FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1996.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________________ to ___________________.
Commission File Number 1-644
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COLGATE-PALMOLIVE COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 13-1815595
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
300 PARK AVENUE, NEW YORK, NEW YORK 10022
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(Address of principal executive offices) (Zip Code)
(212) 310-2000
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(Registrant's telephone number, including area code)
NO CHANGES
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(Former name, former address, and former fiscal year, if changed since last
report).
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No
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Indicate the number of shares outstanding of each of the issuers classes of
common stock, as of the latest practical date:
Class Shares Outstanding Date
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Common, $1.00 par value 146,436,788 April 30, 1996
Total number of sequentially numbered pages in this filing, including exhibits
thereto:
PART I. FINANCIAL INFORMATION
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COLGATE-PALMOLIVE COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
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(Dollars in Millions Except Per Share Amounts)
(Unaudited)
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Three Months Ended
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March 31,
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1996 1995
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Net sales $2,053.7 $1,980.3
Cost of sales 1,050.4 1,010.5
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Gross profit 1,003.3 969.8
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Selling, general and administrative 733.8 685.2
expenses
Interest expense (net of interest income
of $9.3 and $9.1, respectively) 47.1 43.8
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780.9 729.0
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Income before income taxes 222.4 240.8
Provision for income taxes 78.9 84.3
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Net income $ 143.5 $ 156.5
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Earnings per common share:
Primary:
Net income per share $ .95 $ 1.05
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Assuming full dilution:
Net income per share $ .89 $ .97
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Dividends declared per common share*: $ .94 $ .82
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* Includes two dividend declarations in both periods.
See Notes to Condensed Consolidated Financial Statements.
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COLGATE-PALMOLIVE COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(Dollars in Millions)
(Unaudited)
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ASSETS
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March 31, December 31,
1996 1995
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Current Assets:
Cash and cash equivalents $ 206.9 $ 208.8
Marketable securities 52.5 47.8
Receivables (less allowance of $31.9 in
both periods) 1,105.1 1,116.9
Inventories 810.4 774.8
Other current assets 242.3 211.9
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2,417.2 2,360.2
Property, Plant and Equipment:
Cost 3,683.4 3,599.4
Less: Accumulated depreciation 1,484.6 1,444.2
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2,198.8 2,155.2
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Goodwill and other intangible
assets (net of accumulated amortization
of $316.0 and $295.3) 2,785.5 2,741.7
Other assets 400.1 385.2
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$7,801.6 $7,642.3
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See Notes to Condensed Consolidated Financial Statements.
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COLGATE-PALMOLIVE COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(Dollars in Millions)
(Unaudited)
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LIABILITIES AND SHAREHOLDERS' EQUITY
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March 31, December 31,
1996 1995
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Current Liabilities:
Notes and loans payable $ 264.7 $ 204.4
Current portion of long-term debt 34.0 37.0
Accounts payable 748.6 738.7
Accrued income taxes 95.4 76.6
Other accruals 766.2 696.4
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1,908.9 1,753.1
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Long-term debt 2,953.5 2,992.0
Deferred income taxes 242.2 237.3
Other liabilities 1,000.0 980.1
Shareholders' Equity:
Preferred stock 402.0 403.5
Common stock 183.2 183.2
Additional paid-in capital 1,046.6 1,033.7
Retained earnings 2,397.7 2,392.2
Cumulative foreign currency
translation adjustments (516.1) (513.0)
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3,513.4 3,499.6
Unearned compensation (375.1) (378.0)
Treasury stock, at cost (1,441.3) (1,441.8)
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1,697.0 1,679.8
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$7,801.6 $7,642.3
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See Notes to Condensed Consolidated Financial Statements.
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COLGATE-PALMOLIVE COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
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(Dollars in Millions)
(Unaudited)
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Three Months Ended
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March 31,
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1996 1995
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Operating Activities:
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Net cash provided by operating activities $ 175.0 $ 138.1
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Investing Activities:
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Capital expenditures (107.4) (82.6)
Payments for acquisitions, net of cash
acquired (17.3) (1,216.7)
Purchase of marketable securities and other
investments, net (2.4) (34.5)
Other, net (21.4) (9.6)
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Net cash used for investing activities (148.5) (1,343.4)
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Financing Activities:
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Principal payments on debt (7.3) (7.4)
Proceeds from issuance of debt, net 39.2 1,274.9
Dividends paid (69.0) (59.7)
Purchase of common stock - (9.0)
Other, net 9.9 7.8
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Net cash (used for) provided by financing
activities (27.2) 1,206.6
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Effect of exchange rate changes on
cash and cash equivalents (1.2) 0.3
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Net (decrease) increase in cash and cash
equivalents (1.9) 1.6
Cash and cash equivalents at beginning of
period 208.8 169.9
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Cash and cash equivalents at end of period $ 206.9 $ 171.5
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See Notes to Condensed Consolidated Financial Statements.
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COLGATE-PALMOLIVE COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(Dollars in Millions Except Per Share Amounts)
(Unaudited)
1. The condensed consolidated financial statements reflect all normal
recurring adjustments which, in management's opinion, are necessary for a
fair presentation of the results for interim periods. Results of
operations for the three months ended March 31, 1996 and 1995 may not be
representative of results to be expected for a full year.
2. Provision for certain expenses, including income taxes, media advertising,
consumer promotion and new product introductory costs, are based on full
year assumptions. Such expenses are charged to operations in the year
incurred and are included in the accompanying condensed consolidated
financial statements in proportion with the passage of time or with
estimated annual tax rates or annual sales.
3. Inventories by major classes were as follows:
March 31, December 31,
1996 1995
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Raw materials and supplies $ 320.8 $ 313.8
Work-in-process 43.6 38.3
Finished goods 446.0 422.7
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$ 810.4 $ 774.8
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4. Primary earnings per share are determined by dividing net income, after
deducting dividends on preferred stock, net of related tax benefits, by the
weighted average number of common shares outstanding. Fully diluted
earnings per common share are calculated assuming the conversion of all
potentially dilutive securities, including convertible preferred stock and
outstanding options. This calculation also assumes reduction of available
income by pro forma ESOP replacement funding, net of income taxes.
5. As described in Note 3 to the Company's consolidated financial statements
included in its Annual Report on Form 10-K, Colgate-Palmolive acquired the
worldwide Kolynos oral care business from American Home Products in January
1995. The acquisition is currently being reviewed by antitrust regulatory
authorities in Brazil. While it is not yet possible to definitely
determine whether or not approval will be obtained, management believes the
acquisition, or some variation thereof, will eventually be approved.
6. As described in Note 4 to the Company's consolidated financial statements
included in its Annual Report on Form 10-K, Colgate-Palmolive recorded a
charge for restructuring its worldwide manufacturing and administrative
operations in September 1995. Reserves relating to this program totaled
approximately $435.6 and $407.4 at December 31, 1995 and March 31, 1996,
respectively. Management believes that the costs of the restructuring
program will be financed through cash from operations and does not
anticipate any significant impact on its liquidity as a result of the
restructuring program.
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COLGATE-PALMOLIVE COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(Dollars in Millions Except Per Share Amounts)
(Unaudited)
7. Reference is made to the Company's 1995 Annual Report on Form 10-K filed
with the Securities and Exchange Commission for the year 1995 for a
complete set of financial notes including the Company's significant
accounting policies.
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COLGATE-PALMOLIVE COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
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CONDITION AND RESULTS OF OPERATIONS
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(Dollars in Millions Except Per Share Amounts)
Results of Operations
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Worldwide sales reached $2,053.7 in the first quarter of 1996, a 4% increase
over the 1995 first quarter. Sales were impacted by the continuing recession
in Mexico, resulting from the earlier peso maxi-devaluation as well as the
Venezuelan economic stagnation. Excluding these two countries' results sales
and unit volume were up 6%. All worldwide operating divisions grew in sales
and volume.
Sales in the Oral, Personal and Household Care segment were $1,869.9 up 3%
from $1,819.8 in 1995. Unit volume gains across all geographic regions
contributed to the growth.
Colgate-Asia/Africa sales increased 7% to $415.0 on volume gains of 8%.
Contributing to this region's growth were excellent results in greater China,
Hong Kong, India, New Zealand, Taiwan and the Philippines. New products like
Protex antibacterial body cleansing products, fabric softener and
toothbrushes are complementing the Company's existing brand strength.
Colgate-Europe sales increased 2% to $526.9 on a volume increase of 1% as
well as favorable currency gains. Austria, Greece, Germany and the
Netherlands achieved positive volume growth while France and Portugal were
affected by economic softness. Volume was strong in Central Europe,
particularly in Poland and Russia. Colgate Total toothpaste was launched in
Germany, while a new variant named Colgate Total Fresh Stripe is adding sales
throughout Europe. Other European new products include the new Palmolive
shower gel, Protex, Ajax Expel cleanser and Respons hair conditioner.
Colgate-Latin America sales were $489.5, approximately equal to the 1995
record first quarter. Expected declines in Mexico and Venezuela were offset
by excellent results throughout the balance of latin America. Excluding the
effects of Mexico and Venezuela, sales increased 10% on 12% unit volume
gains. Brazil, Colombia and Argentina achieved healthy increases in both
sales and volume.
Colgate-North America sales grew 4% to $438.5 on volume gains of 4%. New
product introductions including Mennen Speed Stick Gel and Palmolive Ultra
dishwashing detergent as well as continued strength from the 1995
introductions of Colgate Baking Soda & Peroxide toothpaste, Irish Spring
Waterfall Clean soap and Palmolive dishwashing liquid & antibacterial hand
soap contributed to the growth.
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COLGATE-PALMOLIVE COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
(Dollars in Millions Except Per Share Amounts)
Sales in the Pet Nutrition segment increased 15% to $183.8 on volume gains of
14%. This growth was driven by benefits from the strategic shift to an in-
house sales force from outside distributors, increased advertising and
successful new product introductions including Hill's Science Diet Canine
Lamb & Rice and Science Diet Canned Varieties, launched mid-1995.
Worldwide gross profit margin of 48.9% virtually equaled that of the 1995
record first quarter, as the Company continues to focus on cost reduction and
shifting product mix towards high-margin oral and personal care products, and
was well ahead of the fourth quarter of 1995 (47.9%).
Selling, general and administrative expenses in the 1996 first quarter
increased as a percentage of sales to 35.7% from 34.6% in the prior year.
The higher levels of expense include increased advertising and other
marketing and selling expenses to support both new product introductions and
established brands worldwide.
Earnings before interest and taxes (EBIT) declined 5.3% to $269.5, impacted
by the recession in Mexico and Venezuela which affected sales, and higher
levels of selling, general and administrative expenses.
Interest expense, net of interest income, was $47.1 in the 1996 first quarter
as compared with $43.8 in 1995.
The effective tax rate for the quarter was 35.5% in 1996 and 35.0% in 1995.
The 35.5% rate reflects the Company's current estimate of its full year
effective income tax rate which is slightly higher than the 1995 full year
rate of 34.3% excluding the restructuring charge.
First quarter 1996 net income was $143.5 or $.95 per share compared with
$156.5 or $1.05 per share in the prior year. The decline in earnings, as
expected, reflects the effects of the economic downturn versus the year ago
quarter.
Liquidity and Capital Resources
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Net cash provided by operations increased to $175.0 in the 1996 first quarter
compared with $138.1 in the prior year. At March 31, 1996, $875.7 of
commercial paper and $203.2 of other short-term borrowings were classified as
long-term debt in accordance with the Company's intent and ability to
refinance these obligations on a long-term basis.
Reference should be made to the 1995 Annual Report on Form 10-K for
additional information regarding available sources of liquidity and capital.
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COLGATE-PALMOLIVE COMPANY
PART II. OTHER INFORMATION
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Item 1. Legal Proceedings
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Reference is made to Note 14 to the consolidated financial
statements on page 35 of the registrant's Annual Report on Form 10-K
for the year ended December 31, 1995.
Item 6. Exhibits and Reports on Form 8-K
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(a) Exhibits:
Exhibit 10-A Amendment No. 1, dated as of March 22, 1996, to
the U.S. $900,000,000 Five Year Credit
Agreement, dated as of March 24, 1995.
Exhibit 10-B Amendment No. 1, dated as of March 22, 1996, to
the U.S. $1,000,000,000 364 Day Credit
Agreement, dated as of March 24, 1995.
Exhibit 10-C Amendment No. 2, dated as of March 23, 1996, to
the U.S. $900,000,000 Five Year Credit
Agreement, dated as of March 24, 1995.
Exhibit 11 Computation of Earnings per Common Share.
Exhibit 12 Ratio of Earnings to Fixed Charges.
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K.
A report on Form 8-K dated March 29, 1996 was filed by the
Company reporting the execution of a Distribution Agreement
relating to its Medium-Term Notes, Series C.
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SIGNATURE
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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 authorised.
COLGATE-PALMOLIVE COMPANY
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(Registrant)
Principal Accounting Officer:
May 10, 1996 /s/ Stephen C. Patrick
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Stephen C. Patrick
Vice President
Corporate Controller
11