Colgate-Palmolive Company (NYSE:CL) today reported worldwide Net
sales of $3,974 million in third quarter 2017, an increase of 3.0%
versus third quarter 2016. Global unit volume increased 1.5%,
pricing was even with the year ago period and foreign exchange was
positive 1.5%. Organic sales (Net sales excluding the impact of
foreign exchange, acquisitions and divestments) increased 1.5%.
Net income and Diluted earnings per share in third quarter 2017
were $607 million and $0.68, respectively. Net income in third
quarter 2017 included $39 million ($0.05 per diluted share) of
aftertax charges resulting from the Company’s Global Growth and
Efficiency Program.
Net income and Diluted earnings per share in third quarter 2016
were $702 million and $0.78, respectively. Net income in third
quarter 2016 included $32 million ($0.04 per diluted share) of
aftertax charges resulting from the Global Growth and Efficiency
Program, a $63 million ($0.07 per diluted share) gain on sale of
land in Mexico, $22 million ($0.02 per diluted share) of benefits
from previously disclosed tax matters and a $4 million ($0.00 per
diluted share) charge for a previously disclosed litigation
matter.
Excluding charges resulting from the Global Growth and
Efficiency Program in both periods and the gain on sale of land in
Mexico, the benefits from previously disclosed tax matters and the
charge for a previously disclosed litigation matter in 2016, Net
income in third quarter 2017 was $646 million, a decrease of 1%
versus third quarter 2016, and Diluted earnings per share in third
quarter 2017 was $0.73, even with third quarter 2016.
Gross profit margin was 60.0% in third quarter 2017 versus 60.1%
in third quarter 2016. Excluding charges resulting from the Global
Growth and Efficiency Program in both periods, Gross profit margin
was 60.4% in third quarter 2017, even with the year ago quarter.
Cost savings from the Company’s funding-the-growth initiatives were
offset by higher raw and packaging material costs.
Selling, general and administrative expenses were 36.0% of Net
sales in third quarter 2017 versus 34.2% of Net sales in third
quarter 2016. Excluding charges resulting from the Global Growth
and Efficiency Program in both periods, Selling, general and
administrative expenses increased by 140 basis points to 35.4% of
Net sales in third quarter 2017 as a result of increased
advertising investment. Worldwide advertising investment increased
19% to $405 million versus $339 million in the year ago
quarter.
Operating profit decreased to $927 million in third quarter 2017
compared to $1,071 million in third quarter 2016. Operating profit
in both periods included charges resulting from the Global Growth
and Efficiency Program. Operating profit
in third quarter 2016 also included a gain on
the sale of land in Mexico and a charge for a previously disclosed
litigation matter. Excluding these items in both periods, as
applicable, Operating profit was $985 million in third quarter
2017, a decrease of 4% versus third quarter 2016. Operating profit
margin was 23.3% in third quarter 2017 versus 27.7% in third
quarter 2016. Excluding the above noted items in both periods, as
applicable, Operating profit margin was 24.8% in third quarter
2017, a decrease of 160 basis points versus the year ago quarter.
This decrease in Operating profit margin was primarily due to an
increase in Selling, general and administrative expenses, as a
percentage of Net sales, reflecting increased advertising
investment.
Net cash provided by operations year to date decreased to $2,295
million compared to $2,317 million in the comparable 2016 period,
primarily due to the timing of income tax payments and higher
voluntary contributions to an employee postretirement plan.
Working capital as a percentage of Net sales improved to negative
4.6% compared to negative 3.4% in the year ago period, reflecting
the Company’s tight focus on working capital.
Ian Cook, Chairman, President and Chief Executive Officer,
commented on the third quarter results, “We are pleased that our
stepped up advertising investment is indeed contributing to the
acceleration of top-line growth worldwide. Net sales in the third
quarter increased 3.0% and organic sales grew 1.5%. This growth was
driven by healthy volume increases across Latin America, North
America and Europe.
"Advertising investment increased both absolutely and as a
percent to sales versus third quarter 2016 across every operating
division. This increased level of spending should continue over the
balance of the year in support of new products, our base businesses
and longer-term consumption-building activities.
“Colgate’s leadership of the global toothpaste market continued
during the quarter with our global market share now at 43.5% year
to date. Our global leadership in manual toothbrushes also
continued with Colgate’s global market share in that category now
at 32.6% year to date."
Building on the Company's successful implementation of the
Global Growth and Efficiency Program to date, on October 26,
2017, the Company's Board of Directors approved an expansion of the
Global Growth and Efficiency Program and an extension of the
program through December 31, 2019 to take advantage of additional
opportunities to streamline the Company's operations. Initiatives
under the expanded Global Growth and Efficiency Program will
continue to fit within the Program’s three focus areas of expanding
commercial hubs, extending shared business services and
streamlining global functions, and optimizing the global supply
chain and facilities. As a result of the expansion, cumulative
aftertax charges related to the Global Growth and Efficiency
Program, once all projects are approved and implemented, are now
estimated to be $1,280 million to $1,380 million, increased from
$1,120 million to $1,170 million. Aftertax charges for 2017 are now
estimated to be $250 million to $280 million. Cumulative aftertax
savings are also projected to increase to $500 million to $575
million, from $425 million to $475 million, annually, once all
projects are approved and implemented. The expected savings target
a three to four year cash payback, on average, with an aftertax
rate of return greater than 30%.
Mr. Cook continued, “As we look ahead, while uncertainty in
global markets and category growth worldwide remain challenging, we
are maintaining our heightened focus on brand building and
productivity maximization. Based on current spot rates, we
continue to expect a low-single-digit net sales increase and
low-single-digit organic sales growth for 2017.
“On a GAAP basis, based on current spot rates and including the
impact of the expanded Global Growth and Efficiency Program, we
continue to plan for a year of gross margin expansion and still
expect a mid-single-digit earnings per share percentage
decline.
“Excluding charges resulting from the Global Growth and
Efficiency Program and the other 2016 one-time items previously
disclosed, based on current spot rates, we continue to plan for a
year of strong operating cash flow, gross margin expansion,
increased advertising investment and low-single-digit earnings per
share growth.”
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 website at
http://www.colgatepalmolive.com.
The following are comments about divisional performance for
third quarter 2017 versus the year ago period. See attached
Geographic Sales Analysis Percentage Changes and Segment
Information tables for additional information on divisional net
sales and operating profit.
North America (20% of Company
Sales)North America Net sales decreased 0.5% in third
quarter 2017. Unit volume increased 3.0% with 4.0% lower pricing,
while foreign exchange was positive 0.5%. Organic sales for North
America decreased 1.0%.
Operating profit in North America decreased 9% in third quarter
2017 to $249 million, or 280 basis points to 31.3% of Net Sales.
This decrease in Operating profit as a percentage of Net sales was
primarily due to a decrease in Gross profit and an increase in
Selling, general and administrative expenses, both as a percentage
of Net sales. This decrease in Gross profit was primarily driven by
higher raw and packaging material costs and lower pricing,
partially offset by cost savings from the Company’s
funding-the-growth initiatives and the Global Growth and Efficiency
Program. This increase in Selling, general and administrative
expenses was due to increased advertising investment, partially
offset by lower overhead expenses.
In the U.S., Colgate maintained its leadership in the toothpaste
category during the quarter with its market share at 35.5% year to
date. Successful new products include Colgate Total
Clean-In-Between, Colgate Optic White Beauty Radiant, Colgate
Sensitive Smart White and Tom’s of Maine Rapid Relief Sensitive
toothpastes. In manual toothbrushes, Colgate maintained its brand
market leadership in the U.S. with its market share in that
category at 40.7% year to date, driven by the success of Colgate
Total 360° 4 Zone manual toothbrush.
New products succeeding in other categories include Colgate
Total Advanced Health mouthwash, Softsoap Hand Wash Plus Lotion,
Softsoap Honey Creme & Lavender and Jasmine and Plum body
washes and Irish Spring Pure Fresh body wash.
Latin America (25% of Company
Sales)Latin America Net sales increased 6.5% in third
quarter 2017. Unit volume increased 3.0% with 2.5% higher pricing
and foreign exchange was positive 1.0%. Volume gains were led by
Brazil and the Southern Cone region. Organic sales for Latin
America increased 5.5%.
Operating profit in Latin America increased 1% in third quarter
2017 to $301 million, while as a percentage of Net sales, it
decreased 170 basis points to 30.6% of Net sales. This decrease in
Operating profit as a percentage of Net sales was primarily due to
an increase in Gross profit, which was more than offset by an
increase in Selling, general and administrative expenses, both as a
percentage of Net sales. This increase in Gross profit was due to
cost savings from the Company’s funding-the-growth initiatives, and
higher pricing, partially offset by higher raw and packaging
material costs. This increase in Selling, general and
administrative expenses was due to increased advertising investment
and higher overhead expenses.
Colgate maintained its leadership in toothpaste in Latin America
during the quarter, with market share gains in Mexico, Peru,
Panama, the Dominican Republic and Paraguay. New products
contributing to growth in the region include Colgate Luminous White
XD Shine, Colgate Triple Action Xtra Freshness, Colgate Kids and
Colgate Sensitive Pro-Alivio Complete Repair toothpastes. Colgate’s
leadership in the manual toothbrush category continued throughout
the region, driven by Colgate 360° Advanced manual toothbrush.
New products contributing to growth in other categories include
Colgate Total 12 and Colgate Plax Ice Glacial mouthwashes, Protex
Pro-Hidrata shower gel and bar soap, Palmolive Natural Secrets
shower gel and bar soap, Lady Speed Stick Derma + Omega 3
antiperspirant, Suavitel Sweet Pleasures fabric conditioner, Axion
Fusion Clean dish liquid and Fabuloso Complete liquid cleaner.
Europe (16% of Company
Sales)Europe Net sales increased 5.5% in third quarter
2017. Unit volume increased 3.0%, pricing decreased 2.0% and
foreign exchange was positive 4.5%. Volume gains were led by
France, Italy, the Netherlands and Poland. Organic sales for Europe
increased 1.0%.
Operating profit in Europe increased 3% in third quarter 2017 to
$162 million, while as a percentage of Net sales, it decreased 70
basis points to 25.2% of Net sales. This decrease in Operating
profit as a percentage of Net sales was primarily due to an
increase in Gross profit, which was more than offset by an increase
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 the Global Growth and Efficiency
Program, partially offset by higher raw and packaging material
costs. This increase in Selling, general and administrative
expenses was due to increased adverting investment, partially
offset by lower overhead expenses.
Colgate maintained its oral care leadership in Europe during the
quarter, with toothpaste market share gains in Germany, Italy, the
Netherlands, Belgium, Austria, Czech Republic, Slovenia, Bosnia and
Latvia. Premium products succeeding in oral care include Colgate
Enamel Strength, Colgate Natural Extracts and meridol Parodont
Expert toothpastes and Colgate 360° Advanced Whole Mouth Health and
Colgate 360° Advanced Max White Expert White manual
toothbrushes.
Premium innovations succeeding in other product categories
include Sanex Zero% shower gels and deodorants, Palmolive Naturals
with precious oils and Palmolive Gourmet shower gels, Paic Extreme
dish liquid, the Ajax Optimal 7 range of multi-benefit cleaners
available in liquid, spray and wipes and Soupline Parfum Supreme
line of fabric conditioner products.
Asia Pacific (18% of Company
Sales)Asia Pacific Net sales increased 0.5% during third
quarter 2017. Unit volume and pricing were even with the year ago
quarter and foreign exchange was positive 0.5%. Volume gains in the
Greater China region and the Philippines offset volume declines in
Australia and India. Organic sales for Asia Pacific were even with
the year ago quarter.
Operating profit in Asia Pacific decreased 4% in third quarter
2017 to $220 million, or 160 basis points to 30.2% of Net sales.
This decrease in Operating profit as a percentage of Net sales was
primarily due to a decrease in Gross profit and an increase in
Selling, general and administrative expenses, both as a percentage
of Net sales. This decrease in Gross profit was primarily driven by
higher costs, which were primarily driven by higher raw and
packaging material costs, partially offset by cost savings from the
Company’s funding-the-growth initiatives. This increase in Selling,
general and administrative expenses was due to higher overhead
expenses and increased advertising investment.
Colgate continued its toothpaste leadership in the Asia Pacific
region during the quarter, with market share gains in the
Philippines. New products succeeding in the region include Colgate
Naturals, Colgate Cibaca Vedshakti, Colgate Swarna Vedshakti and
Colgate Active Salt toothpastes.
New products succeeding in other categories in the region
include Colgate Slim Soft Advanced, Colgate Slim Soft Micro Silky,
Colgate Slim Soft Charcoal Spiral and Colgate Super Flexible manual
toothbrushes, Protex Thai Therapy bar soap, Protex shower cream and
Softlan Gentle Care and Softlan Charcoal Cupboard Fresh fabric
conditioners.
Africa/Eurasia (6% of Company
Sales)Africa/Eurasia Net sales increased 0.5% during
third quarter 2017. Unit volume decreased 4.5%, pricing increased
2.5% and foreign exchange was positive 2.5%. Volume declines in the
Sub-Saharan Africa and Middle East regions were partially offset by
volume gains in Russia. Organic sales for Africa/Eurasia decreased
2.0%.
Operating profit in Africa/Eurasia decreased 12% in third
quarter 2017 to $44 million, or 250 basis points to 17.5% of Net
sales. This decrease in Operating profit as a percentage of Net
sales was primarily due to an increase in Gross profit, which was
more than offset by an increase in Selling, general and
administrative expenses, both as a percentage of Net
sales. This increase in Gross profit was mainly driven by cost
savings from the Company’s funding-the-growth initiatives and the
Global Growth and Efficiency Program, and higher pricing, partially
offset by higher raw and packaging material costs. This increase in
Selling, general and administrative expenses was due to increased
advertising investment.
Colgate continued its toothpaste leadership in Africa/Eurasia
during the quarter, with market share gains in South Africa,
Turkey, Saudi Arabia, Morocco, Kazakhstan, United Arab Emirates,
Kenya, Qatar, Lebanon and Jordan. Successful products contributing
to sales in the region include Colgate Ancient Secrets, Colgate
Total Pro Visible Action and Colgate Optic White Extra Power
toothpastes, Colgate Slim Soft, Zig Zag Charcoal and Colgate Double
Action manual toothbrushes and Palmolive Luminous Oils shower
gels.
Hill’s Pet Nutrition (15% of Company
Sales)Hill’s Net sales increased 2.0% during third
quarter 2017. Unit volume increased 1.0%, pricing was even with the
year ago quarter and foreign exchange was positive 1.0%. Volume
gains in the United States and Western Europe were partially offset
by volume declines in Japan. Hill’s organic sales increased
1.0%.
Hill’s Operating profit decreased 1% in third quarter 2017 to
$161 million, or 80 basis points to 28.1% of Net sales. This
decrease in Operating profit as a percentage of Net sales was
primarily due to an increase in Gross profit, which was more than
offset by an increase in Selling, general and administrative
expenses, both as a percentage of Net sales. This increase in Gross
profit was mainly driven by cost savings from the Company’s
funding-the-growth initiatives, partially offset by higher costs,
which were primarily driven by higher raw and packaging material
costs. This increase in Selling, general and administrative
expenses was due to increased advertising investment, partially
offset by lower overhead expenses.
Successful products contributing to sales in the U.S. include
Hill’s Prescription Diet k/d and k/d + Mobility, both with Enhanced
Appetite Trigger (E.A.T.) technology, Hill’s Prescription Diet z/d
for skin and food sensitivities, Hill’s Prescription Diet i/d for
digestive care, Hill’s Science Diet Youthful Vitality, Hill’s
Science Diet Urinary and Hairball Control and Hill’s Science Diet
Perfect Weight.
Successful products contributing to sales internationally
include Hill’s Prescription Diet i/d, Hill's Prescription Diet k/d
and k/d + Mobility, Hill’s Prescription Diet Derm Defense, Hill’s
Science Diet Small & Mini and Hill’s Science Diet Youthful
Vitality.
***
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 and Hill’s
Prescription Diet. For more information about Colgate’s global
business, visit the Company’s website 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 InformationManagement
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 (excluding Venezuela from all
periods). The Company measures year-to-date market shares from
January 1 of the relevant year through the most recent period for
which market share data is available, which typically reflects a
lag time of one or two months. The Company believes that the
third-party vendors it uses to provide data are reliable, but it
has 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
StatementsThis press release and the related webcast may
contain forward-looking statements (as that term is defined in the
U.S. Private Securities Litigation Reform Act of 1995 or by the
Securities and Exchange Commission (SEC) in its rules, regulations
and releases) that set forth anticipated results based on
management’s plans and assumptions. Such statements may relate, for
example, to sales or volume growth, organic sales growth, profit or
profit margin growth, earnings per share growth (including on a
currency-neutral basis), financial goals, the impact of foreign
exchange volatility, cost-reduction plans including the Global
Growth and Efficiency Program, tax rates, the need to repatriate
undistributed earnings of foreign subsidiaries, new product
introductions or commercial investment levels, acquisitions,
divestitures, or legal or tax proceedings, among other matters.
These statements are made on the basis of the Company's views and
assumptions as of this time and the Company undertakes no
obligation to update these statements whether as a result of new
information, future events or otherwise, except as required by law
or by the rules and regulations of the SEC. Moreover, the Company
does not, nor does any other person, assume responsibility for the
accuracy and completeness of these statements. The Company cautions
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. For more information
about factors that could impact the Company’s business and cause
actual results to differ materially from forward-looking
statements, investors should refer to the Company’s filings with
the SEC (including, but not limited to, the information set forth
under the captions “Risk Factors” and “Cautionary Statement on
Forward-Looking Statements” in the Company’s Annual Report on Form
10-K for the year ended December 31, 2016 and subsequent
Quarterly Reports on Form 10-Q). Copies of these filings may be
obtained upon request from the Company’s Investor Relations
Department or on the Company’s website at
http://www.colgatepalmolive.com.
Non-GAAP Financial MeasuresThe
following provides information regarding the non-GAAP financial
measures used in this earnings release and/or the related
webcast:
This release discusses Net sales growth (GAAP) and organic sales
growth, which is Net sales growth excluding the impact of foreign
exchange, acquisitions and divestments (non-GAAP). Management
believes the organic sales growth measure provides investors and
analysts 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, 2017 vs 2016 included with this release for a
comparison of organic sales growth to Net sales growth in
accordance with GAAP.
To supplement Colgate’s Condensed Consolidated Statements of
Income 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, Effective income tax
rate, Net income attributable to Colgate-Palmolive Company and
Diluted earnings per common share are discussed both as reported
(on a GAAP basis) and excluding charges resulting from the Global
Growth and Efficiency Program and, as applicable, a gain on the
sale of land in Mexico, benefits from previously disclosed tax
matters and a charge for a previously disclosed litigation matter
(non-GAAP). These non-GAAP financial measures exclude items that,
either by their nature or amount, management would not expect to
occur as part of the Company’s normal business on a regular basis,
such as restructuring charges, charges for certain litigation and
tax matters, gains and losses from certain divestitures and certain
unusual, non-recurring items. Investors and analysts use these
financial measures in assessing the Company’s business performance,
and management believes that presenting these financial measures on
a non-GAAP basis provides them with useful supplemental information
to enhance their understanding of the Company’s underlying business
performance and trends. These non-GAAP financial measures also
enhance the ability to compare period-to-period financial results.
See “Non-GAAP Reconciliations” for the three and nine months ended
September 30, 2017 and 2016 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, to evaluate segment and overall operating
performance and as factors in determining compensation. While the
Company believes that these financial measures are useful in
evaluating the Company’s underlying business performance and
trends, 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 a non-GAAP measure 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, 2017 and 2016
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 Statements of
Income For the Three Months Ended September 30, 2017
and 2016 (Dollars in Millions Except Per Share
Amounts) (Unaudited) 2017 2016 Net sales $ 3,974
$ 3,867 Cost of sales 1,591 1,543 Gross profit 2,383
2,324 Gross profit margin 60.0 % 60.1 % Selling,
general and administrative expenses 1,429 1,322 Other
(income) expense, net 27 (69 ) Operating profit 927 1,071
Operating profit margin 23.3 % 27.7 % Interest
(income) expense, net 27 25 Income before income taxes 900
1,046 Provision for income taxes 250 300 Effective
tax rate 27.8 % 28.7 % Net income including noncontrolling
interests 650 746 Less: Net income attributable to
noncontrolling interests 43 44 Net income attributable to
Colgate-Palmolive Company $ 607 $ 702 Earnings per common
share Basic $ 0.69 $ 0.79 Diluted $ 0.68 $ 0.78 Average
common shares outstanding Basic 880.7 891.9 Diluted 886.3 899.2
Table 2 Colgate-Palmolive
Company Condensed Consolidated Statements of
Income For the Nine Months Ended September 30, 2017
and 2016 (Dollars in Millions Except Per Share
Amounts) (Unaudited) 2017 2016 Net sales $ 11,562
$ 11,474 Cost of sales 4,610 4,598 Gross profit 6,952
6,876 Gross profit margin 60.1 % 59.9 % Selling,
general and administrative expenses 4,124 3,996 Other
(income) expense, net 163 (2 ) Operating profit 2,665 2,882
Operating profit margin 23.0 % 25.1 % Interest
(income) expense, net 74 78 Income before income taxes 2,591
2,804 Provision for income taxes 770 846 Effective
tax rate 29.7 % 30.2 % Net income including noncontrolling
interests 1,821 1,958 Less: Net income attributable to
noncontrolling interests 120 123 Net income attributable to
Colgate-Palmolive Company $ 1,701 $ 1,835 Earnings per
common share Basic(1) $ 1.93 $ 2.05 Diluted(1) $ 1.91 $ 2.04
Average common shares outstanding Basic 883.0 893.2 Diluted 889.3
900.2 Note: (1) 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.
Table 3
Colgate-Palmolive Company Condensed Consolidated
Balance Sheets As of September 30, 2017, December 31,
2016 and September 30, 2016 (Dollars in Millions)
(Unaudited) September 30, December 31, September 30,
2017 2016 2016 Cash and cash equivalents $ 1,380 $ 1,315 $ 1,298
Receivables, net 1,530 1,411 1,560 Inventories 1,205 1,171 1,193
Other current assets 621 441 713 Property, plant and equipment, net
3,999 3,840 3,837 Other assets, including goodwill and intangibles
4,040 3,945 4,022 Total assets $ 12,775
$ 12,123 $ 12,623 Total debt $ 6,527 $ 6,533 $
6,523 Other current liabilities 3,847 3,292 3,748 Other non-current
liabilities 2,134 2,281 2,124 Total
liabilities 12,508 12,106 12,395 Total Colgate-Palmolive Company
shareholders’ equity (108 ) (243 ) (133 ) Noncontrolling interests
375 260 361 Total liabilities and equity $
12,775 $ 12,123 $ 12,623
Supplemental Balance Sheet Information Debt less cash, cash
equivalents and marketable securities* $ 4,925 $ 5,147 $ 4,980
Working capital % of sales (4.6 )% (2.2 )% (3.4 )% *Marketable
securities of $222, $71 and $245 as of September 30, 2017, December
31, 2016 and September 30, 2016, 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, 2017 and 2016 (Dollars in Millions)
(Unaudited) 2017 2016
Operating Activities Net
income including noncontrolling interests $ 1,821 $ 1,958
Adjustments to reconcile net income including noncontrolling
interests to net cash provided by operations: Depreciation and
amortization 354 329 Restructuring and termination benefits, net of
cash 80 (1 ) Stock-based compensation expense 106 102 Gain on sale
of land in Mexico — (97 ) Deferred income taxes (2 ) 50 Voluntary
benefit plan contributions (81 ) (53 ) Cash effects of changes in:
Receivables (50 ) (126 ) Inventories 16 4 Accounts payable and
other accruals 39 101 Other non-current assets and liabilities 12
50 Net cash provided by operations 2,295 2,317
Investing Activities Capital expenditures (382 ) (392 )
Purchases of marketable securities and investments (301 ) (271 )
Proceeds from sale of marketable securities and investments 149 158
Proceeds from sale of land in Mexico — 60 Other 2 —
Net cash used in investing activities (532 ) (445 )
Financing Activities Principal payments on debt (3,551 )
(5,446 ) Proceeds from issuance of debt 3,478 5,447 Dividends paid
(1,070 ) (1,053 ) Purchases of treasury shares (1,055 ) (913 )
Proceeds from exercise of stock options 431 418 Net
cash used in financing activities (1,767 ) (1,547 ) Effect
of exchange rate changes on Cash and cash equivalents 69 3
Net increase (decrease) in Cash and cash equivalents 65 328
Cash and cash equivalents at beginning of the period 1,315
970 Cash and cash equivalents at end of the period $ 1,380
$ 1,298
Supplemental Cash Flow
Information Free cash flow before dividends (Net cash provided
by operations less Capital expenditures) Net cash provided by
operations $ 2,295 $ 2,317 Less: Capital expenditures (382 ) (392 )
Free cash flow before dividends $ 1,913 $ 1,925
Income taxes paid $ 820 $ 696
Table 5 Colgate-Palmolive
Company Segment Information For the
Three and Nine Months Ended September 30, 2017 and 2016
(Dollars in Millions) (Unaudited) Three Months Ended
September 30, Nine Months Ended September 30, 2017 2016 2017 2016
Net Sales Oral, Personal and Home Care North America
$ 795 $ 800 $ 2,319 $ 2,393 Latin America 985 924 2,911 2,710
Europe 642 609 1,784 1,803 Asia Pacific 728 723 2,111 2,163
Africa/Eurasia 251 250 738 720
Total Oral, Personal and Home Care 3,401 3,306 9,863 9,789
Pet Nutrition 573 561 1,699 1,685
Total Net Sales $ 3,974 $ 3,867 $
11,562 $ 11,474 Three Months Ended
September 30, Nine Months Ended September 30, 2017 2016 2017 2016
Operating Profit Oral, Personal and Home Care North
America $ 249 $ 273 $ 723 $ 762 Latin America 301 298 878 829
Europe 162 158 447 437 Asia Pacific 220 230 644 668 Africa/Eurasia
44 50 134 138 Total Oral,
Personal and Home Care 976 1,009 2,826 2,834 Pet Nutrition
161 162 481 479 Corporate(1) (210 ) (100 ) (642 ) (431 )
Total Operating Profit $ 927 $ 1,071 $ 2,665
$ 2,882 Note:
(1) Corporate operations include 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, 2017 includes charges of
$58 related to the Global Growth and Efficiency Program. Corporate
Operating profit (loss) for the three months ended September 30,
2016 included charges of $42 related to the Global Growth and
Efficiency Program, a charge of $6 for a previously disclosed
litigation matter and a gain of $97 on the sale of land in
Mexico.Corporate Operating profit (loss) for the nine months ended
September 30, 2017 includes charges of $246 related to the Global
Growth and Efficiency Program. Corporate Operating profit (loss)
for the nine months ended September 30, 2016 included charges of
$156 related to the Global Growth and Efficiency Program, a charge
of $6 for a previously disclosed litigation matter and a gain of
$97 on the sale of land in Mexico.
Table 6 Colgate-Palmolive Company
Geographic Sales Analysis Percentage Changes
For the Three Months Ended September 30, 2017 vs 2016
(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 3.0 % 1.5 % 1.5 % 1.5 % 1.5 % — % 1.5 %
Europe 5.5 % 1.0 % 3.0 % 3.0 % 3.0 %
(2.0
)%
4.5 %
Latin America 6.5 % 5.5 % 3.0 % 3.0 % 3.0 % 2.5
% 1.0 %
Asia Pacific 0.5 % — % — % — % — % — % 0.5 %
Africa/Eurasia 0.5 %
(2.0
)%
(4.5
)%
(4.5
)%
(4.5
)%
2.5 % 2.5 %
Total International 4.0 % 2.0 % 1.5 % 1.5
% 1.5 % 0.5 % 2.0 %
North America
(0.5
)%
(1.0
)%
3.0 % 3.0 % 3.0 %
(4.0
)%
0.5 %
Total CP Products 3.0 % 1.5 % 1.5 % 1.5 % 1.5 %
— % 1.5 %
Hill’s 2.0 % 1.0 % 1.0 % 1.0 % 1.0 % — %
1.0 %
Emerging Markets (1) 4.5 % 3.0 %
1.0 % 1.0 % 1.0 % 2.0 % 1.5 %
Developed Markets 1.5 %
(0.5
)%
2.0 % 2.0 % 2.0 %
(2.5
)%
2.0 % Note: (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, 2017 vs 2016
(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 1.0 % 0.5 %
(0.5
)%
(0.5
)%
(0.5
)%
1.0 % 0.5 %
Europe
(1.0
)%
— % 1.0 % 1.0 % 1.0 %
(1.0
)%
(1.0
)%
Latin America 7.5 % 6.5 % 2.0 % 2.0 % 2.0 % 4.5 % 1.0
%
Asia Pacific
(2.5
)%
(1.5
)%
(1.0
)%
(1.0
)%
(1.0
)%
(0.5
)%
(1.0
)%
Africa/Eurasia 2.5 %
(1.5
)%
(6.0
)%
(6.0
)%
(6.0
)%
4.5 % 4.0 %
Total International 2.0 % 2.0 % — % — % —
% 2.0 % — %
North America
(3.0
)%
(3.0
)%
(1.0
)%
(1.0
)%
(1.0
)%
(2.0
)%
— %
Total CP Products 1.0 % 0.5 %
(0.5
)%
(0.5
)%
(0.5
)%
1.0 % 0.5 %
Hill’s 1.0 % 0.5 %
(1.5
)%
(1.5
)%
(1.5
)%
2.0 % 0.5 %
Emerging Markets (1) 3.5 %
3.0 % — % — % — % 3.0 % 0.5 %
Developed Markets
(2.0
)%
(1.5
)%
(1.0
)%
(1.0
)%
(1.0
)%
(0.5
)%
(0.5
)%
Note: (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, 2017 and 2016 (Dollars in Millions Except Per
Share Amounts) (Unaudited) Gross
Profit 2017 2016 Gross profit, GAAP $ 2,383 $
2,324 Global Growth and Efficiency Program 16 11
Gross profit, non-GAAP $ 2,399 $ 2,335
Basis Point Gross Profit Margin 2017
2016 Change Gross profit margin, GAAP 60.0 % 60.1 %
(10
)
Global Growth and Efficiency Program 0.4 % 0.3 % Gross
profit margin, non-GAAP 60.4 % 60.4 % —
Selling, General and Administrative Expenses 2017
2016 Selling, general and administrative expenses, GAAP $
1,429 $ 1,322 Global Growth and Efficiency Program
(22
)
(9
)
Selling, general and administrative expenses, non-GAAP $ 1,407
$ 1,313
Basis Point Selling, General
and Administrative Expenses as a Percentage of Net Sales
2017 2016 Change Selling, general and
administrative expenses as a percentage of Net sales, GAAP 36.0 %
34.2 % 180 Global Growth and Efficiency Program
(0.6
)%
(0.2
)%
Selling, general and administrative expenses as a percentage
of Net sales, non-GAAP 35.4 % 34.0 % 140
Other (Income) Expense, Net 2017 2016 Other
(income) expense, net, GAAP $ 27 $
(69
)
Global Growth and Efficiency Program
(20
)
(22
)
Gain on sale of land in Mexico — 97 Charge for a previously
disclosed litigation matter —
(6
)
Other (income) expense, net, non-GAAP $ 7 $ —
Operating Profit 2017 2016 %
Change Operating profit, GAAP $ 927 $ 1,071
(13
)%
Global Growth and Efficiency Program 58 42 Gain on sale of land in
Mexico —
(97
)
Charge for a previously disclosed litigation matter — 6
Operating profit, non-GAAP $ 985 $ 1,022
(4
)%
Basis Point Operating Profit Margin
2017 2016 Change Operating profit margin, GAAP
23.3 %
27.7
%
(440
)
Global Growth and Efficiency Program 1.5 % 1.1 % Gain on sale of
land in Mexico — %
(2.5)
%
Charge for a previously disclosed litigation matter — % 0.1 %
Operating profit margin, non-GAAP 24.8 % 26.4 %
(160
)
Table 8 Continued Colgate-Palmolive
Company Non-GAAP Reconciliations For
the Three Months Ended September 30, 2017 and 2016
(Dollars in Millions Except Per Share Amounts) (Unaudited)
2017 Income Before
Income Taxes
Provision For
Income Taxes(1)
Net Income
Including
Noncontrolling
Interests
Net Income
Attributable To
Colgate-
Palmolive
Company
Effective Income
Tax Rate(2)
Diluted Earnings
Per Share(3)
As Reported GAAP $ 900 $ 250 $ 650 $ 607 27.8 % $ 0.68 Global
Growth and Efficiency Program 58 19 39 39
0.3 % 0.05 Non-GAAP $ 958 $ 269 $ 689
$ 646 28.1 % $ 0.73
2016
Income Before
Income Taxes
Provision For Income Taxes(1) Net
IncomeIncluding Noncontrolling Interests
Net Income
Attributable To
Colgate-
Palmolive
Company
Effective Income
Tax Rate(2)
Diluted Earnings
Per Share(3)
As Reported GAAP $ 1,046 $ 300 $ 746 $ 702 28.7 % $ 0.78 Global
Growth and Efficiency Program 42 10 32 32 (0.2 )% 0.04 Gain on sale
of land in Mexico (97 ) (34 ) (63 ) (63 ) (0.6 )% (0.07 ) Benefits
from previously disclosed tax matters — 22 (22 ) (22 ) 2.2 % (0.02
) Charge for a previously disclosed litigation matter 6 2
4 4 — % — Non-GAAP $ 997 $ 300
$ 697 $ 653 30.1 % $ 0.73 Notes: (1)
The income tax effect on non-GAAP items is calculated based upon
the tax laws and statutory income tax rates applicable in the tax
jurisdiction(s) of the underlying non-GAAP adjustment. (2)
The impact of non-GAAP items on the Company’s effective tax rate
represents the difference in the effective tax rate calculated with
and without the non-GAAP adjustment on Income before income taxes
and Provision for income taxes. (3) 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, 2017 and 2016 (Dollars in
Millions Except Per Share Amounts) (Unaudited)
Gross Profit 2017 2016 Gross
profit, GAAP $ 6,952 $ 6,876 Global Growth and Efficiency Program
51 31 Gross profit, non-GAAP $ 7,003 $ 6,907
Basis Point Gross Profit Margin
2017 2016 Change Gross profit margin, GAAP
60.1 % 59.9 % 20 Global Growth and Efficiency Program 0.5 % 0.3 %
Gross profit margin, non-GAAP 60.6 % 60.2 % 40
Selling, General and Administrative Expenses
2017 2016 Selling, general and administrative
expenses, GAAP $ 4,124 $ 3,996 Global Growth and Efficiency Program
(60 ) (49 ) Selling, general and administrative expenses, non-GAAP
$ 4,064 $ 3,947
Basis Point Selling,
General and Administrative Expenses as a Percentage of Net
Sales 2017 2016 Change Selling, general
and administrative expenses as a percentage of Net sales, GAAP 35.7
% 34.8 % 90 Global Growth and Efficiency Program (0.6 )% (0.4 )%
Selling, general and administrative expenses as a percentage
of Net sales, non-GAAP 35.1 % 34.4 % 70
Other (Income) Expense, Net 2017 2016 Other
(income) expense, net, GAAP $ 163 $ (2 ) Global Growth and
Efficiency Program (135 ) (76 ) Gain on sale of land in Mexico — 97
Charge for a previously disclosed litigation matter — (6 )
Other (income) expense, net, non-GAAP $ 28 $ 13
Operating Profit 2017 2016 %
Change Operating profit, GAAP $ 2,665 $ 2,882 (8 )% Global
Growth and Efficiency Program 246 156 Gain on sale of land in
Mexico — (97 ) Charge for a previously disclosed litigation matter
— 6 Operating profit, non-GAAP $ 2,911
$ 2,947 (1 )%
Basis Point Operating Profit
Margin 2017 2016 Change Operating profit
margin, GAAP 23.0 % 25.1 % (210 ) Global Growth and Efficiency
Program 2.2 % 1.4 % Gain on sale of land in Mexico — % (0.8 )%
Charge for a previously disclosed litigation matter — % — %
Operating profit margin, non-GAAP 25.2 % 25.7 % (50 )
Table 9 Continued Colgate-Palmolive Company
Non-GAAP Reconciliations For the Nine
Months Ended September 30, 2017 and 2016 (Dollars in
Millions Except Per Share Amounts) (Unaudited)
2017 Income Before
Income Taxes
Provision For
Income Taxes(1)
Net Income
Including
Noncontrolling
Interests
Net Income
Attributable To
Colgate-
Palmolive
Company
Effective Income
Tax Rate(2)
Diluted Earnings
Per Share(3)
As Reported GAAP $ 2,591 $ 770 $ 1,821 $ 1,701 29.7 % $ 1.91 Global
Growth and Efficiency Program 246 61 185 185
(0.4 )% 0.21 Non-GAAP $ 2,837 $ 831 $
2,006 $ 1,886 29.3 % $ 2.12
2016 Income Before
Income Taxes
ProvisionFor
IncomeTaxes(1)
Net Income
Including
Noncontrolling
Interests
Less: Income
Attributable To
Noncontrolling
Interests
Net Income
Attributable To
Colgate-
Palmolive
Company
Effective Income
Tax Rate(2)
Diluted Earnings
Per Share(3)
As Reported GAAP $ 2,804 $ 846 $ 1,958 $ 123 $ 1,835 30.2 % $ 2.04
Global Growth and Efficiency Program 156 41 115 1 114 (0.2 )% 0.13
Gain on sale of land in Mexico (97 ) (34 ) (63 ) — (63 ) (0.2 )%
(0.07 ) Benefits from previously disclosed tax matters — 35 (35 ) —
(35 ) 1.2 % (0.04 ) Charge for a previously disclosed litigation
matter 6 2 4 — 4 — % —
Non-GAAP $ 2,869 $ 890 $ 1,979 $ 124 $
1,855 31.0 % $ 2.06 Notes:
(1) The income tax effect on non-GAAP
items is calculated based upon the tax laws and statutory income
tax rates applicable in the tax jurisdiction(s) of the underlying
non-GAAP adjustment.
(2) The impact of non-GAAP items on the
Company’s effective tax rate represents the difference in the
effective tax rate calculated with and without the non-GAAP
adjustment on Income before income taxes and Provision for income
taxes.
(3) 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.
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Colgate-Palmolive CompanyJohn Faucher, 212-310-3653orHope
Spiller, 212-310-2291
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