Strong Worldwide Organic Sales
Growth
Colgate-Palmolive Company (NYSE:CL) today reported worldwide Net
sales of $3,999 million in third quarter 2015, a decrease of 8.5%
versus third quarter 2014. Global unit volume grew 1.0%, pricing
increased 3.5% and foreign exchange was negative 13.0%. Divestments
decreased volume by 0.5%. Organic sales (Net sales excluding
foreign exchange, acquisitions and divestments) grew 5.0%.
Net income and Diluted earnings per share in third quarter 2015
were $726 million and $0.80, respectively. Net income in third
quarter 2015 included an aftertax gain of $120 million ($0.13 per
diluted share) from the previously disclosed sale of the Company’s
laundry detergent business in the South Pacific and $47 million
($0.05 per diluted share) of aftertax charges resulting from the
implementation of the Company’s four-year Global Growth and
Efficiency Program (the “2012 Restructuring Program”) and an
effective devaluation in Venezuela.
Net income and Diluted earnings per share in third quarter 2014
were $542 million and $0.59, respectively. Net income in third
quarter 2014 included $159 million ($0.17 per diluted share) of
aftertax charges resulting from the items described in Table 8.
Excluding the above noted items in both periods, Net income in
third quarter 2015 was $653 million, a decrease of 7% versus third
quarter 2014, and Diluted earnings per share in third quarter 2015
was $0.72, a decrease of 5% versus third quarter 2014. On a
currency-neutral basis and excluding the above noted items in both
periods, Diluted earnings per share increased double digit.
Gross profit margin was 58.7% in third quarter 2015 versus 58.4%
in third quarter 2014. Excluding the above noted items in both
periods, Gross profit margin was 58.8% in third quarter 2015, an
increase of 20 basis points versus the year ago quarter, primarily
as a result of the benefits from cost savings from the Company’s
funding-the-growth initiatives and the 2012 Restructuring Program
and higher pricing, partially offset by higher raw and packaging
material costs, driven by significant foreign exchange transaction
costs.
Selling, general and administrative expenses were 33.7% of Net
sales in third quarter 2015 versus 34.2% of Net sales in third
quarter 2014. Excluding the above noted items in both periods,
Selling, general and administrative expenses decreased by 60 basis
points to 33.3% of Net sales in third quarter 2015, due to
decreased advertising investment as a percentage of Net sales, in
part reflecting a shift in advertising investment to in-store
promotional activities. Worldwide advertising investment decreased
23% to $328 million versus the year ago quarter, largely reflecting
the impact of negative foreign exchange.
Operating profit increased 20% to $1,136 million in third
quarter 2015 compared to $948 million in third quarter 2014.
Excluding the above noted items in both periods, Operating profit
decreased 6% to $1,013 million in third quarter 2015. Operating
profit margin was 28.4% in third quarter 2015 versus 21.6% in third
quarter 2014. Excluding the above noted items in both periods,
Operating profit margin was 25.3% in third quarter 2015, an
increase of 70 basis points versus the year ago quarter.
Net cash provided by operations year to date was $2,108 million
compared to $2,392 million in the comparable 2014 period, primarily
due to lower operating earnings and higher payments related to
income taxes and a previously disclosed European competition law
matter. Working capital as a percentage of Net sales was negative
1.3%, an improvement of 80 basis points versus the year ago period
primarily due to a decrease in inventories and accounts receivable,
reflecting the Company’s tight focus on working capital.
Ian Cook, Chairman, President and Chief Executive Officer,
commented on the results and outlook excluding the 2015 and 2014
items noted above, “In the face of challenging macroeconomic
conditions worldwide, we are pleased to have achieved another
quarter of strong organic sales growth, driven by positive unit
volume growth and higher pricing.
“The 5.0% worldwide organic sales growth was led by emerging
markets where organic sales grew a robust 8.0%, despite economic
challenges in certain countries.
“Pleasingly, our profitability also strengthened during the
quarter, with gross profit margin, operating profit margin and net
income as a percent to sales all increasing versus the year ago
period.
“Colgate’s leading share of the global toothpaste market
increased to 44.7% year to date, up 0.7 share points versus the
year ago period. Our global leadership in manual toothbrushes also
strengthened with Colgate’s global market share in that category
reaching 34.5% year to date, up 0.7 share points versus the year
ago period.”
Recognizing the macroeconomic challenges around the world and
the Company’s successful implementation of the 2012 Restructuring
Program to date, on October 29, 2015, the Company’s Board of
Directors approved the reinvestment of the funds from the sale of
the Company’s laundry detergent business in the South Pacific to
expand the 2012 Restructuring Program and extend it through
December 31, 2017. Initiatives under the expanded 2012
Restructuring Program will continue to fit within the Program’s
three focus areas of expanding commercial hubs, extending shared
business services and streamlining global functions and optimizing
the global supply chain and facilities. The Company expects the
initiatives under the expanded program to have a similar aftertax
rate of return to the existing program, which on average has been
30%. The Company will update its disclosure to reflect the impact
the expansion will have on the range of estimated charges and
savings for the 2012 Restructuring Program when the additional
initiatives under the expanded Program are approved.
In closing, Mr. Cook commented, “As we look ahead, macroeconomic
conditions and foreign exchange volatility remain challenging.
Despite that, we anticipate another year of solid organic sales
growth in 2015 driven by a full new product pipeline across all
categories and geographies. Based on current spot rates, we now
plan for full year gross profit margin to be even with the year ago
level, and expect a low to mid-single-digit earnings per share
decline on a dollar basis, excluding charges related to the 2012
Restructuring Program. This earnings per share decline continues to
reflect a double-digit increase on a currency-neutral basis.
“Looking ahead to 2016, we continue to see deterioration in
foreign exchange rates. Given such volatility, providing guidance
on a dollar basis at this time would be premature. However, as we
enter our global budget process, we are planning for a year of
gross margin expansion and double-digit earnings per share growth
on a currency-neutral basis, excluding charges related to the 2012
Restructuring Program."
At 11:00 a.m. ET today, Colgate will host a conference call to
elaborate on third quarter results. To access this call as a
webcast, please go to Colgate’s web site at
http://www.colgatepalmolive.com.
The following are comments about divisional performance for
third quarter 2015 versus the year ago period. See attached
Geographic Sales Analysis Percentage Changes and Segment
Information schedules for additional information on divisional net
sales and operating profit.
North America (20% of Company
Sales)
North America Net sales increased 0.5% in third quarter 2015.
Unit volume increased 2.5% with 0.5% lower pricing, while foreign
exchange was negative 1.5%. Organic sales increased 2.0% during the
quarter.
Operating profit in North America increased 8% in third quarter
2015 to $258 million, or 220 basis points to 32.6% of Net sales.
This increase in Operating profit as a percentage of Net sales was
primarily due to an increase in Gross profit and a decrease in
Selling, general and administrative expenses, both as a percentage
of Net sales. This increase in Gross profit was primarily driven by
cost savings from the Company’s funding-the-growth initiatives,
which were partially offset by higher costs, which included higher
raw and packaging material costs, and lower pricing due to
increased in-store promotional activities. This decrease in
Selling, general and administrative expenses was due to decreased
advertising investment, in part reflecting a shift in advertising
investment to in-store promotional activities.
In the U.S., new product launches are contributing to volume
growth. Market share gains year to date were seen in toothpaste,
manual toothbrushes, mouthwash, liquid hand soap, body wash and
fabric conditioners. Colgate’s share of the toothpaste market
strengthened to 35.3% year to date, up 0.4 share points versus the
year ago period, driven by strong sales of Colgate Enamel Health,
Colgate Optic White Platinum Express White, Colgate Total Daily
Repair and Tom’s of Maine toothpastes. In manual toothbrushes,
Colgate strengthened its brand market leadership in the U.S. with
its market share in that category at 41.4% year to date, up 0.7
share points versus the year ago period. Strong sales of Colgate
360° Enamel Health and Colgate 360° Optic White Platinum manual
toothbrushes contributed to volume growth in the quarter.
Successful products driving volume growth in the U.S. in other
categories include Colgate Enamel Health and Colgate Kids
mouthwashes, Softsoap Fragrant Foaming Collection of liquid hand
soaps, Softsoap Fresh & Glow body washes, Irish Spring
Signature For Men body wash, Palmolive Soft Touch Almond Milk and
Blueberry dish liquid and Suavitel fabric conditioner.
Latin America (27% of Company
Sales)
Latin America Net sales decreased 11.0% in third quarter 2015.
Unit volume decreased 1.0% with 12.0% higher pricing, while foreign
exchange was negative 22.0%. Volume declines in Venezuela and
Brazil were partially offset by volume gains in Mexico, Argentina
and Colombia. Organic sales for Latin America increased 11.0%.
Operating profit in Latin America decreased 9% in third quarter
2015 to $300 million, while as a percentage of Net sales, it
increased 60 basis points to 28.2% 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 due to
higher raw and packaging material costs, driven by foreign exchange
transaction costs, partially offset by cost savings from the
Company’s funding-the-growth initiatives and the 2012 Restructuring
Program and higher pricing. This decrease in Selling, general and
administrative expenses was primarily due to decreased advertising
investment.
Colgate strengthened its leadership in toothpaste throughout
Latin America during the quarter driven by market share gains in
Mexico, Brazil, Venezuela, Argentina, Chile, El Salvador, Honduras
and Nicaragua. Strong sales of Colgate Total 12, Colgate Luminous
White Instant, Colgate Total Professional Breath Health, Colgate
Sensitive Pro-Relief Enamel Repair and Colgate Maximum Cavity
Protection plus Neutrazucar toothpastes contributed to volume
growth throughout the region. Colgate’s leadership in the manual
toothbrush category continued throughout the region, driven by
strong sales of Colgate 360° Surround Whitening, Colgate 360°
Interdental, Colgate Slim Soft and Colgate Triple Action manual
toothbrushes.
Products in other categories contributing to volume growth
include Colgate Plax Ice Infinity mouthwash, Protex Complete 12,
Protex Omega 3, Palmolive Men and Palmolive Naturals Berries and
Coconut Water bar soaps, Lady Speed Stick Powder Fresh and Speed
Stick Xtreme Tech deodorants, Suavitel Complete and Suavitel Aroma
Intense fabric conditioners, Axion Complete dish liquid and
Fabuloso Pure & Clean liquid cleaner.
Europe/South Pacific (18% of Company
Sales)
Europe/South Pacific Net sales decreased 18.0% in third quarter
2015. Unit volume decreased 1.0% with 2.0% lower pricing, while
foreign exchange was negative 15.0%. Excluding the impact of the
divested laundry detergent business in the South Pacific, volume
increased 1.0%. Volume gains in Poland, France and Australia were
partially offset by volume declines in Germany and Austria. Organic
sales for Europe/South Pacific decreased 1.0%.
Operating profit in Europe/South Pacific decreased 13% in third
quarter 2015 to $206 million, while as a percentage of Net sales,
it increased 160 basis points to 28.3% 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 as a
percentage of Net sales. Gross profit as a percentage of Net sales
was even with third quarter 2014, as cost savings from the
Company’s funding-the-growth initiatives and the 2012 Restructuring
Program were offset by higher raw and packaging material costs,
driven by foreign exchange transaction costs, and lower pricing due
to increased in-store promotional activities. The decrease in
Selling, general and administrative expenses as a percentage of Net
sales was due to lower advertising investment, in part reflecting a
shift in advertising investment to in-store promotional activities,
which was partially offset by higher overhead expenses.
Colgate strengthened its oral care leadership in the
Europe/South Pacific region driven by toothpaste market share gains
in France, Italy, Spain, the Netherlands, Belgium, Hungary, Poland,
Czech Republic and Slovenia. Successful premium products driving
market share gains include Colgate Max White Expert White, elmex
Sensitive Professional, Colgate Total Daily Repair, Colgate
Sensitive with Sensifoam and Colgate Sensitive Pro-Relief Repair
& Prevent toothpastes. In the manual toothbrush category,
Colgate Cavity Protection and Colgate Slim Soft Charcoal manual
toothbrushes contributed to market share gains across the
region.
Recent premium innovations contributing to volume growth in
other product categories include the Sanex Advanced line of shower
gels, deodorants, hand creams and body lotions, Palmolive Aroma
Sensations and Palmolive Gourmet shower gels, Ajax All Usage Gel
liquid and wipe cleaners, Ajax Anti Fog glass spray cleaner and
Soupline Fruity Sensations fabric conditioner.
Asia (15% of Company
Sales)
Asia Net sales decreased 1.5% during third quarter 2015. Unit
volume increased 5.5% with 1.0% lower pricing, while foreign
exchange was negative 6.0%. Acquisitions contributed 0.5% to
volume. Volume gains were led by the Greater China region, India
and the Philippines. Organic sales for Asia increased 4.0%.
Operating profit in Asia increased 4% in third quarter 2015 to
$195 million, or 180 basis points to 31.3% 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 Selling, general
and administrative expenses, both as a percentage of Net sales.
This increase in Gross profit was mainly driven by cost savings
from the Company’s funding-the-growth initiatives, which were
partially offset by higher costs, primarily driven by higher raw
and packaging material costs, which included foreign exchange
transaction costs, and lower pricing due to increased in-store
promotional activities. This decrease in Selling, general and
administrative expenses was due to decreased advertising
investment, in part reflecting a shift in advertising investment to
in-store promotional activities.
Colgate continued its toothpaste leadership in Asia during the
quarter. Successful new products including Colgate 360° Pro Gum
Health Whitening, Colgate Optic White Plus Shine, Colgate Active
Salt Neem, Colgate Power White Bamboo Charcoal and Darlie All Shiny
White Multicare toothpastes contributed to volume growth in the
region.
Successful products contributing to volume growth in other
categories in the region include Colgate Slim Soft Tri-Tip, Colgate
360° Charcoal Gold and Darlie Charcoal manual toothbrushes, Colgate
Plax Herbal Salt, Colgate Plax Active Salt and Colgate Plax Bamboo
Charcoal Mint mouthwashes and Palmolive Naturals shampoo and
conditioner.
Africa/Eurasia (6% of Company
Sales)
Africa/Eurasia Net sales decreased 20.5% during third quarter
2015. Unit volume decreased 3.0% with 7.5% higher pricing, while
foreign exchange was negative 25.0%. Divestments decreased volume
by 0.5%. Volume declines in the Central Asia/Caucasus region and
Ukraine were partially offset by volume gains in the Sub Saharan
Africa region and South Africa. Organic sales for Africa/Eurasia
increased 5.0%.
Operating profit in Africa/Eurasia decreased 27% in third
quarter 2015 to $44 million, or 150 basis points to 17.9% 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, driven by higher 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 primarily due to
decreased advertising investment.
Colgate continued its toothpaste leadership in Africa/Eurasia,
driven by market share gains in nearly every country in the region.
Successful products contributing to growth in the region include
Colgate Total, Colgate Optic White Instant and Colgate Maximum
Cavity Protection plus Sugar Acid Neutralizer toothpastes, Colgate
Slim Soft Charcoal, Colgate Natural Extracts and Colgate Zig Zag
manual toothbrushes, Colgate Total mouthwash, Palmolive Gourmet Spa
Mint Shake, Protex For Men and Palmolive Men Taiga Freshness shower
gels and Palmolive Altai Herbs and Protex Complete 12 bar
soaps.
Hill’s Pet Nutrition (14% of Company
Sales)
Hill’s Net sales decreased 3.5% during third quarter 2015. Unit
volume increased 2.5% with 3.0% higher pricing, while foreign
exchange was negative 9.0%. Volume gains were led by the United
States and Japan. Hill’s organic sales increased 5.5%.
Hill’s Operating profit increased 5% in third quarter 2015 to
$157 million, or 250 basis points to 28.8% 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 Selling, general
and administrative expenses, partially offset by an increase in
Other (income) expense, net, all as a percentage of Net sales. This
increase in Gross profit was primarily due to the Company’s
funding-the-growth initiatives and higher pricing, partially offset
by higher raw and packaging material costs, driven by higher
foreign exchange transaction costs. This decrease in Selling,
general and administrative expenses was primarily due to decreased
advertising investment. This increase in Other (income) expense,
net was in part due to the expiration of a foreign sales tax
exemption.
New product introductions driving volume growth in the U.S.
include Hill’s Prescription Diet Metabolic Plus Mobility and
Metabolic Plus Urinary, Hill’s Prescription Diet stews, Hill’s
Prescription Diet i/d Stress and i/d Sensitive and Hill’s Science
Diet Urinary Plus Hairball Control. Hill’s Ideal Balance Slim &
Healthy, Grain Free and Indoor Cat also contributed to volume
growth in the quarter.
New product introductions driving volume growth internationally
include Hill’s Ideal Balance, Hill’s Prescription Diet Metabolic
Plus Mobility, Metabolic Plus Urinary and c/d Multicare Urinary
Stress and Hill’s Science Diet Perfect Weight.
***
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, Hill’s
Prescription Diet and Hill’s Ideal Balance. For more information
about Colgate’s global business, visit the Company’s web site at
http://www.colgatepalmolive.com. To learn more about Colgate Bright
Smiles, Bright Futures® oral health education program, please visit
http://www.colgatebsbf.com. CL-E
Market Share 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. Market
share data is subject to limitations on the availability of
up-to-date information. We believe that the third-party vendors we
use to provide data are reliable, but we have 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.
Explanatory Note Regarding
Currency-Neutral Calculations
Diluted earnings per share growth for third quarter 2015, on a
currency-neutral basis, eliminates from Diluted earnings per share
growth (GAAP) the impact of the items described in Table 8 and the
period-over-period changes in foreign exchange rates in the
translation of local currency results into U.S. dollars.
Accordingly, for purposes of calculating Diluted earnings per share
growth for third quarter 2015, on a currency-neutral basis, third
quarter 2015 local currency results, which include the impact of
foreign currency transaction gains and losses, are translated into
U.S. dollars using average foreign exchange rates for third quarter
2014.
Management’s estimate of earnings per share growth on a
currency-neutral basis for full year 2015 eliminates from earnings
per share growth (GAAP) the impact of the items described in Table
9, the 2012 Restructuring Program and period-over-period changes in
foreign exchange rates in the translation of local currency results
into U.S. dollars. Accordingly, for purposes of estimating earnings
per share growth for full year 2015, on a currency-neutral basis,
estimated full year 2015 local currency results, which include the
impact of estimated foreign currency transaction gains and losses,
are translated into U.S. dollars using 2014 average foreign
exchange rates by quarter.
Cautionary Statement on Forward-Looking
Statements
This press release and the related webcast may contain
forward-looking statements. 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 currency
devaluations, exchange controls, price controls and labor unrest,
including in Venezuela, cost-reduction plans including the 2012
Restructuring Program, tax rates, new product introductions or
commercial investment levels, among other matters. These statements
are made on the basis of our views and assumptions as of this time
and we undertake no obligation to update these statements except as
required by law. We caution 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.
Investors should consult the Company’s filings with the Securities
and Exchange Commission (including the information set forth under
the caption “Risk Factors” in the Company’s Annual Report on Form
10-K for the year ended December 31, 2014) for information about
certain factors that could cause such differences. Copies of these
filings may be obtained upon request from the Company’s Investor
Relations Department or on the Company’s web site 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 organic sales growth, which is Net sales
growth excluding the impact of foreign exchange, acquisitions and
divestments. Management believes this measure provides investors
with useful supplemental information regarding the Company’s
underlying sales trends by presenting sales growth excluding the
external factor of foreign exchange as well as the impact from
acquisitions and divestments. See “Geographic Sales Analysis
Percentage Changes” for the three and nine months ended September
30, 2015 vs 2014 included with this release for a comparison of
organic sales growth to net sales growth in accordance with
accounting principles generally accepted in the United States of
America (“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, Net income attributable
to Colgate-Palmolive Company and Diluted earnings per common share
are discussed both as reported (on a GAAP basis) and, as
applicable, excluding the gain on sale of the Company’s laundry
detergent business in the South Pacific, charges related to the
2012 Restructuring Program, charges related to the effective
devaluations in 2014 and 2015 as a result of the changes to
Venezuela’s foreign exchange system, a charge related to a foreign
tax matter, costs related to the sale of land in Mexico and a
charge related to a European competition law matter (non-GAAP).
Management believes these non-GAAP financial measures provide
investors with useful supplemental information regarding the
performance of the Company’s ongoing operations. See “Non-GAAP
Reconciliations” for the three and nine months ended September 30,
2015 and 2014 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 and as factors in determining compensation. While
the Company believes that these financial measures are useful in
evaluating the Company’s business, 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 not a GAAP measurement
and may not be comparable to similarly titled measures reported by
other companies. See “Condensed Consolidated Statements of Cash
Flows” for the nine months ended September 30, 2015 and 2014 for a
comparison of free cash flow before dividends to Net cash provided
by operations as reported in accordance with GAAP.
(See attached tables for third quarter
results.)
Table 1 Colgate-Palmolive
Company Condensed Consolidated Statements of
Income For the Three Months Ended September 30, 2015
and 2014 (Dollars in Millions Except Per Share
Amounts) (Unaudited) 2015 2014 Net sales $ 3,999
$ 4,379 Cost of sales 1,652 1,821 Gross profit 2,347
2,558 Gross profit margin 58.7 % 58.4 % Selling,
general and administrative expenses 1,347 1,497 Other
(income) expense, net (136 ) 113 Operating profit 1,136 948
Operating profit margin 28.4 % 21.6 % Interest
(income) expense, net 5 4 Income before income taxes 1,131
944 Provision for income taxes 361 364 Effective tax
rate 31.9 % 38.6 % Net income including noncontrolling
interests 770 580 Less: Net income attributable to
noncontrolling interests 44 38 Net income attributable to
Colgate-Palmolive Company $ 726 $ 542 Earnings per common
share Basic $ 0.81 $ 0.59 Diluted $ 0.80 $ 0.59 Average
common shares outstanding Basic 900.1 913.8 Diluted 906.9 922.8
Table 2
Colgate-Palmolive Company Condensed Consolidated
Statements of Income For the Nine Months Ended
September 30, 2015 and 2014 (Dollars in Millions
Except Per Share Amounts) (Unaudited) 2015 2014
Net sales $ 12,135 $ 13,056 Cost of sales 5,029 5,422
Gross profit 7,106 7,634 Gross profit margin 58.6 % 58.5 %
Selling, general and administrative expenses 4,178 4,548
Other (income) expense, net - 524 Operating profit
2,928 2,562 Operating profit margin 24.1 % 19.6 %
Interest (income) expense, net 19 20 Income before income
taxes 2,909 2,542 Provision for income taxes 940 869
Effective tax rate 32.3 % 34.2 % Net income including
noncontrolling interests 1,969 1,673 Less: Net income
attributable to noncontrolling interests 127 121 Net income
attributable to Colgate-Palmolive Company $ 1,842 $ 1,552
Earnings per common share Basic $ 2.04 $ 1.69 Diluted $ 2.02 $ 1.68
Average common shares outstanding Basic 904.1 916.4 Diluted
911.8 925.7
Table
3 Colgate-Palmolive Company Condensed
Consolidated Balance Sheets As of September 30, 2015,
December 31, 2014, and September 30, 2014 (Dollars in
Millions) (Unaudited) September 30, December 31,
September 30, 2015 2014 2014 Cash and cash equivalents $
1,445 $ 1,089 $ 1,355 Receivables, net 1,561 1,552 1,747
Inventories 1,277 1,382 1,422 Other current assets 806 840 657
Property, plant and equipment, net 3,959 4,080 4,038 Other assets,
including goodwill and intangibles 4,515 4,516
4,466 Total assets $ 13,563 $ 13,459
$ 13,685 Total debt $ 6,790 $ 6,148 $ 6,055
Other current liabilities 3,701 3,442 3,798 Other non-current
liabilities 2,482 2,484 2,086
Total liabilities 12,973 12,074 11,939 Total
Colgate-Palmolive Company shareholders' equity 255 1,145 1,420
Noncontrolling interests 335 240
326 Total liabilities and shareholders' equity $ 13,563
$ 13,459 $ 13,685
Supplemental
Balance Sheet Information Debt less cash, cash equivalents and
marketable securities* $ 5,199 $ 4,859 $ 4,576 Working capital % of
sales (1.3 )% 0.8 % (0.5 )% * Marketable securities
of $146, $200 and $124 as of September 30, 2015, December 31, 2014,
and September 30, 2014 respectively, are included in Other current
assets.
Table 4
Colgate-Palmolive Company Condensed Consolidated
Statements of Cash Flows For the Nine Months Ended
September 30, 2015 and 2014 (Dollars in Millions)
(Unaudited) 2015 2014
Operating Activities
Net income including noncontrolling interests $ 1,969 $ 1,673
Adjustments to reconcile net income including noncontrolling
interests to net cash provided by operations: Depreciation and
amortization 337 329 Restructuring and termination benefits, net of
cash 68 69 Voluntary benefit plan contribution - (2 ) Venezuela
remeasurement charges 34 327 Charge for a foreign tax matter - 66
Stock-based compensation expense 104 109 Gain on sale of South
Pacific laundry detergent business (187 ) - Deferred income taxes
(42 ) (35 ) Cash effects of changes in: Receivables (172 ) (222 )
Inventories 1 (51 ) Accounts payable and other accruals (18 ) 100
Other non-current assets and liabilities 14 29
Net cash provided by operations 2,108 2,392
Investing Activities Capital expenditures (459 ) (493 )
Purchases of marketable securities and investments (499 ) (232 )
Proceeds from sale of marketable securities and investments 398 277
Proceeds from sale of South Pacific laundry detergent business 221
- Payment for acquisitions, net of cash acquired (13 ) (25 ) Other
8 18 Net cash used in investing
activities (344 ) (455 )
Financing Activities
Principal payments on debt (6,691 ) (6,220 ) Proceeds from issuance
of debt 7,293 6,597 Dividends paid (1,033 ) (990 ) Purchases of
treasury shares (1,196 ) (1,119 ) Proceeds from exercise of stock
options and excess tax benefits 301 295
Net cash used in financing activities (1,326 ) (1,437 )
Effect of exchange rate changes on Cash and cash equivalents
(82 ) (107 ) Net increase in Cash and cash equivalents 356
393 Cash and cash equivalents at beginning of the period
1,089 962 Cash and cash equivalents at end of
the period $ 1,445 $ 1,355
Supplemental
Cash Flow Information Free cash flow before dividends (Net cash
provided by operations less Capital expenditures) Net cash provided
by operations $ 2,108 $ 2,392 Less: Capital expenditures
(459 ) (493 ) Free cash flow before dividends $ 1,649
$ 1,899 Income taxes paid $ 967 $ 781
Table 5
Colgate-Palmolive Company Segment Information
For the Three and Nine Months Ended September 30, 2015
and 2014 (Dollars in Millions) (Unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2015 2014 2015 2014
Net Sales Oral, Personal and Home Care
North America $ 791 $ 789 $ 2,360 $ 2,344 Latin America
1,064 1,194 3,277 3,577 Europe/South Pacific 728 886 2,200 2,624
Asia 624 634 1,908 1,916 Africa/Eurasia 246
310 754 916 Total Oral,
Personal and Home Care 3,453 3,813 10,499 11,377 Pet
Nutrition 546 566 1,636
1,679
Total Net Sales $ 3,999 $
4,379 $ 12,135 $ 13,056 Three
Months Ended
September 30,
Nine Months Ended
September 30,
2015 2014 2015 2014
Operating Profit Oral, Personal and Home
Care North America $ 258 $ 240 $ 699 $ 687 Latin America 300
330 929 931 Europe/South Pacific 206 237 573 681 Asia 195 187 569
558 Africa/Eurasia 44 60 128
177 Total Oral, Personal and Home Care
1,003 1,054 2,898 3,034 Pet Nutrition 157 149 450 439
Corporate(1) (24 ) (255 ) (420 ) (911 )
Total Operating Profit $ 1,136 $ 948 $
2,928 $ 2,562 Note: (1) Corporate
operations includes costs related to stock options and restricted
stock units, research and development costs, Corporate overhead
costs, restructuring and related implementation costs and gains and
losses on sales of non-core product lines and assets.
Corporate Operating profit (loss) for the three months ended
September 30, 2015 includes charges of $46 related to the 2012
Restructuring Program, a charge of $18 related to the remeasurement
of the Company’s Venezuelan subsidiary’s local currency-denominated
net monetary assets as a result of an effective devaluation and a
gain of $187 on the sale of the Company’s laundry detergent
business in the South Pacific. For the three months ended September
30, 2014, Corporate Operating profit (loss) included charges of $55
related to the 2012 Restructuring Program, a charge of $61 related
to the remeasurement of the Company’s Venezuelan subsidiary’s local
currency-denominated net monetary assets as a result of an
effective devaluation, costs of $1 related to the sale of land in
Mexico and a charge of $11 for a European competition law matter.
Corporate Operating profit (loss) for the nine months ended
September 30, 2015 includes charges of $198 related to the 2012
Restructuring Program, charges of $34 related to the remeasurement
of the Company’s Venezuelan subsidiary’s local currency-denominated
net monetary assets as a result of effective devaluations and a
gain of $187 on the sale of the Company’s laundry detergent
business in the South Pacific. For the nine months ended September
30, 2014, Corporate Operating profit (loss) included charges of
$231 related to the 2012 Restructuring Program, charges of $327
related to the remeasurement of the Company’s Venezuelan
subsidiary’s local currency-denominated net monetary assets as a
result of effective devaluations, costs of $4 related to the sale
of land in Mexico and a charge of $11 for a European competition
law matter.
Table 6 Colgate-Palmolive
Company Geographic Sales Analysis Percentage
Changes For the Three Months Ended September 30, 2015
vs 2014 (Unaudited)
COMPONENTS OF SALES CHANGE Pricing
Coupons Sales Consumer & Change
Organic As Reported Organic Ex-Divested
Trade Foreign
Region
As
Reported
Sales
Change
Volume
Volume
Volume
Incentives
Exchange
Total Company (8.5 )% 5.0 % 1.0 % 1.5 % 1.5 % 3.5 %
(13.0 )%
Europe/South Pacific (2) (18.0 )%
(1.0 )% (1.0 )% 1.0 % 1.0 % (2.0 )% (15.0 )%
Latin
America (11.0 )% 11.0 % (1.0 )% (1.0 )% (1.0 )% 12.0 % (22.0 )%
Asia (1.5 )% 4.0 % 5.5 % 5.0 % 5.5 % (1.0 )% (6.0 )%
Africa/Eurasia (20.5 )% 5.0 % (3.0 )% (2.5 )% (2.5 )%
7.5 % (25.0 )%
Total International (12.0 )% 5.5 % - %
0.5 % 0.5 % 5.0 % (17.0 )%
North America 0.5 % 2.0 %
2.5 % 2.5 % 2.5 % (0.5 )% (1.5 )%
Total CP Products
(9.5 )% 4.5 % 0.5 % 1.0 % 1.0 % 3.5 % (13.5 )%
Hill's
(3.5 )% 5.5 % 2.5 % 2.5 % 2.5 % 3.0 % (9.0 )%
Emerging Markets (1)
(10.0 )% 8.0 % 1.0 % 1.0 % 1.0 % 7.0 % (18.0 )%
Developed
Markets (7.5 )% 1.5 % 0.5 % 1.5 % 1.5 % - % (8.0 )%
Notes:
(1) Emerging Markets include Latin America, Asia (excluding
Japan), Africa/Eurasia and Central Europe.
(2) The sale of the Company's laundry
detergent business in the South Pacific was completed on August 31,
2015. The impact of the sale of the Company's laundry detergent
business in the South Pacific on third quarter sales and volume was
0.5% for the Total Company and 2.0% for Europe/South Pacific
region.
Table 7 Colgate-Palmolive Company
Geographic Sales Analysis Percentage Changes For
the Nine Months Ended September 30, 2015 vs 2014
(Unaudited) COMPONENTS OF SALES
CHANGE Pricing Coupons Sales
Consumer & Change Organic As
Reported Organic Ex-Divested Trade
Foreign
Region
As
Reported
Sales
Change
Volume
Volume
Volume
Incentives
Exchange
Total Company (7.0 )% 5.0 % 2.0 % 2.0 % 2.0 % 3.0 %
(12.0 )%
Europe/South Pacific (2) (16.0 )% 0.5
% 3.0 % 3.5 % 3.5 % (3.0 )% (16.0 )%
Latin America
(8.5 )% 10.0 % - % - % - % 10.0 % (18.5 )%
Asia (0.5
)% 3.0 % 4.0 % 3.5 % 4.0 % (0.5 )% (4.0 )%
Africa/Eurasia (17.5 )% 6.0 % (1.5 )% (1.5 )% (1.5 )% 7.5 %
(23.5 )%
Total International (10.0 )% 5.0 % 1.5 % 1.5
% 2.0 % 3.5 % (15.0 )%
North America 0.5 % 2.0 % 2.0
% 2.0 % 2.0 % - % (1.5 )%
Total CP Products (7.5 )%
4.5 % 1.5 % 1.5 % 2.0 % 3.0 % (12.0 )%
Hill's (2.5 )%
6.0 % 3.5 % 3.5 % 3.5 % 2.5 % (8.5 )%
Emerging
Markets (1) (7.5 )% 7.0 % 1.5 % 1.0 % 1.5 % 6.0 % (15.0
)%
Developed Markets (6.5 )% 2.0 % 2.0 % 2.5 % 2.5 %
(0.5 )% (8.0 )%
Notes:
(1) Emerging Markets include Latin America, Asia (excluding
Japan), Africa/Eurasia and Central Europe.
(2) The sale of the Company's laundry
detergent business in the South Pacific was completed on August 31,
2015. The impact of the sale of the Company's laundry detergent
business in the South Pacific on nine months sales and volume was
0% for the Total Company and 0.5% for Europe/South Pacific
region.
Table 8
Colgate-Palmolive Company
Non-GAAP Reconciliations
For the Three Months Ended September
30, 2015 and 2014
(Dollars in Millions Except Per Share
Amounts) (Unaudited)
Gross Profit 2015 2014
Gross profit, GAAP $ 2,347 $ 2,558 2012 Restructuring Program 3 7
Costs related to the sale of land in Mexico -
1 Gross profit, non-GAAP $ 2,350 $ 2,566
Basis Point Gross Profit Margin 2015
2014 Change Gross profit margin, GAAP 58.7 % 58.4 %
30 2012 Restructuring Program 0.1 % 0.2 % Costs related to the sale
of land in Mexico - % - % Gross profit margin,
non-GAAP 58.8 % 58.6 % 20
Selling, General and Administrative Expenses 2015
2014 Selling, general and administrative expenses, GAAP $
1,347 $ 1,497 2012 Restructuring Program (15 ) (13 )
Selling, general and administrative expenses, non-GAAP $ 1,332
$ 1,484
Basis Point Selling, General
and Administrative Expenses as a Percentage of Net Sales
2015 2014 Change Selling, general and
administrative expenses as a percentage of Net sales, GAAP 33.7 %
34.2 % (50 ) 2012 Restructuring Program (0.4 %) (0.3
%) Selling, general and administrative expenses as a
percentage of Net sales, non-GAAP 33.3 % 33.9 % (60 )
Other (Income) Expense, Net 2015
2014 Other (income) expense, net, GAAP $ (136 ) $ 113 2012
Restructuring Program (28 ) (35 ) Venezuela remeasurement charges
(18 ) (61 ) Gain on sale of South Pacific laundry detergent
business 187 - Charge for a European competition law matter
- (11 ) Other (income) expense, net, non-GAAP $ 5
$ 6
Operating Profit 2015
2014 % Change Operating profit, GAAP $ 1,136 $ 948 20
% 2012 Restructuring Program 46 55 Venezuela remeasurement charges
18 61 Gain on sale of South Pacific laundry detergent business (187
) - Costs related to the sale of land in Mexico - 1 Charge for a
European competition law matter - 11
Operating profit, non-GAAP $ 1,013 $ 1,076 (6
%)
Basis Point Operating Profit Margin
2015 2014 Change Operating profit margin, GAAP
28.4 % 21.6 % 680 2012 Restructuring Program 1.1 % 1.3 % Venezuela
remeasurement charges 0.5 % 1.4 % Gain on sale of South Pacific
laundry detergent business (4.7 %) - % Charge for a European
competition law matter - % 0.3 % Operating
profit margin, non-GAAP 25.3 % 24.6 % 70
Net Income Attributable to Colgate-Palmolive
Company 2015 2014 % Change Net income
attributable to Colgate-Palmolive Company, GAAP $ 726 $ 542 34 %
2012 Restructuring Program 35 41 Venezuela remeasurement charges 12
40 Gain on sale of South Pacific laundry detergent business (120 )
- Charge for a foreign tax matter - 66 Charge for a European
competition law matter - 11 Costs related to the sale of land in
Mexico - 1 Net income
attributable to Colgate-Palmolive Company, non-GAAP $ 653 $
701 (7 %)
Diluted Earnings Per Common
Share(1) 2015 2014 % Change Diluted
earnings per common share, GAAP $ 0.80 $ 0.59 36 % 2012
Restructuring Program 0.04 0.05 Venezuela remeasurement charges
0.01 0.04 Gain on sale of South Pacific laundry detergent business
(0.13 ) - Charge for a foreign tax matter - 0.07 Charge for a
European competition law matter - 0.01
Diluted earnings per common share, non-GAAP $ 0.72 $
0.76 (5 %) Note: (1) The impact of non-GAAP
adjustments on diluted earnings per share may not necessarily equal
the difference between "GAAP" and "non-GAAP" as a result of
rounding.
Table 9
Colgate-Palmolive Company
Non-GAAP Reconciliations
For the Nine Months Ended September 30,
2015 and 2014
(Dollars in Millions Except Per Share
Amounts) (Unaudited)
Gross Profit 2015 2014
Gross profit, GAAP $ 7,106 $ 7,634 2012 Restructuring Program 11 23
Costs related to the sale of land in Mexico -
4 Gross profit, non-GAAP $ 7,117 $ 7,661
Basis Point Gross Profit Margin 2015
2014 Change Gross profit margin, GAAP 58.6 % 58.5 %
10 2012 Restructuring Program - % 0.2 % Costs related to the sale
of land in Mexico - % - % Gross profit margin,
non-GAAP 58.6 % 58.7 % (10 )
Selling, General and Administrative Expenses 2015
2014 Selling, general and administrative expenses, GAAP $
4,178 $ 4,548 2012 Restructuring Program (44 ) (42 )
Selling, general and administrative expenses, non-GAAP $ 4,134
$ 4,506
Basis Point Selling, General
and Administrative Expenses as a Percentage of Net Sales
2015 2014 Change Selling, general and
administrative expenses as a percentage of Net sales, GAAP 34.4 %
34.8 % (40 ) 2012 Restructuring Program (0.3 %) (0.3
%) Selling, general and administrative expenses as a
percentage of Net sales, non-GAAP 34.1 % 34.5 % (40 )
Other (Income) Expense, Net 2015
2014 Other (income) expense, net, GAAP $ - $ 524 2012
Restructuring Program (143 ) (166 ) Venezuela remeasurement charges
(34 ) (327 ) Gain on sale of South Pacific laundry detergent
business 187 - Charges for European competition law matters
- (11 ) Other (income) expense, net, non-GAAP $ 10
$ 20
Operating Profit
2015 2014 % Change Operating profit, GAAP $
2,928 $ 2,562 14 % 2012 Restructuring Program 198 231 Venezuela
remeasurement charges 34 327 Gain on sale of South Pacific laundry
detergent business (187 ) - Costs related to the sale of land in
Mexico - 4 Charges for European competition law matters -
11 Operating profit, non-GAAP $ 2,973
$ 3,135 (5 %)
Basis Point Operating
Profit Margin 2015 2014 Change Operating
profit margin, GAAP 24.1 % 19.6 % 450 2012 Restructuring Program
1.6 % 1.8 % Venezuela remeasurement charges 0.3 % 2.5 % Gain on
sale of South Pacific laundry detergent business (1.5 %) - %
Charges for European competition law matters - % 0.1
% Operating profit margin, non-GAAP 24.5 %
24.0 % 50
Net Income Attributable to
Colgate-Palmolive Company 2015 2014 %
Change Net income attributable to Colgate-Palmolive Company,
GAAP $ 1,842 $ 1,552 19 % 2012 Restructuring Program 142 167
Venezuela remeasurement charges 22 214 Charge for a foreign tax
matter 15 66 Gain on sale of South Pacific laundry detergent
business (120 ) - Costs related to the sale of land in Mexico - 3
Charges for European competition law matters -
11 Net income attributable to Colgate-Palmolive
Company, non-GAAP $ 1,901 $ 2,013 (6 %)
Diluted Earnings Per Common Share (1) (2) 2015
2014 % Change Diluted earnings per common share, GAAP
$ 2.02 $ 1.68 20 % 2012 Restructuring Program 0.15 0.18 Venezuela
remeasurement charges 0.02 0.23 Charge for a foreign tax matter
0.02 0.07 Gain on sale of South Pacific laundry detergent business
(0.13 ) - Charges for European competition law matters -
0.01 Diluted earnings per common share,
non-GAAP $ 2.08 $ 2.17 (4 %) Notes: (1)
The impact of non-GAAP adjustments on diluted earnings per share
may not necessarily equal the difference between "GAAP" and
"non-GAAP" as a result of rounding. (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.
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Colgate-Palmolive CompanyBina Thompson, 212-310-3072Hope
Spiller, 212-310-2291
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