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Jul 27, 2018

Colgate Announces 2nd Quarter 2018 Results

NEW YORK--(BUSINESS WIRE)--Jul. 27, 2018-- Colgate-Palmolive Company (NYSE:CL) today reported worldwide Net sales of $3,886 million in second quarter 2018, an increase of 1.5% versus second quarter 2017. Global unit volume increased 1.5%, and pricing and foreign exchange were even with the year ago period. 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 0.5%.

Net income and Diluted earnings per share in second quarter 2018 were $637 million and $0.73, respectively. Net income in second quarter 2018 included $51 million ($0.06 per diluted share) of aftertax charges resulting from the Company’s Global Growth and Efficiency Program and a $15 million ($0.02 per diluted share) benefit from a previously disclosed foreign tax matter.

Net income and Diluted earnings per share in second quarter 2017 were $524 million and $0.59, respectively. Net income in second quarter 2017 included $115 million ($0.13 per diluted share) of aftertax charges resulting from the Global Growth and Efficiency Program.

Excluding charges resulting from the Global Growth and Efficiency Program in both periods and the benefit from a foreign tax matter in 2018, Net income in second quarter 2018 was $673 million, an increase of 5% versus second quarter 2017, and Diluted earnings per share in second quarter 2018 was $0.77, an increase of 7% versus second quarter 2017.

Gross profit margin was 59.2% in second quarter 2018 versus 60.1% in second quarter 2017. Excluding charges resulting from the Global Growth and Efficiency Program in both periods, Gross profit margin was 59.3% in second quarter 2018, a decrease of 140 basis points versus the year ago quarter as higher raw and packaging material costs were partially offset by cost savings from the Company’s funding-the-growth initiatives.

Selling, general and administrative expenses were 33.5% of Net sales in second quarter 2018 versus 34.2% of Net sales in second quarter 2017. Excluding charges resulting from the Global Growth and Efficiency Program in both periods, Selling, general and administrative expenses decreased by 60 basis points to 33.2% of Net sales in second quarter 2018 as a result of lower overhead expenses as a percentage of Net sales. Worldwide advertising investment increased 1% to $403 million versus $399 million in the year ago quarter.

Operating profit increased to $946 million in second quarter 2018 compared to $878 million in second quarter 2017. Excluding charges resulting from the Global Growth and Efficiency Program in both periods, Operating profit was $1,004 million in second quarter 2018, a decrease of 1% versus second quarter 2017. Operating profit margin was 24.3% in second quarter 2018 versus 22.9% in second quarter 2017. Excluding charges resulting from the Global Growth and Efficiency Program in both periods, Operating profit margin was 25.8% in second quarter 2018, a decrease of 80 basis points versus the year ago quarter. This decrease in Operating profit margin was due to a decrease in Gross profit, partially offset by a decrease in Selling, general and administrative expenses, both as a percentage of Net sales.

Net cash provided by operations year to date was $1,297 million compared to $1,305 million in the comparable 2017 period. Working capital as a percentage of Net sales was negative 2.1% compared to negative 3.9% in the year ago period.

Ian Cook, Chairman and Chief Executive Officer, commented on the second quarter results, “The second quarter was another challenging one with category growth rates remaining soft in many markets around the world and recent unfavorable movements in foreign exchange. Net sales grew 1.5% and organic sales grew 0.5%, below our expectations, due to unit volume declines in emerging markets and flat pricing worldwide.

“Advertising investment increased in absolute dollars versus second quarter 2017 and we continue to plan for increased advertising investment, both absolutely and as a percent to sales, for the full year in support of new products, our base businesses and longer-term consumption-building activities.

“Colgate’s leadership of the global toothpaste market continued during the quarter with our global market share at 42.1% 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, “As we look ahead, while uncertainty in global markets and category growth worldwide remain challenging, we are maintaining our heightened focus on brand building and increased productivity while accelerating our change efforts. Based on current spot rates, we expect a low-single-digit net sales increase and low-single-digit organic sales growth in 2018, with sequential improvement in organic sales growth in the balance of the year.

“On a GAAP basis, based on current spot rates and including the impact of the Global Growth and Efficiency Program, we expect gross margin for the year to be even with 2017 and expect double-digit earnings per share growth versus 2017.

“Excluding charges resulting from the Global Growth and Efficiency Program, the one-time charge related to U.S. tax reform in 2017 and the benefit from a foreign tax matter in 2018, based on current spot rates, we are planning for a year of increased operating cash flow, modestly lower gross margin, increased advertising investment and mid-single-digit earnings per share growth versus 2017.”

At 11:00 a.m. ET today, Colgate will host a conference call to elaborate on second 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 second quarter 2018 versus the year ago period. See attached Geographic Sales Analysis Percentage Changes and Segment Information tables for additional information on divisional net sales and operating profit.

North America (21% of Company Sales)

North America Net sales increased 8.0% in second quarter 2018. Unit volume increased 7.0%, pricing increased 0.5% and foreign exchange was positive 0.5%. The previously disclosed professional skin care acquisitions contributed 5.5% to Net sales and unit volume growth. Organic sales and organic unit volume for North America increased 2.0% and 1.5%, respectively.

Operating profit in North America increased 4% in second quarter 2018 to $264 million, while as a percentage of Net sales it decreased 140 basis points to 32.0%. 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, partially offset by decreased advertising investment. 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 its leadership in the toothpaste category during the quarter with its market share at 34.9% 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 41.9% year to date, supported by the success of Colgate Total 360° Advanced Optic White and Colgate Gum Health manual toothbrushes.

Products succeeding in other categories include Softsoap Hydra Bliss body wash and liquid hand soap, Irish Spring Non-Stop Fresh body wash, Fabuloso Complete liquid cleaner and Suavitel Complete fabric conditioner.

Latin America (24% of Company Sales)

Latin America Net sales decreased 7.0% in second quarter 2018. Unit volume decreased 1.0%, pricing decreased 0.5% and foreign exchange was negative 5.5%. Excluding the impact of the truckers’ strike in Brazil, Latin America unit volume would have increased in the quarter. Volume declines in Central America were partially offset by volume gains in the Southern Cone region. Organic sales for Latin America decreased 1.5%.

Operating profit in Latin America decreased 15% in second quarter 2018 to $262 million, or 270 basis points to 28.1% 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.

Colgate maintained its toothpaste leadership in Latin America during the quarter, with market share gains in Brazil, Peru, Costa Rica, Chile, Guatemala and Panama. Products succeeding in oral care in the region include Colgate Total 12 Salud Visible, Colgate Luminous White XD Shine, Colgate Triple Action Xtra Freshness and Colgate Kids toothpastes. Colgate’s leadership in the manual toothbrush category continued throughout the region, supported by the success of Colgate 360° Advanced Total 12 and Colgate Pro Cuidado manual toothbrushes.

Products succeeding in other categories include Colgate Total 12 mouthwash, Protex Pro-Hidrata, Palmolive Natural Secrets and Palmolive Neutro Balance shower gels and bar soaps, Suavitel Complete fabric conditioner and Fabuloso Complete liquid cleaner.

Europe (16% of Company Sales)

Europe Net sales increased 6.0% in second quarter 2018. Unit volume increased 2.5%, pricing decreased 3.5% and foreign exchange was positive 7.0%. Volume gains were led by France, the United Kingdom and Italy. Organic sales for Europe decreased 1.0%.

Operating profit in Europe increased 7% in second quarter 2018 to $156 million or 20 basis points to 25.2% of Net sales. This increase in Operating profit as a percentage of Net sales was due to a decrease in Selling, general and administrative expenses and a decrease in Other (income) expense, net, partially offset by a decrease in Gross profit, all as a percentage of Net sales. This decrease in Gross profit was primarily due to higher raw and packaging material costs and lower pricing, partially offset by cost savings from the Company’s funding-the-growth initiatives. This decrease in Selling, general and administrative expenses was due to decreased advertising investment, partially offset by higher overhead expenses.

Colgate maintained its toothpaste leadership in Europe during the quarter, with toothpaste market share gains in France, Germany, Italy, Greece, Denmark and Sweden. Products succeeding in oral care include Colgate Max White Expert Complete, Colgate Natural Extracts and meridol Parodont Expert toothpastes and Colgate 360° Advanced Whole Mouth Health and Colgate 360° Advanced Max White Expert White manual toothbrushes.

Products succeeding in other categories include Colgate Plax mouthwash, Sanex Zero% shower gel, deodorant and body lotion, Sanex Dermo shower gel, Palmolive Aroma Sensations shower gel, Palmolive Handwash + Lotion liquid hand soap, Ajax Boost liquid cleaner and Soupline Parfum Supreme fabric conditioner.

Asia Pacific (18% of Company Sales)

Asia Pacific Net sales increased 1.5% during second quarter 2018. Unit volume decreased 1.0%, pricing increased 1.0% and foreign exchange was positive 1.5%. Volume declines in the Greater China region were partially offset by volume gains in India and the Philippines. Organic sales for Asia Pacific were even with the year ago period.

Operating profit in Asia Pacific decreased 1% in second quarter 2018 to $203 million, or 100 basis points to 30.1% 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, partially offset by decreased advertising investment.

Colgate maintained its toothpaste leadership in the Asia Pacific region during the quarter with market share gains in the Philippines. Products succeeding in the region include Colgate Naturals, Colgate Swarna Vedshakti, Colgate MaxFresh and elmex Sensitive toothpastes.

Products succeeding in other categories include Colgate Slim Soft Advanced, Colgate Slim Soft Micro Silky and Colgate Slim Soft Flex Clean manual toothbrushes, Protex Thai Therapy bar soap, Colgate Plax mouthwash, Palmolive Luminous Oils shower gel, and Softlan Aroma Therapy fabric conditioner.

Africa/Eurasia (6% of Company Sales)

Africa/Eurasia Net sales increased 1.0% during second quarter 2018. Unit volume increased 2.0%, pricing increased 1.0% and foreign exchange was negative 2.0%. Volume gains were led by the Sub-Saharan region and South Africa. Organic sales for Africa/Eurasia increased 3.0%.

Operating profit in Africa/Eurasia decreased 7% in second quarter 2018 to $42 million, or 140 basis points to 17.3% 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, partially offset by cost savings from the Company’s funding-the-growth initiatives. This decrease in Selling, general and administrative expenses was primarily due to lower overhead expenses.

Colgate maintained its toothpaste leadership in Africa/Eurasia during the quarter, with market share gains in Saudi Arabia, United Arab Emirates, Kenya, Kuwait, Morocco and Qatar. Successful products contributing to sales in the region include Colgate Ancient Secrets, Colgate Natural Extracts, Colgate Optic White Expert White and Colgate Maximum Cavity Protection toothpastes, Colgate 360° Advanced Whole Mouth Clean and Colgate Slim Soft Advanced manual toothbrushes, Palmolive Gourmet and Palmolive Luminous Oils shower gel and Protex Herbal bar soap.

Hill’s Pet Nutrition (15% of Company Sales)

Hill’s Net sales increased 3.5% during second quarter 2018. Unit volume increased 1.0%, pricing increased 1.0% and foreign exchange was positive 1.5%. Volume gains in the United States and Australia were partially offset by volume declines in South Africa. Hill’s organic sales increased 2.0%.

Hill’s Operating profit decreased 2% in second quarter 2018 to $165 million, or 160 basis points to 27.9% 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, 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 Other (income) expense, net was due to the expiration of a foreign sales tax benefit.

Successful products contributing to sales in the U.S. include Hill’s Prescription Diet k/d and k/d + Mobility, Hill’s Prescription Diet i/d for digestive care, Hill’s Science Diet Youthful Vitality, Hill’s Science Diet Urinary and Hairball Control and Hill’s Science Diet Kitten.

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, Speed Stick, Lady Speed Stick, Softsoap, Irish Spring, Protex, Sorriso, Kolynos, elmex, Tom’s of Maine, Sanex, Ajax, Axion, Fabuloso, Soupline and Suavitel, as well as Hill’s Science Diet and Hill’s Prescription Diet. For more information about Colgate’s global business, visit the Company’s website at http://www.colgatepalmolive.com. To learn more about Colgate Bright Smiles, Bright Futures® oral health education program, please visit http://www.colgatebsbf.com. CL-E

Effective January 1, 2018, as required, the Company adopted ASU No. 2017-07, “Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,” on a retrospective basis. As a result, for all periods presented, only the service related component of pension and other postretirement benefit costs is included in Operating profit. The non-service related components (interest cost, expected return on assets and amortization of actuarial gains and losses) are included in a new line item, “Non-service related postretirement costs,” which is below Operating profit. Adoption of this standard had no effect on Net income attributable to Colgate-Palmolive Company, Earnings per common share or Cash flow. Refer to the Company’s website at http://www.colgatepalmolive.com for reconciliations to previously reported amounts for all quarters of 2017 as well as for years 2017 and 2016.

Market Share Information

Management uses market share information as a key indicator to monitor business health and performance. References to market share in this press release are based on a combination of consumption and market share data provided by third-party vendors, primarily Nielsen, and internal estimates. All market share references represent the percentage of the dollar value of sales of our products, relative to all product sales in the category in the countries in which the Company competes and purchases data (excluding Venezuela from all periods). The Company measures year-to-date market shares from January 1 of the relevant year through the most recent period for which market share data is available, which typically reflects a lag time of one or two months. The Company believes that the third-party vendors it uses to provide data are reliable, but it has not verified the accuracy or completeness of the data or any assumptions underlying the data. In addition, market share information calculated by the Company may be different from market share information calculated by other companies due to differences in category definitions, the use of data from different countries, internal estimates and other factors.

Cautionary Statement on Forward-Looking Statements

This press release and the related webcast may contain forward-looking statements (as that term is defined in the U.S. Private Securities Litigation Reform Act of 1995 or by the Securities and Exchange Commission (SEC) in its rules, regulations and releases) that set forth anticipated results based on management’s current plans and assumptions. Such statements may relate, for example, to sales or volume growth, organic sales growth, profit or profit margin growth, earnings per share growth (including on a currency-neutral basis), financial goals, the impact of foreign exchange volatility, cost-reduction plans including the Global Growth and Efficiency Program, tax rates, U.S. tax reform, 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 six months ended June 30, 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 (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 six months ended June 30, 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 six months ended June 30, 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 second quarter results.)

         
        Table 1
Colgate-Palmolive Company
 
Condensed Consolidated Statements of Income
 
For the Three Months Ended June 30, 2018 and 2017
 
(Dollars in Millions Except Per Share Amounts) (Unaudited)
 
    2018  

2017(1)

         
Net sales   $ 3,886     $ 3,826  
         
Cost of sales   1,585     1,526  
         
Gross profit   2,301     2,300  
         
Gross profit margin  

59.2

%

  60.1 %  
         
Selling, general and administrative expenses   1,300     1,309  
         
Other (income) expense, net   55     113  
         
Operating profit   946     878  
         
Operating profit margin   24.3 %   22.9 %  
         
Non-service related postretirement costs   23     25  
         
Interest (income) expense, net   35     24  
         
Income before income taxes   888     829  
         
Provision for income taxes   213     269  
         
Effective tax rate   24.0 %   32.4 %  
         
Net income including noncontrolling interests   675     560  
         
Less: Net income attributable to noncontrolling interests   38     36  
         
Net income attributable to Colgate-Palmolive Company   $ 637     $ 524  
         
Earnings per common share        
Basic   $ 0.73     $ 0.59  
Diluted   $ 0.73     $ 0.59  
         
Average common shares outstanding        
Basic   871.7     883.8  
Diluted   874.0     890.8  

 

 

(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 Six Months Ended June 30, 2018 and 2017
 
(Dollars in Millions Except Per Share Amounts) (Unaudited)
         
    2018  

2017(1)

         
Net sales   $ 7,888     $ 7,588  
         
Cost of sales   3,179     3,019  
         
Gross profit   4,709     4,569  
         
Gross profit margin   59.7 %   60.2 %  
         
Selling, general and administrative expenses   2,692     2,645  
         
Other (income) expense, net   88     134  
         
Operating profit   1,929     1,790  
         
Operating profit margin   24.5 %   23.6 %  
         
Non-service related postretirement costs   47     52  
         
Interest (income) expense, net   70     47  
         
Income before income taxes   1,812     1,691  
         
Provision for income taxes   459     520  
         
Effective tax rate   25.3 %   30.8 %  
         
Net income including noncontrolling interests   1,353     1,171  
         
Less: Net income attributable to noncontrolling interests   82     77  
         
Net income attributable to Colgate-Palmolive Company   $ 1,271     $ 1,094  
         
Earnings per common share        

Basic(2)

  $ 1.46     $ 1.24  

Diluted(2)

  $ 1.45     $ 1.23  
         
Average common shares outstanding        
Basic   873.5     884.2  
Diluted   877.0     890.9  

 

 

(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 June 30, 2018, December 31, 2017 and June 30, 2017
 
(Dollars in Millions) (Unaudited)
             
    June 30,   December 31,   June 30,
    2018   2017   2017
Cash and cash equivalents   $ 833     $ 1,535     $ 1,241  
Receivables, net   1,545     1,480     1,526  
Inventories   1,254     1,221     1,199  
Other current assets   540     403     589  
Property, plant and equipment, net   3,908     4,072     3,930  
Other assets, including goodwill and intangibles   4,570     3,965     4,095  
Total assets   $ 12,650     $ 12,676     $ 12,580  
             
Total debt   $ 6,865     $ 6,577     $ 6,519  
Other current liabilities   3,596     3,397     3,767  
Other non-current liabilities   2,378     2,459     2,206  
Total liabilities   12,839     12,433     12,492  
Total Colgate-Palmolive Company shareholders’ equity   (523 )   (60 )   (242 )
Noncontrolling interests   334     303     330  
Total liabilities and equity   $ 12,650     $ 12,676     $ 12,580  
             
Supplemental Balance Sheet Information            
Debt less cash, cash equivalents and marketable securities(1)   $ 5,949     $ 5,024     $ 5,123  
Working capital % of sales   (2.1 )%   (2.0

)%

  (3.9 )%
                   
(1) Marketable securities of $83, $18 and $155 as of June 30, 2018, December 31, 2017 and June 30, 2017, respectively, are included in Other current assets.
 

 

         
        Table 4
Colgate-Palmolive Company
 
Condensed Consolidated Statements of Cash Flows
 
For the Six Months Ended June 30, 2018 and 2017
 
(Dollars in Millions) (Unaudited)
         
    2018   2017
Operating Activities        
Net income including noncontrolling interests   $ 1,353     $ 1,171  
Adjustments to reconcile net income including noncontrolling interests to net cash provided by operations:    
Depreciation and amortization   258     226  
Restructuring and termination benefits, net of cash   (14 )   78  
Stock-based compensation expense   47     53  
Deferred income taxes   2     (64 )
Voluntary benefit plan contributions       (57 )
Cash effects of changes in:        
Receivables   (200 )   (64 )
Inventories   (30 )   9  
Accounts payable and other accruals   (96 )   (61 )
Other non-current assets and liabilities   (23 )   14  
Net cash provided by operations   1,297     1,305  
         
Investing Activities        
Capital expenditures   (216 )   (229 )
Purchases of marketable securities and investments   (96 )   (201 )
Proceeds from sale of marketable securities and investments   19     114  
Payment for acquisitions, net of cash acquired   (727 )    
Other   7     4  
Net cash used in investing activities   (1,013 )   (312 )
         
Financing Activities        
Principal payments on debt   (3,953 )   (1,841 )
Proceeds from issuance of debt   4,266     1,761  
Dividends paid   (756 )   (716 )
Purchases of treasury shares   (696 )   (660 )
Proceeds from exercise of stock options   160     337  
Net cash used in financing activities   (979 )   (1,119 )
         
Effect of exchange rate changes on Cash and cash equivalents   (7 )   52  
Net increase (decrease) in Cash and cash equivalents   (702 )   (74 )
Cash and cash equivalents at beginning of the period   1,535     1,315  
Cash and cash equivalents at end of the period   $ 833     $ 1,241  
         
Supplemental Cash Flow Information        
Free cash flow before dividends (Net cash provided by operations less Capital expenditures)        
Net cash provided by operations   $ 1,297     $ 1,305  
Less: Capital expenditures   (216 )   (229 )
Free cash flow before dividends   $ 1,081     $ 1,076  
         
         
Income taxes paid   $ 468     $ 639  
                 

 

                 
                Table 5
Colgate-Palmolive Company
 
Segment Information
 
For the Three and Six Months Ended June 30, 2018 and 2017
 
(Dollars in Millions) (Unaudited)
         
    Three Months Ended June 30,   Six Months Ended June 30,
    2018   2017   2018   2017
Net Sales                
Oral, Personal and Home Care                
                 
North America   $ 824     $ 764     $ 1,651     $ 1,524  
Latin America   933     1,002     1,862     1,926  
Europe   620     584     1,268     1,142  
Asia Pacific   674     663     1,433     1,383  
Africa/Eurasia   243     241     498     487  
                 
Total Oral, Personal and Home Care   3,294     3,254     6,712     6,462  
                 
Pet Nutrition   592     572     1,176     1,126  
                 
Total Net Sales   $ 3,886     $ 3,826     $ 7,888     $ 7,588  
                 
                 
    Three Months Ended June 30,   Six Months Ended June 30,
    2018  

2017(1)

  2018  

2017(1)

Operating Profit                
Oral, Personal and Home Care                
                 
North America   $ 264     $ 255     $ 521     $ 502  
Latin America   262     309     535     580  
Europe   156     146     318     288  
Asia Pacific   203     206     429     425  
Africa/Eurasia   42     45     92     91  
                 
Total Oral, Personal and Home Care   927     961     1,895     1,886  
                 
Pet Nutrition   165     169     329     332  
Corporate(2)   (146 )   (252 )     (295 )   (428 )  
                 
Total Operating Profit   $ 946     $ 878     $ 1,929     $ 1,790  
                                 
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 months ended June 30, 2018 includes charges of $58 related to the Global Growth and Efficiency Program. Corporate Operating profit (loss) for the three months ended June 30, 2017 included charges of $141 related to the Global Growth and Efficiency Program.

 

Corporate Operating profit (loss) for the six months ended June 30, 2018 includes charges of $82 related to the Global Growth and Efficiency Program. Corporate Operating profit (loss) for the six months ended June 30, 2017 included charges of $186 related to the Global Growth and Efficiency Program.

 

 

 
Table 6
Colgate-Palmolive Company
 
Geographic Sales Analysis Percentage Changes
 
For the Three Months Ended June 30, 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)   1.5 %   0.5 %   1.5 %   0.5 %   1.5 %   %   %
                             
Europe   6.0 %   (1.0 )%   2.5 %   2.5 %   2.5 %   (3.5 )%   7.0 %
                             
Latin America   (7.0 )%   (1.5 )%   (1.0 )%   (1.0 )%   (1.0 )%   (0.5 )%   (5.5 )%
                             
Asia Pacific   1.5 %   %   (1.0 )%   (1.0 )%   (1.0 )%   1.0 %   1.5 %
                             
Africa/Eurasia   1.0 %   3.0 %   2.0 %   2.0 %   2.0 %   1.0 %   (2.0 )%
                             
Total International   (1.0 )%   (0.5 )%   %   %   %   (0.5 )%   (0.5 )%
                             
North America(1)   8.0 %   2.0 %   7.0 %   1.5 %   7.0 %   0.5 %   0.5 %
                             
Total CP Products   1.0 %   %   1.5 %   0.5 %   1.5 %   (0.5 )%   %
                             
Hill’s   3.5 %   2.0 %   1.0 %   1.0 %   1.0 %   1.0 %   1.5 %
                             
                             
Emerging Markets(2)   (3.0 )%   (0.5 )%   (0.5 )%   (0.5 )%   (0.5 )%   %   (2.5 )%
                             
Developed Markets   6.0 %   1.0 %   4.0 %   1.5 %   4.0 %   (0.5 )%   2.5 %
                                           
Notes:
(1) The impact of the previously disclosed professional skin care acquisitions on as reported volume was 1.0% for Total Company and 5.5% 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 Six Months Ended June 30, 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)   4.0 %   1.0 %   2.0 %   1.0 %   2.0 %   %   2.0 %
                             
Europe   11.0 %   0.5 %   3.5 %   3.5 %   3.5 %   (3.0 )%   10.5 %
                             
Latin America   (3.5 )%   (0.5 )%   (0.5 )%   (0.5 )%   (0.5 )%   %   (3.0 )%
                             
Asia Pacific   3.5 %   %   %   %   %   %   3.5 %
                             
Africa/Eurasia   2.5 %   1.0 %   (0.5 )%   (0.5 )%   (0.5 )%   1.5 %   1.5 %
                             
Total International   2.5 %   %   0.5 %   0.5 %   0.5 %   (0.5 )%   2.5 %
                             
North America(1)   8.5 %   3.5 %   8.0 %   3.5 %   8.0 %   %   0.5 %
                             
Total CP Products   4.0 %   0.5 %   2.0 %   1.0 %   2.0 %   (0.5 )%   2.5 %
                             
Hill’s   4.5 %   1.5 %   1.0 %   1.0 %   1.0 %   0.5 %   3.0 %
                             
                             
Emerging Markets(2)   0.5 %   %   (0.5 )%   (0.5 )%   (0.5 )%   0.5 %   0.5 %
                             
Developed Markets   7.5 %   2.0 %   4.5 %   2.5 %   4.5 %   (0.5 )%   3.5 %
                                           
Notes:
(1) The impact of the previously disclosed professional skin care acquisitions on as reported volume was 1.0% for Total Company and 4.5% 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 June 30, 2018 and 2017
 
(Dollars in Millions Except Per Share Amounts) (Unaudited)
 
Gross Profit                   2018  

2017

   
Gross profit, GAAP               $ 2,301     $ 2,300      
Global Growth and Efficiency Program               5     21      
Gross profit, non-GAAP               $ 2,306     $ 2,321      
                             
                            Basis Point
Gross Profit Margin               2018   2017   Change
Gross profit margin, GAAP               59.2 %   60.1 %     (90 )
Global Growth and Efficiency Program               0.1 %   0.6 %      
Gross profit margin, non-GAAP               59.3 %   60.7 %     (140 )
                     
                     
Selling, General and Administrative Expenses           2018  

2017(1)

   
Selling, general and administrative expenses, GAAP         $ 1,300     $ 1,309      
Global Growth and Efficiency Program               (10 )   (17 )      
Selling, general and administrative expenses, non-GAAP         $ 1,290     $ 1,292      
                             
                            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       33.5 %   34.2 %     (70 )
Global Growth and Efficiency Program               (0.3 )%   (0.4 )%      
Selling, general and administrative expenses as a percentage of Net sales, non-GAAP   33.2 %   33.8 %     (60 )
                         
                         
Other (Income) Expense, Net               2018  

2017(1)

   
Other (income) expense, net, GAAP         $ 55     $ 113      
Global Growth and Efficiency Program         (43 )   (103 )      
Other (income) expense, net, non-GAAP         $ 12     $ 10      
                             
                             
Operating Profit                   2018  

2017(1)

  % Change
Operating profit, GAAP         $ 946     $ 878     8 %
Global Growth and Efficiency Program         58     141      
Operating profit, non-GAAP         $ 1,004     $ 1,019     (1 )%
                             
                            Basis Point
Operating Profit Margin               2018  

2017(1)

  Change
Operating profit margin, GAAP               24.3 %   22.9 %     140  
Global Growth and Efficiency Program               1.5 %   3.7 %      
Operating profit margin, non-GAAP               25.8 %   26.6 %     (80 )
 
 
Non-Service Related Postretirement Costs       2018  

2017(1)

   
Non-service related postretirement costs, GAAP       $ 23     $ 25      
Global Growth and Efficiency Program     (3 )   (1 )      
Non-service related postretirement costs, non-GAAP       $ 20     $ 24      
                         

 

 
Table 8
Continued
Colgate-Palmolive Company
 
Non-GAAP Reconciliations
 
For the Three Months Ended June 30, 2018 and 2017
 
(Dollars in Millions Except Per Share Amounts) (Unaudited)
 
    2018
   

Income
Before
Income
Taxes

 

Provision
For
Income
Taxes(2)

 

Net Income
Including
Noncontrolling
Interests

 

Less: Income
Attributable
To
Noncontrolling
Interests

 

Net Income
Attributable
To
Colgate-
Palmolive
Company

 

Effective
Income
Tax Rate(3)

 

Diluted
Earnings
Per Share

As Reported GAAP   $ 888     $ 213     $ 675     $ 38     $ 637     24.0 %   $ 0.73  
Global Growth and Efficiency Program   61     13     48     (3 )   51     (0.2 )%   0.06  
Benefit from a foreign tax matter       15     (15 )       (15 )   1.6 %   (0.02 )
Non-GAAP   $ 949     $ 241     $ 708     $ 35     $ 673     25.4 %   $ 0.77  
                             
                             
    2017
   

Income Before
Income Taxes

 

Provision For
Income Taxes(2)

 

Net Income
Including
Noncontrolling
Interests

 

Net Income
Attributable
To
Colgate-
Palmolive
Company

 

Effective
Income
Tax Rate(3)

 

Diluted
Earnings
Per Share

As Reported GAAP   $ 829     $ 269     $ 560     $ 524     32.4 %   $ 0.59  
Global Growth and Efficiency Program   142     27     115     115     (1.9 )%   0.13  
Non-GAAP   $ 971     $ 296     $ 675     $ 639     30.5 %   $ 0.72  
                                               
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 Six Months Ended June 30, 2018 and 2017
 
(Dollars in Millions Except Per Share Amounts) (Unaudited)
 
Gross Profit                   2018   2017    
Gross profit, GAAP               $ 4,709     $ 4,569      
Global Growth and Efficiency Program               11     35      
Gross profit, non-GAAP               $ 4,720     $ 4,604      
                             
                            Basis Point
Gross Profit Margin               2018   2017   Change
Gross profit margin, GAAP               59.7 %   60.2 %     (50 )
Global Growth and Efficiency Program               0.1 %   0.5 %      
Gross profit margin, non-GAAP               59.8 %   60.7 %     (90 )
                     
                     
Selling, General and Administrative Expenses           2018  

2017(1)

   
Selling, general and administrative expenses, GAAP       $ 2,692     $ 2,645      
Global Growth and Efficiency Program           (15 )   (38 )      
Selling, general and administrative expenses, non-GAAP       $ 2,677     $ 2,607      
                             
                            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       34.1 %   34.9 %     (80 )
Global Growth and Efficiency Program           (0.2 )%   (0.5 )%      
Selling, general and administrative expenses as a percentage of Net sales, non-GAAP   33.9 %   34.4 %     (50 )
                         
                         
Other (Income) Expense, Net               2018  

2017(1)

   
Other (income) expense, net, GAAP           $ 88     $ 134      
Global Growth and Efficiency Program           (56 )   (113 )      
Other (income) expense, net, non-GAAP           $ 32     $ 21      
                         
                         
Operating Profit               2018  

2017(1)

  % Change
Operating profit, GAAP           $ 1,929     $ 1,790     8 %
Global Growth and Efficiency Program           82     186      
Operating profit, non-GAAP           $ 2,011     $ 1,976     2 %
                             
                            Basis Point
Operating Profit Margin               2018  

2017(1)

  Change
Operating profit margin, GAAP           24.5 %   23.6 %     90  
Global Growth and Efficiency Program           1.0 %   2.4 %      
Operating profit margin, non-GAAP           25.5 %   26.0 %     (50 )
 
                             
Non-Service Related Postretirement Costs       2018  

2017(1)

   
Non-service related postretirement costs, GAAP       $ 47     $ 52      
Global Growth and Efficiency Program     (7 )   (2 )      
Non-service related postretirement costs, non-GAAP       $ 40     $ 50      
                         

 

 
Table 9
Continued
Colgate-Palmolive Company
 
Non-GAAP Reconciliations
 
For the Six Months Ended June 30, 2018 and 2017
 
(Dollars in Millions Except Per Share Amounts) (Unaudited)
 
    2018
   

Income
Before
Income
Taxes

 

Provision
For
Income
Taxes(2)

 

Net Income
Including
Noncontrolling
Interests

 

Less: Income
Attributable
To
Noncontrolling
Interests

 

Net Income
Attributable
To
Colgate-
Palmolive
Company

 

Effective
Income
Tax Rate(3)

 

Diluted
Earnings
Per Share

As Reported GAAP   $ 1,812     $ 459     $ 1,353     $ 82     $ 1,271     25.3 %   $ 1.45  
Global Growth and Efficiency Program   89     21     68     (3 )   71     (0.1 )%   0.08  
Benefit from a foreign tax matter       15     (15 )       (15 )   0.8 %   (0.02 )
Non-GAAP   $ 1,901     $ 495     $ 1,406     $ 79     $ 1,327     26.0 %   $ 1.51  
                             
                             
    2017
   

Income Before
Income Taxes

 

Provision For
Income Taxes(2)

 

Net Income
Including
Noncontrolling
Interests

 

Net Income
Attributable
To
Colgate-
Palmolive
Company

 

Effective
Income
Tax Rate(3)

 

Diluted
Earnings
Per Share

As Reported GAAP   $ 1,691     $ 520     $ 1,171     $ 1,094     30.8 %   $ 1.23  
Global Growth and Efficiency Program   188     42     146     146     (0.9 )%   0.16  
Non-GAAP   $ 1,879     $ 562     $ 1,317     $ 1,240     29.9 %   $ 1.39  
                                               
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.

 

Source: Colgate-Palmolive Company

Colgate-Palmolive Company
John Faucher 212-310-3653
Hope Spiller 212-310-2291