Excellent Worldwide Unit Volume Growth NEW YORK, April 26, 2006
/PRNewswire-FirstCall/ -- Colgate-Palmolive Company (NYSE:CL) today
announced strong worldwide sales and unit volume growth for first
quarter 2006, with every operating division delivering volume
increases. Worldwide sales and unit volume, as reported including
divestments, grew 4.5%. Excluding divestments, worldwide sales and
unit volume grew 7.0%, on top of 7.5% volume growth in the year ago
quarter. Increased global pricing of 1.5% was offset by negative
foreign exchange of 1.5%. The strong top line growth was supported
by record level advertising spending. First quarter 2006 results
include $46.8 million of aftertax charges related to the 2004
Restructuring Program. As previously disclosed, effective January
1, 2006, the Company adopted FAS 123R related to stock-based
compensation, which resulted in an incremental $12.1 million
non-cash, aftertax charge in the current quarter or $.02 per share,
with no such charge in 2005. Reported net income and diluted
earnings per share were $324.5 million and $.59, respectively,
including the restructuring and stock compensation charges noted
above. Excluding these items, net income in the quarter increased
11% versus first quarter 2005 to $383.4 million and diluted
earnings per share increased 15% to $.70. In first quarter 2005,
reported net income and diluted earnings per share were $300.1
million and $.53, respectively, and net income and diluted earnings
per share excluding restructuring charges were $344.7 million and
$.61, respectively. As reported, gross profit margin was 54.5%.
Excluding restructuring charges, gross profit margin was 56.3%,
reaching an all-time record and a 110 basis point improvement
versus the year ago quarter. Operating profit as reported increased
5% versus first quarter 2005. Excluding the restructuring and stock
compensation charges, operating profit increased 11% versus first
quarter 2005. Worldwide advertising supporting Colgate's brands
also rose 11% to $297.1 million, a first quarter record, with every
operating division increasing their advertising spending as a
percent to sales during the quarter. Net cash provided by
operations decreased 10% to $382.5 million versus the year ago
period, as higher cash from operations was more than offset by
higher income tax payments during the quarter. The increase in
first quarter income taxes paid is primarily timing-related and
does not change the Company's previously announced expected full
year tax range of 31% to 32%. End of first quarter working capital
improved versus year ago to 1.5% of sales. Reuben Mark, Chairman
and CEO said, "We are very pleased to begin 2006 with excellent top
and bottom line growth, exceeding expectations and building on the
strong growth momentum we saw in 2005. "We are especially
encouraged by the 110 basis point improvement in gross profit
margin during the quarter, to an all-time record and the largest
quarterly gross profit increase in over three years. This increase,
aided by our ongoing savings programs, the benefits from
restructuring, increased pricing and a continued shift toward
higher margin products, allowed us to fund a double-digit increase
in advertising supporting Colgate brands, while at the same time
delivering a double-digit increase in earnings per share." Ian
Cook, President and COO further commented, "We are delighted that
our higher level of advertising support is driving market share
gains worldwide. "Unit volume in Oral Care was up significantly in
every geographic division, and was up 10% worldwide. "Our global
toothpaste leadership continues to expand with market share
increases both here in the U.S. and in key countries around the
world. Colgate's worldwide growth in manual toothbrushes also
continues to strengthen, with our global market share in this
category increasing versus year ago to another record high." Mr.
Mark continued, "Colgate's fundamentals are very strong. Despite
sharply rising energy costs, we expect our gross profit margin,
before restructuring charges, to be up nicely for the year as a
result of our ongoing cost-savings initiatives, improved pricing,
restructuring and promotional savings. "This quarter's strong
results add to our confidence that we will deliver double-digit
E.P.S. growth for the year, excluding restructuring and stock
compensation charges." At 10:30 a.m. ET today, Colgate will host a
conference call to elaborate on first quarter results. To access
this call as a webcast, please go to Colgate's web site at
http://www.colgate.com/. The following are comments about
divisional performance. See attached Geographic Sales Analysis and
Segment Information schedules for additional information on
divisional sales and operating profit. The information regarding
Europe/South Pacific and Greater Asia/Africa reflects the modified
geographic reporting structure implemented by Colgate effective
January 1, 2006, as previously disclosed. North America (22% of
Company Sales) Positive growth continued in North America, fueled
by new product sales and market share gains. Sales and unit volume,
excluding divestments, grew 7.0% and 6.5%, respectively, to a
record level, on top of very strong growth in the year ago period.
Sales as reported rose 1.5%, on 1.0% volume growth during the
quarter because of the year-on-year impact of the divestment of the
North American detergent business. Positive foreign exchange added
0.5% while pricing was even with the year ago period. North
American operating profit decreased 3%, primarily as a result of
the detergent divestment and a planned increase in advertising
spending. Excluding the divestment, operating profit percentage
growth from North America would have been in the mid single-digits,
even after a significant increase in advertising during the
quarter. Colgate's leadership of the U.S. toothpaste market
continues to grow, with its ACNielsen market share reaching 36.5%
year to date, up 30 basis points versus the year ago period and
over three share points ahead of the number two competitor. In the
U.S., new products are generating strong volume and market share
growth. Key categories continuing to gain market share versus prior
year include toothpaste, manual toothbrushes, bar soap and fabric
conditioners. In oral care, strong growth in Colgate Luminous and
Colgate Max Fresh toothpastes and Colgate 360 Degree manual
toothbrush contributed to the share gains. New products
contributing to growth in other categories include Ajax Ruby Red
Grapefruit and Palmolive Oxy Plus dish liquids, Irish Spring
MicroClean bar soap, and Softsoap Brand Kitchen Fresh Hands and
Softsoap Brand Shea Butter liquid hand soaps. Positive growth
momentum in the U.S. is expected to continue throughout the year
driven by new product launches supported by higher advertising
spending. Recent introductions for 2006 include Softsoap Brand Pure
Cashmere moisturizing body wash and Speed Stick deodorant with
Irish Spring scents. Latin America (24% of Company Sales) Latin
American dollar sales grew 17.5% in the first quarter to a record
level. Unit volume for the region grew 7.0% on top of excellent
growth in the year ago period. All 18 countries in the region
contributed to the strong volume gains, led by Brazil, Mexico,
Venezuela, Colombia, Central America and Argentina. Positive
foreign exchange added 4.0% and higher pricing contributed 6.5%.
Latin American operating profit increased 29%, to an all- time
record level even after a strong double-digit increase in
advertising behind Colgate brands during the quarter. Colgate
continues to build its strong leadership in oral care throughout
Latin America with toothpaste market share gains seen in nearly
every country in the region, reaching record highs in Venezuela,
Colombia and Ecuador. New products contributing to these gains
include Colgate Max Fresh and Colgate Sensitive Whitening
toothpastes and the relaunch of Colgate Total toothpaste with new
packaging and strong advertising highlighting the toothpaste's
ability to provide complete 12 hour protection while actively
fighting 12 teeth and gum problems. Other new products driving
growth in Latin America are Colgate MicroSonic battery-powered
toothbrush, Colgate Smiles line of manual toothbrushes for kids,
Palmolive Nutri-Milk and Protex Propolis bar soaps, and Lady Speed
Stick and Speed Stick multiform deodorants. Europe/South Pacific
(24% of Company Sales) Europe/South Pacific volume grew 8.0%,
excluding divestments, on top of a very strong performance in the
year ago quarter. Strong volume gains in the United Kingdom,
Germany, Denmark, Spain, Italy, Ireland, Greece, Holland, Adria,
Poland, the Baltic States, Hungary, and Australia more than offset
challenging economic conditions in France. The GABA oral care
business continues to perform ahead of expectations, achieving
strong sales and unit volume growth during the quarter. Dollar
sales in the region, excluding divestments, declined 3.5%, as
strong unit volume growth was more than offset by 9.0% negative
foreign exchange and negative pricing of 2.5%. As reported,
Europe/South Pacific sales declined 4.0% and unit volume grew 7.5%.
Operating profit for the region grew 8% in local currency, while
decreasing 1% in dollars as a result of the sharp decrease in
European currency value. Colgate maintained its oral care
leadership in Europe led by toothpaste market share gains in the
United Kingdom, Spain, Greece, Ireland, Holland, Austria, Poland,
Czech Republic, Slovenia and Bulgaria. Successful new products
driving these gains include Colgate Sensitive Plus Whitening,
Colgate Max Fresh and Colgate Oxygen toothpastes. Recent
innovations contributing to gains in other categories include
Palmolive Naturals with Olive Milk and Palmolive Thermal Spa
Firming shower gels and Ajax Professional Degreaser spray cleaner.
Greater Asia/Africa (17% of Company Sales) Greater Asia/Africa
sales and unit volume, excluding divestments, grew 8.5% and 7.0%,
respectively, on top of strong growth in the year ago quarter.
Strong volume gains were achieved in India, Vietnam, Hong Kong,
Malaysia, Thailand, Russia, Ukraine, Turkey, Saudi Arabia, the Gulf
States and South Africa. Greater China volume was even with the
very strong 18% growth in the year ago quarter, with dollar sales
up in the mid single-digits. Pricing increased 2.5% and foreign
exchange was negative 1.0%. Sales and volume, as reported,
increased 4.0% and 2.5%, respectively, reflecting the year-on-year
impact of the divestment of the detergent business in Southeast
Asia. Operating profit for the region increased 4% to a record
level and would have been up double-digit, excluding the detergent
divestment, despite a record level of advertising supporting
Colgate brands during the quarter. Colgate strengthened its oral
care leadership in the region led by toothpaste market share gains
in Greater China, India, Hong Kong, Russia and Turkey. Regional
toothbrush market shares for the Colgate equity reached a record
high during the quarter. Successful new products driving the oral
care growth include Colgate Max Fresh, Colgate Propolis and Darlie
Tea Care toothpastes, Colgate 360 Degree manual toothbrush and
Colgate MicroSonic battery-powered toothbrush. New products
contributing to growth in other categories in the region include
Palmolive Aromatherapy with Propolis shower gel and liquid hand
soap, Palmolive Thermal Spa bar soap and liquid hand soap, Protex
Sun Care bar soap, Protex Icy Cool Talc and Palmolive Naturals
shampoo and conditioner. Hill's (13% of Company Sales) Innovative
new products and veterinary endorsements continue to drive growth
at Hill's, a world leader in specialty pet food. Hill's sales and
unit volume grew 7.0% and 5.5%, respectively, to a first quarter
record level and the best volume increase in twelve quarters.
Positive pricing of 4.5% offset the unfavorable foreign exchange of
3.0%. Operating profit increased 6% to a record level during the
quarter. Innovative new products contributing to growth in the U.S.
specialty retail channel during the quarter include Science Diet
Lamb Meal & Rice Recipe Large Breed dog food, Science Diet Lamb
Meal & Rice Recipe Small Bites dog food, and Science Diet
Indoor Cat food. In the U.S. veterinary channel, sales of
Prescription Diet j/d Canine, a food clinically proven to improve
mobility in dogs with arthritis, and the relaunch of Prescription
Diet d/d Canine and Feline, which addresses a range of inflammatory
skin conditions, continue to exceed expectations. Internationally,
growth was strong led by Australia, Taiwan, Belgium, Germany,
Italy, Denmark, Israel, South Africa and the United Kingdom. * * *
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,
Mennen, Softsoap, Irish Spring, Protex, Sorriso, Kolynos, Elmex,
Ajax, Axion, Soupline, and Suavitel, as well as Hill's Science Diet
and Hill's Prescription Diet pet foods. For more information about
Colgate's global business, visit the Company's web site at
http://www.colgate.com/. This press release and the related webcast
(other than historical information) may contain forward-looking
statements. 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 captions "Risk Factors" and
"Cautionary Statement on Forward-Looking Statements" in the
Company's Form 10-K for the year ended December 31, 2005) for
information about factors that could cause such differences. Copies
of these filings may be obtained upon request from the Company's
Investor Relations Department or the Company's web site at
http://www.colgate.com/. Non-GAAP Financial Measures The following
provides information regarding the non-GAAP measures used in this
earnings release: To supplement Colgate's condensed consolidated
financial statements presented in accordance with accounting
principles generally accepted in the United States of America
(GAAP), the Company has disclosed non-GAAP measures of operating
results that exclude certain items. Gross profit margin, operating
profit, effective tax rate, net income, and earnings per share are
discussed in this release both as reported (on a GAAP basis) and
excluding the impact of certain items, which are composed of
charges related to the restructuring program that began in the
fourth quarter of 2004 and is expected to be substantially
completed by 2008 (the "2004 Restructuring Program") as well as the
incremental charge associated with the adoption of a new accounting
standard, "Other Item," as explained below. The restructuring
charges, which are reported in the corporate segment, include
separation- related costs, incremental depreciation and asset
write-downs and other costs related to the implementation of the
2004 Restructuring Program. In light of their nature and magnitude,
the Company believes the above items should be presented separately
to enhance an investor's overall understanding of its ongoing
operations. The Other Item, which pertains to 2006, reflects an
incremental non-cash charge associated with the Company's adoption
of Financial Accounting Standards Board Statement of Financial
Accounting Standards No. 123R, "Share-Based Payment" (FAS 123R).
The Company adopted FAS 123R effective January 1, 2006 using the
modified prospective transition method and therefore has not
restated prior periods' results. However, as required by FAS 123R,
the Company recorded an incremental stock-based compensation charge
related to the expensing of stock options and the accelerated
expense recognition of restricted stock awards granted to
retirement eligible individuals in the results for the three months
ended March 31, 2006. To enhance an investor's ability to make
period over period comparisons, the Company believes this item
should be presented separately for as long as the prior period does
not include the charge. Management believes these non-GAAP
financial measures provide useful information to investors
regarding the underlying business trends and performance of the
Company's ongoing operations and are useful for period over period
comparisons of such operations. 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. See "Consolidated
Income Statement and Supplemental Information - Reconciliation
Excluding the 2004 Restructuring Program and Other Item" for the
three months ended March 31, 2006 and 2005 included with this
release for a reconciliation of these financial measures to the
related GAAP measures. Sales and unit volume growth, both worldwide
and in relevant geographic divisions, and operating profit in
certain geographic divisions are discussed in this release both as
reported and excluding divestments. Management believes this
provides useful information to investors as it allows comparisons
of sales growth and volume growth and operating profit from ongoing
operations. See "Geographic Sales Analysis, Percentage Changes -
First Quarter 2006 vs. 2005" for a comparison of sales excluding
divestments to sales as reported in accordance with GAAP. 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 attached tables for first quarter results.)
Table 1 Colgate-Palmolive Company Consolidated Income Statement and
Supplemental Information Reconciliation Excluding the 2004
Restructuring Program and Other Item For the Three Months Ended
March 31, 2006 and 2005 (in Millions Except Per Share Amounts)
(Unaudited) 2006 Adoption Impact Excluding As of FAS Restructuring
Reported Restructuring 123R & FAS 123R Net sales $2,870.6 $ - $
- $2,870.6 Cost of sales 1,307.1 52.1 - 1,255.0 Gross profit
1,563.5 (52.1) - 1,615.6 Gross profit margin 54.5% 56.3% Selling,
general and administrative expenses 1,017.6 5.0 17.6 995.0 Other
(income) expense, net 28.4 8.7 - 19.7 Operating profit 517.5 (65.8)
(17.6) 600.9 Operating profit margin 18.0% 20.9% Interest expense,
net 37.3 - - 37.3 Income before income taxes 480.2 (65.8) (17.6)
563.6 Provision for income taxes 155.7 (19.0) (5.5) 180.2 Effective
tax rate 32.4% 32.0% Net income 324.5 (46.8) (12.1) 383.4 Earnings
per common share Basic $0.62 $(0.09) $(0.02) $0.73 Diluted $0.59
$(0.09) $(0.02) $0.70 Average common shares outstanding Basic 515.2
515.2 515.2 515.2 Diluted 549.8 549.8 549.8 549.8 2005 Excluding As
Reported Restructuring Restructuring Net sales $2,743.0 $ -
$2,743.0 Cost of sales 1,239.4 10.7 1,228.7 Gross profit 1,503.6
(10.7) 1,514.3 Gross profit margin 54.8% 55.2% Selling, general and
administrative expenses 944.4 - 944.4 Other (income) expense, net
66.6 39.0 27.6 Operating profit 492.6 (49.7) 542.3 Operating profit
margin 18.0% 19.8% Interest expense, net 31.6 - 31.6 Income before
income taxes 461.0 (49.7) 510.7 Provision for income taxes 160.9
(5.1) 166.0 Effective tax rate 34.9% 32.5% Net income 300.1 (44.6)
344.7 Earnings per common share Basic $0.56 $(0.08) $0.64 Diluted
$0.53 $(0.08) $0.61 Average common shares outstanding Basic 524.8
524.8 524.8 Diluted 561.7 561.7 561.7 Table 2 Colgate-Palmolive
Company Condensed Consolidated Balance Sheets As of March 31, 2006,
December 31, 2005 and March 31, 2005 (Dollars in Millions)
(Unaudited) March 31, December 31, March 31, 2006 2005 2005 Cash
and cash equivalents $382.8 $340.7 $413.9 Receivables, net 1,320.8
1,309.4 1,316.2 Inventories 949.5 855.8 906.7 Other current assets
296.6 251.2 307.4 Property, plant and equipment, net 2,519.6
2,544.1 2,553.8 Other assets, including goodwill and intangibles
3,226.5 3,205.9 3,193.5 Total assets $8,695.8 $8,507.1 $8,691.5
Total debt 3,491.6 3,446.2 3,756.8 Other current liabilities
2,372.9 2,214.8 2,303.9 Other non-current liabilities 1,543.5
1,496.0 1,615.8 Total shareholders' equity 1,287.8 1,350.1 1,015.0
Total liabilities and shareholders' equity $8,695.8 $8,507.1
$8,691.5 Supplemental Balance Sheet Information Debt less cash and
marketable securities* $3,093.0 $3,095.2 $3,329.8 Working capital %
of sales 1.5% 1.7% 1.9% * Marketable securities of $15.8, $10.3 and
$13.1 as of March 31, 2006, December 31, 2005 and March 31, 2005,
respectively, are included in Other current assets. Table 3
Colgate-Palmolive Company Condensed Consolidated Statements of Cash
Flows For the Three Months Ended March 31, 2006 and 2005 (Dollars
in Millions) (Unaudited) 2006 2005 Operating Activities Net income
$324.5 $300.1 Adjustments to reconcile net income to net cash
provided by operations: Restructuring, net of cash 45.6 43.1
Depreciation and amortization 80.2 83.2 Stock-based compensation
expense 28.8 10.2 Deferred income taxes (17.9) 1.8 Cash effects of
changes in: Receivables (7.2) (19.8) Inventories (85.3) (72.9)
Accounts payable and other accruals (21.3) 35.6 Other non-current
assets and liabilities 35.1 43.7 Net cash provided by operations
382.5 425.0 Investing Activities Capital expenditures (51.7) (60.5)
Other (3.8) (2.4) Net cash used in investing activities (55.5)
(62.9) Financing Activities Principal payments on debt (657.4)
(613.3) Proceeds from issuance of debt 704.2 757.3 Dividends paid
(151.6) (127.5) Purchases of treasury shares (214.6) (282.7)
Proceeds from exercise of stock options and excess tax benefits
31.9 10.8 Net cash used in financing activities (287.5) (255.4)
Effect of exchange rate changes on cash and cash equivalents 2.6
(12.4) Net increase in cash and cash equivalents 42.1 94.3 Cash and
cash equivalents at beginning of period 340.7 319.6 Cash and cash
equivalents at end of period $382.8 $413.9 Supplemental Cash Flow
Information Free cash flow before dividends (net cash provided by
operations less capital expenditures) Net cash provided by
operations $382.5 $425.0 Less: Capital expenditures (51.7) (60.5)
Free cash flow before dividends $330.8 $364.5 Income taxes paid
$160.4 $65.9 Table 4 Colgate-Palmolive Company Segment Information
For the Three Months Ended March 31, 2006 and 2005 (Dollars in
Millions) (Unaudited) Three Months Ended March 31, 2006 2005 Net
sales Oral, Personal and Home Care North America $617.6 $609.7
Latin America 692.7 588.5 Europe/South Pacific 691.7 720.2 Greater
Asia/Africa 483.3 465.2 Total Oral, Personal and Home Care $2,485.3
$2,383.6 Pet Nutrition 385.3 359.4 Total Net sales $2,870.6
$2,743.0 Three Months Ended March 31, 2006 2005 Operating profit
Oral, Personal and Home Care North America $132.3 $136.8 Latin
America 211.2 163.1 Europe/South Pacific 152.5 154.4 Greater
Asia/Africa 65.4 62.8 Total Oral, Personal and Home Care 561.4
517.1 Pet Nutrition 103.8 98.2 Corporate (147.7) (122.7) Total
Operating profit $517.5 $492.6 Effective January 1, 2006, the
Company modified the geographic reporting structure of its Oral,
Personal and Home Care segment in order to address evolving markets
and more closely align countries with similar consumer needs and
retail trade structures. Management responsibility for Eastern
European operations including Russia, Turkey, Ukraine and Belarus,
transferred to Greater Asia management and responsibility for
countries in the South Pacific, including Australia, was
transferred to European management. The financial information for
2005 has been reclassified to conform to the new reporting
structure. The Company evaluates segment performance based on
several factors, including Operating profit. The Company uses
Operating profit as a measure of operating segment performance
because it excludes the impact of corporate-driven decisions
related to interest expense and income taxes. Corporate operations
include research and development costs, unallocated overhead costs,
stock-based compensation related to stock options and restricted
stock awards, restructuring and related implementation costs, and
gains and losses on sales of non-core brands and assets. Corporate
operating expenses for the three months ended March 31, 2006
include $65.8 of charges related to the Company's 2004
Restructuring Program and an incremental charge of $17.6 related to
the adoption of FAS 123R. Corporate operating expenses for the
three months ended March 31, 2005 include $49.7 of charges related
to the Company's 2004 Restructuring Program. Table 5
Colgate-Palmolive Company Geographic Sales Analysis Percentage
Changes - First Quarter 2006 vs 2005 March 31, 2006 (Unaudited)
COMPONENTS OF SALES CHANGE 1ST QUARTER 1st Qtr 1st Qtr Pricing
Sales Sales Coupons Change Change Ex- Consumer & As Ex-
Divested Trade Reported Divestment Volume Incentives Exchange
Region Total Company 4.5% 7.0% 7.0% 1.5% -1.5% Europe/South Pacific
-4.0% -3.5% 8.0% -2.5% -9.0% Latin America 17.5% 17.5% 7.0% 6.5%
4.0% Greater Asia/Africa 4.0% 8.5% 7.0% 2.5% -1.0% Total
International 5.5% 7.0% 7.5% 2.0% -2.5% North America 1.5% 7.0%
6.5% 0.0% 0.5% Total CP Products 4.5% 7.0% 7.0% 1.5% -1.5% Hill's
7.0% 7.0% 5.5% 4.5% -3.0% DATASOURCE: Colgate-Palmolive Company
CONTACT: Bina Thompson, +1-212-310-3072, or Allison Klimerman,
+1-212-310-3770, both of Colgate Web site: http://www.colgate.com/
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