Organic Sales Growth In All Operating
Divisions
Colgate-Palmolive Company (NYSE:CL) today reported worldwide Net
sales of $4,379 million in third quarter 2014, a decrease of 0.5%
versus third quarter 2013. Global unit volume grew 2.0%, pricing
increased 1.5% and foreign exchange was negative 4.0%. Organic
sales (Net sales excluding foreign exchange, acquisitions and
divestments) grew 3.5%.
Net income and Diluted earnings per share in third quarter 2014
were $542 million and $0.59, respectively. Net income in third
quarter 2014 included $159 million ($0.17 per diluted share) of
aftertax charges resulting from the implementation of the
previously disclosed four-year Global Growth and Efficiency Program
(the “2012 Restructuring Program”), a Venezuela remeasurement
charge, costs related to the sale of land in Mexico and charges for
a foreign tax matter and a European competition law matter, both
previously disclosed.
Net income and Diluted earnings per share in third quarter 2013
were $656 million and $0.70, respectively. Net income in third
quarter 2013 included aftertax charges of $24 million ($0.03 per
diluted share) resulting from the items described in Table 8.
Excluding the above noted items in both periods, Net income in
third quarter 2014 was $701 million, an increase of 3% versus third
quarter 2013, and Diluted earnings per share in third quarter 2014
was $0.76, an increase of 4% versus third quarter 2013.
Gross profit margin was 58.4% in third quarter 2014 versus 58.8%
in the year ago quarter. Excluding the above noted items in both
periods, Gross profit margin was 58.6% in third quarter 2014, a
decrease of 40 basis points versus the year ago quarter, primarily
as a result of higher pricing and cost savings from the Company’s
funding-the-growth initiatives and from the 2012 Restructuring
Program being more than offset by higher raw and packaging material
costs, which included foreign exchange transaction costs.
Selling, general and administrative expenses were 34.2% of Net
sales in third quarter 2014 versus 35.2% of Net sales in third
quarter 2013. Excluding the above noted items in both periods,
Selling, general and administrative expenses decreased by 110 basis
points to 33.9% of Net sales in third quarter 2014, due to
decreased advertising investment as a percentage of Net sales.
Worldwide advertising investment decreased 10.5% to $428 million
versus the high level of the year ago quarter.
Operating profit decreased 7% to $948 million in third quarter
2014 compared to $1,016 million in third quarter 2013. Excluding
the above noted items in both periods, Operating profit increased
3% to $1,076 million.
Net cash provided by operations year to date was $2,392 million
compared to $2,365 million in the comparable 2013 period, due to
higher operating earnings. Free cash flow before dividends (Net
cash provided by operations less Capital expenditures) exceeded
100% of Net income. Working capital as a percentage of Net sales
was negative 0.5%, an increase of 40 basis points versus the year
ago period primarily due to a decrease in accounts payable and
accrued liabilities.
Ian Cook, Chairman, President and Chief Executive Officer,
commented on the results excluding the 2014 and 2013 items noted
above, “We are pleased to have achieved another quarter of
broad-based organic sales growth and higher profitability, despite
difficult economic conditions worldwide. Operating profit margin
and net income as a percent to sales both increased versus the year
ago period.
“All operating divisions contributed to the 3.5% organic sales
growth, driven by positive unit volume growth and higher pricing.
Organic sales grew 4.5% in emerging markets, despite economic
challenges in certain countries.
“Colgate’s leading global market shares in toothpaste and manual
toothbrushes remain strong at 44.6% and 33.4%, respectively, on a
year-to-date basis. We continue to make great progress in
mouthwash, with our global market share in that category reaching a
record high at 16.9% year to date, up 40 basis points versus the
year ago period.”
The 2012 Restructuring Program is proceeding smoothly. On
October 23, 2014, the Company’s Board of Directors approved an
expansion of the 2012 Restructuring Program to take advantage of
additional savings opportunities. As a result of the expansion,
cumulative aftertax charges related to the 2012 Restructuring
Program, once all phases are approved and implemented, are now
estimated to increase by $175 million, to $950 million to $1,050
million. Aftertax charges for 2014 are now expected to increase by
$25 million, to approximately $225 million to $255 million. Savings
are also projected to increase by $65 million, to $340 million to
$390 million aftertax annually by the fourth year of the program.
The expected savings continue to represent a three to four year
cash payback, on average, with a targeted aftertax rate of return
of 30%. Implementation of the 2012 Restructuring Program is still
expected to be substantially completed by December 31, 2016.
As previously disclosed, Venezuela’s government enacted changes
to its foreign exchange system in the first quarter of 2014. During
the third quarter, the SICAD I rate devalued to a quarter-end rate
of 12 bolivares per dollar. The impact of the remeasurement at the
new rate resulted in an aftertax remeasurement charge of $40
million ($0.04 per diluted share) included in third quarter results
as noted above. Assuming this rate remains for the balance of the
year, the Company expects the ongoing impact on diluted earnings
per share to be approximately $0.03 in the fourth quarter of
2014.
In closing, Mr. Cook commented on the Company’s outlook in light
of the ongoing impact of the changes to Venezuela’s foreign
exchange system and excluding the other 2014 and 2013 items noted
above, “For 2014, we anticipate another year of solid organic sales
growth. Given the recent deterioration in exchange rates, we now
expect gross margin may be flat for the year and expect diluted
earnings per share to grow 3% to 4% on a dollar basis, based on
current spot rates.
“As we look ahead, our long-term goal of double-digit annual
earnings per share growth on a dollar basis remains unchanged. For
2015, our global budget process is still in its initial stages and
since our last earnings release we have already seen a
deterioration in foreign exchange. In light of this, we are
planning for a year of gross margin expansion and mid to high
single-digit earnings per share growth, on a dollar basis based on
current spot rates, excluding charges related to the 2012
Restructuring Program.”
At 11:00 a.m. ET today, Colgate will host a conference call to
elaborate on third quarter results. To access this call as a
webcast, please go to Colgate’s web site at
http://www.colgatepalmolive.com.
The following are comments about divisional performance for
third quarter 2014 versus the year ago period. See attached
Geographic Sales Analysis Percentage Changes and Segment
Information schedules for additional information on divisional net
sales and operating profit.
North America (18% of Company
Sales)
North America Net sales increased 2.0% in third quarter 2014.
Unit volume increased 3.0% with 0.5% lower pricing due to increased
promotional activities and 0.5% negative foreign exchange. Organic
sales increased 2.5% during the quarter.
Operating profit in North America decreased 2% in third quarter
2014 to $240 million, or 110 basis points to 30.4% of Net sales.
This decrease in Operating profit was primarily due to an increase
in Selling, general and administrative expenses, which was
partially offset by an increase in Gross profit, both as a
percentage of Net sales. This increase in Gross profit was
primarily driven by cost savings from the Company’s
funding-the-growth initiatives, which were partially offset by
higher costs, driven by higher raw and packaging material costs,
and pricing. This increase in Selling, general and administrative
expenses was primarily due to increased advertising investment.
In the U.S., new product launches are contributing to volume
growth. Market share gains year to date were seen in manual
toothbrushes, mouthwash, liquid cleaners and fabric conditioners.
In toothpaste, Colgate Enamel Health, Colgate Optic White, Colgate
Optic White Platinum Whiten & Protect, Colgate MaxFresh Cool
Scrub, Colgate Sensitive SmartFoam and Tom’s of Maine toothpastes
had strong sales during the quarter.
In manual toothbrushes, Colgate continued its brand market
leadership in the U.S. with its market share in that category
reaching a record 40.8% year to date, up 2.4 share points versus
the year ago period. This success was driven by strong sales of
Colgate Optic White Toothbrush + Built-In Whitening Pen, Colgate
360° Enamel Health, Colgate 360° Optic White, Colgate 360° Total
Advanced Floss-Tip bristles and Colgate Slim Soft manual
toothbrushes.
Successful products driving volume growth in the U.S. in other
categories include Colgate Total Lasting White, Colgate Total
Advanced Pro-Shield, Colgate Optic White and Colgate Kids
mouthwashes, Fabuloso Fiesta Orange liquid cleaner and Suavitel
Fast Dry fabric conditioner.
Latin America (27% of Company
Sales)
Latin America Net sales decreased 4.5% in third quarter 2014.
Unit volume increased 1.5% with 5.0% higher pricing and 11.0%
negative foreign exchange. Volume gains were led by Venezuela,
Mexico and Colombia and were partially offset by volume declines in
Brazil. Organic sales for Latin America increased 6.0% during the
quarter.
Operating profit in Latin America decreased 8% in third quarter
2014 to $330 million, or 100 basis points to 27.6% of Net
sales. This decrease in Operating profit was due to a decrease
in Gross profit, which was partially offset by a decrease in
Selling, general and administrative expenses, both as a percentage
of Net sales. This decrease in Gross profit was due to higher
costs, primarily driven by higher raw and packaging material costs,
which included foreign exchange transaction costs, partially offset
by cost savings from the Company’s funding-the-growth initiatives
and pricing. This decrease in Selling, general and administrative
expenses was primarily due to decreased advertising investment,
which was partially offset by higher overhead expenses.
Colgate’s strong leadership in toothpaste throughout Latin
America continued during the quarter with Chile and Peru achieving
record high market shares year to date. Strong sales of Colgate
Luminous White Advanced and Colgate Maximum Cavity Protection plus
Neutrazucar toothpastes drove volume growth throughout the region.
Colgate’s leadership in the manual toothbrush market continued
throughout the region, driven by strong sales of Colgate 360°
Luminous White, Colgate Slim Soft Black and Colgate 360°
Interdental manual toothbrushes. In mouthwash, Colgate’s strong
market share performance continued throughout the region, driven by
the success of Colgate Plax Fresh Tea and Colgate Plax 2 in 1
mouthwashes.
Products in other categories contributing to volume growth
include Protex Men, Protex Vitamin E, Protex Omega 3, Palmolive
Naturals Argan Oil and Palmolive Naturals Yogurt and Royal Jelly
bar soaps, Lady Speed Stick and Speed Stick Stress Defense
deodorants, Suavitel Complete and Suavitel Aroma Intense fabric
conditioners, Axion Goodbye Odors dish liquid and Fabuloso Apple
liquid cleaner.
Europe/South Pacific (20% of Company
Sales)
Europe/South Pacific Net sales increased 0.5% in third quarter
2014. Unit volume increased 2.5% with 2.5% lower pricing due to
increased promotional activities and 0.5% positive foreign
exchange. Volume gains were led by the United Kingdom and France.
Organic sales for Europe/South Pacific increased 0.5%.
Operating profit in Europe/South Pacific increased 10% in third
quarter 2014 to $237 million, or 220 basis points to 26.7% of Net
sales. This increase in Operating profit was primarily due to an
increase in Gross profit and a decrease in Selling, general and
administrative expenses, both as a percentage of Net sales. This
increase in Gross profit was primarily driven by cost savings from
the Company’s funding-the-growth initiatives and from the 2012
Restructuring Program, partially offset by higher raw and packaging
material costs, and pricing. This decrease in Selling, general and
administrative expenses was primarily due to decreased advertising
investment, mainly due to the timing of new product launches.
Colgate strengthened its oral care leadership in the
Europe/South Pacific region with toothpaste share gains led by the
United Kingdom, Denmark, Italy, France, Germany, Portugal, Bosnia,
Serbia and New Zealand. Successful premium products driving share
gains include Colgate Max White One Optic, Colgate Max White One
Luminous, Colgate Maximum Cavity Protection plus Sugar Acid
Neutralizer, elmex Sensitive Plus Gentle Whitening and meridol
Gentle White toothpastes. In the manual toothbrush category,
Colgate Cavity Protection, Colgate 360° Interdental and Colgate
Slim Soft Charcoal manual toothbrushes contributed to volume growth
throughout the region.
Recent premium innovations contributing to volume growth in
other product categories include Colgate Plax Deep Clean and
meridol mouthwashes, Palmolive Naturals shower and bath gel for
Kids, Palmolive Men and Palmolive Mediterranean Moments Olive Oil
and Fig shower gels, Ajax All Usage Gel liquid cleaner and Soupline
Paradise Sensations fabric conditioner.
Asia (15% of Company
Sales)
Asia Net sales increased 1.0% during third quarter 2014. Unit
volume increased 0.5% with 0.5% higher pricing. Foreign exchange
was even with the year ago quarter. Volume gains were led by India
and were partially offset by volume declines in the Greater China
region. Organic sales for Asia increased 1.0%.
Operating profit in Asia increased 7% in third quarter 2014 to
$187 million, or 170 basis points to 29.5% of Net sales. This
increase in Operating profit was primarily due to a decrease in
Selling, general and administrative expenses, which was partially
offset by a decrease in Gross profit, both as a percentage of
Net sales. This decrease in Gross profit was due to higher costs,
primarily driven by higher raw and packaging material costs, which
included foreign exchange transaction costs, partially offset by
cost savings from the Company’s funding-the-growth initiatives and
pricing. This decrease in Selling, general and administrative
expenses was due to decreased advertising investment.
Colgate continued its toothpaste leadership in Asia, driven by
market share gains in India, Thailand, the Philippines, Malaysia
and Pakistan. Successful new products including Colgate 360°
Charcoal Deep Clean, Colgate Optic White, Colgate Active Salt
Healthy White and Colgate Maximum Cavity Protection plus Sugar Acid
Neutralizer toothpastes contributed to volume growth in the
region.
Successful products contributing to volume growth in other
categories in the region include Colgate Slim Soft Dual Action and
Colgate 360° Charcoal manual toothbrushes, Colgate Plax Fresh
Jasmine Tea, Colgate Plax Fruity Fresh and Colgate Pro Gum Health
mouthwashes and Palmolive Naturals shampoo and conditioner.
Africa/Eurasia (7% of Company
Sales)
Africa/Eurasia Net sales decreased 3.5% during third quarter
2014. Unit volume increased 3.5% with 1.0% higher pricing and 8.0%
negative foreign exchange. Volume gains were led by Russia and
South Africa and were partially offset by volume declines in the
Central Asia/Caucasus region. Organic sales for Africa/Eurasia
increased 4.5%.
Operating profit in Africa/Eurasia decreased 8% in third quarter
2014 to $60 million, or 80 basis points to 19.4% of Net sales. This
decrease in Operating profit was primarily due to a decrease in
Gross profit, which was partially offset by a decrease in Selling,
general and administrative expenses, both as a percentage of Net
sales. This decrease in Gross profit was primarily due to
higher raw and packaging material costs, driven by higher foreign
exchange transaction costs, partially offset by cost savings from
the Company’s funding-the-growth initiatives and from the 2012
Restructuring Program and pricing. This decrease in Selling,
general and administrative expenses was primarily due to decreased
advertising investment, partially offset by higher overhead
expenses.
Colgate continued its toothpaste leadership in Africa/Eurasia,
driven by market share gains in Sub Saharan Africa, North Africa,
Kenya, Saudi Arabia, United Arab Emirates, Kuwait, the Central
Asia/Caucasus region and Ukraine. Successful products contributing
to volume growth in the region include Colgate Altai Herbs, Colgate
Optic White Instant and Colgate Maximum Cavity Protection plus
Sugar Acid Neutralizer toothpastes, Colgate Slim Soft Charcoal
manual toothbrush, Colgate Altai Herbs mouthwash, Palmolive Gourmet
Spa Peach, Palmolive Gourmet Spa Creamy Coffee and Protex for Men
shower gels and Protex African Therapy bar soap.
Hill’s Pet Nutrition (13% of Company
Sales)
Hill’s Net sales increased 4.0% during third quarter 2014. Unit
volume increased 1.0% with 3.5% higher pricing and 0.5% negative
foreign exchange. Volume gains were led by Russia and South Africa.
Hill’s organic sales increased 4.5%.
Hill’s Operating profit increased 8% in third quarter 2014 to
$149 million, or 100 basis points to 26.3% of Net sales. This
increase in Operating profit was primarily due to a decrease in
Selling, general and administrative expenses and a decrease in
Other (income) expense, net, which were partially offset by a
decrease in Gross profit, all as a percentage of Net sales. This
decrease in Gross profit was primarily due to higher raw and
packaging material costs, which included foreign exchange
transaction costs, partially offset by cost savings from the
Company’s funding-the-growth initiatives and pricing. This decrease
in Selling, general and administrative expenses was primarily due
to decreased advertising investment, partially offset by higher
overhead expenses, the latter due to increased investment in
customer development initiatives. This decrease in Other (income)
expense, net was in part due to the expiration of a third-party
royalty agreement.
New product introductions driving volume growth in the U.S.
include Hill’s Ideal Balance Slim & Healthy, Hill’s Science
Diet Perfect Weight and Hill’s Prescription Diet c/d Multicare
Urinary Stress, c/d Multicare with Ocean Fish, i/d Chicken &
Vegetable Stew and k/d Vegetable & Tuna Stew. Other successful
products driving volume growth include Hill’s Ideal Balance Small
Breed and Grain Free and Hill’s Science Diet Sensitive Stomach
& Skin and Oral Care.
New product introductions driving volume growth internationally
include Hill’s Prescription Diet Metabolic, c/d Multicare Urinary
Stress and c/d Multicare with Ocean Fish, Hill’s Ideal Balance,
Hill’s Science Plan Small & Miniature Breed, and the relaunch
in Japan of Hill’s Science Diet with improved taste.
***
About Colgate-Palmolive: Colgate-Palmolive is a leading global
consumer products company, tightly focused on Oral Care, Personal
Care, Home Care and Pet Nutrition. Colgate sells its products in
over 200 countries and territories around the world under such
internationally recognized brand names as Colgate, Palmolive, Speed
Stick, Lady Speed Stick, Softsoap, Irish Spring, Protex, Sorriso,
Kolynos, elmex, Tom’s of Maine, Sanex, Ajax, Axion, Fabuloso,
Soupline and Suavitel, as well as Hill’s Science Diet, Hill’s
Prescription Diet and Hill’s Ideal Balance. For more information
about Colgate’s global business, visit the Company’s web site at
http://www.colgatepalmolive.com. To learn more about Colgate Bright
Smiles, Bright Futures® oral health education program, please visit
http://www.colgatebsbf.com. CL-E
Market Share Information
Management uses market share information as a key indicator to
monitor business health and performance. References to market share
in this press release are based on a combination of consumption and
market share data provided by third-party vendors, primarily
Nielsen, and internal estimates. All market share references
represent the percentage of the dollar value of sales of our
products, relative to all product sales in the category in the
countries in which the Company competes and purchases data. Market
share data is subject to limitations on the availability of
up-to-date information. We believe that the third-party vendors we
use to provide data are reliable, but we have not verified the
accuracy or completeness of the data or any assumptions underlying
the data. In addition, market share information calculated by the
Company may be different from market share information calculated
by other companies due to differences in category definitions, the
use of data from different countries, internal estimates and other
factors.
Cautionary Statement on Forward-Looking
Statements
This press release and the related webcast may contain
forward-looking statements. Such statements may relate, for
example, to sales or volume growth, organic sales growth, profit or
profit margin growth, earnings growth, financial goals, the impact
of currency devaluations, exchange controls, price controls and
labor unrest, including in Venezuela, cost-reduction plans
including the 2012 Restructuring Program, tax rates, new product
introductions or commercial investment levels. These statements are
made on the basis of our views and assumptions as of this time and
we undertake no obligation to update these statements except as
required by law. We caution investors that any such forward-looking
statements are not guarantees of future performance and that actual
events or results may differ materially from those statements.
Investors should consult the Company’s filings with the Securities
and Exchange Commission (including the information set forth under
the caption “Risk Factors” in the Company’s Annual Report on Form
10-K for the year ended December 31, 2013) for information about
certain factors that could cause such differences. Copies of these
filings may be obtained upon request from the Company’s Investor
Relations Department or on the Company’s web site at
http://www.colgatepalmolive.com.
Non-GAAP Financial Measures
The following provides information regarding the non-GAAP
financial measures used in this earnings release and/or the related
webcast:
This release discusses organic sales growth, which is Net sales
growth excluding the impact of foreign exchange, acquisitions and
divestments. Management believes this measure provides investors
with useful supplemental information regarding the Company’s
underlying sales trends by presenting sales growth excluding the
external factor of foreign exchange as well as the impact from
acquisitions and divestments. See “Geographic Sales Analysis
Percentage Changes” for the three and nine months ended September
30, 2014 vs 2013 included with this release for a comparison of
organic sales growth to sales growth in accordance with accounting
principles generally accepted in the United States of America
(“GAAP”).
To supplement Colgate’s Condensed Consolidated Income Statements
presented in accordance with GAAP, the Company has disclosed
non-GAAP measures of operating results that exclude certain items.
Worldwide Gross profit, Gross profit margin, Selling, general and
administrative expenses, Selling, general and administrative
expenses as a percentage of Net sales, Other (income) expense, net,
Operating profit, Operating profit margin, Net income attributable
to Colgate-Palmolive Company and Diluted earnings per common share
are discussed both as reported (on a GAAP basis) and, as
applicable, excluding charges related to the 2012 Restructuring
Program, charges related to the effective devaluations as a result
of the changes to Venezuela’s foreign exchange system in 2014,
charges related to the devaluation in Venezuela in 2013, costs
related to the sale of land in Mexico, a charge for a foreign tax
matter and charges associated with certain European competition law
matters (non-GAAP). Management believes these non-GAAP financial
measures provide investors with useful supplemental information
regarding the performance of the Company’s ongoing operations. See
“Non-GAAP Reconciliations” for the three and nine months ended
September 30, 2014 and 2013 included with this release for a
reconciliation of these financial measures to the related GAAP
measures.
The Company uses these financial measures internally in its
budgeting process and as factors in determining compensation. While
the Company believes that these financial measures are useful in
evaluating the Company’s business, this information should be
considered as supplemental in nature and is not meant to be
considered in isolation or as a substitute for the related
financial information prepared in accordance with GAAP. In
addition, these non-GAAP financial measures may not be the same as
similar measures presented by other companies.
The Company defines free cash flow before dividends as Net cash
provided by operations less Capital expenditures. As management
uses this measure to evaluate the Company’s ability to satisfy
current and future obligations, repurchase stock, pay dividends and
fund future business opportunities, the Company believes that it
provides useful information to investors. Free cash flow before
dividends is not a measure of cash available for discretionary
expenditures since the Company has certain non-discretionary
obligations such as debt service that are not deducted from the
measure. Free cash flow before dividends is not a GAAP measurement
and may not be comparable to similarly titled measures reported by
other companies. See “Condensed Consolidated Statements of Cash
Flows” for the nine months ended September 30, 2014 and 2013 for a
comparison of free cash flow before dividends to Net cash provided
by operations as reported in accordance with GAAP.
(See attached tables for third quarter
results.)
Table 1 Colgate-Palmolive Company
Condensed Consolidated Income Statements
For the Three Months Ended September 30, 2014 and 2013
(Dollars in Millions Except Per Share Amounts)
(Unaudited) 2014 2013
Net sales $ 4,379 $ 4,398 Cost of sales 1,821 1,813
Gross profit 2,558 2,585 Gross profit margin 58.4 % 58.8 %
Selling, general and administrative expenses 1,497 1,549
Other (income) expense, net 113 20 Operating profit
948 1,016 Operating profit margin 21.6 % 23.1 %
Interest (income) expense, net 4 - Income before income
taxes 944 1,016 Provision for income taxes 364 317
Effective tax rate 38.6 % 31.2 % Net income including
noncontrolling interests 580 699 Less: Net income
attributable to noncontrolling interests 38 43 Net income
attributable to Colgate-Palmolive Company $ 542 $ 656
Earnings per common share Basic $ 0.59 $ 0.71 Diluted $ 0.59 $ 0.70
Average common shares outstanding Basic 913.8 928.1 Diluted
922.8 936.9
Table 2
Colgate-Palmolive Company Condensed
Consolidated Income Statements For the Nine Months
Ended September 30, 2014 and 2013 (Dollars in
Millions Except Per Share Amounts) (Unaudited)
2014 2013 Net sales $ 13,056 $ 13,059
Cost of sales 5,422 5,425 Gross profit 7,634 7,634
Gross profit margin 58.5 % 58.5 % Selling, general
and administrative expenses 4,548 4,611 Other (income)
expense, net 524 359 Operating profit 2,562 2,664
Operating profit margin 19.6 % 20.4 % Interest (income)
expense, net 20 (8 ) Income before income taxes 2,542 2,672
Provision for income taxes 869 863 Effective tax rate
34.2 % 32.3 % Net income including noncontrolling interests
1,673 1,809 Less: Net income attributable to noncontrolling
interests 121 132 Net income attributable to
Colgate-Palmolive Company $ 1,552 $ 1,677 Earnings per
common share Basic $ 1.69 $ 1.80 Diluted $ 1.68 $ 1.78
Average common shares outstanding Basic 916.4 932.5 Diluted 925.7
941.4
Table 3
Colgate-Palmolive Company
Condensed Consolidated Balance
Sheets
As of September 30, 2014, December 31,
2013 and September 30, 2013
(Dollars in Millions)
(Unaudited)
September
30, December 31, September 30, 2014 2013 2013 Cash and cash
equivalents $ 1,355 $ 962 $ 721 Receivables, net 1,747 1,636 1,737
Inventories 1,422 1,425 1,441 Other current assets 657 799 701
Property, plant and equipment, net 4,038 4,083 3,858 Other assets,
including goodwill and intangibles 4,466 4,971
4,981 Total assets $ 13,685 $ 13,876
$ 13,439 Total debt $ 6,055 $ 5,657 $ 5,284
Other current liabilities 3,798 3,562 3,884 Other non-current
liabilities 2,086 2,121 2,264
Total liabilities 11,939 11,340 11,432 Total
Colgate-Palmolive Company shareholders' equity 1,420 2,305 1,784
Noncontrolling interests 326 231
223 Total liabilities and shareholders' equity $ 13,685
$ 13,876 $ 13,439
Supplemental
Balance Sheet Information Debt less cash, cash equivalents and
marketable securities* $ 4,576 $ 4,522 $ 4,417 Working capital % of
sales (0.5 )% 0.7 % (0.9 )% *
Marketable securities of $124, $173 and
$146 as of September 30, 2014, December 31, 2013 and September 30,
2013, respectively, are included in Other current assets.
Table 4
Colgate-Palmolive Company Condensed
Consolidated Statements of Cash Flows For the Nine
Months Ended September 30, 2014 and 2013 (Dollars in
Millions) (Unaudited) 2014
2013
Operating Activities Net income including
noncontrolling interests $ 1,673 $ 1,809 Adjustments to reconcile
net income including noncontrolling interests to net cash provided
by operations: Depreciation and amortization 329 329 Restructuring
and termination benefits, net of cash 69 82 Voluntary benefit plan
contribution (2 ) (101 ) Venezuela remeasurement charges 327 172
Charge for a foreign tax matter 66 - Stock-based compensation
expense 109 105 Deferred income taxes (35 ) 35 Cash effects of
changes in: Receivables (222 ) (137 ) Inventories (51 ) (107 )
Accounts payable and other accruals 100 121 Other non-current
assets and liabilities 29 57 Net cash
provided by operations 2,392 2,365
Investing
Activities Capital expenditures (493 ) (419 ) Purchases of
marketable securities and investments (232 ) (408 ) Proceeds from
sale of marketable securities and investments 277 195 Payment for
acquisitions, net of cash acquired (25 ) - Other 18
4 Net cash used in investing activities (455 ) (628 )
Financing Activities Principal payments on debt
(6,220 ) (5,504 ) Proceeds from issuance of debt 6,597 5,563
Dividends paid (990 ) (1,030 ) Purchases of treasury shares (1,119
) (1,115 ) Proceeds from exercise of stock options and excess tax
benefits 295 276 Net cash used in
financing activities (1,437 ) (1,810 ) Effect of exchange
rate changes on Cash and cash equivalents (107 ) (90
) Net increase (decrease) in Cash and cash equivalents 393 (163 )
Cash and cash equivalents at beginning of the period 962
884 Cash and cash equivalents at end of the
period $ 1,355 $ 721
Supplemental Cash Flow
Information Free cash flow before dividends (Net cash provided
by operations less Capital expenditures) Net cash provided by
operations $ 2,392 $ 2,365 Less: Capital expenditures (493 )
(419 ) Free cash flow before dividends $ 1,899 $
1,946 Income taxes paid $ 781 $ 781
Table 5
Colgate-Palmolive Company
Segment Information
For the Three and Nine Months Ended
September 30, 2014 and 2013
(Dollars in Millions)
(Unaudited)
Three Months EndedSeptember 30,
Nine Months EndedSeptember 30,
2014 2013 2014 2013
Net Sales Oral, Personal and Home Care
North America $ 789 $ 774 $ 2,344 $ 2,300 Latin America
1,194 1,251 3,577 3,747 Europe/South Pacific 886 880 2,624 2,552
Asia 634 627 1,916 1,900 Africa/Eurasia 310
321 916 932 Total Oral,
Personal and Home Care 3,813 3,853 11,377 11,431 Pet
Nutrition 566 545 1,679
1,628
Total Net Sales $ 4,379 $
4,398 $ 13,056 $ 13,059
Three Months EndedSeptember 30,
Nine Months EndedSeptember 30,
2014 2013 2014 2013
Operating Profit Oral, Personal and Home
Care North America $ 240 $ 244 $ 687 $ 686 Latin America 330
358 931 1,022 Europe/South Pacific 237 216 681 605 Asia 187 174 558
533 Africa/Eurasia 60 65 177
192 Total Oral, Personal and Home Care
1,054 1,057 3,034 3,038 Pet Nutrition 149 138 439 410
Corporate(1) (255 ) (179 ) (911 ) (784
)
Total Operating Profit $ 948 $ 1,016
$ 2,562 $ 2,664 Note: (1) Corporate operations
includes costs related to stock options and restricted stock units,
research and development costs, Corporate overhead costs,
restructuring and related implementation costs and gains and losses
on sales of non-core product lines and assets. Corporate
Operating profit (loss) for the three months ended September 30,
2014 includes charges of $55 related to the 2012 Restructuring
Program, a charge of $61 related to the Venezuela remeasurements,
costs of $1 related to the sale of land in Mexico and a charge of
$11 for a European competition law matter. For the three months
ended September 30, 2013, Corporate Operating profit (loss)
included charges of $30 related to the 2012 Restructuring Program
and costs of $3 related to the sale of land in Mexico.
Corporate Operating profit (loss) for the nine months ended
September 30, 2014 includes charges of $231 related to the 2012
Restructuring Program, a charge of $327 related to the Venezuela
remeasurements, costs of $4 related to the sale of land in Mexico
and a charge of $11 for a European competition law matter. For the
nine months ended September 30, 2013, Corporate Operating profit
(loss) included charges of $198 related to the 2012 Restructuring
Program, a charge of $172 related to the Venezuela remeasurement,
costs of $14 related to the sale of land in Mexico and a charge of
$18 for a European competition law matter.
Table
6 Colgate-Palmolive Company Geographic
Sales Analysis Percentage Changes For the Three
Months Ended September 30, 2014 vs 2013
(Unaudited)
COMPONENTS OF SALES CHANGE
Pricing Coupons Sales Consumer &
Change Organic As Reported Organic
Ex-Divested Trade Foreign
Region
As
Reported
Sales
Change
Volume
Volume
Volume
Incentives
Exchange
Total Company (0.5)% 3.5 % 2.0 % 2.0 % 2.0 % 1.5 %
(4.0)%
Europe/South Pacific 0.5 % 0.5 % 2.5 % 3.0 %
3.0 % (2.5)% 0.5 %
Latin America (4.5)% 6.0 % 1.5 %
1.0 % 1.5 % 5.0 % (11.0)%
Asia 1.0 % 1.0 % 0.5 % 0.5
% 0.5 % 0.5 % - %
Africa/Eurasia (3.5)% 4.5 % 3.5 %
3.5 % 3.5 % 1.0 % (8.0)%
Total International (2.0)%
3.5 % 1.5 % 2.0 % 2.0 % 1.5 % (5.0)%
North America
2.0 % 2.5 % 3.0 % 3.0 % 3.0 % (0.5)% (0.5)%
Total CP
Products (1.0)% 3.0 % 2.0 % 2.0 % 2.0 % 1.0 % (4.0)%
Hill's 4.0 % 4.5 % 1.0 % 1.0 % 1.0 % 3.5 % (0.5)%
Emerging Markets (1) (2.5)% 4.5 % 1.5 % 1.5 %
1.5 % 3.0 % (7.0)%
Developed Markets 1.5 % 2.0 % 2.0
% 2.5 % 2.5 % (0.5)% - % Notes: (1) Emerging Markets
include Latin America, Asia (excluding Japan), Africa/Eurasia and
Central Europe.
Table 7 Colgate-Palmolive
Company Geographic Sales Analysis Percentage
Changes For the Nine Months Ended September 30, 2014
vs 2013 (Unaudited)
COMPONENTS OF SALES CHANGE
Pricing Coupons Sales
Consumer & Change Organic As
Reported Organic Ex-Divested Trade
Foreign
Region
As
Reported
Sales
Change
Volume
Volume
Volume
Incentives
Exchange
Total Company - % 4.5 % 3.0 % 3.0 % 3.0 % 1.5 %
(4.5)%
Europe/South Pacific 3.0 % 1.5 % 3.5 % 4.0 %
4.0 % (2.5)% 2.0 %
Latin America (4.5)% 8.5 % 3.0 %
3.0 % 3.0 % 5.5 % (13.0)%
Asia 1.0 % 4.0 % 3.5 % 3.5
% 3.5 % 0.5 % (3.0)%
Africa/Eurasia (1.5)% 7.0 % 6.5
% 6.5 % 6.5 % 0.5 % (8.5)%
Total International (1.0)%
5.5 % 3.5 % 3.5 % 3.5 % 2.0 % (6.5)%
North America
2.0 % 2.5 % 3.5 % 3.5 % 3.5 % (1.0)% (0.5)%
Total CP
Products (0.5)% 4.5 % 3.5 % 3.5 % 3.5 % 1.0 % (5.0)%
Hill's 3.0% 4.0 % 1.0 % 1.0 % 1.0 % 3.0 % (1.0)%
Emerging Markets (1) (2.0)% 7.0 % 4.0 % 4.0 %
4.0 % 3.0 % (9.0)%
Developed Markets 2.0 % 2.0 % 2.0
% 2.5 % 2.5 % (0.5)% 0.5 % Notes: (1) Emerging
Markets include Latin America, Asia (excluding Japan),
Africa/Eurasia and Central Europe.
Table 8
Colgate-Palmolive Company
Non-GAAP Reconciliations
For the Three Months Ended September 30, 2014 and
2013
(Dollars in Millions Except Per Share
Amounts) (Unaudited)
Gross Profit
2014 2013 Gross profit,
GAAP $ 2,558 $ 2,585 2012 Restructuring Program 7 8 Costs related
to the sale of land in Mexico 1 3 Gross
profit, non-GAAP $ 2,566 $ 2,596
Basis
Point Gross Profit Margin 2014 2013
Change Gross profit margin, GAAP 58.4 % 58.8 % (40 ) 2012
Restructuring Program 0.2 % 0.2 % Costs related to the sale of land
in Mexico - % - % Gross profit margin,
non-GAAP 58.6 % 59.0 % (40 )
Selling, General and Administrative Expenses 2014
2013 Selling, general and administrative expenses, GAAP $
1,497 $ 1,549 2012 Restructuring Program (13 ) (9 )
Selling, general and administrative expenses, non-GAAP $ 1,484
$ 1,540
Basis Point Selling, General
and Administrative Expenses as a Percentage of Net Sales
2014 2013 Change Selling, general and
administrative expenses as a percentage of Net sales, GAAP 34.2 %
35.2 % (100 ) 2012 Restructuring Program (0.3 %) (0.2
%) Selling, general and administrative expenses as a
percentage of Net sales, non-GAAP 33.9 % 35.0 % (110
)
Other (Income) Expense, Net 2014
2013 Other (income) expense, net, GAAP $ 113 $ 20 2012
Restructuring Program (35 ) (13 ) Venezuela remeasurement charge
(61 ) - Charge for a European competition law matter (11 )
- Other (income) expense, net, non-GAAP $ 6 $
7
Operating Profit 2014
2013 % Change Operating profit, GAAP $ 948 $ 1,016 (7
%) 2012 Restructuring Program 55 30 Venezuela remeasurement charge
61 - Costs related to the sale of land in Mexico 1 3 Charge for a
European competition law matter 11 -
Operating profit, non-GAAP $ 1,076 $ 1,049 3 %
Basis Point Operating Profit Margin
2014 2013 Change Operating profit margin, GAAP
21.6 % 23.1 % (150 ) 2012 Restructuring Program 1.3 % 0.7 %
Venezuela remeasurement charge 1.4 % - % Costs related to the sale
of land in Mexico - % 0.1 % Charge for a European competition law
matter 0.3 % - % Operating profit margin,
non-GAAP 24.6 % 23.9 % 70
Net
Income Attributable to Colgate-Palmolive Company 2014
2013 % Change Net income attributable to
Colgate-Palmolive Company, GAAP $ 542 $ 656 (17 %) 2012
Restructuring Program 41 22 Venezuela remeasurement charge 40 -
Costs related to the sale of land in Mexico 1 2 Charge for a
foreign tax matter 66 - Charge for a European competition law
matter 11 - Net income
attributable to Colgate-Palmolive Company, non-GAAP $ 701 $
680 3 %
Diluted Earnings Per Common
Share(1) 2014 2013 % Change Diluted
earnings per common share, GAAP $ 0.59 $ 0.70 (16 %) 2012
Restructuring Program 0.05 0.02 Venezuela remeasurement charge 0.04
- Costs related to the sale of land in Mexico - 0.01 Charge for a
foreign tax matter 0.07 - Charge for a European competition law
matter 0.01 - Diluted earnings
per common share, non-GAAP $ 0.76 $ 0.73 4 %
(1) The impact of non-GAAP adjustments on diluted earnings per
share may not necessarily equal the difference between "GAAP" and
"non-GAAP" as a result of rounding.
Table 9
Colgate-Palmolive Company
Non-GAAP Reconciliations
For the Nine Months Ended September 30, 2014 and 2013
(Dollars in Millions Except Per Share
Amounts) (Unaudited)
Gross Profit 2014
2013 Gross profit, GAAP $ 7,634
$ 7,634 2012 Restructuring Program 23 26 Costs related to the sale
of land in Mexico 4 11 Gross profit,
non-GAAP $ 7,661 $ 7,671
Basis Point
Gross Profit Margin 2014 2013 Change
Gross profit margin, GAAP 58.5 % 58.5 % - 2012 Restructuring
Program 0.2 % 0.2 % Costs related to the sale of land in Mexico
- % - % Gross profit margin, non-GAAP
58.7 % 58.7 % -
Selling, General and
Administrative Expenses 2014 2013 Selling,
general and administrative expenses, GAAP $ 4,548 $ 4,611 2012
Restructuring Program (42 ) (31 ) Selling, general
and administrative expenses, non-GAAP $ 4,506 $ 4,580
Basis Point Selling, General and Administrative
Expenses as a Percentage of Net Sales 2014 2013
Change Selling, general and administrative expenses as a
percentage of Net sales, GAAP 34.8 % 35.3 % (50 ) 2012
Restructuring Program (0.3 %) (0.2 %) Selling,
general and administrative expenses as a percentage of Net sales,
non-GAAP 34.5 % 35.1 % (60 )
Other
(Income) Expense, Net 2014 2013 Other (income)
expense, net, GAAP $ 524 $ 359 2012 Restructuring Program (166 )
(141 ) Venezuela remeasurement charges (327 ) (172 ) Costs related
to the sale of land in Mexico - (3 ) Charges for European
competition law matters (11 ) (18 ) Other (income)
expense, net, non-GAAP $ 20 $ 25
Operating Profit 2014 2013 % Change
Operating profit, GAAP $ 2,562 $ 2,664 (4 %) 2012 Restructuring
Program 231 198 Venezuela remeasurement charges 327 172 Costs
related to the sale of land in Mexico 4 14 Charges for European
competition law matters 11 18
Operating profit, non-GAAP $ 3,135 $ 3,066 2 %
Basis Point Operating Profit Margin 2014
2013 Change Operating profit margin, GAAP 19.6 % 20.4
% (80 ) 2012 Restructuring Program 1.8 % 1.5 % Venezuela
remeasurement charges 2.5 % 1.3 % Costs related to the sale of land
in Mexico - % 0.1 % Charges for European competition law matters
0.1 % 0.2 % Operating profit margin, non-GAAP
24.0 % 23.5 % 50
Net Income
Attributable to Colgate-Palmolive Company 2014
2013 % Change Net income attributable to
Colgate-Palmolive Company, GAAP $ 1,552 $ 1,677 (7 %) 2012
Restructuring Program 167 153 Venezuela remeasurement charges 214
111 Costs related to the sale of land in Mexico 3 9 Charge for a
foreign tax matter 66 - Charges for European competition law
matters 11 18 Net income
attributable to Colgate-Palmolive Company, non-GAAP $ 2,013
$ 1,968 2 %
Diluted Earnings Per Common
Share (1) (2) 2014 2013 % Change
Diluted earnings per common share, GAAP $ 1.68 $ 1.78 (6 %) 2012
Restructuring Program 0.18 0.16 Venezuela remeasurement charges
0.23 0.12 Costs related to the sale of land in Mexico - 0.01 Charge
for a foreign tax matter 0.07 - Charges for European competition
law matters 0.01 0.02 Diluted
earnings per common share, non-GAAP $ 2.17 $ 2.09 4 %
(1) The impact of non-GAAP adjustments on diluted earnings
per share may not necessarily equal the difference between "GAAP"
and "non-GAAP" as a result of rounding. (2) Basic and
diluted earnings per share are computed independently for each
quarter and any year-to-date period presented. As a result of
changes in shares outstanding during the year and rounding, the sum
of the quarters’ earnings per share may not necessarily equal the
earnings per share for any year-to-date period.
Colgate-Palmolive CompanyBina Thompson, 212-310-3072orHope
Spiller, 212-310-2291
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