FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994.
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 1-644-2
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 146,944,328 April 30, 1994
Total number of sequentially numbered pages in this filing, including
exhibits thereto: 14.
PART I. FINANCIAL INFORMATION
COLGATE-PALMOLIVE COMPANY
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Dollars in Millions Except Per Share Amounts)
(Unaudited)
Three Months Ended
March 31,
1994 1993
Net sales $1,770.0 $1,702.7
Cost of sales 907.9 887.9
Gross profit 862.1 814.8
Selling, general and administrative
expenses 611.3 585.3
Interest expense (net of interest income
of $6.4 and $6.0, respectively) 20.6 11.2
631.9 596.5
Income before income taxes 230.2 218.3
Provision for income taxes 80.6 77.5
Income before changes in accounting 149.6 140.8
Cumulative effect on prior years of
accounting changes - (358.2)
Net income (loss) $ 149.6 $ (217.4)
Earnings per common share:
Primary:
Before changes in accounting $ .98 $.85
Cumulative effect on prior
years of accounting changes - (2.24)
Net income (loss) $ .98 $ (1.39)
Assuming full dilution:
Before changes in accounting $ .91 $ .79
Cumulative effect on prior years of
accounting changes - (2.04)
Net income (loss) $ .91 $ (1.25)
Dividends declared per common share*: $ .72 $ .62
* Includes two dividend declarations in both periods.
See Notes to Condensed Consolidated Financial Statements.
COLGATE-PALMOLIVE COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in Millions)
(Unaudited)
ASSETS
March 31, December 31,
1994 1993
Current Assets:
Cash and cash equivalents $ 147.9 $ 144.1
Marketable securities 86.2 67.1
Receivables (net of allowance for
doubtful accounts of $24.7
and $24.9) 1,025.8 988.3
Inventories 701.6 678.0
Other current assets 216.3 192.9
2,177.8 2,070.4
Property, Plant and Equipment:
Cost 2,860.4 2,820.2
Less: Accumulated depreciation 1,073.3 1,053.9
1,787.1 1,766.3
Goodwill and other intangible
assets (less accumulated amortization
of $164.9 and $151.2) 1,588.8 1,589.0
Other assets 397.2 335.5
$5,950.9 $ 5,761.2
See Notes to Condensed Consolidated Financial Statements.
COLGATE-PALMOLIVE COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in Millions)
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
March 31, December 31,
1994 1993
Current Liabilities:
Notes and loans payable $ 290.9 $ 169.4
Current portion of long-term debt 11.6 15.5
Accounts payable 606.5 599.3
Accrued income taxes 94.6 59.4
Other accruals 584.2 550.4
1,587.8 1,394.0
Long-term debt 1,662.8 1,532.4
Deferred income taxes 285.1 266.2
Other liabilities 696.9 693.6
Shareholders' Equity:
Preferred stock 413.2 414.3
Common stock 183.2 183.2
Additional paid-in capital 1,002.7 1,000.9
Retained earnings 2,206.7 2,163.4
Cumulative foreign currency
translation adjustments (393.4) (372.9)
3,412.4 3,388.9
Unearned compensation (387.8) (389.9)
Treasury stock, at cost (1,306.3) (1,124.0)
1,718.3 1,875.0
$5,950.9 $5,761.2
See Notes to Condensed Consolidated Financial Statements.
COLGATE-PALMOLIVE COMPANY
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in Millions)
(Unaudited)
Three Months Ended
March 31,
1994 1993
Operating Activities:
Net cash provided by operating activities $ 148.1 $ 113.8
Investing Activities:
Capital expenditures (67.0) (64.0)
Payments for acquisitions, net of cash acquired (18.8) -
(Purchase) sale of marketable securities, net (19.3) 36.4
Other, net (50.6) 34.4
Net cash (used for) provided by investing
activities (155.7) 6.8
Financing Activities:
Principal payments on debt (8.1) (85.7)
Proceeds from issuance of debt, net 260.7 68.2
Dividends paid (53.6) (49.8)
Purchase of common stock (185.6) (11.3)
Other, net (1.3) 17.6
Net cash provided by (used for) financing
activities 12.1 (61.0)
Effect of exchange rate changes on
cash and cash equivalents (0.7) (1.8)
Net increase in cash and cash equivalents 3.8 57.8
Cash and cash equivalents at beginning of
period 144.1 117.9
Cash and cash equivalents at end of period $147.9 $175.7
See Notes to Condensed Consolidated Financial Statements.
COLGATE-PALMOLIVE COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions)
(Unaudited)
1.The condensed consolidated financial statements reflect all normal
recurring adjustments which, in management's opinion, are necessary
for a fair presentation of the results for interim periods. Results
of operations for the three months ended March 31, 1994 and 1993
may not be representative of results to be expected for a full
year.
2.Provision for certain expenses, including income taxes, media
advertising, consumer promotion and new product introductory costs,
are based on full year assumptions. Such expenses are charged to
operations in the year incurred and are included in the
accompanying condensed consolidated financial statements in
proportion with the passage of time or with estimated annual tax
rates or annual sales.
3.Inventories by major classes were as follows:
March 31, December 31,
1994 1993
Raw materials and supplies $252.4 $250.0
Work-in-process 35.0 28.7
Finished goods 414.2 399.3
$701.6 $678.0
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.Effective January 1, 1994, the Company adopted Statement of
Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," which addresses the
accounting and reporting for investments in equity securities that
have readily determinable fair values and for all investments in
debt securities. The effect of adoption had no impact on results of
operations or cash flows and was not material to financial
condition.
6.Reference is made to the Company's Annual Report on Form 10-K
filed with the Securities and Exchange Commission for the
year 1993 for a complete set of financial notes including the
Company's significant accounting policies.
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 $1,770.0 in the first quarter of 1994, a 4%
increase over the 1993 first quarter, reflecting overall volume gains
of 6%. Sales would have increased 7% excluding the negative effects
of foreign currency declines, particularly in Europe.
Sales in the Oral, Personal and Household Care segment were $1,563.5
up 5% from $1,495.9 in 1993 on volume growth of 7%. Strong sales in
the Latin America and Asia/Africa regions more than offset declines in
USA/Canada/Puerto Rico and Europe, which continues to include the
effects of poor economic conditions in major countries and unfavorable
currency translation. Colgate-Latin America sales grew 15% to $404.8
on volume gains of 9% led by strong performances in Mexico, Colombia,
the Dominican Republic and Chile. Colgate-Asia/Africa sales increased
21% to $326.6 on volume gains of 23%. These volume gains included 8%
internally generated growth with outstanding performances in Malaysia,
Hong Kong, China and South Africa, as well as the mid-1993 consolidation
of the Company's Indian subsidiary, based on increased ownership to
majority control. Colgate-USA/Canada/Puerto Rico sales declined 6%
to $384.4 while volume grew 4% in a difficult competitive environment.
Sales in Colgate-Europe declined 4% to $447.7 on overall volume gains
of 1%. Strong volume growth in Eastern Europe and Spain was partially
offset by declines in France and the Nordic Group.
Sales in the Specialty Marketing segment of $206.5 in the first quarter
of 1994 were essentially even with the 1993 first quarter. Hill's Pet
Nutrition comprising most of this segment, generated excellent demand and
increased pet food volume 5% over the 1993 first quarter. This volume
increase was tempered by the short-term impact of several non-continuing
outside distributors eliminating inventories. The non-core businesses in
the Specialty Marketing segment, including Princess House tableware and
veterinary drugs distributed by Hill's, had lower sales and unit volume
in the 1994 first quarter as compared with the prior year.
Gross profit margin improved to 48.7% from 47.9% in the first quarter of
1993. The improvement in gross profit reflects the Company's continuing
strategy to shift product mix to higher margin oral and personal care
product categories, reduce overhead and improve manufacturing efficiency.
This increased profitability enabled the Company to reinvest in its existing
businesses in the form of higher research and development and advertising
during the 1994 first quarter as compared with the prior year.
Selling, general and administrative expenses at 34.5% of sales in the 1994
first quarter were basically even with prior year first quarter results.
In absolute dollar terms, the higher levels of selling, general and
administrative expenses reflected the increase in total advertising
spending, which also increased as a percentage of sales. Earnings before
interest and taxes (EBIT) increased 9.3% to $250.8. EBIT as a percentage
of sales increased to 14.2% from 13.5% in 1993.
Interest expense, net of interest income, was $20.6 in the 1994 first
quarter as compared with $11.2 in 1993. This increase is primarily due
to increased levels of debt incurred in connection with the share repurchase
program which commenced during the 1993 second quarter.
The effective tax rate was 35.0% versus 35.5% in 1993. The 35.0% rate
reflects the Company's current estimate of its full year effective
income tax rate, which is slightly higher than the 1993 full year rate
of 34.5%.
COLGATE-PALMOLIVE COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Dollars in Millions Except Per Share Amounts)
First quarter 1994 net income was $149.6 or $.98 per share compared
with a net loss of $217.4 or $1.39 per share in the prior year.
Included in the first quarter 1993 net loss and per share amounts was
the charge for the cumulative effect of changes in accounting for
Other Postretirement Benefits, Postemployment Benefits and Income
Taxes. Excluding the charge, net income increased 6% and earnings per
share rose 15% on 8% fewer shares outstanding.
Liquidity and Capital Resources
Net cash provided by operations increased to $148.1 in the 1994 first
quarter compared with $113.8 in the prior year. The improvement in
cash generated by operating activities to 8.4% of sales from 6.7% in
1993 reflects the Company's improving profitability and continued
management emphasis on working capital control. At March 31, 1994,
commercial paper outstanding was $822.6, the majority of which is
classified as long-term due to the Company's intent and ability to
refinance these obligations on a long-term basis. In keeping with
the Company's ongoing program to repurchase common shares in the
open market and private transactions to provide for employee benefit
plans and to maintain its targeted capital structure, aggregate open
market repurchases for the 1994 first quarter approximated 3 million
shares with a total purchase price of $180.4. During the first quarter
the Board of Directors authorized the repurchase of up to an additional
five million shares. In addition, in May 1994, the Company filed a
shelf registration for $500.0 of debt securities. The Company plans
to sell debt securities from time to time and use the proceeds for
general corporate purposes.
Reference should be made to the 1993 Annual Report on Form 10-K for
additional information regarding available sources of liquidity and
capital.
COLGATE-PALMOLIVE COMPANY
PART II. OTHER INFORMATION
Item 1.Legal Proceedings
Reference is made to Note 15 to the consolidated
financial statements on page 33 of the registrant's
Annual Report on Form 10-K for the year ended December
31, 1993.
Item 4.Submission of Matters to a Vote of Security Holders
The Company's annual meeting of stockholders was
held on May 5, 1994. The matters voted on and the
results of the vote are as follows:
(a) Vernon R. Alden, Jill K. Conway, Ronald E.
Ferguson, Ellen M. Hancock, David W. Johnson, John P.
Kendall, Delano E. Lewis, Reuben Mark and Howard B.
Wentz, Jr. were elected directors of the Company.
The results of the vote are as follows:
Votes Received Votes Withheld
Vernon R. Alden 130,355,606 1,142,012
Jill K. Conway 130,526,577 971,041
Ronald E. Ferguson 130,567,634 929,984
Ellen M. Hancock 130,543,089 954,529
David W. Johnson 130,514,681 982,937
John P. Kendall 130,475,206 1,022,412
Delano E. Lewis 130,494,411 1,003,207
Reuben Mark 130,543,907 953,711
Howard B. Wentz, Jr. 130,569,951 927,667
(b) The selection of Arthur Andersen & Co. as auditors
for the year ending December 31, 1994 was approved.
The results of the vote are as follows:
Votes For Votes Against Abstentions
129,012,423 1,665,141 820,054
(c) The adoption of the Company's Non-Employee Director
Stock Option Plan, which allows directors who are not
officers or employees of the Company or any subsidiary
of the Company to be eligible to receive stock options,
was approved. The results of the vote are as follows:
Votes For Votes Against Abstentions
115,782,293 11,247,008 4,468,317
(d) The adoption of an amended Executive Incentive
Compensation Plan ("EICP Plan"), which incorporates the
requirements of Section 162(m) of the Internal Revenue
Code into the EICP Plan and thereby maximizes the
deductibility of the annual bonuses and long term
incentive awards under the EICP Plan, was approved. The
results of the vote are as follows:
Votes For Votes Against Abstentions
120,743,587 7,353,687 3,400,344
(e) A stockholder proposal submitted by College
Retirement Equities Fund requesting the Board of
Directors to adopt a policy of seeking shareholder
approval before issuing preference stock except
under certain circumstances was not approved. The results
of the vote are as follows:
Votes For Votes Against Abstentions Broker Non-Votes
40,084,032 71,086,395 3,974,449 16,352,742
COLGATE-PALMOLIVE COMPANY
PART II. OTHER INFORMATION (Continued)
Item 6.Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 11. Computation of Earnings per Common Share.
Exhibit 12. Ratio of Earnings to Fixed Charges.
(b) Reports on Form 8-K.
None.
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 Accounting Officer:
May 16, 1994 /s/ Stephen C. Patrick
Stephen C. Patrick
Vice President
Corporate Controller
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 March 31,
1994 1993
PRIMARY
Earnings:
Income before changes in accounting $ 149.6 $ 140.8
Deduct: Dividends on preferred
shares, net of income taxes 5.4 5.2
Income applicable to common shares before
cumulative effect on prior years of
accounting changes 144.2 135.6
Cumulative effect on prior years of
accounting changes - (358.2)
Net income (loss) applicable to common
shares $ 144.2 $(222.6)
Shares (in millions):
Weighted average shares outstanding 147.8 160.4
Earnings per common share, primary:
Income before changes in accounting $ .98 $ .85
Cumulative effect on prior years of
accounting changes - (2.24)
Net income (loss) $ .98 $ (1.39)
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 March 31,
1994 1993
ASSUMING FULL DILUTION
Earnings:
Income before changes in accounting $ 149.6 $ 140.8
Deduct dividends on preferred shares .1 .1
Replacement funding resulting from
assumed conversion of Series B
Convertible Preference Stock,
net of tax 2.1 1.2
Income before changes in accounting,
as adjusted 147.4 139.5
Cumulative effects on prior years
of accounting changes - (358.2)
Net income (loss) applicable to common
shares $ 147.4 $(218.7)
Shares (in millions):
Weighted average number of common
shares outstanding 147.8 160.4
Assumed conversion of options reduced by
the number of shares which could have
been purchased with the proceeds from
the exercise of such options 2.1 2.7
Assumed conversion of Series B
convertible Preference Stock 12.3 12.5
Weighted average number of common
shares outstanding, as adjusted 162.2 175.6
Earnings per common share, assuming
full dilution:
Income before changes in accounting $ .91 $ .79
Cumulative effect on prior years of
accounting changes - (2.04)
Net income (loss) $ .91 $(1.25)
Exhibit 12
COLGATE-PALMOLIVE COMPANY
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in Millions)
(Unaudited)
Three Months Ended
March 31, 1994
Income before income taxes $230.2
Add:
Interest on indebtedness and amortization
of debt expense and discount or premium 27.0
Portion of rents representative of
interest factor 7.6
Interest on ESOP debt, net of dividends .5
Less:
Income of less than fifty-percent-owned
subsidiaries (.5)
Income as adjusted $264.8
Fixed Charges:
Interest on indebtedness and amortization
of debt expense and discount or premium $ 27.0
Portion of rents representative of
interest factor 7.6
Interest on ESOP debt, net of dividends .5
Capitalized interest 1.9
Total fixed charges $ 37.0
Ratio of earnings to fixed charges 7.2
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 was $8.6. 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.
