of 2008. The tax rate in the 2007 third quarter of 33.3% and the nine month period of 28.7% was also impacted by the Company's 2004 Restructuring Program with the nine month tax rate further impacted by the recognition of $73.9 of tax benefits as a result of the reduction of a tax loss carryforward valuation allowance in Brazil of $94.6, partially offset by tax provisions for the recapitalization of certain overseas subsidiaries, the sale of the household bleach business in Latin America, the Hill's Pet Nutrition voluntary recall and SFAS 88 pension charges.

The impact of the 2004 Restructuring Program on an individual period will depend upon the countries and the projects involved. Over its duration, charges associated with the 2004 Restructuring Program are projected to generate tax benefits at a rate between 25% and 30%.

Net income for the third quarter of 2008 increased 19% to $499.9 from $420.1 in the comparable 2007 period, and earnings per common share on a diluted basis increased to $0.94 per share compared with $0.77 per share in the comparable 2007 period. Net income for the third quarter of 2008 and 2007 includes $31.2 ($0.05 per share) and $36.3 ($0.07 per share), respectively, of charges related to the Company's 2004 Restructuring Program. Additionally, net income for the third quarter of 2007 includes the negative impact of $10.0 ($0.02 per share) of SFAS 88 pension charges.

Net income for the first nine months of 2008 increased 10% to $1,460.2 from $1,322.5 in the comparable 2007 period, and earnings per common share on a diluted basis increased to $2.72 per share compared with $2.43 per share in the . . .