FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998.
0R
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
--------------------- ---------------------
COMMISSION FILE NUMBER 1-644
-----
COLGATE-PALMOLIVE COMPANY
-------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 13-1815595
- ----------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
300 PARK AVENUE, NEW YORK, NEW YORK 10022
--------------------------------------- --------------------
(Address of principal executive offices) (Zip Code)
(212) 310-2000
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
NO CHANGES
- --------------------------------------------------------------------------------
(Former name, former address, and former fiscal year, if changed since last
report).
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ________
-------
Indicate the number of shares outstanding of each of the issuers classes of
common stock, as of the latest practical date:
Class Shares Outstanding Date
- ----------------------- ------------------ ----
Common, $1.00 par value 292,808,029 October 31, 1998
Total number of sequentially numbered pages in this filing, including exhibits
thereto:
PART I. FINANCIAL INFORMATION
- ------- ---------------------
COLGATE-PALMOLIVE COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
-------------------------------------------
(Dollars in Millions Except Per Share Amounts)
(Unaudited)
- --------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- -----------------
1998 1997 1998 1997
---------- ---------- --------- ----------
Net sales $2,265.4 $2,297.2 $6,681.4 $6,745.2
Cost of sales 1,072.8 1,130.5 3,192.7 3,329.8
-------- -------- -------- --------
Gross profit 1,192.6 1,166.7 3,488.7 3,415.4
Selling, general and administrative
expenses 825.1 832.6 2,430.9 2,461.3
Interest expense 52.5 59.9 153.8 176.2
Interest income (5.8) (13.3) (19.8) (36.9)
-------- -------- -------- --------
Income before income taxes 320.8 287.5 923.8 814.8
Provision for income taxes 105.9 98.9 309.4 280.8
-------- -------- -------- --------
Net income $ 214.9 $ 188.6 $ 614.4 $ 534.0
======== ======== ======== ========
Earnings per common share:
Basic $ .71 $ .62 $ 2.03 $ 1.76
======== ======== ======== ========
Diluted $ .66 $ .58 $ 1.88 $ 1.64
======== ======== ======== ========
Dividends declared per common share $ .28 $ .28 $ .83 $ .79
======== ======== ======== ========
See Notes to Condensed Consolidated Financial Statements.
2
COLGATE-PALMOLIVE COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(Dollars in Millions)
(Unaudited)
- --------------------------------------------------------------------------------
ASSETS
------
September 30, December 31,
1998 1997
-------------- ---------------
Current Assets:
Cash and cash equivalents $ 210.0 $ 183.1
Marketable securities 16.1 22.2
Receivables (net of allowances of
$39.4 and $35.8) 1,107.0 1,037.4
Inventories 775.3 728.4
Other current assets 224.8 225.4
-------- --------
2,333.2 2,196.5
Property, plant and equipment, at cost: 4,017.0 3,798.4
Less: Accumulated depreciation 1,518.5 1,357.4
-------- --------
2,498.5 2,441.0
Goodwill and other intangible assets
(net of accumulated amortization
of $536.2 and $475.0) 2,536.4 2,585.3
Other assets 331.2 315.9
-------- --------
$7,699.3 $7,538.7
======== ========
See Notes to Condensed Consolidated Financial Statements.
3
COLGATE-PALMOLIVE COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(Dollars in Millions)
(Unaudited)
- --------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
September 30, December 31,
1998 1997
--------------- ---------------
Current Liabilities:
Notes and loans payable $ 176.4 $ 158.4
Current portion of long-term debt 244.6 178.3
Accounts payable 738.4 716.9
Accrued income taxes 165.0 67.0
Other accruals 872.9 838.9
--------- ---------
2,197.3 1,959.5
Long-term debt 2,361.5 2,340.3
Deferred income taxes 282.7 284.5
Other liabilities 781.2 775.8
Shareholders' equity:
Preferred stock 377.3 385.3
Common stock 366.4 366.4
Additional paid-in capital 1,097.1 1,027.4
Retained earnings 3,495.9 3,138.0
Cumulative foreign currency
translation adjustments (704.1) (693.7)
--------- ---------
4,632.6 4,223.4
Unearned compensation (356.2) (364.5)
Treasury stock, at cost (2,199.8) (1,680.3)
--------- ---------
2,076.6 2,178.6
--------- ---------
$ 7,699.3 $ 7,538.7
========= =========
See Notes to Condensed Consolidated Financial Statements.
4
COLGATE-PALMOLIVE COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
-------------------------------------------------------
AND
---
CUMULATIVE TRANSLATION ADJUSTMENT
---------------------------------
(Dollars in Millions)
(Unaudited)
- --------------------------------------------------------------------------------
Three Months Ended Three Months Ended
September 30, 1998 September 30, 1997
------------------------------------ ------------------------------------
Cumulative Cumulative
Retained Translation Retained Translation
Earnings Adjustment Total Earnings Adjustment Total
---------- ------------ ---------- ---------- ------------ ----------
Beginning balance, July 1 $3,362.9 $(712.2) $2,650.7 $2,915.9 $(555.1) $2,360.8
Net income 214.9 214.9 188.6 188.6
Effect of balance sheet
translation 8.1 8.1 (63.1) (63.1)
-------- --------
Total comprehensive income 223.0 125.5
Dividends (81.9) (81.9) (81.8) (81.8)
-------- ------- -------- -------- ------- --------
Ending balance, September 30 $3,495.9 $(704.1) $2,791.8 $3,022.7 $(618.2) $2,404.5
======== ======= ======== ======== ======= ========
Nine Months Ended Nine Months Ended
September 30, 1998 September 30, 1997
------------------------------------ ------------------------------------
Cumulative Cumulative
Retained Translation Retained Translation
Earnings Adjustment Total Earnings Adjustment Total
---------- ------------ ---------- ---------- ------------ ----------
Beginning balance, January 1 $3,138.0 $(693.7) $2,444.3 $2,731.0 $(534.7) $2,196.3
Net income 614.4 614.4 534.0 534.0
Effect of balance sheet
translation (10.4) (10.4) (83.5) (83.5)
-------- --------
Total comprehensive income 604.0 450.5
Dividends (256.5) (256.5) (242.3) (242.3)
-------- ------- -------- -------- ------- --------
Ending balance, September 30 $3,495.9 $(704.1) $2,791.8 $3,022.7 $(618.2) $2,404.5
======== ======= ======== ======== ======= ========
See Notes to Condensed Consolidated Financial Statements.
5
COLGATE-PALMOLIVE COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(Dollars in Millions)
(Unaudited)
- --------------------------------------------------------------------------------
Nine Months Ended
-----------------
September 30,
1998 ------------- 1997
----------- -----------
OPERATING ACTIVITIES:
- ---------------------
Net cash provided by operating activities $ 835.5 $ 760.7
INVESTING ACTIVITIES:
- ---------------------
Capital expenditures (237.9) (320.3)
Payments for acquisitions, net of cash
acquired (.7) (31.0)
Sale of non-core product lines 58.9 61.1
Proceeds from sale of marketable
securities, net 5.4 26.0
Other, net (13.8) 3.9
------- -------
Net cash used for investing activities (188.1) (260.3)
FINANCING ACTIVITIES:
- ---------------------
Principal payments on debt (372.1) (300.7)
Proceeds from issuance of debt, net 452.4 117.3
Purchase of common stock (423.2) (108.3)
Dividends paid (256.5) (242.3)
Other, net (22.8) 16.0
------- -------
Net cash used for financing activities (622.2) (518.0)
Effect of exchange rate changes on
cash and cash equivalents 1.7 (3.2)
------- -------
Net increase/(decrease)in cash and cash
equivalents 26.9 (20.8)
Cash and cash equivalents at beginning of
period 183.1 248.2
------- -------
Cash and cash equivalents at end of
period $ 210.0 $ 227.4
======= =======
See Notes to Condensed Consolidated Financial Statements.
6
COLGATE-PALMOLIVE COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(Dollars in Millions Except Per Share Amounts)
(Unaudited)
- --------------------------------------------------------------------------------
1. The condensed consolidated financial statements reflect all normal recurring
adjustments which, in management's opinion, are necessary for a fair
presentation of the results for interim periods. Results of operations for
the interim periods may not be representative of results to be expected for a
full year.
2. Provision for certain expenses, including income taxes, media advertising,
consumer promotion and new product introductory costs, are based on full
year assumptions. Such expenses are charged to operations in the year
incurred and are included in the accompanying condensed consolidated
financial statements in proportion with the passage of time or with
estimated annual tax rates or annual sales.
3. Inventories by major classes were as follows:
September 30, December 31,
1998 1997
--------------------- --------------------
Raw material and supplies $279.3 $261.0
Work-in-process 33.6 33.5
Finished goods 462.4 433.9
------ ------
$775.3 $728.4
====== ======
4. Earnings Per Share:
Three Months Ended
------------------
September 30, 1998 September 30, 1997
------------------ ------------------
Per Per
Income Shares Share Income Shares Share
------ ------ ------ ------ ------ -----
Net income $214.9 $188.6
Preferred dividends (5.2) (5.2)
------ ------
Basic EPS 209.7 295.3 $ .71 183.4 295.9 $ .62
====== ======
Stock options 6.4 7.2
ESOP conversion 4.6 22.5 4.6 23.0
------ ----- ------ -----
DILUTED EPS $214.3 324.2 $ .66 $188.0 326.1 $ .58
====== ===== ====== ====== ===== ======
7
COLGATE-PALMOLIVE COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(Dollars in Millions Except Per Share Amounts)
(Unaudited)
- --------------------------------------------------------------------------------
Nine Months Ended
-----------------
September 30, 1998 September 30, 1997
------------------ ------------------
Per Per
Income Shares Share Income Shares Share
------ ------ ----- ------ ------ -----
Net income $614.4 $534.0
Preferred dividends (15.7) (15.7)
------ ------
Basic EPS 598.7 295.7 $2.03 518.3 295.3 $1.76
===== =====
Stock options 6.9 6.8
ESOP conversion 13.8 22.4 13.8 23.0
------ ----- ------ -----
DILUTED EPS $612.5 325.0 $1.88 $532.1 325.1 $1.64
====== ===== ===== ====== ===== =====
5. In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities." The statement establishes accounting and
reporting standards requiring that every derivative instrument be recorded in
the balance sheet as either an asset or liability measured at its fair value.
The statement requires that changes in the derivative's fair value be
recognized currently in earnings unless specific hedge accounting criteria
are met. Statement 133 is effective, prospectively, for fiscal years
beginning after June 15, 1999. The Company is currently evaluating the effect
of adopting Statement 133 on the Company's financial statements.
6. On September 8, 1998, one of the Company's Brazilian subsidiaries, Kolynos do
Brasil Ltda. ("Kolynos"), received notice of an administrative proceeding
from the Central Bank of Brazil. The notice primarily takes issue with
certain filings made with the Central Bank in connection with financing
arrangements related to the acquisition of Kolynos in January 1995. The
Central Bank seeks to impose fines prescribed by statute, and it, in no way,
challenges or seeks to unwind the acquisition.
Management believes, based on the opinion of its Brazilian legal counsel,
that the filings challenged by the Central Bank fully complied with Brazilian
law and that the issues raised in the notice are without merit. While the
outcome of this proceeding is not currently predictable, management does not
believe that it will result in a material adverse effect on the Company's
financial condition or ongoing cash flows and results of operations.
7. Reference is made to the Company's Annual Report on Form 10-K filed with the
Securities and Exchange Commission for the year 1997 for a complete set of
financial notes including the Company's significant accounting policies.
8
COLGATE-PALMOLIVE COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
(Dollars in Millions Except Per Share Amounts)
- --------------------------------------------------------------------------------
RESULTS OF OPERATIONS
- ---------------------
Worldwide sales reached $2,265.4 in the third quarter of 1998, a 1% decrease
from the 1997 third quarter, reflecting a decline in foreign currencies offset
by unit volume gains of 3%. Excluding the negative effect of foreign exchange,
sales would have increased 6%.
Sales in the Oral, Personal and Household Care segment were $2,019.6 down 2%
from 1997 on volume growth of 2%.
Colgate-Latin America sales remained flat at $595.6 as volume increases of 7%
were offset by foreign currency negatives. Mexico, Brazil, Colombia, and
Central America led the region with strong volume gains. The continued
marketing success of Colgate Double Cool Stripe toothpaste, Colgate Sensation
whitening toothpaste, Caprice Naturals and Palmolive Botanicals hair care
products and consumption-building programs all contributed to volume growth.
Colgate-North America sales reached $530.8 in the third quarter of 1998. Sales
and volume, excluding divested businesses, grew 6%. Contributing to strong
growth are the continued marketing success of Colgate Total toothpaste, Softsoap
antibacterial hand gel, Speed Stick Ultimate odor-fighting antiperspirant, and
Lady Speed Stick gel.
Colgate-Europe third quarter sales were level at $520.6. Unit volume declined
1% reflecting economic contraction in Russia. United Kingdom, Italy, Portugal,
Holland and the Nordic group were among the countries delivering strong volume.
Excluding Russia's volume decline, volume in Europe would have been up
approximately 1%.
Colgate-Asia/Africa third quarter sales decreased 13% to $372.6, reflecting
devalued local currencies and widespread economic contraction in this region.
Overall unit volume, excluding divested business, decreased 2%, partially offset
by healthy volume growth in China, Taiwan, Philippines, Vietnam and Australia.
Hill's Pet Nutrition segment sales increased 6% to $245.8 on unit volume gains
of 7%. Hill's-International benefited from new products, increased advertising
in Japan and expanded selling activities in key European markets and the South
Pacific. Hill's has experienced new product momentum particularly with Science
Diet Savory Recipes, Feline Savory Cuts and new Prescription Diet Canine n/d
formulas through increased consumer awareness.
Sales in the Oral, Personal and Household Care segment for the nine months ended
September 30, 1998 were $5,961.5, down 1% from the comparable period in 1997 on
volume growth of 3%. Within this segment, Colgate-Latin America sales increased
3% on volume growth of 8%, Colgate-North America sales excluding divested
businesses increased 7% on volume growth of 6%. Colgate-Europe sales decreased
1% on volume growth of 2% and Colgate-Asia/Africa sales declined 14% as unit
volume decreased 2%.
9
COLGATE-PALMOLIVE COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
(Dollars in Millions Except Per Share Amounts)
- --------------------------------------------------------------------------------
Worldwide gross profit margin for the third quarter of 1998 increased to 52.6%
from 50.8% as the Company continued to benefit from product mix, streamlining
manufacturing costs, global sourcing and other cost reduction programs. Gross
profit margin for the first nine months increased to 52.2% from 50.6%.
Selling, general and administrative (SG&A) expenses were generally level with
prior periods as a percentage of sales, increasing to 36.4% in the third quarter
of 1998 from 36.2% in 1997, and decreasing to 36.4% in the first nine months of
1998 from 36.5% for the comparable period in 1997.
During the quarter the Company recorded a one-time charge, primarily covering a
writedown of assets in Russia, which was offset by a one-time gain of $26
million on the sale of the U.S. HandiWipes brand.
Earnings before interest and taxes (EBIT) increased 10% to $367.5 in the 1998
third quarter, and reached a level of 16.2% of sales versus 14.5% in the third
quarter of 1997. For the first nine months of 1998 EBIT increased 11% to
$1,057.8, a level of 15.8% of sales as compared to 14.1% in 1997.
Interest expense, net of interest income, remained level at $46.7 in the 1998
third quarter as compared with $46.6 in 1997. For the first nine months of 1998,
interest expense decreased to $134.0 compared with $139.3 in 1997 primarily as a
result of strong operating cash flows which helped to lower debt levels.
The effective tax rate for the third quarter of 1998 was 33% versus 34.4% for
the third quarter of 1997. The effective rate for the first nine months of 1998
was 33.5% versus 34.5% for the same period in 1997. The rate in 1998 reflects
continued benefits from the Company's tax planning strategies.
Net income for the third quarter of 1998 increased 14% to $214.9 or $.71 per
share compared with $188.6 or $.62 per share in the prior year. For the first
nine months of 1998, net income increased 15% to $614.4 or $2.03 per share
compared with $534.0 or $1.76 per share in the prior year.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Net cash provided by operations increased 10% to $835.5 in the first nine months
of 1998 compared with $760.7 in the comparable period of 1997. The improvement
was generated by the increase in operating profit and working capital
management. At September 30, 1998, commercial paper outstanding was $793.9,
which was classified as long-term debt due to the Company's intent and ability
to refinance these obligations on a long-term basis. The ratio of net debt to
total capitalization (defined as the ratio of the book values of debt less cash
and marketable securities ["net debt"] to net debt plus equity) increased to 55%
as compared to December 31, 1997, at 53%.
Reference should be made to the 1997 Annual Report on Form 10-K for additional
information regarding liquidity and capital resources.
10
COLGATE-PALMOLIVE COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
(Dollars in Millions Except Per Share Amounts)
- --------------------------------------------------------------------------------
YEAR 2000 UPDATE
- ----------------
The Company has developed plans to address the possible exposures related to the
year 2000 on the Company's internal systems and equipment. In the critical area
of internal operating systems, in 1994 the Company decided to convert its
worldwide business systems to SAP which is year 2000 compliant. The Company's
conversion to SAP is progressing on schedule, with conversion in operations
representing 70% of the Company's global business to be complete by the first
quarter of 1999. When completed, the Company's investment in SAP systems will
cumulatively total approximately $430 million, half of which will be capitalized
and the remainder expensed as incurred. The computer systems and embedded
microprocessors and control systems in all operations are planned to be made
compliant by June 30, 1999.
The Company is also in discussions with suppliers and customers to assess the
potential impact on operations in the event their systems are not made
compliant.
The first two phases of the year 2000 project plan -- forming teams at the
corporate, division and subsidiary levels worldwide, and the inventory of
systems and equipment -- were complete at July 31, 1998. The third phase, risk
assessment and contingency planning, is substantially complete with respect to
all internal computing systems and embedded chips and is underway with respect
to critical external business partners.
The fourth phase, planned to be substantially completed by the end of the first
quarter 1999, will be to accomplish systems testing, remediation, and
contingency plans regarding critical systems, equipment and business partners
with a high risk assessment. Contingency planning for suppliers will include
backup procedures, alternative suppliers and possibly increases in inventory
levels. All remaining testing and plan implementation is scheduled to be
substantially completed by mid-year 1999 in the fifth phase of the project.
Progress against project plan timelines is monitored through a system of
internal reporting and is presented to senior management and the Audit Committee
of the Board of Directors or the full Board on a frequent basis.
The Company currently estimates that the total incremental cost, including
external contractor costs, costs to modify existing systems and costs of
internal resources dedicated to preparing for the year 2000 to be approximately
$30 million, of which 30% has been spent to date. These costs are charged to
expense as incurred and are incremental to the above noted investment in SAP
systems which were previously planned and in the process of being implemented.
The Company is taking steps to prevent major interruptions in the business
related to year 2000 issues. The effect, if any, if the Company, its suppliers
or the public sector are not fully year 2000 compliant is not reasonably
estimable. The Company believes, however, that the successful completion of its
year 2000 project will significantly reduce the risk of a major business
interruption due to year 2000 failures.
11
COLGATE-PALMOLIVE COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
(Dollars in Millions Except Per Share Amounts)
- --------------------------------------------------------------------------------
YEAR 2000 UPDATE (CONTINUED)
- ----------------------------
Readers are cautioned that forward-looking statements made in the Year 2000
Update are based on management's estimates, assumptions and projections. Some
of the factors that could cause actual results to differ materially from
expectations expressed in the Company's forward-looking statements are described
in the Company's Form 8-K filed with the Securities and Exchange Commission on
November 13, 1998 under the caption "Cautionary Statement on Forward-Looking
Statements". These factors include, but are not limited to, the risks associated
with international operations, the activities of competitors, retail trade
practices, the success of new product introductions, cost pressures and
manufacturing and environmental matters.
12
PART II. OTHER INFORMATION
- -------- -----------------
Item 1. Legal Proceedings
- ------- -----------------
On September 8, 1998, one of the Company's Brazilian subsidiaries,
Kolynos do Brasil Ltda. ("Kolynos"), received notice of an
administrative proceeding from the Central Bank of Brazil, citing
Articles 1,3,9,23 and 58 of Law No. 4131 dated September 3, 1962 and
related circular letters, which address foreign capital registration and
foreign exchange transactions. The notice primarily takes issue with
certain filings made with the Central Bank in connection with financing
arrangements related to the acquisition of Kolynos in January 1995,
which is described in the Company's Form 8-K dated January 10, 1995. The
Central Bank's sole remedy is to seek to impose fines prescribed in the
above-referenced statutes, and it, in no way, challenges or seeks to
unwind the acquisition.
Management believes, based on the opinion of its Brazilian legal
counsel, that the filings challenged by the Central Bank fully complied
with Brazilian law and that the issues raised in the notice are without
merit. The Company intends to defend its position and cooperate with the
Brazilian banking authorities to seek a satisfactory resolution of this
matter.
For information regarding other legal matters refer to Note 17 to the
consolidated financial statements on page 35 of the registrant's Annual
Report on Form 10-K for the year ended December 31, 1997.
Item 6. Exhibits and Reports on Form 8-K
- ------- --------------------------------
(a) Exhibits:
Exhibit 12 Ratio of Earnings to Fixed Charges.
Exhibit 27 Financial Data Schedule.
(b) Reports on Form 8-K.
None.
The exhibits indicated above which are not included with the Form 10-Q are
available upon request and payment of a reasonable fee approximating the
registrant's cost of providing and mailing the exhibits. Inquiries should be
directed to:
Colgate-Palmolive Company
Office of the Secretary (10-Q Exhibits)
300 Park Avenue
New York, NY 10022-7499
13
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COLGATE-PALMOLIVE COMPANY
-------------------------
(Registrant)
Principal Financial Officer:
November 13, 1998 /s/ Stephen C. Patrick
-------------------------
Stephen C. Patrick
Chief Financial Officer
Principal Accounting Officer:
November 13, 1998 /s/ Dennis J. Hickey
------------------------
Dennis J. Hickey
Vice President and
Corporate Controller
14
EXHIBIT 12
----------
COLGATE-PALMOLIVE COMPANY
-------------------------
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
-------------------------------------------------
DOLLARS IN MILLIONS (Unaudited)
NINE MONTHS ENDED
SEPTEMBER 30, 1998
------------------
Income before income taxes $ 923.8
ADD:
Interest on indebtedness and amortization of debt
expense and discount or premium 153.9
Portion of rents representative of interest
factor 23.6
Interest on ESOP debt, net of dividends 2.4
LESS:
Income of less than fifty-percent-owned
subsidiaries (3.8)
--------
Income as adjusted $1,099.9
========
FIXED CHARGES:
Interest on indebtedness and amortization of debt
expense and discount or premium 153.9
Portion of rents representative of interest
factor 23.6
Interest on ESOP debt, net of dividends 2.4
Capitalized interest 7.4
--------
Total fixed charges $ 187.3
========
Ratio of earnings to fixed charges 5.9
========
In June 1989, the Company's leveraged employee stock ownership plan ("ESOP")
issued $410.0 of long-term notes due through 2009 bearing an average interest
rate of 8.6%. These notes are guaranteed by the Company. Interest incurred on
the ESOP's notes for the nine months ended was $24.6. This interest is funded
through preferred and common stock dividends. The fixed charges presented above
include interest on ESOP indebtedness to the extent it is not funded through
preferred and common stock dividends.
5
1,000,000
9-MOS
DEC-31-1998
JAN-01-1998
SEP-30-1998
210
16
1,146
39
775
2,333
4,017
1,519
7,699
2,197
2,362
0
377
366
1,333
7,699
6,681
6,681
3,193
2,431
0
0
134
924
309
0
0
0
0
614
2.03
1.88
