Colgate-Palmolive Company (NYSE:CL) today reported worldwide Net
sales of $4,002 million in first quarter 2018, an increase of 6.5%
versus first quarter 2017. Global unit volume increased 2.0%,
pricing was even with the year ago period and foreign exchange was
positive 4.5%. The previously disclosed professional skin care
acquisitions contributed 0.5% to unit volume growth. Organic sales
(Net sales excluding the impact of foreign exchange, acquisitions
and divestments) increased 1.5%.
Net income and Diluted earnings per share in first quarter 2018
were $634 million and $0.72, respectively. Net income in first
quarter 2018 included $20 million ($0.02 per diluted share) of
aftertax charges resulting from the Company’s Global Growth and
Efficiency Program.
Net income and Diluted earnings per share in first quarter 2017
were $570 million and $0.64, respectively. Net income in first
quarter 2017 included $31 million ($0.03 per diluted share) of
aftertax charges resulting from the Global Growth and Efficiency
Program.
Excluding charges resulting from the Global Growth and
Efficiency Program in both periods, Net income in first quarter
2018 was $654 million, an increase of 9% versus first quarter 2017,
and Diluted earnings per share in first quarter 2018 was $0.74, an
increase of 10% versus first quarter 2017.
Gross profit margin was 60.2% in first quarter 2018 versus 60.3%
in first quarter 2017. Excluding charges resulting from the Global
Growth and Efficiency Program in both periods, Gross profit margin
was 60.3% in first quarter 2018, a decrease of 40 basis points
versus the year ago quarter as higher raw and packaging material
costs were partially offset by cost savings from the Company’s
funding-the-growth initiatives.
Selling, general and administrative expenses were 34.8% of Net
sales in first quarter 2018 versus 35.5% of Net sales in first
quarter 2017. Excluding charges resulting from the Global Growth
and Efficiency Program in both periods, Selling, general and
administrative expenses decreased by 30 basis points to 34.7% of
Net sales in first quarter 2018 as a result of decreased
advertising investment as a percentage of Net sales and lower
overhead expenses as a percentage of Net sales. On an absolute
basis, worldwide advertising investment increased 4% to $416
million versus $400 million in the year ago quarter.
Operating profit increased to $983 million in first quarter 2018
compared to $912 million in first quarter 2017. Excluding charges
resulting from the Global Growth and Efficiency Program in both
periods, Operating profit was $1,007 million in first quarter 2018,
an increase of 5% versus first quarter 2017. Operating profit
margin was 24.6% in first quarter 2018 versus 24.2% in first
quarter 2017. Excluding charges resulting from the Global Growth
and Efficiency Program in both periods, Operating profit margin was
25.2% in first quarter 2018, a decrease of 20 basis points versus
the year ago quarter. This decrease in Operating profit margin was
primarily due to a decrease in Gross profit, partially offset by a
decrease in Selling, general and administrative expenses, both as a
percentage of Net sales.
Net cash provided by operations year to date decreased to $616
million compared to $691 million in the comparable 2017 period,
primarily due to higher levels of working capital. Working capital
as a percentage of Net sales was negative 2.7% compared to negative
4.3% in the year ago period.
Ian Cook, Chairman, President and Chief Executive Officer,
commented on the first quarter results, “The first quarter was a
challenging one as category growth remained soft in many markets
around the world. While net sales grew 6.5%, organic sales grew
1.5%, below our expectations, due to flat unit volume growth in
emerging markets. In developed markets, unit volume grew 4.5% and
organic volume grew 3.0%, led by strong volume growth in North
America and Europe. Encouragingly, worldwide pricing improved
sequentially versus fourth quarter 2017.
“Advertising investment increased in absolute dollars versus
first quarter 2017 and we continue to plan for increased
advertising investment, both absolutely and as a percent to sales,
for the full year in support of new products, our base businesses
and longer-term consumption-building activities.
“Operating profit, net income and diluted earnings per share all
increased versus the year ago period.
“Colgate’s leadership of the global toothpaste market continued
during the quarter with our global market share at 42.4% year to
date. Our global leadership in manual toothbrushes also continued
with Colgate’s global market share in that category at 32.5% year
to date.”
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
increased productivity while accelerating our change
efforts. Based on current spot rates, we expect a
mid-single-digit net sales increase and low-single-digit organic
sales growth in 2018, with sequential improvement in organic sales
growth in the balance of the year.
“On a GAAP basis, based on current spot rates and including the
impact of the Global Growth and Efficiency Program, we are planning
for a year of gross margin expansion and expect double-digit
earnings per share growth.
“Excluding charges resulting from the Global Growth and
Efficiency Program and the one-time charge related to U.S. tax
reform in 2017, based on current spot rates, we are planning for a
year of increased operating cash flow, gross margin expansion,
increased advertising investment and low-double-digit earnings per
share growth.”
At 11:00 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 website at http://www.colgatepalmolive.com.
The following are comments about divisional performance for
first quarter 2018 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 (21% of Company
Sales)
North America Net sales increased 9.0% in first quarter 2018.
Unit volume increased 9.0%, pricing decreased 0.5% and foreign
exchange was positive 0.5%. The previously disclosed professional
skin care acquisitions contributed 3.5% to unit volume growth.
Organic sales and organic unit volume for North America increased
5.0% and 5.5%, respectively.
Operating profit in North America increased 4% in first quarter
2018 to $257 million, while as a percentage of Net sales it
decreased 140 basis points to 31.1% of Net sales. This decrease in
Operating profit as a percentage of Net sales was due to an
increase in Selling, general and administrative expenses and an
increase in Other (income) expense, net, partially offset by an
increase in Gross profit, all as a percentage of Net sales. This
increase in Gross profit was primarily due to cost savings from the
Company’s funding-the-growth initiatives, partially offset by
higher raw and packaging material costs. This increase in Selling,
general and administrative expenses was due to higher overhead
expenses, partially offset by decreased advertising investment.
This increase in Other (income) expense, net was due to the
amortization of intangible assets resulting from the professional
skin care acquisitions.
In the U.S., Colgate maintained its leadership in the toothpaste
category during the quarter with its market share at 35.2% year to
date. Successful products include Colgate Optic White Stain
Fighter, Colgate Optic White Stain-Less White, Colgate Sensitive
Smart White and Tom’s of Maine toothpastes. In manual toothbrushes,
Colgate widened its brand market leadership in the U.S. with its
market share in that category at 42.6% year to date, supported by
the success of Colgate Total 360° Advanced Optic White and Colgate
Gum Health manual toothbrushes.
Products succeeding in other categories include Softsoap Hydra
Bliss body wash and liquid hand soap, Irish Spring Pure Fresh bar
soap, Fabuloso Complete liquid cleaner and Suavitel Complete fabric
conditioner.
Latin America (23% of Company
Sales)
Latin America Net sales increased 0.5% in first quarter 2018.
Unit volume was even with the year ago period, pricing increased
0.5% and foreign exchange was even with the year ago period. Volume
gains in Brazil were offset by volume declines in Mexico. Organic
sales for Latin America increased 0.5%.
Operating profit in Latin America increased 1% in first quarter
2018 to $273 million, or 10 basis points to 29.4% of Net sales.
This increase in Operating profit as a percentage of Net sales was
due to a decrease in Selling, general and administrative expenses
and a decrease in Other (income) expense, net, 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, partially offset by cost savings from the
Company’s funding-the-growth initiatives. This decrease in Selling,
general and administrative expenses was due to decreased
advertising investment and lower overhead expenses.
Colgate maintained its toothpaste leadership in Latin America
during the quarter, with market share gains in Brazil, Peru, Chile,
Puerto Rico, Guatemala and El Salvador. Products contributing to
growth in the region include Colgate Total 12 Salud Visible,
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, supported by the success
of Colgate 360° Advanced Total 12 and Colgate Pro Cuidado manual
toothbrushes.
Products contributing to growth in other categories include
Colgate Total 12 mouthwash, Protex Pro-Hidrata shower gel and bar
soap, Palmolive Natural Secrets shower gel and bar soap, Lady Speed
Stick Derma + Aloe antiperspirant, Suavitel Superior Care fabric
conditioner and Axion Perfect Fusion and Fabuloso Complete liquid
cleaners.
Europe (16% of Company
Sales)
Europe Net sales increased 16.0% in first quarter 2018. Unit
volume increased 4.0%, pricing decreased 2.5% and foreign exchange
was positive 14.5%. Volume gains were led by France and Italy.
Organic sales for Europe increased 1.5%.
Operating profit in Europe increased 14% in first quarter 2018
to $162 million, while as a percentage of Net sales, it decreased
40 basis points to 25.0% of Net sales. This decrease in Operating
profit as a percentage of Net sales was primarily due to a decrease
in Gross profit, 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 and lower pricing, partially offset by
cost savings from the Company’s funding-the-growth initiatives.
This decrease in Selling, general and administrative expenses was
due to lower overhead expenses, partially offset by increased
advertising investment.
Colgate maintained its toothpaste leadership in Europe during
the quarter, with toothpaste market share gains in France, Germany,
Greece, Switzerland, Austria and Denmark. Products succeeding in
oral care include Colgate Max White Expert Complete, 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.
Products succeeding in other categories include Colgate Plax
mouthwash, Sanex Zero% shower gel, deodorant and body lotion,
Palmolive Aroma Sensations shower gel, Palmolive Handwash + Lotion
liquid hand soap, Ajax Boost liquid cleaner and Soupline Parfum
Supreme fabric conditioner.
Asia Pacific (19% of Company
Sales)
Asia Pacific Net sales increased 5.5% during first quarter 2018.
Unit volume increased 0.5%, pricing decreased 0.5% and foreign
exchange was positive 5.5%. Volume gains in India and the
Philippines were partially offset by volume declines in the Greater
China region and Australia. Organic sales for Asia Pacific were
even with the year ago period.
Operating profit in Asia Pacific increased 3% in first quarter
2018 to $226 million, while as a percentage of Net sales it
decreased 60 basis points to 29.8% of Net sales. This decrease in
Operating profit as a percentage of Net sales was due to a decrease
in Gross profit, 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 costs,
primarily driven by higher raw and packaging material costs,
partially offset by cost savings from the Company’s
funding-the-growth initiatives. This decrease in Selling, general
and administrative expenses was due to decreased advertising
investment, partially offset by higher overhead expenses.
Colgate maintained its toothpaste leadership in the Asia Pacific
region during the quarter with market share gains in the
Philippines. Products succeeding in the region include Colgate
Naturals, Colgate Swarna Vedshakti, Colgate Dare To Love and
Colgate Total Charcoal toothpastes.
Products succeeding in other categories include Colgate Slim
Soft Advanced, Colgate Slim Soft Micro Silky and Colgate Super
Flexible manual toothbrushes, Protex Thai Therapy bar soap, Protex
shower cream and Softlan Aroma Therapy fabric conditioner.
Africa/Eurasia (6% of Company
Sales)
Africa/Eurasia Net sales increased 3.5% during first quarter
2018. Unit volume decreased 3.5%, pricing increased 2.5% and
foreign exchange was positive 4.5%. The volume decline was mainly
driven by South Africa. Organic sales for Africa/Eurasia decreased
1.0%.
Operating profit in Africa/Eurasia increased 9% in first quarter
2018 to $50 million, or 90 basis points to 19.6% of Net sales. This
increase in Operating profit as a percentage of Net sales was
primarily due to a decrease in Selling, general and administrative
expenses, partially offset by a decrease in Gross profit, both as a
percentage of Net sales. This decrease in Gross profit was
primarily due to higher raw and packaging material costs, partially
offset by cost savings from the Company’s funding-the-growth
initiatives and higher pricing. This decrease in Selling, general
and administrative expenses was due to decreased advertising
investment and lower overhead expenses.
Colgate maintained its toothpaste leadership in Africa/Eurasia
during the quarter, with market share gains in Saudi Arabia, Kenya,
Kuwait, Qatar and Oman. Successful products contributing to sales
in the region include Colgate Ancient Secrets, Colgate Safe
Whitening, Colgate Natural Extracts and Colgate Optic White Extra
Power toothpastes, Colgate Zig Zag Charcoal and Colgate Triple
Action manual toothbrushes, Palmolive Luminous Oils shower gel and
Protex Herbal bar soap.
Hill’s Pet Nutrition (15% of Company
Sales)
Hill’s Net sales increased 5.5% during first quarter 2018. Unit
volume increased 0.5%, pricing increased 1.0% and foreign exchange
was positive 4.0%. Volume gains in the United States, Australia and
Brazil were partially offset by volume declines in Japan. Hill’s
organic sales increased 1.5%.
Hill’s Operating profit increased 1% in first quarter 2018 to
$164 million, while as a percentage of Net sales it decreased 130
basis points to 28.1% of Net sales. This decrease in Operating
profit as a percentage of Net sales was due to a decrease in Gross
profit and an increase in Other (income) expense, net, partially
offset by a decrease in Selling, general and administrative
expenses, all as a percentage of Net sales. This decrease in Gross
profit was primarily due to higher raw and packaging material
costs, partially offset by cost savings from the Company’s
funding-the-growth initiatives and higher pricing. This decrease in
Selling, general and administrative expenses was due to decreased
advertising investment, partially offset by higher overhead
expenses. This increase in Other (income) expense, net was
primarily due to the expiration of a foreign sales tax benefit.
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 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 k/d and k/d + Mobility, Hill’s
Prescription Diet Metabolic + Urinary, Hill’s Prescription Diet k/d
Early Stage 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
Effective January 1, 2018, as required, the Company adopted ASU
No. 2017-07, “Compensation-Retirement Benefits (Topic 715):
Improving the Presentation of Net Periodic Pension Cost and Net
Periodic Postretirement Benefit Cost,” on a retrospective
basis. As a result, for all periods presented, only the service
related component of pension and other postretirement benefit costs
is included in Operating profit. The non-service related components
(interest cost, expected return on assets and amortization of
actuarial gains and losses) are included in a new line item,
“Non-service related postretirement costs,” which is below
Operating profit. Adoption of this standard had no effect on Net
income attributable to Colgate-Palmolive Company, Earnings per
common share or Cash flow. See Table 1A “Supplemental Condensed
Consolidated Statements of Income Information,” Table 4A
“Supplemental Segment Information” and Table 6A “Supplemental
Non-GAAP Reconciliations Information” for reconciliations to
previously reported amounts for the three months ended March 31,
2017. Refer to the Company’s website at http://www.colgatepalmolive.com for
reconciliations to previously reported amounts for all quarters of
2017 as well as for years 2017 and 2016.
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
(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
Statements
This 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 current 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, U.S.
tax reform, 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, 2017 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 Measures
The 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 months ended
March 31, 2018 vs 2017 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, Non-service related
postretirement costs, 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 (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 months ended March 31, 2018 and
2017 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 three months ended March 31, 2018 and 2017 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 first quarter
results.)
Table 1 Colgate-Palmolive Company
Condensed Consolidated Statements of Income
For the Three Months Ended March 31, 2018 and 2017
(Dollars in Millions Except Per Share Amounts) (Unaudited)
2018 2017* Net sales $ 4,002 $ 3,762 Cost of
sales 1,594 1,493 Gross profit 2,408 2,269 Gross
profit margin 60.2 % 60.3 % Selling, general and
administrative expenses 1,392 1,336 Other (income) expense,
net 33 21 Operating profit 983 912 Operating profit
margin 24.6 % 24.2 % Non-service related postretirement
costs 24 27 Interest (income) expense, net 35 23
Income before income taxes 924 862 Provision for income
taxes 246 251 Effective tax rate 26.6 % 29.1 % Net
income including noncontrolling interests 678 611 Less: Net
income attributable to noncontrolling interests 44 41 Net
income attributable to Colgate-Palmolive Company $ 634 $ 570
Earnings per common share Basic $ 0.72 $ 0.64 Diluted $ 0.72 $ 0.64
Average common shares outstanding Basic 875.4 884.7 Diluted
879.9 891.0
*The Company adopted ASU No. 2017-07,
“Compensation–Retirement Benefits (Topic 715): Improving the
Presentation of Net Periodic Pension Cost and Net Periodic
Postretirement Benefit Cost,” on January 1, 2018. The adoption of
this standard resulted in the non-service related postretirement
costs being presented separately in the income statement from the
service cost component and the non-service related postretirement
costs no longer being included in Operating profit. As this
standard was applied retrospectively, as required, the Company
reclassified certain amounts to a new line below Operating profit
called Non-service related postretirement costs. The
reclassification had no effect on Net income attributable to
Colgate-Palmolive Company, Earnings per common share or Cash
flow.
See Table 1A “Supplemental Condensed Consolidated Statements of
Income Information,” Table 4A “Supplemental Segment Information”
and Table 6A “Supplemental Non-GAAP Reconciliations Information”
for reconciliations to previously reported amounts for the three
months ended March 31, 2017. Refer to the Company’s website for
reconciliations to previously reported amounts for all quarters of
2017 as well as for years 2017 and 2016.
Table 1A Colgate-Palmolive Company
Supplemental Condensed Consolidated Statements of Income
Information Impact of the adoption of ASU No.
2017-07, “Compensation–Retirement Benefits (Topic 715): Improving
the Presentation of Net Periodic Pension Cost and Net
Periodic Postretirement Benefit Cost” For the Three
Months Ended March 31, 2017 (Dollars in Millions
Except Per Share Amounts) (Unaudited) Pre-Adoption
Post-Adoption of ASU No. of ASU No. Impact of 2017-07 2017-07
Adoption Selling, general and administrative expenses
$ 1,362 $ 1,336 $ (26 ) Other (income) expense, net 22 21 (1
) Operating profit 885 912 27 Operating profit margin
23.5 % 24.2 % +70 bps Non-service related postretirement
costs — 27 27 Net income including noncontrolling interests
611 611 — Less: Net income attributable to noncontrolling
interests 41 41 — Net income attributable to
Colgate-Palmolive Company $ 570 $ 570 $ —
Note: Refer to the Company’s website for reconciliations to
previously reported amounts for all quarters of 2017 as well as for
years 2017 and 2016.
The reclassification had no effect on Net
income attributable to Colgate-Palmolive Company, Earnings per
common share or Cash flow.
Table 2 Colgate-Palmolive
Company Condensed Consolidated Balance Sheets
As of March 31, 2018, December 31, 2017 and March 31,
2017 (Dollars in Millions) (Unaudited)
March 31,
December 31,
March 31,
2018 2017
2017
Cash and cash equivalents $ 851 $ 1,535 $ 1,347 Receivables, net
1,644 1,480 1,496 Inventories 1,312 1,221 1,189 Other current
assets 485 403 564 Property, plant and equipment, net 4,087 4,072
3,883 Other assets, including goodwill and intangibles 4,765
3,965 3,969 Total assets $ 13,144 $ 12,676
$ 12,448 Total debt $ 6,709 $ 6,577 $ 6,473
Other current liabilities 3,821 3,397 3,802 Other non-current
liabilities 2,513 2,459 2,178 Total
liabilities 13,043 12,433 12,453 Total Colgate-Palmolive Company
shareholders’ equity (249 ) (60 ) (313 ) Noncontrolling interests
350 303 308 Total liabilities and equity $
13,144 $ 12,676 $ 12,448
Supplemental Balance Sheet Information Debt less cash, cash
equivalents and marketable securities* $ 5,803 $ 5,024 $ 5,014
Working capital % of sales (2.7 )% (2.0 )% (4.3 )% *Marketable
securities of $55, $18 and $112 as of March 31, 2018, December 31,
2017 and March 31, 2017, 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, 2018 and 2017 (Dollars in Millions)
(Unaudited) 2018 2017
Operating Activities Net
income including noncontrolling interests $ 678 $ 611 Adjustments
to reconcile net income including noncontrolling interests to net
cash provided by operations: Depreciation and amortization 129 109
Restructuring and termination benefits, net of cash (25 ) (9 )
Stock-based compensation expense 28 35 Deferred income taxes 13 (51
) Voluntary benefit plan contributions — (57 ) Cash effects of
changes in: Receivables (211 ) (52 ) Inventories (33 ) 9 Accounts
payable and other accruals 33 98 Other non-current assets and
liabilities 4 (2 ) Net cash provided by operations 616 691
Investing Activities Capital expenditures (118 ) (121
) Purchases of marketable securities and investments (38 ) (85 )
Proceeds from sale of marketable securities and investments — 48
Payment for acquisitions, net of cash acquired (727 ) — Other 2
— Net cash used in investing activities (881 ) (158 )
Financing Activities Principal payments on debt
(2,079 ) (805 ) Proceeds from issuance of debt 2,226 738 Dividends
paid (352 ) (345 ) Purchases of treasury shares (351 ) (333 )
Proceeds from exercise of stock options 119 225 Net
cash used in financing activities (437 ) (520 ) Effect of
exchange rate changes on Cash and cash equivalents 18 19
Net increase (decrease) in Cash and cash equivalents (684 )
32 Cash and cash equivalents at beginning of the period 1,535
1,315 Cash and cash equivalents at end of the period
$ 851 $ 1,347
Supplemental Cash Flow
Information Free cash flow before dividends (Net cash provided
by operations less Capital expenditures) Net cash provided by
operations $ 616 $ 691 Less: Capital expenditures (118 ) (121 )
Free cash flow before dividends $ 498 $ 570
Income taxes paid $ 163 $ 186
Table
4 Colgate-Palmolive Company Segment
Information For the Three Months Ended March 31, 2018
and 2017 (Dollars in Millions) (Unaudited)
2018 2017
Net Sales Oral, Personal and Home Care
North America $ 827 $ 760 Latin America 929 924 Europe 648
558 Asia Pacific 759 720 Africa/Eurasia 255 246
Total Oral, Personal and Home Care 3,418 3,208 Pet
Nutrition 584 554
Total Net Sales $
4,002 $ 3,762 2018 2017*
Operating Profit Oral, Personal and Home Care North
America $ 257 $ 247 Latin America 273 271 Europe 162 142 Asia
Pacific 226 219 Africa/Eurasia 50 46 Total
Oral, Personal and Home Care 968 925 Pet Nutrition 164 163
Corporate(1) (149 ) (176 )
Total Operating Profit $
983 $ 912 Corporate Operating profit (loss) for the
three months ended March 31, 2018 includes charges of $24 related
to the Global Growth and Efficiency Program. Corporate Operating
profit (loss) for the three months ended March 31, 2017 includes
charges of $45 related to the Global Growth and Efficiency Program.
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. *The Company adopted ASU No.
2017-07, “Compensation–Retirement Benefits (Topic 715): Improving
the Presentation of Net Periodic Pension Cost and Net Periodic
Postretirement Benefit Cost,” on January 1, 2018. The adoption of
this standard resulted in the non-service related postretirement
costs being presented separately in the income statement from the
service cost component and the non-service related postretirement
costs no longer being included in Operating profit. As this
standard was applied retrospectively, as required, the Company
reclassified the non-service components from Operating profit to a
new line below Operating profit called Non-service related
postretirement costs. See Table 4A “Supplemental Segment
Information” for reconciliations to previously reported segment
information for the three months ended March 31, 2017. Refer to the
Company’s website for reconciliations to previously reported
amounts for all quarters of 2017 as well as for years 2017 and
2016.
Table 4A
Colgate-Palmolive Company Supplemental Segment
Information Impact of the adoption of ASU No.
2017-07, “Compensation–Retirement Benefits (Topic 715):
Improving the Presentation of Net Periodic Pension Cost and
Net Periodic Postretirement Benefit Cost” For the
Three Months Ended March 31, 2017 (Dollars in
Millions) (Unaudited) Pre-Adoption of
Post-Adoption of Impact of ASU No. 2017-07 ASU No. 2017-07 Adoption
Operating Profit Oral, Personal and Home Care North
America $ 233 $ 247 $ 14 Latin America 269 271 2 Europe 140 142 2
Asia Pacific 219 219 — Africa/Eurasia 45 46 1
Total Oral, Personal and Home Care 906 925 19 Pet Nutrition
157 163 6 Corporate (178 ) (176 ) 2
Total Operating
Profit $ 885 $ 912 $ 27 Note: Refer to the
Company’s website for reconciliations to previously reported
amounts for all quarters of 2017 as well as for years 2017 and
2016.
Table 5 Colgate-Palmolive Company
Geographic Sales Analysis Percentage Changes For
the Three Months Ended March 31, 2018 vs 2017
(Unaudited) COMPONENTS
OF SALES CHANGE Pricing
Coupons Sales Consumer & Change
Organic As Reported Organic Ex-Divested
Trade Foreign
Region
As Reported
Sales Change
Volume(1) Volume
Volume Incentives
Exchange Total Company(1)
6.5% 1.5% 2.0% 1.5% 2.0% —% 4.5%
Europe 16.0% 1.5%
4.0% 4.0% 4.0% (2.5)% 14.5%
Latin America 0.5% 0.5%
—% —% —% 0.5% —%
Asia Pacific 5.5% —% 0.5% 0.5% 0.5%
(0.5)% 5.5%
Africa/Eurasia 3.5% (1.0)% (3.5)% (3.5)%
(3.5)% 2.5% 4.5%
Total International 6.0% 0.5% 1.0%
1.0% 1.0% (0.5)% 5.5%
North America(1) 9.0%
5.0% 9.0% 5.5% 9.0% (0.5)% 0.5%
Total CP Products
6.5% 1.5% 2.5% 2.0% 2.5% (0.5)% 4.5%
Hill’s 5.5% 1.5%
0.5% 0.5% 0.5% 1.0% 4.0%
Emerging
Markets(2) 4.0% 0.5% —% —% —% 0.5% 3.5%
Developed Markets 9.0% 2.5% 4.5% 3.0% 4.5% (0.5)% 5.0% Note:
(1) The impact of the previously disclosed professional skin care
acquisitions on as reported volume was 0.5% for Total Company and
3.5% for North America. (2) Emerging Markets include Latin America,
Asia (excluding Japan), Africa/Eurasia and Central Europe.
Table 6 Colgate-Palmolive Company Non-GAAP
Reconciliations For the Three Months Ended March 31,
2018 and 2017 (Dollars in Millions Except Per Share
Amounts) (Unaudited) Gross
Profit 2018 2017 Gross profit, GAAP $ 2,408 $
2,269 Global Growth and Efficiency Program 6 14 Gross
profit, non-GAAP $ 2,414 $ 2,283
Basis
Point Gross Profit Margin 2018 2017
Change Gross profit margin, GAAP 60.2 % 60.3 % (10 ) Global
Growth and Efficiency Program 0.1 % 0.4 % Gross profit
margin, non-GAAP 60.3 % 60.7 % (40 )
Selling,
General and Administrative Expenses 2018
2017* Selling, general and administrative expenses, GAAP $
1,392 $ 1,336 Global Growth and Efficiency Program (5 ) (21 )
Selling, general and administrative expenses, non-GAAP $ 1,387
$ 1,315
Basis Point Selling, General
and Administrative Expenses as a Percentage of Net Sales
2018 2017* Change Selling, general and
administrative expenses as a percentage of Net sales, GAAP 34.8 %
35.5 % (70 ) Global Growth and Efficiency Program (0.1 )% (0.5 )%
Selling, general and administrative expenses as a percentage
of Net sales, non-GAAP 34.7 % 35.0 % (30 )
Other
(Income) Expense, Net 2018 2017* Other (income)
expense, net, GAAP $ 33 $ 21 Global Growth and Efficiency Program
(13 ) (10 ) Other (income) expense, net, non-GAAP $ 20 $ 11
Operating Profit 2018
2017* % Change Operating profit, GAAP $ 983 $ 912 8 %
Global Growth and Efficiency Program 24 45
Operating profit, non-GAAP $ 1,007 $ 957 5 %
Basis Point Operating Profit Margin 2018
2017* Change Operating profit margin, GAAP 24.6 %
24.2 % 40 Global Growth and Efficiency Program 0.6 % 1.2 %
Operating profit margin, non-GAAP 25.2 % 25.4 % (20 )
Non-Service Related Postretirement Costs 2018
2017* Non-service related postretirement costs, GAAP $ 24 $
27 Global Growth and Efficiency Program (4 ) (1 ) Non-service
related postretirement costs, non-GAAP $ 20 $ 26
Table 6 Continued Colgate-Palmolive Company
Non-GAAP Reconciliations For the Three
Months Ended March 31, 2018 and 2017 (Dollars in
Millions Except Per Share Amounts) (Unaudited)
2018 Net Income
Attributable Net Income To Including
Colgate- Effective Diluted Income
Before Provision For Noncontrolling
Palmolive Income Earnings Income Taxes
Income Taxes(1)
Interests Company
Tax Rate(2)
Per Share As Reported GAAP $ 924 $ 246 $ 678 $ 634 26.6 % $
0.72 Global Growth and Efficiency Program 28 8 20
20 0.1 % 0.02 Non-GAAP $ 952 $ 254 $
698 $ 654 26.7 % $ 0.74
2017
Net Income Attributable Net Income To
Including Colgate- Effective Diluted
Income Before Provision For Noncontrolling
Palmolive Income Earnings Income Taxes
Income Taxes(1)
Interests Company
Tax Rate(2)
Per Share As Reported GAAP $ 862 $ 251 $ 611 $ 570 29.1 % $
0.64 Global Growth and Efficiency Program 46 15 31
31 0.2 % 0.03 Non-GAAP $ 908 $ 266 $
642 $ 601 29.3 % $ 0.67 The impact of non-GAAP
adjustments may not necessarily equal the difference between “GAAP”
and “non-GAAP” as a result of rounding.
*The Company adopted ASU No. 2017-07,
“Compensation–Retirement Benefits (Topic 715): Improving the
Presentation of Net Periodic Pension Cost and Net Periodic
Postretirement Benefit Cost,” on January 1, 2018. The adoption of
this standard resulted in the non-service related postretirement
costs being presented separately in the income statement from the
service cost component and the non-service related postretirement
costs no longer being included in Operating profit. The
reclassification had no effect on Net income attributable to
Colgate-Palmolive Company, Earnings per common share or Cash
flow.
See Table 6A “Supplemental Non-GAAP Reconciliations
Information” for reconciliations to previously reported amounts for
the three months ended March 31, 2017. Refer to the Company’s
website for reconciliations to previously reported amounts for all
quarters of 2017 as well as for years 2017 and 2016. 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.
Table 6A
Colgate-Palmolive Company Supplemental Non-GAAP
Reconciliations Information
Impact of the adoption of ASU No.
2017-07, “Compensation–Retirement Benefits (Topic 715): Improving
the
Presentation of Net Periodic Pension
Cost and Net Periodic Postretirement Benefit Cost”
For the Three Months Ended March 31, 2017
(Dollars in Millions Except Per Share Amounts) (Unaudited)
Pre-Adoption of Post-Adoption of
Impact of Selling, General and Administrative
Expenses ASU No. 2017-07 ASU No. 2017-07
Adoption Selling, general and administrative expenses, GAAP
$ 1,362 $ 1,336 $ (26 ) Global Growth and Efficiency Program (21 )
(21 ) — Selling, general and administrative expenses,
non-GAAP $ 1,341 $ 1,315 $ (26 )
Pre-Adoption of Post-Adoption of Impact of
Selling, General and Administrative Expenses as a Percentage of
Net Sales ASU No. 2017-07 ASU No. 2017-07
Adoption Selling, general and administrative expenses as a
percentage of Net sales, GAAP 36.2 % 35.5 % -70 bps Global Growth
and Efficiency Program (0.6 )% (0.5 )% +10 bps Selling, general and
administrative expenses as a percentage of Net sales, non-GAAP 35.6
% 35.0 % -60 bps
Pre-Adoption of
Post-Adoption of Impact of Other (Income) Expense,
Net ASU No. 2017-07 ASU No. 2017-07
Adoption Other (income) expense, net, GAAP $ 22 $ 21 $ (1 )
Global Growth and Efficiency Program (11 ) (10 ) 1 Other
(income) expense, net, non-GAAP $ 11 $ 11 $ —
Pre-Adoption of Post-Adoption of
Impact of Operating Profit ASU No. 2017-07
ASU No. 2017-07 Adoption Operating profit, GAAP $ 885
$ 912 $ 27 Global Growth and Efficiency Program 46 45
(1 ) Operating profit, non-GAAP $ 931 $ 957 $ 26
Pre-Adoption of Post-Adoption of
Impact of Operating Profit Margin ASU No.
2017-07 ASU No. 2017-07 Adoption Operating profit
margin, GAAP 23.5 % 24.2 % +70 bps Global Growth and Efficiency
Program 1.2 % 1.2 % — bps Operating profit margin, non-GAAP 24.7 %
25.4 % +70 bps
Note: The reclassification had no effect
on Gross profit, Net income, Earnings per common share or Cash
flow. Refer to the Company’s website for reconciliations to
previously reported amounts for all quarters of 2017 as well as for
years 2017 and 2016.
The impact of non-GAAP adjustments may not necessarily equal
the difference between “GAAP” and “non-GAAP” as a result of
rounding.
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Colgate-Palmolive CompanyJohn Faucher, 212-310-3653Hope Spiller,
212-310-2291
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