SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report
(Date of earliest event reported)
January 10, 1995
COLGATE-PALMOLIVE COMPANY
(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation)
1-644-2 13-1815595
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(Commission File Number) (IRS Employer
Identification No.)
300 Park Avenue New York, NY 10022
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (212) 310-2000
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Total number of sequentially numbered pages in this filing, including
exhibits thereto:
Item 2. Acquisition or Disposition of Assets
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On January 10, 1995, KAC Corp. ("KAC"), a wholly owned subsidiary of
Colgate-Palmolive Company (the "Company" or Colgate-Palmolive"), together
with the Company and other wholly owned subsidiaries of the Company,
acquired the worldwide "Kolynos" oral health care business ("Kolynos" or
the "Kolynos Business") of Whitehall International Inc., a subsidiary of
American Home Products Corporation ("AHPC"), for U.S. $1.04 billion in cash
(the "Acquisition").
The Kolynos Business is a multinational oral health care business operating
primarily in South America, where it was established in the 1920's, and
also having a presence in Greece, Taiwan, and Hungary. The assets of the
Kolynos Business, located primarily in Argentina, Brazil, Colombia,
Ecuador, Peru, Uruguay and Venezuela, include trademarks and other
intellectual property, accounts receivable, inventories and property, plant
and equipment which is utilized in the production of toothpaste,
toothbrushes, dental floss and oral rinses. KAC intends to continue to
operate the Kolynos Business in Brazil through a wholly owned subsidiary,
K&S Aquisicoes Ltda. In other countries, the acquiror of the Kolynos
Business is the existing branch or subsidiary of Colgate-Palmolive in the
particular country. Excluded from the transaction were AHPC's ethical
products and businesses related to lip treatments and anesthetics, and its
oral health care business in India.
The transaction was structured as a multinational acquisition of assets and
stock. The parties entered into a Purchase Agreement, dated January 9,
1995 ("Purchase Agreement"), wherein, among other things, each of the
respective selling and purchasing parties to the transaction made certain
representations and warranties including, without limitation, those related
to: corporate organization, good standing status and qualification to
conduct business; corporate authorization to enter into the transaction;
validity, legality, and enforceability of the Purchase Agreement; required
consents and approvals; accuracy of financial statements; title to assets;
ownership of shares; contracts and intellectual property rights; employee
benefit arrangements; absence of undisclosed liabilities; and compliance
with applicable laws.
The Acquisition will be reviewed by antitrust regulatory authorities in
Brazil and Colombia. The Company will make a filing with the Economic
Protection Administrative Council (Conselho Administrativo de Defesa
Economica, the "CADE"), the agency responsible for approving acquisitions
and other business combinations under Brazilian antitrust law, on or about
January 30, 1995. The CADE has 120 days to review the transaction, which
period can be extended. On January 10, 1995, the Company filed a petition
with the Superintendent of Industry and Commerce in Colombia
(Superintendencia de Industria y Comercio, the "Superintendency of
Industry"). The Superintendency of Industry has 30 days to review the
transaction under Colombian antitrust law, which period may also be
extended.
The $1.04 billion purchase price was determined through arm's length
negotiations. The financing used to acquire the Kolynos Business was
provided by Citibank, N.A. and Morgan Guaranty Trust Company of New York.
The Acquisition is being accounted for by Colgate-Palmolive using the purchase
method of accounting. The results of operations will be included with the
results of the Company from January 10, 1995.
The required historical combined financial statements of the worldwide
Kolynos oral health care business of American Home Products Corporation are
included herein pursuant to Item 7.
The above description does not purport to be complete and is qualified in
its entirety by reference to the Purchase Agreement incorporated as Exhibit
2 hereto.
Item 7. Financial Statements and Exhibits
---------------------------------
(a) Financial statements of business acquired
(1) Kolynos audited combined statements of net assets to be sold as
of November 30, 1994 and 1993.
(2) Kolynos audited combined statement of income for the years
ended November 30, 1994, 1993 and 1992.
(3) Kolynos audited combined statements of cash flows for the years
ended November 30, 1994 and 1993.
(4) Notes to Kolynos audited combined financial statements as of and
for the years ended November 30, 1994 and 1993.
(5) Independent Auditors' Report dated January 9, 1995.
(b) Pro forma financial information
It is not practicable to provide the required pro forma financial
information at this time. This data will be filed under cover of
Form 8 as soon as practicable, but in any event, no later than 60
days after the date this report on Form 8-K is required to be
filed.
(c) Exhibits
The Exhibit number corresponds to the number assigned to such
Exhibit in the Exhibit Table of Item 601 of Regulation S-K
Exhibit Number Description
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2 Purchase Agreement among
American Home Products
Corporation, Colgate-Palmolive
Company and KAC Corp.
January 9, 1995
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COLGATE-PALMOLIVE COMPANY
Date: January 25, 1995 By: /s/ ANDREW D. HENDRY
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Andrew D. Hendry
Senior Vice President
General Counsel and Secretary
American Home Products Corporation
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Worldwide Kolynos Oral Health Care Product Line,
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Excluding India (Kolynos) (Note 1)
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Combined Statements
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Together With
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Report of Independent Public Accountants
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
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To American Home Products Corporation:
We have audited the accompanying combined statements of net assets to be
sold of American Home Products Corporation's Worldwide Kolynos Oral
Healthcare product line, excluding India (Kolynos), as of November 30, 1994
and 1993, and the related combined statements of income and cash flows for
each of the three years in the period ended November 30, 1994. These
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
As discussed in Note 1, these statements have been prepared pursuant to the
purchase agreement dated January 9, 1995 between American Home Products
Corporation and Colgate-Palmolive Company. They have been derived from the
financial statements of the legal entities in Brazil, Argentina, Peru,
Colombia, Ecuador, Uruguay and Venezuela utilizing various allocation
methods described in Note 1 to represent the Kolynos net assets to be sold
and the related results of operations and cash flows.
In our opinion, the statements referred to above present fairly, in all
material respects, the combined net assets to be sold pursuant to the
Purchase Agreement referred to in Note 1, of Kolynos as of November 30,
1994 and 1993, and to the results of operations and cash flows for each of
the three years in the period ended November 30, 1994 in conformity with
generally accepted accounting principles.
This report is intended solely for your information and use in connection
with the Purchase Agreement and should not be used for any other purpose.
ARTHUR ANDERSEN LLP
New York, New York
January 9, 1995
AMERICAN HOME PRODUCTS CORPORATION
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Worldwide Kolynos Oral Healthcare Product Line, Excluding India (Kolynos)
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COMBINED STATEMENTS OF NET ASSETS TO BE SOLD
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AS OF NOVEMBER 30, 1994 AND 1993
--------------------------------
(in thousands of U.S. dollars)
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1994 1993
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CURRENT ASSETS:
Cash and cash equivalents $ 0 $ 0
Accounts receivable, net 29,223 25,097
Inventories 13,034 11,636
Other current assets 5,706 1,251
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Total current assets 47,963 37,984
PROPERTY, PLANT AND EQUIPMENT, net 26,444 29,414
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74,407 67,398
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CURRENT LIABILITIES:
Accounts payable 7,479 5,983
Accrued expenses 10,673 8,729
Other liabilities 1,886 706
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Total current liabilities 20,038 15,418
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COMMITMENTS AND CONTINGENCIES (Note 2)
Net assets to be sold $54,369 $51,980
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The accompanying notes are an integral part of these statements.
AMERICAN HOME PRODUCTS CORPORATION
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Worldwide Kolynos Oral Healthcare Product Line, Excluding India (Kolynos)
-------------------------------------------------------------------------
COMBINED STATEMENTS OF INCOME
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FOR THE YEARS ENDED NOVEMBER 30, 1994, 1993 AND 1992
----------------------------------------------------
(in thousands of U.S. dollars)
------------------------------
1994 1993 1992
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NET SALES $288,190 $251,520 $214,800
COST OF GOODS SOLD 105,040 89,240 84,300
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 103,150 90,550 66,300
RESEARCH AND DEVELOPMENT EXPENSES 2,340 1,300 800
OTHER EXPENSE, net 27,570 39,800 38,390
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Income before provision
for income taxes 50,090 30,630 25,010
PROVISION FOR INCOME TAXES 21,146 21,560 7,530
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Net income $28,944 $9,070 $17,480
======== ======== ========
The accompanying notes are an integral part of these statements.
AMERICAN HOME PRODUCTS CORPORATION
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Worldwide Kolynos Oral Healthcare Product Line, Excluding India (Kolynos)
-------------------------------------------------------------------------
COMBINED STATEMENTS OF CASH FLOWS
---------------------------------
FOR THE YEARS ENDED NOVEMBER 30, 1994, 1993 AND 1992
----------------------------------------------------
(in thousands of U.S. dollars)
------------------------------
1994 1993 1992
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NET INCOME $28,944 $9,070 $17,480
ADJUSTMENTS TO RECONCILE TO NET CASH
PROVIDED FROM OPERATIONS:
Depreciation and amortization 4,860 4,850 3,810
Increase (decrease) in components
of working capital-
Accounts receivable (4,126) (1,160) (1,629)
Inventories (1,398) (143) (620)
Accounts payable
and accrued expenses 3,440 (658) 2,485
Other (3,275) 520 (1,233)
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Net cash provided from
operations 28,445 12,479 20,293
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INVESTING ACTIVITIES -- Purchase of
property, plant and equipment, net (1,890) (6,150) (3,589)
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FINANCING ACTIVITIES:
Dividends and changes in assets
and liabilities not subject to
sale (including effects of
exchange rates on cash balances)
(Note 1) (26,555) (6,329) (16,704)
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Increase (decrease) in cash
and cash equivalents 0 0 0
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CASH AND CASH EQUIVALENTS, beginning of
year (Note 1) 0 0 0
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CASH AND CASH EQUIVALENTS, end of year
(Note 1) $ 0 $ 0 $ 0
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The accompanying notes are an integral part of these statements.
AMERICAN HOME PRODUCTS CORPORATION
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Worldwide Kolynos Oral Healthcare Product Line, Excluding India (Kolynos)
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NOTES TO COMBINED STATEMENTS
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(in thousands of U.S. dollars)
------------------------------
(1) BASIS OF PRESENTATION AND SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES:
-----------------------------------
The accompanying combined statements were prepared pursuant to the
Purchase Agreement dated January 9, 1995 between American Home
Products Corporation and Colgate-Palmolive Company. In accordance
with the Purchase Agreement certain assets and liabilities of Kolynos
have been excluded from the statements of net assets to be sold.
Specifically excluded are all cash and cash equivalents, all tax
assets and liabilities, intercompany assets and liabilities and the
land and building related to the Quilmes, Argentina plant. See Note 2
with respect to commitments and contingency being assumed by
purchaser.
In addition, the combined statements of net assets to be sold have
been derived from the financial statements of the following subsidiary
legal entities in Brazil, Argentina, Peru, Colombia, Equador, Uruguay
and Venezuela utilizing the following allocation methodologies and
represents approximately 79% of 1994 net revenues generated by the
legal entities or the Whitehall segment within those legal entities-
- Whitehall Laboratorios Ltd. (a Delaware Corporation)
- Whitehall Laboratorios S.A. (an Argentinean Company)
- Laboratorios Wyeth - Whitehall Ltda. (a Brazilian Company)
- Whitehall Laboratories S.A. (a Uruguayan Company)
- Laboratorios Wyeth S.A. (a Venezuelan Company)
- Comercial Kolynos S.A. (a Peruvian Company)
- Kolan S.A. (a Peruvian Company)
In accordance with Section 5.7 of the Purchase Agreement, these
statements reflect, except for the excluded net assets described
above, all of the assets and liabilities related to the business that
arose out of or were incurred in the conduct of the business. In
management's opinion, the allocations described below represent a fair
basis of presentation.
Accounts Receivable-
--------------------
Accounts receivable for the legal entities are billed for all
businesses primarily on the same invoices and are not specifically
identifiable. As such, the amounts included in the accompanying
statements principally represent the total legal entities accounts
receivable amounts multiplied by the ratio of Kolynos net sales to the
total entities net sales.
Inventories-
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Inventories represent the actual Kolynos products on-hand as of
November 30, 1994 and 1993. They are stated at the lower of cost (on
a first-in, first-out basis) or market.
-2-
The components of inventory at November 30, 1994 and 1993 are as
follows:
1994 1993
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Raw materials $3,913 $3,195
Work in process 3,626 2,787
Finished goods 5,495 5,654
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$13,034 $11,636
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Other Current Assets-
---------------------
Generally, Kolynos and the other businesses share advertising and
sales efforts. As such, other current assets which represent primarily
advances to employees, prepaid advertising and other current assets of
the legal entities have been allocated based on the ratio of Kolynos
net sales to total legal entities net sales with the exception of
$3,879 related to prepaid advertising costs of Kolynos in Brazil.
Property, Plant and Equipment-
--------------------------------
Property, plant and equipment represents the actual cost of those
assets which have been identified in the purchase agreement as related
to the production, sale and support of the Kolynos oral healthcare
product line excluding the Quilmes land and building. Depreciation is
provided, primarily using the straight-line method, over the estimated
useful lives. The components of property, plant and equipment are as
follows at November 30-
1994 1993
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Land $ 682 $ 682
Buildings 14,268 13,135
Machinery and equipment 64,360 68,517
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Accumulated depreciation and amortization 52,866 52,920
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$26,444 $29,414
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Accounts Payable, Accrued Expenses and Other Liabilities-
---------------------------------------------------------
Generally, purchasing efforts are shared by all businesses including
Kolynos. Accordingly, accounts payable, accrued expenses and other
liabilities which represent trade payables and accruals arising in the
ordinary course of business and other liabilities which are primarily
composed of accrued severance, payroll, vacation and advertising are
not specifically identified. As such, the amounts included in the
accompanying statements principally represent the total legal entities
accounts payable, accrued expenses and other liability amounts
multiplied by the ratio of Kolynos net sales to total legal entities
net sales.
Employee Benefit Plans-
-----------------------
Kolynos provides certain employee severance and medical benefits to
employees in accordance with the various laws of the countries where
they do business. The accompanying financial statements include an
estimate of the liability associated with such benefits.
-3-
Revenues and Expenses-
----------------------
Net sales, cost of goods sold and media expenses (included in selling,
general and administrative expenses) are based on actual revenues and
expenses associated with the Kolynos product line.
Except for any permanent differences (such as translation adjustments)
the provision for income taxes is based on the statutory rates in
effect in each country (rates ranging from 25% to 38% in 1994, 1993
and 1992).
A reconciliation between the provision for income taxes and tax based
on the applicable statutory rate is as follows-
1994 1993 1992
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Tax at statutory rate $16,740 $10,099 $8,481
Effect on tax provision due
to the foreign exchange
translation adjustment
in Brazil 4,406 11,461 (92)
Utilization of net operating
loss carryforward in Brazil 0 0 (1,039)
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Provision for income taxes $21,146 $21,560 $7,530
======= ======= ======
In accordance with the terms of the Purchase Agreement, the income tax
assets and liabilities arising from these provisions for income taxes
have been excluded from the accompanying combined statements of net
assets to be sold.
Approximately $5,701, $5,589 and $2,916 of social contribution and
state tax expense in Brazil is included in selling, general and
administrative expenses in the accompanying statements of income.
Most other items of income and expense are incurred for both
businesses and accordingly are not specifically identified. As such,
the amounts included in the accompanying combined statements of income
represent the total legal entities income and expense items multiplied
by the ratio of Kolynos net sales to total legal entities net sales.
(2) COMMITMENTS AND CONTINGENCIES:
------------------------------
Kolynos is involved in various legal matters including product
liability and environmental proceedings of a nature considered normal
to its business. In the opinion of management, there are no such
proceedings pending, or to the knowledge of management threatened
against Kolynos, which would have a material effect on the net assets
to be sold.
-4-
(3) TRANSLATION OF CURRENCIES:
--------------------------
The assets and liabilities of subsidiaries, other than those operating
in highly inflationary environments, are translated into U. S. dollars
at year-end exchange rates. Income and expense items are converted
into U. S. dollars at average rates of exchange prevailing during the
year.
For subsidiaries operating in highly inflationary environments,
inventories and property, plant and equipment are translated at the
rate of exchange on the date the assets were acquired, while other
assets and liabilities are translated at year-end exchange rates.
Translation adjustments for these operations are included in other
expense, net in the accompanying statements of income and amounted to
$25,700, $37,600 and $35,900, respectively, for 1994, 1993 and 1992.