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, 1996.
0R
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to .
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COMMISSION FILE NUMBER 1-644
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COLGATE-PALMOLIVE COMPANY
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(Exact name of registrant as specified in its charter)
DELAWARE 13-1815595
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
300 PARK AVENUE, NEW YORK, NEW YORK 10022
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(Address of principal executive offices) (Zip Code)
(212) 310-2000
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(Registrant's telephone number, including area code)
NO CHANGES
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(Former name, former address, and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date:
Class Shares Outstanding Date
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Common, $1.00 par value 146,888,896 September 30, 1996
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)
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THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
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1996 1995 1996 1995
---- ---- ---- ----
Net sales $2,230.6 $2,134.4 $6,451.6 $6,205.4
Cost of sales 1,135.8 1,109.7 3,292.5 3,230.8
-------- -------- -------- --------
Gross profit 1,094.8 1,024.7 3,159.1 2,974.6
-------- -------- -------- --------
Selling, general and administrative
expenses 799.1 785.8 2,313.4 2,185.5
Provision for restructured operations - 460.5 - 460.5
Interest expense 59.8 61.8 174.5 172.2
Interest income (9.4) (8.5) (23.9) (26.3)
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849.5 1,299.6 2,464.0 2,791.9
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Income(loss)before income taxes 245.3 (274.9) 695.1 182.7
Income tax provision(benefit) 84.4 (24.7) 241.8 133.2
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Net income (loss) $ 160.9 $ (250.2) $ 453.3 $ 49.5
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Earnings(loss)per common share:
Primary $ 1.06 $ (1.76) $ 2.99 $ .23
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-------- -------- -------- --------
Assuming full dilution $ .99 $ (1.76) $ 2.79 $ .23
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-------- -------- -------- --------
Dividends declared per common share: $ .47 $ .47 $ 1.41 $ 1.29
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-------- -------- -------- --------
See Notes to Condensed Consolidated Financial Statements.
2
COLGATE-PALMOLIVE COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN MILLIONS)
(UNAUDITED)
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ASSETS
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SEPTEMBER 30, DECEMBER 31,
1996 1995
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Current Assets:
Cash and cash equivalents $ 222.7 $ 208.8
Marketable securities 94.7 47.8
Receivables (less allowance for
doubtful accounts of $32.9 and
$31.9) 1,146.4 1,116.9
Inventories 792.8 774.8
Other current assets 241.0 211.9
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2,497.6 2,360.2
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Property, Plant and Equipment:
Cost 3,773.9 3,599.4
Less: Accumulated depreciation 1,466.9 1,444.2
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2,307.0 2,155.2
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Goodwill and other intangible assets
(less accumulated amortization
of $364.1 and $295.3) 2,733.3 2,741.7
Other assets 383.0 385.2
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$7,920.9 $7,642.3
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-------- --------
See Notes to Condensed Consolidated Financial Statements.
3
COLGATE-PALMOLIVE COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN MILLIONS)
(UNAUDITED)
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LIABILITIES AND SHAREHOLDERS' EQUITY
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SEPTEMBER 30, DECEMBER 31,
1996 1995
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Current Liabilities:
Notes and loans payable $ 285.4 $ 204.4
Current portion of long-term debt 89.9 37.0
Accounts payable 695.3 738.7
Accrued income taxes 112.6 76.7
Other accruals 743.8 696.3
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1,927.0 1,753.1
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Long-term debt 2,901.2 2,992.0
Deferred income taxes 226.8 237.3
Other liabilities 952.9 980.1
Shareholders' Equity:
Preferred Stock 395.1 403.5
Common Stock 183.2 183.2
Additional paid-in capital 1,057.2 1,033.7
Retained earnings 2,628.2 2,392.2
Cumulative foreign currency
translation adjustments (532.5) (513.0)
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3,731.2 3,499.6
Unearned compensation (371.6) (378.0)
Treasury stock, at cost (1,446.6) (1,441.8)
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1,913.0 1,679.8
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$7,920.9 $7,642.3
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-------- --------
See Notes to Condensed Consolidated Financial Statements.
4
COLGATE-PALMOLIVE COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN MILLIONS)
(UNAUDITED)
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NINE MONTHS ENDED
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SEPTEMBER 30,
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1996 1995
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OPERATING ACTIVITIES:
Net cash provided by operating activities $ 580.7 $ 513.8
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INVESTING ACTIVITIES:
Capital expenditures (320.1) (297.5)
Payments for acquisitions, net of cash
acquired (42.9) (1,265.0)
Purchase of marketable securities, net (46.9) (5.8)
Other, net 27.6 (46.2)
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Net cash used for investing activities (382.3) (1,614.5)
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FINANCING ACTIVITIES:
Principal payments on debt (7.4) (8.2)
Proceeds from issuance of debt, net 38.6 1,315.9
Purchase of common stock (17.2) (9.0)
Dividends paid (217.3) (197.8)
Proceeds from outside investors 8.5 32.4
Other, net 13.9 22.9
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Net cash (used for) provided by
financing activities (180.9) 1,156.2
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Effect of exchange rate changes on
cash and cash equivalents (3.6) (1.4)
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Net increase in cash and cash equivalents 13.9 54.1
Cash and cash equivalents at beginning of
period 208.8 169.9
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Cash and cash equivalents at end of period $ 222.7 $ 224.0
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-------- --------
See Notes to Condensed Consolidated Financial Statements.
5
COLGATE-PALMOLIVE COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
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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,
1996 1995
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Raw material and supplies $ 306.2 $ 313.8
Work-in-process 40.0 38.3
Finished goods 446.6 422.7
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$ 792.8 $ 774.8
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4. Primary earnings per share are determined by dividing net income, after
deducting dividends on preferred stock, net of related tax benefits, by the
weighted average number of common shares outstanding. Fully diluted
earnings per common share are calculated assuming the conversion of all
potentially dilutive securities, including convertible preferred stock and
outstanding options. This calculation also assumes reduction of available
income by pro forma ESOP replacement funding, net of income taxes.
5. As described in Note 3 to the Company's consolidated financial statements
included in its Annual Report on Form 10-K, Colgate-Palmolive acquired the
worldwide Kolynos oral care business in January 1995. As previously
announced and as described in Item 5 to this quarterly report, the
antitrust regulatory authorities in Brazil approved the acquisition of the
oral care business subject to certain conditions. The Company is studying
these conditions and is developing proposals to submit to the Brazilian
authorities regarding these conditions.
6
COLGATE-PALMOLIVE COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
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6. As described in Note 4 to the Company's consolidated financial statements
included in its Annual Report on Form 10-K, Colgate-Palmolive recorded a
charge for restructuring its worldwide manufacturing and administrative
operations in September 1995. Reserves relating to this program totaled
approximately $310.5 and $435.6 at September 30, 1996 and December 31,
1995, respectively. Management believes that the costs of the
restructuring program will be financed through cash from operations and
does not anticipate any significant impact on its liquidity as a result of
the restructuring program.
7. Reference is made to the Company's Annual Report on Form 10-K filed with
the Securities and Exchange Commission for the year 1995 for a complete set
of financial notes including the Company's significant accounting policies.
7
COLGATE-PALMOLIVE COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
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RESULTS OF OPERATIONS
Worldwide sales reached $2,230.6 in the third quarter of 1996, a 5% increase
over the 1995 third quarter, reflecting overall volume gains of 6%.
Sales in the Oral, Personal and Household Care segment were $2,009.1 up 4% from
the third quarter of 1995 on volume growth of 5%. Excluding the effect of
foreign exchange, sales would have increased 7%.
Colgate-Asia/Africa sales increased 4% to $439.4 on volume gains of 5%.
Contributing to this region's growth were sales increases in China, Hong Kong,
Taiwan and Zimbabwe. Increased volume in India and South Africa was tempered by
the effect of exchange rates.
Colgate-Europe sales were $561.1, which was level with the third quarter of 1995
due to the strengthening of the U.S. Dollar. Excluding the effect of foreign
exchange, sales increased 3% on volume growth of 4%. Germany, France, Spain,
Poland, and Russia achieved strong volume gains.
Colgate-Latin America sales grew 9% to $520.4 on volume gains of 8%. This growth
was led by healthy sales increases in Argentina, Colombia, Brazil and Mexico,
which is recovering from the currency devaluation and recession in 1995.
Colgate-North America sales grew 4% to $488.2 with volume gains of 5% reflecting
the continued market success of products such as Colgate Baking Soda & Peroxide
toothpaste, Palmolive Antibacterial dishwashing liquid and Mennen Speed Stick
gel deodorant.
Hill's Pet Nutrition sales increased 11% to $221.5 on 6% volume growth from 1995
third quarter results which were slightly depressed due to Hill's completing its
program to bring its distribution system in-house.
Worldwide sales for the first nine months of 1996 increased 4% to $6,451.6 from
$6,205.4 in the same period of 1995, on 5% volume growth.
Oral, Personal and Household Care sales increased 3% to $5,838.4 in the first
nine months of 1996, on volume gains of 5%. Within this segment, Colgate-
Asia/Africa sales increased 5% on volume growth of 7%. Colgate-Europe sales
were flat primarily due to unfavorable currency losses offsetting 2% volume
gains. Colgate-Latin America sales grew 5% on volume gains of 5%. Colgate-North
America sales and volume grew 5%.
Hill's Pet Nutrition sales for the first nine months of 1996 increased 11% as
compared to 1995 on 8% volume growth.
Worldwide gross profit margin for the 1996 third quarter increased to 49.1% from
8
COLGATE-PALMOLIVE COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Dollars in Millions Except Per Share Amounts)
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48.0% reflecting cost reduction, changes in product mix, the initial benefits of
the 1995 restructuring program and improved performance in Mexico. Gross profit
margin for the first nine months increased to 49.0% from 47.9%.
Selling, general and administrative expenses as a percentage of sales decreased
to 35.8% in 1996 from 36.8% in 1995 in the third quarter and increased to 35.9%
from 35.2% in the first nine months due primarily to increased advertising,
quarterly timing of expenses and cost savings.
As described in Note 4 to the Company's consolidated financial statements
included in its Annual Report on Form 10-K, Colgate-Palmolive recorded a charge
for restructuring its worldwide manufacturing and administrative operations in
September 1995. The worldwide restructuring program resulted in a 1995 third
quarter pretax charge of $460.5 ($369.2 net of tax), or $2.54 per share for the
1995 third quarter and $2.55 per share for the nine months.
Earnings before interest and taxes (EBIT) for the 1996 third quarter and nine
month period increased 23.8% and 7.2% to $295.7 and $845.7, respectively,
compared to $238.9 and $789.1 for the same periods in the prior year excluding
the restructuring charge.
Interest expense, net of interest income, decreased to $50.4 in the 1996 third
quarter from $53.3 in 1995 due to slightly lower debt levels. Interest expense,
net increased to $150.6 in the first nine months of 1996 from $145.9 in 1995.
The effective tax rate for the 1996 third quarter and nine month period was
34.4% and 34.8%, compared with 35.9% and 34.9%, respectively for the same
periods in the previous year excluding the restructuring charge.
Net income for the 1996 third quarter of $160.9 was 35% higher than comparable
1995 net income of $119.0 which excludes the one-time restructuring charge.
Earnings per share for the 1996 third quarter increased 36% to $1.06 from $.78
in 1995 excluding the restructuring charge. For the nine months net income and
earnings per share increased 8% to $453.3 and $2.99, respectively, excluding the
1995 restructuring charge.
LIQUIDITY AND CAPITAL RESOURCES
Working capital at September 30, 1996 was $570.6 as compared to $607.1 at
December 31, 1995 and $737.3 at September 30, 1995. Net cash provided by
operations increased to $580.7 in the first nine months of 1996 compared with
$513.8 in the prior year due to higher profits and lower investment in working
capital compared to the prior year. At September 30, 1996 commercial paper
outstanding was $968.2 which is classified as long-term due to the Company's
intent and ability to refinance these obligations on a long-term basis.
Reference should be made to the 1995 Annual Report on Form 10-K for additional
information regarding liquidity and capital resources.
9
COLGATE-PALMOLIVE COMPANY
PART II. OTHER INFORMATION
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ITEM 1. LEGAL PROCEEDINGS
Reference is made to Note 14 to the Company's consolidated financial
statements included in its Annual Report on Form 10-K for the year
ended December 31, 1995 and to Note 5 to the condensed consolidated
financial statements included herein.
ITEM 5. OTHER INFORMATION
As described in Note 3 to the Company's consolidated financial
statements included in its Annual Report on Form 10-K for the year
ended December 31, 1995, the Company acquired the worldwide Kolynos
oral care business in January 1995. The Brazilian portion of the
acquisition has been under review by Brazilian antitrust regulatory
authorities, the Brazilian Administrative Council of Economic Defense
(CADE). On September 18, 1996, the CADE approved the transaction
unconditionally as to the Brazilian toothbrush, dental floss and
mouthwash markets. As to the Brazilian dental cream market, the CADE
approved the transaction subject to the Company accepting one of
several alternative conditions: (a) the suspension of the Kolynos
trademark for toothpaste in Brazil for four years which could include,
among other things, offering the Kolynos trademark to another party as
a double brand, (b) the exclusive license of the Kolynos trademark for
toothpaste in Brazil to a third party for twenty years or more, or (c)
the sale of the Kolynos trademark for toothpaste in Brazil. The CADE
also proposed terms with respect to each condition. The CADE published
its decision in the Brazilian DIARIO OFICIAL on September 27, 1996
setting forth the details of these conditions, establishing the timing
for implementing the conditions and imposing penalties for
non-compliance. The Company is studying these conditions and is
developing proposals to submit to the Brazilian authorities regarding
these conditions. See also Note 5 to the Company's condensed
consolidated financial statements, included herein.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 10.V Colgate-Palmolive Company 1996 Stock Option Plan.
Exhibit 11. Computation of Earnings per Common Share.
Exhibit 12. Ratio of Earnings to Fixed Charges.
Exhibit 27. Financial Data Schedule.
10
COLGATE-PALMOLIVE COMPANY
PART II. OTHER INFORMATION (CONTINUED)
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(b) Reports on Form 8-K:
A report on Form 8-K dated September 19, 1996 was filed by the
Company reporting the press release announcing the approval of
the the Company's acquisition of the Kolynos oral care business
in Brazil subject to certain conditions.
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
11
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
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(Registrant)
October 25, 1996 /s/ Stephen C. Patrick
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Stephen C. Patrick
Chief Financial Officer
12
COLGATE-PALMOLIVE COMPANY
1996 STOCK OPTION PLAN
Section 1. Purpose -- The purpose of the Colgate-Palmolive Company 1996 Stock
Option Plan (the "Plan") is to promote the interests of Colgate-Palmolive
Company (the "Company") and its stockholders by (a) providing incentives for
employees, (b) encouraging stock ownership by employees by providing them with a
means to acquire a proprietary interest in the Company, and (c) aiding in
attracting and retaining employees of the caliber necessary for the continued
growth and profitability of the Company.
Section 2. Administration -- The Plan shall be administered by a Committee (the
"Committee") consisting of not less than three directors of the Company to be
appointed from time to time by the Board of Directors. Each member of the
Committee shall be a "non-employee director" within the meaning of Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended. The
Committee shall administer and interpret the Plan and may establish and amend
rules and regulations therefor. The Committee shall select participants and
determine the amounts, times, forms, terms and conditions of grants. Any
decision made or action taken by the Committee arising out of or in connection
with the interpretation or administration of the Plan shall be final and
conclusive. No member of the Committee shall be liable for any action or
determination made in good faith with respect to the Plan.
Section 3. Grants -- (a) Grants under the Plan may be in the form of options
to purchase shares of the Company's common stock, stock appreciation units and
equity units. Limited rights, as described in section 12, may also be granted.
Options, stock appreciation units, equity units and limited rights are herein
called "stock incentives". Stock incentives may be granted from time to time
under the Plan for up to an aggregate of 1,800,000 shares of common stock of the
Company plus the number of shares. Either authorized but unissued shares or
reacquired shares may be used for grants. The Company may purchase shares
required for this purpose. The number of shares of common stock available under
the Plan shall be reduced by the number of shares subject to options and, if
stock appreciation units and equity units are granted other than in conjunction
with options, the number of stock appreciation units and equity units granted,
and increased by the number of shares subject to options that terminate or are
cancelled other than as a result of the exercise of a stock incentive granted in
conjunction with such options and the number of stock appreciation units and
equity units granted in conjunction with options, that terminate or are
cancelled. In no event will the determination of the number of shares available
be calculated in a manner inconsistent with applicable laws and regulations as
in effect from time to time.
(b) The Committee, in its discretion, may, from time to time, implement, amend
or terminate a stock option replacement feature to the Plan, as provided for
herein (the "Stock Option Replacement Feature"). When implemented, the Stock
Option
Replacement Feature shall provide that if a Participant exercises an option or a
portion thereof by using shares of common stock in payment of the option price
(which shares shall have been owned by the Participant for at least six (6)
months), the Participant shall, without further action by the Committee, be
granted a new option (a "Replacement Option") to purchase shares of common stock
equal to the number of shares of common stock used in payment of the exercise
price and the number of shares withheld for tax in respect of the exercise. The
grant of the Replacement Option shall occur, simultaneous with the exercise of
the option in accordance with the conditions hereof, and shall have an option
price equal to the fair market value of the common stock on the date of grant of
the Replacement Option. Replacement Options may be granted under this Plan upon
exercise of options granted pursuant to the 1987 Stock Option Plan, and the 1977
Stock Option Plan.
A Replacement Option (a) shall not be exercisable until at least six months
after the date of grant, (b) shall have an expiration date no later than the
date on which the original option (with respect to which the Replacement Option
was granted) would have expired by its terms, (c) may not be granted more than
twice each year to the same Participant, and (d) shall comply with all other
provisions of this Plan.
Subject to the foregoing, the Committee shall, in addition to all other powers
granted to the Committee under the Plan, have the power to designate (a) the
date the Replacement Option shall be exercisable (or become vested), (b) the
expiration date of the Replacement Option and (c) any limitations on the
frequency of the grants of Replacement Options to any Participant. In addition,
the Committee may establish, as a condition to the grant of Replacement Options,
a requirement that the recipient agrees not to resell "Excess Shares" (as
hereinafter defined) received in connection with such grant for a period of time
not to exceed two years. As used herein, "Excess Shares" shall mean the number
of shares received upon exercise of the option (with respect to which the
Replacement Option was granted) in excess of the number of shares tendered as
payment for such exercise.
Section 4. Participation -- Employees eligible for stock incentives shall be
selected by the Committee from time to time from among those employees of the
Company and its subsidiaries who are in a position to contribute materially to
the success of the Company.
Section 5. Conditions -- (a) Stock incentives may be evidenced by stock
incentive agreements, which shall be subject to the applicable provisions of the
Plan and contain such other provisions as the Committee shall determine from
time to time. A stock incentive may be exercised at one time or in such
installments over the balance of the exercise period as may be provided in the
stock incentive agreement.
(b) The option price per share shall be not less than the Fair Market Value of
the common stock on the date each option is granted.
(c) The Committee may permit the voluntary surrender of all or a portion of any
stock incentive to be conditioned upon the granting of a new stock incentive.
2
(d) In the event of a Change of Control of the Company, then notwithstanding
any provision of this section or of any provision of any stock incentive
agreements to the contrary, all stock options, stock appreciation units and
equity units which have not terminated and which are then held by any
participant shall, as of such Change of Control, become immediately exercisable
(subject, however, to the restrictions on surrender of stock appreciation units
and equity units for cash as set forth in paragraph (c) of section 9) without
regard to the exercise period specified in any relevant stock incentive
agreement.
Section 6. Exercise of Stock Incentives -- (a) Subject to paragraph (a) of
Section 5, each stock incentive will be exercisable in whole or in part from
time to time, prior to its cancellation or termination, by written notice to the
Company specifying the number of shares or units, as the case may be, with
respect to which it is being exercised. If any option is being exercise, such
notice shall be accompanied by payment in full of the purchase price by cash or
check or in other form acceptable to the Committee, including shares of common
stock of the Company or partly in cash or check and partly in such shares,
except that the Committee may, from time to time, impose limits and conditions
on the use of such shares for payment. The Committee may alternatively permit,
under such terms and conditions as it may establish from time to time, payment
methods for option exercises which will enable a participant (other than a
participant who, at the time of exercise, is subject to Section 16(b) of the
Securities Exchange Act of 1934) to pay the exercise price of an option, and any
applicable withholding taxes, from the proceeds of the sale of shares received
as a result of the exercise of such option. Certificates for shares to be
received upon the exercise of stock incentives will be delivered in regular
course. Fractional shares will not be issued.
(b) Except as provided in paragraph 16(h) hereof, a stock incentive may be
exercised during the life-time of the participant only by the participant and
after his or her death only by the persons to whom the stock incentive has been
transferred by will or by laws of descent and distribution. Stock incentives
are not otherwise transferable. Stock appreciation units granted with respect
to incentive stock options may be exercised only when the Fair Market Value of
the common stock subject to the related option exceeds the exercise price
thereof.
(c) Upon the exercise of one or more stock appreciation units granted in
conjunction with a stock option, such option shall be cancelled with respect to
an equal number of shares and an equal number of equity units granted in
conjunction therewith, if any, shall be cancelled. Upon the exercise of one or
more equity units granted in conjunction with a stock option, such option shall
be cancelled with respect to an equal number of shares and an equal number of
stock appreciation units granted in conjunction therewith, if any, shall be
cancelled. Upon the exercise of a stock option for one or more shares, an equal
number of stock appreciation units and an equal number of equity units granted
in conjunction therewith, if any, shall be cancelled.
3
Section 7. Use of Proceeds -- Proceeds, if any, from the exercise of options
pursuant to the Plan will be used for general corporate purposes.
Section 8. Termination of Stock Incentives -- Each stock incentive will
terminate upon the earlier of (a) or (b) below.
(a) The date fixed by the Committee when the stock incentive is granted as set
forth in the relevant stock incentive agreement.
(b) Termination of employment or, to the extent the stock incentive was then
exercisable, three months after the participant's termination of employment,
except as follows:
(i) If the participant dies while an employee, or within three months after
termination of employment, the stock incentive may be fully exercised (whether
or not the stock incentive was fully exercisable), at any time or from time to
time within three years after the date of death.
(ii) If the participant retires after attaining age 65, or earlier with the
consent of the Company, or if employment is terminated by disability, the stock
incentive may be fully exercised (whether or not the stock incentive was fully
exercisable, unless provided otherwise in the stock incentive agreement) within
three years after the date of such retirement or termination.
(iii) If the Committee determines that the stock incentive may be exercised
(whether or not it was fully exercisable) for a longer period of time.
Notwithstanding anything hereinabove to the contrary, if a participant's
employment is terminated for cause, his or her ability to exercise the stock
incentive shall terminate on the date of termination of employment. For this
purpose, the determination of the Committee as to whether employment was
terminated for cause shall be final.
Section 9. Stock Appreciation Units and Equity Units -- (a) Stock appreciation
units and equity units may be granted on a "free-standing" basis or in
conjunction with all or a portion of the shares covered by an option, either at
the time of grant of the option or at any time thereafter during the term of the
option.
(b) Each stock appreciation unit and each equity unit shall entitle the holder
thereof to elect, prior to its cancellation or termination, to exercise such
stock appreciation unit or equity unit and receive either cash or shares of
common stock or both, as the Committee may determine, in an aggregate amount
equal in Fair Market Value on the date of such election to the following:
(i) In the case of a stock appreciation unit, the excess, if any, of the Fair
Market Value of a share of common stock on the date of such election over the
Fair Market Value of a share of common stock on the date of grant of the stock
appreciation unit.
4
(ii) In the case of an equity unit, the remainder of (A) the sum of the
dividend equivalents credited under paragraph (d) plus the Equity Per Share on
the date of exercise minus (B) the Equity Per Share on the date of grant. The
number of shares which may be issued upon exercise of an equity unit may not
exceed the number of equity units exercised and the balance will be payable in
cash, subject to the terms of the Plan.
(c) Stock appreciation units or equity units may be exercised only as provided
under their terms. In addition, the following provisions shall apply:
(i) No stock appreciation units or equity units may be exercised within six
months from the date of grant thereof, except in the event of death or
disability of the participant prior to the expiration of the six months.
(ii) Stock appreciation units or equity units may be surrendered for cash only
during the period beginning on the third business day following the date of
release of a summary statement of the Company's quarterly or annual sales and
earnings and ending on the twelfth business day following such date of release.
Payment of such cash may be deferred by the participant subject to such terms
and conditions as may be prescribed by the Committee.
(iii) The Committee may disapprove an election to surrender any stock
appreciation unit or equity unit for cash in full or partial settlement thereof.
(iv) In the event the Committee disapproves, in whole or in part, an election
by a participant to surrender any stock appreciation unit or equity unit for
cash, such disapproval shall not effect the participant's right to surrender the
stock appreciation unit or equity unit currently for shares of common stock or
at a later date for shares or cash, or his or her right to exercise the options
currently or at a later date, to the extent otherwise exercisable, provided that
any subsequent surrender for cash shall be similarly subject to the Committee's
approval.
(d) Each equity shall be credited with an amount equal to dividends paid per
share of common stock as of each record date from the date of grant of the
equity unit until the date of exercise. Unless the Committee determines
otherwise, dividend equivalents shall be paid only in accordance with paragraph
(b) (ii) of this section.
Section 10. Incentive Stock Options -- Each option granted under the Plan which
is intended to be an incentive stock option as defined in Section 422A of the
United States Internal Revenue Code shall be so designated. The aggregate fair
market value (determined as of the time such option is granted) of the stock
with respect to which incentive stock options granted after 1986 are exercisable
for the first time by such individual during any calendar year after 1986 under
any option plan of his or her employer corporation and its parent and subsidiary
corporation shall not exceed $100,000.
5
Section 11. Loans -- The Company may make loans to such participants as the
Committee, in its discretion, may determine (including a participant who is a
director or officer of the Company) in connection with the exercise of options
granted under the Plan in an amount up to the exercise price of the option to be
exercised plus any applicable withholding taxes. In no event may any such loan
exceed the Fair Market Value, at the date of exercise, of the shares covered by
the option, or portion thereof, exercised by the participant. Such loans shall
be subject to such terms and conditions as the Committee shall determine. Every
loan shall comply with all applicable laws, regulations and rules of the Federal
Reserve Board and any other governmental agency having jurisdiction.
Section 12. Limited Rights -- (i) A limited right may be awarded by the
Committee in connection with any option granted under the Plan with respect to
all or some of the shares of common stock covered by such related option. A
limited right may be granted either at the time the option is granted or
thereafter at any time prior to the cancellation , exercise, forfeiture,
termination or expiration of the option. A limited right may be exercised only
during the thirty-day period beginning on a Change of Control of the Company.
In addition, each limited right which has not terminated and which is then held
by a participant shall be exercisable whether or not the related option is
exercisable. Notwithstanding the provisions of the two immediately preceding
sentences, no limited right may be exercised by an employee who is subject to
Section 16(b) of the Securities Exchange Act of 1934 until the expiration of six
months from the date of grant of the limited right.
(ii) Upon the exercise of limited rights, the participant shall receive in cash
an amount equal to the product computed by multiplying (a) the excess of (X) the
highest Fair Market Value per share of common stock during the thirty-day period
ending on the date the limited right is exercised over (Y) the option price per
share of common stock at which the related option is exercisable by (b) the
number of shares of common stock with respect to which the limited right is
being exercised. Notwithstanding the foregoing, in the case of a limited right
granted in respect of an incentive stock option, the holder may not receive an
amount in excess of such amount as will enable such option to qualify as an
incentive stock option.
(iii) Upon exercise of a limited right, such related option and any related
stock appreciation unit and equity shall cease to be exercisable to the extent
of the shares of common stock with respect to which such limited right is
exercised. Upon the exercise or termination of a related option, the limited
right with respect to such related option shall terminate to the extent of the
shares of common stock with respect to which the related option was exercised or
terminated.
Section 13. Foreign Stock Incentives -- The Committee may grant options to
employees who are subject to the tax laws of nations other than the United
States, which options may have terms and conditions that differ from other
options granted under the Plan for the purposes of complying with the foreign
tax laws. The Committee may grant stock appreciation units, equity units and
limited rights to employees without the grant
6
of an accompanying option if the employees are subject at the time of grant to
the laws of a jurisdiction that prohibits them from owning common stock. The
units and rights shall permit the employees to receive cash at the time of any
exercise of such units or rights.
Section 14. Adjustments -- In the event of any change in the common stock,
through the declaration of stock dividends, through recapitalization resulting
in stock split-ups or combinations of shares, or as the result of similar
events, appropriate adjustment, to be determined by the Committee, shall be made
in the number of shares subject to the Plan, in the number of shares and price
per share of all shares subject to outstanding stock incentives and in the Fair
Market Value or Equity Per Share on the date from which any increase therein is
measured under stock appreciation units, equity units or limited rights. In the
case of equity units, the Committee may make such adjustment to the computation
of equity per share as the Committee deems equitable, in light of whether or not
the grantee is entitled to the most recent dividend and whether or not the
equity of the applicable balance sheet reflects the debiting of such dividend.
Section 15. Definitions -- (a) A Change of Control shall be deemed to have
taken place upon (i) the acquisition by a third person, including a "group" as
defined in Section 13(d) (3) of the Securities Exchange Act of 1934 of shares of
the Company having 30% or more of the total number of votes that may be cast for
the election of directors of the Company. (ii) shareholder approval of the
acquisition of the Company, or substantially all of its assets, by another
entity or of a merger, reorganization, consolidation or other business
combination to which the Company is a party or (iii) the election during any
period of 24 months or less of 50% or more of the directors of the Company where
such directors were not in office immediately prior to such period.
(b) Fair Market Value shall be the mean between the high and low prices for the
day on the New York Stock Exchange Composite Tape. In the absence of a reported
sale, the mean between the high and low prices on the most recent date on which
a sale was reported may be used.
(c) Equity Per Share as of any date means the common stockholder's equity, as
stated in the most recent publicly available quarterly or annual consolidated
balance sheet of the Company, divided by the number of shares of the Company's
common stock and common stock equivalents outstanding as of the date of such
balance sheet.
Section 16. General Provisions -- (a) No stock incentives may be exercised if
such exercise and the receipt of cash or stock thereunder, would be contrary to
law or the regulations of any duly constituted authority having jurisdiction
over the Plan.
(b) Absence on leave approved by a duly constituted officer of the Company or
any of its subsidiaries shall not be considered interruption or termination of
service of any employee for any purposes of the Plan, except that no award may
be granted to an employee while he or she is absent on leave.
7
(c) No participant shall have any rights as a stockholder with respect to any
shares subject to his or her stock incentives prior to the date as of which he
or she is actually recorded as the holder of the common stock covered by such
stock incentives upon the stock records of the Company.
(d) Nothing in the Plan or any stock incentive granted hereunder shall confer
upon any employee any right to continue in the employ of the Company or any of
its subsidiaries or interfere in any way with the right of the Company or any of
its subsidiaries to terminate his or her employment at any time.
(e) Any agreement may provide that stock issued upon exercise of any stock
incentive may be subject to such restrictions, including, without limitation,
restrictions as to transferability and restrictions constituting substantial
risks of forfeiture, as the Committee may determine at the time such stock
incentive is granted.
(f) The obligation of the Company to issue, transfer or deliver common stock
under the Plan shall be subject to (a) the effectiveness of a registration
statement under the Securities Act of 1933, as amended, with respect to such
issue, transfer or delivery, if deemed necessary or appropriate by counsel for
the Company, (b) the condition that the shares of common stock reserved for
issuance, if any, shall have been listed (or authorized for listing upon
official notice of issuance) upon each stock exchange on which outstanding
shares of the same class may then be listed and (c) all other applicable laws,
regulations, rules and orders which shall then be in effect.
(g) This Plan, insofar as it provides for cash payments, shall be unfunded, and
the Company shall not be required to segregate any assets which may at any time
be awarded under the Plan. Any liability of the Company to any person with
respect to any grant under this Plan shall be based solely upon any contractual
obligations which may be created by this Plan. No such obligation of the
Company shall be deemed to be secured by any pledge of, or other encumbrance on,
any property of the Company.
(h) In the event the Committee determines that a participant is incapacitated
and unable to exercise stock incentives granted under the Plan, the Committee,
in its discretion, may authorize the assignment of the power to exercise such
stock incentives to a fiduciary, legal guardian or other individual whom the
Committee deems appropriate based on the applicable facts and circumstances.
(i) The Company shall deduct from all payments and distributions under the Plan
any taxes required to be withheld by federal, state or local governments. In
case distributions are made in shares of common stock, the Company shall have
the right to retain the value of sufficient shares to equal the amount of the
tax required to be withheld in respect of such distributions. In lieu of
withholding the value of shares, the Committee may require a recipient of a
distribution in common stock to pay the Company for any such taxes required to
be withheld upon such terms and conditions as the Committee may prescribe.
8
(j) Captions preceding the sections hereof are inserted solely as a matter of
convenience and in no way define or limit the scope or intent of any provisions
hereof.
Section 17. Amendment and Termination -- The Board of Directors may alter,
suspend or terminate the Plan. Except as provided in section 14, the Board may
not, however, materially modify the requirements regarding eligibility for
participation in the Plan or, without the consent of the holder thereof, alter
or impair any stock incentive previously granted under the Plan. The Plan will
terminate upon the adoption by the Board of a successor stock option plan. No
stock incentive may be granted after the termination of the Plan, but stock
incentives previously granted may be exercised in accordance with their terms.
9
EXHIBIT 11
PAGE 1 OF 2
COLGATE-PALMOLIVE COMPANY
COMPUTATION OF EARNINGS PER COMMON SHARE
DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS
(UNAUDITED)
- --------------------------------------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------- -------------
PRIMARY 1996 1995 1996 1995
---- ---- ---- ----
EARNINGS:
Net income (loss) $ 160.9 $(250.2) $ 453.3 $ 49.5
Deduct: Dividends on preferred
shares, net of income taxes 5.3 5.4 16.1 16.2
-------- -------- -------- --------
Net income (loss) applicable to
common shares $ 155.6 $(255.6) $ 437.2 $ 33.3
-------- -------- -------- --------
-------- -------- -------- --------
SHARES (IN MILLIONS):
Weighted average common shares
outstanding 146.8 145.5 146.4 145.0
-------- -------- -------- --------
-------- -------- -------- --------
Earnings (loss) per common share,
primary $ 1.06 $ (1.76) $ 2.99 $ .23
-------- -------- -------- --------
-------- -------- -------- --------
EXHIBIT 11
PAGE 2 OF 2
COLGATE-PALMOLIVE COMPANY
COMPUTATION OF EARNINGS PER COMMON SHARE
DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS
(UNAUDITED)
- --------------------------------------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------- -------------
ASSUMING FULL DILUTION 1996 1995 1996 1995
---- ---- ---- ----
EARNINGS:
Net income (loss) $ 160.9 $(250.2) $ 453.3 $ 49.5
Deduct:
Dividends on preferred shares .1 5.4 .4 16.2
Replacement funding resulting from
assumed conversion of Series B
Convertible Preference Stock, net of tax 1.2 - 3.7 -
------- ------- ------- -------
Net income (loss) applicable to common shares $ 159.6 $(255.6) $ 449.2 $ 33.3
------- ------- ------- -------
------- ------- ------- -------
SHARES (IN MILLIONS):
Weighted average number of common shares
outstanding 146.8 145.5 146.4 145.0
Assumed conversion of options
reduced by the number of shares which
could have been purchased with the
proceeds from the exercise of such
options 2.6 - 2.7 2.2
Assumed conversion of Series B
Convertible Preference Stock 11.7 - 11.7 -
------- ------- ------- -------
Weighted average number of common shares
outstanding, as adjusted 161.1 145.5 160.8 147.2
------- ------- ------- -------
------- ------- ------- -------
Earnings (loss) per common share,
assuming full dilution $ .99 $ (1.76) $ 2.79 $ .23
------- ------- ------- -------
------- ------- ------- -------
The calculation of fully diluted earnings per share excludes the effect of anti-
dilutive securities for the third quarter and the nine months of 1995,
respectively.
EXHIBIT 12
COLGATE-PALMOLIVE COMPANY
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
DOLLARS IN MILLIONS (UNAUDITED)
- --------------------------------------------------------------------------------
NINE MONTHS ENDED
SEPTEMBER 30, 1996
------------------
Income before income taxes $ 695.1
ADD:
Interest on indebtedness and amortization of debt
expense and discount or premium
174.5
Portion of rents representative of interest
factor
23.0
Interest on ESOP debt, net of dividends 1.5
LESS:
Income of less than fifty-percent-owned
subsidiaries
(6.3)
---------
Income as adjusted $ 887.8
---------
---------
FIXED CHARGES:
Interest on indebtedness and amortization of
debt expense and discount or premium
$ 174.5
Portion of rents representative of interest
factor 23.0
Interest on ESOP debt, net of dividends 1.5
Capitalized interest 9.6
---------
Total fixed charges $ 208.6
---------
---------
Ratio of earnings to fixed charges 4.3
---------
---------
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 expense on
the ESOP's notes was $25.1. This interest is funded through preferred and
common stock dividends as well as Company contributions. 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-31-1996
JAN-01-1996
SEP-30-1996
223
95
1,179
33
793
2,498
3,774
1,467
7,921
1,927
2,901
0
395
183
1,335
7,921
6,452
6,452
3,293
2,313
0
0
151
695
242
453
0
0
0
453
2.99
2.79
