Colgate-Palmolive Company (NYSE:CL) today reported worldwide Net
sales of $3,811 million in fourth quarter 2018, a decrease of 2.0%
versus fourth quarter 2017. Global unit volume increased 0.5%,
pricing increased 2.5% and foreign exchange was negative 5.0%. The
previously disclosed professional skin care acquisitions
contributed 1.0% to Net sales and unit volume growth in the
quarter. Organic sales (Net sales excluding the impact of foreign
exchange, acquisitions and divestments) increased 2.0%.
Net income and Diluted earnings per share in fourth quarter 2018
were $606 million and $0.70, respectively. Net income in fourth
quarter 2018 included $32 million ($0.04 per diluted share) of
aftertax charges resulting from the Company’s Global Growth and
Efficiency Program.
Net income and Diluted earnings per share in fourth quarter 2017
were $323 million and $0.37, respectively. Net income in fourth
quarter 2017 included $61 million ($0.07 per diluted share) of
aftertax charges resulting from the Global Growth and Efficiency
Program and a charge related to U.S. tax reform of $275 million
($0.31 per diluted share).
Excluding charges resulting from the Global Growth and
Efficiency Program in both periods and the charge related to U.S.
tax reform in 2017, Net income in fourth quarter 2018 was $638
million, a decrease of 3% versus fourth quarter 2017, and Diluted
earnings per share in fourth quarter 2018 was $0.74, a decrease of
1% versus fourth quarter 2017.
Gross profit margin was 59.1% in fourth quarter 2018 versus
59.8% in fourth quarter 2017. Excluding charges resulting from the
Global Growth and Efficiency Program in both periods, Gross profit
margin was 59.4% in fourth quarter 2018, a decrease of 100 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 and higher pricing.
Selling, general and administrative expenses were 34.8% of Net
sales in fourth quarter 2018 versus 34.6% of Net sales in fourth
quarter 2017. Excluding charges resulting from the Global Growth
and Efficiency Program in both periods, Selling, general and
administrative expenses increased 70 basis points versus the year
ago quarter to 34.6% of Net sales in fourth quarter 2018 due to
higher overhead expenses, driven by higher logistics costs, and
increased advertising investment, both as a percentage of Net
sales. On an absolute basis, worldwide advertising investment
increased 2% to $376 million in fourth quarter 2018 versus $369
million in the year ago quarter.
Operating profit decreased to $891 million in fourth quarter
2018 compared to $960 million in fourth quarter 2017. Excluding
charges resulting from the Global Growth and Efficiency Program in
both periods, Operating profit was $936 million in fourth quarter
2018, a decrease of 10% versus fourth quarter 2017. Operating
profit margin was 23.4% in fourth quarter 2018 versus 24.7% in
fourth quarter 2017. Excluding charges resulting from the Global
Growth and Efficiency Program in both periods, Operating profit
margin was 24.6% in fourth quarter 2018, a decrease of 210 basis
points versus the year ago quarter. This decrease in Operating
profit margin 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.
Net cash provided by operations year to date was $3,056 million
compared to $3,054 million in the comparable 2017 period. Working
capital as a percentage of Net sales was negative 1.7% compared to
negative 2.0% in the year ago period.
Ian Cook, Chairman and Chief Executive Officer, commented on the
fourth quarter results, “We are pleased with the improvement in
organic sales growth this quarter, driven by 2.5% positive
pricing.
“Colgate’s leadership of the global toothpaste market continued
during the quarter with our global market share at 42.0% year to
date. Our global leadership in manual toothbrushes also continued
with Colgate’s global market share in that category at 32.3% year
to date.”
Mr. Cook continued, “Looking ahead to 2019, based on current
spot rates, we expect net sales to be flat to up low-single-digits,
with organic sales growth of 2% to 4% as we are planning for
increased investment behind our brands, higher pricing and strong
innovation, led by the relaunches of Colgate Total and Hill’s
Science Diet and our continued focus on naturals.
“We are also planning to invest in expanding our portfolio
offerings by bringing brands like elmex and meridol into new
markets and by broadening our e-commerce offerings, including
direct to consumer, to build on our strong e-commerce growth in
2018. We also plan to continue to increase our investment behind
our professional skin care businesses, Elta MD and PCA Skin.
“On a GAAP basis, based on current spot rates, we are planning
for a year of gross margin expansion and expect a low-single-digit
decline in earnings per share.
"Excluding charges resulting from the Global Growth and
Efficiency Program in both 2018 and 2019, the charge related to
U.S. tax reform in 2018 and the benefit from a foreign tax matter
in 2018, based on current spot rates, we are planning for a year of
gross margin expansion, increased advertising investment and a
mid-single-digit decline in earnings per share. Our outlook
reflects an increase in raw material prices, an increase in our tax
rate year-over-year and the uncertainty surrounding the global
economy, exchange rates and pricing.
“Given our plans to increase investment behind our brands to
drive acceleration in organic sales growth, we believe our earnings
outlook for 2019 is appropriate.”
At 11:00 a.m. ET today, Colgate will host a conference call to
elaborate on fourth 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
fourth 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 (22% of Company
Sales)
North America Net sales increased 5.0% in fourth quarter 2018.
Unit volume increased 3.0%, pricing increased 2.5% and foreign
exchange was negative 0.5%. The previously disclosed professional
skin care acquisitions contributed 5.0% to Net sales and unit
volume growth. Organic sales for North America increased 0.5% and
organic unit volume decreased 2.0%.
Operating profit in North America decreased 7% in fourth quarter
2018 to $257 million, or 410 basis points to 30.6% of Net sales.
This decrease in Operating profit as a percentage of Net sales was
due to a decrease in Gross profit, an increase in Selling, general
and administrative expenses and an increase in Other (income)
expense, net, 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 increase in Selling, general
and administrative expenses was due to higher overhead expenses,
primarily driven by increased logistics costs. This increase in
Other (income) expense, net was primarily due to the amortization
of intangible assets resulting from the professional skin care
acquisitions.
In the U.S., Colgate maintained leadership in the toothpaste
category during the quarter with its market share at 34.8% year to
date. Successful products include Colgate Optic White Stain
Fighter, Colgate Optic White Stain-Less 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 41.5% year to date, supported by the success of Colgate
360° Total 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 Non-Stop Fresh
body wash, Fabuloso Complete liquid cleaner and Suavitel Complete
fabric conditioner.
Latin America (23% of Company
Sales)
Latin America Net sales decreased 9.0% in fourth quarter 2018.
Unit volume decreased 3.5%, pricing increased 4.5% and foreign
exchange was negative 10.0%. Volume declines in Brazil and
Argentina were partially offset by volume gains in Mexico. Organic
sales for Latin America increased 1.0%.
Operating profit in Latin America decreased 17% in fourth
quarter 2018 to $238 million, or 270 basis points to 26.8% 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 due to higher raw and packaging material costs, which
included foreign exchange transaction costs, partially offset by
cost savings from the Company’s funding-the-growth initiatives and
higher pricing. This decrease in Selling, general and
administrative expenses was due to decreased advertising
investment.
Colgate maintained its toothpaste leadership in Latin America
during the quarter, with market share gains in Guatemala, Dominican
Republic, Panama, Chile, El Salvador and Nicaragua. Products
succeeding in the region include Colgate Natural Extracts, Colgate
Total 12 Salud Visible and Colgate Triple Action Xtra Freshness
toothpastes. Colgate’s leadership in the manual toothbrush category
continued throughout the region, supported by the success of
Colgate Pro Cuidado and Colgate Premier manual toothbrushes.
Products succeeding in other categories include Colgate Total 12
mouthwash, Protex Deep Clean and Palmolive Natureza Secreta bar
soaps, Lady Speed Stick Clinical and Speed Stick Clinical spray
deodorants, Axion dish liquid and Fabuloso Complete liquid
cleaner.
Europe (16% of Company
Sales)
Europe Net sales decreased 2.5% in fourth quarter 2018. Unit
volume increased 2.0%, pricing decreased 1.0% and foreign exchange
was negative 3.5%. Volume gains were driven by the United Kingdom
and France. Organic sales for Europe increased 1.0%.
Operating profit in Europe was even with the year ago quarter,
while as a percentage of Net sales, it increased 70 basis points to
25.9% of Net sales. This increase in Operating profit as a
percentage of Net sales was due to an increase in Gross profit and
a decrease in Other (income) expense, net, partially offset by an
increase in Selling, general and administrative expenses, 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 increased advertising investment, partially
offset by lower overhead expenses. This decrease in Other (income)
expense, net was primarily due to a non-recurring expense recorded
in the year ago quarter.
Colgate maintained its toothpaste leadership in Europe during
the quarter, with market share gains in France, Italy, Greece, the
Netherlands, Denmark and Belgium. Products succeeding in oral care
include Colgate Max White Expert Complete, Colgate Natural Extracts
Charcoal and elmex toothpastes, Colgate 360° Advanced Whole Mouth
Health and Colgate Slim Soft Advanced manual toothbrushes and
Colgate Plax mouthwash.
Products succeeding in other categories include Sanex and
Palmolive Aroma Sensations shower gels, Ajax Boost liquid cleaner
and Soupline fabric conditioner.
Asia Pacific (16% of Company
Sales)
Asia Pacific Net sales decreased 6.5% during fourth quarter
2018. Unit volume decreased 0.5%, pricing decreased 0.5% and
foreign exchange was negative 5.5%. Volume declines in the Greater
China region were partially offset by volume gains in India and
Australia. Organic sales for Asia Pacific decreased 1.0%.
Operating profit in Asia Pacific decreased 20% in fourth quarter
2018 to $157 million, or 440 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 and an increase 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, 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 maintained its toothpaste leadership in the Asia Pacific
region during the quarter with market share gains in Australia and
the Philippines. Products succeeding in the region include Colgate
Naturals, Colgate Swarna Vedshakti, Colgate Power White, Colgate
Sensitive Pro-Relief and elmex Sensitive toothpastes.
Products succeeding in other categories include Colgate Slim
Soft Advanced and Colgate Slim Soft Flex Clean manual toothbrushes,
Palmolive Skin Therapy bar soap, Colgate Plax mouthwash, Palmolive
Luminous Oils shower gel and Cuddly Aroma Intense fabric
conditioner.
Africa/Eurasia (6% of Company
Sales)
Africa/Eurasia Net sales decreased 5.0% during fourth quarter
2018. Unit volume decreased 3.5%, pricing increased 7.5% and
foreign exchange was negative 9.0%. Volume declines in Turkey and
South Africa were partially offset by volume gains in the Gulf
States. Organic sales for Africa/Eurasia increased 4.0%.
Operating profit in Africa/Eurasia decreased 11% in fourth
quarter 2018 to $40 million, or 120 basis points to 17.2% of Net
sales. This decrease in Operating profit as a percentage of Net
sales was primarily due an increase in Selling, general and
administrative expenses, partially offset by an increase in Gross
profit, both 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 and higher pricing, partially offset
by higher raw and packaging material costs, which included foreign
exchange transaction costs. This increase in Selling, general and
administrative expenses was due to higher overhead expenses and
increased advertising investment.
Colgate maintained its toothpaste leadership in Africa/Eurasia
during the quarter, with market share gains in Turkey, Saudi
Arabia, United Arab Emirates, Kenya, Kazakhstan and Kuwait.
Successful products contributing to sales in the region include
Colgate Ancient Secrets, Colgate Natural Extracts and Colgate Optic
White Expert White toothpastes, Colgate 360° Advanced Whole Mouth
Clean and Colgate Slim Soft Advanced manual toothbrushes and
Palmolive Gourmet and Palmolive Luminous Oils shower gels.
Hill’s Pet Nutrition (17% of Company
Sales)
Hill’s Net sales increased 6.0% during fourth quarter 2018. Unit
volume increased 3.5%, pricing increased 4.5% and foreign exchange
was negative 2.0%. Volume gains in the United States and Western
Europe were partially offset by volume declines in Russia. Hill’s
organic sales increased 8.0%.
Hill’s Operating profit increased 6% in fourth quarter 2018 to
$188 million, while as a percentage of Net sales it decreased 20
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 and an increase in Other (income) expense, net, largely
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 lower
overhead expenses partially offset by increased advertising
investment. 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 Bioactive Recipe, Hill’s Prescription Diet Metabolic +
Urinary, Hill’s Prescription Diet k/d and k/d + Mobility, Hill’s
Prescription Diet k/d Early Support, Hill’s Science Diet Youthful
Vitality, Hill’s Science Diet Kitten 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, Hill’s Science Diet Youthful Vitality and Hill’s
Science Diet Kitten.
***
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,
elmex, Tom’s of Maine, Sorriso, Speed Stick, Lady Speed Stick,
Softsoap, Irish Spring, Protex, Sanex, Elta MD, PCA Skin, 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
The Company’s annual meeting of stockholders is currently
scheduled for Friday, May 10, 2019.
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. 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, net selling price
increases, organic sales growth, profit or profit margin growth,
earnings per share levels, financial goals, the impact of foreign
exchange volatility, cost-reduction plans including the Global
Growth and Efficiency Program, tax rates, U.S. tax reform, 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 and twelve months ended
December 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 and, as applicable, the benefit from a foreign tax matter
and charges related to U.S. tax reform (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 twelve months
ended December 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 twelve months ended December 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 fourth quarter
results.)
Table 1 Colgate-Palmolive Company
Condensed Consolidated Statements of Income
For the Three Months Ended December 31, 2018 and 2017
(Dollars in Millions Except Per Share Amounts) (Unaudited)
2018
2017(1)
Net sales $ 3,811 $ 3,892 Cost of sales 1,558 1,564
Gross profit 2,253 2,328 Gross profit margin 59.1 %
59.8 % Selling, general and administrative expenses 1,328
1,345 Other (income) expense, net 34 23 Operating
profit 891 960 Operating profit margin 23.4 % 24.7 %
Non-service related postretirement costs 22 36 Interest
(income) expense, net 37 28 Income before income taxes 832
896 Provision for income taxes 189 543 Effective tax
rate 22.7 % 60.6 % Net income including noncontrolling
interests 643 353 Less: Net income attributable to
noncontrolling interests 37 30 Net income attributable to
Colgate-Palmolive Company $ 606 $ 323 Earnings per common
share Basic $ 0.70 $ 0.37 Diluted $ 0.70 $ 0.37 Average
common shares outstanding Basic 866.6 878.0 Diluted 867.5 883.3
Note: (1) 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.
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 2 Colgate-Palmolive
Company Condensed Consolidated Statements of
Income For the Twelve Months Ended December 31, 2018
and 2017 (Dollars in Millions Except Per Share
Amounts) (Unaudited) 2018
2017(1)
Net sales $ 15,544 $ 15,454 Cost of sales 6,313 6,174
Gross profit 9,231 9,280 Gross profit margin 59.4 %
60.0 % Selling, general and administrative expenses 5,389
5,400 Other (income) expense, net 148 173 Operating
profit 3,694 3,707 Operating profit margin 23.8 % 24.0 %
Non-service related postretirement costs 87 118
Interest (income) expense, net 143 102 Income before income
taxes 3,464 3,487 Provision for income taxes 906 1,313
Effective tax rate 26.2 % 37.7 % Net income including
noncontrolling interests 2,558 2,174 Less: Net income
attributable to noncontrolling interests 158 150 Net income
attributable to Colgate-Palmolive Company $ 2,400 $ 2,024
Earnings per common share
Basic(2)
$ 2.76 $ 2.30
Diluted(2)
$ 2.75 $ 2.28 Average common shares outstanding Basic 870.6
881.8 Diluted 873.0 887.8
Notes: (1) 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.
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. (2) Basic and diluted earnings per share are
computed independently for each quarter and any year-to-date period
presented. As a result of changes in shares outstanding during the
year and rounding, the sum of the quarters’ earnings per share may
not necessarily equal the earnings per share for any year-to-date
period.
Table 3 Colgate-Palmolive Company
Condensed Consolidated Balance Sheets As of
December 31, 2018 and December 31, 2017 (Dollars in
Millions) (Unaudited) December 31, December 31,
2018 2017 Cash and cash equivalents $ 726 $ 1,535 Receivables, net
1,400 1,480 Inventories 1,250 1,221 Other current assets 417 403
Property, plant and equipment, net 3,881 4,072 Other assets,
including goodwill and intangibles 4,487 3,965 Total
assets $ 12,161 $ 12,676 Total debt $ 6,366 $
6,577 Other current liabilities 3,329 3,397 Other non-current
liabilities 2,269 2,459 Total liabilities 11,964
12,433 Total Colgate-Palmolive Company shareholders’ equity (102 )
(60 ) Noncontrolling interests 299 303 Total
liabilities and equity $ 12,161 $ 12,676
Supplemental Balance Sheet Information
Debt less cash, cash equivalents and
marketable securities(1)
$ 5,630 $ 5,024 Working capital % of sales (1.7 )% (2.0 )% Note:
(1) Marketable securities of $10 and $18 as of December 31, 2018
and 2017, respectively, are included in Other current assets.
Table 4 Colgate-Palmolive Company Condensed
Consolidated Statements of Cash Flows For the Twelve
Months Ended December 31, 2018 and 2017 (Dollars in
Millions) (Unaudited) 2018 2017
Operating
Activities Net income including noncontrolling interests $
2,558 $ 2,174 Adjustments to reconcile net income including
noncontrolling interests to net cash provided by operations:
Depreciation and amortization 511 475 Restructuring and termination
benefits, net of cash (7 ) 91 Stock-based compensation expense 109
127 Charge for U.S. tax reform 80 275 Deferred income taxes 27 108
Voluntary benefit plan contributions (67 ) (81 ) Cash effects of
changes in: Receivables (79 ) (15 ) Inventories (58 ) (8 ) Accounts
payable and other accruals 18 (96 ) Other non-current assets and
liabilities (36 ) 4 Net cash provided by operations 3,056
3,054
Investing Activities Capital expenditures (436
) (553 ) Sale of property and non-core products 1 44 Purchases of
marketable securities and investments (169 ) (347 ) Proceeds from
sale of marketable securities and investments 156 391 Payment for
acquisitions, net of cash acquired (728 ) — Other 6 (6 ) Net
cash used in investing activities (1,170 ) (471 )
Financing Activities Principal payments on debt (7,355 )
(4,808 ) Proceeds from issuance of debt 7,176 4,779 Dividends paid
(1,591 ) (1,529 ) Purchases of treasury shares (1,238 ) (1,399 )
Proceeds from exercise of stock options 329 507 Net
cash used in financing activities (2,679 ) (2,450 ) Effect
of exchange rate changes on Cash and cash equivalents (16 ) 87
Net increase (decrease) in Cash and cash equivalents (809 )
220 Cash and cash equivalents at beginning of the period 1,535
1,315 Cash and cash equivalents at end of the period
$ 726 $ 1,535
Supplemental Cash Flow
Information Free cash flow before dividends (Net cash provided
by operations less Capital expenditures) Net cash provided by
operations $ 3,056 $ 3,054 Less: Capital expenditures (436 ) (553 )
Free cash flow before dividends $ 2,620 $ 2,501
Income taxes paid $ 847 $ 1,037
Table 5
Colgate-Palmolive Company Segment Information
For the Three and Twelve Months Ended December 31, 2018
and 2017 (Dollars in Millions) (Unaudited)
Three Months Ended December 31, Twelve Months Ended December
31, 2018 2017 2018 2017
Net Sales Oral,
Personal and Home Care North America $ 839 $ 798 $ 3,348 $
3,117 Latin America 887 976 3,605 3,887 Europe 594 610 2,502 2,394
Asia Pacific 628 670 2,734 2,781 Africa/Eurasia 233 245
967 983 Total Oral, Personal and Home
Care 3,181 3,299 13,156 13,162 Pet Nutrition 630 593
2,388 2,292
Total Net Sales $
3,811 $ 3,892 $ 15,544 $ 15,454
Three Months Ended December 31, Twelve Months Ended December
31, 2018
2017(1)
2018
2017(1)
Operating Profit Oral, Personal and Home Care North
America $ 257 $ 277 $ 1,037 $ 1,043 Latin America 238 288 995 1,171
Europe 154 154 634 605 Asia Pacific 157 197 777 842 Africa/Eurasia
40 45 173 180 Total Oral,
Personal and Home Care 846 961 3,616 3,841 Pet Nutrition 188
178 680 677
Corporate(2)
(143 ) (179 ) (602 ) (811 )
Total Operating Profit $
891 $ 960 $ 3,694 $ 3,707 Notes:
(1) 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. 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.
(2) 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 and twelve months ended December 31, 2018
includes charges of $45 and $152, respectively, related to the
Global Growth and Efficiency Program. Corporate Operating profit
(loss) for the three and twelve months ended December 31, 2017
includes charges of $80 and $313, respectively, related to the
Global Growth and Efficiency Program.
Table 6 Colgate-Palmolive Company
Geographic Sales Analysis Percentage Changes For
the Three Months Ended December 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) (2.0)% 2.0% 0.5% (0.5)% 0.5%
2.5% (5.0)%
Europe (2.5)% 1.0% 2.0% 2.0% 2.0% (1.0)%
(3.5)%
Latin America (9.0)% 1.0% (3.5)% (3.5)% (3.5)%
4.5% (10.0)%
Asia Pacific (6.5)% (1.0)% (0.5)% (0.5)%
(0.5)% (0.5)% (5.5)%
Africa/Eurasia (5.0)% 4.0%
(3.5)% (3.5)% (3.5)% 7.5% (9.0)%
Total International
(6.5)% 1.0% (1.5)% (1.5)% (1.5)% 2.5% (7.5)%
North
America(1) 5.0% 0.5% 3.0% (2.0)% 3.0% 2.5% (0.5)%
Total CP Products (3.5)% 0.5% (0.5)% (2.0)% (0.5)% 2.5%
(5.5)%
Hill’s 6.0% 8.0% 3.5% 3.5% 3.5% 4.5% (2.0)%
Emerging Markets(2) (7.0)% 1.5% (2.0)%
(2.0)% (2.0)% 3.5% (8.5)%
Developed Markets 2.5% 2.0%
2.5% 0.5% 2.5% 1.5% (1.5)% Notes:
(1) The impact of the previously disclosed
professional skin care acquisitions on as reported volume was 1.0%
for Total Company and 5.0% for North America.
(2) 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 Twelve Months Ended December 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) 0.5% 0.5% 1.0% —% 1.0% 0.5%
(1.0)%
Europe 4.5% 0.5% 2.5% 2.5% 2.5% (2.0)% 4.0%
Latin America (7.5)% (1.0)% (2.5)% (2.5)% (2.5)% 1.5%
(6.5)%
Asia Pacific (1.5)% (1.5)% (1.5)% (1.5)%
(1.5)% —% —%
Africa/Eurasia (1.5)% 2.5% (1.0)% (1.0)%
(1.0)% 3.5% (4.0)%
Total International (2.5)% (0.5)%
(1.0)% (1.0)% (1.0)% 0.5% (2.0)%
North
America(1) 7.5% 2.5% 6.5% 1.5% 6.5% 1.0% —%
Total CP Products —% —% 1.0% (0.5)% 1.0% 0.5% (1.5)%
Hill’s 4.0% 3.5% 1.5% 1.5% 1.5% 2.0% 0.5%
Emerging Markets(2) (4.0)% (0.5)% (2.0)% (2.0)%
(2.0)% 1.5% (3.5)%
Developed Markets 5.0% 1.5% 3.5%
1.5% 3.5% —% 1.5% Notes:
(1) The impact of the previously disclosed
professional skin care acquisitions on as reported volume was 1.0%
for Total Company and 5.0% for North America.
(2) 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 December
31, 2018 and 2017 (Dollars in Millions Except Per
Share Amounts) (Unaudited)
Gross Profit 2018 2017 Gross profit,
GAAP $ 2,253 $ 2,328 Global Growth and Efficiency Program 12
24 Gross profit, non-GAAP $ 2,265 $ 2,352
Basis Point Gross Profit Margin 2018
2017 Change Gross profit margin, GAAP 59.1 % 59.8 %
(70 ) Global Growth and Efficiency Program 0.3 % 0.6 %
Gross profit margin, non-GAAP 59.4 % 60.4 % (100 )
Selling, General and Administrative Expenses
2018 2017(1) Selling, general and
administrative expenses, GAAP $ 1,328 $ 1,345 Global Growth and
Efficiency Program (9 ) (26 ) Selling, general and administrative
expenses, non-GAAP $ 1,319 $ 1,319
Basis
Point Selling, General and Administrative Expenses as a
Percentage of Net Sales 2018 2017(1)
Change Selling, general and administrative expenses as a
percentage of Net sales, GAAP 34.8 % 34.6 % 20 Global Growth and
Efficiency Program (0.2 )% (0.7 )% Selling, general and
administrative expenses as a percentage of Net sales, non-GAAP 34.6
% 33.9 % 70
Other (Income) Expense, Net
2018 2017(1) Other (income) expense, net, GAAP
$ 34 $ 23 Global Growth and Efficiency Program (24 ) (30 ) Other
(income) expense, net, non-GAAP $ 10 $ (7 )
Operating Profit (Loss) 2018 2017(1)
% Change Operating profit (loss), GAAP $ 891 $ 960 (7 )%
Global Growth and Efficiency Program 45 80
Operating profit, non-GAAP $ 936 $ 1,040 (10
)%
Basis Point Operating Profit Margin
2018 2017(1) Change Operating profit
margin, GAAP 23.4 % 24.7 % (130 ) Global Growth and Efficiency
Program 1.2 % 2.0 % Operating profit margin, non-GAAP
24.6 % 26.7 % (210 )
Non-Service Related
Postretirement Costs 2018 2017(1)
Non-service related postretirement costs, GAAP $ 22 $ 36 Global
Growth and Efficiency Program (1 ) (7 ) Non-service related
postretirement costs, non-GAAP $ 21 $ 29
Table
8 Continued Colgate-Palmolive Company
Non-GAAP Reconciliations For the Three Months
Ended December 31, 2018 and 2017 (Dollars in Millions
Except Per Share Amounts) (Unaudited)
2018 Income BeforeIncome Taxes
Provision For Income Taxes(2) Net
IncomeIncluding Non-controlling Interests
Less: IncomeAttributable To
Non-controlling Interests Net
IncomeAttributable To Colgate- Palmolive
Company Effective Income Tax
Rate(3) Diluted EarningsPer Share
As Reported GAAP
$832
$ 189 $ 643 $ 37 $ 606 22.7% $ 0.70 Global Growth and Efficiency
Program 46 12 34 2 32 0.2%
0.04 Non-GAAP $878 $ 201 $ 677 $ 39 $ 638 22.9% $
0.74
2017 Income BeforeIncome
Taxes Provision For Income Taxes(2) Net
Income IncludingNon-controlling Interests Net
IncomeAttributable To Colgate- Palmolive
Company Effective Income Tax Rate(3)
Diluted Earnings Per Share As Reported GAAP
$896
$ 543 $ 353 $ 323 60.6% $ 0.37 Global Growth and Efficiency Program
87
26 61 61 (2.7)% 0.07 U.S. tax reform
—
(275 ) 275 275 (28.0)% 0.31 Non-GAAP
$983
$ 294 $ 689 $ 659 29.9% $ 0.75
The impact of non-GAAP adjustments may not
necessarily equal the difference between “GAAP” and “non-GAAP” as a
result of rounding.
Notes:
(1) 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.
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.
(2) 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.
(3) 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 9 Colgate-Palmolive Company Non-GAAP
Reconciliations For the Twelve Months Ended December
31, 2018 and 2017 (Dollars in Millions Except Per
Share Amounts) (Unaudited)
Gross Profit 2018 2017 Gross
profit, GAAP $ 9,231 $ 9,280 Global Growth and Efficiency Program
31 75 Gross profit, non-GAAP $ 9,262 $ 9,355
Basis Point Gross Profit Margin
2018 2017 Change Gross profit margin, GAAP
59.4 % 60.0 % (60 ) Global Growth and Efficiency Program 0.2 % 0.5
% Gross profit margin, non-GAAP 59.6 % 60.5 % (90 )
Selling, General and Administrative Expenses 2018
2017(1) Selling, general and administrative expenses,
GAAP $ 5,389 $ 5,400 Global Growth and Efficiency Program (33 ) (86
) Selling, general and administrative expenses, non-GAAP $ 5,356
$ 5,314
Basis Point Selling, General
and Administrative Expenses as a Percentage of Net Sales
2018 2017(1) Change Selling, general
and administrative expenses as a percentage of Net sales, GAAP 34.7
% 34.9 % (20 ) Global Growth and Efficiency Program (0.2 )% (0.5 )%
Selling, general and administrative expenses as a percentage
of Net sales, non-GAAP 34.5 % 34.4 % 10
Other
(Income) Expense, Net 2018 2017(1) Other
(income) expense, net, GAAP $ 148 $ 173 Global Growth and
Efficiency Program (88 ) (152 ) Other (income) expense, net,
non-GAAP $ 60 $ 21
Operating Profit
2018 2017(1) % Change Operating profit,
GAAP $ 3,694 $ 3,707 — % Global Growth and Efficiency Program 152
313 Operating profit, non-GAAP $ 3,846
$ 4,020 (4 )%
Basis Point Operating Profit
Margin 2018 2017(1) Change
Operating profit margin, GAAP 23.8 % 24.0 % (20 ) Global Growth and
Efficiency Program 0.9 % 2.0 % Operating profit margin,
non-GAAP 24.7 % 26.0 % (130 )
Non-Service Related
Postretirement Costs 2018 2017(1)
Non-service related postretirement costs, GAAP $ 87 $ 118 Global
Growth and Efficiency Program (9 ) (20 ) Non-service related
postretirement costs, non-GAAP $ 78 $ 98
Table
9 Continued Colgate-Palmolive Company
Non-GAAP Reconciliations For the Twelve Months
Ended December 31, 2018 and 2017 (Dollars in Millions
Except Per Share Amounts) (Unaudited) 2018
IncomeBeforeIncomeTaxes
ProvisionFor
IncomeTaxes(2)
Net IncomeIncluding
Non-controlling Interests
Less:IncomeAttributable
To Non-controlling Interests
Net IncomeAttributable To
Colgate- Palmolive Company
Effective Income Tax Rate(3)
Diluted EarningsPer Share As Reported GAAP $ 3,464 $
906 $ 2,558 $ 158 $ 2,400 26.2 % $ 2.75 Global Growth and
Efficiency Program 161 37 124 (1 ) 125 (0.1 )% 0.15 Benefit from a
foreign tax matter — 15 (15 ) — (15 ) 0.4 % (0.02 )
U.S. tax reform
— (80 ) 80 — 80 (2.3 )% 0.09
Non-GAAP $ 3,625 $ 878 $ 2,747 $ 157 $
2,590 24.2 % $ 2.97
2017
Income BeforeIncome Taxes
ProvisionFor
IncomeTaxes(2)
Net IncomeIncluding Non-controlling
Interests Net IncomeAttributable To
Colgate- Palmolive Company Effective
Income Tax Rate(3) Diluted EarningsPer
Share As Reported GAAP $ 3,487 $ 1,313 $ 2,174 $ 2,024 37.7 % $
2.28 Global Growth and Efficiency Program 333 87 246 246 (1.0 )%
0.28 U.S. tax reform — (275 ) 275 275 (7.2 )%
0.31 Non-GAAP $ 3,820 $ 1,125 $ 2,695 $
2,545 29.5 % $ 2.87
The impact of non-GAAP adjustments may not
necessarily equal the difference between “GAAP” and “non-GAAP” as a
result of rounding.
Notes: (1) 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.
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. (2) 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. (3) 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.
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