UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-K
(Mark
One)
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T
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ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For
the fiscal year ended December 31, 2009
or
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£
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For
the transition period from
to
.
Commission
File Number 1-644
(Exact
name of registrant as specified in its charter)
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DELAWARE
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13-1815595
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(State
or other jurisdiction of incorporation or organization)
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(I.R.S.
Employer Identification No.)
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300
Park Avenue, New York, New York
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10022
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(Address
of principal executive offices)
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(Zip
Code)
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Registrant’s
telephone number, including area code 212-310-2000
Securities
registered pursuant to Section 12(b) of the Act:
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Title of each class
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Name of each exchange on which
registered
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Common
Stock, $1.00 par value
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New
York Stock Exchange
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Indicate by check mark if the
registrant is a well-known seasoned issuer, as defined in Rule 405 of the
Securities Act. Yes T No £
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes £ NoT
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 T No£
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405) during
the preceding 12 months (or for such shorter period that the registrant was
required to submit and post such files). Yes T No £
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§229.405) is not contained herein, and will not be contained, to
the best of registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. £
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
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Large
accelerated filer T
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Accelerated
filer £
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Non-accelerated
filer £ (Do not
check if a smaller reporting company)
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Smaller
reporting company £
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Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes£ NoT
The
aggregate market value of Colgate-Palmolive Company Common Stock held by
non-affiliates as of June 30, 2009 (the last business day of its most recently
completed second quarter) was approximately $35.2 billion.
There
were 493,747,179 shares of Colgate-Palmolive Company Common Stock
outstanding as of January 31, 2010.
DOCUMENTS
INCORPORATED BY REFERENCE:
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Documents
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Form 10-K Reference
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Portions
of Proxy Statement for the 2010 Annual Meeting
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Part
III, Items 10 through 14
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Colgate-Palmolive Company
Table
of Contents
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Part
I
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Page
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Item
1.
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1
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Item
1A.
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5
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Item
1B.
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10
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Item
2.
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10
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Item
3.
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10
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Item
4.
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13
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Part
II
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Item
5.
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14
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Item
6.
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15
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Item
7.
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15
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Item
7A.
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35
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Item
8.
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35
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Item
9.
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35
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Item
9A.
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36
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Item
9B.
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36
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Part
III
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Item
10.
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37
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Item
11.
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37
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Item
12.
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37
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Item
13.
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38
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Item
14.
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38
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Part
IV
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Item
15.
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39
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40
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PART
I
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ITEM 1.
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BUSINESS
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(a)
General Development of the Business
Colgate-Palmolive
Company (together with its subsidiaries, the “Company” or “Colgate”) is a
leading consumer products company whose products are marketed in over 200
countries and territories throughout the world. Colgate was founded in 1806 and
incorporated under the laws of the State of Delaware in 1923.
For
recent business developments and other information, refer to the information set
forth under the captions “Executive Overview and Outlook,” “Results of
Operations” and “Liquidity and Capital Resources” in Part II, Item 7 of this
report.
(b)
Financial Information about Segments
Worldwide
Net sales and Operating profit by business segment and geographic region during
the last three years appear under the caption “Results of Operations” in Part
II, Item 7 of this report and in Note 14 to the Consolidated Financial
Statements.
(c)
Narrative Description of the Business
The
Company manages its business in two product segments: Oral, Personal and Home
Care; and Pet Nutrition. Colgate is a global leader in Oral Care with the
leading toothpaste and manual toothbrush brands throughout many parts of the
world according to value share data provided by ACNielsen. Colgate’s Oral Care
products include Colgate Total and Colgate Max Fresh toothpastes, Colgate
360° manual
toothbrushes and Colgate and Colgate Plax mouth rinses. Colgate’s
Oral Care business also includes dental floss and pharmaceutical products for
dentists and other oral health professionals.
Colgate
is a leader in many product categories of the Personal Care market with global
leadership in liquid hand soap. Colgate’s Personal Care products include
Palmolive and Softsoap brand shower gels, Palmolive, Irish Spring and Protex bar
soaps and Speed Stick and Lady Speed Stick deodorants and
antiperspirants. Colgate is the market leader in liquid hand soap in
the U.S. with its line of Softsoap brand products according to value share data
provided by ACNielsen. Colgate’s Personal Care business outside the
U.S. also includes Palmolive and Caprice shampoo and conditioners.
Colgate
manufactures and markets a wide array of products for Home Care, including
Palmolive and Ajax dishwashing liquids, Fabuloso and Ajax household cleaners and
Murphy’s Oil Soap. Colgate is a market leader in fabric conditioners with
leading brands including Suavitel in Latin America and Soupline in
Europe.
Sales of
Oral, Personal and Home Care products accounted for 41%, 22% and 23%,
respectively, of total worldwide sales in 2009. Geographically, Oral Care is a
significant part of the Company’s business in Greater Asia/Africa, comprising approximately 69%
of sales in that region for 2009.
Colgate,
through its Hill’s Pet Nutrition segment (Hill’s), is a world leader in
specialty pet nutrition products for dogs and cats with products marketed in
over 95 countries around the world. Hill’s markets pet foods primarily under two
trademarks: Science Diet, which is sold by authorized pet supply retailers and
veterinarians for everyday nutritional needs; and Prescription Diet, a range of
therapeutic products sold by veterinarians to help nutritionally manage disease
conditions in dogs and cats. Sales of Pet Nutrition products
accounted for 14% of the Company’s total worldwide sales in 2009.
For more
information regarding the Company’s worldwide sales by product categories, refer
to Notes 1 and 14 to the Consolidated Financial Statements.
Research
and Development
Strong
research and development capabilities and alliances enable Colgate to support
its many brands with technologically sophisticated products to meet consumers’
oral, personal and home care and pet nutrition needs. The Company’s spending
related to research and development activities was $269 million, $253 million
and $247 million during 2009, 2008 and 2007, respectively.
Distribution;
Raw Materials; Competition; Trademarks and Patents
The
Company’s products are generally marketed by a direct sales force at individual
operating subsidiaries or business units. In some instances, distributors or
brokers are used. No single customer accounts for 10% or more of the Company’s
sales.
Most raw
and packaging materials are purchased from other companies and are available
from several sources. No single raw or packaging material represents, and no
single supplier provides, a significant portion of the Company’s total material
requirements. For certain materials, however, new suppliers may have
to be qualified under industry, government and Colgate standards, which can
require additional investment and take some period of time. Raw and packaging
material commodities such as resins, tallow, corn and soybeans are subject to
market price variations.
The
Company’s products are sold in a highly competitive global marketplace, which
has experienced increased trade concentration and the growing presence of
large-format retailers and discounters. Products similar to those produced and
sold by the Company are available from competitors in the U.S. and overseas.
Certain of the Company’s competitors are larger and have greater resources than
the Company. In addition, private label brands sold by retail trade chains are a
source of competition for certain product lines of the Company. Product quality
and innovation, brand recognition, marketing capability and acceptance of new
products largely determine success in the Company’s business
segments.
Trademarks
are considered to be of material importance to the Company’s business. The
Company follows a practice of seeking trademark protection in the U.S. and
throughout the world where the Company’s products are sold. Principal global and
regional trademarks include Colgate, Palmolive, Mennen, Speed Stick, Lady Speed
Stick, Softsoap, Irish Spring, Protex, Sorriso, Kolynos, Elmex, Tom’s of Maine,
Ajax, Axion, Fabuloso, Soupline, Suavitel, Hill’s Science Diet and Hill’s
Prescription Diet. The Company’s rights in these trademarks endure for as long
as they are used and registered. Although the Company actively develops and
maintains a portfolio of patents, no single patent is considered significant to
the business as a whole.
Environmental
Matters
The
Company has programs that are designed to ensure that its operations and
facilities meet or exceed standards established by applicable environmental
rules and regulations. Capital expenditures for environmental control facilities
totaled $15 million for 2009. For future years, expenditures are currently
expected to be of a similar magnitude. For additional information regarding
environmental matters refer to Note 13 to the Consolidated Financial
Statements.
Employees
As of
December 31, 2009, the Company employed approximately 38,100
employees.
Executive
Officers of the Registrant
The
following is a list of executive officers as of February 25, 2010:
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Name
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Age
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Date First Elected Officer
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Present Title
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Ian
Cook
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57
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1996
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Chairman
of the Board
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President
and Chief Executive Officer
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Michael
J. Tangney
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65
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1993
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Vice
Chairman
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Stephen
C. Patrick
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60
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1990
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Chief
Financial Officer
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Andrew
D. Hendry
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62
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1991
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Senior
Vice President
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|||
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General
Counsel and Secretary
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||||||
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Fabian
T. Garcia
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50
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2003
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Chief
Operating Officer,
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Europe,
Global Marketing, Customer Development, Supply Chain and
Technology
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Franck
J. Moison
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56
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2002
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Chief
Operating Officer
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Emerging
Markets
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||||||
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Dennis
J. Hickey
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61
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1998
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Vice
President and Corporate Controller
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Ronald
T. Martin
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61
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2001
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Vice
President
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Global
Social Responsibility
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||||||
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John
J. Huston
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55
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2002
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Vice
President
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Office
of the Chairman
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Delia
H. Thompson
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60
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2002
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Vice
President
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Investor
Relations
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Hector
I. Erezuma
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65
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2005
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Vice
President
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Taxation
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Daniel
B. Marsili
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49
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2005
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Vice
President
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Global
Human Resources
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||||||
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Gregory
P. Woodson
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58
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2007
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Vice
President
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Chief
Ethics and Compliance Officer
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Nina
D. Gillman
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56
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2008
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Vice
President
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Deputy
General Counsel, Global Legal Organization and Assistant
Secretary
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| Name | Age | Date First Elected Officer | Present Title | |||
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David
R. Groener
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55
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2008
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Vice
President
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Global
Supply Chain
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Alexandre
de Guillenchmidt
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64
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2008
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President
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Colgate-Europe
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Rosemary
Nelson
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62
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2008
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Vice
President
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Deputy
General Counsel, Operations
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Derrick
E.M. Samuel
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53
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2008
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President
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Colgate
– Greater Asia
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Justin
P. Skala
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50
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2008
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President
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Colgate-Latin
America
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Noel
R. Wallace
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46
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2009
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President
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Colgate
North America and Global Sustainability
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||||||
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Neil
Thompson
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54
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2009
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President
and Chief Executive Officer
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Hill’s
Pet Nutrition, Inc
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||||||
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Elaine
Paik
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45
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2009
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Vice
President and Corporate
Treasurer
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Each of
the executive officers listed above has served the registrant or its
subsidiaries in various executive capacities for the past five
years.
Under the
Company’s By-Laws, the officers of the corporation hold office until their
respective successors are chosen and qualified or until they have resigned,
retired or been removed by the affirmative vote of a majority of the Board of
Directors. There are no family relationships between any of the
executive officers, and there is no arrangement or understanding between any
executive officer and any other person pursuant to which the executive officer
was elected.
(d)
Financial Information about Geographic Areas
For
financial data by geographic region, refer to the information set forth under
the caption “Results of Operations” in Part II, Item 7, of this report and in
Note 14 to the Consolidated Financial Statements. For a discussion of
risks associated with our international operations, see Item 1A, “Risk
Factors.”
(e)
Available Information
The
Company’s web site address is
www.colgate.com. The
information contained on the Company’s web site is not included as a part of, or
incorporated by reference into, this Annual Report on Form 10-K. The Company
makes available, free of charge, on its web site its annual reports on Form
10-K, its quarterly reports on Form 10-Q, its interactive data files posted
pursuant to Rule 405 of Regulation S-T, its current reports on Form 8-K and
amendments to such reports filed or furnished pursuant to Section 13(a) or 15(d)
of the Securities Exchange Act of 1934 (the Exchange Act) as soon as reasonably
practicable after the Company has electronically filed such material with, or
furnished it to, the United States Securities and Exchange Commission (the SEC).
Also available on the Company’s web site are the Company’s Code of Conduct and
Corporate Governance Guidelines, the charters of the Committees of the Board of
Directors, reports under Section 16 of the Exchange Act of transactions in
Company stock by directors and officers and its proxy statements.
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ITEM
1A.
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RISK
FACTORS
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Set forth
below is a summary of the material risks to an investment in our
securities. These risks are not the only ones we face. Additional
risks not presently known to us or that we currently deem immaterial may also
have an adverse effect on us. If any of the below risks actually occur, our
business, results of operations, cash flows or financial condition could suffer,
which might cause the value of our securities to decline.
We
face risks associated with significant international operations.
We
operate on a global basis with approximately 75% of our net sales coming from
markets outside the U.S. While geographic diversity helps to reduce the
Company’s exposure to risks in any one country or part of the world, it also
means that we are subject to the full range of risks associated with significant
international operations, including, but not limited to:
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·
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changes
in exchange rates for foreign currencies, which may reduce the U.S. dollar
value of revenue we receive from non-U.S. markets or increase our labor or
supply costs in those markets,
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·
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exchange
controls and other limits on our ability to repatriate earnings from
overseas,
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·
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political
or economic instability or changing macroeconomic conditions in our major
markets,
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·
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lack
of well-established or reliable legal systems in certain areas where the
Company operates,
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·
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foreign
ownership restrictions and nationalization or expropriation of property or
other resources, and
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·
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foreign
or domestic legal and regulatory requirements resulting in potentially
adverse tax consequences or the imposition of onerous trade restrictions
or other government controls.
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These
risks could have a significant impact on our ability to sell our products on a
competitive basis in international markets and may have a material adverse
effect on our results of operations, cash flows and financial condition. We
monitor our foreign currency exposure to minimize the impact on earnings of
foreign currency rate movements through a combination of cost-containment
measures, selling price increases and foreign currency hedging. We cannot
provide assurances, however, that these measures will succeed in offsetting any
negative impact of foreign currency rate movements on our business and results
of operations.
For
example, our results of operations will be adversely impacted by the recent
designation of Venezuela as hyper-inflationary and the subsequent currency
devaluation in Venezuela. Exchange controls in Venezuela could also
have an adverse impact on our results of operations. For
additional information regarding the potential impact of the risks associated
with our operations in Venezuela, refer to Item 7 “Management’s Discussion and
Analysis of Financial Condition and Results of Operations – Executive Overview
and Outlook” and Note 18 to the Consolidated Financial
Statements.
Uncertain global
economic conditions and disruptions in the credit markets may adversely affect
our business.
Uncertain
global economic conditions could adversely affect our
business. Recent global economic trends pose challenges to our
business and could result in declining revenues, profitability and cash
flow. Although we continue to devote significant resources to support
our brands, during periods of economic uncertainty consumers may switch to
economy brands, which could reduce sales volumes of our products or result in a
shift in our product mix from higher margin to lower margin product
offerings. Additionally, retailers may increase pressure on our
selling prices or increase promotional activity for lower-priced or value
offerings as they seek to maintain sales volumes and margins.
While we
currently generate significant cash flows from our ongoing operations and have
access to global credit markets through our various financing activities, any
disruption in the credit markets could limit the availability of credit or the
ability or willingness of financial institutions to extend credit, which could
adversely affect our liquidity and capital resources. If any
financial institutions that are parties to our revolving credit facility
supporting our commercial paper program or other financing arrangements, such as
interest rate or foreign exchange hedging instruments, were to declare
bankruptcy or become insolvent, they may be unable to perform under their
agreements with us. This could leave us with reduced borrowing
capacity or unhedged against certain interest rate or foreign currency
exposures. In addition, tighter credit markets may lead to business
disruptions for certain of our suppliers, contract manufacturers or trade
customers which could, in turn, adversely impact our business.
Significant
competition in our industry could adversely affect our business.
We face
vigorous competition around the world, including from other large, multinational
consumer product companies, some of which have greater resources than we do. We
face this competition in several aspects of our business, including, but not
limited to, the pricing of products, promotional activities, advertising and new
product introductions.
We may be
unable to anticipate the timing and scale of such activities or initiatives by
competitors or to successfully counteract them, which could harm our business.
In addition, the cost of responding to such activities and initiatives may
affect our financial performance in the relevant period. Our ability to compete
also depends on the strength of our brands and on our ability to protect our
patent, trademark and trade dress rights and to defend against related
challenges brought by competitors. A failure to compete effectively could
adversely affect our growth and profitability.
Changes
in the policies of our retail trade customers and increasing dependence on key
retailers in developed markets may adversely affect our business.
Our
products are sold in a highly competitive global marketplace which has
experienced increased trade concentration and the growing presence of
large-format retailers and discounters. With the growing trend toward retail
trade consolidation, we are increasingly dependent on key retailers, and some of
these retailers, including large-format retailers, may have greater bargaining
strength than we do. They may use this leverage to demand higher trade
discounts, allowances or slotting fees, which could lead to reduced sales or
profitability. We may also be negatively affected by changes in the policies of
our retail trade customers, such as inventory de-stocking, limitations on access
to shelf space, delisting of our products, environmental initiatives and other
conditions. In addition, private label products sold by retail trade
chains, which are typically sold at lower prices than branded products, are a
source of competition for certain of our product lines, including liquid hand
soap.
The
growth of our business depends on the successful development and introduction of
new products.
Our
growth depends on the continued success of existing products as well as the
successful development and introduction of new products and line extensions,
which face the uncertainty of retail and consumer acceptance and reaction from
competitors. In addition, our ability to create new products and line extensions
and to sustain existing products is affected by whether we can:
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•
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develop
and fund technological innovations,
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•
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receive
and maintain necessary patent and trademark
protection,
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•
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obtain
governmental approvals and registrations of regulated
products,
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•
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comply
with U.S. Food and Drug Administration (FDA) and other governmental
regulations, and
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|
|
•
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anticipate
consumer needs and preferences
successfully.
|
The
failure to develop and launch successful new products could hinder the growth of
our business and any delay in the development or launch of a new product could
result in the Company not being the first to market, which could compromise our
competitive position.
Volatility
in material and other costs and our increasing dependence on key suppliers could
adversely impact our profitability.
Raw and
packaging material commodities such as resins, tallow, corn and soybeans are
subject to wide price variations. Increases in the costs and availability of
these commodities and the costs of energy, transportation and other necessary
services may adversely affect our profit margins if we are unable to pass along
any higher costs in the form of price increases or otherwise achieve cost
efficiencies such as in manufacturing and distribution. In addition, our move to
global suppliers, for materials and other services in order to achieve cost
reductions and simplify our business, has resulted in an increasing dependence
on key suppliers. For certain materials, new suppliers may have to be qualified
under industry, government and Colgate standards, which can require additional
investment and take some period of time. While we believe that the supplies of
raw materials needed to manufacture our products are adequate, global economic
conditions, supplier capacity constraints and other factors could affect the
availability of, or prices for, those raw materials.
Damage
to our reputation could have an adverse effect on our business.
Maintaining
our strong reputation with consumers and our trade partners globally is critical
to selling our branded products. Accordingly, we devote significant
time and resources to programs designed to protect and preserve our reputation,
such as our Ethics and Compliance, Sustainability, Brand Protection and Product
Safety, Regulatory and Quality initiatives. In particular, adverse
publicity about product safety or quality and similar types of concerns, real or
imagined, or the allegations of product contamination or tampering, whether or
not valid, may result in a product recall or reduced demand for our products. A
significant product recall could tarnish the image of the affected brands and
cause consumers to choose other products.
In
addition, from time to time, third parties sell counterfeit versions of our
products. To the extent that third parties sell products that are
counterfeit versions of our brands, consumers of our brands could confuse our
products with products that they consider inferior, or that pose safety risks,
which could cause them to refrain from purchasing our brands in the future and
in turn could impair our brand equity and adversely affect our
business.
Similarly,
adverse publicity regarding our responses to health concerns, our environmental
impacts, including packaging, energy and water use and waste management, or
other sustainability issues, whether or not deserved, could jeopardize our
reputation. Damage to our reputation or loss of consumer confidence
in our products for any of these reasons could have a material adverse effect on
our business, as well as require resources to rebuild our
reputation.
Our
business is subject to regulation in the U.S. and abroad.
The
manufacture, packaging, labeling, storage, distribution, advertising and sale of
our products are subject to extensive regulation in the U.S. and abroad. This
regulation includes, but is not limited to, the following:
|
|
•
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in
the U.S.
|
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|
•
|
our
products and the manufacture of our products are subject to regulation and
review and/or approval by the Food and Drug Administration (FDA) as well
as by the Consumer Product Safety Commission and the Environmental
Protection Agency (EPA),
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•
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our
product claims and advertising are regulated by the Federal Trade
Commission, the FDA and the EPA and, in
addition,
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•
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state
and local agencies regulate in parallel to the above
agencies;
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•
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we
are also subject to similar regulation in the foreign countries in which
we manufacture and sell our products;
and
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|
•
|
our
selling practices are regulated by competition authorities in the U.S. and
abroad.
|
A finding
that we are in violation of, or out of compliance with, applicable laws or
regulations could subject us to civil remedies, including fines, damages,
injunctions or product recalls, or criminal sanctions, any of which could have a
material adverse effect on our business. Even if a claim is unsuccessful, is not
merited or is not fully pursued, the negative publicity surrounding such
assertions regarding our products or processes could adversely affect our
reputation and brand image. For information regarding our European
competition matters, see Item 3, “Legal Proceedings” and Note 13 to the
Consolidated Financial Statements.
We comply
with the regulatory requirements applicable to the manufacture and sale of the
products we currently market. New or more restrictive regulations or
more restrictive interpretations of existing regulations, however, could have an
adverse impact on our business. For example, from time to time,
various regulatory authorities and consumer groups in Europe, the U.S. and other
countries request or conduct reviews of the use of certain ingredients in
consumer products, including triclosan. A finding by a regulatory
authority that triclosan, or any other of our ingredients, should not be used in
certain consumer products or should otherwise be newly regulated, could have an
adverse impact on our business, as could negative reactions by our consumers,
trade customers or non-governmental organizations to our use of such
ingredients. Currently, Colgate uses triclosan in certain of its
oral, personal and home care products, including Colgate Total toothpaste,
Softsoap brand liquid hand soap, Palmolive dish liquid and Protex bar
soap.
Our
business is subject to the risks inherent in global manufacturing and sourcing
activities.
The
Company is engaged in manufacturing and sourcing of products and materials on a
global scale. We are subject to the risks inherent in such
activities, including, but not limited to:
|
|
•
|
industrial
accidents or other occupational health and safety
issues,
|
|
|
•
|
environmental
events,
|
|
|
•
|
strikes
and other labor disputes,
|
|
|
•
|
disruptions
in logistics,
|
|
|
•
|
loss
or impairment of key manufacturing
sites,
|
|
|
•
|
raw
material and product quality or safety
issues,
|
|
|
•
|
natural
disasters, acts of war or terrorism and other external factors over which
we have no control.
|
While we
have business continuity and contingency plans for key manufacturing sites and
the supply of raw materials, significant disruption of manufacturing for any of
the above reasons could interrupt product supply and, if not remedied, have an
adverse impact on our business. In addition, if our products, or raw materials
contained in our products, are found or perceived to be defective or unsafe, we
may need to recall some of our products; our reputation and brand image could be
diminished; and we could lose market share or become subject to liability
claims, any of which could have a material adverse effect on our
business.
Our
success depends upon our ability to attract and retain key employees and the
succession of senior management.
Our
success largely depends on the performance of our management team and other key
employees. If we are unable to attract and retain talented, highly
qualified senior management and other key people, our future operations could be
adversely affected. In addition, if we are unable to effectively
provide for the succession of senior management, including our Chief Executive
Officer, our business may be materially adversely affected. While we
follow a disciplined, ongoing succession planning process and have succession
plans in place for senior management and other key executives, these do not
guarantee that the services of qualified senior executives will continue to be
available to us at particular moments in time.
|
ITEM
1B.
|
UNRESOLVED
STAFF COMMENTS
|
None.
|
ITEM 2.
|
PROPERTIES
|
The
Company owns or leases approximately 330 properties which include manufacturing,
distribution, research and office facilities worldwide. Our corporate
headquarters is located in leased property at 300 Park Avenue, New York, New
York.
In the
U.S., the Company operates approximately 60 properties of which 14 are owned.
Major U.S. manufacturing and warehousing facilities used by the Oral, Personal
and Home Care segment of our business are located in Morristown, New Jersey;
Morristown, Tennessee; and Cambridge, Ohio. The Pet Nutrition segment has major
facilities in Bowling Green, Kentucky; Topeka, Kansas; Emporia, Kansas;
Commerce, California; and Richmond, Indiana. The primary research center for
Oral, Personal and Home Care products is located in Piscataway, New Jersey and
the primary research center for Pet Nutrition products is located in Topeka,
Kansas. Piscataway, New Jersey also serves as our global data
center.
Overseas,
the Company operates approximately 270 properties, of which 70 are owned, in
over 70 countries. Major overseas facilities used by the Oral, Personal and Home
Care segment of our business are located in Australia, Brazil, China, Colombia,
France, Italy, Mexico, Poland, South Africa, Thailand, Venezuela, Vietnam and
elsewhere throughout the world. The Pet Nutrition segment has a major facility
in the Czech Republic.
All of
the facilities we operate are well maintained and adequate for the purpose for
which they are intended.
|
ITEM
3.
|
LEGAL
PROCEEDINGS
|
The
Company is contingently liable with respect to lawsuits, environmental matters
and other matters arising in the normal course of business.
Brazilian
Matters
In 2001,
the Central Bank of Brazil sought to impose a substantial fine on the Company’s
Brazilian subsidiary (approximately $150 million at the current exchange rate)
based on alleged foreign exchange violations in connection with the financing of
the Company’s 1995 acquisition of the Kolynos oral care business from Wyeth
(formerly American Home Products) (the Seller), as described in the Company’s
Form 8-K dated January 10, 1995. The Company appealed the imposition of the fine
to the Brazilian Monetary System Appeals Council (the Council), and on January
30, 2007, the Council decided the appeal in the Company’s favor, dismissing the
fine entirely. However, certain tax and civil proceedings that began as a result
of this Central Bank matter are still outstanding as described
below.
The
Brazilian internal revenue authority has disallowed interest deductions and
foreign exchange losses taken by the Company’s Brazilian subsidiary for certain
years in connection with the financing of the Kolynos acquisition. The tax
assessments with interest, at the current exchange rate, approximate $115
million. The Company has been disputing the disallowances by appealing the
assessments within the internal revenue authority’s appellate process with the
following results to date:
|
|
·
|
In
June 2005, the First Board of Taxpayers ruled in the Company’s favor and
allowed all of the previously claimed deductions for 1996 through 1998. In
March 2007, the First Board of Taxpayers ruled in the Company’s favor and
allowed all of the previously claimed deductions for 1999 through 2001.
The tax authorities appealed these decisions to the next administrative
level.
|
|
|
·
|
In
August 2009, the First Taxpayers’ Council (the next and final
administrative level of appeal) overruled the decisions of the First Board
of Taxpayers, upholding the majority of the assessments, disallowing a
portion of the assessments and remanding a portion of the assessments for
further consideration by the First Board of
Taxpayers.
|
The
Company has filed a motion for reconsideration with the First Taxpayers’ Council
and further appeals are available within the Brazilian federal
courts. The Company intends to challenge these assessments
vigorously. Although there can be no assurances, management believes, based on
the opinion of its Brazilian legal counsel and other advisors, that the
disallowances are without merit and that the Company should ultimately prevail
on appeal, if necessary, in the Brazilian federal courts.
In 2002,
the Brazilian Federal Public Attorney filed a civil action against the federal
government of Brazil, Laboratorios Wyeth-Whitehall Ltda. (the Brazilian
subsidiary of the Seller) and the Company, as represented by its Brazilian
subsidiary, seeking to annul an April 2000 decision by the Brazilian Board of
Tax Appeals that found in favor of the Seller’s Brazilian subsidiary on the
issue of whether it had incurred taxable capital gains as a result of the
divestiture of Kolynos. The action seeks to make the Company’s Brazilian
subsidiary jointly and severally liable for any tax due from the Seller’s
Brazilian subsidiary. Although there can be no assurances, management believes,
based on the opinion of its Brazilian legal counsel, that the Company should
ultimately prevail in this action. The Company intends to challenge this action
vigorously.
In
December 2005, the Brazilian internal revenue authority issued to the Company’s
Brazilian subsidiary a tax assessment with interest and penalties of
approximately $69 million, at the current exchange rate, based on a claim that
certain purchases of U.S. Treasury bills by the subsidiary and their subsequent
disposition during the period 2000 to 2001 were subject to a tax on foreign
exchange transactions. The Company is disputing the assessment within the
internal revenue authority’s administrative appeals process. In October 2007,
the Second Board of Taxpayers, which has jurisdiction over these matters, ruled
in favor of the internal revenue authority. In January 2008, the Company
appealed this decision to the next administrative level. Although there can be
no assurances, management believes, based on the advice of its Brazilian legal
counsel, that the tax assessment is without merit and that the Company should
prevail on appeal either at the administrative level or, if necessary, in the
Brazilian federal courts. The Company intends to challenge this assessment
vigorously.
European Competition
Matters
During
the period from February 2006 to June 2009, the Company learned that
investigations relating to potential competition law violations involving the
Company’s subsidiaries had been commenced by governmental authorities in the
European Union (EU), France, Germany, Greece, Italy, the Netherlands, Romania,
Spain, Switzerland and the United Kingdom (UK). The Company
understands that many of these investigations also involve other consumer goods
companies and/or retail customers. While several of the
investigations are ongoing, there have been the following results to
date:
|
●
|
In
February 2008, the federal competition authority in Germany imposed fines
on four of the Company’s competitors, but the Company was not fined due to
its cooperation with the German
authorities.
|
|
●
|
In
November 2009, the UK Office of Fair Trading informed the Company that it
was no longer pursuing its investigation of the
Company.
|
|
●
|
In
December 2009, the Swiss competition law authority imposed a fine of $5
million on the Company’s GABA subsidiary for alleged violations of
restrictions on parallel imports into Switzerland. The Company is
appealing the fine in the Swiss
courts.
|
|
●
|
In
January 2010, the Spanish competition law authority found that four
suppliers of shower gel had entered into an agreement regarding product
down-sizing, for which Colgate’s Spanish subsidiary was fined $3 million.
The Company intends to appeal the fine in the Spanish
courts.
|
|
●
|
While
the investigations of the Company’s Romanian subsidiary by the Romanian
competition authority are now closed, a complainant has
petitioned the court to reopen one of the
investigations.
|
Currently,
formal claims of violations, or statements of objections, are pending against
the Company in France and Italy. The French competition authority
alleges agreements on pricing and promotion of heavy duty detergents among four
consumer goods companies, including the Company’s French
subsidiary. The Italian competition authority alleges that 17
consumer goods companies, including the Company’s Italian subsidiary, exchanged
competitively sensitive information in the cosmetics sector. The
Company will have an opportunity to respond to each of these statements of
objections. Investigations are ongoing in the EU, France, Germany,
Greece and the Netherlands, but no formal claims of violations have been filed
in these jurisdictions.
The
Company’s policy is to comply with antitrust and competition laws and, if a
violation of any such laws is found, to take appropriate remedial action and to
cooperate fully with any related governmental inquiry. The Company has
undertaken a comprehensive review of its selling practices and related
competition law compliance in Europe and elsewhere and, where the Company has
identified a lack of compliance, it has undertaken remedial action. Competition
and antitrust law investigations often continue for several years and can result
in substantial fines for violations that are found. Such fines, depending on the
gravity and duration of the infringement as well as the value of the sales
involved, have amounted, in some cases, to hundreds of millions of dollars.
While the Company cannot predict the final financial impact of these competition
law issues as these matters may change, the Company has taken and will, as
necessary, take additional reserves as and when appropriate.
ERISA
Matters
In
October 2007, a putative class action claiming that certain aspects of the cash
balance portion of the Colgate-Palmolive Company Employees’ Retirement Income
Plan (the Plan) do not comply with the Employee Retirement Income Security Act
was filed against the Plan and the Company in the United States District Court
for the Southern District of New York. Specifically, Proesel, et al. v.
Colgate-Palmolive Company Employees’ Retirement Income Plan, et al.
alleges improper calculation of lump sum distributions, age discrimination and
failure to satisfy minimum accrual requirements, thereby resulting in the
underpayment of benefits to Plan participants. Two other putative class actions
filed earlier in 2007, Abelman, et al. v.
Colgate-Palmolive Company Employees’ Retirement Income Plan, et al., in
the United States District Court for the Southern District of Ohio, and Caufield v.
Colgate-Palmolive Company Employees’ Retirement Income Plan, in the
United States District Court for the Southern District of Indiana, both alleging
improper calculation of lump sum distributions and, in the case of Abelman, claims for
failure to satisfy minimum accrual requirements, were transferred to the
Southern District of New York and consolidated with Proesel into one
action, In re
Colgate-Palmolive ERISA Litigation. The complaint in the consolidated
action alleges improper calculation of lump sum distributions and failure to
satisfy minimum accrual requirements, but does not include a claim for age
discrimination. The relief sought includes recalculation of benefits in
unspecified amounts, pre- and post-judgment interest, injunctive relief and
attorneys’ fees. This action has not been certified as a class action as yet.
The Company and the Plan intend to contest this action vigorously should the
parties be unable to reach a settlement.
For
additional discussion of the Company’s contingencies refer to Note 13 to the
Consolidated Financial Statements.
|
ITEM
4.
|
SUBMISSION
OF MATTERS TO A VOTE OF SECURITY
HOLDERS
|
None.
PART
II
|
ITEM 5.
|
MARKET
FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
|
Refer to
the information regarding the market for the Company’s common stock and the
quarterly market price information appearing under the caption “Market and
Dividend Information”, and the “Number of common shareholders of record” under
the caption “Historical Financial Summary”. For information regarding the
securities authorized for issuance under our equity compensation plans, refer to
“Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters” included in Item 12 of this report.
Issuer Purchases of Equity
Securities
For each
of the three months in the quarter ended December 31, 2009, the Company
repurchased its common stock under a share repurchase program that was approved
by the Board of Directors in January 2008 (the 2008 Program). Under the 2008
Program, the Company was authorized to purchase up to 30 million shares of the
Company’s common stock. The Board’s authorization also provided for
share repurchases on an on-going basis to fulfill certain requirements of the
Company’s compensation and benefit programs. The shares were repurchased in open
market transactions or privately negotiated transactions at the Company’s
discretion, subject to market conditions, customary blackout periods and other
factors.
The
following table shows the stock repurchase activity for each of the three months
in the quarter ended December 31, 2009:
|
Month
|
Total Number of Shares Purchased(1)
|
Average Price Paid per
Share
|
Total Number of Shares Purchased as Part of
Publicly Announced Plans or Programs(2)
|
Maximum Number of Shares that May Yet be Purchased
Under the Plans or Programs
|
||||||||||||
|
October
1 through 31, 2009
|
437,885 | $ | 77.75 | 415,700 | 6,996,647 | |||||||||||
|
November
1 through 30, 2009
|
2,040,557 | $ | 81.95 | 2,005,000 | 4,991,647 | |||||||||||
|
December
1 through 31, 2009
|
2,528,399 | $ | 83.64 | 2,515,000 | 2,476,647 | |||||||||||
|
Total
|
5,006,841 | $ | 82.44 | 4,935,700 | ||||||||||||
____________
|
(1)
|
Includes
share repurchases under the 2008 Program and those associated with certain
employee elections under the Company’s compensation and benefit
programs.
|
|
(2)
|
The
difference between the total number of shares purchased and the total
number of shares purchased as part of publicly announced plans or programs
is 71,141 shares, all of which relate to shares surrendered to the Company
to satisfy certain employee elections under its compensation and benefit
programs.
|
(Dollars in Millions Except Per Share
Amounts)
On
February 4, 2010, the Company’s Board of Directors authorized a new share
repurchase program (the 2010 Program) effective as of that date. The
2010 Program authorizes the repurchase of up to 40 million shares of the
Company’s common stock. As with the prior program, the Board’s
authorization also provides for share repurchases on an on-going basis to
fulfill certain requirements of the Company’s compensation and benefit programs.
The shares will be repurchased from time to time in open market transactions or
privately negotiated transactions at the Company’s discretion, subject to market
conditions, customary blackout periods and other factors.
|
ITEM 6.
|
SELECTED
FINANCIAL DATA
|
Refer to
the information set forth under the caption “Historical Financial
Summary.”
|
ITEM
7.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
Executive
Overview and Outlook
Colgate-Palmolive
Company seeks to deliver strong, consistent business results and superior
shareholder returns by providing consumers on a global basis with products that
make their lives healthier and more enjoyable.
To this
end, the Company is tightly focused on two product segments: Oral, Personal and
Home Care; and Pet Nutrition. Within these segments, the Company follows a
closely defined business strategy to develop and increase market leadership
positions in key product categories. These product categories are prioritized
based on their capacity to maximize the use of the organization’s core
competencies and strong global equities and to deliver sustainable long-term
growth.
Operationally,
the Company is organized along geographic lines with specific regional
management teams having responsibility for the business and financial results in
each region. The Company competes in more than 200 countries and territories
worldwide with established businesses in all regions contributing to the
Company’s sales and profitability. This geographic diversity and balance help to
reduce the Company’s exposure to business and other risks in any one country or
part of the world.
The Oral,
Personal and Home Care segment is operated through four reportable operating
segments: North America, Latin America, Europe/South Pacific and Greater
Asia/Africa, all of which sell to a variety of retail and wholesale customers
and distributors. The Company, through Hill’s Pet Nutrition, also competes on a
worldwide basis in the pet nutrition market, selling its products principally
through the veterinary profession and specialty pet retailers.
On an
ongoing basis, management focuses on a variety of key indicators to monitor
business health and performance. These indicators include market share, sales
(including volume, pricing and foreign exchange components), organic sales
growth, gross profit margin, operating profit, net income and earnings per
share, as well as measures used to optimize the management of working capital,
capital expenditures, cash flow and return on capital. The monitoring of these
indicators and the Company’s corporate governance practices (including the
Company’s Code of Conduct) help to maintain business health and strong internal
controls.
(Dollars in Millions Except Per Share
Amounts)
To
achieve its business and financial objectives, the Company focuses the
organization on initiatives to drive and fund growth. The Company seeks to
capture significant opportunities for growth by identifying and meeting consumer
needs within its core categories, through its focus on innovation and the
deployment of valuable consumer and shopper insights in the development of
successful new products regionally, which are then rolled out on a global basis.
To enhance these efforts, the Company has developed key initiatives to build
strong relationships with consumers, dental and veterinary professionals and
retail customers. Growth opportunities are greater in emerging
markets where economic development is likely to expand the markets for the
Company’s products.
The
investments needed to fund this growth are developed through continuous,
Company-wide initiatives to lower costs and increase effective asset utilization
through which the Company seeks to become even more effective and efficient
throughout its businesses. The Company also continues to prioritize its
investments toward its higher margin businesses, specifically Oral Care,
Personal Care and Pet Nutrition.
The
Company operates in a highly competitive global marketplace and looking forward,
expects global macroeconomic and market conditions to remain highly
challenging. As disclosed in “Item 1A. Risk Factors”, with
approximately 75% of its Net sales generated outside of the United States, the
Company is exposed to changes in economic conditions and foreign currency
exchange rates, as well as political uncertainty in some countries, all of which
could impact future operating results.
Venezuela
has been designated hyper-inflationary effective January 1,
2010. Consequently, the functional currency for the Company’s
Venezuelan subsidiary will be the U.S. dollar and the impact of all future
Venezuelan currency fluctuations will be recorded in income. See
“Managing Foreign Currency, Interest Rate and Commodity Price Exposure—Foreign
Exchange Risk” below and Note 18 to the Consolidated Financial
Statements.
Also, on
January 8, 2010, the Venezuelan government announced its decision to devalue its
currency and implement a two-tier exchange rate structure. As a
result, the official exchange rate changed from 2.15 to 2.60 for essential goods
and 4.30 for non-essential goods. While we currently believe that
many of our products may receive the 2.60 rate of exchange, we will remeasure
the financial statements of our Venezuelan subsidiary for 2010 and future
periods at the rate at which we expect to remit dividends, which currently is
4.30. While difficult to project, our preliminary estimate is that
the impact of the devaluation will be a net reduction in 2010 diluted earnings
per share of between $0.06 and $0.10 per share. This includes the
ongoing negative impact from foreign exchange translation, partially offset by
one-time benefits from lower taxes on accrued but unpaid remittances and the
remeasurement of the local balance sheet at the devaluation date. As
actual results may differ, please see “Cautionary Statement on Forward-Looking
Statements” below. The Venezuelan government continues to impose
currency exchange controls. We could be negatively affected if we are
unable to obtain U.S. dollars at either of the official rates, in which case we
may have to obtain dollars through transactions on the parallel market, where
the exchange rate is less favorable. In 2009, our Venezuelan
operations contributed 6% of consolidated net sales.
Lower
commodity and oil prices as compared with 2008 had a favorable impact on the
Company’s results for 2009. The Company believes that this effect should
continue in 2010 and, coupled with ongoing aggressive savings programs and
favorable currency trends, should offset the impact of any pressures on selling
prices or the costs of any consumption building programs that may be implemented
to drive volume given the uncertain economic environment. However,
continued difficult macroeconomic conditions and uncertainties in the global
credit markets could negatively impact the Company’s suppliers, customers and
consumers which could, in turn, have an adverse impact on the Company’s
business.
(Dollars in Millions Except Per Share
Amounts)
As a
result of the Company’s four-year restructuring and business-building program
(the 2004 Restructuring Program), which was finalized as of December 31, 2008,
the Company streamlined its global supply chain, reallocated resources to
enhance its sales, marketing and new product organizations in high-potential
developing countries and other key markets and consolidated these organizations
in certain mature markets. The savings and benefits from the 2004
Restructuring Program, along with the Company’s other ongoing cost-savings and
growth initiatives, are providing funds for investment in support of key
categories and markets and new product development, while also supporting an
increased level of profitability.
The
Company believes it is well prepared to meet the challenges ahead due to its
strong financial condition, experience operating in challenging environments and
continued focus on the Company’s strategic initiatives: getting closer to the
consumer, the profession and customers; effectiveness and efficiency in
everything; innovation everywhere; and leadership. This focus, together with the
strength of the Company’s global brand names and its broad international
presence in both mature and emerging markets, should position the Company well
to increase shareholder value over the long-term.
Results
of Operations
Net
Sales
Worldwide
Net sales were $15,327 in 2009, level with 2008 as volume growth of 0.5% and net
selling price increases of 6.0% were offset by a negative foreign exchange
impact of 6.5%. Worldwide organic sales (Net sales excluding the impact of
foreign exchange, acquisitions and divestments) grew 6.5% in 2009.
Net sales
in the Oral, Personal and Home Care segment were $13,195 in 2009, level with
2008, as volume growth of 2.0% and net selling price increases of 5.5% were
offset by a negative foreign exchange impact of 7.5%. The 2008 divestment of a
non-core brand in Germany impacted sales growth in 2009 by 0.5% versus 2008.
Excluding the impact of this divestment, Net sales increased 0.5% in 2009 on
volume growth of 2.5%. Organic sales in the Oral, Personal and Home Care segment
grew 8.0% in 2009.
Net sales
in Hill’s Pet Nutrition were $2,132 in 2009, down 0.5% from 2008 as net selling
price increases of 8.5% were more than offset by 7.5% volume declines and a 1.5%
negative impact of foreign exchange. Organic sales in Hill’s Pet Nutrition grew
1.0% in 2009.
Worldwide
Net sales were $15,330 in 2008, up 11.0% from 2007, driven by volume growth of
3.5%, net selling price increases of 5.5% and a positive foreign exchange impact
of 2.0%. The 2007 divestment of the Latin American household bleach business and
the 2008 divestment of the Senegal fabric care business reduced sales growth for
2008 by 0.5% versus 2007. Excluding the impact of these divestments, Net sales
increased 11.5% in 2008 on volume growth of 4.0%. Worldwide organic sales grew
9.5% in 2008.
(Dollars in Millions Except Per Share
Amounts)
Gross
Profit
Worldwide
gross profit margin was 58.8% in 2009, 56.3% in 2008 and 56.2% in
2007. Restructuring and implementation-related charges incurred under
the 2004 Restructuring Program included in Cost of sales for the years ended
December 31, 2008 and 2007 were $59 and $154, respectively. The 2004
Restructuring Program lowered the reported gross profit margin by 40 basis
points (bps) and 110 bps in 2008 and 2007, respectively. Excluding the impact of
the 2004 Restructuring Program, gross profit margin was 56.7% in 2008 and 57.3%
in 2007. The gross profit increase in 2009 was driven by higher pricing and a
continued focus on cost-savings programs, partially offset by a negative foreign
exchange impact and costs related to the remeasurement of liabilities related to
inventory purchases in Venezuela. Excluding the impact of the 2004 Restructuring
Program, the decrease in 2008 was due to increases in raw and packaging material
costs, partially offset by higher pricing and a continued focus on cost-savings
programs.
For
additional information regarding the Company’s 2004 Restructuring Program, refer
to “Restructuring and Related Implementation Charges” below and Note 4 to the
Consolidated Financial Statements.
During
2009, due to currency exchange control limitations in Venezuela, the Company’s
Venezuelan subsidiary (CP Venezuela) settled certain of its U.S.
dollar-denominated liabilities with dollars obtained through securities
transactions in the parallel market at an exchange rate less favorable than the
official rate. As a result, in the second half of 2009, CP Venezuela incurred
$92 of higher costs related to the remeasurement of U.S. dollar liabilities to
be settled with proceeds from these transactions, $65 of which is included in
Gross profit for liabilities related to the purchase of inventory and $27 of
which is included in Other (income) expense, net for all other liabilities.
Additionally, in order to manage its overall currency exposure, CP Venezuela has
purchased $210 of U.S. dollar-denominated bonds issued by a Venezuelan
state-owned corporation and $50 of U.S. dollar-linked, devaluation-protected
bonds issued by the Venezuelan government.
Selling, General and
Administrative Expenses
Selling,
general and administrative expenses as a percentage of Net sales were 34.5% in
2009, 35.4% in 2008 and 36.1% in 2007. Included in Selling, general and
administrative expenses are charges related to the 2004 Restructuring Program of
$81 (0.5% of Net sales) in 2008 and $49 (0.4% of Net sales) in
2007. The 90 bps decrease in 2009 was driven primarily by the absence
of charges related to the 2004 Restructuring Program in 2009, lower advertising
costs (80 bps) and a continued focus on cost-savings programs, partially offset
by higher pension and benefit costs. Selling, general and administrative
expenses as a percentage of Net sales in 2008 decreased by 70 bps due to
moderating levels of advertising investment (40 bps) and a continued focus on
cost savings programs.
(Dollars in Millions Except Per Share
Amounts)
Other (Income) Expense,
Net
Other
(income) expense, net was $111, $103 and $54 in 2009, 2008 and 2007,
respectively. The components of Other (income) expense, net are presented
below:
|
Other
(income) expense, net
|
2009
|
2008
|
2007
|
|||||||||
|
Amortization
of intangible assets
|
$ | 22 | $ | 19 | $ | 18 | ||||||
|
Legal
and environmental matters
|
27 | 23 | — | |||||||||
|
Remeasurement
of certain liabilities in Venezuela
|
27 | — | — | |||||||||
|
Asset
impairments
|
16 | — | — | |||||||||
|
Equity
(income)
|
(5 | ) | (4 | ) | (4 | ) | ||||||
|
2004
Restructuring Program
|
— | 24 | 56 | |||||||||
|
Investment
losses (income)
|
— | 25 | (2 | ) | ||||||||
|
Gain
on sales of non-core product lines, net
|
— | — | (49 | ) | ||||||||
|
Pension
settlement charges
|
— | — | 15 | |||||||||
|
Hill’s
limited voluntary recall
|
— | — | 13 | |||||||||
|
Other,
net
|
24 | 16 | 7 | |||||||||
|
Total
Other (income) expense, net
|
$ | 111 | $ | 103 | $ | 54 | ||||||
Operating
Profit
In 2009,
Operating profit increased 17% to $3,615 from $3,101 in 2008. In 2008, Operating
profit increased 14% from $2,720 in 2007. Excluding the impact of the
2004 Restructuring Program and other items set forth below, Operating profit
increased 11% in 2009 and 10% in 2008 as follows:
|
%
|
%
|
|||||||||||||||||||
|
2009
|
2008
|
Change
|
2007
|
Change
|
||||||||||||||||
|
Operating
profit, GAAP
|
$ | 3,615 | $ | 3,101 | 17 | % | $ | 2,720 | 14 | % | ||||||||||
|
2004
Restructuring Program
|
— | 164 | 259 | |||||||||||||||||
|
Gain
on sale of non-core product lines, net
|
— | — | (49 | ) | ||||||||||||||||
|
Pension
settlement charges
|
— | — | 15 | |||||||||||||||||
|
Hill’s
limited voluntary recall
|
— | — | 14 | |||||||||||||||||
|
Operating
profit, non-GAAP
|
$ | 3,615 | $ | 3,265 | 11 | % | $ | 2,959 | 10 | % | ||||||||||
Interest Expense,
Net
Interest
expense, net was $77 in 2009 compared with $96 in 2008 and $157 in 2007. The
decrease in Interest expense, net from 2008 to 2009 was due to lower average
interest rates and lower debt levels. The decrease in Interest
expense, net from 2007 to 2008 was due to lower average interest
rates.
(Dollars in Millions Except Per Share
Amounts)
Income
Taxes
The
effective income tax rate was 32.2% in both 2009 and 2008, and 29.6% in 2007.
The tax rate in all years benefited from global tax planning strategies. The
2007 effective tax rate reflects a 300 bps reduction from the recognition of $74
of tax benefits as a result of the reduction of a tax loss carryforward
valuation allowance in Brazil of $95 that was partially offset by tax provisions
for the recapitalization of certain overseas subsidiaries and increases of 40
bps from the impact of the Company’s 2004 Restructuring Program and 10 bps from
the sale of the household bleach business in Latin America.
The
impact of the 2004 Restructuring Program on the effective income tax rate for an
individual period depended on the projects and the related tax jurisdictions
involved. The tax benefit derived from the charges incurred in 2008 and 2007 for
the 2004 Restructuring Program was at a rate of 31.4% and 28.9%,
respectively.
For
additional information regarding the Company’s income taxes, refer to Note 11 to
the Consolidated Financial Statements.
Net
Income
Net
income was $2,291, or $4.37 per share on a diluted basis in 2009 compared with
$1,957, or $3.66 per share on a diluted basis in 2008 and $1,737 or $3.20 per
share in 2007. Net income in 2008 included $113 ($0.21 per share) of charges
related to the Company’s 2004 Restructuring Program. Net income in
2007 included a $30 ($0.05 per share) gain on the sale of the household bleach
business in Latin America and an income tax benefit of $74 ($0.14 per share)
related to the tax items noted above, which were more than offset by $184 ($0.34
per share) of charges related to the Company’s 2004 Restructuring Program, $10
($0.02 per share) of pension settlement charges and $8 ($0.01 per share) of
charges related to the limited voluntary recall of certain Hill’s Pet Nutrition
feline products.
Segment
Results
The
Company markets its products in over 200 countries and territories throughout
the world in two distinct business segments: Oral, Personal and Home Care; and
Pet Nutrition. The Company evaluates segment performance based on
several factors, including Operating profit. The Company uses Operating profit
as a measure of the operating segment performance because it excludes the impact
of corporate-driven decisions related to interest expense and income
taxes.
To
conform to the current year presentation required by the Consolidation Topic of
the Financial Accounting Standards Board (FASB) Codification, the amounts of Net
income attributable to noncontrolling interests in less-than-wholly owned
subsidiaries of $80 and $67 for years ended December 31, 2008 and December 31,
2007, respectively, which were previously deducted from Greater Asia/Africa
Operating profit, have been reclassified to a new line below Operating
profit.
(Dollars in Millions Except Per Share
Amounts)
Worldwide
Net Sales by Business Segment and Geographic Region
|
2009
|
2008
|
2007
|
||||||||||
|
Oral,
Personal and Home Care
|
||||||||||||
|
North
America
|
$ | 2,950 | $ | 2,852 | $ | 2,721 | ||||||
|
Latin
America
|
4,319 | 4,088 | 3,489 | |||||||||
|
Europe/South
Pacific
|
3,271 | 3,582 | 3,383 | |||||||||
|
Greater
Asia/Africa
|
2,655 | 2,660 | 2,338 | |||||||||
|
Total
Oral, Personal and Home Care
|
13,195 | 13,182 | 11,931 | |||||||||
|
Pet
Nutrition
|
2,132 | 2,148 | 1,859 | |||||||||
|
Total
Net sales
|
$ | 15,327 | $ | 15,330 | $ | 13,790 | ||||||
Worldwide
Operating Profit by Business Segment and Geographic Region
|
2009
|
2008
|
2007
|
||||||||||
|
Oral,
Personal and Home Care
|
||||||||||||
|
North
America
|
$ | 843 | $ | 689 | $ | 667 | ||||||
|
Latin
America
|
1,360 | 1,181 | 1,006 | |||||||||
|
Europe/South
Pacific
|
748 | 746 | 764 | |||||||||
|
Greater
Asia/Africa
|
631 | 527 | 430 | |||||||||
|
Total
Oral, Personal and Home Care
|
3,582 | 3,143 | 2,867 | |||||||||
|
Pet
Nutrition
|
555 | 542 | 487 | |||||||||
|
Corporate
|
(522 | ) | (584 | ) | (634 | ) | ||||||
|
Total
Operating profit
|
$ | 3,615 | $ | 3,101 | $ | 2,720 | ||||||
North
America
Net sales
in North America increased 3.5% in 2009 to $2,950 as a result of 4.0% volume
growth and level selling prices, partially offset by a 0.5% negative impact of
foreign exchange. Organic sales in North America grew 4.0% in 2009. Products
contributing to growth in oral care included Colgate Total Enamel Strength,
Colgate Sensitive Enamel Protect and Colgate Max White with Mini Bright Strips
toothpastes, Colgate 360° ActiFlex, Colgate Max Fresh and Colgate Max White
manual toothbrushes and the new Colgate Wisp mini-brush. Products contributing
to growth in other categories included Softsoap Nutri Serums, Softsoap Body
Butter Coconut Scrub, Irish Spring Hair and Body and Cool Relief body washes,
and Palmolive Pure + Caring and Ajax Lime with Bleach Alternative dish liquids.
Net sales in North America increased 5.0% in 2008 to $2,852 as a result of 1.5%
volume growth and net selling price increases of 3.5%.
Operating
profit in North America increased 22% in 2009 to $843 due to sales growth,
cost-saving initiatives and lower raw and packaging material
costs. In 2008, Operating profit in North America increased 3% to
$689 due to sales growth and the benefits from restructuring and other
cost-saving initiatives, partially offset by higher raw and packaging material
costs.
(Dollars in Millions Except Per Share
Amounts)
Latin
America
Net sales
in Latin America increased 5.5% in 2009 to $4,319 as a result of 3.0% volume
growth and net selling price increases of 13.5%, partially offset by an 11.0%
negative impact of foreign exchange. Organic sales in Latin America grew 16.5%
in 2009. Volume gains were led by Brazil, Venezuela, Colombia, and Mexico.
Products contributing to growth in oral care included Colgate Total Professional
Sensitive, Colgate Total Professional Whitening and Colgate Triple Action
toothpastes, Colgate 360° ActiFlex, Colgate 360° Deep Clean and Colgate Max
White manual toothbrushes and Colgate Plax Complete Care and Colgate Plax
Sensitive mouthwashes. Products contributing to growth in other categories
included Protex Aloe bar soap, Axion Professional dish liquid, Lady Speed Stick
Depil Control and Speed Stick Waterproof deodorants, and Suavitel GoodBye
Ironing and Suavitel Magic Moments fabric conditioners. In 2008, Net sales in
Latin America increased 17.0% to $4,088 as a result of 6.0% volume growth, net
selling price increases of 9.5% and 1.5% positive impact of foreign exchange.
The divestment of the Latin American household bleach business reduced 2008
sales growth by 0.5% versus the comparable period of 2007. Excluding the impact
of this divestment, Net sales increased 17.5% in 2008 on volume growth of 6.5%.
Organic sales grew in Latin America 16.0% in 2008.
Operating
profit in Latin America increased 15% in 2009 to $1,360 as a result of sales
growth and cost-saving initiatives. In 2008, Operating profit in
Latin America increased 17% to $1,181 as a result of sales growth and the
benefits from restructuring and other cost-saving initiatives, which more than
offset increased raw material costs and advertising spending.
Europe/South
Pacific
Net sales
in Europe/South Pacific decreased 8.5% in 2009 to $3,271 as net selling price
increases of 0.5% were more than offset by 0.5% in volume declines and an 8.5%
negative impact of foreign exchange. The 2008 divestment of a non-core brand in
Germany impacted sales growth for 2009 by 0.5% versus 2008. Excluding the impact
of this divestment, Net sales decreased 8.0% in 2009 and volume was level with
2008. Organic sales in Europe/South Pacific grew 0.5% in 2009. Volume gains in
the United Kingdom, Greece, Denmark and Australia were more than offset by
volume declines in Spain, Germany, Slovenia and Ireland. Products contributing
to growth in oral care included Colgate Sensitive Pro-Relief, Colgate Total
Advanced Clean and Colgate Max Fresh with Mouthwash Beads toothpastes, Colgate
360° ActiFlex and Colgate Max White manual toothbrushes and Colgate Plax Alcohol
Free and Colgate Plax Ice mouth rinses. Products contributing to growth in other
categories included Palmolive Aromatherapy Morning Tonic shower gel, Ajax
Professional bucket dilutable and Ajax Professional glass cleaners, Lady Speed
Stick Clinical Protection and Lady Speed Stick Depil Protect deodorants and
Soupline Magic Moments and Soupline Aroma Tranquility fabric conditioners. In
2008, Net sales in Europe/South Pacific increased 6.0% to $3,582 as a result of
0.5% volume growth and a 5.5% positive impact of foreign exchange. Organic sales
in Europe/South Pacific grew 0.5% in 2008.
Operating
profit in Europe/South Pacific was level at $748 in 2009, as a continued focus
on cost-savings programs, lower advertising costs and lower raw and packaging
material costs offset the negative impact of foreign exchange. In 2008,
Operating profit in Europe/South Pacific decreased 2% to $746, reflecting higher
raw and packaging material costs, as well as higher selling, general and
administrative costs, partially due to increased advertising
spending.
(Dollars in Millions Except Per Share
Amounts)
Greater
Asia/Africa
Net sales
in Greater Asia/Africa were level in 2009 at $2,655 as volume growth of 2.0% and
net selling prices of 6.0% were offset by a 8.0% negative impact of foreign
exchange. Organic sales in Greater Asia/Africa grew 8.0% in 2009. Volume gains
were led by India, the Greater China region, Turkey and Thailand. Products
driving oral care growth included Colgate Sensitive Pro-Relief, Colgate Total
Professional Clean and Colgate 360° Whole Mouth Clean toothpastes, Colgate 360°
ActiFlex and Colgate Max White manual toothbrushes and Colgate Plax Ice and
Colgate Plax Complete Care mouthwashes. Products contributing to growth in other
categories included Palmolive Spa Banya shower liquid and bar soap and Lady
Speed Stick Depil Control deodorant. In 2008, Net sales in Greater Asia/Africa
increased 14.0% to $2,660 as a result of 7.0% volume growth, an increase in net
selling prices of 5.5% and a 1.5% positive impact of foreign exchange. The
divestment of the Senegal fabric care business reduced 2008 sales growth by 0.5%
versus 2007. Excluding the impact of this divestment, sales increased 14.5% in
2008 on volume growth of 7.5%. Organic sales in Greater Asia/Africa grew 13.0%
in 2008.
Operating
profit in Greater Asia/Africa increased 20% in 2009 to $631, reflecting higher
pricing, lower raw and packaging material costs and cost-saving initiatives. In
2008, Operating profit in Greater Asia/Africa increased 23% to $527 as a result
of sales growth and cost-saving initiatives, which more than offset higher raw
material costs and advertising spending.
Hill’s
Pet Nutrition
Net sales
for Hill’s Pet Nutrition decreased 0.5% in 2009 to $2,132 as 8.5% net selling
price increases were more than offset by 7.5% volume declines and a 1.5%
negative impact of foreign exchange. Volume was negatively impacted in part due
to price increases taken in late 2008 and early 2009 in response to
significantly higher commodity costs. Organic sales in Hill’s Pet Nutrition grew
1.0% in 2009. New products contributing to sales in the U.S. specialty channel
include a significantly expanded line of Science Diet Simple Essentials Treats
Canine. New pet food products contributing to international sales include
Science Plan Snacks Canine and Science Plan Healthy Mobility Canine. In 2008,
Net sales for Hill’s Pet Nutrition increased 15.5% to $2,148 as a result of 2.5%
volume growth, an increase in net selling prices of 10.5% and a 2.5% positive
impact of foreign exchange. Organic sales in Hill’s Pet Nutrition
grew 13.0% in 2008.
Operating
profit for Hill’s Pet Nutrition increased 2% to $555 in 2009 due to higher
pricing, lower raw and packaging material costs and cost-saving initiatives. In
2008, the Operating profit increased 11% to $542 due to increased sales
partially offset by higher agricultural commodities costs and higher advertising
spending.
Like most
major North American pet food producers, Hill’s Pet Nutrition was affected by
the U.S. Food and Drug Administration’s pet food recall in March 2007. Hill’s
took the precaution of conducting a voluntary recall of a small number of its
products that may have been affected. These products accounted for less than
0.5% of Hill’s Pet Nutrition’s annual Net sales. The related sales loss did not
have a significant impact on the Company’s 2007 annual Net sales or Operating
profit. Hill’s Pet Nutrition’s Operating profit for 2007 does not reflect the
impact of the recall as these costs have been included in the Corporate
segment.
(Dollars in Millions Except Per Share
Amounts)
Corporate
Operating
profit (loss) for the Corporate segment was ($522), ($584) and ($634) in 2009,
2008 and 2007, respectively. Corporate operations include Corporate overhead
costs, research and development costs, stock-based compensation related to stock
options and restricted stock awards, restructuring and related implementation
costs, gains and losses on sales of non-core product lines and assets, and, in
2007, certain pension settlement charges as well as the impact on Operating
profit of the limited voluntary recall of certain Hill’s Pet Nutrition feline
products. The components of Operating profit (loss) for the Corporate segment
are presented below:
|
2009
|
2008
|
2007
|
||||||||||
|
Gain
on sales of non-core product lines, net
|
$ | — | $ | — | $ | 49 | ||||||
|
2004
Restructuring Program
|
— | (164 | ) | (259 | ) | |||||||
|
Pension
settlement charges
|
— | — | (15 | ) | ||||||||
|
Hill’s
limited voluntary recall
|
— | — | (14 | ) | ||||||||
|
Corporate
overhead costs and other, net
|
(522 | ) | (420 | ) | (395 | ) | ||||||
|
Total
Corporate Operating profit (loss)
|
$ | (522 | ) | $ | (584 | ) | $ | (634 | ) | |||
Corporate
Operating profit (loss) in 2009 decreased as compared to 2008, primarily due to
the absence of charges related to the 2004 Restructuring Program,
offset by higher Corporate overhead costs, primarily pension and benefit
costs.
Corporate
Operating profit (loss) in 2008 decreased as compared to 2007, primarily due to
lower charges related to the 2004 Restructuring Program, partially offset by
higher charges for legal and environmental costs and investment
losses. In addition, 2007 includes the negative impact of pension
settlement charges and the negative impact of the limited voluntary recall of
certain Hill’s Pet Nutrition feline products.
For
additional information regarding the Company’s 2004 Restructuring Program, refer
to “Restructuring and Related Implementation Charges” below and Note 4 to the
Consolidated Financial Statements.
Non-GAAP Financial
Measures
Net sales
and volume growth, both worldwide and in relevant geographic divisions, are
discussed in this Annual Report on Form 10-K both on a GAAP basis and excluding
divestments (non-GAAP). Management believes these non-GAAP financial measures
provide useful supplemental information to investors as they allow comparisons
of Net sales and volume growth from ongoing operations. This Annual
Report on Form 10-K also discusses organic sales growth (Net sales growth
excluding the impact of foreign exchange, acquisitions and divestments)
(non-GAAP). Management believes this measure provides investors with
useful supplemental information regarding the Company’s underlying sales trends
by presenting sales growth excluding the external factor of foreign exchange, as
well as the impact of acquisitions and divestments.
Worldwide
Gross profit margin and Operating profit are discussed in this Annual Report on
Form 10-K both on a GAAP basis and excluding the impact of the 2004
Restructuring Program and other items (non-GAAP). Management believes these
non-GAAP financial measures provide useful supplemental information to investors
regarding the underlying business trends and performance of the Company’s
ongoing operations and are useful for period-over-period comparisons of such
operations.
(Dollars in Millions Except Per Share
Amounts)
The
Company uses the above financial measures internally in its budgeting process
and as a factor in determining compensation. While the Company believes that
these non-GAAP financial measures are useful in evaluating the Company’s
business, this information should be considered as supplemental in nature and is
not meant to be considered in isolation or as a substitute for the related
financial information prepared in accordance with GAAP. In addition, these
non-GAAP financial measures may not be the same as similar measures presented by
other companies.
Restructuring
and Related Implementation Charges
2004
Restructuring Program
The
Company’s 2004 Restructuring Program to enhance the Company’s global leadership
position in its core businesses was finalized as of December 31, 2008 and there
were no charges incurred in the twelve months ended December 31, 2009. The
restructuring accrual decreased from $33 at December 31, 2008 to $15 at December
31, 2009, primarily due to cash payments for termination benefits, exit
activities and the implementation of strategies.
Charges
incurred in connection with the implementation of various projects since
inception were as follows:
|
Cumulative
Charges as of December 31,
2008
|
||||
|
Termination
Benefits
|
$ | 426 | ||
|
Incremental
Depreciation
|
222 | |||
|
Asset
Impairments
|
47 | |||
|
Other
|
374 | |||
|
Total
cumulative 2004 Restructuring Program charges, pretax
|
$ | 1,069 | ||
Other
charges primarily consisted of implementation-related charges resulting directly
from exit activities and the implementation of new strategies as a result of the
2004 Restructuring Program. These charges included ramp-down costs related to
the closure of existing facilities, start-up costs for new facilities and
third-party incremental costs related to the development and implementation of
new business and strategic initiatives. Since the inception of the 2004
Restructuring Program in December 2004, the Company has incurred $46 of charges
related to start-up costs for new manufacturing facilities and $137 of costs for
the development and implementation of new business and strategic
initiatives.
Total
charges related to the 2004 Restructuring Program were as follows: North America
(36%), Europe/South Pacific (28%), Latin America (4%), Greater Asia/Africa
(10%), Hill’s Pet Nutrition (1%) and Corporate (21%).
(Dollars in Millions Except Per Share
Amounts)
For the
years ended December 31, 2008 and 2007, restructuring and implementation-related
charges were reflected in the income statement as follows:
|
2008
|
2007
|
|||||||
|
Cost
of sales
|
$ | 59 | $ | 154 | ||||
|
Selling,
general and administrative expenses
|
81 | 49 | ||||||
|
Other
(income) expense, net
|
24 | 56 | ||||||
|
Total
2004 Restructuring Program charges, pretax
|
$ | 164 | $ | 259 | ||||
|
Total
2004 Restructuring Program charges, aftertax
|
$ | 113 | $ | 184 | ||||
Restructuring
and implementation-related charges in the preceding table were recorded in the
Corporate segment as these decisions were centrally directed and controlled and
were not included in internal measures of segment operating
performance.
The
following table summarizes the activity for the restructuring and
implementation-related charges discussed above and the related accrual
balances:
|
Termination Benefits
|
Incremental Depreciation
|
Asset Impairments
|
Other
|
Total
|
||||||||||||||||
|
Balance
at December 31, 2006
|
$ | 53 | $ | — | $ | — | $ | 12 | $ | 65 | ||||||||||
|
Charges
|
81 | 41 | — | 137 | 259 | |||||||||||||||
|
Cash
payments
|
(65 | ) | — | — | (138 | ) | (203 | ) | ||||||||||||
|
Charges
against assets
|
(14 | ) | (41 | ) | — | (5 | ) | (60 | ) | |||||||||||
|
Other
|
(2 | ) | — | — | 3 | 1 | ||||||||||||||
|
Foreign
exchange
|
2 | — | — | — | 2 | |||||||||||||||
|
Balance
at December 31, 2007
|
$ | 55 | $ | — | $ | — | $ | 9 | $ | 64 | ||||||||||
|
Charges
|
33 | 20 | (12 | ) | 123 | 164 | ||||||||||||||
|
Cash
payments
|
(74 | ) | — | — | (121 | ) | (195 | ) | ||||||||||||
|
Charges
against assets
|
(3 | ) | (20 | ) | 12 | 21 | 10 | |||||||||||||
|
Other
|
— | — | — | (7 | ) | (7 | ) | |||||||||||||
|
Foreign
exchange
|
1 | — | — | (4 | ) | (3 | ) | |||||||||||||
|
Balance
at December 31, 2008
|
$ | 12 | $ | — | $ | — | $ | 21 | $ | 33 | ||||||||||
|
Charges
|
— | — | — | — | — | |||||||||||||||
|
Cash
payments
|
(7 | ) | — | — | (11 | ) | (18 | ) | ||||||||||||
|
Charges
against assets
|
— | — | — | — | — | |||||||||||||||
|
Other
|
— | — | — | — | — | |||||||||||||||
|
Foreign
exchange
|
(1 | ) | — | — | 1 | — | ||||||||||||||
|
Balance
at December 31, 2009
|
$ | 4 | $ | — | $ | — | $ | 11 | $ | 15 | ||||||||||
Termination
benefits incurred pursuant to the 2004 Restructuring Program were calculated
based on long-standing benefit practices, local statutory requirements and, in
certain cases, voluntary termination arrangements. Termination benefits also
include pension enhancements amounting to $3 in 2008, which are reflected as
Charges against assets within Termination benefits in the preceding table, as
the corresponding balance sheet amounts are reflected as a reduction of pension
assets or an increase in pension liabilities.
(Dollars in Millions Except Per Share
Amounts)
Incremental
depreciation was recorded to reflect changes in useful lives and estimated
residual values for long-lived assets that are taken out of service prior to the
end of their normal service period. Asset impairments have been recorded to
write down assets held for sale or disposal to their fair value based on amounts
expected to be realized. Within Asset impairments, charges are net of gains
realized on the sale of assets.
During
2008, Other charges related to start-up costs for new manufacturing facilities
were $5 and costs incurred for the development and implementation of new
business and strategic initiatives were $66. Start-up costs for new
facilities and third-party incremental costs related to the development and
implementation of new business and strategic initiatives were expensed as
incurred.
Liquidity and Capital
Resources
The
Company expects cash flow from operations and debt issuances will be sufficient
to meet foreseeable business operating and recurring cash needs (including debt
service, dividends, capital expenditures and planned stock repurchases). The
Company believes its strong cash-generating capability and financial condition
should continue to allow it broad access to financial markets
worldwide.
Cash
Flow
Net cash
provided by operations in 2009 was $3,277 as compared with $2,302 in 2008 and
$2,252 in 2007. The increase in 2009 as compared to 2008 is primarily related to
improved profitability, decreased working capital and lower cash spending
related to the 2004 Restructuring Program, partially offset by higher tax
payments. The increase in 2008 as compared to 2007 reflects the
Company’s improved profitability, offset by increased working capital, higher
tax payments and higher voluntary cash contributions to the Company’s U.S.
postretirement benefit plans.
The
Company defines working capital as the difference between current assets
(excluding cash and cash equivalents and marketable securities, the latter of
which is reported in Other current assets) and current liabilities (excluding
short-term debt). Overall, the Company’s working capital decreased to (0.4%) of
Net sales in 2009 as compared with 2.5% in 2008. The decrease in working capital
in 2009 is primarily related to improved accounts receivable days’ sales
outstanding and decreased inventory days outstanding, while current liabilities
including income taxes increased with our profitability. In 2008,
higher balances in accounts receivable were due primarily to higher Net
sales. Additionally, inventory and accounts payable and other
accruals increased in 2008 as a result of raw material cost increases and
inventory build-up for new product launches and promotional
activities.
Investing
activities used $841 of cash during 2009 compared with uses of $613 and $528
during 2008 and 2007, respectively. Investing activities for 2009 included the
purchase of $210 of U.S. dollar-denominated bonds issued by a Venezuelan
state-owned corporation and $50 of U.S. dollar-linked, devaluation-protected
bonds issued by the Venezuelan government. The increase in use in 2008 as
compared to 2007 was primarily due to higher capital spending and lower proceeds
from the sale of property and non-core product lines, offset by lower payments
for acquisitions.
(Dollars in Millions Except Per Share
Amounts)
Capital
expenditures were $575, $684 and $583 for 2009, 2008 and 2007, respectively.
Lower capital expenditures in 2009 reflected the completion during the year of
certain capacity expansions, as well as the completion of the 2004 Restructuring
Program at the end of 2008. Capital spending continues to focus
primarily on projects that yield high aftertax returns. Overall capital
expenditures for 2010 are expected to represent approximately 3.5% of Net
sales.
Investing
activities in 2009 and 2008 included $17 and $58, respectively, of proceeds from
the sale of certain assets, including certain asset sales in 2008 related to the
2004 Restructuring Program. Investing activities in 2007 included $67
of net proceeds from the sale of the Company’s Latin American household bleach
business and $43 of proceeds from the sale of other property related to the 2004
Restructuring Program. In 2007, the Company increased its ownership
interest in one of its subsidiaries in China to 100% at a cost of
$27.
Financing
activities used $2,270 of cash during 2009 compared to $1,530 and $1,803 during
2008 and 2007, respectively. The increase in 2009 was primarily due
to higher net debt payments and an increase in dividends paid. The
decrease in 2008 was primarily due to fewer repurchases of common
stock.
Long-term
debt decreased to $3,147 as of December 31, 2009 as compared to $3,676 as of
December 31, 2008 and total debt decreased to $3,182 as of December 31, 2009 as
compared to $3,783 as of December 31, 2008. The Company’s long-term debt is
rated AA- by Standard & Poor’s and Aa3 by Moody’s Investors
Service.
At
December 31, 2009, the Company had access to unused domestic and foreign lines
of credit of $3,014 and could also issue medium-term notes pursuant to an
effective shelf registration statement. In August 2008, the Company increased
the borrowing capacity under its domestic revolving credit facility from $1,500
to $1,600 by adding two banks to the syndicate of banks participating in the
revolving credit facility. The facility has an expiration date of
November 2012. These domestic lines are available for general
corporate purposes and to support the issuance of commercial paper.
During
the third quarter of 2009, the Company issued $300 of U.S. dollar-denominated
six-year notes at a fixed rate of 3.15% under the Company’s shelf registration
statement. Proceeds from the debt issuance were primarily used to reduce
commercial paper borrowings. In addition, during the third quarter of 2009, to
effectively convert a portion of the Company’s fixed rate debt portfolio to a
variable rate, the Company also entered into interest rate swaps, with a total
notional value of $330.
During
2008, the Company issued $250 of five-year notes at a fixed rate of 4.2% under
the Company’s shelf registration statement. The Company
simultaneously entered into interest rate swaps to effectively convert the fixed
interest rate of the notes to a variable rate. During 2008, the
Company also issued approximately $75 of forty-year notes at a variable rate,
also under the shelf registration statement. Proceeds from the debt
issuances were used to repay $100 of medium-term notes with an original maturity
of May 2017 and to reduce commercial paper borrowings.
During
2007, the Company issued 250 million of Euro-denominated medium-term notes
maturing in June 2014 at a fixed interest rate of 4.75%, payable
annually. The net proceeds of approximately $332 (248 million Euros)
from the issuance were used to pay down U.S. dollar-denominated commercial
paper.
(Dollars in Millions Except Per Share
Amounts)
Domestic
and foreign commercial paper outstanding was $0 and $735 as of December 31, 2009
and 2008, respectively. The average daily balances outstanding for commercial
paper in 2009 and 2008 were $1,144 and $1,284, respectively. These
borrowings carry a Standard & Poor’s rating of A-1+ and a Moody’s Investors
Service rating of P-1. The Company regularly classifies commercial paper and
certain current maturities of notes payable as long-term debt as it has the
intent and ability to refinance such obligations on a long-term basis,
including, if necessary, by utilizing its line of credit that expires in
2012.
Certain
of the facilities with respect to the Company’s bank borrowings contain
cross-default provisions. Noncompliance with these requirements could ultimately
result in the acceleration of amounts owed. The Company is in full compliance
with all such requirements and believes the likelihood of noncompliance is
remote. See Note 6 to the Consolidated Financial Statements for further
information about the Company’s long-term debt and credit
facilities.
Dividend
payments in 2009 were $981, an increase from $889 in 2008 and $798 in 2007.
Common stock dividend payments increased to $1.72 per share in 2009 from $1.56
per share in 2008 and $1.40 per share in 2007. The Series B Preference stock
dividend payments increased to $13.76 per share in 2009 from $12.48 per share in
2008 and $11.20 per share in 2007. On February 4, 2010, the Company’s
Board of Directors increased the quarterly common stock cash dividend to $0.53
per share, effective as of the second quarter 2010.
The
Effect of exchange rate changes on Cash and cash equivalents in 2009 primarily
reflects the premium associated with acquiring U.S. dollar currency through
parallel market transactions in Venezuela.
The
Company repurchases its shares of common stock in the open market and in private
transactions to maintain its targeted capital structure and to fulfill certain
requirements of its compensation and benefit plans. The repurchases are made
pursuant to programs authorized by the Company’s Board of
Directors. Shares repurchased from January 30, 2008 through February
4, 2010 were repurchased pursuant to a program authorized by the Board on
January 30, 2008 (the 2008 Program) and shares repurchased from March 9, 2006 to
January 29, 2008 were repurchased pursuant to a program authorized by the Board
on March 9, 2006 (the 2006 Program). On February 4, 2010, the
Company’s Board of Directors authorized a new share repurchase program (the 2010
Program) which replaced the 2008 Program. The 2010 Program authorizes the
repurchase of up to 40 million shares of the Company’s common
stock.
Aggregate
repurchases in 2009 included 13.9 million common shares under the 2008 Program
and 1.0 million common shares to fulfill the requirements of compensation and
benefit plans, for a total purchase price of $1,063. Aggregate
repurchases in 2008 included 13.8 million common shares under both the 2008
Program and the 2006 Program, and 0.9 million common shares to fulfill the
requirements of compensation and benefit plans, for a total purchase price of
$1,073. Aggregate repurchases in 2007 included 20.8 million common
shares for a total purchase price of $1,269.
(Dollars in Millions Except Per Share
Amounts)
The
following represents the scheduled maturities of the Company’s contractual
obligations as of December 31, 2009:
|
Payments Due by Period
|
||||||||||||||||||||||||||||
|
Total
|
2010
|
2011
|
2012
|
2013
|
2014
|
Thereafter
|
||||||||||||||||||||||
|
Long-term
debt including current portion
|
$ | 3,147 | $ | 326 | $ | 639 | $ | 341 | $ | 262 | $ | 358 | $ | 1,221 | ||||||||||||||
|
Net
cash interest payments on long-term debt(1)
|
686 | 110 | 98 | 87 | 68 | 58 | 265 | |||||||||||||||||||||
|
Leases
|
1,283 | 185 | 158 | 140 | 121 | 109 | 570 | |||||||||||||||||||||
|
Purchase
obligations(2)
|
551 | 287 | 140 | 77 | 25 | 11 | 11 | |||||||||||||||||||||
|
Total(3)
|
$ | 5,667 | $ | 908 | $ | 1,035 | $ | 645 | $ | 476 | $ | 536 | $ | 2,067 | ||||||||||||||
____________
|
(1)
|
Includes
the net interest payments on fixed and variable rate debt and associated
interest rate swaps. Interest payments associated with floating rate
instruments are based on management’s best estimate of projected interest
rates for the remaining term of variable rate
debt.
|
|
(2)
|
The
Company had outstanding contractual obligations with suppliers at the end
of 2009 for the purchase of raw, packaging and other materials and
services in the normal course of business. These purchase obligation
amounts represent only those items which are based on agreements that are
enforceable and legally binding and that specify minimum quantity, price
and term and do not represent total anticipated
purchases.
|
|
(3)
|
Long-term
liabilities associated with the Company’s postretirement plans are
excluded from the table above due to the uncertainty of the timing of
these cash disbursements. The amount and timing of cash funding related to
these benefit plans will generally depend on local regulatory
requirements, various economic assumptions (the most significant of which
are detailed in “Critical Accounting Policies and Use of Estimates,”
below) and voluntary Company contributions. Based on current
information, the Company does not anticipate having to make any mandatory
contributions to its qualified U.S. pension plan until
2012. Management’s best estimate of cash requirements to be
paid directly from the Company’s assets for its postretirement plans for
the year ending December 31, 2010, is approximately $120, including
approximately $35 for other retiree benefit plans. These estimated cash
requirements include approximately $55 of projected contributions to the
Company’s postretirement plans, comprised of $35 of voluntary
contributions to our U.S. pension plans and approximately $20 of projected
benefit payments made directly to participants of unfunded
plans.
|
Liabilities
for unrecognized income tax benefits are excluded from the table above as the
Company is unable to reasonably predict the ultimate amount or timing of a
settlement of such liabilities. See Note 11 to the Consolidated
Financial Statements for more information.
As more
fully described in Note 13 to the Consolidated Financial Statements, the Company
is contingently liable with respect to lawsuits, environmental matters, taxes
and other matters arising in the ordinary course of business.
(Dollars in Millions Except Per Share
Amounts)
Off-Balance
Sheet Arrangements
The
Company does not have off-balance sheet financing or unconsolidated special
purpose entities.
Managing
Foreign Currency, Interest Rate and Commodity Price Exposure
The
Company is exposed to market risk from foreign currency exchange rates, interest
rates and commodity price fluctuations. Volatility relating to these exposures
is managed on a global basis by utilizing a number of techniques, including
working capital management, selling price increases, selective borrowings in
local currencies and entering into selective derivative instrument transactions,
issued with standard features, in accordance with the Company’s treasury and
risk management policies. The Company’s treasury and risk management policies
prohibit the use of leveraged derivatives for any purpose as well as derivatives
for trading purposes.
The
sensitivity of our financial instruments to these market fluctuations is
discussed below. See Note 2 and Note 7 to the Consolidated Financial Statements
for further discussion of derivatives and hedging policies and fair value
measurements.
Foreign
Exchange Risk
As the
Company markets its products in over 200 countries and territories, it is
exposed to currency fluctuations related to manufacturing and selling its
products in currencies other than the U.S. dollar. Our foreign currency
exposures reflect the Company’s operations in the markets in Latin America (28%
of Net sales), Europe/South Pacific (21% of Net sales) and Asia/Africa (17% of
Net sales). The Company manages its foreign currency exposures in these markets
through a combination of cost-containment measures, selling price increases and
foreign currency hedging of certain costs in an effort to minimize the impact on
earnings of foreign currency rate movements. See the “Results of Operations”
section above for discussion of the foreign exchange impact on Net sales in each
segment.
The
assets and liabilities of foreign subsidiaries, other than those operating in
highly inflationary environments, are translated into U.S. dollars at year-end
exchange rates with resulting translation gains and losses accumulated in a
separate component of shareholders’ equity. Income and expense items are
translated into U.S. dollars at average rates of exchange prevailing during the
year.
For
subsidiaries operating in highly inflationary environments, inventories,
prepaids, goodwill and property, plant and equipment are remeasured at their
historical exchange rates, while other assets and liabilities are remeasured at
year-end exchange rates. Remeasurement adjustments for these operations are
included in Net income.
The
Company primarily utilizes foreign currency contracts, including forward and
swap contracts, local currency deposits and local currency borrowings to hedge
portions of its exposures relating to foreign currency purchases, assets and
liabilities created in the normal course of business and the net investment in
certain foreign subsidiaries. The duration of foreign currency
contracts generally does not exceed 12 months and the contracts are valued using
observable forward rates.
(Dollars in Millions Except Per Share
Amounts)
Our
foreign currency forward contracts that qualify for cash flow hedge accounting
resulted in net unrealized gains of $4 at December 31, 2009 and net unrealized
losses of $5 at December 31, 2008. Changes in the fair value of cash flow hedges
are recorded in Other comprehensive income (loss) and are reclassified into
earnings in the same period or periods during which the underlying hedged
transaction is recognized in earnings. At the end of 2009, an unfavorable 10%
change in exchange rates would have resulted in a net unrealized loss of
$17.
Interest
Rate Risk
The
Company manages its targeted mix of fixed and floating rate debt with debt
issuances and by entering into interest rate swaps in order to mitigate
fluctuations in earnings and cash flows that may result from interest rate
volatility. The notional amount, interest payment and maturity date
of the swaps match the principal, interest payment and maturity date of the
related debt in all cases, and the swaps are valued using observable benchmark
rates.
Based on
year-end 2009 variable rate debt levels, a 1-percentage-point increase in
interest rates would have increased Interest expense, net by $10 in
2009.
Commodity
Price Risk
The
Company is exposed to price volatility related to raw materials used in
production, such as resins, tallow, corn and soybeans. The Company manages its
raw material exposures through a combination of cost containment measures,
ongoing productivity initiatives and the limited use of commodity hedging
contracts. Futures contracts are used on a limited basis, primarily in the Pet
Nutrition segment, to manage volatility related to anticipated raw material
inventory purchases of certain traded commodities.
Our open
commodity derivative contracts, which qualify for cash flow hedge accounting,
resulted in net unrealized losses of $0 and $7 for the years ended December 31,
2009 and 2008, respectively. At the end of 2009, an unfavorable 10% change in
commodity futures prices would have resulted in an unrealized net loss of
$1.
Credit
Risk
The
Company is exposed to the risk of credit loss in the event of nonperformance by
counterparties to financial instrument contracts; however, nonperformance is
considered unlikely as it is the Company’s policy to contract with highly rated
diverse counterparties.
Recent
Accounting Pronouncements
No new
accounting pronouncement issued or which became effective during the fiscal year
has had or is expected to have a material impact on the Consolidated Financial
Statements.
(Dollars in Millions Except Per Share
Amounts)
Critical
Accounting Policies and Use of Estimates
The
preparation of financial statements requires management to use judgment and make
estimates. The level of uncertainty in estimates and assumptions increases with
the length of time until the underlying transactions are completed. Actual
results could ultimately differ from those estimates. The accounting policies
that are most critical in the preparation of the Company’s Consolidated
Financial Statements are those that are both important to the presentation of
the Company’s financial condition and results of operations and require
significant or complex judgments and estimates on the part of management. The
Company’s critical accounting policies are reviewed periodically with the Audit
Committee of the Board of Directors.
In
certain instances, accounting principles generally accepted in the United States
of America allow for the selection of alternative accounting methods. The
Company’s significant policies that involve the selection of alternative methods
are accounting for shipping and handling costs and inventories.
|
|
•
|
Shipping
and handling costs may be reported as either a component of cost of sales
or selling, general and administrative expenses. The Company reports such
costs, primarily related to warehousing and outbound freight, in the
Consolidated Statements of Income as a component of Selling, general and
administrative expenses. Accordingly, the Company’s gross profit margin is
not comparable with the gross profit margin of those companies that
include shipping and handling charges in cost of sales. If such costs had
been included in cost of sales, gross profit margin as a percent of sales
would have decreased by 730 bps, from 58.8% to 51.5%, in 2009 and
decreased by 780 and 790 bps in 2008 and 2007, respectively, with no
impact on reported earnings.
|
|
|
•
|
The
Company accounts for inventories using both the first-in, first-out (FIFO)
method (approximately 79% of inventories) and the last-in, first-out
(LIFO) method (approximately 21% of inventories). There would have been no
material impact on reported earnings for 2009, 2008 and 2007 had all
inventories been accounted for under the FIFO
method.
|
The areas
of accounting that involve significant or complex judgments and estimates are
pensions and other postretirement benefits, stock options, asset impairments,
uncertain tax positions, tax valuation allowances and legal and other
contingencies.
|
|
•
|
In
pension accounting, the most significant actuarial assumptions are the
discount rate and the long-term rate of return on plan assets. The
discount rate for U.S. defined benefit plans was 5.75%, 6.30% and 6.50% as
of December 31, 2009, 2008 and 2007, respectively. The discount rate for
other U.S. postretirement plans was 5.75%, 5.80% and 6.50% as of December
31, 2009, 2008 and 2007, respectively. Discount rates used for
the U.S. defined benefit and other postretirement plans are based on a
yield curve constructed from a portfolio of high-quality bonds for which
the timing and amount of cash outflows approximate the estimated payouts
of the U.S. plans. For the Company’s international plans, the discount
rates are set by benchmarking against investment-grade corporate bonds
rated AA. The assumed long-term rate of return on plan assets for U.S.
plans was 8.0% as of December 31, 2009, 2008 and 2007. In determining the
long-term rate of return, the Company considers the nature of the plans’
investments, an expectation for the plans’ investment strategies and the
historical rate of return.
|
(Dollars in Millions Except Per Share
Amounts)
Average
annual rates of return for the U.S. plans for the most recent 1-year, 5-year,
10-year, 15-year and 25-year periods were 17%, 5%, 4%, 6%, and 9%, respectively.
In addition, the current rate of return assumption for the U.S. plans is based
upon a targeted asset allocation of approximately 33% in fixed income securities
(which are expected to earn approximately 6% in the long-term), 63% in equity
securities (which are expected to earn approximately 9.25% in the long-term) and
4% in real estate and other (which are expected to earn approximately 6% in the
long-term). A 1% change in either the discount rate or the assumed rate of
return on plan assets of the U.S. pension plans would impact future Net income
by approximately $10. A third assumption is the long-term rate of compensation
increase, a change in which would partially offset the impact of a change in
either the discount rate or the long-term rate of return. This rate
was 4.0% as of December 31, 2009, 2008 and 2007. Refer to Note 10 to the
Consolidated Financial Statements for further discussion of the Company’s
pension and other postretirement plans.
|
|
•
|
The
assumption requiring the most judgment in accounting for other
postretirement benefits is the medical cost trend rate. The Company
reviews external data and its own historical trends for health care costs
to determine the medical cost trend rate. The assumed rate of increase is
9.00% for 2010, declining to 5.00% by 2016 and remaining at 5.00% for the
years thereafter. The effect of a 1% increase in the assumed long-term
medical cost trend rate would reduce Net income by
$5.
|
|
|
•
|
The
Company recognizes the cost of employee services received in exchange for
awards of equity instruments, such as stock options and restricted stock,
based on the fair value of those awards at the date of
grant. The Company uses the Black-Scholes-Merton
(Black-Scholes) option pricing model to determine the fair value of
stock-option awards. The weighted-average estimated fair value
of each stock option granted for the year ended December 31, 2009 was
$12.06. The Black-Scholes model uses various assumptions to determine the
fair value of options. These assumptions include expected term of options,
expected volatility, risk-free interest rate and expected dividend yield.
While these assumptions do not require significant judgment, as the
significant inputs are determined from historical experience or
independent third-party sources, changes in these inputs could result in
significant changes in fair value. A one-year change in term
would result in a change in fair value of approximately 9%. A one percent
change in volatility would change fair value by approximately
5%.
|
|
|
•
|
The
asset impairment analysis performed for goodwill and intangible assets
requires several estimates including future cash flows, growth rates and
the selection of a discount rate. Since the estimated fair value of the
Company’s intangible assets substantially exceeds the recorded book value,
significant changes in these estimates would have to occur to result in an
impairment charge related to these
assets.
|
|
|
•
|
The
recognition and measurement of uncertain tax positions involves
consideration of the amounts and probabilities of various outcomes that
could be realized upon ultimate
settlement.
|
|
|
•
|
Tax
valuation allowances are established to reduce tax assets such as tax loss
carryforwards, to net realizable value. Factors considered in estimating
net realizable value include historical results by tax jurisdiction,
carryforward periods, income tax strategies and forecasted taxable
income.
|
(Dollars in Millions Except Per Share
Amounts)
|
|
•
|
Legal
and other contingency reserves are based on management’s assessment of the
risk of potential loss, which includes consultation with outside legal
counsel and advisors. Such assessments are reviewed each period and
revised, based on current facts and circumstances, if necessary. While it
is possible that the Company’s cash flows and results of operations in a
particular quarter or year could be materially affected by the impact of
such contingencies, it is the opinion of management that these matters
will not have a material impact on the Company’s financial position,
on-going results of operations or cash flows. Refer to Note 13 to the
Consolidated Financial Statements for further discussion of the Company’s
contingencies.
|
The
Company generates revenue through the sale of well-known consumer products to
trade customers under established trading terms. While the recognition of
revenue and receivables requires the use of estimates, there is a short time
frame (typically less than 60 days) between the shipment of product and cash
receipt, thereby reducing the level of uncertainty in these estimates. Refer to
Note 2 to the Consolidated Financial Statements for further description of the
Company’s significant accounting policies.
Cautionary
Statement on Forward-Looking Statements
This
Annual Report on Form 10-K may contain “forward-looking statements” as that term
is defined in the Private Securities Litigation Reform Act of 1995 or by the SEC
in its rules, regulations and releases. Such statements may relate, for example,
to sales or volume growth, profit and profit margin growth, earnings growth,
financial goals, the impact of the recent currency devaluation in Venezuela,
cost-reduction plans, tax rates and new product introductions, among other
matters. These statements are made on the basis of the Company’s views and
assumptions as of this time and the Company undertakes no obligation to update
these statements. Moreover, the Company does not, nor does any other person,
assume responsibility for the accuracy and completeness of those
statements. The Company cautions investors that any such
forward-looking statements are not guarantees of future performance and that
actual events or results may differ materially from those statements. Actual
events or results may differ materially because of factors that affect
international businesses and global economic conditions, as well as matters
specific to us and the markets we serve, including currency rate
fluctuations, changes in foreign or domestic laws or regulations or their
interpretation, political and fiscal developments, the availability and cost of
raw and packaging materials, our ability to maintain or increase selling prices
as required, changes in the policies of retail trade customers and our ability
to continue lowering costs and to mitigate the impact of the recent currency
devaluation in Venezuela. For information about these and other
factors that could impact our business and cause actual results to differ
materially from forward-looking statements, refer to “Risk Factors” in Item
1A.
|
ITEM 7A.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
|
See
“Managing Foreign Currency, Interest Rate and Commodity Price Exposure” in Item
7.
|
ITEM
8.
|
FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
|
See “Index to Financial
Statements.”
|
ITEM 9.
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
|
None.
|
ITEM 9A.
|
CONTROLS
AND PROCEDURES
|
Evaluation
of Disclosure Controls and Procedures
The
Company’s management, under the supervision and with the participation of the
Company’s Chairman of the Board, President and Chief Executive Officer and Chief
Financial Officer, carried out an evaluation of the effectiveness of the design
and operation of the Company’s disclosure controls and procedures as of December
31, 2009 (the Evaluation). Based upon the Evaluation, the Company’s Chairman of
the Board, President and Chief Executive Officer and Chief Financial Officer
concluded that the Company’s disclosure controls and procedures (as defined in
Rule 13a-15(e) of the Exchange Act) are effective.
Management’s
Annual Report on Internal Control over Financial Reporting
The
Company’s management is responsible for establishing and maintaining adequate
internal control over financial reporting. The Company’s internal control over
financial reporting is a process designed under the supervision of its Chairman
of the Board, President and Chief Executive Officer and Chief Financial Officer
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of the Company’s financial statements for external reporting
in accordance with accounting principles generally accepted in the United States
of America. Management evaluates the effectiveness of the Company’s internal
control over financial reporting using the criteria set forth by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO) in “Internal
Control—Integrated Framework.” Management, under the supervision and with the
participation of the Company’s Chairman of the Board, President and Chief
Executive Officer and Chief Financial Officer, assessed the effectiveness of the
Company’s internal control over financial reporting as of December 31, 2009 and
concluded that it is effective.
The
Company’s independent registered public accounting firm, PricewaterhouseCoopers
LLP, has audited the effectiveness of the Company’s internal control over
financial reporting as of December 31, 2009, and has expressed an unqualified
opinion in their report, which appears in this report.
Changes
in Internal Control over Financial Reporting
There
were no changes in the Company’s internal control over financial reporting that
occurred during the Company’s most recent fiscal quarter that have materially
affected, or are reasonably likely to materially affect, the Company’s internal
control over financial reporting.
|
ITEM
9B.
|
OTHER
INFORMATION
|
On
February 25, 2010, the Company amended the Colgate-Palmolive Company
Supplemental Salaried Employees’ Retirement Plan to limit the benefit payable
thereunder so that such benefit, when expressed as a lump sum value, together
with the benefit payable under the Colgate-Palmolive Company Employees’
Retirement Income Plan, also expressed as a lump sum, will not exceed a cap of
$20 million, with such cap to be adjusted at an annual rate of
6%. The plan amendment is filed as Exhibit 10-B(d) to this
report. For additional information regarding the Company’s retirement
plans, see the Company’s Proxy Statement for its 2010 Annual Meeting of
Stockholders.
PART
III
|
ITEM
10.
|
DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE
|
See
“Executive Officers of the Registrant” in Part I of this report.
Additional
information required by this Item relating to directors, executive officers and
corporate governance of the registrant and information regarding compliance with
Section 16(a) of the Exchange Act is incorporated herein by reference to the
Company’s Proxy Statement for its 2010 Annual Meeting of Stockholders (the 2010
Proxy Statement).
Code
of Ethics
The
Company’s Code of Conduct promotes the highest ethical standards in all of the
Company’s business dealings. The Code of Conduct satisfies the SEC’s
requirements for a Code of Ethics for senior financial officers and applies to
all Company employees, including the Chairman, President and Chief Executive
Officer, Chief Financial Officer and Chief Accounting Officer, and the Company’s
directors. The Code of Conduct is available on the Company’s website at www.colgate.com. Any
amendment to the Code of Conduct will promptly be posted on the Company’s
website. It is the Company’s policy not to grant waivers of the Code of Conduct.
In the extremely unlikely event that the Company grants an executive officer a
waiver from a provision of the Code of Conduct, the Company will promptly
disclose such information by posting it on its website or by using other
appropriate means in accordance with SEC rules.
|
ITEM
11.
|
EXECUTIVE
COMPENSATION
|
The
information regarding executive compensation set forth in the 2010 Proxy
Statement is incorporated herein by reference.
|
ITEM
12.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
|
|
|
(a)
|
The
information regarding security ownership of certain beneficial owners and
management set forth in the 2010 Proxy Statement is incorporated herein by
reference.
|
|
|
(b)
|
The
registrant does not know of any arrangements that may at a subsequent date
result in a change in control of the
registrant.
|
|
|
(c)
|
Equity
compensation plan information as of December 31,
2009:
|
|
|
(a)
|
(b)
|
(c)
|
|||||||||
|
Plan
Category
|
Number
of securities to be issued upon exercise of outstanding options, warrants
and rights
(in
thousands)
|
Weighted-average
exercise price of outstanding options, warrants and rights
|
Number
of securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column
(a))
(in
thousands)
|
|||||||||
|
Equity
compensation plans approved by security holders
|
27,892 | (1) | $ | 58 | (2) | 29,579 | (3) | |||||
|
Equity
compensation plans not approved by security holders
|
Not
applicable
|
Not
applicable
|
Not
applicable
|
|||||||||
|
Total
|
27,892 | $ | 58 | 29,579 | ||||||||
____________
|
(1)
|
Consists
of 25,091 options outstanding and 2,801 restricted shares awarded but not
yet vested under the Company’s Stock Option and Incentive Stock Plans,
respectively, which are more fully described in Note 8 to the Consolidated
Financial Statements.
|
|
(2)
|
Includes
the weighted-average exercise price of stock options outstanding of $65
and restricted shares of $0.
|
|
(3)
|
Amount
includes 18,426 options available for issuance under the Company’s Stock
Option Plans and 11,153 of restricted shares available for issuance under
the Company’s Incentive Stock Plan.
|
|
ITEM
13.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
|
The
information regarding certain relationships and related transactions and
director independence set forth in the 2010 Proxy Statement is incorporated
herein by reference.
|
ITEM
14.
|
PRINCIPAL
ACCOUNTANT FEES AND SERVICES
|
The
information regarding auditor fees and services set forth in the 2010 Proxy
Statement is incorporated herein by reference.
PART
IV
|
ITEM
15.
|
EXHIBITS
AND FINANCIAL STATEMENT SCHEDULES
|
(a) Financial
Statements and Financial Statement Schedules
See “Index to Financial
Statements.”
(b) Exhibits.
See “Exhibits to Form
10-K.”
COLGATE-PALMOLIVE COMPANY
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) 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)
|
||
|
Date:
February 25, 2010
|
By
|
/s/ Ian Cook
|
|
|
Ian
Cook
Chairman
of the Board, President and
Chief
Executive Officer
|
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below on February 25, 2010, by the following persons on behalf of the
registrant and in the capacities indicated.
|
(a) Principal
Executive Officer
|
(d) Directors
|
|
|
/s/ Ian Cook
|
/s/ John
T. Cahill
|
|
|
Ian
Cook
Chairman
of the Board, President and
Chief
Executive Officer
|
John
T. Cahill
|
|
|
/s/ Jill
K. Conway
|
||
|
Jill
K. Conway
|
||
|
(b) Principal
Financial Officer
|
||
|
/s/ Stephen
C. Patrick
|
/s/ Ian
Cook
|
|
|
Stephen
C. Patrick
Chief
Financial Officer
|
Ian
Cook
|
|
|
(c) Principal
Accounting Officer
|
/s/ Ellen
M. Hancock
|
|
|
Ellen
M. Hancock
|
||
|
/s/Dennis
J. Hickey
|
/s/ David
W. Johnson
|
|
|
Dennis
J. Hickey
Vice
President and
Corporate
Controller
|
David
W. Johnson
|
|
|
/s/ Richard
J. Kogan
|
||
|
Richard
J. Kogan
|
||
|
/s/ Delano
E. Lewis
|
||
|
Delano
E. Lewis
|
||
|
/s/ J.
Pedro Reinhard
|
||
|
J.
Pedro Reinhard
|
||
|
/s/ Stephen
I. Sadove
|
||
|
Stephen
I. Sadove
|
Index
to Financial Statements
|
Page
|
||
|
Consolidated
Financial Statements
|
||
|
Report
of Independent Registered Public Accounting Firm
|
43
|
|
|
Consolidated
Statements of Income for the years ended December 31, 2009, 2008 and
2007
|
44
|
|
|
Consolidated
Balance Sheets as of December 31, 2009 and 2008
|
45
|
|
|
Consolidated
Statements of Changes in Shareholders’ Equity for the years ended December
31, 2009, 2008 and 2007
|
46
|
|
|
Consolidated
Statements of Cash Flows for the years ended December 31, 2009, 2008 and
2007
|
48
|
|
|
Notes
to Consolidated Financial Statements
|
49
|
|
|
Schedule
II - Valuation and Qualifying Accounts for the years ended December 31,
2009, 2008 and 2007
|
92
|
|
|
Selected
Financial Data
|
||
|
Market
and Dividend Information
|
93
|
|
|
Historical
Financial Summary
|
95
|
|
All other
financial statements and schedules not listed have been omitted since the
required information is included in the financial statements or the notes
thereto or is not applicable or required.
Report
of Independent Registered Public Accounting Firm
To the
Board of Directors and Shareholders of
Colgate-Palmolive
Company
In our
opinion, the consolidated financial statements listed in the accompanying index
present fairly, in all material respects, the financial position of
Colgate-Palmolive Company and its subsidiaries (the Company) at December 31,
2009 and 2008, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 2009 in conformity with
accounting principles generally accepted in the United States of
America. In addition, in our opinion, the financial statement
schedule listed in the accompanying index presents fairly, in all material
respects, the information set forth therein when read in conjunction with the
related consolidated financial statements. Also in our opinion, the
Company maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2009, based on criteria established in
Internal Control - Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). The Company's
management is responsible for these financial statements and financial statement
schedule, for maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control over financial
reporting, included in Management's Annual Report on Internal Control over
Financial Reporting, appearing under Item 9A. Our responsibility is
to express opinions on these financial statements, on the financial statement
schedule, and on the Company's internal control over financial reporting based
on our integrated audits. We conducted our audits in accordance with
the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the financial statements are free
of material misstatement and whether effective internal control over financial
reporting was maintained in all material respects. Our audits of the
financial statements included examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. Our audit of
internal control over financial reporting included obtaining an understanding of
internal control over financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk. Our
audits also included performing such other procedures as we considered necessary
in the circumstances. We believe that our audits provide a reasonable basis for
our opinions.
A
company’s internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s internal
control over financial reporting includes those policies and procedures that (i)
pertain to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of the assets of the company;
(ii) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (iii) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the financial
statements.
Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
/s/
PricewaterhouseCoopers LLP
New York,
New York
February
25, 2010
COLGATE-PALMOLIVE
COMPANY
Consolidated
Statements of Income
For
the years ended December 31,
(Dollars
in Millions Except Per Share Amounts)
|
2009
|
2008(A)
|
2007(A)
|
||||||||||
|
Net
sales
|
$ | 15,327 | $ | 15,330 | $ | 13,790 | ||||||
|
Cost
of sales
|
6,319 | 6,704 | 6,043 | |||||||||
|
Gross
profit
|
9,008 | 8,626 | 7,747 | |||||||||
|
Selling,
general and administrative expenses
|
5,282 | 5,422 | 4,973 | |||||||||
|
Other
(income) expense, net
|
111 | 103 | 54 | |||||||||
|
Operating
profit
|
3,615 | 3,101 | 2,720 | |||||||||
|
Interest
expense, net
|
77 | 96 | 157 | |||||||||
|
Income
before income taxes
|
3,538 | 3,005 | 2,563 | |||||||||
|
Provision
for income taxes
|
1,141 | 968 | 759 | |||||||||
|
Net
income including noncontrolling interests
|
2,397 | 2,037 | 1,804 | |||||||||
|
Less:
Net income attributable to noncontrolling interests
|
106 | 80 | 67 | |||||||||
|
Net
income
|
$ | 2,291 | $ | 1,957 | $ | 1,737 | ||||||
|
Earnings
per common share, basic
|
$ | 4.53 | $ | 3.81 | $ | 3.35 | ||||||
|
Earnings
per common share, diluted
|
$ | 4.37 | $ | 3.66 | $ | 3.20 | ||||||
|
(A)
|
Prior
year amounts have been reclassified to conform to the current year
presentation required by the Consolidation Topic of the FASB Codification.
See Note 2 to Consolidated Financial Statements for additional
information.
|
See Notes
to Consolidated Financial Statements.
COLGATE-PALMOLIVE
COMPANY
Consolidated
Balance Sheets
As
of December 31,
(Dollars
in Millions Except Share Amounts)
|
2009
|
2008(A)
|
|||||||
|
Assets
|
||||||||
|
Current
Assets
|
||||||||
|
Cash
and cash equivalents
|
$ | 600 | $ | 555 | ||||
|
Receivables
(net of allowances of $52 and $47, respectively)
|
1,626 | 1,592 | ||||||
|
Inventories
|
1,209 | 1,197 | ||||||
|
Other
current assets
|
375 | 366 | ||||||
|
Total
current assets
|
3,810 | 3,710 | ||||||
|
Property,
plant and equipment, net
|
3,516 | 3,119 | ||||||
|
Goodwill,
net
|
2,302 | 2,152 | ||||||
|
Other
intangible assets, net
|
821 | 834 | ||||||
|
Other
assets
|
685 | 164 | ||||||
|
Total
assets
|
$ | 11,134 | $ | 9,979 | ||||
|
Liabilities
and Shareholders’ Equity
|
||||||||
|
Current
Liabilities
|
||||||||
|
Notes
and loans payable
|
$ | 35 | $ | 107 | ||||
|
Current
portion of long-term debt
|
326 | 91 | ||||||
|
Accounts
payable
|
1,172 | 1,061 | ||||||
|
Accrued
income taxes
|
387 | 272 | ||||||
|
Other
accruals
|
1,679 | 1,421 | ||||||
|
Total
current liabilities
|
3,599 | 2,952 | ||||||
|
Long-term
debt
|
2,821 | 3,585 | ||||||
|
Deferred
income taxes
|
82 | 82 | ||||||
|
Other
liabilities
|
1,375 | 1,316 | ||||||
|
Total
liabilities
|
7,877 | 7,935 | ||||||
|
Commitments
and contingent liabilities
|
— | — | ||||||
|
Shareholders’
Equity
|
||||||||
|
Preference
stock
|
169 | 181 | ||||||
|
Common
stock, $1 par value (2,000,000,000 shares authorized, 732,853,180 shares
issued)
|
733 | 733 | ||||||
|
Additional
paid-in capital
|
1,764 | 1,610 | ||||||
|
Retained
earnings
|
13,157 | 11,760 | ||||||
|
Accumulated
other comprehensive income (loss)
|
(2,096 | ) | (2,477 | ) | ||||
| 13,727 | 11,807 | |||||||
|
Unearned
compensation
|
(133 | ) | (187 | ) | ||||
|
Treasury
stock, at cost
|
(10,478 | ) | (9,697 | ) | ||||
|
Total
Colgate-Palmolive Company shareholders’ equity
|
3,116 | 1,923 | ||||||
|
Noncontrolling
interests
|
141 | 121 | ||||||
|
Total
shareholders’ equity
|
3,257 | 2,044 | ||||||
|
Total
liabilities and shareholders’ equity
|
$ | 11,134 | $ | 9,979 | ||||
|
(A)
|
Prior
year amounts have been reclassified to conform to the current year
presentation required by the Consolidation Topic of the FASB
Codification. See Note 2 to Consolidated Financial Statements
for additional information.
|
See Notes
to Consolidated Financial Statements.
COLGATE-PALMOLIVE
COMPANY
Consolidated
Statements of Changes in Shareholders’ Equity
(Dollars
in Millions)
|
Colgate-Palmolive Company Shareholder’s
Equity
|
Noncontrolling
Interests(A)
|
|||||||||||||||||||||||||||||||||||
|
Preference
Stock
|
Common
Stock
|
Additional
Paid-In Capital
|
Unearned
Compensation
|
Treasury
Stock
|
Retained Earnings
|
Accumulated
Other Comprehensive Income
(Loss)
|
Comprehensive Income (Loss)
|
|||||||||||||||||||||||||||||
|
Balance,
January 1, 2007
|
$ | 223 | $ | 733 | $ | 1,218 | $ | (251 | ) | $ | (8,074 | ) | $ | 9,644 | $ | (2,081 | ) | $ | 112 | |||||||||||||||||
|
Net
income
|
1,737 | $ | 1,737 | 67 | ||||||||||||||||||||||||||||||||
|
Other
comprehensive income:
|
||||||||||||||||||||||||||||||||||||
|
Cumulative
translation adjustment
|
250 | 250 | 7 | |||||||||||||||||||||||||||||||||
|
Retirement
Plan and other retiree benefit adjustments, net of taxes
|
164 | 164 | ||||||||||||||||||||||||||||||||||
|
Other
|
— | — | ||||||||||||||||||||||||||||||||||
|
Total
comprehensive income
|
$ | 2,151 | ||||||||||||||||||||||||||||||||||
|
Adjustment
to initially apply FIN 48
|
(4 | ) | ||||||||||||||||||||||||||||||||||
|
Purchase
of Noncontrolling interests
|
(27 | ) | ||||||||||||||||||||||||||||||||||
|
Dividends
declared:
|
||||||||||||||||||||||||||||||||||||
|
Series
B Convertible Preference stock, net of taxes
|
(28 | ) | ||||||||||||||||||||||||||||||||||
|
Common
stock
|
(721 | ) | ||||||||||||||||||||||||||||||||||
|
Noncontrolling
interests in Company’s subsidiaries
|
(49 | ) | ||||||||||||||||||||||||||||||||||
|
Stock-based
compensation expense
|
110 | |||||||||||||||||||||||||||||||||||
|
Stock
options exercised
|
175 | 255 | ||||||||||||||||||||||||||||||||||
|
Treasury
stock acquired
|
(1,269 | ) | ||||||||||||||||||||||||||||||||||
|
Preference
stock conversion
|
(25 | ) | (92 | ) | 117 | |||||||||||||||||||||||||||||||
|
Other
|
107 | 32 | 67 | |||||||||||||||||||||||||||||||||
|
Balance,
December 31, 2007
|
$ | 198 | $ | 733 | $ | 1,518 | $ | (219 | ) | $ | (8,904 | ) | $ | 10,628 | $ | (1,667 | ) | $ | 110 | |||||||||||||||||
|
Net
income
|
1,957 | $ | 1,957 | 80 | ||||||||||||||||||||||||||||||||
|
Other
comprehensive income:
|
||||||||||||||||||||||||||||||||||||
|
Cumulative
translation adjustment
|
(450 | ) | (450 | ) | (5 | ) | ||||||||||||||||||||||||||||||
|
Retirement
Plan and other retiree benefit adjustments, net of taxes
|
(352 | ) | (352 | ) | ||||||||||||||||||||||||||||||||
|
Other
|
(8 | ) | (8 | ) | ||||||||||||||||||||||||||||||||
|
Total
comprehensive income
|
$ | 1,147 | ||||||||||||||||||||||||||||||||||
See Notes
to Consolidated Financial Statements.
COLGATE-PALMOLIVE
COMPANY
Consolidated
Statements of Changes in Shareholders’ Equity
(Dollars
in Millions)
|
Colgate-Palmolive Company Shareholder’s
Equity
|
Noncontrolling Interests(A) | |||||||||||||||||||||||||||||||||||
| Preference Stock | Common Stock | Additional Paid-In Capital | Unearned Compensation | Treasury Stock | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Comprehensive Income (Loss) | |||||||||||||||||||||||||||||
|
Dividends
declared:
|
||||||||||||||||||||||||||||||||||||
|
Series
B Convertible Preference stock, net of taxes
|
(28 | ) | ||||||||||||||||||||||||||||||||||
|
Common
stock
|
(797 | ) | ||||||||||||||||||||||||||||||||||
|
Noncontrolling
interests in Company’s subsidiaries
|
(64 | ) | ||||||||||||||||||||||||||||||||||
|
Stock-based
compensation expense
|
100 | |||||||||||||||||||||||||||||||||||
|
Stock
options exercised
|
61 | 157 | ||||||||||||||||||||||||||||||||||
|
Treasury
stock acquired
|
(1,073 | ) | ||||||||||||||||||||||||||||||||||
|
Preference
stock conversion
|
(17 | ) | (66 | ) | 83 | |||||||||||||||||||||||||||||||
|
Other
|
(3 | ) | 32 | 40 | ||||||||||||||||||||||||||||||||
|
Balance,
December 31, 2008
|
$ | 181 | $ | 733 | $ | 1,610 | $ | (187 | ) | $ | (9,697 | ) | $ | 11,760 | $ | (2,477 | ) | $ | 121 | |||||||||||||||||
|
Net
income
|
2,291 | $ | 2,291 | 106 | ||||||||||||||||||||||||||||||||
|
Other
comprehensive income:
|
||||||||||||||||||||||||||||||||||||
|
Cumulative
translation adjustment
|
346 | 346 | 1 | |||||||||||||||||||||||||||||||||
|
Retirement
Plan and other retiree benefit adjustments, net of taxes
|
8 | 8 | ||||||||||||||||||||||||||||||||||
|
Other
|
27 | 27 | ||||||||||||||||||||||||||||||||||
|
Total
comprehensive income
|
$ | 2,672 | ||||||||||||||||||||||||||||||||||
|
Dividends
declared:
|
||||||||||||||||||||||||||||||||||||
|
Series
B Convertible Preference stock, net of taxes
|
(30 | ) | ||||||||||||||||||||||||||||||||||
|
Common
stock
|
(864 | ) | ||||||||||||||||||||||||||||||||||
|
Noncontrolling
interests in Company’s subsidiaries
|
(87 | ) | ||||||||||||||||||||||||||||||||||
|
Stock-based
compensation expense
|
117 | |||||||||||||||||||||||||||||||||||
|
Stock
options exercised
|
92 | 175 | ||||||||||||||||||||||||||||||||||
|
Treasury
stock acquired
|
(1,063 | ) | ||||||||||||||||||||||||||||||||||
|
Preference
stock conversion
|
(12 | ) | (48 | ) | 60 | |||||||||||||||||||||||||||||||
|
Other
|
(7 | ) | 54 | 47 | ||||||||||||||||||||||||||||||||
|
Balance,
December 31, 2009
|
$ | 169 | $ | 733 | $ | 1,764 | $ | (133 | ) | $ | (10,478 | ) | $ | 13,157 | $ | (2,096 | ) | $ | 141 | |||||||||||||||||
|
(A)
|
Prior
year amounts have been reclassified to conform to the current year
presentation required by the Consolidation Topic of the FASB
Codification. See Note 2 to Consolidated Financial Statements
for additional information.
|
See Notes
to Consolidated Financial Statements.
COLGATE-PALMOLIVE
COMPANY
Consolidated
Statements of Cash Flows
For
the years ended December 31,
(Dollars
in Millions)
|
2009
|
2008(A)
|
2007(A)
|
||||||||||
|
Operating
Activities
|
||||||||||||
|
Net
income
|
$ | 2,291 | $ | 1,957 | $ | 1,737 | ||||||
|
Adjustments
to reconcile net income to net cash provided by
operations:
|
||||||||||||
|
Restructuring,
net of cash
|
(18 | ) | (50 | ) | 21 | |||||||
|
Depreciation
and amortization
|
351 | 348 | 334 | |||||||||
|
Gain
before tax on sale of non-core product lines
|
(5 | ) | - | (49 | ) | |||||||
|
Stock-based
compensation expense
|
117 | 100 | 110 | |||||||||
|
Deferred
income taxes
|
(23 | ) | (6 | ) | (147 | ) | ||||||
|
Cash
effects of changes in:
|
||||||||||||
|
Receivables
|
57 | (70 | ) | (66 | ) | |||||||
|
Inventories
|
44 | (135 | ) | (111 | ) | |||||||
|
Accounts
payable and other accruals
|
294 | 125 | 366 | |||||||||
|
Other
non-current assets and liabilities
|
169 | 33 | 57 | |||||||||
|
Net
cash provided by operations
|
3,277 | 2,302 | 2,252 | |||||||||
|
Investing
Activities
|
||||||||||||
|
Capital
expenditures
|
(575 | ) | (684 | ) | (583 | ) | ||||||
|
Payment
for acquisitions, net of cash acquired
|
- | - | (27 | ) | ||||||||
|
Sale
of property and non-core product lines
|
17 | 58 | 110 | |||||||||
|
Sales
(purchases) of marketable securities and investments
|
(289 | ) | 10 | (11 | ) | |||||||
|
Other
|
6 | 3 | (17 | ) | ||||||||
|
Net
cash used in investing activities
|
(841 | ) | (613 | ) | (528 | ) | ||||||
|
Financing
Activities
|
||||||||||||
|
Principal
payments on debt
|
(3,950 | ) | (2,320 | ) | (1,738 | ) | ||||||
|
Proceeds
from issuance of debt
|
3,424 | 2,515 | 1,513 | |||||||||
|
Dividends
paid
|
(981 | ) | (889 | ) | (798 | ) | ||||||
|
Purchases
of treasury shares
|
(1,063 | ) | (1,073 | ) | (1,269 | ) | ||||||
|
Proceeds
from exercise of stock options and excess tax benefits
|
300 | 237 | 489 | |||||||||
|
Net
cash used in financing activities
|
(2,270 | ) | (1,530 | ) | (1,803 | ) | ||||||
|
Effect
of exchange rate changes on Cash and cash equivalents
|
(121 | ) | (33 | ) | 18 | |||||||
|
Net
(decrease) increase in Cash and cash equivalents
|
45 | 126 | (61 | ) | ||||||||
|
Cash
and cash equivalents at beginning of year
|
555 | 429 | 490 | |||||||||
|
Cash
and cash equivalents at end of year
|
$ | 600 | $ | 555 | $ | 429 | ||||||
|
Supplemental
Cash Flow Information
|
||||||||||||
|
Income
taxes paid
|
$ | 1,098 | $ | 862 | $ | 647 | ||||||
|
Interest
paid
|
98 | 119 | 163 | |||||||||
|
Principal
payments on ESOP debt, guaranteed by the Company
|
74 | 64 | 54 | |||||||||
|
(A)
|
Prior
year amounts have been reclassified to conform to the current year
presentation required by the Consolidation Topic of the FASB Codification.
See Note 2 to Consolidated Financial Statements for additional
information.
|
See Notes
to Consolidated Financial Statements.
COLGATE-PALMOLIVE
COMPANY
Notes
to Consolidated Financial Statements
(Dollars
in Millions Except Per Share Amounts)
1. Nature
of Operations
The
Company manufactures and markets a wide variety of products in the U.S. and
around the world in two distinct business segments: Oral, Personal and Home
Care; and Pet Nutrition. Oral, Personal and Home Care products include
toothpaste, toothbrushes and mouth rinses, bar and liquid hand soaps, shower
gels, shampoos, conditioners, deodorants and antiperspirants, laundry and
dishwashing detergents, fabric conditioners, household cleaners, bleaches and
other similar items. These products are sold primarily to wholesale and retail
distributors worldwide. Pet Nutrition products include specialty pet nutrition
products manufactured and marketed by Hill’s Pet Nutrition. The principal
customers for Pet Nutrition products are veterinarians and specialty pet
retailers. Principal global and regional trademarks include Colgate, Palmolive,
Mennen, Speed Stick, Lady Speed Stick, Softsoap, Irish Spring, Protex, Sorriso,
Kolynos, Elmex, Tom’s of Maine, Ajax, Axion, Fabuloso, Soupline, Suavitel,
Hill’s Science Diet and Hill’s Prescription Diet.
The
Company’s principal classes of products accounted for the following percentages
of worldwide sales for the past three years:
|
2009
|
2008
|
2007
|
||||||||||
|
Oral
Care
|
41 | % | 41 | % | 40 | % | ||||||
|
Home
Care
|
23 | % | 23 | % | 24 | % | ||||||
|
Personal
Care
|
22 | % | 22 | % | 23 | % | ||||||
|
Pet
Nutrition
|
14 | % | 14 | % | 13 | % | ||||||
|
Total
|
100 | % | 100 | % | 100 | % | ||||||
2.
Summary of Significant Accounting Policies
Principles
of Consolidation
The
Consolidated Financial Statements include the accounts of Colgate-Palmolive
Company and its majority-owned subsidiaries. Intercompany transactions and
balances have been eliminated. The Company’s investments in consumer products
companies with interests ranging between 20% and 50% are accounted for using the
equity method. Net income (loss) from such investments is recorded in Other
(income) expense, net in the Consolidated Statements of Income. As of
December 31, 2009 and 2008, equity method investments included in Other assets
were $15 and $13, respectively. Unrelated third parties hold the remaining
ownership interest in these investments. Investments with less than a
20% interest are accounted for using the cost method.
COLGATE-PALMOLIVE
COMPANY
Notes
to Consolidated Financial Statements (continued)
(Dollars
in Millions Except Per Share Amounts)
To
conform to the current year presentation required by the Consolidation Topic of
the Financial Accounting Standards Board (“FASB”) Codification, net income
attributable to noncontrolling interests in less-than-wholly owned subsidiaries
has been reclassified from Other (income) expense, net to a new line below
Operating profit called Net income attributable to noncontrolling
interests. The reclassification had no effect on Net income or
Earnings per common share. Additionally, prior period balances of accumulated
undistributed earnings relating to noncontrolling interests in less-than-wholly
owned subsidiaries have been reclassified from Other liabilities to a component
of Shareholders’ Equity. For further information regarding the impact
of these reclassifications on segments, refer to Note 14.
Use
of Estimates
The
preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to use
judgment and make estimates that affect the reported amounts of assets and
liabilities and disclosure of contingent gains and losses at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. The level of uncertainty in estimates and assumptions
increases with the length of time until the underlying transactions are
completed. As such, the most significant uncertainty in the Company’s
assumptions and estimates involved in preparing the financial statements
includes pension and other retiree benefit cost assumptions, stock-based
compensation, asset impairment, uncertain tax positions, tax valuation
allowances and legal and other contingency reserves. Additionally, the Company
uses available market information and other valuation methodologies in assessing
the fair value of financial instruments and retirement plan assets. Judgment is
required in interpreting market data to develop the estimates of fair value, and
accordingly, changes in assumptions or the estimation methodologies may affect
the fair value estimates. Actual results could ultimately differ from those
estimates.
Revenue
Recognition
Sales are
recorded at the time products are shipped to trade customers and when risk of
ownership transfers. Net sales reflect units shipped at selling list prices
reduced by sales returns and the cost of current and continuing promotional
programs. Current promotional programs, such as product listing allowances and
co-operative advertising arrangements, are recorded in the period incurred.
Continuing promotional programs are predominantly consumer coupons and
volume-based sales incentive arrangements with trade customers. The redemption
cost of consumer coupons is based on historical redemption experience and is
recorded when coupons are distributed. Volume-based incentives offered to trade
customers are based on the estimated cost of the program and are recorded as
products are sold.
COLGATE-PALMOLIVE
COMPANY
Notes
to Consolidated Financial Statements (continued)
(Dollars
in Millions Except Per Share Amounts)
Shipping
and Handling Costs
Shipping
and handling costs are classified as Selling, general and administrative
expenses and were $1,116, $1,193 and $1,080 for the years ended December 31,
2009, 2008 and 2007, respectively.
Marketing
Costs
The
Company markets its products through advertising and other promotional
activities. Advertising costs are included in Selling, general and
administrative expenses and are expensed as incurred. Certain consumer and trade
promotional programs, such as consumer coupons, are recorded as a reduction of
sales.
Cash
and Cash Equivalents
The
Company considers all highly liquid investments with original maturities of
three months or less to be cash equivalents.
Inventories
Inventories
are stated at the lower of cost or market. The cost of approximately 79% of
inventories is determined using the first-in, first-out (FIFO) method. The cost
of all other inventories, predominantly in the U.S. and Mexico, is determined
using the last-in, first-out (LIFO) method.
Property,
Plant and Equipment
Land,
buildings and machinery and equipment are stated at cost. Depreciation is
provided, primarily using the straight-line method, over estimated useful lives
ranging from 3 to 15 years for machinery and equipment and up to 40 years for
buildings.
Goodwill
and Other Intangibles
Goodwill
and indefinite life intangible assets, such as the Company’s global brands, are
subject to impairment tests at least annually. These tests were performed and
did not result in an impairment charge. Other intangible assets with finite
lives, such as trademarks, local brands and non-compete agreements, are
amortized over their useful lives, ranging from 5 to 40 years.
COLGATE-PALMOLIVE
COMPANY
Notes
to Consolidated Financial Statements (continued)
(Dollars
in Millions Except Per Share Amounts)
Income Taxes
The
provision for income taxes is determined using the asset and liability method.
Under this method, deferred tax assets and liabilities are recognized based upon
the differences between the financial statement and tax bases of assets and
liabilities using enacted tax rates that will be in effect at the time such
differences are expected to reverse. Deferred tax assets are reduced by a
valuation allowance when, in the opinion of management, it is more likely than
not that some portion or all of the deferred tax assets will not be realized.
Provision is made currently for taxes payable on remittances of overseas
earnings; no provision is made for taxes on overseas retained earnings that are
deemed to be permanently reinvested.
The
Company uses a comprehensive model to recognize, measure, present and disclose
in its financial statements uncertain tax positions that the Company has taken
or expects to take on an income tax return. The Company recognizes
interest expense and penalties related to unrecognized tax benefits within
income tax expense.
Financial
Instruments
Derivative
instruments are recorded as assets and liabilities at estimated fair value based
on available market information. The Company’s derivative instruments that
qualify for hedge accounting are designated as either fair value hedges, cash
flow hedges or net investment hedges. For fair value hedges, changes in fair
value of the derivative, as well as the offsetting changes in fair value of the
hedged item, are recognized in earnings each period. For cash flow hedges,
changes in fair value of the derivative are recorded in Other comprehensive
income (loss) and are recognized in earnings when the offsetting effect of the
hedged item is also recognized in earnings. For hedges of the net investment in
foreign subsidiaries, changes in fair value of the derivative are recorded in
Other comprehensive income (loss) to offset the change in the value of the net
investment being hedged. Cash flows related to hedges are classified
in the same category as the cash flows from the hedged item in the Consolidated
Statements of Cash Flows.
The
Company may also enter into certain foreign currency and interest rate
instruments that economically hedge certain of its risks but do not qualify for
hedge accounting. Changes in fair value of these derivative instruments, based
on quoted market prices, are recognized in earnings each period. The Company’s
derivative instruments and other financial instruments are more fully described
in Note 7, along with the related fair value measurement
considerations.
Stock-Based
Compensation
The
Company recognizes the cost of employee services received in exchange for awards
of equity instruments, such as stock options and restricted stock, based on the
fair value of those awards at the date of grant over the requisite service
period. The Company uses the Black-Scholes-Merton (Black-Scholes)
option pricing model to determine the fair value of stock-option
awards. Stock-based compensation plans, related expenses and
assumptions used in the Black-Scholes option pricing model are more fully
described in Note 8.
COLGATE-PALMOLIVE
COMPANY
Notes
to Consolidated Financial Statements (continued)
(Dollars
in Millions Except Per Share Amounts)
Translation
of Overseas Currencies
The
assets and liabilities of foreign subsidiaries, other than those operating in
highly inflationary environments, are translated into U.S. dollars at year-end
exchange rates with resulting translation gains and losses accumulated in a
separate component of shareholders’ equity. Income and expense items are
translated into U.S. dollars at average rates of exchange prevailing during the
year.
For
subsidiaries operating in highly inflationary environments, inventories,
prepaids, goodwill and property, plant and equipment are remeasured at their
historical exchange rates, while other assets and liabilities are remeasured at
year-end exchange rates. Remeasurement adjustments for these operations are
included in Net income.
Recent
Accounting Pronouncements
No new
accounting pronouncement issued or which became effective during the fiscal year
has had or is expected to have a material impact on the Consolidated Financial
Statements.
Reclassifications
Certain
prior year amounts have been reclassified to conform to the current year
presentation.
3.
Acquisitions and Divestitures
Acquisitions
During
2007, the Company increased its ownership interest in one of its subsidiaries in
China to 100% at a cost of $27.
Divestitures
Consistent
with the Company’s strategy to prioritize higher-margin businesses, the Company
sold its household bleach businesses in Latin America, excluding Colombia, in
2007. The transaction included the sale of the bleach brands Agua Jane and Nevex
in Uruguay and Venezuela, respectively, and the license of the Ajax brand for
bleach during a transition period in the Dominican Republic and Ecuador. The
transaction closed in the Latin American countries during the first quarter of
2007 with proceeds of $67, resulting in a pretax gain of $49 ($30 aftertax)
included in Other (income) expense, net in 2007. These operations
were not material to the Company’s annual Net sales, Net income or Earnings per
share.
COLGATE-PALMOLIVE
COMPANY
Notes
to Consolidated Financial Statements (continued)
(Dollars
in Millions Except Per Share Amounts)
4.
Restructuring and Related Implementation Charges
The
Company’s four-year restructuring and business-building program (the 2004
Restructuring Program) to enhance the Company’s global leadership position in
its core businesses was finalized as of December 31, 2008 and there were no
charges incurred during the year ended December 31, 2009.
The
Company incurred total pretax cumulative charges of $1,069 ($776 aftertax)
related to the 2004 Restructuring Program. Charges incurred in connection with
the implementation of various projects since inception were as
follows:
|
Cumulative
Charges as of December 31,
2008
|
||||
|
Termination
Benefits
|
$ | 426 | ||
|
Incremental
Depreciation
|
222 | |||
|
Asset
Impairments
|
47 | |||
|
Other
|
374 | |||
|
Total
cumulative 2004 Restructuring Program charges, pretax
|
$ | 1,069 | ||
Other
charges primarily consisted of implementation-related charges resulting directly
from exit activities and the implementation of new strategies as a result of the
2004 Restructuring Program. These charges included ramp-down costs related to
the closure of existing facilities, start-up costs for new facilities and
third-party incremental costs related to the development and implementation of
new business and strategic initiatives. Since the inception of the 2004
Restructuring Program in December 2004, the Company incurred $46 of charges
related to start-up costs for new manufacturing facilities and $137 of costs for
the development and implementation of new business and strategic
initiatives.
The
majority of costs incurred since inception related to the following significant
projects: the voluntary early retirement program in the U.S.; the closing of the
Jeffersonville, Indiana oral care facility; the consolidation of toothpaste
production in Europe; exiting certain manufacturing activities in other
categories in Portugal, Denmark, Puerto Rico, Senegal and Kansas City, Kansas;
and the realignment of sales, administrative and research and development
functions in various locations around the world. Total charges related to the
2004 Restructuring Program were as follows: North America (36%), Europe/South
Pacific (28%), Latin America (4%), Greater Asia/Africa (10%), Hill’s Pet
Nutrition (1%) and Corporate (21%).
COLGATE-PALMOLIVE
COMPANY
Notes
to Consolidated Financial Statements (continued)
(Dollars
in Millions Except Per Share Amounts)
For the
years ended December 31, 2008 and 2007 restructuring and implementation-related
charges were reflected in the income statement as follows:
|
2008
|
2007
|
|||||||
|
Cost
of sales
|
$ | 59 | $ | 154 | ||||
|
Selling,
general and administrative expenses
|
81 | 49 | ||||||
|
Other
(income) expense, net
|
24 | 56 | ||||||
|
Total
2004 Restructuring Program charges, pretax
|
$ | 164 | $ | 259 | ||||
|
Total
2004 Restructuring Program charges, aftertax
|
$ | 113 | $ | 184 | ||||
Restructuring
and implementation-related charges in the preceding table were recorded in the
Corporate segment as these decisions were centrally directed and controlled and
were not included in internal measures of segment operating
performance.
The
following table summarizes the activity for the restructuring and
implementation-related charges discussed above and the related accrual
balances:
|
Termination Benefits
|
Incremental Depreciation
|
Asset Impairments
|
Other
|
Total
|
||||||||||||||||
|
Balance
at December 31, 2006
|
$ | 53 | $ | - | $ | - | $ | 12 | $ | 65 | ||||||||||
|
Charges
|
81 | 41 | - | 137 | 259 | |||||||||||||||
|
Cash
payments
|
(65 | ) | - | - | (138 | ) | (203 | ) | ||||||||||||
|
Charges
against assets
|
(14 | ) | (41 | ) | - | (5 | ) | (60 | ) | |||||||||||
|
Other
|
(2 | ) | - | - | 3 | 1 | ||||||||||||||
|
Foreign
exchange
|
2 | - | - | - | 2 | |||||||||||||||
|
Balance
at December 31, 2007
|
$ | 55 | $ | - | $ | - | $ | 9 | $ | 64 | ||||||||||
|
Charges
|
33 | 20 | (12 | ) | 123 | 164 | ||||||||||||||
|
Cash
payments
|
(74 | ) | - | - | (121 | ) | (195 | ) | ||||||||||||
|
Charges
against assets
|
(3 | ) | (20 | ) | 12 | 21 | 10 | |||||||||||||
|
Other
|
- | - | - | (7 | ) | (7 | ) | |||||||||||||
|
Foreign
exchange
|
1 | - | - | (4 | ) | (3 | ) | |||||||||||||
|
Balance
at December 31, 2008
|
$ | 12 | $ | - | $ | - | $ | 21 | $ | 33 | ||||||||||
|
Charges
|
- | - | - | - | - | |||||||||||||||
|
Cash
payments
|
(7 | ) | - | - | (11 | ) | (18 | ) | ||||||||||||
|
Charges
against assets
|
- | - | - | - | - | |||||||||||||||
|
Other
|
- | - | - | - | - | |||||||||||||||
|
Foreign
exchange
|
(1 | ) | - | - | 1 | - | ||||||||||||||
|
Balance
at December 31, 2009
|
$ | 4 | $ | - | $ | - | $ | 11 | $ | 15 | ||||||||||
COLGATE-PALMOLIVE
COMPANY
Notes
to Consolidated Financial Statements
(Dollars
in Millions Except Per Share Amounts)
Termination
benefits incurred pursuant to the 2004 Restructuring Program were calculated
based on long-standing benefit practices, local statutory requirements and, in
certain cases, voluntary termination arrangements. Termination benefits also
include pension enhancements amounting to $3 in 2008, which are reflected as
Charges against assets within Termination benefits in the preceding table, as
the corresponding balance sheet amounts are reflected as a reduction of pension
assets or an increase in pension liabilities.
Incremental
depreciation was recorded to reflect changes in useful lives and estimated
residual values for long-lived assets that were taken out of service prior to
the end of their normal service period. Asset impairments were recorded to write
down assets held for sale or disposal to their fair value based on amounts
expected to be realized. Within Asset impairments, charges are net of gains
realized on the sale of assets.
During
2008, Other charges related to start-up costs for new manufacturing facilities
were $5 and costs incurred for the development and implementation of business
and strategic initiatives were $66. Start-up costs for new facilities
and third-party incremental costs related to the development and implementation
of new business and strategic initiatives were expensed as
incurred.
5.
Goodwill and Other Intangible Assets
The net
carrying value of Goodwill as of December 31, 2009 and 2008, by segment is as
follows:
|
2009
|
2008
|
|||||||
|
Oral,
Personal and Home Care
|
||||||||
|
North
America
|
$ | 367 | $ | 350 | ||||
|
Latin
America
|
637 | 531 | ||||||
|
Europe/South
Pacific
|
1,089 | 1,064 | ||||||
|
Greater
Asia/Africa
|
194 | 192 | ||||||
|
Total
Oral, Personal and Home Care
|
2,287 | 2,137 | ||||||
|
Pet
Nutrition
|
15 | 15 | ||||||
|
Total
Goodwill
|
$ | 2,302 | $ | 2,152 | ||||
The
change in the amount of Goodwill in each year was primarily due to the impact of
foreign currency translation. In addition, in 2007 Goodwill increased
$16 due to an increase in the Company’s ownership in one of its Chinese
subsidiaries.
COLGATE-PALMOLIVE
COMPANY
Notes
to Consolidated Financial Statements
(Dollars
in Millions Except Per Share Amounts)
Other
intangible assets as of December 31, 2009 and 2008 are comprised of the
following:
|
2009
|
2008
|
|||||||||||||||||||||||
|
Gross Carrying Amount
|
Accumulated Amortization
|
Net
|
Gross Carrying Amount
|
Accumulated Amortization
|
Net
|
|||||||||||||||||||
|
Trademarks
|
$ | 528 | $ | (205 | ) | $ | 323 | $ | 436 | $ | (186 | ) | $ | 250 | ||||||||||
|
Other
finite life intangible assets
|
36 | (13 | ) | 23 | 38 | (12 | ) | 26 | ||||||||||||||||
|
Indefinite
life intangible assets
|
475 | — | 475 | 558 | — | 558 | ||||||||||||||||||
|
Total
Other intangible assets
|
$ | 1,039 | $ | (218 | ) | $ | 821 | $ | 1,032 | $ | (198 | ) | $ | 834 | ||||||||||
The
changes in the net carrying amounts of Other intangible assets during 2009, 2008
and 2007 were partially due to amortization expense of $22, $19 and $18,
respectively, as well as the impact of foreign currency
translation. In addition, in 2009 $81 was reclassified from
Indefinite life intangible assets to Trademarks. In 2007, Other
intangible assets increased by $20 due to the acquisition of
patents. Annual estimated amortization expense for each of the next
five years is expected to be approximately $20.
6.
Long-Term Debt and Credit Facilities
Long-term
debt consists of the following at December 31:
|
Weighted Average Interest
Rate
|
Maturities
|
2009
|
2008
|
|||||||||||||
|
Notes
|
3.4% | 2010-2078 | $ | 2,536 | $ | 2,259 | ||||||||||
|
Payable
to banks
|
1.8% | 2010-2013 | 611 | 601 | ||||||||||||
|
ESOP
notes, guaranteed by the Company
|
8.8% | 2009 | — | 74 | ||||||||||||
|
Commercial
paper
|
0.1% | 2009 | — | 735 | ||||||||||||
|
Capitalized
leases
|
— | 7 | ||||||||||||||
| 3,147 | 3,676 | |||||||||||||||
|
Less:
Current portion of long-term debt
|
326 | 91 | ||||||||||||||
|
Total
|
$ | 2,821 | $ | 3,585 | ||||||||||||
The
weighted-average interest rate on short-term borrowings included in Notes and
loans payable in the Consolidated Balance Sheets as of December 31, 2009 and
2008 was 0.7% and 4.9%, respectively.
COLGATE-PALMOLIVE
COMPANY
Notes
to Consolidated Financial Statements
(Dollars
in Millions Except Per Share Amounts)
Scheduled
maturities of long-term debt outstanding as of December 31, 2009, are as
follows:
|
Years
Ended December 31,
|
||||
|
2010
|
$ | 326 | ||
|
2011
|
639 | |||
|
2012
|
341 | |||
|
2013
|
262 | |||
|
2014
|
358 | |||
|
Thereafter
|
1,221 | |||
The
Company has entered into interest rate swap agreements and foreign exchange
contracts related to certain of these debt instruments (see Note
7).
During
the third quarter of 2009, the Company issued $300 of U.S. dollar-denominated
six-year notes at a fixed rate of 3.15% under the Company’s shelf registration
statement. Proceeds from the debt issuance were primarily used to
reduce commercial paper borrowings. At December 31, 2009 the Company
had access to unused domestic and foreign lines of credit of $3,014 and could
also issue medium-term notes pursuant to an effective shelf registration
statement.
In August
2008, the Company increased the borrowing capacity under its domestic revolving
credit facility from $1,500 to $1,600 by adding two banks to the syndicate of
banks participating in the revolving credit facility. The facility
has an expiration date of November 2012.
During
2008, the Company issued $250 of five-year notes at a fixed rate of 4.2% under
the Company’s shelf registration statement. During 2008, the Company
also issued approximately $75 of U.S. dollar-denominated forty-year notes at a
variable rate, also under the shelf registration statement. Proceeds
from the debt issuances were used to repay $100 of medium-term notes with an
original maturity of May 2017 and to reduce commercial paper
borrowings.
Certain
of the facilities with respect to the Company’s bank borrowings contain
cross-default provisions. Non-compliance with these requirements could
ultimately result in the acceleration of amounts owed. The Company is in full
compliance with all such requirements and believes the likelihood of
non-compliance is remote.
7.
Fair Value Measurements
The
Company uses available market information and other valuation methodologies in
assessing the fair value of financial instruments. Judgment is required in
interpreting market data to develop the estimates of fair value and,
accordingly, changes in assumptions or the estimation methodologies may affect
the fair value estimates. The Company is exposed to credit losses in
the event of nonperformance by counterparties to financial instrument contracts;
however, nonperformance is considered unlikely as it is the Company’s policy to
contract with highly rated diverse counterparties.
COLGATE-PALMOLIVE
COMPANY
Notes
to Consolidated Financial Statements (continued)
(Dollars
in Millions Except Per Share Amounts)
Assets
and liabilities carried at fair value are classified and disclosed in one of the
following three categories:
Level 1:
Based upon quoted market prices in active markets for identical assets or
liabilities.
Level 2:
Based upon observable market-based inputs or unobservable inputs that are
corroborated by market data.
Level 3:
Based upon unobservable inputs reflecting the reporting entity’s own
assumptions.
Financial
Instruments
At
December 31, 2009 and 2008, marketable securities of $41 and $12, respectively,
were included within Other current assets in the Consolidated Balance Sheets and
consisted of bank deposits with original maturities greater than 90 days (Level
1 valuation). The carrying amount of cash and cash equivalents,
accounts receivable and short-term debt approximated fair value as of December
31, 2009. The estimated fair value of the Company’s long-term debt, including
the current portion, as of December 31, 2009 and 2008, was $3,362 and $3,991,
respectively, and the related carrying value was $3,147 and $3,676,
respectively. The estimated fair value of long-term debt was derived
principally from quoted prices on the Company’s outstanding fixed-term notes
(Level 2 valuation).
During
the second half of 2009, the Company purchased $210 of U.S. dollar-denominated
bonds issued by a Venezuelan state-owned corporation with stated maturities
ranging from two to seven years and $50 of U.S. dollar-linked,
devaluation-protected bonds issued by the Venezuelan government with stated
maturities ranging from six to eight years. Each investment is classified as
available-for-sale and included within Other assets in the Consolidated Balance
Sheet. These investments are considered Level 1 as they have quoted prices on an
active exchange with daily liquidity. As of December 31, 2009, the $15
difference between the fair value of these investments and their initial
carrying value was recorded as an unrealized gain in Other comprehensive
income.
Derivative
Instruments
The
Company’s derivative instruments include interest rate swap contracts, foreign
currency contracts and commodity contracts. The Company utilizes
interest rate swap contracts to manage its targeted mix of fixed and floating
rate debt, and these swaps are valued using observable benchmark rates (Level 2
valuation). Foreign currency contracts consist of forward and swap contracts
utilized to hedge a portion of the Company’s foreign currency purchases, assets
and liabilities created in the normal course of business as well as the net
investment in certain foreign subsidiaries. These contracts are valued using
observable forward rates (Level 2 valuation). Commodity contracts are utilized
to hedge the purchases of raw materials used in the Company’s operations. These
contracts are measured using quoted commodity exchange prices (Level 1
valuation). The duration of foreign currency and commodity contracts generally
does not exceed 12 months.
COLGATE-PALMOLIVE
COMPANY
Notes
to Consolidated Financial Statements (continued)
(Dollars
in Millions Except Per Share Amounts)
It is the
Company’s policy to enter into derivative instrument contracts with terms that
match the underlying exposure being hedged. As such, the Company’s derivative
instruments are considered highly effective. Hedge ineffectiveness, if any, is
not material for any period presented.
Financial
Statement Classification
The
Company holds derivative instruments that are designated as hedging instruments
as well as certain instruments not so designated. The following table
discloses the fair value as of December 31, 2009 for both types of derivative
instruments:
|
Asset Derivatives
|
Liability Derivatives
|
|||||||||
|
Account
|
Fair Value
|
Account
|
Fair Value
|
|||||||
|
Designated
derivative instruments
|
||||||||||
|
Interest
rate swap contracts
|
Other
assets
|
$ | 17 |
Other
liabilities
|
$ | — | ||||
|
Foreign
currency contracts
|
Other
current assets
|
11 |
Other
accruals
|
8 | ||||||
|
Commodity
contracts
|
Other
current assets
|
1 |
Other
accruals
|
1 | ||||||
|
Total
designated
|
$ | 29 | $ | 9 | ||||||
|
Derivatives
not designated
|
||||||||||
|
Foreign
currency contracts
|
Other
current assets
|
$ | 3 |
Other
accruals
|
$ | — | ||||
|
Total
not designated
|
$ | 3 | $ | — | ||||||
|
Total
|
$ | 32 | $ | 9 | ||||||
COLGATE-PALMOLIVE
COMPANY
Notes
to Consolidated Financial Statements (continued)
(Dollars
in Millions Except Per Share Amounts)
The
following table discloses the fair value as of December 31, 2008 for both types
of derivative instruments:
|
Asset Derivatives
|
Liability Derivatives
|
|||||||||
|
Account
|
Fair Value
|
Account
|
Fair Value
|
|||||||
|
Designated
derivative instruments
|
||||||||||
|
Interest
rate swap contracts
|
Other
assets
|
$ | 24 |
Other
liabilities
|
$ | — | ||||
|
Foreign
currency contracts
|
Other
current assets
|
52 |
Other
accruals
|
66 | ||||||
|
Commodity
contracts
|
Other
current assets
|
— |
Other
accruals
|
7 | ||||||
|
Total
designated
|
$ | 76 | $ | 73 | ||||||
|
Derivatives
not designated
|
||||||||||
|
Foreign
currency contracts
|
Other
current assets
|
$ | 32 |
Other
accruals
|
$ | — | ||||
|
Total
not designated
|
$ | 32 | $ | — | ||||||
|
Total
|
$ | 108 | $ | 73 | ||||||
Derivatives
not designated as hedging instruments for each period consist of cross-currency
swaps which serve as economic hedges of a foreign currency
deposit. The cross-currency swap outstanding at December 31, 2009
replaced a swap with similar terms that settled in June 2009, resulting in a
realized gain of $21. For the year ended December 31, 2009, $8 of net losses
were recognized in Other (income) expense, net related to the swaps, offset by
$8 of net gains recognized in Other (income) expense, net on the underlying
deposit. The notional value of the swaps as of December 31, 2009 and
2008, was $99 and $119, respectively.
Cash
flow hedges
As of
December 31, 2009, all of the Company’s commodity contracts, with a notional
value of $15, and certain foreign currency forward contracts, with a notional
value of $207, have been designated as cash flow hedges. As of December 31,
2008, all of the Company’s commodity contracts, with a notional value of $41,
and certain foreign currency contracts, with a notional value of $194, were
designated as cash flow hedges. For cash flow hedges, the effective
portion of the gain or loss is reported as a component of Other comprehensive
income (loss) and reclassified into earnings in the same period or periods
during which the hedged transaction affects earnings.
COLGATE-PALMOLIVE
COMPANY
Notes
to Consolidated Financial Statements (continued)
(Dollars
in Millions Except Per Share Amounts)
Activity
related to cash flow hedges recorded during the year ended December 31, 2009 was
as follows:
|
Gain (Loss)
|
|||||||||
|
Cash Flow Hedges
|
Recognized
in OCI*
|
Reclassified
into Income
|
Location
of Gain (Loss) Reclassified from Accumulated
OCI into Income
|
||||||
|
Foreign
currency contracts
|
$ | (19 | ) | $ | (30 | ) |
Cost
of sales
|
||
|
Commodity
contracts
|
1 | (8 | ) |
Cost
of sales
|
|||||
| $ | (18 | ) | $ | (38 | ) | ||||
*The net
gain (loss) recognized in OCI is expected to be recognized in earnings within
the next twelve months.
Fair
value hedges
During
the third quarter of 2009, the Company entered into interest rate swaps to
effectively convert a portion of the Company’s fixed rate debt to a variable
rate. These swaps, with a stated maturity of April 2012 and a
notional value of $330, are designated as fair value hedges.
As of
December 31, 2009, the Company has designated all interest rate swap contracts
with a notional value of $600, and certain foreign currency forward contracts
with a notional value of $889, as fair value hedges. As of December
31, 2008, the Company designated all interest rate swap contracts with a
notional value of $270, and certain foreign currency contracts with a notional
value of $734, as fair value hedges. For fair value hedges, the gain
or loss on the derivative and the offsetting loss or gain on the hedged item are
recognized in current earnings.
Activity
related to fair value hedges recorded during the year ended December 31, 2009
was as follows:
|
Gain (Loss) on
|
|||||||||
|
Fair Value Hedges
|
Derivatives
|
Hedged Item
|
Location in Income
Statement
|
||||||
|
Foreign
currency contracts
|
$ | 19 | $ | (19 | ) |
Selling,
general and administrative expenses
|
|||
|
Interest
rate swap contracts
|
(7 | ) | 7 |
Interest
expense, net
|
|||||
| $ | 12 | $ | (12 | ) | |||||
COLGATE-PALMOLIVE
COMPANY
Notes
to Consolidated Financial Statements (continued)
(Dollars
in Millions Except Per Share Amounts)
Net
investment hedges
As of
December 31, 2009, the Company has designated certain foreign currency forward
contracts with a notional value of $89, and certain foreign currency-denominated
debt with a notional value of $396, as net investment hedges. For the period
ended December 31, 2009, a $23 net loss was recorded in OCI to offset the
changes in the values of the net investments being hedged. As of
December 31, 2008, the Company designated certain foreign currency contracts
with a notional value of $24, and certain foreign currency-denominated debt with
a notional value of $642, as net investment hedges.
8.
Capital Stock and Stock-Based Compensation Plans
Preference
Stock
The
Company has the authority to issue 50,000,000 shares of Preference
stock. In 1989, the Company approved the issuance of 6,315,149 shares
of Series B Convertible Preference stock (the Preference stock) without par
value. Each share of Preference stock, which is convertible into eight shares of
common stock, has a redemption price of $65 per share and pays cumulative
dividends equal to the higher of $2.44 or the current dividend paid on eight
common shares for the comparable six-month period. As of December 31, 2009 and
2008, there were 2,607,541 and 2,784,175 shares of Preference stock,
respectively, outstanding and issued to the Company’s Employee Stock Ownership
Plan. See Note 9 for further information about the Company’s Employee Stock
Ownership Plan.
Stock
Repurchases
The
Company repurchased stock at a cost of $1,063 during 2009. In 2009, the Company
repurchased its common stock under a share repurchase program that was approved
by the Board of Directors in January 2008 (the 2008 Program). Under the 2008
Program, the Company was authorized to purchase up to 30 million shares of the
Company’s common stock.
On
February 4, 2010, the Company’s Board of Directors authorized a new share
repurchase program (the 2010 Program) effective as of that date. The
2010 Program authorizes the repurchase of up to 40 million shares of the
Company’s common stock. The Board’s authorization also provides for
share repurchases on an on-going basis to fulfill certain requirements of the
Company’s compensation and benefit programs. The shares will be repurchased from
time to time in open market transactions or privately negotiated transactions at
the Company’s discretion, subject to market conditions, customary blackout
periods and other factors.
The
Company may use either authorized and unissued shares or treasury shares to meet
share requirements resulting from the exercise of stock options and vesting of
restricted stock awards.
COLGATE-PALMOLIVE
COMPANY
Notes
to Consolidated Financial Statements (continued)
(Dollars
in Millions Except Per Share Amounts)
A summary
of common stock and treasury stock activity for the three years ended December
31, 2009 is as follows:
|
Common Stock
|
Treasury Stock
|
|||||||
|
Balance,
January 1, 2007
|
512,658,587 | 220,194,593 | ||||||
|
Common
stock acquired
|
(18,062,892 | ) | 18,062,892 | |||||
|
Shares
issued for stock options
|
10,051,559 | (10,051,559 | ) | |||||
|
Shares
issued for restricted stock and other
|
1,275,715 | (1,275,715 | ) | |||||
|
Preference
stock conversion
|
3,111,832 | (3,111,832 | ) | |||||
|
Balance,
December 31, 2007
|
509,034,801 | 223,818,379 | ||||||
|
Common
stock acquired
|
(14,731,316 | ) | 14,731,316 | |||||
|
Shares
issued for stock options
|
4,280,505 | (4,280,505 | ) | |||||
|
Shares
issued for restricted stock and other
|
799,926 | (799,926 | ) | |||||
|
Preference
stock conversion
|
2,028,664 | (2,028,664 | ) | |||||
|
Balance,
December 31, 2008
|
501,412,580 | 231,440,600 | ||||||
|
Common
stock acquired
|
(14,916,340 | ) | 14,916,340 | |||||
|
Shares
issued for stock options
|
5,455,317 | (5,455,317 | ) | |||||
|
Shares
issued for restricted stock and other
|
800,388 | ( 800,388 | ) | |||||
|
Preference
stock conversion
|
1,413,072 | (1,413,072 | ) | |||||
|
Balance,
December 31, 2009
|
494,165,017 | 238,688,163 | ||||||
Stock-Based
Compensation
The
Company recognizes the cost of employee services received in exchange for awards
of equity instruments, such as stock options and restricted stock, based on the
fair value of those awards at the date of grant. The value of restricted stock
awards, based on market prices, is amortized on a straight-line basis over the
requisite service period. The estimated fair value of stock options on the date
of grant is amortized on a straight-line basis over the requisite service period
for each separately vesting portion of the award. Awards to employees
eligible for retirement prior to the award becoming fully vested are recognized
as compensation cost over the period through the date that the employee first
becomes eligible to retire and is no longer required to provide service to earn
the award.
The
Company has two types of stock-based compensation plans, which are described
below. The total stock-based compensation expense charged against pretax income
for these plans was $117, $100 and $110 for the years ended December 31, 2009,
2008 and 2007, respectively. The total income tax benefit recognized on
stock-based compensation was approximately $40, $32 and $37 for the years ended
December 31, 2009, 2008 and 2007, respectively.
COLGATE-PALMOLIVE
COMPANY
Notes
to Consolidated Financial Statements (continued)
(Dollars
in Millions Except Per Share Amounts)
Stock-based
compensation expense is recorded within Selling, general and administrative
expenses in the Corporate segment as these amounts are not included in internal
measures of segment operating performance.
The
Company uses the Black-Scholes option pricing model to determine the fair value
of stock-option awards. The weighted-average estimated fair value of
stock options granted in the year ended December 31, 2009, 2008 and 2007 was
$12.06, $13.35 and $12.72, respectively. Fair value is estimated using the
Black-Scholes option pricing model with the assumptions summarized in the
following table:
|
2009
|
2008
|
2007
|
||||||||||
|
Expected
Term of Options
|
4.5
years
|
4.5
years
|
4
years
|
|||||||||
|
Expected
Volatility Rate
|
22.1% | 19.5% | 21.0% | |||||||||
|
Risk-Free
Rate
|
2.3% | 3.0% | 4.2% | |||||||||
|
Expected
Dividend Yield
|
2.4% | 2.0% | 2.1% | |||||||||
The
weighted-average expected term of options granted in 2009 and 2008 was
determined with reference to historical exercise and post-vesting cancellation
experience, the vesting period of the awards and contractual term of the awards,
among other factors. Prior to 2008, the weighted-average expected
option term reflected the application of the simplified method, which defined
the term as the average of the contractual term of the options and the
weighted-average vesting period for all option tranches. Expected
volatility incorporates implied share-price volatility derived from exchange
traded options on the Company’s common stock. The risk-free rate for
the expected term of the option is based on the U.S. Treasury implied yield at
the time of grant.
Incentive
Stock Plan
The
Company has a plan that provides for grants of restricted stock awards for
officers and other employees. A committee of independent members of the Board of
Directors administers the plan. Awards are made in common stock and vest at the
end of the restriction period, which is generally three years. As of
December 31, 2009, 11,153,000 shares of common stock were available for future
restricted stock awards.
COLGATE-PALMOLIVE
COMPANY
Notes
to Consolidated Financial Statements (continued)
(Dollars
in Millions Except Per Share Amounts)
A summary
of restricted stock award activity during 2009 is presented below:
|
Shares
(in thousands)
|
Weighted Average Grant Date Fair Value Per
Award
|
|||||||
|
Restricted
stock awards as of January 1, 2009
|
2,429 | $ | 66 | |||||
|
Activity:
|
||||||||
|
Granted
|
1,150 | 64 | ||||||
|
Vested
|
(774 | ) | 60 | |||||
|
Forfeited
|
(4 | ) | 66 | |||||
|
Restricted
stock awards as of December 31, 2009
|
2,801 | 66 | ||||||
As of
December 31, 2009, there was $56 of total unrecognized compensation expense
related to nonvested restricted stock awards, which will be recognized over a
weighted-average period of 1.6 years. The total fair value of shares vested
during the years ended December 31, 2009, 2008 and 2007 was $48, $56 and $78,
respectively.
Stock
Option Plans
The
Company’s stock option plans provide for the issuance to directors, officers and
other employees of non-qualified stock options that generally have a contractual
term of six years and vest over three years. As of December 31, 2009, 18,426,000
shares of common stock were available for future stock option
grants.
A summary
of stock option plan activity during 2009 is presented below:
|
Shares
(in thousands)
|
Weighted Average Exercise
Price
|
Weighted Average Remaining Contractual
Life
(in years)
|
Value of Unexercised In-the-Money
Options
|
|||||||||||||
|
Options
outstanding, January 1, 2009
|
27,452 | $62 | ||||||||||||||
|
Granted
|
4,835 | 73 | ||||||||||||||
|
Exercised
|
(7,044 | ) | 56 | |||||||||||||
|
Forfeited
or expired
|
(152 | ) | 71 | |||||||||||||
|
Options
outstanding, December 31, 2009
|
25,091 | 65 | 3 | $423 | ||||||||||||
|
Options
exercisable, December 31, 2009
|
16,153 | $60 | 2 | $353 | ||||||||||||
COLGATE-PALMOLIVE
COMPANY
Notes
to Consolidated Financial Statements (continued)
(Dollars
in Millions Except Per Share Amounts)
As of
December 31, 2009, there was $42 of total unrecognized compensation expense
related to options, which will be recognized over a weighted-average period of
1.4 years. The total value of options exercised during the years ended December
31, 2009, 2008 and 2007 was $120, $113 and $290, respectively.
The
benefits of tax deductions in excess of grant date fair value resulting from the
exercise of stock options and vesting of restricted stock awards for the years
ended December 31, 2009, 2008 and 2007 was $16, $26 and $65, respectively, and
was reported as a financing cash flow. Cash proceeds received from options
exercised for the years ended December 31, 2009, 2008 and 2007 were $284, $211
and $424, respectively.
9.
Employee Stock Ownership Plan
In 1989,
the Company expanded its Employee Stock Ownership Plan (ESOP) through the
introduction of a leveraged ESOP that funds certain benefits for employees who
have met eligibility requirements. The ESOP issued $410 of long-term notes due
through July 2009 bearing an average interest rate of 8.7%. The notes, which
were guaranteed by the Company, were repaid in July 2009. The ESOP used the
proceeds of the notes to purchase 6.3 million shares of Preference stock from
the Company. The Preference stock, each share of which is convertible into eight
shares of common stock, has a redemption price of $65 per share and pays
semiannual dividends equal to the higher of $2.44 or the current dividend paid
on eight common shares for the comparable six-month period. During 2000, the
ESOP entered into a loan agreement with the Company under which the benefits of
the ESOP may be extended through 2035.
Dividends
on the Preference stock, as well as on the common stock also held by the ESOP,
are paid to the ESOP trust and, together with cash contributions and advances
from the Company, are used by the ESOP to repay principal and interest.
Preference stock is released for allocation to participants based upon the ratio
of the current year’s debt service to the sum of total principal and interest
payments over the life of the debt. As of December 31, 2009, 1,305,666 shares
were released and allocated to participant accounts and 1,301,875 shares were
available for future allocation.
Dividends
on the Preference stock are deductible for income tax purposes and, accordingly,
are reflected net of their tax benefit in the Consolidated Statements of Changes
in Shareholders’ Equity.
Annual
expense related to the leveraged ESOP, determined as interest incurred on the
original notes, plus the higher of either principal payments or the historical
cost of Preference stock allocated, less dividends received on the shares held
by the ESOP and advances from the Company, was $22 in 2009, $7 in 2008 and
$12 in 2007. Unearned compensation, which is shown as a reduction in
Shareholders’ equity, represents the amount of ESOP debt due to the Company
reduced by the difference between the cumulative cost of Preference stock
allocated and the cumulative principal payments.
COLGATE-PALMOLIVE
COMPANY
Notes
to Consolidated Financial Statements (continued)
(Dollars
in Millions Except Per Share Amounts)
Interest
incurred on the ESOP’s notes was $2 in 2009, $8 in 2008 and $13 in 2007. The
Company paid dividends on the shares held by the ESOP of $37 in 2009, $36 in
2008 and $36 in 2007. Company contributions to the ESOP were $22 in 2009, $7 in
2008 and $12 in 2007.
10.
Retirement Plans and Other Retiree Benefits
|
|
Retirement
Plans
|
The
Company and certain of its U.S. and overseas subsidiaries maintain defined
benefit retirement plans. Benefits are based primarily on years of service and
employees’ career earnings. In the Company’s principal U.S. plans and certain
funded overseas plans, funds are contributed to trusts in accordance with
regulatory limits to provide for current service and for any unfunded projected
benefit obligation over a reasonable period. The target asset allocation for the
Company’s defined benefit plans are as follows:
|
United States
|
International
|
|||||||
|
Asset
Category
|
||||||||
|
Equity
securities
|
63 | % | 43 | % | ||||
|
Debt
securities
|
33 | 50 | ||||||
|
Real
estate and other
|
4 | 7 | ||||||
|
Total
|
100 | % | 100 | % | ||||
COLGATE-PALMOLIVE
COMPANY
Notes
to Consolidated Financial Statements (continued)
(Dollars
in Millions Except Per Share Amounts)
At
December 31, 2009 the allocation of the Company’s plan assets and the level of
valuation input for each major asset category, was as follows:
|
Level of
|
Pension Plans
|
Other Retiree
|
|||||||||||
|
Valuation Input
|
United States
|
International
|
Benefits
|
||||||||||
|
Investments:
|
|||||||||||||
|
Cash
& cash equivalents
|
Level
1
|
$ | 84 | $ | 21 | $ | 2 | ||||||
|
U.S.
common stocks
|
Level
1
|
220 | — | 6 | |||||||||
|
International
common stocks
|
Level
1
|
48 | — | 2 | |||||||||
|
Fixed
income securities (a)
|
Level
2
|
144 | — | — | |||||||||
|
Common/collective
trust funds (b):
|
Level
2
|
||||||||||||
|
Equity
index funds
|
351 | 135 | 9 | ||||||||||
|
Emerging
market equity index funds
|
52 | 14 | 1 | ||||||||||
|
Other
common stock funds
|
88 | 21 | 2 | ||||||||||
|
Fixed
income funds: U.S. or foreign government and agency
securities
|
157 | 24 | 4 | ||||||||||
|
Fixed
income funds: investment grade corporate bonds
|
52 | 120 | 1 | ||||||||||
|
Fixed
income funds: high yield corporate bonds and other
|
56 | 10 | 1 | ||||||||||
|
Guaranteed
investment contracts (c)
|
Level
2
|
— | 45 | — | |||||||||
|
Real
estate (d)
|
Level
3
|
48 | 11 | — | |||||||||
|
Total
Investments at fair value
|
$ | 1,300 | $ | 401 | $ | 28 | |||||||
|
|
(a)
|
The
fixed income securities are traded over the counter and a small portion of
the securities lack daily pricing or liquidity and as such are classified
as level 2. Approximately 75% of the fixed income portfolio is
invested in U.S. treasury or agency securities, with the remainder
invested in corporate bonds.
|
|
|
(b)
|
Interests
in common/collective trust funds are valued using the net asset value
(NAV) per unit in each fund. The NAV is based on the value of
the underlying investments owned by each trust, minus its liabilities,
divided by the number of shares
outstanding.
|
|
|
(c)
|
The
guaranteed investment contracts (GICs) represent contracts with insurance
companies measured at the cash surrender value of each
contract. The level 2 valuation reflects that the cash
surrender value is based principally on a referenced pool of investment
funds with active redemption.
|
|
|
(d)
|
Real
estate is valued using the NAV per unit of funds that are invested in real
property, and the real property is valued using independent market
appraisals. Since the appraisals include unobservable inputs
the investments in each fund are classified as level
3.
|
COLGATE-PALMOLIVE
COMPANY
Notes
to Consolidated Financial Statements (continued)
(Dollars
in Millions Except Per Share Amounts)
The
following table presents a reconciliation of level 3 plan assets measured at
fair value for the year ended December 31, 2009:
|
United
States
|
International
|
|||||||
|
Real Estate Fund
|
Real Estate Fund
|
|||||||
|
Beginning
balance as of January 1, 2009
|
$ | 72 | $ | 9 | ||||
|
Earned
income, net of management expenses
|
2 | 1 | ||||||
|
Unrealized
gain (loss) on investment
|
(26 | ) | 1 | |||||
|
Purchases,
sales, issuances and settlements, net
|
— | — | ||||||
|
Ending
balance as of December 31, 2009
|
$ | 48 | $ | 11 | ||||
Equity
securities in the U.S. plans include investments in the Company’s common stock
representing 10% and 9% of U.S. plan assets at December 31, 2009 and 2008,
respectively. No shares of the Company’s common stock were purchased
or sold by the plans in 2009. Such plans purchased approximately
298,000 shares of the Company’s common stock in 2008, and no shares were sold in
2008. The plans received dividends on the Company’s common stock of
$3 and $2 in 2009 and 2008, respectively.
Other
Retiree Benefits
The
Company and certain of its subsidiaries provide health care and life insurance
benefits for retired employees to the extent not provided by
government-sponsored plans. The Company utilizes a portion of its leveraged ESOP
to reduce its obligation to provide these other retiree benefits and to offset
its current service cost.
COLGATE-PALMOLIVE
COMPANY
Notes
to Consolidated Financial Statements (continued)
(Dollars
in Millions Except Per Share Amounts)
The
Company uses a December 31 measurement date for its defined benefit and other
retiree benefit plans. Summarized information for the Company’s defined benefit
and other retiree benefit plans are as follows:
|
Pension Benefits
|
Other Retiree
Benefits
|
|||||||||||||||||||||||
|
2009
|
2008
|
2009
|
2008
|
2009
|
2008
|
|||||||||||||||||||
|
United States
|
International
|
|||||||||||||||||||||||
|
Change
in Benefit Obligations
|
||||||||||||||||||||||||
|
Benefit
obligations at beginning of year
|
$ | 1,570 | $ | 1,459 | $ | 604 | $ | 718 | $ | 542 | $ | 472 | ||||||||||||
|
Service
cost
|
42 | 40 | 15 | 15 | 3 | 1 | ||||||||||||||||||
|
Interest
cost
|
95 | 95 | 37 | 37 | 36 | 34 | ||||||||||||||||||
|
Participants’
contributions
|
1 | 2 | 3 | 3 | — | — | ||||||||||||||||||
|
Acquisitions/plan
amendments
|
— | 30 | 1 | 6 | — | — | ||||||||||||||||||
|
Actuarial
loss (gain)
|
104 | 63 | 46 | (24 | ) | 37 | 58 | |||||||||||||||||
|
Foreign
exchange impact
|
— | — | 39 | (97 | ) | 5 | (11 | ) | ||||||||||||||||
|
Termination
benefits
|
— | 1 | — | 1 | — | — | ||||||||||||||||||
|
Curtailments
and settlements
|
— | — | (3 | ) | (13 | ) | — | — | ||||||||||||||||
|
Benefit
payments
|
(109 | ) | (120 | ) | (36 | ) | (42 | ) | (20 | ) | (12 | ) | ||||||||||||
|
Benefit
obligations at end of year
|
$ | 1,703 | $ | 1,570 | $ | 706 | $ | 604 | $ | 603 | $ | 542 | ||||||||||||
|
Change
in Plan Assets
|
||||||||||||||||||||||||
|
Fair
value of plan assets at beginning of year
|
$ | 1,134 | $ | 1,452 | $ | 320 | $ | 442 | $ | 24 | $ | 32 | ||||||||||||
|
Actual
return on plan assets
|
189 | (307 | ) | 43 | (53 | ) | 4 | (8 | ) | |||||||||||||||
|
Company
contributions
|
85 | 108 | 45 | 41 | 20 | 12 | ||||||||||||||||||
|
Participants’
contributions
|
1 | 1 | 3 | 3 | — | — | ||||||||||||||||||
|
Foreign
exchange impact
|
— | — | 29 | (62 | ) | — | — | |||||||||||||||||
|
Settlements
|
— | — | (3 | ) | (9 | ) | — | — | ||||||||||||||||
|
Benefit
payments
|
(109 | ) | (120 | ) | (36 | ) | (42 | ) | (20 | ) | (12 | ) | ||||||||||||
|
Fair
value of plan assets at end of year
|
$ | 1,300 | $ | 1,134 | $ | 401 | $ | 320 | $ | 28 | $ | 24 | ||||||||||||
|
Funded
Status
|
||||||||||||||||||||||||
|
Benefit
obligations at end of year
|
$ | 1,703 | $ | 1,570 | $ | 706 | $ | 604 | $ | 603 | $ | 542 | ||||||||||||
|
Fair
value of plan assets at end of year
|
1,300 | 1,134 | 401 | 320 | 28 | 24 | ||||||||||||||||||
|
Net
amount recognized
|
$ | (403 | ) | $ | (436 | ) | $ | (305 | ) | $ | (284 | ) | $ | (575 | ) | $ | (518 | ) | ||||||
|
Amounts
Recognized in Balance Sheet
|
||||||||||||||||||||||||
|
Noncurrent
assets
|
$ | — | $ | — | $ | 4 | $ | 5 | $ | — | $ | — | ||||||||||||
|
Current
liabilities
|
(12 | ) | (15 | ) | (14 | ) | (13 | ) | (35 | ) | (28 | ) | ||||||||||||
|
Noncurrent
liabilities
|
(391 | ) | (421 | ) | (295 | ) | (276 | ) | (540 | ) | (490 | ) | ||||||||||||
|
Net
amount recognized
|
$ | (403 | ) | $ | (436 | ) | $ | (305 | ) | $ | (284 | ) | $ | (575 | ) | $ | (518 | ) | ||||||
|
Amounts
recognized in Accumulated other comprehensive income consist
of
|
||||||||||||||||||||||||
|
Actuarial
loss
|
$ | 641 | $ | 687 | $ | 132 | $ | 113 | $ | 267 | $ | 246 | ||||||||||||
|
Transition/prior
service cost
|
29 | 32 | 8 | 11 | 2 | 1 | ||||||||||||||||||
| $ | 670 | $ | 719 | $ | 140 | $ | 124 | $ | 269 | $ | 247 | |||||||||||||
|
Accumulated
benefit obligation
|
$ | 1,645 | $ | 1,506 | $ | 635 | $ | 546 | $ | — | $ | — | ||||||||||||
COLGATE-PALMOLIVE
COMPANY
Notes
to Consolidated Financial Statements (continued)
(Dollars
in Millions Except Per Share Amounts)
|
Pension Benefits
|
Other
Retiree Benefits
|
|||||||||||||||||||||||
|
2009
|
2008
|
2009
|
2008
|
2009
|
2008
|
|||||||||||||||||||
|
United States
|
International
|
|||||||||||||||||||||||
|
Weighted-Average
Assumptions Used to Determine Benefit Obligations
|
||||||||||||||||||||||||
|
Discount
rate
|
5.75% | 6.30% | 5.41% | 5.88% | 5.75% | 5.80% | ||||||||||||||||||
|
Long-term
rate of return on plan assets
|
8.00% | 8.00% | 6.58% | 6.70% | 8.00% | 8.00% | ||||||||||||||||||
|
Long-term
rate of compensation increase
|
4.00% | 4.00% | 3.35% | 3.33% | — | — | ||||||||||||||||||
|
ESOP
growth rate
|
— | — | — | — | 10.00% | 10.00% | ||||||||||||||||||
The
overall investment objective of the plans is to balance risk and return so that
obligations to employees are met. The Company evaluates its long-term rate of
return on plan assets on an annual basis. In determining the long-term rate of
return, the Company considers the nature of the plans’ investments, an
expectation for the plans’ investment strategies and the historical rates of
return. The assumed rate of return for 2009 for the U.S. plans was 8%. Average
annual rates of return for the U.S. plans for the most recent 1-year, 5-year,
10-year, 15-year and 25-year periods were 17%, 5%, 4%, 6%, and 9%,
respectively. Similar assessments were performed in determining rates
of return on international pension plan assets to arrive at the Company’s 2009
weighted-average rate of return of 6.58%.
Plans
with projected benefit obligations in excess of plan assets and plans with
accumulated benefit obligations in excess of plan assets as of December 31
consist of the following:
|
Years Ended December 31,
|
||||||||
|
2009
|
2008
|
|||||||
|
Benefit
Obligation Exceeds Fair Value of Plan Assets
|
||||||||
|
Projected
benefit obligation
|
$ | 2,338 | $ | 2,085 | ||||
|
Fair
value of plan assets
|
1,629 | 1,361 | ||||||
|
Accumulated
benefit obligation
|
2,170 | 1,967 | ||||||
|
Fair
value of plan assets
|
1,579 | 1,346 | ||||||
COLGATE-PALMOLIVE
COMPANY
Notes
to Consolidated Financial Statements (continued)
(Dollars
in Millions Except Per Share Amounts)
The
medical cost trend rate of increase assumed in measuring the expected cost of
benefits is projected to decrease from 9.00% in 2010 to 5.00% by 2016, remaining
at 5.00% for the years thereafter. Changes in the assumed rate can have a
significant effect on amounts reported. The effect of a 1% change in the assumed
medical cost trend rate would have the following approximate
effect:
|
One percentage point
|
||||||||
|
Increase
|
Decrease
|
|||||||
|
Accumulated
postretirement benefit obligation
|
$ | 77 | $ | (64 | ) | |||
|
Annual
expense
|
7 | (6 | ) | |||||
COLGATE-PALMOLIVE
COMPANY
Notes
to Consolidated Financial Statements (continued)
(Dollars
in Millions Except Per Share Amounts)
Summarized
information regarding the net periodic benefit costs for the Company’s defined
benefit and other retiree benefit plans is as follows:
|
Pension Benefits
|
Other Retiree
Benefits
|
|||||||||||||||||||||||||||||||||||
|
2009
|
2008
|
2007
|
2009
|
2008
|
2007
|
2009
|
2008
|
2007
|
||||||||||||||||||||||||||||
|
United States
|
International
|
|||||||||||||||||||||||||||||||||||
|
Components
of Net Periodic Benefit Cost
|
||||||||||||||||||||||||||||||||||||
|
Service
cost
|
$ | 42 | $ | 40 | $ | 41 | $ | 15 | $ | 15 | $ | 19 | $ | 10 | $ | 10 | $ | 11 | ||||||||||||||||||
|
Interest
cost
|
95 | 95 | 87 | 37 | 37 | 35 | 36 | 34 | 32 | |||||||||||||||||||||||||||
|
Annual
ESOP allocation
|
— | — | — | — | — | — | (7 | ) | (9 | ) | (9 | ) | ||||||||||||||||||||||||
|
Expected
return on plan assets
|
(89 | ) | (114 | ) | (109 | ) | (23 | ) | (27 | ) | (28 | ) | (2 | ) | (3 | ) | (2 | ) | ||||||||||||||||||
|
Amortization
of transition & prior service costs (credits)
|
4 | 4 | 6 | 3 | 1 | 1 | — | — | — | |||||||||||||||||||||||||||
|
Amortization
of actuarial loss
|
50 | 6 | 16 | 5 | 3 | 7 | 13 | 9 | 12 | |||||||||||||||||||||||||||
|
Net
periodic benefit cost
|
$ | 102 | $ | 31 | $ | 41 | $ | 37 | $ | 29 | $ | 34 | $ | 50 | $ | 41 | $ | 44 | ||||||||||||||||||
|
Other
postretirement charges
|
— | 1 | 33 | — | 4 | 1 | — | — | 5 | |||||||||||||||||||||||||||
|
Total
pension cost
|
$ | 102 | $ | 32 | $ | 74 | $ | 37 | $ | 33 | $ | 35 | $ | 50 | $ | 41 | $ | 49 | ||||||||||||||||||
|
Weighted-
Average Assumptions Used to Determine Net Periodic Benefit
Cost
|
||||||||||||||||||||||||||||||||||||
|
Discount
rate
|
6.30% | 6.50% | 5.80% | 5.88% | 5.52% | 4.82% | 5.80% | 6.50% | 5.80% | |||||||||||||||||||||||||||
|
Long-term
rate of return on plan assets
|
8.00% | 8.00% | 8.00% | 6.70% | 7.00% | 6.70% | 8.00% | 8.00% | 8.00% | |||||||||||||||||||||||||||
|
Long-term
rate of compensation increase
|
4.00% | 4.00% | 4.00% | 3.33% | 3.65% | 3.41% | — | — | — | |||||||||||||||||||||||||||
|
ESOP
growth rate
|
— | — | — | — | — | — | 10.00% | 10.00% | 10.00% | |||||||||||||||||||||||||||
COLGATE-PALMOLIVE
COMPANY
Notes
to Consolidated Financial Statements (continued)
(Dollars
in Millions Except Per Share Amounts)
During
2009, the Company made voluntary contributions of $73 to its U.S. postretirement
plans.
During
2008, the Company made voluntary contributions of $95 (including $19 related to
the 2004 Restructuring Program) to its U.S. postretirement
plans. Other postretirement charges in 2008 primarily related to
certain one-time termination benefits incurred pursuant to the 2004
Restructuring Program.
During
2007, the Company made voluntary contributions of $45 (including $35 related to
the 2004 Restructuring Program) to its U.S. postretirement
plans. Other postretirement charges in 2007 relating to certain
one-time termination benefits incurred pursuant to the 2004 Restructuring
Program amounted to $16. Other 2007 pension settlement charges amounted to $23
and pertained primarily to lump sum payments of normal retirement benefits
associated with retirement plans in the U.S.
Termination
benefits incurred pursuant to the 2004 Restructuring Program in 2008 and 2007
are reflected as a restructuring charge; however, the related accrual resides in
pension and other retiree benefit assets and liabilities at December 31, 2008
and 2007, respectively.
Amounts
recognized in Other Comprehensive Income during the year ended December 31, 2009
were as follows:
|
Before-Tax
Amount
|
Net-of-Tax
Amount
|
|||||||
|
Net
actuarial loss & prior service costs arising during the
period
|
$ | 64 | $ | 40 | ||||
|
Amortization
of net actuarial loss, transition & prior service
costs
|
(75 | ) | (48 | ) | ||||
|
Total
|
$ | (11 | ) | $ | (8 | ) | ||
The
estimated actuarial loss and the estimated transition/prior service cost for
defined benefit and other retiree benefit plans that will be amortized from
accumulated other comprehensive income into net periodic benefit cost over the
next fiscal year is as follows:
|
Pension Benefits
|
Other Retiree Benefits
|
|||||||
|
Net
actuarial loss
|
$ | 48 | $ | 13 | ||||
|
Net
transition & prior service cost (credit)
|
7 | — | ||||||
COLGATE-PALMOLIVE
COMPANY
Notes
to Consolidated Financial Statements (continued)
(Dollars
in Millions Except Per Share Amounts)
Expected
Contributions & Benefit Payments
Management’s
best estimate of cash requirements to be paid directly from the Company’s assets
to its postretirement plans for the year ending December 31, 2010, is
approximately $120, including approximately $35 for other retiree benefit plans.
These estimated cash requirements include approximately $55 of projected
contributions to the Company’s postretirement plans, composed of $35 of
voluntary contributions to our U.S. pension plans and approximately $20 of
projected benefit payments made directly to participants of unfunded plans.
Expected contributions are dependent on many variables, including the
variability of the market value of the assets as compared to the obligation and
other market or regulatory conditions. Accordingly, actual funding may differ
from current estimates.
Total
benefit payments expected to be paid to participants, which include payments
directly from the Company’s assets to participants of unfunded plans, as
discussed above, as well as payments paid from the plans are as
follows:
|
Pension Benefits
|
||||||||||||
|
Years
Ended December 31,
|
United States
|
International
|
Other Retiree Benefits
|
|||||||||
|
2010
|
$ | 120 | $ | 41 | $ | 36 | ||||||
|
2011
|
120 | 51 | 38 | |||||||||
|
2012
|
120 | 42 | 38 | |||||||||
|
2013
|
122 | 43 | 38 | |||||||||
|
2014
|
122 | 47 | 38 | |||||||||
|
2015-2019
|
664 | 231 | 178 | |||||||||
11.
Income Taxes
The
components of income before income taxes are as follows for the three years
ended December 31:
|
2009
|
2008
|
2007
|
||||||||||
|
United
States
|
$ | 1,173 | $ | 1,027 | $ | 802 | ||||||
|
International
|
2,365 | 1,978 | 1,761 | |||||||||
|
Total
Income before income taxes
|
$ | 3,538 | $ | 3,005 | $ | 2,563 | ||||||
The
provision for income taxes consists of the following for the three years ended
December 31:
|
2009
|
2008
|
2007
|
||||||||||
|
United
States
|
$ | 399 | $ | 314 | $ | 274 | ||||||
|
International
|
742 | 654 | 485 | |||||||||
|
Total
Provision for income taxes
|
$ | 1,141 | $ | 968 | $ | 759 | ||||||
COLGATE-PALMOLIVE
COMPANY
Notes
to Consolidated Financial Statements (continued)
(Dollars
in Millions Except Per Share Amounts)
Temporary
differences between accounting for financial statement purposes and accounting
for tax purposes result in the current provision for taxes being higher (lower)
than the total provision for income taxes as follows:
|
2009
|
2008
|
2007
|
||||||||||
|
Goodwill
and intangible assets
|
$ | 15 | $ | (10 | ) | $ | (34 | ) | ||||
|
Property,
plant and equipment
|
(24 | ) | (29 | ) | 15 | |||||||
|
Pension
and other retiree benefits
|
27 | (46 | ) | 10 | ||||||||
|
Stock-based
compensation
|
18 | 18 | 6 | |||||||||
|
Tax
loss and tax credit carryforwards
|
(27 | ) | (30 | ) | (14 | ) | ||||||
|
Valuation
allowances
|
3 | 6 | 112 | |||||||||
|
Other,
net
|
7 | (5 | ) | 31 | ||||||||
|
Total
|
$ | 19 | $ | (96 | ) | $ | 126 | |||||
The
difference between the statutory U.S. federal income tax rate and the Company’s
global effective tax rate as reflected in the Consolidated Statements of Income
is as follows:
|
Percentage
of Income before income taxes
|
2009
|
2008
|
2007
|
|||||||||
|
Tax
at United States statutory rate
|
35.0 | % | 35.0 | % | 35.0 | % | ||||||
|
State
income taxes, net of federal benefit
|
0.5 | 0.8 | 0.9 | |||||||||
|
Earnings
taxed at other than United States statutory rate
|
(2.5 | ) | (1.9 | ) | (0.6 | ) | ||||||
|
Reduction
of valuation allowances
|
— | — | (4.5 | ) | ||||||||
|
Other,
net
|
(0.8 | ) | (1.7 | ) | (1.2 | ) | ||||||
|
Effective
tax rate
|
32.2 | % | 32.2 | % | 29.6 | % | ||||||
The 2007
change in valuation allowances resulted from management’s assessment of the
Company’s ability to utilize certain operating loss and tax carryforwards prior
to expiration.
COLGATE-PALMOLIVE
COMPANY
Notes
to Consolidated Financial Statements (continued)
(Dollars
in Millions Except Per Share Amounts)
The
components of deferred tax assets (liabilities) are as follows at December
31:
|
2009
|
2008
|
|||||||
|
Deferred
tax liabilities:
|
||||||||
|
Goodwill
and intangible assets
|
$ | (440 | ) | $ | (418 | ) | ||
|
Property,
plant and equipment
|
(320 | ) | (278 | ) | ||||
|
Other
|
(157 | ) | (112 | ) | ||||
| (917 | ) | (808 | ) | |||||
|
Deferred
tax assets:
|
||||||||
|
Pension
and other retiree benefits
|
389 | 364 | ||||||
|
Tax
loss and tax credit carryforwards
|
153 | 141 | ||||||
|
Accrued
liabilities
|
134 | 92 | ||||||
|
Stock-based
compensation
|
103 | 80 | ||||||
|
Other
|
163 | 151 | ||||||
|
Valuation
allowance
|
(2 | ) | (5 | ) | ||||
| 940 | 823 | |||||||
|
Net
deferred income taxes
|
$ | 23 | $ | 15 | ||||
|
Deferred
taxes included within:
|
||||||||
|
Assets:
|
||||||||
|
Other
current assets
|
$ | 105 | $ | 97 | ||||
|
Liabilities:
|
||||||||
|
Deferred
income taxes
|
(82 | ) | (82 | ) | ||||
|
Net
deferred income taxes
|
$ | 23 | $ | 15 | ||||
Applicable
U.S. income and foreign withholding taxes have not been provided on
approximately $2,900 of undistributed earnings of foreign subsidiaries at
December 31, 2009. These earnings have been and are currently considered to be
indefinitely reinvested and are currently not subject to such taxes. Determining
the tax liability that would arise if these earnings were remitted is not
practicable.
In
addition, net tax benefits of $18 in 2009, $291 in 2008 and $50 in 2007 recorded
directly through equity predominantly include tax benefits related to employee
equity compensation and benefit plans.
The
Company uses a comprehensive model to recognize, measure, present and disclose
in its financial statements uncertain tax positions that the Company has taken
or expects to take on an income tax return.
COLGATE-PALMOLIVE
COMPANY
Notes
to Consolidated Financial Statements (continued)
(Dollars
in Millions Except Per Share Amounts)
Unrecognized
tax benefits activity for the years ended December 31, 2009, 2008 and 2007 is
summarized below:
|
2009
|
2008
|
2007
|
||||||||||
|
Unrecognized
tax benefits:
|
||||||||||||
|
Balance,
January 1
|
$ | 171 | $ | 199 | $ | 184 | ||||||
|
Increases
as a result of tax positions taken during the current year
|
30 | 6 | 48 | |||||||||
|
Decreases
of tax positions taken during prior years
|
(9 | ) | (10 | ) | (22 | ) | ||||||
|
Increases
of tax positions taken during prior years
|
18 | 31 | 5 | |||||||||
|
Decreases
as a result of settlements with taxing authorities and the expiration of
statutes of limitations
|
(24 | ) | (51 | ) | (18 | ) | ||||||
|
Effect
of foreign currency rate movements
|
1 | (4 | ) | 2 | ||||||||
|
Balance,
December 31
|
$ | 187 | $ | 171 | $ | 199 | ||||||
If all of
the unrecognized tax benefits above were recognized, approximately $140 would
impact the effective tax rate.
The
Company recognized approximately ($1), $7 and $9 of interest (income) expense
related to the above unrecognized tax benefits within income tax expense in
2009, 2008 and 2007, respectively. The Company had accrued interest
of approximately $24 and $35 as of December 31, 2009 and 2008,
respectively.
The
Company and its subsidiaries file income tax returns in the U.S. federal
jurisdiction and many state and foreign jurisdictions. While the
statutes of limitations may not have expired, all U.S federal income tax returns
for the periods ended through December 31, 2005 have been audited by and settled
with the Internal Revenue Service (IRS). With a few exceptions, the
Company is no longer subject to U.S. state and local income tax examination for
the years prior to 2005. In addition, the Company has subsidiaries in various
foreign jurisdictions that have statutes of limitations generally ranging from
three to six years.
COLGATE-PALMOLIVE
COMPANY
Notes
to Consolidated Financial Statements (continued)
(Dollars
in Millions Except Per Share Amounts)
12.
Earnings Per Share
|
For the Year Ended
2009
|
For the Year Ended
2008
|
For the Year Ended
2007
|
||||||||||||||||||||||||||||||||||
|
Income
|
Shares
(millions)
|
Per Share
|
Income
|
Shares
(millions)
|
Per Share
|
Income
|
Shares
(millions)
|
Per Share
|
||||||||||||||||||||||||||||
|
Net
income
|
$ | 2,291 | $ | 1,957 | $ | 1,737 | ||||||||||||||||||||||||||||||
|
Preferred
dividends
|
(30 | ) | (28 | ) | (28 | ) | ||||||||||||||||||||||||||||||
|
Basic
EPS
|
2,261 | 499.5 | $ | 4.53 | 1,929 | 506.3 | $ | 3.81 | 1,709 | 510.8 | $ | 3.35 | ||||||||||||||||||||||||
|
Stock
options and restricted stock
|
3.8 | 5.8 | 7.6 | |||||||||||||||||||||||||||||||||
|
Convertible
Preference stock
|
30 | 21.3 | 28 | 22.9 | 28 | 25.3 | ||||||||||||||||||||||||||||||
|
Diluted
EPS
|
$ | 2,291 | 524.6 | $ | 4.37 | $ | 1,957 | 535.0 | $ | 3.66 | $ | 1,737 | 543.7 | $ | 3.20 | |||||||||||||||||||||
Basic earnings
per common share is computed by dividing net income available for common
stockholders by the weighted-average number of common shares outstanding for the
period.
Diluted
earnings per common share is computed on the basis of the weighted-average
number of shares of common stock plus the effect of dilutive potential common
shares outstanding during the period using the treasury stock method. Dilutive
potential common shares include outstanding stock options and restricted stock
awards.
As of
December 31, 2009, 2008 and 2007, the average number of stock options that were
anti-dilutive and not included in diluted earnings per share calculations were
5,794,326, 1,367,200 and 2,358, respectively.
13.
Commitments and Contingencies
Minimum
rental commitments under noncancellable operating leases, primarily for office
and warehouse facilities, are $185 in 2010, $158 in 2011, $140 in 2012, $121 in
2013, $109 in 2014 and $570 thereafter. Rental expense amounted to $212 in 2009,
$183 in 2008 and $157 in 2007. Capital leases included in fixed assets,
contingent rentals and sublease income are not significant. The Company has
various contractual commitments to purchase raw, packaging and other materials
totaling approximately $551 at December 31, 2009.
The
Company is contingently liable with respect to lawsuits, environmental matters,
taxes and other matters arising in the normal course of business.
COLGATE-PALMOLIVE
COMPANY
Notes
to Consolidated Financial Statements (continued)
(Dollars
in Millions Except Per Share Amounts)
Management
proactively reviews and monitors the Company’s exposure to, and the impact of,
environmental matters. The Company is party to various environmental matters
and, as such, may be responsible for all or a portion of the cleanup,
restoration and post-closure monitoring of several sites. In June 2009, a
Consent Decree was entered by the United States District Court for the District
of New Jersey with respect to a superfund site associated with a prior
acquisition. Substantially all of the Company’s liability with
respect to that site was covered by the Company’s insurance carriers, which have
made all their required payments.
As a
matter of course, the Company is regularly audited by the IRS and other tax
authorities around the world in countries where it conducts business. In this
regard, the IRS has completed its examination of the Company’s federal income
tax returns through 2005. The amount of additional tax involved as a result of
assessments arising from the IRS examination did not have a material impact on
the financial position, results of operations or cash flows of the
Company. Estimated incremental tax payments related to potential
disallowances for subsequent periods are insignificant.
In
December 2006, a subsidiary of the Company received an income tax assessment
from the Mexican tax authorities for the year 1999 totaling approximately $165,
at the current exchange rate, including interest and penalties, challenging the
transfer pricing on transactions between that subsidiary and another of the
Company’s subsidiaries located in the United States. In April 2008, the same
subsidiary of the Company received a similar income tax assessment from the
Mexican tax authorities for the years 2000 and 2001 totaling approximately $604,
at the current exchange rate, including interest and penalties. The Company,
through its subsidiary, requested and received in 1999 a written advance ruling
from the Mexican tax authorities for income tax matters on which the Company
relied in subsequently claiming on its returns the income tax treatment to which
these assessments relate. Although the Company believes, based on the advice of
outside counsel, that its income tax filings are in full compliance with the
written advance ruling and applicable tax law and regulations, in June 2009, the
Company entered into a settlement agreement with the Mexican tax authorities
which resolves the transfer pricing disputes for the years 1999-2001, as well as
any potential disputes which could arise for 2002-2007. As part of the
settlement, the Mexican tax authorities withdrew the assessments of tax and
interest for the years 1999-2001 and the Company made a payment of tax and
interest related to the years 2002-2007. The net impact of the settlement was
not material and approximated reserves previously taken by the Company for this
matter.
Brazilian
Matters
In 2001,
the Central Bank of Brazil sought to impose a substantial fine on the Company’s
Brazilian subsidiary (approximately $150 at the current exchange rate) based on
alleged foreign exchange violations in connection with the financing of the
Company’s 1995 acquisition of the Kolynos oral care business from Wyeth
(formerly American Home Products) (the Seller), as described in the Company’s
Form 8-K dated January 10, 1995. The Company appealed the imposition of the fine
to the Brazilian Monetary System Appeals Council (the Council), and on January
30, 2007, the Council decided the appeal in the Company’s favor, dismissing the
fine entirely. However, certain tax and civil proceedings that began as a result
of this Central Bank matter are still outstanding as described
below.
COLGATE-PALMOLIVE
COMPANY
Notes
to Consolidated Financial Statements (continued)
(Dollars
in Millions Except Per Share Amounts)
The
Brazilian internal revenue authority has disallowed interest deductions and
foreign exchange losses taken by the Company’s Brazilian subsidiary for certain
years in connection with the financing of the Kolynos acquisition. The tax
assessments with interest, at the current exchange rate, approximate $115. The
Company has been disputing the disallowances by appealing the assessments within
the internal revenue authority’s appellate process with the following results to
date:
|
|
·
|
In
June 2005, the First Board of Taxpayers ruled in the Company’s favor and
allowed all of the previously claimed deductions for 1996 through 1998. In
March 2007, the First Board of Taxpayers ruled in the Company’s favor and
allowed all of the previously claimed deductions for 1999 through 2001.
The tax authorities appealed these decisions to the next administrative
level.
|
|
|
·
|
In
August 2009, the First Taxpayers’ Council (the next and final
administrative level of appeal) overruled the decisions of the First Board
of Taxpayers, upholding the majority of the assessments, disallowing a
portion of the assessments and remanding a portion of the assessments for
further consideration by the First Board of
Taxpayers.
|
The
Company has filed a motion for reconsideration with the First Taxpayers’ Council
and further appeals are available within the Brazilian federal
courts. The Company intends to challenge these assessments
vigorously. Although there can be no assurances, management believes, based on
the opinion of its Brazilian legal counsel and other advisors, that the
disallowances are without merit and that the Company should ultimately prevail
on appeal, if necessary, in the Brazilian federal courts.
In 2002,
the Brazilian Federal Public Attorney filed a civil action against the federal
government of Brazil, Laboratorios Wyeth-Whitehall Ltda. (the Brazilian
subsidiary of the Seller) and the Company, as represented by its Brazilian
subsidiary, seeking to annul an April 2000 decision by the Brazilian Board of
Tax Appeals that found in favor of the Seller’s Brazilian subsidiary on the
issue of whether it had incurred taxable capital gains as a result of the
divestiture of Kolynos. The action seeks to make the Company’s Brazilian
subsidiary jointly and severally liable for any tax due from the Seller’s
Brazilian subsidiary. Although there can be no assurances, management believes,
based on the opinion of its Brazilian legal counsel, that the Company should
ultimately prevail in this action. The Company intends to challenge this action
vigorously.
In
December 2005, the Brazilian internal revenue authority issued to the Company’s
Brazilian subsidiary a tax assessment with interest and penalties of
approximately $69, at the current exchange rate, based on a claim that certain
purchases of U.S. Treasury bills by the subsidiary and their subsequent
disposition during the period 2000 to 2001 were subject to a tax on foreign
exchange transactions. The Company is disputing the assessment within the
internal revenue authority’s administrative appeals process. In October 2007,
the Second Board of Taxpayers, which has jurisdiction over these matters, ruled
in favor of the internal revenue authority. In January 2008, the Company
appealed this decision to the next administrative level. Although there can be
no assurances, management believes, based on the advice of its Brazilian legal
counsel, that the tax assessment is without merit and that the Company should
prevail on appeal either at the administrative level or, if necessary, in the
Brazilian federal courts. The Company intends to challenge this assessment
vigorously.
COLGATE-PALMOLIVE
COMPANY
Notes
to Consolidated Financial Statements (continued)
(Dollars
in Millions Except Per Share Amounts)
European Competition
Matters
During
the period from February 2006 to June 2009, the Company learned that
investigations relating to potential competition law violations involving the
Company’s subsidiaries had been commenced by governmental authorities in the
European Union (EU), France, Germany, Greece, Italy, the Netherlands, Romania,
Spain, Switzerland and the United Kingdom (UK). The Company
understands that many of these investigations also involve other consumer goods
companies and/or retail customers. While several of the
investigations are ongoing, there have been the following results to
date:
|
|
·
|
In
February 2008, the federal competition authority in Germany imposed fines
on four of the Company’s competitors, but the Company was not fined due to
its cooperation with the German
authorities.
|
|
|
·
|
In
November 2009, the UK Office of Fair Trading informed the Company that it
was no longer pursuing its investigation of the
Company.
|
|
|
·
|
In
December 2009, the Swiss competition law authority imposed a fine of $5 on
the Company’s GABA subsidiary for alleged violations of restrictions on
parallel imports into Switzerland. The Company is appealing the
fine in the Swiss courts.
|
|
|
·
|
In
January 2010, the Spanish competition law authority found that four
suppliers of shower gel had entered into an agreement regarding product
down-sizing, for which Colgate’s Spanish subsidiary was fined $3. The
Company intends to appeal the fine in the Spanish
courts.
|
|
|
·
|
While the investigations of the Company's Romanian subsidiary by the Romanian competition authority are now closed, a complainant has petitioned the court to reopen one of the investigations. |
Currently,
formal claims of violations, or statements of objections, are pending against
the Company in France and Italy. The French competition authority
alleges agreements on pricing and promotion of heavy duty detergents among
four consumer goods companies, including the Company’s French
subsidiary. The Italian competition authority alleges that 17
consumer goods companies, including the Company’s Italian subsidiary, exchanged
competitively sensitive information in the cosmetics sector. The
Company will have an opportunity to respond to each of these statements of
objections. Investigations are ongoing in the EU, France, Germany,
Greece and the Netherlands, but no formal claims of violations have been filed
in these jurisdictions.
COLGATE-PALMOLIVE
COMPANY
Notes
to Consolidated Financial Statements (continued)
(Dollars
in Millions Except Per Share Amounts)
The
Company’s policy is to comply with antitrust and competition laws and, if a
violation of any such laws is found, to take appropriate remedial action and to
cooperate fully with any related governmental inquiry. The Company has
undertaken a comprehensive review of its selling practices and related
competition law compliance in Europe and elsewhere and, where the Company has
identified a lack of compliance, it has undertaken remedial action. Competition
and antitrust law investigations often continue for several years and can result
in substantial fines for violations that are found. Such fines, depending on the
gravity and duration of the infringement as well as the value of the sales
involved, have amounted, in some cases, to hundreds of millions of dollars.
While the Company cannot predict the final financial impact of these competition
law issues as these matters may change, the Company has taken and will, as
necessary, take additional reserves as and when appropriate.
ERISA
Matters
In
October 2007, a putative class action claiming that certain aspects of the cash
balance portion of the Colgate-Palmolive Company Employees’ Retirement Income
Plan (the Plan) do not comply with the Employee Retirement Income Security Act
was filed against the Plan and the Company in the United States District Court
for the Southern District of New York. Specifically, Proesel, et al. v.
Colgate-Palmolive Company Employees’ Retirement Income Plan, et al.
alleges improper calculation of lump sum distributions, age discrimination and
failure to satisfy minimum accrual requirements, thereby resulting in the
underpayment of benefits to Plan participants. Two other putative class actions
filed earlier in 2007, Abelman, et al. v.
Colgate-Palmolive Company Employees’ Retirement Income Plan, et al., in
the United States District Court for the Southern District of Ohio, and Caufield v.
Colgate-Palmolive Company Employees’ Retirement Income Plan, in the
United States District Court for the Southern District of Indiana, both alleging
improper calculation of lump sum distributions and, in the case of Abelman, claims for
failure to satisfy minimum accrual requirements, were transferred to the
Southern District of New York and consolidated with Proesel into one
action, In re
Colgate-Palmolive ERISA Litigation. The complaint in the consolidated
action alleges improper calculation of lump sum distributions and failure to
satisfy minimum accrual requirements, but does not include a claim for age
discrimination. The relief sought includes recalculation of benefits in
unspecified amounts, pre- and post-judgment interest, injunctive relief and
attorneys’ fees. This action has not been certified as a class action as yet.
The Company and the Plan intend to contest this action vigorously should the
parties be unable to reach a settlement.
While it
is possible that the Company’s cash flows and results of operations in a
particular quarter or year could be materially affected by the impact of the
above-noted contingencies, it is the opinion of management that these matters
will not have a material impact on the Company’s financial position, ongoing
results of operations or cash flows.
COLGATE-PALMOLIVE
COMPANY
Notes
to Consolidated Financial Statements (continued)
(Dollars
in Millions Except Per Share Amounts)
14.
Segment Information
The
Company operates in two product segments: Oral, Personal and Home Care; and Pet
Nutrition. The operations of the Oral, Personal and Home Care segment
are managed geographically in four reportable operating
segments: North America, Latin America, Europe/South Pacific and
Greater Asia/Africa. Management evaluates segment performance based
on several factors, including Operating profit. The Company uses
Operating profit as a measure of the operating segment performance because it
excludes the impact of corporate-driven decisions related to interest expense
and income taxes.
The
accounting policies of the operating segments are generally the same as those
described in Note 2 to the Consolidated Financial
Statements. Intercompany sales have been
eliminated. Corporate operations include stock-based compensation
related to stock options and restricted stock awards, research and development
costs, Corporate overhead costs, restructuring and related implementation costs
and gains and losses on sales of non-core product lines and
assets. The Company reports these items within Corporate operations
as they relate to Corporate-based responsibilities and decisions and are not
included in the internal measures of segment operating performance used by the
Company in order to measure the underlying performance of the business
segments.
To
conform to the current year presentation required by the Consolidation Topic of
the FASB Codification, the amounts of Net income attributable to noncontrolling
interests in less-than-wholly owned subsidiaries of $80 and $67 for the years
ended December 31, 2008 and December 31, 2007, respectively, which were
previously deducted from Greater Asia/Africa Operating profit, have been
reclassified to a new line below Operating profit.
|
Net
sales
|
2009
|
2008
|
2007
|
|||||||||
|
Oral,
Personal and Home Care
|
||||||||||||
|
North
America(1)
|
$ | 2,950 | $ | 2,852 | $ | 2,721 | ||||||
|
Latin
America
|
4,319 | 4,088 | 3,489 | |||||||||
|
Europe/South
Pacific
|
3,271 | 3,582 | 3,383 | |||||||||
|
Greater
Asia/Africa
|
2,655 | 2,660 | 2,338 | |||||||||
|
Total
Oral, Personal and Home Care
|
13,195 | 13,182 | 11,931 | |||||||||
|
Pet
Nutrition(2)
|
2,132 | 2,148 | 1,859 | |||||||||
|
Total
Net sales
|
$ | 15,327 | $ | 15,330 | $ | 13,790 | ||||||
____________
|
(1)
|
Net
sales in the U.S. for Oral, Personal and Home Care were $2,577, $2,490 and
$2,363 in 2009, 2008 and 2007,
respectively.
|
|
(2)
|
Net
sales in the U.S. for Pet Nutrition were $1,071, $1,082 and $959 in 2009,
2008 and 2007, respectively.
|
COLGATE-PALMOLIVE
COMPANY
Notes
to Consolidated Financial Statements (continued)
(Dollars
in Millions Except Per Share Amounts)
|
Operating
profit
|
2009
|
2008
|
2007
|
|||||||||
|
Oral,
Personal and Home Care
|
||||||||||||
|
North
America
|
$ | 843 | $ | 689 | $ | 667 | ||||||
|
Latin
America
|
1,360 | 1,181 | 1,006 | |||||||||
|
Europe/South
Pacific
|
748 | 746 | 764 | |||||||||
|
Greater
Asia/Africa
|
631 | 527 | 430 | |||||||||
|
Total
Oral, Personal and Home Care
|
3,582 | 3,143 | 2,867 | |||||||||
|
Pet
Nutrition
|
555 | 542 | 487 | |||||||||
|
Corporate
|
(522 | ) | (584 | ) | (634 | ) | ||||||
|
Total
Operating profit
|
$ | 3,615 | $ | 3,101 | $ | 2,720 | ||||||
|
Capital
expenditures
|
2009
|
2008
|
2007
|
|||||||||
|
Oral,
Personal and Home Care
|
||||||||||||
|
North
America
|
$ | 62 | $ | 42 | $ | 88 | ||||||
|
Latin
America
|
105 | 112 | 127 | |||||||||
|
Europe/South
Pacific
|
86 | 64 | 124 | |||||||||
|
Greater
Asia/Africa
|
91 | 157 | 110 | |||||||||
|
Total
Oral, Personal and Home Care
|
344 | 375 | 449 | |||||||||
|
Pet
Nutrition
|
156 | 224 | 74 | |||||||||
|
Corporate
|
75 | 85 | 60 | |||||||||
|
Total
Capital expenditures
|
$ | 575 | $ | 684 | $ | 583 | ||||||
|
Depreciation
and amortization
|
2009
|
2008
|
2007
|
|||||||||
|
Oral,
Personal and Home Care
|
||||||||||||
|
North
America
|
$ | 59 | $ | 55 | $ | 60 | ||||||
|
Latin
America
|
77 | 87 | 81 | |||||||||
|
Europe/South
Pacific
|
67 | 70 | 70 | |||||||||
|
Greater
Asia/Africa
|
63 | 61 | 58 | |||||||||
|
Total
Oral, Personal and Home Care
|
266 | 273 | 269 | |||||||||
|
Pet
Nutrition
|
36 | 32 | 31 | |||||||||
|
Corporate
|
49 | 43 | 34 | |||||||||
|
Total
Depreciation and amortization
|
$ | 351 | $ | 348 | $ | 334 | ||||||
COLGATE-PALMOLIVE
COMPANY
Notes
to Consolidated Financial Statements (continued)
(Dollars
in Millions Except Per Share Amounts)
|
Identifiable
assets
|
2009
|
2008
|
2007
|
|||||||||
|
Oral,
Personal and Home Care
|
||||||||||||
|
North
America
|
$ | 2,271 | $ | 1,997 | $ | 2,083 | ||||||
|
Latin
America
|
3,278 | 2,550 | 2,640 | |||||||||
|
Europe/South
Pacific
|
2,647 | 2,620 | 2,757 | |||||||||
|
Greater
Asia/Africa
|
1,760 | 1,704 | 1,657 | |||||||||
|
Total
Oral, Personal and Home Care
|
9,956 | 8,871 | 9,137 | |||||||||
|
Pet
Nutrition
|
1,127 | 1,025 | 746 | |||||||||
|
Corporate(3)
|
51 | 83 | 229 | |||||||||
|
Total
Identifiable assets(4)
|
$ | 11,134 | $ | 9,979 | $ | 10,112 | ||||||
____________
|
(3)
|
Corporate
identifiable assets primarily consist of derivative instruments (44%) and
investments in equity securities (46%) in 2009. In 2008,
Corporate identifiable assets primarily consist of derivative instruments
(66%) and investments in equity securities (27%). In 2007,
Corporate identifiable assets consisted primarily of U.S. benefit plan
assets and investments in equity
securities.
|
|
(4)
|
Long-lived
assets in the U.S., primarily property, plant and equipment and goodwill
and other intangibles represented approximately one-third of total
long-lived assets of $6,795, $6,182 and $6,402 in 2009, 2008 and 2007,
respectively.
|
COLGATE-PALMOLIVE
COMPANY
Notes
to Consolidated Financial Statements (continued)
(Dollars
in Millions Except Per Share Amounts)
15.
Supplemental Income Statement Information
|
Other
(income) expense, net
|
2009
|
2008
|
2007
|
|||||||||
|
Amortization
of intangible assets
|
$ | 22 | $ | 19 | $ | 18 | ||||||
|
Legal
and environmental matters
|
27 | 23 | — | |||||||||
|
Remeasurement
of certain liabilities in Venezuela
|
27 | — | — | |||||||||
|
Asset
impairments
|
16 | — | — | |||||||||
|
Equity
(income)
|
(5 | ) | (4 | ) | (4 | ) | ||||||
|
2004
Restructuring Program
|
— | 24 | 56 | |||||||||
|
Investment
losses (income)
|
— | 25 | (2 | ) | ||||||||
|
Gain
on sales of non-core product lines, net
|
— | — | (49 | ) | ||||||||
|
Pension
settlement charges
|
— | — | 15 | |||||||||
|
Hill’s
limited voluntary recall
|
— | — | 13 | |||||||||
|
Other,
net
|
24 | 16 | 7 | |||||||||
|
Total
Other (income) expense, net
|
$ | 111 | $ | 103 | $ | 54 | ||||||
|
Interest
expense, net
|
2009 | 2008 | 2007 | |||||||||
|
Interest
incurred
|
$ | 102 | $ | 115 | $ | 173 | ||||||
|
Interest
capitalized
|
(14 | ) | (9 | ) | (6 | ) | ||||||
|
Interest
income
|
(11 | ) | (10 | ) | (10 | ) | ||||||
|
Total
Interest expense, net
|
$ | 77 | $ | 96 | $ | 157 | ||||||
| 2009 | 2008 | 2007 | ||||||||||
|
Research
and development
|
$ | 269 | $ | 253 | $ | 247 | ||||||
|
Advertising
|
$ | 1,534 | $ | 1,650 | $ | 1,546 | ||||||
16.
Supplemental Balance Sheet Information
|
Inventories
|
2009
|
2008
|
||||||
|
Raw
materials and supplies
|
$ | 310 | $ | 297 | ||||
|
Work-in-process
|
50 | 41 | ||||||
|
Finished
goods
|
849 | 859 | ||||||
|
Total
Inventories
|
$ | 1,209 | $ | 1,197 | ||||
Inventories
valued under LIFO amounted to $255 and $244 at December 31, 2009 and 2008,
respectively. The excess of current cost over LIFO cost at the end of each year
was $55 and $54, respectively. The liquidations of LIFO inventory quantities had
no material effect on income in 2009, 2008 and 2007.
COLGATE-PALMOLIVE
COMPANY
Notes
to Consolidated Financial Statements (continued)
(Dollars
in Millions Except Per Share Amounts)
|
Property,
plant and equipment, net
|
2009
|
2008
|
||||||
|
Land
|
$ | 156 | $ | 151 | ||||
|
Buildings
|
1,077 | 1,028 | ||||||
|
Manufacturing
machinery and equipment
|
4,481 | 3,884 | ||||||
|
Other
equipment
|
986 | 874 | ||||||
| 6,700 | 5,937 | |||||||
|
Accumulated
depreciation
|
(3,184 | ) | (2,818 | ) | ||||
|
Total
Property, plant and equipment, net
|
$ | 3,516 | $ | 3,119 | ||||
|
Other
accruals
|
2009
|
2008
|
||||||
|
Accrued
advertising
|
$ | 538 | $ | 457 | ||||
|
Accrued
payroll and employee benefits
|
370 | 317 | ||||||
|
Accrued
taxes other than income taxes
|
101 | 60 | ||||||
|
Restructuring
accrual
|
15 | 33 | ||||||
|
Pension
and other retiree benefits
|
61 | 56 | ||||||
|
Accrued
interest
|
24 | 23 | ||||||
|
Derivatives
|
9 | 72 | ||||||
|
Other
|
561 | 403 | ||||||
|
Total
Other accruals
|
$ | 1,679 | $ | 1,421 | ||||
|
Other
liabilities
|
2009
|
2008
|
||||||
|
Pension
and other retiree benefits
|
$ | 1,226 | $ | 1,187 | ||||
|
Other
|
149 | 129 | ||||||
|
Total
Other liabilities
|
$ | 1,375 | $ | 1,316 | ||||
Accumulated
Other Comprehensive Income
Accumulated
other comprehensive income is comprised of cumulative foreign currency
translation gains and losses, unrecognized pension and other retiree benefit
costs, unrealized gains and losses from derivative instruments designated as
cash flow hedges and unrealized gains/losses on available for sale securities.
At December 31, 2009 and 2008, Accumulated other comprehensive income consisted
primarily of aftertax unrecognized pension and other retiree benefit costs of
$657 and $665, respectively, and cumulative foreign currency translation
adjustments of $1,453 and $1,799, respectively. Foreign currency translation
adjustments in 2009 primarily reflect gains due to the strengthening of the
Brazilian real and Swiss franc, while losses in 2008 were largely due to the
weakening of the Brazilian real, Mexican peso and Euro.
COLGATE-PALMOLIVE
COMPANY
Notes
to Consolidated Financial Statements (continued)
(Dollars
in Millions Except Per Share Amounts)
17.
Quarterly Financial Data (Unaudited)
|
Total
|
First
Quarter
|
Second
Quarter
|
Third
Quarter
|
Fourth
Quarter
|
||||||||||||||||
|
2009
|
||||||||||||||||||||
|
Net
sales
|
$ | 15,327 | $ | 3,503 | $ | 3,745 | $ | 3,998 | $ | 4,081 | ||||||||||
|
Gross
profit
|
9,008 | 2,013 | 2,201 | 2,367 | 2,427 | |||||||||||||||
|
Net
income
|
2,291 | 508 | 562 | 590 | 631 | |||||||||||||||
|
Earnings
per common share:
|
||||||||||||||||||||
|
Basic
|
4.53 | 1.00 | 1.11 | 1.17 | 1.25 | |||||||||||||||
|
Diluted
|
4.37 | 0.97 | 1.07 | 1.12 | 1.21 | |||||||||||||||
|
2008
|
||||||||||||||||||||
|
Net
sales
|
$ | 15,330 | $ | 3,713 | $ | 3,965 | $ | 3,988 | $ | 3,664 | ||||||||||
|
Gross
profit
|
8,626 | 2,100 | 2,240 | 2,236 | 2,050 | |||||||||||||||
|
Net
income
|
1,957 | 466 | (1) | 494 | (2) | 500 | (3) | 497 | (4) | |||||||||||
|
Earnings
per common share:
|
||||||||||||||||||||
|
Basic
|
3.81 | 0.90 | 0.96 | 0.98 | 0.97 | |||||||||||||||
|
Diluted
|
3.66 | 0.86 | (1) | 0.92 | (2) | 0.94 | (3) | 0.94 | (4) | |||||||||||
____________
|
Note:
|
Basic
and diluted earnings per share are computed independently for each quarter
presented. Accordingly, the sum of the quarterly earnings per share may
not agree with the calculated full year earnings per
share.
|
|
(1)
|
Net
income and diluted earnings per share for the first quarter of 2008 were
reduced by an aftertax charge of $21 and $0.04, respectively, reflecting
charges related to the 2004 Restructuring
Program.
|
|
(2)
|
Net
income and diluted earnings per share for the second quarter of 2008 were
reduced by an aftertax charge of $30 and $0.06, respectively, reflecting
charges related to the 2004 Restructuring
Program.
|
|
(3)
|
Net
income and diluted earnings per share for the third quarter of 2008 were
reduced by an aftertax charge of $31 and $0.05, respectively, reflecting
charges related to the 2004 Restructuring
Program.
|
|
(4)
|
Net
income and diluted earnings per share for the fourth quarter of 2008 were
reduced by an aftertax charge of $31 and $0.06, respectively, reflecting
charges related to the 2004 Restructuring
Program.
|
COLGATE-PALMOLIVE
COMPANY
Notes
to Consolidated Financial Statements (continued)
(Dollars
in Millions Except Per Share Amounts)
18. Subsequent
Events - Venezuela
Effective
January 1, 2010, Venezuela has been designated as hyper-inflationary and
therefore CP Venezuela’s functional currency will be the U.S.
dollar. As a result, the impact of all future Venezuelan currency
fluctuations will be reported in income. Changing the reporting
currency from the Venezuelan bolivar to the U.S. dollar resulted in a one-time
charge of approximately $275, recorded as a Cumulative translation adjustment in
Other comprehensive income (loss) on January 1, 2010. This charge
primarily represents the premium paid to acquire U.S. dollar-denominated cash
and bonds at the parallel market rate. Previously these assets had
been remeasured at the parallel market rate and then translated for financial
reporting purposes at the official rate of 2.15.
On
January 8, 2010, the Venezuelan government announced its decision to devalue its
currency and implement a two-tier exchange rate structure. As a
result, the official exchange rate changed from 2.15 to 2.60 for essential goods
and 4.30 for non-essential goods. While we currently believe that
many of our products may receive the 2.60 rate of exchange, we will remeasure
the financial statements of our Venezuelan subsidiary for 2010 and future
periods at the rate at which we expect to remit dividends, which currently is
4.30. As the local currency operations in Venezuela will now
translate into fewer U.S. dollars, this will have an ongoing adverse effect on
our reported results.
COLGATE-PALMOLIVE
COMPANY
SCHEDULE
II-VALUATION AND QUALIFYING ACCOUNTS
(Dollars
in Millions)
|
Column A
|
Column B
|
Column C
|
Column D
|
Column E
|
||||||||||||||||
|
Additions
|
||||||||||||||||||||
|
Balance at Beginning of
Period
|
Charged to Costs and
Expenses
|
Other
|
Deductions
|
Balance at End of
Period
|
||||||||||||||||
|
Year
Ended December 31, 2009
|
||||||||||||||||||||
|
Allowance
for doubtful accounts and estimated returns
|
$ | 47 | $ | 9 | $ | — | $ | 4 | $ | 52 | ||||||||||
|
Valuation
allowance for deferred tax assets
|
$ | 5 | $ | — | $ | — | $ | 3 | (1) | $ | 2 | |||||||||
|
Year
Ended December 31, 2008
|
||||||||||||||||||||
|
Allowance
for doubtful accounts and estimated returns
|
$ | 51 | $ | 6 | $ | — | $ | 10 | $ | 47 | ||||||||||
|
Valuation
allowance for deferred tax assets
|
$ | 11 | $ | 3 | $ | — | $ | 9 | (1) | $ | 5 | |||||||||
|
Year
Ended December 31, 2007
|
||||||||||||||||||||
|
Allowance
for doubtful accounts and estimated returns
|
$ | 46 | $ | 7 | $ | — | $ | 2 | $ | 51 | ||||||||||
|
Valuation
allowance for deferred tax assets
|
$ | 125 | $ | 6 | $ | — | $ | 120 | (2) | $ | 11 | |||||||||
____________
|
(1)
|
Decrease
in allowance due to utilization of tax loss and tax credit
carryforwards.
|
|
(2)
|
Decrease
is primarily a result of the reduction of a tax loss carryforward
valuation allowance in Brazil of $95 and the utilization of tax loss and
tax credit carryforwards.
|
COLGATE-PALMOLIVE
COMPANY
Market
and Dividend Information
The
Company’s common stock is listed on the New York Stock Exchange. The trading
symbol for the common stock is CL. Dividends on the common stock have been paid
every year since 1895, and the Company’s regular common stock dividend payments
have increased for 47 consecutive years.
|
Market
Price of Common Stock
|
||||||||||||||||
|
2009
|
2008
|
|||||||||||||||
|
Quarter Ended
|
High
|
Low
|
High
|
Low
|
||||||||||||
|
March
31
|
$ | 69.32 | $ | 55.05 | $ | 80.98 | $ | 73.50 | ||||||||
|
June
30
|
71.76 | 57.29 | 78.89 | 68.21 | ||||||||||||
|
September
30
|
76.55 | 71.02 | 79.99 | 68.56 | ||||||||||||
|
December
31
|
86.32 | 75.82 | 76.76 | 54.77 | ||||||||||||
|
Year-end
Closing Price
|
$ | 82.15 | $ | 68.54 | ||||||||||||
Dividends
Paid Per Common Share
|
Quarter Ended
|
2009
|
2008
|
||||||
|
March
31
|
$ | 0.40 | $ | 0.36 | ||||
|
June
30
|
0.44 | 0.40 | ||||||
|
September
30
|
0.44 | 0.40 | ||||||
|
December
31
|
0.44 | 0.40 | ||||||
|
Total
|
$ | 1.72 | $ | 1.56 | ||||
Stock
Price Performance Graphs
The
following graphs compare cumulative total stockholder returns on the
Colgate-Palmolive common stock against the S&P Composite-500 Stock Index and
a peer company index for a twenty-year period, ten-year period and a five-year
period each ending December 31, 2009. The companies included in the
peer company index are consumer products companies that have both domestic and
international businesses. These companies are: Avon Products, Inc.,
The Clorox Company, Kimberly-Clark Corporation, The Procter & Gamble Company
and Unilever (N.V. and plc).
COLGATE-PALMOLIVE
COMPANY
Market
and Dividend Information
 |
These
performance graphs do not constitute soliciting material, are not deemed filed
with the Securities and Exchange Commission and are not incorporated by
reference in any of the Company’s filings under the Securities Act of 1933 or
the Securities Exchange Act of 1934, whether made before or after the date of
this Annual Report on Form 10-K and irrespective of any general incorporation
language in any such filing, except to the extent the Company specifically
incorporates these performance graphs by reference therein.
COLGATE-PALMOLIVE
COMPANY
Historical
Financial Summary
For
the years ended December 31,
(Dollars
in Millions Except Per Share Amounts)
(Unaudited)
|
2009
|
2008
|
2007
|
2006
|
2005
|
2004
|
2003
|
2002
|
2001
|
2000
|
|||||||||||||||||||||||||||||||
|
Continuing
Operations
|
||||||||||||||||||||||||||||||||||||||||
|
Net
sales(1)
|
$ | 15,327 | $ | 15,330 | $ | 13,790 | $ | 12,238 | $ | 11,397 | $ | 10,584 | $ | 9,903 | $ | 9,294 | $ | 9,084 | $ | 9,004 | ||||||||||||||||||||
|
Results
of operations:
|
||||||||||||||||||||||||||||||||||||||||
|
Net
income
|
2,291 | 1,957 | (2) | 1,737 | (3) | 1,353 | (4) | 1,351 | (5) | 1,327 | (6) | 1,421 | 1,288 | 1,147 | 1,064 | |||||||||||||||||||||||||
|
Per
share, basic
|
4.53 | 3.81 | (2) | 3.35 | (3) | 2.57 | (4) | 2.54 | (5) | 2.45 | (6) | 2.60 | 2.33 | 2.02 | 1.81 | |||||||||||||||||||||||||
|
Per
share, diluted
|
4.37 | 3.66 | (2) | 3.20 | (3) | 2.46 | (4) | 2.43 | (5) | 2.33 | (6) | 2.46 | 2.19 | 1.89 | 1.70 | |||||||||||||||||||||||||
|
Depreciation
and amortization expense
|
351 | 348 | 334 | 329 | 329 | 328 | 316 | 297 | 336 | 338 | ||||||||||||||||||||||||||||||
|
Financial
Position
|
||||||||||||||||||||||||||||||||||||||||
|
Current
ratio
|
1.1 | 1.3 | 1.1 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | ||||||||||||||||||||||||||||||
|
Property,
plant and equipment, net
|
3,516 | 3,119 | 3,015 | 2,696 | 2,544 | 2,648 | 2,542 | 2,491 | 2,514 | 2,528 | ||||||||||||||||||||||||||||||
|
Capital
expenditures
|
575 | 684 | 583 | 476 | 389 | 348 | 302 | 344 | 340 | 367 | ||||||||||||||||||||||||||||||
|
Total
assets
|
11,134 | 9,979 | 10,112 | 9,138 | 8,507 | 8,673 | 7,479 | 7,087 | 6,985 | 7,252 | ||||||||||||||||||||||||||||||
|
Long-term
debt
|
2,821 | 3,585 | 3,222 | 2,720 | 2,918 | 3,089 | 2,685 | 3,211 | 2,812 | 2,537 | ||||||||||||||||||||||||||||||
|
Colgate-Palmolive
Company shareholders’ equity
|
3,116 | 1,923 | 2,286 | 1,411 | 1,350 | 1,245 | 887 | 350 | 846 | 1,468 | ||||||||||||||||||||||||||||||
|
Share
and Other
|
||||||||||||||||||||||||||||||||||||||||
|
Book
value per common share
|
6.52 | 4.09 | (7) | 4.75 | (7) | 3.03 | (7) | 2.87 | (7) | 2.84 | (7) | 2.11 | (7) | 1.08 | (7) | 1.91 | (7) | 2.78 | (7) | |||||||||||||||||||||
|
Cash
dividends declared and paid per common share
|
1.72 | 1.56 | 1.40 | 1.25 | 1.11 | 0.96 | 0.90 | 0.72 | 0.675 | 0.63 | ||||||||||||||||||||||||||||||
|
Closing
price
|
82.15 | 68.54 | 77.96 | 65.24 | 54.85 | 51.16 | 50.05 | 52.43 | 57.75 | 64.55 | ||||||||||||||||||||||||||||||
|
Number
of common shares outstanding (in millions)
|
494.2 | 501.4 | 509.0 | 512.7 | 516.2 | 526.6 | 533.7 | 536.0 | 550.7 | 566.7 | ||||||||||||||||||||||||||||||
|
Number
of common shareholders of record
|
30,600 | 31,400 | 32,200 | 33,400 | 35,000 | 36,500 | 37,700 | 38,800 | 40,900 | 42,300 | ||||||||||||||||||||||||||||||
|
Average
number of employees
|
38,100 | 36,600 | 36,000 | 34,700 | 35,800 | 36,000 | 36,600 | 37,700 | 38,500 | 38,300 | ||||||||||||||||||||||||||||||
|
(1)
|
Net
sales amounts for 2001 and 2000 have been revised to reflect the
reclassification of certain sales incentives and promotional expenses from
selling, general and administrative expenses to a reduction of net sales
and cost of sales in accordance with new accounting
standards.
|
|
(2)
|
Net
income and earnings per share in 2008 include $113 of aftertax charges
associated with the 2004 Restructuring
Program.
|
|
(3)
|
Net
income and earnings per share in 2007 include a gain for the sale of the
Company’s household bleach business in Latin America of $29 aftertax and
an income tax benefit of $74 related to the reduction of a tax loss
carryforward valuation allowance in Brazil, partially offset by tax
provisions for the recapitalization of certain overseas subsidiaries.
These gains were more than offset by $184 of aftertax charges associated
with the 2004 Restructuring Program, $10 of pension settlement charges and
$8 of charges related to the limited voluntary recall of certain Hill’s
Pet Nutrition feline products.
|
|
(4)
|
Net
income and earnings per share in 2006 include a gain for the sale of the
Company’s household bleach business in Canada of $38 aftertax. This gain
was more than offset by $287 of aftertax charges associated with the 2004
Restructuring Program and $48 of aftertax charges related to the adoption
of the update to the Stock Compensation Topic of the FASB
Codification.
|
|
(5)
|
Net
income and earnings per share in 2005 include a gain for the sale of
heavy-duty laundry detergent brands in North America and Southeast Asia of
$93 aftertax. This gain was more than offset by $145 of aftertax charges
associated with the 2004 Restructuring Program, $41 of income taxes for
incremental repatriation of foreign earnings related to the American Jobs
Creation Act and $23 aftertax of non-cash pension and other retiree
benefit charges.
|
|
(6)
|
Net
income and earnings per share in 2004 include $48 of aftertax charges
associated with the 2004 Restructuring
Program.
|
|
(7)
|
Amounts
have been recalculated to conform to the current year presentation
required by the Consolidation Topic of the FASB
Codification. See Note 2 to the Consolidated Financial
Statements for additional
information.
|
COLGATE-PALMOLIVE
COMPANY
EXHIBITS
TO FORM 10-K
YEAR
ENDED DECEMBER 31, 2009
Commission
File No. 1-644
|
Exhibit No.
|
Description
|
|
|
3-A
|
|
Restated
Certificate of Incorporation, as amended. (Registrant hereby incorporates
by reference Exhibit 3-A to its Quarterly Report on Form 10-Q for the
quarter ended June 30, 2008, File No. 1-644.)
|
|
3-B
|
|
By-laws,
as amended. (Registrant hereby incorporates by reference Exhibit 3-A to
its Current Report on Form 8-K filed on June 7, 2007, File No.
1-644.)
|
|
4
|
a)
|
Indenture,
dated as of November 15, 1992, between the Company and The Bank of New
York Mellon (formerly known as The Bank of New York) as Trustee.
(Registrant hereby incorporates by reference Exhibit 4.1 to its
Registration Statement on Form S-3 and Post-Effective Amendment No. 1
filed on June 26, 1992, Registration No. 33-48840.)*
|
|
|
b)
|
Colgate-Palmolive
Company Employee Stock Ownership Trust Agreement dated as of June 1, 1989,
as amended. (Registrant hereby incorporates by reference Exhibit 4-B (b)
to its Quarterly Report on Form 10-Q for the quarter ended June 30, 2000,
File No. 1-644.)
|
|
c)
|
Form
of 4.75% Notes Due 2014 of Colgate-Palmolive Company. (Registrant hereby
incorporates by reference Exhibit 99(B) to its Registration Statement on
Form 8-A filed on June 8, 2007, File No. 1-644.)
|
|
|
10-A
|
a)
|
Colgate-Palmolive
Company 2009 Executive Incentive Compensation Plan. (Registrant hereby
incorporates by reference Appendix A to its 2009 Notice of Meeting and
Proxy Statement.)
|
|
|
b)
|
Colgate-Palmolive
Company Executive Incentive Compensation Plan Trust, as amended.
(Registrant hereby incorporates by reference Exhibit 10-B (b) to its
Annual Report on Form 10-K for the year ended December 31, 1987, File No.
1-644.)
|
|
|
c)
|
Amendment,
dated as of October 29, 2007, to the Colgate-Palmolive Company Executive
Incentive Compensation Plan Trust. (Registrant hereby incorporates by
reference Exhibit 10-A (b) to its Quarterly Report on Form 10-Q for the
quarter ended September 30, 2007, File No. 1-644.)
|
|
10-B
|
a)
|
Colgate-Palmolive
Company Supplemental Salaried Employees’ Retirement Plan, amended and
restated as of September 12, 2007. (Registrant hereby incorporates by
reference Exhibit 10-B (a) to its Quarterly Report on Form 10-Q for the
quarter ended September 30, 2007, File No.
1-644.)
|
|
Exhibit No.
|
Description
|
|
|
|
b)
|
Amended
and Restated Colgate-Palmolive Company Supplemental Salaried Employees’
Retirement Plan Trust, dated August 2, 1990. (Registrant hereby
incorporates by reference Exhibit 10-B (b) to its Quarterly Report on Form
10-Q for the quarter ended September 30, 2007, File No.
1-644.)
|
|
c)
|
Amendment,
dated as of October 29, 2007, to the Amended and Restated
Colgate-Palmolive Company Supplemental Salaried Employee Trust.
(Registrant hereby incorporates by reference Exhibit 10-B (c) to its
Quarterly Report on Form 10-Q for the quarter ended September 30, 2007,
File No. 1-644.)
|
|
| d) | Amendment, dated as of February 25, 2010, to the Amended and Restated Colgate-Palmolive Company Supplemental Salaried Employees' Retirement Plan. ** | |
|
10-C
|
a)
|
Colgate-Palmolive
Company Executive Severance Plan, as amended and restated as of June 7,
2007. (Registrant hereby incorporates by reference Exhibit 10-A to its
Current Report on Form 8-K filed on June 7, 2007, File No.
1-644.)
|
|
|
b)
|
Colgate-Palmolive
Company Executive Severance Plan Trust. (Registrant hereby incorporates by
reference Exhibit 10-E (b) to its Annual Report on Form 10-K for the year
ended December 31, 1987, File No. 1-644.)
|
|
c)
|
Amendment,
dated as of October 29, 2007, to the Colgate-Palmolive Company Executive
Severance Plan Trust. (Registrant hereby incorporates by reference Exhibit
10-C to its Quarterly Report on Form 10-Q for the quarter ended September
30, 2007, File No. 1-644.)
|
|
10-D
|
Colgate-Palmolive
Company Pension Plan for Outside Directors, as amended and restated.
(Registrant hereby incorporates by reference Exhibit 10-D to its Annual
Report on Form 10-K for the year ended December 31, 1999, File No.
1-644.)
|
|
|
10-E
|
Colgate-Palmolive
Company 2007 Stock Plan for Non-Employee Directors, amended and restated
as of September 12, 2007. (Registrant hereby incorporates by reference
Exhibit 10-D to its Quarterly Report on Form 10-Q for the quarter ended
September 30, 2007, File No. 1-644.)
|
|
|
10-F
|
Colgate-Palmolive
Company Stock Plan for Non-Employee Directors, amended and restated as of
September 12, 2007. (Registrant hereby incorporates by reference Exhibit
10-E to its Quarterly Report on Form 10-Q for the quarter ended September
30, 2007, File No. 1-644.)
|
|
|
10-G
|
a)
|
Colgate-Palmolive
Company Restated and Amended Deferred Compensation Plan for Non-Employee
Directors, as amended. (Registrant hereby incorporates by reference
Exhibit 10-H to its Annual Report on Form 10-K for the year ended December
31, 1997, File No. 1-644.)
|
|
b)
|
Amendment,
dated as of September 12, 2007, to the Colgate-Palmolive Company Restated
and Amended Deferred Compensation Plan for Non-Employee Directors.
(Registrant hereby incorporates by reference Exhibit 10-F to its Quarterly
Report on Form 10-Q for the quarter ended September 30, 2007, File No.
1-644.)
|
|
Exhibit No.
|
Description
|
|
|
10-H
|
Colgate-Palmolive
Company Deferred Compensation Plan, amended and restated as of September
12, 2007. (Registrant hereby incorporates by reference Exhibit 10-G to its
Quarterly Report on Form 10-Q for the quarter ended September 30, 2007,
File No. 1-644.)
|
|
|
10-I
|
Colgate-Palmolive
Company Above and Beyond Plan – Officer Level. (Registrant hereby
incorporates by reference Exhibit 10-A to its Quarterly Report on Form
10-Q for the quarter ended September 30, 2004, File No.
1-644.)
|
|
|
10-J
|
a)
|
Colgate-Palmolive
Company Non-Employee Director Stock Option Plan, as amended. (Registrant
hereby incorporates by reference Exhibit 10-L to its Annual Report on Form
10-K for the year ended December 31, 1997, File No.
1-644.)
|
|
b)
|
Amendment,
dated as of December 29, 2005, to the Colgate-Palmolive Company
Non-Employee Director Stock Option Plan, as amended. (Registrant hereby
incorporates by reference Exhibit 10-J (b) to its Annual Report on Form
10-K for the year ended December 31, 2005, File No.
1-644.)
|
|
|
c)
|
Amendment,
dated as of December 7, 2006, to the Colgate-Palmolive Company
Non-Employee Director Stock Option Plan, as amended. (Registrant hereby
incorporates by reference Exhibit 10-J (c) to its Annual Report on Form
10-K for the year ended December 31, 2006, File No.
1-644.)
|
|
|
d)
|
Amendment,
dated as of October 29, 2007, to the Colgate-Palmolive Company
Non-Employee Director Stock Option Plan. (Registrant hereby incorporates
by reference Exhibit 10-K to its Quarterly Report on Form 10-Q for the
quarter ended September 30, 2007, File No. 1-644.)
|
|
|
10-K
|
a)
|
U.S.
$1,500,000,000 Five Year Credit Agreement dated as of November 3, 2005,
among Colgate-Palmolive Company as Borrower, the Banks named therein as
Banks, Bank of America, N.A., BNP Paribas, HSBC Bank USA, N.A. and
JPMorgan Chase Bank, N.A. as Co-Syndication Agents, Citibank, N.A. as
Administrative Agent and Citigroup Global Markets Inc. as Arranger.
(Registrant hereby incorporates by reference Exhibit 10-A to its Quarterly
Report on Form 10-Q for the quarter ended September 30, 2005, File No.
1-644.)
|
|
b)
|
Assumption
Agreement dated August 13, 2008, among Colgate-Palmolive Company as
Borrower, Citibank, N.A. as Administrative Agent and Banco Bilao Vizcaya
Argentaria, S.A. (Registrant hereby incorporates by reference
Exhibit 10-M (b) to its Quarterly Report on Form 10-Q for the quarter
ended September 30, 2008, File No. 1-644.)
|
|
|
c)
|
Assumption
Agreement dated August 13, 2008, among Colgate-Palmolive Company as
Borrower, Citibank, N.A. as Administrative Agent and The Northern Trust
Company. (Registrant hereby incorporates by reference Exhibit
10-M (c) to its Quarterly Report on Form 10-Q for the quarter ended
September 30, 2008, File No.
1-644.)
|
|
10-L
|
a)
|
Colgate-Palmolive
Company 1997 Stock Option Plan. (Registrant hereby incorporates by
reference appendix A to its 1997 Notice of Meeting and Proxy
Statement.)
|
|
Exhibit No.
|
Description
|
|
|
b)
|
Amendment,
dated as of December 29, 2005, to the Colgate-Palmolive Company 1997 Stock
Option Plan. (Registrant hereby incorporates by reference Exhibit 10-M (b)
to its Annual Report on Form 10-K for the year ended December 31, 2005,
File No. 1-644.)
|
|
|
c)
|
Amendment,
dated as of December 7, 2006, to the Colgate-Palmolive Company 1997 Stock
Option Plan. (Registrant hereby incorporates by reference Exhibit 10-M (c)
to its Annual Report on Form 10-K for the year ended December 31, 2006,
File No. 1-644.).
|
|
|
d)
|
Action,
dated as of October 29, 2007, taken pursuant to the Colgate-Palmolive
Company 2005 Employee Stock Option Plan and Colgate-Palmolive Company 1997
Stock Option Plan. (Registrant hereby incorporates by reference Exhibit
10-I to its Quarterly Report on Form 10-Q for the quarter ended September
30, 2007, File No. 1-644.)
|
|
|
10-M
|
Colgate-Palmolive
Company Supplemental Savings and Investment Plan, amended and restated as
of September 12, 2007. (Registrant hereby incorporates by reference
Exhibit 10-H to its Quarterly Report on Form 10-Q for the quarter ended
September 30, 2007, File No. 1-644.)
|
|
|
10-N
|
|
Form
of Indemnification Agreement between Colgate-Palmolive Company and its
directors, executive officers and certain key employees. (Registrant
hereby incorporates by reference Exhibit 10-B to its Quarterly Report on
Form 10-Q for the quarter ended June 30, 2004, File No.
1-644.)
|
|
10-O
|
|
Form
of Stock Incentive Agreement used in connection with grants to employees
under the Colgate-Palmolive Company 1997 Stock Option Plan. (Registrant
hereby incorporates by reference Exhibit 10-O to its Current Report on
Form 8-K dated September 8, 2004, File No. 1-644.)
|
|
|
Form
of Restricted Stock Award Agreement used in connection with grants to
employees under the 2009 Colgate-Palmolive Company Executive Incentive
Compensation Plan.**
|
|
|
10-Q
|
a)
|
Colgate-Palmolive
Company 2005 Non-Employee Director Stock Option Plan. (Registrant hereby
incorporates by reference appendix C to its 2005 Notice of Meeting and
Proxy Statement.)
|
|
|
b)
|
Form
of Award Agreement used in connection with grants to non-employee
directors under the Colgate-Palmolive Company 2005 Non-Employee Director
Stock Option Plan. (Registrant hereby incorporates by reference Exhibit
10-B to its Current Report on Form 8-K dated May 4, 2005, File No.
1-644.)
|
|
|
c)
|
Amendment,
dated as of September 7, 2006, to the Colgate-Palmolive Company 2005
Non-Employee Director Stock Option Plan. (Registrant hereby incorporates
by reference Exhibit 10-B to its Quarterly Report on Form 10-Q for the
quarter ended September 30, 2006, File No.
1-644.)
|
|
Exhibit No.
|
Description
|
|
|
|
d)
|
Amendment,
dated as of December 7, 2006, to the Colgate-Palmolive Company 2005
Non-Employee Director Stock Option Plan. (Registrant hereby
incorporates by reference Exhibit 10-S (d) to its Annual Report on Form
10-K for the year ended December 31, 2006, File No.
1-644.)
|
|
e)
|
Amendment,
dated as of October 29, 2007, to the Colgate-Palmolive Company 2005
Non-Employee Director Stock Option Plan. (Registrant hereby incorporates
by reference Exhibit 10-J to its Quarterly Report on Form 10-Q for the
quarter ended September 30, 2007, File No.
1-644.)
|
|
10-R
|
a)
|
Colgate-Palmolive
Company 2005 Employee Stock Option Plan. (Registrant hereby incorporates
by reference appendix B to its 2005 Notice of Meeting and Proxy
Statement.)
|
|
b)
|
Form
of Award Agreement used in connection with grants to employees under the
Colgate-Palmolive Company 2005 Employee Stock Option Plan. (Registrant
hereby incorporates by reference Exhibit 10-A to its Current Report on
Form 8-K dated May 4, 2005, File No. 1-644.)
|
|
|
c)
|
Amendment,
dated as of September 7, 2006, to the Colgate-Palmolive Company 2005
Employee Stock Option Plan. (Registrant hereby incorporates by reference
Exhibit 10-A to its Quarterly Report on Form 10-Q for the quarter ended
September 30, 2006, File No. 1-644.)
|
|
|
d)
|
Amendment,
dated as of December 7, 2006, to the Colgate-Palmolive Company 2005
Employee Stock Option Plan. (Registrant hereby incorporates by
reference Exhibit 10-T (d) to its Annual Report on Form 10-K for the year
ended December 31, 2006, File No. 1-644.)
|
|
|
e)
|
Action,
dated as of October 29, 2007, taken pursuant to the Colgate-Palmolive
Company 2005 Employee Stock Option Plan and Colgate-Palmolive Company 1997
Stock Option Plan. (Registrant hereby incorporates by reference Exhibit
10-I to its Quarterly Report on Form 10-Q for the quarter ended September
30, 2007, File No. 1-644.)
|
|
|
f)
|
Amendment,
dated as of February 26, 2009, to the Colgate-Palmolive Company 2005
Employee Stock Option Plan. (Registrant hereby incorporates by reference
Exhibit 10-S (f) to its Annual Report on Form 10-K for the year ended
December 31, 2008, File No. 1-644.)
|
|
|
10-S
|
Retirement
Agreement, dated as of February 21, 2007, between Colgate-Palmolive
Company and Javier G. Teruel. (Registrant hereby incorporates
by reference Exhibit 10-V to its Annual Report on Form 10-K for the year
ended December 31, 2006, File No. 1-644.)
|
|
|
Computation
of Ratio of Earnings to Fixed Charges and Preferred
Dividends.**
|
||
|
Subsidiaries
of the Registrant.**
|
||
|
Consent
of Independent Registered Public Accounting Firm.**
|
||
|
Certificate
of the Chairman of the Board, President and Chief Executive Officer of
Colgate-Palmolive Company pursuant to Rule 13a-14(a) under the Securities
Exchange Act of 1934.**
|
|
Exhibit No.
|
Description
|
|
|
Certificate
of the Chief Financial Officer of Colgate-Palmolive Company pursuant to
Rule 13a-14(a) under the Securities Exchange Act of
1934.**
|
||
|
Certificate
of the Chairman of the Board, President and Chief Executive Officer and
the Chief Financial Officer of Colgate-Palmolive Company pursuant to Rule
13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. §
1350.**
|
||
| 101 |
The
following materials from Colgate-Palmolive Company’s Annual Report on Form
10-K for the year ended December 31, 2009, formatted in eXtensible
Business Reporting Language (XBRL): (i) the Consolidated Statements of
Income, (ii) the Consolidated Balance Sheets, (iii) the Consolidated
Statements of Changes in Shareholders’ Equity, (iv) the Consolidated
Statements of Cash Flows, and (v) Notes to Consolidated Financial
Statements, tagged as blocks of
text.
|
___________
|
*
|
Registrant
hereby undertakes upon request to furnish the Commission with a copy of
any instrument with respect to long-term debt where the total amount of
securities authorized thereunder does not exceed 10% of the total assets
of the registrant and its subsidiaries on a consolidated
basis.
|
|
**
|
Filed
herewith.
|
The
exhibits indicated above that are not included with the Form 10-K 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-K Exhibits)
|
|
|
300
Park Avenue
|
|
|
New
York, New York 10022-7499
|
102
Exhibit
10-B(d)
Amendment
to the Colgate-Palmolive Company
Supplemental
Salaried Employees’ Retirement Plan
AMENDMENT,
dated as of February 25, 2010, to the Colgate-Palmolive Company Supplemental
Salaried Employees’ Retirement Plan.
RESOLVED,
effective February 25, 2010, Sections 3.2, 3.3 and 4.4 of the Colgate-Palmolive
Company Supplemental Salaried Employees’ Retirement Plan are amended as
follows:
1. Section
3.2 is deleted and replaced in its entirety with the
following:
Amount of Member’s
Benefit.
|
|
(a)
|
In
the case of any Member whose Determination Date is coincident with or
immediately following his separation from service, such Member shall be
entitled to a benefit under this Plan, the Actuarial Equivalent of which
is equal to the difference between:
|
|
|
(i)
|
the
benefit that would have been payable under the Base Plan as of such date
in the form elected by the Member under such plan if the limitations of
Code sections 401(a)(17) and 415 were not take into account in calculating
the benefit; and
|
|
|
(ii)
|
the
benefit actually payable under the Base
Plan.
|
In the
case of a Member Eligible for the Increased Benefit, the determination of the
benefit payable under the Base Plan under (i) of the immediately preceding
sentence shall be made by assuming that the benefit is payable in the form of a
joint and 75% surviving spouse annuity with no actuarial reduction to reflect
the 75% survivor annuity, provided, however that in any case where the surviving
spouse is more than 60 months younger than the Member, the additional 25%
surviving spouse annuity shall be reduced 1/8 of 1% (.00125) per month for each
month over 60 months that the surviving spouse is younger than the
Member.
|
|
(b)
|
In
any case where the Determination Date under the Base Plan does not
coincide with, or immediately follow, the Member’s separation from
service, the Member shall be entitled to a benefit under this Plan, the
Actuarial Equivalent of which is equal to the difference
between:
|
|
|
(i)
|
the
annual benefit that would have been payable under the Base Plan in the
normal form as of the earliest date the Member could have commenced
benefits under the Base Plan following his separation from service if the
limitations of Code sections 401(a)(17) and 415 were not taken into
account in calculating the benefit;
and
|
|
|
(ii)
|
the
Maximum Benefit applicable to the Member as of that
date.
|
In the
case of a Member Eligible for the Increased Benefit, the determination of the
benefit payable under the Base Plan under (i) of the immediately preceding
sentence shall be made in accordance with the second sentence of Section
3.2(a).
|
|
(c)
|
The
benefit amount determined above is subject to reduction as provided in
Sections 3.6, 3.7 and 3.8. The benefit amount (after the
reductions required under Sections 3.6 and 3.7 but prior to the reduction
required under Section 3.8), when expressed as a straight life annuity,
and then added to the benefit payable under the Base Plan, when expressed
as a straight life annuity (in each case using the actuarial assumptions
specified in Section 2.1 which are in effect on the Benefit Commencement
Date), shall be limited to 70 percent of the Member’s salary base on the
date of separation from service plus the value of the executive incentive
compensation (whether or not payable in cash) awarded for services
rendered in the calendar year immediately preceding the calendar year
containing the separation from service date. For this purpose,
executive incentive compensation includes cash and non-cash awards under
the Executive Incentive Compensation Plan of the Company. Also
for this purpose, restricted stock issued pursuant to the Executive
Incentive Compensation Plan shall be valued at its publicly traded value
on the New York Stock Exchange at the close of business on the date of
grant.
|
|
|
(d)
|
The
benefit amount determined above (after the reductions required under
Sections 3.2(c), 3.6, and 3.7 but prior to the reduction required under
Section 3.8) when expressed as a lump sum, and when added to the benefit
determined under Section 3.2(a)(ii) or Section 3.2(b)(ii), as applicable,
when expressed as a lump sump (in each case using the actuarial
assumptions which are then in effect under the Base Plan on the Benefit
Commencement Date) shall be further limited to the difference between (i)
$20,000,000, increased by 6% compounded annually commencing in January
2010 and adjusted monthly, and (ii) the benefit determined under Section
3.2(a)(ii) or Section 3.2(b)(ii), as applicable, when expressed as a lump
sum using the actuarial assumptions which are then in effect under the
Base Plan on the Benefit Commencement Date if the present value of the
benefit amount to which a Member is entitled under this Article III on or
after February 25, 2010, when expressed as a lump sum using the actuarial
assumptions which are in effect on such date, would otherwise exceed the
limit set forth above in this Section 3.2(d), subject to obtaining the
written consent of any such Member and his Beneficiary to such
reduction.
|
2. Section
3.3 is deleted and replaced in its entirety with the
following:
2
Amount of Beneficiary’s
Benefit. Upon the death of a Member whose Beneficiary is
eligible for a Beneficiary’s benefit under the Base Plan, such Beneficiary shall
be entitled to an annual benefit under this Plan equal to the difference between
(i) the benefit that would have been payable to the Beneficiary under the Base
Plan if the limitations of Code Sections 401(a)(17) and 415 were not taken
into account in calculating the benefit; and (ii) the benefit actually payable
to the Beneficiary under the Base Plan. In the case of a Member
Eligible for the Increased Benefit who dies after retirement, the determination
of the benefit payable under the Base Plan under (i) of the immediately
preceding sentence shall be made by assuming that the normal form of benefit is
in the form of a joint and 75% surviving spouse annuity with no actuarial
reduction to reflect the 75% survivor annuity, provided, however that in any
case where the surviving spouse is more than 60 months younger than the Member,
the additional 25% surviving spouse annuity shall be reduced 1/8 of 1% (.00125)
per month for each month over 60 months that the surviving spouse is younger
than the Member. Notwithstanding the above, the Beneficiary of a
Member Eligible for an Increased Benefit shall not be entitled to receive a
total benefit under the Base Plan and the Plan that exceeds the Member Eligible
for an Increased Benefit’s normal retirement benefit under the Base Plan and the
Plan. In no event, however, shall the benefit amount payable to the
Beneficiary, when expressed as a lump sum (using the actuarial assumptions then
in effect under the Base Plan) exceed 50% (75% or reduced in accordance with the
immediately preceding sentence, in the case of a Member Eligible for the
Increased Benefit) of the benefit amount applicable to the Member on the date of
his death if the amount of the Member’s Benefit is subject to the limitation set
forth in Section 3.2(d).
3. Section
4.4 is deleted and replaced in its entirety with the
following:
Amendment and
Termination. The Company may amend, modify or terminate this
Plan at any time, provided, however, that no such amendment, modification or
termination shall reduce any benefit under this Plan to which a Member, or the
Member’s Beneficiary, is entitled under Article III prior to the date of such
amendment or termination, and in which such Member or Beneficiary would have
been vested if such benefit had been provided under the Base Plan, unless the
Member or Beneficiary either becomes entitled to an amount equal to the
Actuarial Equivalent of such benefit under another plan, including the Base
Plan, program or practice adopted by the Company or consents in writing to such
reduction. The Employee Relations Committee may make changes to this
Plan which do not materially reduce the value of the benefits paid under this
Plan to conform to, or take advantage of, any governmental requirements,
statutes, regulations or other authority.
and be it
further
RESOLVED,
that the officers of the Company be, and they hereby are, jointly and severally,
authorized and empowered to take any and all actions, and to execute any and all
agreements, documents and instruments, as they in their discretion may deem
necessary or appropriate to effectuate the foregoing resolution.
3
EXHIBIT
10-P
FORM
OF RESTRICTED STOCK AWARD AGREEMENT
COLGATE-PALMOLIVE
COMPANY
EXECUTIVE
INCENTIVE COMPENSATION PLAN
<<Date>>
<<Title>>
<<First Name>> <<Last Name>>
Colgate-Palmolive
Company
<<Location>>
This will
confirm the following award of restricted stock made to you on [DATE] by the
Personnel and Organization Committee of the Board of Directors of
Colgate-Palmolive Company (the “Company”) pursuant to the Executive
Incentive Compensation Plan of the Company (the “Plan”). If you have not received
copies of the Plan and the Plan Prospectus, they are available from the Company
at 300 Park Avenue, New York, NY 10022, Attention: Mr.
Andrew D. Hendry, Senior Vice President, General Counsel and
Secretary.
You have
been granted an award of <<________>> shares of restricted
stock.
This
award is subject to the terms, conditions, limitations and restrictions
contained in or established pursuant to the Plan and all requirements of
applicable law. Your acceptance of the award shall constitute your
acknowledgment of, and agreement to, all such terms, conditions, limitations and
restrictions.
Receiving
shares of common stock is contingent upon your continued employment with the
Company for [_______] years (i.e., until at least [DATE]) (the “Vesting Period”)
[notwithstanding the normal Plan guidelines regarding the effect of retirement
on awards]1. During the Vesting
Period, dividend equivalents will be credited to the shares of restricted
stock. As soon as practicable after the end of the Vesting Period,
the award plus dividend equivalents will be paid to you in the form of Colgate
common stock, less any required tax withholding that becomes due during or at
the end of the Vesting Period.
Nothing
herein contained shall obligate the Company or any subsidiary of the Company to
continue your employment for any particular period or on any particular basis of
compensation, including without limitation, to make future grants of restricted
shares or other equity awards.
This
award may not be assigned or transferred in whole or in part except as provided
in the Plan. You shall not have any of the rights of a shareholder
with respect to any of the restricted shares which are the subject of the award
until shares of common stock are actually issued to you.
The
number of restricted shares included in your award is subject to adjustment as
provided in the Plan. You assume all risks incident to any change
hereafter in applicable laws or regulations or incident to any change in the
market value of the Colgate common stock after the date of grant of the award
and after vesting.
Data
Privacy. You understand that the Company and the Company subsidiary
for which you work may hold certain personal information about you, including,
but not limited to, your name, home address and telephone number, date of birth,
social insurance number or other identification number, any shares of stock or
directorships held in the Company, details of all restricted stock awards or any
other entitlement to shares of stock awarded, canceled, exercised, vested,
unvested or outstanding in your favor, for the exclusive purpose of
implementing, administering and managing the Plan (“Data”). You
hereby consent to the collection, use and transfer, in electronic or other form,
of your personal data as described in this Agreement and any other restricted
stock grant materials by and among, as applicable, the Company, its subsidiaries
and Affiliates and any third parties engaged by the Company to administer the
Plan, for the exclusive purpose of implementing, administering and managing your
participation in the Plan. You understand that you may request a list
with the names and addresses of any potential recipients of the Data by
contacting your local human resources representative. You understand
that you may, at any time, view Data, request additional information about the
storage and processing of Data, require any necessary amendments to Data or
refuse or withdraw the consents herein, in any case without cost, by contacting
in writing your local human resources representative. You understand,
however, that refusing or withdrawing your consent may affect your ability to
participate in the Plan. For more information on the consequences of
your refusal to consent or withdrawal of consent, you understand that you may
contact your local human resources representative.
This
Agreement and related restricted stock award are governed by, and subject to,
the laws of the State of Delaware, without reference to principles of conflict
of laws, as provided in the Plan.
|
Very
truly yours,
|
|
|
COLGATE-PALMOLIVE
COMPANY
|
|
|
By
|
Sign
below to indicate your acceptance of the foregoing and
retain this Agreement for your records.
-2-
EXHIBIT
12
COLGATE-PALMOLIVE
COMPANY
(Dollars
in Millions Except Per Share Amounts)
|
Years Ended December
31,
|
||||||||||||||||||||
|
2009
|
2008(A) | 2007(A) | 2006(A) | 2005(A) | ||||||||||||||||
|
Earnings:
|
||||||||||||||||||||
|
Income
before income taxes
|
$ | 3,538 | $ | 3,005 | $ | 2,563 | $ | 2,059 | $ | 2,134 | ||||||||||
|
Add:
|
||||||||||||||||||||
|
Interest
on indebtedness and amortization of debt expense and discount or
premium
|
88 | 106 | 167 | 167 | 142 | |||||||||||||||
|
Portion
of rents representative of interest factor
|
71 | 61 | 52 | 47 | 44 | |||||||||||||||
|
Loss
on equity investments
|
— | — | — | — | — | |||||||||||||||
|
Less:
|
||||||||||||||||||||
|
Gain
on equity investments
|
(5 | ) | (4 | ) | (3 | ) | (3 | ) | (2 | ) | ||||||||||
|
Income
as adjusted
|
$ | 3,692 | $ | 3,168 | $ | 2,779 | $ | 2,270 | $ | 2,318 | ||||||||||
|
Fixed
Charges:
|
||||||||||||||||||||
|
Interest
on indebtedness and amortization of debt expense and discount or
premium
|
$ | 88 | $ | 106 | $ | 167 | $ | 167 | $ | 142 | ||||||||||
|
Portion
of rents representative of interest factor
|
71 | 61 | 52 | 47 | 44 | |||||||||||||||
|
Capitalized
interest
|
14 | 9 | 6 | 4 | 3 | |||||||||||||||
|
Total
fixed charges
|
$ | 173 | $ | 176 | $ | 225 | $ | 218 | $ | 189 | ||||||||||
|
Preferred
Dividends:
|
||||||||||||||||||||
|
Dividends
declared on Preference stock
|
36 | 35 | 35 | 36 | 35 | |||||||||||||||
|
Total
preferred dividends
|
$ | 36 | $ | 35 | $ | 35 | $ | 36 | $ | 35 | ||||||||||
|
Ratio
of earnings to fixed charges
|
21.3 | 18.0 | 12.4 | 10.4 | 12.3 | |||||||||||||||
|
Ratio
of earnings to fixed charges and preferred dividends
|
17.7 | 15.0 | 10.7 | 8.9 | 10.3 | |||||||||||||||
|
(A)
|
Prior year amounts have been
recalculated to conform to the current year presentation required by the
Consolidation Topic of the FASB Codification. See Note 2 to the
Consolidated Financial Statements for additional
information.
|
EXHIBIT
21
Page
1 of 2
COLGATE-PALMOLIVE
COMPANY
SUBSIDIARIES OF THE
REGISTRANT
|
Name of Company
|
State in which Incorporated or Country in which
Organized
|
|
Colgate
(Guangzhou) Co. Ltd.
|
China
|
|
Colgate
Flavors and Fragrances, Inc.
|
Delaware
|
|
Colgate
Oral Pharmaceuticals, Inc.
|
Delaware
|
|
Colgate-Palmolive
(Middle East Exports) Ltd.
|
BVI
|
|
Colgate-Palmolive
Europe Sarl
|
Switzerland
|
|
Colgate-Palmolive
Industrial Unipessoal, Lda.
|
Portugal
|
|
Colgate-Palmolive
Peru S.A.
|
Peru
|
|
Colgate
Sanxiao Company Limited
|
China
|
|
Colgate-Palmolive
S.p.A.
|
Italy
|
|
Colgate-Palmolive
(America), Inc.
|
Delaware
|
|
Colgate-Palmolive
(Asia) Pte. Ltd.
|
Singapore
|
|
Colgate-Palmolive
(Caribbean), Inc.
|
Delaware
|
|
Colgate-Palmolive
(Central America), Inc.
|
Delaware
|
|
Colgate-Palmolive
(Centro America) S.A.
|
Guatemala
|
|
Colgate-Palmolive
(Dominican Republic), Inc.
|
Delaware
|
|
Colgate-Palmolive
(Eastern) Pte. Ltd.
|
Singapore
|
|
Colgate-Palmolive
(China) Co., Ltd.
|
China
|
|
Colgate-Palmolive
(H.K.) Ltd.
|
Hong
Kong
|
|
Colgate-Palmolive
(Hellas) S.A.I.C.
|
Greece
|
|
Colgate-Palmolive
(India) Limited
|
India
|
|
Colgate-Palmolive
(Malaysia) Sdn Bhd
|
Malaysia
|
|
Colgate-Palmolive
(Marketing) Sdn Bhd
|
Malaysia
|
|
Colgate-Palmolive
(Poland) Sp. zo.o.
|
Poland
|
|
Colgate-Palmolive
(Pty) Limited
|
South
Africa
|
|
Colgate-Palmolive
(Thailand) Ltd.
|
Thailand
|
|
Colgate-Palmolive
A/S
|
Denmark
|
|
Colgate-Palmolive
AB
|
Sweden
|
|
Colgate-Palmolive
Argentina S.A.
|
Argentina
|
|
Colgate-Palmolive
Belgium S.A./N.V.
|
Belgium
|
|
Colgate-Palmolive
Canada, Inc.
|
Canada
|
|
Colgate-Palmolive
Ceska Republika, s.r.o.
|
Czech
Republic
|
|
Colgate-Palmolive
Chile S.A.
|
Chile
|
|
Colgate-Palmolive
Cia.
|
Delaware
|
|
Colgate-Palmolive
Compania Anonima
|
Venezuela
|
|
Colgate-Palmolive
Company, Distr.
|
Puerto
Rico
|
|
Colgate-Palmolive
de Puerto Rico, Inc.
|
Delaware
|
|
Colgate-Palmolive
del Ecuador S.A.I.C.
|
Ecuador
|
|
Colgate-Palmolive
España, S.A./N.V.
|
Spain
|
|
Colgate-Palmolive
G.m.b.H.
|
Germany
|
|
Colgate-Palmolive
Holding S. Com. p.a.
|
Spain
|
EXHIBIT
21
Page
2 of 2
|
Name of Company
|
State in which Incorporated or Country in which
Organized
|
|
Colgate-Palmolive
Holdings (UK) Limited
|
United
Kingdom
|
|
Colgate-Palmolive
Inc. S.A.
|
Uruguay
|
|
Colgate-Palmolive
Comercial Ltda.
|
Brazil
|
|
Colgate-Palmolive
International LLC
|
Delaware
|
|
Colgate-Palmolive
Ltd.
|
New
Zealand
|
|
Colgate-Palmolive
Manufacturing (Poland) Sp. zo.o
|
Poland
|
|
Colgate-Palmolive
Moroc S.A.
|
Morocco
|
|
Colgate-Palmolive
Nederland BV
|
Netherlands
|
|
Colgate-Palmolive
Norge A/S
|
Norway
|
|
Colgate-Palmolive
Operations (Ireland) Limited
|
Ireland
|
|
Colgate-Palmolive
Philippines, Inc.
|
Philippines
|
|
Colgate-Palmolive
Pty Limited
|
Australia
|
|
Colgate-Palmolive
Senegal N.S.O.A.
|
Senegal
|
|
Colgate-Palmolive
Services (Belgium) SA/NV
|
Belgium
|
|
Colgate-Palmolive
Services, S.A.
|
France
|
|
Colgate-Palmolive
Temizlik Urunleri Sanayi ve Ticaret, A.S.
|
Turkey
|
|
Colgate-Palmolive
Vietnam
|
Vietnam
|
|
Colgate-Palmolive,
S.A. de C.V.
|
Mexico
|
|
Cotelle
S.A.
|
France
|
|
CPIF
Venture, Inc.
|
Delaware
|
|
GABA
Holding A.G.
|
Switzerland
|
|
Hawley
& Hazel Chemical (Taiwan) Corporation Ltd.
|
Taiwan
|
|
Hawley
& Hazel Chemical Company (HK) Limited
|
Hong
Kong
|
|
Hawley
& Hazel Chemical Company (Zhongshan) Limited
|
China
|
|
Hill’s
Pet Nutrition Asia-Pacific, Pte., Ltd.
|
Singapore
|
|
Hill’s
Pet Nutrition Indiana, Inc.
|
Delaware
|
|
Hill’s
Pet Nutrition Limited
|
United
Kingdom
|
|
Hill’s
Pet Nutrition Manufacturing, B.V.
|
Netherlands
|
|
Hill’s
Pet Nutrition Manufacturing s.r.o.
|
Czech
Republic
|
|
Hill’s
Pet Nutrition Sales, Inc.
|
Delaware
|
|
Hill’s
Pet Nutrition SNC
|
France
|
|
Hill’s
Pet Nutrition, Inc.
|
Delaware
|
|
Hill’s
Pet Products, Inc.
|
Delaware
|
|
Hill’s-Colgate
(Japan) Ltd.
|
Japan
|
|
Inmobiliara
Hills, S.A. de C.V.
|
Mexico
|
|
Mission
Hills, S.A. de C.V.
|
Mexico
|
|
Norwood
International Incorporated
|
Delaware
|
|
Tom’s
of Maine, Inc.
|
Maine
|
There are
a number of additional subsidiaries in the United States and foreign countries
that, considered in the aggregate, do not constitute a significant
subsidiary.
EXHIBIT
23
We hereby
consent to the incorporation by reference in the Registration Statements on Form
S-3 (No. 333-154923) and Form S-8 (Nos. 2-76922, 2-96982, 33-17136, 33-27227,
33-34952, 33-58231, 33-58746, 33-61038, 33-64753, 333-23685, 333-38251,
333-45679, 333-72342, 333-79411, 333-133856, 333-132038, and 333-159885) of
Colgate-Palmolive Company of our report dated February 25, 2010 relating to the
financial statements, financial statement schedule and the effectiveness of
internal control over financial reporting, which appears in this Form
10-K.
|
/s/
PRICEWATERHOUSECOOPERS
LLP
|
New York,
New York
February
25, 2010
EXHIBIT
31-A
I, Ian
Cook, certify that:
|
1.
|
I
have reviewed this Annual Report on Form 10-K of Colgate-Palmolive
Company;
|
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
|
4.
|
The
registrant’s other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and
have:
|
|
|
(a)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
|
|
|
(b)
|
Designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
|
|
(c)
|
Evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation;
and
|
|
|
(d)
|
Disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial
reporting; and
|
|
5.
|
The
registrant’s other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to
the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent
functions):
|
|
|
(a)
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
|
|
|
(b)
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
|
Date:
February 25, 2010
|
/s/ Ian Cook
|
|
|
Ian
Cook
|
|
|
Chairman
of the Board, President and
Chief
Executive Officer
|
EXHIBIT
31-B
I,
Stephen C. Patrick, certify that:
|
1.
|
I
have reviewed this Annual Report on Form 10-K of Colgate-Palmolive
Company;
|
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
|
4.
|
The
registrant’s other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and
have:
|
|
|
(a)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
|
|
|
(b)
|
Designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
|
|
(c)
|
Evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation;
and
|
|
|
(d)
|
Disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial
reporting; and
|
|
5.
|
The
registrant’s other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to
the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent
functions):
|
|
|
(a)
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
|
|
|
(b)
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
|
Date: February
25, 2010
|
/s/ Stephen C.
Patrick
|
|
|
Stephen
C. Patrick
Chief
Financial Officer
|
EXHIBIT
32
The
undersigned Chairman of the Board, President and Chief Executive Officer and
Chief Financial Officer of Colgate-Palmolive Company each certify, pursuant to
Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. § 1350,
that:
|
(1)
|
the
Annual Report on Form 10-K for the year ended December 31, 2009 (the
“Annual Report”) which this statement accompanies, fully complies with the
requirements of Section 13(a) of the Securities Exchange Act of 1934
and
|
|
(2)
|
information
contained in the Annual Report fairly presents, in all material respects,
the financial condition and results of operations of Colgate-Palmolive
Company.
|
Dated: February
25, 2010
|
/s/ Ian Cook
|
|
|
Ian
Cook
|
|
|
Chairman
of the Board, President and Chief Executive Officer
|
|
|
/s/ Stephen C.
Patrick
|
|
|
Stephen
C. Patrick
|
|
|
Chief
Financial Officer
|
A signed
original of this written statement has been provided to Colgate-Palmolive
Company and will be retained by Colgate-Palmolive Company and furnished to the
Securities and Exchange Commission or its staff upon request.