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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
(Mark One)
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1998
OR
[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to .
Commission File Number 1-644
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COLGATE-PALMOLIVE COMPANY
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 13-1815595
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
<TABLE>
<S> <C>
300 Park Avenue, New York, New York 10022
(Address of principal executive offices) (Zip Code)
</TABLE>
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Registrant's telephone number, including area code 212-310-2000
Securities Registered Pursuant to Section 12(b) of the Act:
----------------
<TABLE>
<S> <C>
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
$4.25 Preferred Stock, without par value, New York Stock Exchange
cumulative dividend
</TABLE>
<TABLE>
<S> <C>
Common Stock, $1.00 par value New York Stock Exchange
</TABLE>
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K 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. [X]
At February 28, 1999 the aggregate market value of stock held by non-
affiliates was $24.7 billion. There were 291,285,182 shares of Common Stock
outstanding as of February 28, 1999.
DOCUMENTS INCORPORATED BY REFERENCE:
<TABLE>
<S> <C>
Documents Form 10-K Reference
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Portions of Proxy Statement for the 1999 Annual
Meeting Part III, Items 10 through 13
</TABLE>
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<PAGE>
PART I
ITEM 1. BUSINESS
(a) General Development of the Business
Colgate-Palmolive Company (the "Company"), which was organized under the
laws of the State of Delaware in 1923, is a leading consumer products company
that markets its products in over 200 countries throughout the world.
For recent business developments, refer to the information set forth under
the caption "Results of Operations", "Liquidity and Capital Resources" and
"Outlook" in Part II, Item 7 of this report.
(b) Financial Information About Industry Segments
Worldwide net sales and earnings by geographic region and business segment
during the last three years appears under the caption "Results of Operations"
in Part II, Item 7 of this report on pages 6 and 8.
(c) Narrative Description of the Business
The Company manages its business in two distinct product segments: Oral,
Personal and Household Care, and Pet Nutrition. Colgate is a global leader in
Oral Care with the number one toothpaste brand in the U.S. and throughout many
parts of the world. Colgate's Oral Care products include toothbrushes,
toothpaste, mouth rinses and dental floss, and pharmaceutical products for
dentists and other oral health professionals. Significant recent product
launches in this segment include Colgate Total toothpaste, and Colgate Total
Professional and Colgate Wave toothbrushes.
Colgate leads many segments of the Personal Care market with several
products including bar and liquid soaps, shampoos, conditioners, deodorants
and antiperspirants, and baby and shave products. Colgate is the number one
market leader in liquid soaps in the U.S. and globally is the market leader in
male deodorant sticks. Strong brands in this segment include Irish Spring,
Softsoap and Palmolive, which is available as a soap and, in many countries,
as a shampoo and conditioner. Colgate also manufactures and markets Mennen
deodorants, baby care products and men's toiletries.
Colgate manufactures and markets a wide array of products for household
care. Major products include Palmolive and Ajax dishwashing liquid and
antibacterial hand soaps and new Palmolive for pots & pans. Colgate also
markets other household names in cleaning and laundry products such as Fab,
Ajax and Murphy's oil soap which is North America's leading wood cleaner. In
the Company's major markets outside the U.S., Colgate is number one in fabric
softeners with leading brands Suavitel in Latin America, Soupline in Europe
and Softlan in Asia.
Sales of Oral, Personal, Household and Fabric Care products accounted for
32%, 24%, 16% and 15% of total worldwide sales in 1998, respectively.
Geographically, Oral Care is a significant part of the Company's business in
Asia/Africa, comprising over 43% of sales in that region. See also Note 1 to
the Consolidated Financial Statements.
Colgate, through its Hill's Pet Nutrition subsidiary, sells high quality pet
nutrition products for dogs and cats. Hill's markets pet foods primarily under
two names: Science Diet, which is sold by authorized pet supply retailers,
breeders and veterinarians for every day nutritional needs, and Prescription
Diet for dogs and cats with disease conditions. Hill's sells its products in
68 countries and leads the premium pet food segment in Japan. Sales of Pet
Nutrition products accounted for 11% of total worldwide sales in 1998.
Research and Development
Strong research and development capabilities enable Colgate to support its
many brands with technologically sophisticated products for consumer's
personal needs and pet nutrition needs. During 1998, the Company spent over
$160 million on research and development activities. See Note 9 to the
Consolidated Financial Statements included herein.
2
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Distribution; Competition; Trademarks and Patents
The Company's products are generally marketed by a direct sales force at
each individual operating subsidiary or business unit. In some instances,
distributors or brokers are used. No one customer accounts for a material
portion of the Company's sales.
Most raw materials are purchased from other companies and are available from
several sources. While it is generally the Company's policy to streamline
supply chain sources, raw materials used in the manufacture of the company's
products are generally available in adequate supply. Raw material commodities
such as tallow and essential oils are subject to wide price variations. No one
of the Company's raw materials represents a significant portion of total
material requirements.
The Company's products are marketed under highly competitive conditions.
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. Product quality, brand
recognition and acceptance and marketing capability 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 by
all available means in the United States and throughout the world where the
Company's products are sold. Principal global trademarks include Colgate,
Palmolive, Mennen, Protex, Ajax, Soupline, Suavitel, Fab, Science Diet and
Prescription Diet in addition to several regional trademarks. These trademarks
are of significant importance to the Company and its subsidiaries within their
markets. The Company's rights in these trademarks endure for as long as they
are used or registered. Although the Company owns a number of patents, no one
patent is considered significant to the business as a whole.
Employees
At year-end, the Company employed approximately 38,300 employees of which
approximately 80% were located outside the United States.
Environmental Matters
Compliance with environmental rules and regulations has not significantly
affected the Company's earnings or competitive position. Capital expenditures
for environmental control facilities totaled $23.6 million for 1998. For
future years, expenditures are expected to be in the same range. The Company
has programs that are designed to ensure that its operations and facilities
meet or exceed applicable rules and regulations. Please refer to Note 16 to
the Consolidated Financial Statements.
(d) Financial Information About Foreign and Domestic Operations and Export
Sales
For information concerning geographic area financial data refer to the
information set forth under the caption "Results of Operations" in Part II,
Item 7 of this report.
ITEM 2. PROPERTIES
The Company owns and leases a total of 313 manufacturing, distribution,
research and office facilities worldwide. Corporate headquarters is housed in
leased facilities at 300 Park Avenue, New York, New York.
In the United States, the Company operates 50 facilities, of which 24 are
owned. Major U.S. manufacturing and warehousing facilities used by the Oral,
Personal and Household Care segment are located in Kansas City, Kansas;
Morristown, New Jersey; Jeffersonville, Indiana, and Cambridge, Ohio. The
Company is transforming its former facilities in Jersey City, New Jersey into
a mixed-use complex with the assistance of developers and other investors. The
Pet Nutrition segment has major facilities in Bowling Green, Kentucky; Topeka,
Kansas;
3
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and Richmond, Indiana. Research facilities are located throughout the world
with the primary research center for Oral, Personal and Household Care
products located in Piscataway, New Jersey.
Overseas, the Company operates 263 facilities, of which 97 are owned, in
over 70 countries. Major overseas facilities used by the Oral, Personal and
Household Care segment are located in Australia, Brazil, Canada, China,
Colombia, France, Italy, Mexico, Thailand, the United Kingdom and elsewhere
throughout the world. In some areas outside the United States, products are
either manufactured by independent contractors under Company specifications or
are imported from the United States or elsewhere.
All facilities operated by the Company are, in general, well maintained and
adequate for the purpose for which they are intended. The Company conducts
continuing reviews of its facilities with the view to modernization and cost
reduction.
ITEM 3. LEGAL PROCEEDINGS
On September 8, 1998, one of the Company's Brazilian subsidiaries, Kolynos
do Brasil Ltda. ("Kolynos"), received notice of an administrative proceeding
from the Central Bank of Brazil, citing Articles 1, 3, 9, 23 and 58 of Law No.
4131 dated September 3, 1962 and related circular letters, which address
foreign capital registration and foreign exchange transactions. The notice
primarily takes issue with certain filings made with the Central Bank in
connection with the financing of the acquisition of Kolynos in January 1995,
which is described in the Company's Form 8-K dated January 10, 1995. The
Central Bank's sole remedy is to seek to impose fines prescribed in the above-
referenced statutes and, in no way, challenges or seeks to unwind the
acquisition.
Management believes, based on the opinion of its Brazilian legal counsel,
that the filings challenged by the Central Bank fully complied with Brazilian
law and that the issues raised in the notice are without merit. The Company
intends to defend its position and cooperate with the Brazilian banking
authorities to seek a satisfactory resolution of this matter.
For information regarding legal matters refer to Note 16 of the Consolidated
Financial Statements included herein.
4
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following is a list of executive officers as of March 30, 1999:
<TABLE>
<CAPTION>
Date First
Elected
Name Age Officer Present Title
---- --- ---------- -------------
<S> <C> <C> <C>
Reuben Mark........... 60 1974 Chairman of the Board and Chief Executive
Officer
William S. Shanahan... 58 1983 President and Chief Operating Officer
Lois D. Juliber....... 50 1991 Executive Vice President
Chief of Operations, Developed Markets
David A. Metzler...... 56 1991 Executive Vice President
Chief of Operations, High Growth Markets
Stephen C. Patrick.... 49 1990 Chief Financial Officer
John T. Reid.......... 59 1997 Chief Technological Officer
Andrew D. Hendry...... 51 1991 Senior Vice President
General Counsel and Secretary
Robert J. Joy......... 52 1996 Vice President
Global Human Resources
Dennis J. Hickey...... 50 1998 Vice President
Corporate Controller
Ian M. Cook........... 46 1996 President
Colgate-North America
Michael J. Tangney.... 54 1993 President
Colgate-Latin America
Javier G. Teruel...... 48 1996 President
Colgate-Europe
Robert C. Wheeler..... 57 1991 Chief Executive Officer
Hill's Pet Nutrition, Inc.
Steven R. Belasco..... 52 1991 Vice President
Taxation and Real Estate
Brian J. Heidtke...... 58 1986 Vice President
Finance and Corporate Treasurer
Peter D. McLeod....... 58 1984 Vice President
Manufacturing Engineering Technology
John H. Tietjen....... 56 1995 Vice President
Global Business Development
Michael S. Roskothen.. 62 1993 President
Global Oral Care
Barrie M. Spelling.... 55 1994 President
Global Personal Care
</TABLE>
Each of the executive officers listed above has served the registrant or its
subsidiaries in various executive capacities for the past five years.
The Company By-Laws, paragraph 38, states: The officers of the corporation
shall hold office until their respective successors are chosen and qualified
in their stead, or until they have resigned, retired or been removed in the
manner hereinafter provided. Any officer elected or appointed by the board of
directors may be removed at any time by the affirmative vote of a majority of
the whole board of directors.
5
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS
Refer to the information regarding the market for the Company's Common Stock
and the quarterly market price information appearing under "Market and
Dividend Information" in Note 14 to the Consolidated Financial Statements
included herein; the information under "Capital Stock and Stock Compensation
Plans" in Note 5 to the Consolidated Financial Statements included herein; and
the "Number of shareholders of record" and "Cash dividends declared and paid
per common share" under the caption "Historical Financial Summary" included
herein.
ITEM 6. SELECTED FINANCIAL DATA
Refer to the information set forth under the caption "Historical Financial
Summary" included herein.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(Dollars in Millions Except Per Share Amounts)
Results of Operations
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Worldwide Net Sales by Business Segment and Geo-
graphic Region
Oral, Personal and Household Care
North America(/1/)............................ $2,047.5 $1,992.5 $1,869.0
Latin America................................. 2,407.9 2,363.8 2,124.8
Europe........................................ 2,067.7 2,078.8 2,173.4
Asia/Africa................................... 1,452.6 1,656.3 1,713.1
-------- -------- --------
Total Oral, Personal and Household Care......... 7,975.7 8,091.4 7,880.3
Total Pet Nutrition(/2/)........................ 995.9 965.3 868.7
-------- -------- --------
Total Net Sales................................. $8,971.6 $9,056.7 $8,749.0
======== ======== ========
</TABLE>
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(/1/) Sales in the United States for Oral, Personal and Household Care were
$1,799.6, $1,756.1 and $1,610.4 in 1998, 1997 and 1996, respectively.
(/2/) Sales in the United States for Pet Nutrition were $688.6, $689.4 and
$630.1 in 1998, 1997 and 1996, respectively.
Net Sales
Worldwide net sales decreased 1% to $8,971.6 in 1998 on volume growth of
3.5%. Sales would have grown 6%, excluding the effect of foreign exchange
declines and divestments. Sales in the Oral, Personal and Household Care
segment decreased 1% on 3% volume growth, while sales in Pet Nutrition
increased 3% on 4% volume growth.
In 1998, sales from continuing businesses in North America increased 6% as
unit volume rose 5%. Included in the strong growth in Oral Care were launches
of new products such as Colgate Total toothpaste, which was launched in late
1997. Success in Personal Care resulted from the launch of three new fragrance
varieties of Softsoap Body Wash, Softsoap hand gel, Speed Stick Ultimate odor-
fighting antiperspirant and Lady Speed Stick gel. Adding new market shares
were Palmolive lemon dishwashing liquid & antibacterial hand soap.
6
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(Dollars in Millions Except Per Share Amounts)
Sales in Latin America increased 2% on 7% volume growth. The largest
increases were achieved in Mexico, Brazil, Venezuela and Central America.
Contributing to the strong growth in the region were Oral and Personal Care
sales. Increased Oral Care sales were driven by Colgate great regular flavor
and Colgate Double Cool Stripe toothpastes. Personal Care sales were increased
by Palmolive Botanicals shampoo, Palmolive soap and Protex Fresh soap.
Sales in Europe remained flat in 1998 due to the effects of weak economic
conditions in Russia, while volume grew 1%. The United Kingdom, Italy, Belgium
and Greece achieved the strongest sales growth and volume increases in the
region. Sales in the United Kingdom and other countries were helped by strong
sales of Palmolive shower gels and Colgate Sensation whitening toothpaste. The
continued success of products such as Ajax Fetes des Fleurs, in three
different fragrances, and the introduction of two new dishwashing products
also contributed to the volume increase in this highly competitive market.
Sales in the Asia/Africa region decreased 12% as volume decreased 1%,
reflecting weaker ASEAN currencies. Volume declined in the ASEAN countries of
Malaysia, the Philippines and Thailand, reflecting continued economic
difficulties, and in India as a result of aggressive competition. Partially
offsetting declines in the ASEAN countries were strong growth in China and
increases in Australia, Taiwan and Vietnam.
Sales for Hill's Pet Nutrition increased 3% on 4% volume growth. Within the
United States, sales of Prescription Diet products increased due to the
introduction of new products including Prescription Diet n/d, the first
product clinically proven to improve the quality and life expectancy of dogs
undergoing cancer treatment. Strongest growth occurred in Japan and Europe,
where introduction of new products and increased advertising fueled that
growth.
In 1997, worldwide net sales increased 4% to $9,056.7 on volume growth of
7%, reflecting volume increases by all divisions. North America posted overall
sales and volume growth of 7%. In Europe, sales decreased 4% in 1997 on 5%
higher volume, due primarily to weaker European currencies. Latin America led
the Oral, Personal and Household Care segment with an 11% increase in sales on
10% volume growth. Sales in the Asia/Africa region decreased 3%. Excluding
divested businesses, sales in Asia/Africa declined 2% on 5% volume growth. The
Pet Nutrition segment increased sales 11% on 9% volume gains.
Gross Profit
Gross profit margin increased to 52.2%, above both the 1997 level of 50.7%
and the 1996 level of 49.1%. This favorable trend reflects the Company's
financial strategy to improve all aspects of its supply chain through global
sourcing, restructuring and other cost reduction initiatives, as well as its
emphasis on higher margin products.
Selling, General and Administrative Expenses
Selling, general and administrative expenses as a percentage of sales were
generally level: 36% in 1998, 36% in 1997 and 35% in 1996, reflecting higher
advertising costs offset by the Company's continued focus on expense
containment.
Other Expense, Net
Other expense, net, consists principally of amortization of goodwill and
other intangible assets, minority interest in earnings of less-than-100%-owned
consolidated subsidiaries, earnings from equity investments and other
miscellaneous gains and losses. Other expense, net, decreased in 1998 from
$72.4 to $61.2, primarily due to lower amortization expense and gains from
sales of non-core product lines and other assets.
During the third quarter of 1998, the Company divested certain non-core
brands and recorded a one-time pretax gain of $42.4 ($26.0 aftertax) on the
sale of the U.S. HandiWipes brand, which was offset by one-time
7
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(Dollars in Millions Except Per Share Amounts)
charges, primarily to cover a decision to substantially reduce the Company's
operations in Russia, following the severe contraction of the Russian economy,
as well as the Company's continuing program of product standardization and
organization redesign. The pretax charge for Russia was $25.0, which covered a
write-down of assets, employee termination costs and the settlement of
contractual obligations, which were substantially implemented before year-end.
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Worldwide Earnings by Business Segment and
Geographic Region
Oral, Personal and Household Care
North America.............................. $ 395.5 $ 312.6 $ 258.2
Latin America.............................. 502.0 483.0 410.7
Europe..................................... 317.5 283.5 280.7
Asia/Africa................................ 158.6 178.3 215.3
-------- -------- --------
Total Oral, Personal and Household Care...... 1,373.6 1,257.4 1,164.9
Total Pet Nutrition.......................... 173.8 162.5 127.3
Corporate.................................... (124.4) (134.1) (140.2)
-------- -------- --------
Earnings Before Interest and Taxes........... 1,423.0 1,285.8 1,152.0
Interest Expense, Net........................ (172.9) (183.5) (197.4)
-------- -------- --------
Income Before Income Taxes................... $1,250.1 $1,102.3 $ 954.6
======== ======== ========
</TABLE>
Earnings Before Interest and Taxes (EBIT)
EBIT increased 11% in 1998 to $1,423.0 compared with $1,285.8 in 1997. EBIT
for the Oral, Personal and Household Care segment was up 9%, with North
America, Latin America and Europe posting gains of 27%, 4% and 12%,
respectively. The North America and Europe profitability increase includes the
effect of higher margins on higher volumes. In Latin America, the increase in
profitability was 3% less than the increase in volume, primarily due to the
impact of foreign exchange. EBIT in Asia/Africa decreased 11%, reflecting
weakened economies in the ASEAN countries and increased competition in India.
EBIT in the Pet Nutrition segment increased 7% on both higher volumes and
gross profit margins.
Interest Expense, Net
Interest expense, net, was $172.9 compared with $183.5 in 1997 and $197.4 in
1996. The decline in interest expense is primarily the result of lower average
debt levels during the year compared with 1997 and a decrease in interest
rates.
Income Taxes
The effective tax rate on income was 32.1% in 1998 versus 32.8% in 1997 and
33.5% in 1996. Global tax planning strategies, including the realization of
tax credits, benefited the effective tax rate in all three years presented.
Net Income
Net income was $848.6 in 1998 or $2.81 per share compared with $740.4 in
1997 or $2.44 per share and $635.0 in 1996 or $2.09 per share.
8
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(Dollars in Millions Except Per Share Amounts)
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Identifiable Assets
Oral, Personal and Household Care
North America................................... $2,591.0 $2,553.2 $2,531.4
Latin America................................... 2,128.3 2,204.8 2,365.1
Europe.......................................... 1,329.9 1,201.5 1,236.3
Asia/Africa..................................... 952.4 891.9 1,001.5
-------- -------- --------
Total Oral, Personal and Household Care........... 7,001.6 6,851.4 7,134.3
Total Pet Nutrition............................... 502.6 517.3 578.6
Total Corporate................................... 181.0 170.0 188.6
-------- -------- --------
Total Identifiable Assets(/1/).................... $7,685.2 $7,538.7 $7,901.5
======== ======== ========
</TABLE>
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(/1/) Long-lived assets in the United States, primarily fixed assets and
goodwill, represented approximately one-third of total long-lived assets
of $5,330.0, $5,234.9 and $5,415.6 in 1998, 1997 and 1996, respectively.
Liquidity and Capital Resources
Net cash provided by operations increased 7.4% to $1,178.8 compared with
$1,097.8 in 1997 and $917.4 in 1996. The increases reflect the Company's
improved profitability, lower cash taxes and working capital management. Cash
generated from operations was used to fund capital spending, repurchase stock
and increase dividends.
During 1998, long-term debt increased from $2,518.6 to $2,582.2 and total
debt increased from $2,677.1 to $2,757.5. The increase includes additional net
issuances of medium-term notes of approximately $210 partially offset by lower
commercial paper borrowings.
As of December 31, 1998, $461.2 of domestic and foreign commercial paper was
outstanding. These borrowings carry a Standard & Poor's rating of A1 and a
Moody's rating of P1. The commercial paper as well as other short-term
borrowings are classified as long-term debt at December 31, 1998, as it is the
Company's intent and ability to refinance such obligations on a long-term
basis. The Company has additional sources of liquidity available in the form
of lines of credit maintained with various banks. At December 31, 1998, such
unused lines of credit amounted to $1,670.9. In addition, at December 31,
1998, the Company had $203.8 available under previously filed shelf
registrations.
As of December 31, 1997, $607.5 of domestic and foreign commercial paper was
outstanding. An unused line of credit of approximately $1,586.4 was available
in addition to $697.8 available under previously filed shelf registrations.
In 1996, the Company entered into a $496.3 loan agreement and obtained a
$406.0 term loan with foreign commercial banks. In addition, the Company
issued $100.0 of notes in a private placement and issued $75.0 medium-term
notes under previously filed shelf registrations.
The ratio of net debt to total capitalization (defined as the ratio of the
book values of debt less cash and marketable securities ["net debt"] to net
debt plus equity) increased to 55% during 1998 from 53% in 1997. The ratio had
decreased in 1997 from 58% in 1996. The increase in 1998 was primarily the
result of increased borrowings related to stock repurchases offset partially
by operating cash flow.
9
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(Dollars in Millions Except Per Share Amounts)
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Capital Expenditures
North America........................................ $ 90.1 $114.2 $119.8
Latin America........................................ 99.2 105.2 86.1
Europe............................................... 83.7 104.6 107.3
Asia/Africa.......................................... 80.5 104.9 85.6
------ ------ ------
Total Oral, Personal and Household Care................ 353.5 428.9 398.8
Total Pet Nutrition.................................... 20.7 29.8 45.4
Total Corporate........................................ 15.4 19.8 14.8
------ ------ ------
Total Capital Expenditures............................. $389.6 $478.5 $459.0
====== ====== ======
Depreciation and Amortization
North America........................................ $ 95.6 $ 87.1 $ 77.1
Latin America........................................ 75.6 70.2 77.4
Europe............................................... 67.9 68.0 71.0
Asia/Africa.......................................... 42.1 45.4 43.8
------ ------ ------
Total Oral, Personal and Household Care................ 281.2 270.7 269.3
Total Pet Nutrition.................................... 32.5 32.1 30.1
Total Corporate........................................ 16.6 17.1 16.9
------ ------ ------
Total Depreciation and Amortization.................... $330.3 $319.9 $316.3
====== ====== ======
</TABLE>
Capital expenditures were 4%, 5% and 5% of net sales for 1998, 1997 and
1996, respectively. Capital spending continues to be focused primarily on
projects that yield high aftertax returns, thereby reducing the Company's cost
structure. The higher levels in 1997 and 1996 primarily reflect capital
spending relating to the Company's restructuring programs. Capital
expenditures for 1999 are expected to continue at the current rate of
approximately 4% of net sales.
Other investing activities in 1998, 1997 and 1996 included strategic
acquisitions and divestitures around the world. The aggregate purchase price
of all 1998, 1997 and 1996 acquisitions was $22.6, $20.3 and $38.5,
respectively. The HandiWipes brand was sold in 1998, and the Sterno fuel brand
was sold in 1997. The aggregate sale price of all 1998, 1997 and 1996 sales of
brands was $57.4, $101.4 and $25.1, respectively.
The Company repurchases common shares in the open market and private
transactions to provide for employee benefit plans and to maintain its
targeted capital structure. Aggregate repurchases for 1998 were 7.1 million
shares, with a total purchase price of $542.5. In 1997, 2.8 million shares
were repurchased with a total purchase price of $175.1.
Dividend payments were $345.6, up from $333.4 in 1997 and $296.2 in 1996.
Common stock dividend payments increased to $1.10 per share in 1998 from $1.06
per share in 1997 and $.94 per share in 1996. The Series B Preference Stock
dividends were declared and paid at the stated rate of $4.88 per share in all
three years.
Internally generated cash flows appear to be adequate to support currently
planned business operations, acquisitions and capital expenditures.
Significant acquisitions would require external financing.
The Company is a party to various superfund and other environmental matters
and is contingently liable with respect to lawsuits, taxes and other matters
arising out of the normal course of business. Management proactively reviews
and manages its exposure to, and the impact of, environmental matters. While
it is possible that the Company's cash flows and results of operations in
particular quarterly or annual periods could be
10
<PAGE>
(Dollars in Millions Except Per Share Amounts)
affected by the one-time impacts of the resolution of such contingencies, it
is the opinion of management that the ultimate disposition of these matters,
to the extent not previously provided for, will not have a material impact on
the Company's financial condition or ongoing cash flows and results of
operations.
Status of Restructuring Reserve
In September 1995, a reserve of $460.5 was established to cover a worldwide
restructuring of manufacturing and administrative operations. The primary
elements of the reserve related to employee termination costs and expenses
associated with the realignment of the Company's global manufacturing
operations, as well as settlement of contractual obligations. The costs of
completing the restructuring activities to date approximated the original
estimate. As planned, the restructuring has produced savings that increase
pretax earnings by over $150 annually.
The planned restructuring projects, primarily in North America and Europe
but also affecting Hill's Pet Nutrition and Colgate locations in Asia/Africa
and certain Latin America locations, are substantially completed. The
remaining reserve amount of $39.6 primarily covers the reconfiguring of two
factories in Asia/Africa and the consolidation of administrative operations
following the implementation of SAP computer systems and related process
changes in Europe and Asia/Africa. All remaining projects will be completed in
1999. The financing for remaining cash requirements will come from operations.
Managing Foreign Currency and Interest Rate Exposure
The Company is exposed to market risk from foreign currency exchange rate
fluctuations and interest rates. To manage the volatility relating to foreign
currency exposures on a consolidated basis, the Company utilizes a number of
techniques, including selective borrowings in local currencies, purchases of
forward foreign currency exchange contracts, balance sheet management and
increases in selling prices.
The Company operates in over 200 countries and territories and is exposed to
currency fluctuation related to manufacturing and selling its products in
currencies other than the U.S. Dollar. The major foreign currency exposures
involve the markets in Mexico, Brazil and France, each of which represents
individually 6% to 8% of worldwide sales. Each of the other countries'
operations represent less than 4% of worldwide sales. In the countries of
Mexico, Brazil and France during the three-year period from 1996 to 1998, the
combination of selling price increases and cost containment measures have more
than offset the impact of foreign currency rate movements resulting in
increased gross profit margins during the periods presented.
The Company utilizes simple instruments such as interest rate swaps to
manage the Company's mix of fixed and floating rate debt. The Company's target
floating rate obligations as a percentage of the Company's global debt is set
by policy. As a matter of policy, the Company does not speculate in financial
markets and therefore does not hold or issue derivative financial instruments
for trading purposes.
Value at Risk
The Company's risk management procedures include the monitoring of interest
rate and foreign exchange exposures and the Company's offsetting hedge
positions utilizing analytical analysis of cashflows, market value,
sensitivity analysis and value-at-risk estimations. However, the use of these
techniques to quantify the market risk of such instruments should not be
construed as an endorsement of their accuracy or the accuracy of the related
assumptions. The Company utilizes a Value-at-Risk (VAR) model and an Earnings-
at-Risk (EAR) model that are intended to measure the maximum potential loss in
its interest rate and foreign exchange financial instruments assuming adverse
market conditions occur, given a 95% confidence level. The models utilize a
variance/covariance modeling technique. Historical interest rates and foreign
exchange rates from the preceding year are used to estimate the volatility and
correlation of future rates. The estimated maximum potential one-day loss in
fair value of interest rate or foreign exchange rate instruments, calculated
using the VAR model, is not
11
<PAGE>
(Dollars in Millions Except Per Share Amounts)
material to the consolidated financial position, results of operations or cash
flows of the Company. The estimated maximum yearly loss in earnings due to
interest rate or foreign exchange rate instruments, calculated utilizing the
EAR model, is not material to the Company's results of operations. Actual
results in the future may differ materially from these projected results due
to actual developments in the global financial markets.
A discussion of the Company's accounting policies for financial instruments
is included in the Summary of Significant Accounting Policies in the notes to
the Consolidated Financial Statements, and further disclosure relating to
financial instruments is included in the Fair Value of Financial Instruments
note.
Year 2000 Update
The Company has developed plans to address the possible exposures related to
the year 2000 on the Company's internal systems and equipment. In the critical
area of internal operating systems, in 1994 the Company decided to convert its
worldwide business systems to SAP, which is year 2000 compliant. The Company's
conversion to SAP is progressing on schedule, with conversion in operations
representing over 70% of the Company's global business to be complete by mid-
year 1999. When completed, the Company's investment in SAP systems will
cumulatively total approximately $430, half of which will be capitalized and
the remainder expensed as incurred. The computer systems and embedded
microprocessors and control systems in all operations are planned to be made
compliant by June 30, 1999.
The Company is also in discussions with suppliers and customers to assess
the potential impact on operations in the event their systems are not made
compliant.
The first two phases of the year 2000 project plan--forming teams at the
corporate, division and subsidiary levels worldwide, and the inventory of
systems and equipment--were complete at July 31, 1998. The third phase, risk
assessment and contingency planning, is substantially complete with respect to
all internal computing systems and embedded chips and is underway with respect
to critical external business partners.
The fourth phase, planned to be substantially completed by the end of the
first quarter of 1999, will be to accomplish systems testing, remediation and
contingency plans regarding critical systems and equipment with a high risk
assessment. Contingency planning for suppliers includes backup procedures and
processes, alternative suppliers and increases in inventory levels. Review of
data interface capability of key business partners and all remaining internal
testing and plan implementation are scheduled to be substantially completed by
mid-year 1999 in the fifth phase of the project. Progress against project plan
timelines is monitored through a system of internal reporting and is presented
to senior management and the Audit Committee of the Board of Directors or the
full Board on a frequent basis.
The Company currently estimates that the total incremental cost, including
external contractor costs, costs to modify existing systems and costs of
internal resources dedicated to preparing for the year 2000, to be
approximately $30, of which 40% has been spent to date. These costs are
charged to expense as incurred and are incremental to the above noted
investment in SAP systems which were previously planned and in the process of
being implemented.
The Company is taking steps to prevent major interruptions in the business
related to year 2000 issues. The effect, if any, if the Company, its suppliers
or the public sector is not fully year 2000 compliant is not reasonably
estimable. The Company believes, however, that the successful completion of
its year 2000 project will significantly reduce the risk of a major business
interruption due to year 2000 failures.
Conversion to the Euro Currency
On January 1, 1999, certain member countries of the European Union
established fixed conversion rates between their existing currencies and
adopted the euro as their new common legal currency. As of that date, the euro
began trading on currency exchanges and the legacy currencies were to remain
legal tender in the participating countries for a transition period between
January 1, 1999 and January 1, 2002.
12
<PAGE>
(Dollars in Millions Except Per Share Amounts)
The Company is addressing most of the issues involved with the introduction
of the euro through its worldwide conversion to the SAP system. The more
important issues facing the Company include reassessing currency risk and
processing tax and accounting records.
Based upon progress to date, the Company believes that use of the euro will
not have a significant impact on the manner in which it conducts its business
affairs and processes its business and accounting records. Accordingly,
conversion to the euro is not expected to have a material effect on the
Company's financial condition, cash flows or results of operations.
Outlook
Looking forward into 1999, the Company is well positioned for strong growth
in most of its markets, particularly North America and Western Europe.
However, movements in foreign currency exchange rates can impact future
operating results as measured in U.S. dollars. In particular, recent economic
turmoil in Brazil and continued economic uncertainty in Asia may impact the
overall results of Latin America and Asia/Africa. Projected growth in these
parts of the world may be tempered until these economies become more stable.
During 1998, as required by generally accepted accounting principles, the
Company ceased to account for its Brazilian operations as highly inflationary
as historical inflation levels had fallen sharply. However, since the close of
1998, the Brazilian currency has devalued sharply. Based on management's best
estimates and events to date, this devaluation will result in a charge to
cumulative translation adjustments of approximately $250 to be recognized in
1999 which will be, in effect, a write-down of our foreign-currency-
denominated assets (primarily goodwill and property, plant and equipment).
This will be accompanied by lower amortization and depreciation expense in
future periods. The Company remains cautious on the outlook for operations in
Brazil in 1999. Management expects that the net impact on 1999 results of
operations will be a reduction of net income of approximately $20 to $25,
primarily in the first quarter. In addition, effective January 1999, the
Company's operations in Mexico will no longer be accounted for as highly
inflationary. The effect of this change on future results of operations is not
determinable.
The Company expects the continued success of Colgate Total toothpaste, using
patented proprietary technology, to bolster worldwide oral care leadership and
expects new products in all other categories to add potential for further
growth. Overall, subject to global economic conditions, the Company does not
expect the 1999 market conditions to be materially different from those
experienced in 1998 and the Company expects its positive momentum to continue.
Historically, the consumer products industry has been less susceptible to
changes in economic growth than many other industries, and therefore the
Company constantly evaluates projects that will focus operations on
opportunities for enhanced growth potential. Over the long term, Colgate's
continued focus on its consumer products business and the strength of its
global brand names, its broad international presence in both developed and
developing markets, and its strong capital base all position the Company to
take advantage of growth opportunities and to continue to increase
profitability and shareholder value.
Forward-Looking Statements
Readers are cautioned that the Results of Operations and other sections of
this report contain forward-looking statements that are based on management's
estimates, assumptions and projections. A description of some of the factors
that could cause actual results to differ materially from expectations
expressed in the Company's forward-looking statements set forth in the
Company's Form 8-K filed with the Securities and Exchange Commission on
November 13, 1998 under the caption "Cautionary Statement on Forward-Looking
Statements," is incorporated herein by reference. These factors include, but
are not limited to, the risks associated with international operations, the
activities of competitors, retail trade practices, the success of new product
introductions, cost pressures, manufacturing and environmental matters.
13
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See the "Index to Financial Statements" which is located on page 17 of this
report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding directors and executive officers of the registrant set
forth in the Proxy Statement for the 1999 Annual Meeting is incorporated herein
by reference, as is the text in Part I of this report under the caption
"Executive Officers of the Registrant".
ITEM 11. EXECUTIVE COMPENSATION
The information set forth in the Proxy Statement for the 1999 Annual Meeting
is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security ownership of management set forth in the Proxy Statement for the
1999 Annual Meeting is incorporated herein by reference.
(b) There are no arrangements known to the registrant that may at a
subsequent date result in a change in control of the registrant.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth in the Proxy Statement for the 1999 Annual Meeting
is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements and Financial Statement Schedules
See the "Index to Financial Statements" which is located on page 17 of this
report.
(b) Exhibits. See the exhibit index which is included herein.
(c) Reports on Form 8-K .
1. A report on Form 8-K dated October 22, 1998 was filed by the Company
reporting that the Board of Directors renewed and updated the shareholder
protections of its rights plan that expired on October 26, 1998 through the
adoption of a revised Shareholder Rights Plan.
2. A report on Form 8-K dated November 13, 1998 was filed by the Company
setting forth meaningful cautionary statements to accompany "forward
looking" statements, as that term is defined in the Private Securities
Litigation Reform Act of 1995, made by the Company from time to time.
14
<PAGE>
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: March 30, 1998
By___________________________________
Reuben Mark
Chairman of the Board
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on March 30, 1999 by the following persons on
behalf of the registrant and in the capacities indicated.
Signatures Title
/s/ Reuben Mark Chairman of the Board and Chief
- ------------------------------------- Executive Officer and Director
Reuben Mark (Principal Executive Officer)
/s/ Stephen C. Patrick Chief Financial Officer (Principal
- ------------------------------------- Financial Officer)
Stephen C. Patrick
/s/ Dennis J. Hickey Vice President and Corporate
- ------------------------------------- Controller (Principal Accounting
Dennis J. Hickey Officer)
/s/ Jill K. Conway Director
- -------------------------------------
Jill K. Conway
/s/ Ronald E. Ferguson Director
- -------------------------------------
Ronald E. Ferguson
/s/ Ellen M. Hancock Director
- -------------------------------------
Ellen M. Hancock
/s/ David W. Johnson Director
- -------------------------------------
David W. Johnson
/s/ John P. Kendall Director
- -------------------------------------
John P. Kendall
/s/ Richard J. Kogan Director
- -------------------------------------
Richard J. Kogan
/s/ Delano E. Lewis Director
- -------------------------------------
Delano E. Lewis
/s/ Howard B. Wentz, Jr. Director
- -------------------------------------
Howard B. Wentz, Jr.
15
<PAGE>
United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-K
FINANCIAL STATEMENTS
For The Year Ended December 31, 1998
COLGATE-PALMOLIVE COMPANY
NEW YORK, NEW YORK 10022
16
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Financial Statements
Consolidated Statements of Income for the years ended December 31, 1998,
1997, and 1996........................................................... 18
Consolidated Balance Sheets at December 31, 1998 and 1997................. 19
Consolidated Statements of Retained Earnings, Comprehensive Income and
Changes in Capital Accounts for the years ended December 31, 1998, 1997
and 1996................................................................. 20
Consolidated Statements of Cash Flows for the years ended December 31,
1998, 1997 and 1996...................................................... 21
Notes to Consolidated Financial Statements................................ 22
Financial Statement Schedules for the years ended December 31, 1998, 1997
and 1996:
Schedule II Valuation and Qualifying Accounts............................. 38
Report of Independent Public Accountants.................................. 41
Selected Financial Data
Historical Financial Summary.............................................. 42
</TABLE>
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.
17
<PAGE>
COLGATE-PALMOLIVE COMPANY
Consolidated Statements of Income
(Dollars in Millions Except Per Share Amounts)
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Net sales............................................ $8,971.6 $9,056.7 $8,749.0
Cost of sales........................................ 4,290.3 4,461.5 4,451.1
-------- -------- --------
Gross profit....................................... 4,681.3 4,595.2 4,297.9
Selling, general and administrative expenses......... 3,197.1 3,237.0 3,052.1
Other expense, net................................... 61.2 72.4 93.8
Interest expense, net................................ 172.9 183.5 197.4
-------- -------- --------
Income before income taxes........................... 1,250.1 1,102.3 954.6
Provision for income taxes........................... 401.5 361.9 319.6
-------- -------- --------
Net income......................................... $ 848.6 $ 740.4 $ 635.0
======== ======== ========
Earnings per common share, basic..................... $ 2.81 $ 2.44 $ 2.09
======== ======== ========
Earnings per common share, diluted................... $ 2.61 $ 2.27 $ 1.96
======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
18
<PAGE>
COLGATE-PALMOLIVE COMPANY
Consolidated Balance Sheets
(Dollars in Millions Except Per Share Amounts)
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents................................ $ 181.7 $ 183.1
Marketable securities.................................... 12.8 22.2
Receivables (less allowances of $35.9 and $35.8, respec-
tively)................................................. 1,085.6 1,037.4
Inventories.............................................. 746.0 728.4
Other current assets..................................... 218.8 225.4
-------- --------
Total current assets................................... 2,244.9 2,196.5
Property, plant and equipment, net......................... 2,589.2 2,441.0
Goodwill and other intangibles, net........................ 2,524.1 2,585.3
Other assets............................................... 327.0 315.9
-------- --------
$7,685.2 $7,538.7
======== ========
Liabilities and Shareholders' Equity
Current Liabilities
Notes and loans payable.................................. $ 175.3 $ 158.4
Current portion of long-term debt........................ 281.6 178.3
Accounts payable......................................... 726.1 716.9
Accrued income taxes..................................... 74.2 67.0
Other accruals........................................... 857.2 838.9
-------- --------
Total current liabilities.............................. 2,114.4 1,959.5
Long-term debt............................................. 2,300.6 2,340.3
Deferred income taxes...................................... 448.0 284.5
Other liabilities.......................................... 736.6 775.8
Shareholders' Equity
Preferred stock.......................................... 376.2 385.3
Common stock, $1 par value (1,000,000,000 shares
authorized,
366,426,590 shares issued).............................. 366.4 366.4
Additional paid-in capital............................... 1,191.1 1,027.4
Retained earnings........................................ 3,641.0 3,138.0
Cumulative translation adjustments....................... (799.8) (693.7)
-------- --------
4,774.9 4,223.4
Unearned compensation.................................... (355.5) (364.5)
Treasury stock, at cost.................................. (2,333.8) (1,680.3)
-------- --------
Total shareholders' equity............................. 2,085.6 2,178.6
-------- --------
$7,685.2 $7,538.7
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
19
<PAGE>
COLGATE-PALMOLIVE COMPANY
Consolidated Statements of Retained Earnings, Comprehensive Income and Changes
in Capital Accounts
(Dollars in Millions Except Per Share Amounts)
<TABLE>
<CAPTION>
Common Shares Additional Treasury Shares Cumulative Compre-
------------------- Paid-in -------------------- Retained Translation hensive
Shares Amount Capital Shares Amount Earnings Adjustment Income
----------- ------ ---------- ---------- -------- -------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1,
1996................... 291,707,744 $366.4 $ 850.5 74,718,846 $1,441.8 $2,392.2 $(513.0)
Net income.............. 635.0 $ 635.0
Other comprehensive
income:
Cumulative translation
adjustment............ (21.7) (21.7)
-------
Total comprehensive
income................. $ 613.3
=======
Dividends declared:
Series B Convertible
Preference Stock, net
of income taxes....... (20.9)
Preferred stock........ (.5)
Common stock........... (274.8)
Shares issued for stock
options................ 2,206,216 44.4 (2,206,216) 22.0
Treasury stock acquired. (688,800) 688,800 27.4
Other................... 1,042,476 23.5 (1,042,476) (22.4)
----------- ------ -------- ---------- -------- -------- -------
Balance, December 31,
1996................... 294,267,636 $366.4 $ 918.4 72,158,954 $1,468.8 $2,731.0 $(534.7)
----------- ------ -------- ---------- -------- -------- -------
Net income.............. 740.4 $ 740.4
Other comprehensive
income:
Cumulative translation
adjustment............ (159.0) (159.0)
-------
Total comprehensive
income................. $ 581.4
=======
Dividends declared:
Series B Convertible
Preference Stock, net
of income taxes....... (20.6)
Preferred stock........ (.5)
Common stock........... (312.3)
Shares issued for stock
options................ 3,163,141 64.2 (3,163,141) 54.4
Treasury stock acquired. (2,795,926) 2,795,926 175.1
Other................... 767,844 44.8 (767,844) (18.0)
----------- ------ -------- ---------- -------- -------- -------
Balance, December 31,
1997................... 295,402,695 $366.4 $1,027.4 71,023,895 $1,680.3 $3,138.0 $(693.7)
----------- ------ -------- ---------- -------- -------- -------
Net income.............. 848.6 $ 848.6
Other comprehensive
income:
Cumulative translation
adjustment............ (106.1) (106.1)
-------
Total comprehensive
income................. $ 742.5
=======
Dividends declared:
Series B Convertible
Preference Stock, net
of income taxes....... (20.4)
Preferred stock........ (.5)
Common stock........... (324.7)
Shares issued for stock
options................ 3,357,425 129.0 (3,357,425) 145.1
Treasury stock acquired. (7,149,456) 7,149,456 542.5
Other................... 1,099,076 34.7 (1,099,076) (34.1)
----------- ------ -------- ---------- -------- -------- -------
Balance, December 31,
1998................... 292,709,740 $366.4 $1,191.1 73,716,850 $2,333.8 $3,641.0 $(799.8)
=========== ====== ======== ========== ======== ======== =======
</TABLE>
See Notes to Consolidated Financial Statements.
20
<PAGE>
COLGATE-PALMOLIVE COMPANY
Consolidated Statements of Cash Flows
(Dollars in Millions Except Per Share Amounts)
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- --------
<S> <C> <C> <C>
Operating Activities
Net income....................................... $ 848.6 $ 740.4 $ 635.0
Adjustments to reconcile net income to net cash
provided by operations:
Restructured operations........................ (34.8) (48.5) (105.6)
Depreciation and amortization.................. 330.3 319.9 316.3
Income taxes and other, net.................... 60.7 18.5 13.2
Cash effects of changes in:
Receivables.................................. (15.2) (61.6) (15.4)
Inventories.................................. (19.5) (50.9) (1.2)
Payables and accruals........................ 8.7 180.0 75.1
------- ------- --------
Net cash provided by operations.............. 1,178.8 1,097.8 917.4
------- ------- --------
Investing Activities
Capital expenditures............................. (389.6) (478.5) (459.0)
Payment for acquisitions, net of cash acquired... (22.6) (31.5) (59.3)
Sale of non-core product lines................... 57.4 96.4 25.1
Sale of marketable securities and investments.... 18.7 68.5 1.2
Other............................................ (15.8) 7.7 (12.0)
------- ------- --------
Net cash used for investing activities......... (351.9) (337.4) (504.0)
------- ------- --------
Financing Activities
Principal payments on debt....................... (677.5) (670.7) (1,164.6)
Proceeds from issuance of debt................... 762.9 350.4 1,077.4
Dividends paid................................... (345.6) (333.4) (296.2)
Purchase of common stock......................... (542.5) (175.1) (27.4)
Other............................................ (27.3) 15.8 39.2
------- ------- --------
Net cash used for financing activities......... (830.0) (813.0) (371.6)
------- ------- --------
Effect of exchange rate changes on cash and cash
equivalents..................................... 1.7 (12.5) (2.4)
------- ------- --------
Net (decrease) increase in cash and cash equiva-
lents........................................... (1.4) (65.1) 39.4
Cash and cash equivalents at beginning of year... 183.1 248.2 208.8
------- ------- --------
Cash and cash equivalents at end of year......... $ 181.7 $ 183.1 $ 248.2
======= ======= ========
Supplemental Cash Flow Information
Income taxes paid.................................. $ 273.8 $ 261.3 $ 273.0
Interest paid...................................... 202.8 230.6 229.1
Principal payments on ESOP debt, guaranteed by the
Company........................................... 6.1 5.5 5.0
</TABLE>
See Notes to Consolidated Financial Statements.
21
<PAGE>
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
Household Care, and Pet Nutrition. Oral, Personal and Household Care products
include toothpaste, oral rinses and toothbrushes, bar and liquid soaps,
shampoos, conditioners, deodorants and antiperspirants, baby and shave
products, laundry and dishwashing detergents, fabric softeners, cleansers and
cleaners, bleaches and other similar items. These products are sold primarily
to wholesale and retail distributors worldwide. Pet Nutrition products include
pet food products manufactured and marketed by Hill's Pet Nutrition. The
principal customers for Pet Nutrition products are veterinarians and specialty
pet retailers. Principal global trademarks include Colgate, Palmolive, Mennen,
Protex, Ajax, Soupline, Suavitel, Fab, Science Diet and Prescription Diet in
addition to various regional trademarks.
The Company's principal classes of products accounted for the following
percentages of worldwide sales for the past three years:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Oral Care................................................... 32% 31% 30%
Personal Care............................................... 24 23 22
Household Surface Care...................................... 16 16 16
Fabric Care................................................. 15 16 18
Pet Nutrition............................................... 11 11 10
</TABLE>
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. Investments in companies in
which the Company's interest is between 20% and 50% are accounted for using
the equity method. The Company's share of the net income from such investments
is recorded as equity earnings and is classified as Other expense, net in the
Consolidated Statements of Income.
Revenue Recognition
Sales are recorded at the time products are shipped to trade customers. Net
sales reflect units shipped at selling list prices reduced by promotion
allowances.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions 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. Actual results could differ from those estimates.
Accounting Changes
In 1997, the Financial Accounting Standards Board (FASB) issued Statement
No. 130, "Reporting Comprehensive Income." The Company adopted this statement
as of January 1, 1998, and, accordingly, disclosures were expanded to include
the Consolidated Statement of Retained Earnings, Comprehensive Income and
Changes in Capital Accounts. There was no impact on the Company's financial
position, results of operations or cash flows.
22
<PAGE>
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements--(continued)
(Dollars in Millions Except Per Share Amounts)
The Company also adopted FASB Statements No. 131 and No. 132, which revised
reporting and disclosures as to operating segments, pension and other
postretirement benefits. Prior years' information has been restated to conform
to the requirements of the new statements.
In June 1998, the FASB issued Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities." The statement establishes accounting and
reporting standards requiring that every derivative instrument be recorded in
the balance sheet as either an asset or liability measured at its fair value.
The statement requires that changes in the derivative's fair value be
recognized currently in earnings unless specific hedge accounting criteria are
met. Statement No. 133 will be effective, prospectively, for the Company's
financial statements in the year 2000. The statement is not expected to have a
material impact on the Company's financial position, results of operations or
cash flows.
During 1998, as required by generally accepted accounting principles, the
Company ceased to account for its Brazilian operations as highly inflationary
as historical inflation levels had fallen sharply. The effect of this change
was to reduce shareholders' equity by $98.4, primarily related to the
recognition of deferred tax benefits expected to be realized in the future.
However, since the close of 1998, the Brazilian currency has devalued sharply.
Based on management's best estimates and events to date, this devaluation will
result in a charge to cumulative translation adjustments of approximately $250
to be recognized in 1999 which will be, in effect, a write-down of our
foreign-currency-denominated assets (primarily goodwill and property, plant
and equipment). This will be accompanied by lower amortization and
depreciation expense in future periods. The Company remains cautious on the
outlook for operations in Brazil in 1999.
Cash and Cash Equivalents
The Company considers all highly liquid investments with maturity of three
months or less when purchased to be cash equivalents. Investments in short-
term securities that do not meet the definition of cash equivalents are
classified as marketable securities. Marketable securities are reported at
cost, which approximates market.
Inventories
Inventories are valued at the lower of cost or market. The first-in, first-
out (FIFO) method is used to value most inventories. The remaining inventories
are valued 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 40 years.
Goodwill and Other Intangibles
Intangible assets principally consist of goodwill, which is amortized on the
straight-line method, generally over a period of 40 years. Other intangible
assets, principally non-compete agreements and customer lists, are amortized
on the straight-line method over periods ranging from 5 to 20 years depending
on their useful lives.
The recoverability of the carrying values of intangible assets is evaluated
periodically based on a review of forecasted operating cash flows and the
profitability of the related business. For the three-year period ended
December 31, 1998, there were no material adjustments to the carrying values
of intangible assets resulting from these evaluations.
Advertising
Advertising costs are expensed in the year incurred.
23
<PAGE>
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements--(continued)
(Dollars in Millions Except Per Share Amounts)
Income Taxes
Deferred taxes are recognized for the expected future tax consequences of
temporary differences between the amounts carried for financial reporting and
tax purposes. 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.
Translation of Overseas Currencies
The assets and liabilities of 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
converted into U.S. dollars at average rates of exchange prevailing during the
year.
For subsidiaries operating in highly inflationary environments, inventories,
goodwill and property, plant and equipment are translated at the rate of
exchange on the date the assets were acquired, while other assets and
liabilities are translated at year-end exchange rates. Translation adjustments
for these operations are included in net income.
Financial Instruments
The net effective cash payment of the interest rate swap contracts combined
with the related interest payments on the debt that they hedge are accounted
for as interest expense. Those interest rate instruments that do not qualify
as hedge instruments for accounting purposes are marked to market and recorded
at fair value.
Gains and losses from foreign exchange contracts that hedge the Company's
investments in its foreign subsidiaries are shown in the cumulative
translation adjustments account included in shareholders' equity. Gains and
losses from contracts that hedge firm commitments are recorded in the balance
sheets as a component of the related receivable or payable until realized, at
which time they are recognized in the statements of income. The contracts that
hedge anticipated sales and purchases do not qualify as hedges for accounting
purposes. Accordingly, the related gains and losses are calculated using the
current forward rates and are recorded in the Consolidated Statements of
Income as Other expense, net.
Segment Information
The Company operates in two product segments: Oral, Personal and Household
Care, and Pet Nutrition. The operations of the Oral, Personal and Household
Care segment are managed geographically in four reportable operating segments:
North America, Latin America, Europe and Asia/Africa.
Management measures segment profit as operating income, which is defined as
income before interest expense and income taxes. The accounting policies of
the operating segments are the same as those described in the summary of
significant accounting policies. Corporate operations include research and
development costs, unallocated overhead costs, and gains and losses on sales
of non-strategic brands and assets. Corporate assets include primarily real
estate and benefit plan assets.
The financial and descriptive information on the Company's geographic area
and industry segment data, appearing in the tables contained in management's
discussion of this report, is an integral part of these financial statements.
Reclassifications
Certain prior year balances have been reclassified to conform with current
year presentation.
24
<PAGE>
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements--(continued)
(Dollars in Millions Except Per Share Amounts)
3. Acquisitions and Divestitures
During 1998, 1997 and 1996, the Company made several acquisitions totaling
$22.6, $20.3 and $38.5, respectively. Individually, none of these acquisitions
were significant.
The acquisitions were accounted for as purchases, and accordingly, the
purchase prices were allocated to the net tangible and intangible assets
acquired based on estimated fair values at the dates the acquisitions were
consummated. The results of operations of the acquired businesses have been
included in the Consolidated Financial Statements since the respective
acquisition dates. The inclusion of pro forma financial data for all
acquisitions would not have materially affected the financial information
included herein.
The aggregate sale price of all 1998, 1997 and 1996 divestitures was $57.4 ,
$101.4 and $25.1, respectively. In 1998, the HandiWipes brand and related
assets were sold for $53.0, and in 1997, the Sterno fuel brand and related
assets were sold for $70.0.
4. Long-Term Debt and Credit Facilities
Long-term debt consists of the following at December 31:
<TABLE>
<CAPTION>
Weighted Average
Interest Rate Maturities 1998 1997
---------------- ---------- -------- --------
<S> <C> <C> <C> <C>
Notes......................... 7.1% 1999-2030 $1,382.4 $1,186.6
Commercial paper and other
short-term borrowings,
reclassified................. 5.2 1999 461.2 607.5
ESOP notes, guaranteed by the
Company...................... 8.7 2001-2009 373.6 379.7
Payable to banks.............. 5.5 2000-2004 361.8 339.2
Capitalized leases............ 3.2 5.6
-------- --------
2,582.2 2,518.6
Less: current portion of long-
term debt 281.6 178.3
-------- --------
$2,300.6 $2,340.3
======== ========
</TABLE>
Commercial paper and certain other short-term borrowings are classified as
long-term debt as it is the Company's intent and ability to refinance such
obligations on a long-term basis. Scheduled maturities of debt outstanding at
December 31, 1998, excluding short-term borrowings reclassified, are as
follows: 1999--$281.6; 2000--$411.8; 2001--$109.5; 2002--$159.7; 2003--$266.5
and $891.9 thereafter. The Company has entered into interest rate swap
agreements and foreign exchange contracts related to certain of these debt
instruments (see Note 11).
At December 31, 1998, the Company had unused credit facilities amounting to
$1,670.9. Commitment fees related to credit facilities are not material. The
weighted average interest rate on short-term borrowings, excluding amounts
reclassified, as of December 31, 1998 and 1997, was 6.2% and 8.5%,
respectively.
The Company's long-term debt agreements include various restrictive
covenants and require the maintenance of certain defined financial ratios with
which the Company is in compliance.
25
<PAGE>
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements--(continued)
(Dollars in Millions Except Per Share Amounts)
5. Capital Stock and Stock Compensation Plans
Preferred Stock
Preferred Stock consists of 250,000 authorized shares without par value. It
is issuable in series, of which one series of 122,620 shares, designated $4.25
Preferred Stock, with a stated and redeemable value of $100 per share, has
been issued and is outstanding. The $4.25 Preferred Stock is redeemable only
at the option of the Company.
Preference Stock
In 1988, the Company authorized the issuance of 50,000,000 shares of
Preference Stock, without par value. The Series B Convertible Preference
Stock, which is convertible into four shares of common stock, ranks junior to
all series of the Preferred Stock. At December 31, 1998 and 1997, 5,598,808
and 5,734,940 shares of Series B Convertible Preference Stock, respectively,
were outstanding and issued to the Company's Employee Stock Ownership Plan.
Shareholder Rights Plan
On October 23, 1998, the Board of Directors adopted a new Shareholder Rights
Plan to replace its previous plan, which expired October 24, 1998, with a
comparable plan. Under the Plan each share of the Company's common stock
carries with it one Preference Share Purchase Right ("Rights"). The Rights
themselves will at no time have voting power or pay dividends. The Rights
become exercisable only if a person or group acquires 15% or more of the
Company's common stock or announces a tender offer, the consummation of which
would result in ownership by a person or group of 15% or more of the common
stock. When exercisable, each Right entitles a holder to buy one one-hundredth
of a share of a new series of preference stock at an exercise price of
$440.00, subject to adjustment.
If the Company is acquired in a merger or other business combination, each
Right will entitle a holder to buy, at the Right's then current exercise
price, a number of the acquiring company's common shares having a market value
of twice such price. In addition, if a person or group acquires 15% or more of
the Company's common stock, each Right will entitle its holder (other than
such person or members of such group) to purchase, at the Right's then current
exercise price, a number of shares of the Company's common stock having a
market value of twice the Right's exercise price.
Further, at any time after a person or group acquires 15% or more (but less
than 50%) of the Company's common stock, the Board of Directors may, at its
option, exchange part or all of the Rights (other than Rights held by the
acquiring person or group) for shares of the Company's common stock on a one-
for-one basis.
The Company, at the option of its Board of Directors, may amend the Rights
or redeem the Rights for $.01 at any time before the acquisition by a person
or group of beneficial ownership of 15% or more of its common stock. The Board
of Directors is also authorized to reduce the 15% threshold to not less than
10%. Unless redeemed earlier, the Rights will expire on October 31, 2008.
Stock Repurchases
During 1998, the Company entered into a series of forward purchase
agreements on its common stock. These agreements are settled on a net basis in
shares of the Company's common stock. To the extent that the market price of
the Company's common stock on a settlement date is higher (lower) than the
forward purchase price, the net differential is received (paid) by the
Company. As of December 31, 1998, agreements were in place
26
<PAGE>
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements--(continued)
(Dollars in Millions Except Per Share Amounts)
covering approximately $458.6 of the Company's common stock (5.0 million
shares) that had forward prices averaging $91.68 per share. If these
agreements were settled based on the December 31, 1998 market price of the
Company's common stock ($92.88 per share), the Company would be entitled to
receive approximately 64,000 shares. During 1998, settlements resulted in the
Company receiving 321,331 shares, which were recorded as treasury stock.
Incentive Stock Plan
The Company has a plan which provides for grants of restricted stock awards
for officers and other executives of the Company and its major subsidiaries. A
committee of non-employee members of the Board of Directors administers the
plan. During 1998 and 1997, 285,077 and 335,270 shares, respectively, were
awarded to employees in accordance with the provisions of the plan.
Stock Option Plans
The Company's Stock Option Plans ("Plans") provide for the issuance of non-
qualified stock options to officers and key employees. Options are granted at
prices not less than the fair market value on the date of grant. At 1998 year-
end, 17,286,622 shares of common stock were available for future grants.
The Plans contain an accelerated ownership feature which provides for the
grant of new options when previously owned shares of Company stock are used to
exercise existing options. The number of new options granted under this
feature is equal to the number of shares of previously owned Company stock
used to exercise the original options and to pay the related required U.S.
income tax. The new options are granted at a price equal to the fair market
value on the date of the new grant and have the same expiration date as the
original options exercised.
Stock option plan activity is summarized below:
<TABLE>
<CAPTION>
1998 1997 1996
-------------------- -------------------- --------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
---------- -------- ---------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding,
January 1.............. 22,767,392 $46 21,415,198 $32 20,991,790 $29
Granted................. 6,268,644 78 7,703,057 73 5,709,222 41
Exercised............... (7,458,754) 44 (6,095,277) 32 (5,114,564) 29
Canceled or expired..... (184,159) 42 (255,586) 38 (171,250) 31
---------- ---------- ----------
Options outstanding, De-
cember 31.............. 21,393,123 56 22,767,392 46 21,415,198 32
========== ========== ==========
Options exercisable, De-
cember 31.............. 13,344,382 $46 14,683,179 $38 13,983,844 $29
========== ========== ==========
</TABLE>
27
<PAGE>
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements--(continued)
(Dollars in Millions Except Per Share Amounts)
The following table summarizes information relating to currently outstanding
and exercisable options as of December 31, 1998:
<TABLE>
<CAPTION>
Weighted
Average Weighted Weighted
Remaining Average Average
Range of Contractual Options Exercise Options Exercise
Exercise Prices Life In Years Outstanding Price Exercisable Price
--------------- ------------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
$11.44--$21.28.......... 1 1,163,047 $15 1,163,047 $15
$25.03--$34.34.......... 5 4,771,853 31 4,771,853 31
$34.38--$44.47.......... 6 3,655,279 40 2,731,609 40
$44.56--$62.16.......... 7 3,503,605 58 1,871,727 54
$62.44--$79.38.......... 9 4,009,582 70 1,138,721 73
$79.47--$106.04......... 6 4,289,757 94 1,667,425 94
---------- ----------
6 21,393,123 $56 13,344,382 $46
========== ========== ===
</TABLE>
The Company applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees," and related interpretations in accounting for
options granted under the Plans. Accordingly, no compensation expense has been
recognized. Had compensation expense been determined based on the Black-
Scholes option pricing model value at the grant date for awards in 1998, 1997
and 1996 consistent with the provisions of Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS 123), the
Company's net income, basic earnings per common share and diluted earnings per
common share would have been $803.5, $2.65 per share and $2.49 per share,
respectively, in 1998; $716.1, $2.35 per share and $2.19 per share,
respectively, in 1997; and $621.7, $2.05 per share and $1.92 per share,
respectively, in 1996.
The weighted average Black-Scholes value of grants issued in 1998, 1997 and
1996 was $12.47, $7.85 and $5.40, respectively. The Black-Scholes value of
each option granted is estimated using the Black-Scholes option pricing model
with the following assumptions: option term until exercise ranging from 2 to 7
years, volatility ranging from 17% to 30%, risk-free interest rate ranging
from 5.0% to 6.2% and an expected dividend yield of 2.5%. The Black-Scholes
model used to determine the option values shown above was developed to
estimate the fair value of short-term freely tradable, fully transferable
options without vesting restrictions and was not designed to value reloads,
all of which significantly differ from the Company's stock option awards. The
value of this model is also limited by the inclusion of highly subjective
assumptions which greatly affect calculated values.
6. Employee Stock Ownership Plan
In 1989, the Company expanded its Employee Stock Ownership Plan ("ESOP")
through the introduction of a leveraged ESOP covering certain employees who
have met certain eligibility requirements. The ESOP issued $410.0 of long-term
notes due through 2009 bearing an average interest rate of 8.6%. The long-term
notes, which are guaranteed by the Company, are reflected in the accompanying
Consolidated Balance Sheets. The ESOP used the proceeds of the notes to
purchase 6.3 million shares of Series B Convertible Preference Stock from the
Company. The Stock has a minimum redemption price of $65 per share and pays
semiannual dividends equal to the higher of $2.44 or the current dividend paid
on four common shares for the comparable six-month period.
Dividends on these preferred shares, as well as common shares also held by
the ESOP, are paid to the ESOP trust and, together with contributions, are
used by the ESOP to repay principal and interest on the outstanding notes.
Preferred shares are released for allocation to participants based upon the
ratio of the current year's debt
28
<PAGE>
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements--(continued)
(Dollars in Millions Except Per Share Amounts)
service to the sum of total principal and interest payments over the life of
the loan. At December 31, 1998, 1,528,450 shares were allocated to participant
accounts. Each allocated share may be converted by the trustee into four
common shares but preferred shares generally convert only after the employee
ceases to work for the Company.
Dividends on these preferred shares are deductible for income tax purposes
and, accordingly, are reflected net of their tax benefit in the Consolidated
Statements of Retained Earnings, Comprehensive Income and Changes in Capital
Accounts.
Annual expense related to the leveraged ESOP, determined as interest
incurred on the notes, less employee contributions and dividends received on
the shares held by the ESOP, plus the higher of either principal repayments on
the notes or the cost of shares allocated, was $2.4 in 1998, $3.0 in 1997 and
$3.9 in 1996. Similarly, unearned compensation, shown as a reduction in
shareholders' equity, is reduced by the higher of principal payments or the
cost of shares allocated.
Interest incurred on the ESOP's notes amounted to $32.5 in 1998, $33.0 in
1997 and $33.5 in 1996. The Company paid dividends on the stock held by the
ESOP of $29.3 in 1998, $29.8 in 1997 and $31.1 in 1996. Company contributions
to the ESOP were $0 in 1998, $1.0 in 1997 and $4.1 in 1996. Employee
contributions to the ESOP were $9.4 in 1998, $8.2 in 1997 and $5.9 in 1996.
7. Retirement Plans and Other Retiree Benefits
Retirement Plans
The Company, its U.S. subsidiaries and some of its overseas subsidiaries
maintain defined benefit retirement plans covering substantially all of their
employees. Benefits are based primarily on years of service and employees'
career earnings. In the Company's principal U.S. plans, funds are contributed
to the trusts in accordance with regulatory limits to provide for current
service and for any unfunded projected benefit obligation over a reasonable
period. To the extent these requirements are exceeded by plan assets, a
contribution may not be made in a particular year. Assets of the plans consist
principally of common stocks, guaranteed investment contracts with insurance
companies, investments in real estate funds and U.S. Government obligations.
Domestic plan assets also include investments in the Company's common stock
representing 7% and 6% of plan assets at December 31, 1998 and 1997,
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, in the form of future retiree contributions, to reduce its obligation to
provide these postretirement benefits and offset its current service cost.
Postretirement benefits otherwise are not currently funded.
29
<PAGE>
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements--(continued)
(Dollars in Millions Except Per Share Amounts)
Summarized information of the Company's defined benefit retirement plans and
postretirement plans are as follows:
<TABLE>
<CAPTION>
Other
Pension Benefits Retiree Benefits
------------------------------- ------------------
1998 1997 1998 1997 1998 1997
------ ------ ------- ------ -------- --------
North America International
-------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Change in Benefit Obliga-
tion
Benefit obligation at be-
ginning of year.......... $976.6 $925.7 $ 278.8 $271.9 $ 143.7 $ 152.7
Service cost.............. 28.1 24.9 17.7 16.6 (11.0) (7.8)
Interest cost............. 68.9 67.6 18.2 17.6 14.7 13.4
Participant's Contribu-
tion..................... 3.3 3.1 9.7 2.3 -- --
Acquisitions/Plan Amend-
ments.................... 1.5 .1 4.0 9.4 (3.7) --
Actuarial loss/(gain)..... 7.9 40.8 14.1 13.6 20.0 (6.0)
Foreign exchange impact... (2.6) (1.6) 4.4 (38.4) -- (.2)
Benefits paid............. (85.4) (84.0) (17.3) (14.2) (10.7) (8.4)
------ ------ ------- ------ -------- --------
Benefit obligation at end
of year.................. $998.3 $976.6 $ 329.6 $278.8 $ 153.0 $ 143.7
------ ------ ------- ------ -------- --------
Change in Plan Assets
Fair value of plan assets
at beginning of year..... $907.3 $842.8 $ 193.4 $171.2 $ -- $ --
Actual return on plan as-
sets..................... 133.1 134.5 18.5 22.7 -- --
Company contributions..... 6.9 13.6 16.6 11.9 10.7 8.4
Plan participant contribu-
tions.................... 3.3 3.1 9.7 2.3 -- --
Foreign exchange impact... (2.4) (2.7) (10.9) (10.4) -- --
Acquisitions/Plan Amend-
ments.................... -- -- 5.0 9.9 -- --
Benefits paid............. (85.4) (84.0) (17.3) (14.2) (10.7) (8.4)
------ ------ ------- ------ -------- --------
Fair value of plan assets
at end of year........... $962.8 $907.3 $ 215.0 $193.4 $ -- $ --
------ ------ ------- ------ -------- --------
Funded Status
Funded Status at end of
year..................... $(35.5) $(69.3) $(114.6) $(85.4) $ (153.0) $ (143.7)
Unrecognized net transi-
tion asset............... (6.6) (13.6) (2.5) (2.2) -- --
Unrecognized net actuarial
loss/(gain).............. 19.0 58.7 16.4 1.7 (22.5) (44.3)
Unrecognized prior service
costs.................... 39.9 44.6 3.9 4.5 (8.3) (2.6)
------ ------ ------- ------ -------- --------
Net amount recognized..... $ 16.8 $ 20.4 $ (96.8) $(81.4) $ (183.8) $ (190.6)
====== ====== ======= ====== ======== ========
Amounts Recognized in Bal-
ance Sheet
Other assets.............. $ 93.3 $ 83.4 $ 40.9 $ 30.1 $ -- $ --
Other liabilities......... (76.5) (63.0) (137.7) (111.5) (183.8) (190.6)
------ ------ ------- ------ -------- --------
Net amount recognized..... $ 16.8 $ 20.4 $ (96.8) $(81.4) $ (183.8) $ (190.6)
====== ====== ======= ====== ======== ========
Weighted Average Assump-
tions
Discount rate............. 7.25% 7.25% 6.82% 7.47% 7.25% 7.25%
Long-term rate of return
on plan assets........... 9.25% 9.25% 8.92% 10.21% -- --
Long-term rate of compen-
sation increase.......... 5.00% 5.50% 4.44% 4.83% -- --
ESOP growth rate.......... -- -- -- -- 10.00% 10.00%
</TABLE>
30
<PAGE>
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements--(continued)
(Dollars in Millions Except Per Share Amounts)
<TABLE>
<CAPTION>
Other
Pension Benefits Retiree Benefits
---------------------------------------------- ---------------------
1998 1997 1996 1998 1997 1996 1998 1997 1996
------ ------ ------ ------ ------ ------ ------ ------ -----
North America International
---------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Components of Net
Periodic Benefit Costs
Service cost............ $ 28.1 $ 24.9 $ 24.5 $ 17.7 $ 16.6 $ 15.1 $ 4.0 $ 2.3 $ 1.7
Interest cost........... 68.9 67.6 64.4 18.2 17.6 17.5 14.7 13.4 12.6
Annual ESOP Allocation.. -- -- -- -- -- -- (15.0) (10.1) (5.0)
Expected return on plan
assets................. (80.8) (77.0) (73.1) (13.9) (14.2) (13.6) -- -- --
Amortization of
transition/prior
service costs.......... (.9) 1.3 (1.5) .1 .8 3.3 (.6) (.3) (.2)
Amortization of
actuarial loss/(gain).. 1.5 .7 3.8 .5 .4 .7 (1.0) (1.8) (2.0)
------ ------ ------ ------ ------ ------ ------ ------ -----
Net periodic benefit
cost................... $ 16.8 $ 17.5 $ 18.1 $ 22.6 $ 21.2 $ 23.0 $ 2.1 $ 3.5 $ 7.1
====== ====== ====== ====== ====== ====== ====== ====== =====
</TABLE>
The accumulated benefit obligation and fair value of plan assets for the
pension plans with accumulated benefit obligations in excess of plan assets
were $206.9 and $8.5, respectively, as of December 31, 1998, and $185.6 and
$7.2, respectively, as of December 31, 1997. These amounts represent non-
qualified domestic plans and plans at foreign locations that are primarily
unfunded, as such book reserves equal to the unfunded amount have been
recorded.
The projected benefit obligation and fair value of plan assets for the
pension plans with projected benefit obligations in excess of plan assets were
$360.0 and $110.1, respectively, as of December 31, 1998, and $311.0 and
$98.4, respectively, as of December 31, 1997.
The assumed medical cost trend rate used in measuring the postretirement
benefit obligation was 4.75% for 1999 and years thereafter. Changes in this
rate can have a significant effect on amounts reported. The effect of a 1%
increase/decrease in the assumed medical cost trend rate would change the
accumulated postretirement benefit obligation by approximately $14.5; annual
expense would change by approximately $2.3.
8. Income Taxes
The provision for income taxes consists of the following for the years ended
December 31:
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
United States........................................... $122.6 $ 91.0 $ 67.2
International........................................... 278.9 270.9 252.4
------ ------ ------
$401.5 $361.9 $319.6
====== ====== ======
</TABLE>
The components of income before income taxes are as follows for the three
years ended December 31:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- ------
<S> <C> <C> <C>
United States....................................... $ 362.0 $ 271.8 $171.3
International....................................... 888.1 830.5 783.3
-------- -------- ------
$1,250.1 $1,102.3 $954.6
======== ======== ======
</TABLE>
31
<PAGE>
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements--(continued)
(Dollars in Millions Except Per Share Amounts)
The difference between the statutory United States federal income tax rate
and the Company's global effective tax rate as reflected in the Consolidated
Statements of Income is as follows:
<TABLE>
<CAPTION>
Percentage of Income Before Tax 1998 1997 1996
------------------------------- ---- ---- ----
<S> <C> <C> <C>
Tax at U.S. statutory rate................................. 35.0% 35.0% 35.0%
State income taxes, net of federal benefit................. .7 .6 .3
Earnings taxed at other than U.S. statutory rate........... (2.6) (1.8) (1.4)
Reversal of valuation allowance............................ (2.7) (1.5) --
Other, net................................................. 1.7 .5 (.4)
---- ---- ----
Effective tax rate......................................... 32.1% 32.8% 33.5%
==== ==== ====
</TABLE>
In addition, net tax (cost) benefit of $(18.5) in 1998 and $49.2 in 1997
were recorded directly through equity.
Differences between accounting for financial statement purposes and
accounting for tax purposes result in taxes currently payable being (lower)
higher than the total provision for income taxes as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------- ------ ------
<S> <C> <C> <C>
Excess of tax over book depreciation............... $ (40.0) $(12.7) $(15.9)
Net restructuring spending......................... (13.6) (47.5) (26.3)
Tax credit utilization............................. (10.2) (11.5) --
Other, net......................................... (37.0) 16.7 21.5
------- ------ ------
$(100.8) $(55.0) $(20.7)
======= ====== ======
</TABLE>
The components of deferred tax assets (liabilities) are as follows at
December 31:
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Deferred Taxes--Current:
Accrued liabilities..................................... $ 73.8 $ 78.8
Restructuring........................................... 14.1 27.7
Other, net.............................................. 22.5 17.9
------- -------
Total deferred taxes current............................ 110.4 124.4
------- -------
Deferred Taxes--Long-term:
Intangible assets....................................... (328.5) (251.6)
Property, plant and equipment........................... (251.1) (188.4)
Postretirement benefits................................. 62.6 65.6
Tax loss and tax credit carryforwards................... 176.9 159.5
Other, net.............................................. 14.9 54.7
Valuation allowance..................................... (122.8) (124.3)
------- -------
Total deferred taxes long-term.......................... (448.0) (284.5)
------- -------
Net deferred taxes.................................... $(337.6) $(160.1)
======= =======
</TABLE>
The major component of the 1998 and 1997 valuation allowance relates to tax
benefits in certain jurisdictions not expected to be realized. The increase in
deferred taxes--long-term primarily relates to deferred taxes recognized in
Brazil subsequent to their change from a highly inflationary economy.
32
<PAGE>
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements--(continued)
(Dollars in Millions Except Per Share Amounts)
Applicable U.S. income and foreign withholding taxes have not been provided
on approximately $661 of undistributed earnings of foreign subsidiaries at
December 31, 1998. These earnings are currently considered to be permanently
invested and are not subject to such taxes. Determining the tax liability that
would arise if these earnings were remitted is not practicable.
9. Supplemental Income Statement Information
<TABLE>
<CAPTION>
Other Expense, Net 1998 1997 1996
- ------------------ ------ ------ ------
<S> <C> <C> <C>
Amortization of intangibles............................. $ 81.7 $ 86.5 $ 91.7
Earnings from equity investments........................ (5.3) (5.6) (7.8)
Minority interest....................................... 28.1 29.1 33.4
Other................................................... (43.3) (37.6) (23.5)
------ ------ ------
$ 61.2 $ 72.4 $ 93.8
====== ====== ======
<CAPTION>
Interest Expense, Net 1998 1997 1996
- --------------------- ------ ------ ------
<S> <C> <C> <C>
Interest incurred....................................... $216.8 $241.6 $244.4
Interest capitalized.................................... (12.3) (10.0) (12.7)
Interest income......................................... (31.6) (48.1) (34.3)
------ ------ ------
$172.9 $183.5 $197.4
====== ====== ======
Research and development................................ $166.0 $166.3 $159.7
Maintenance and repairs................................. 109.7 113.6 107.1
Media advertising....................................... 592.2 637.0 565.9
</TABLE>
10. Supplemental Balance Sheet Information
<TABLE>
<CAPTION>
Inventories 1998 1997
- ----------- ------ ------
<S> <C> <C>
Raw materials and supplies....................................... $257.9 $261.0
Work-in-process.................................................. 32.9 33.5
Finished goods................................................... 455.2 433.9
------ ------
$746.0 $728.4
====== ======
</TABLE>
Inventories valued under LIFO amounted to $162.2 and $157.9 at December 31,
1998 and 1997, respectively. The excess of current cost over LIFO cost at the
end of each year was $39.8 and $46.7, respectively. The liquidations of LIFO
inventory quantities increased income by $1.3, $0 and $1.4 in 1998, 1997 and
1996, respectively.
<TABLE>
<CAPTION>
Property, Plant and Equipment, Net 1998 1997
- ---------------------------------- --------- ---------
<S> <C> <C>
Land...................................................... $ 122.6 $ 120.6
Buildings................................................. 705.0 653.0
Machinery and equipment................................... 3,299.7 3,024.8
--------- ---------
4,127.3 3,798.4
Accumulated depreciation.................................. (1,538.1) (1,357.4)
--------- ---------
$ 2,589.2 $ 2,441.0
========= =========
</TABLE>
33
<PAGE>
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements--(continued)
(Dollars in Millions Except Per Share Amounts)
<TABLE>
<CAPTION>
Goodwill and Other Intangible Assets, Net 1998 1997
- ----------------------------------------- -------- --------
<S> <C> <C>
Goodwill and other intangibles.............................. $3,080.8 $3,060.3
Accumulated amortization.................................... (556.7) (475.0)
-------- --------
$2,524.1 $2,585.3
======== ========
<CAPTION>
Other Accruals 1998 1997
- -------------- -------- --------
<S> <C> <C>
Accrued payroll and employee benefits....................... $ 312.4 $ 331.7
Accrued advertising......................................... 232.6 170.1
Accrued interest............................................ 51.2 49.5
Accrued taxes other than income taxes....................... 72.0 46.7
Restructuring accrual....................................... 39.6 79.0
Other....................................................... 149.4 161.9
-------- --------
$ 857.2 $ 838.9
======== ========
<CAPTION>
Other Liabilities 1998 1997
- ----------------- -------- --------
<S> <C> <C>
Minority interest........................................... $ 230.5 $ 227.0
Pension and other benefits.................................. 398.0 365.1
Other....................................................... 108.1 183.7
-------- --------
$ 736.6 $ 775.8
======== ========
</TABLE>
11. Fair Value of Financial Instruments
The Company utilizes interest rate swap contracts and foreign currency
exchange contracts to manage interest rate and foreign currency exposures.
(See the Management's Discussion and Analysis--Managing Foreign Currency and
Interest Rate Exposure for further discussion.) In assessing the fair value of
financial instruments at December 31, 1998 and 1997, the Company has used
available market information and other valuation methodologies. Some judgment
is necessarily required in interpreting market data to develop the estimates
of fair value, and, accordingly, the estimates are not necessarily indicative
of the amounts that the Company could realize in a current market exchange.
The carrying amounts of cash and cash equivalents, marketable securities,
long-term investments and short-term debt approximated fair value as of
December 31, 1998 and 1997. The estimated fair value of the Company's
remaining financial instruments at December 31 are summarized as follows:
<TABLE>
<CAPTION>
1998 1997
-------------------- --------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
(Liabilities)/Assets
Long-term debt, including
current portion.............. $(2,582.2) $(2,800.0) $(2,518.6) $(2,665.6)
(including foreign exchange
contracts)
Other liabilities:
Interest rate contracts....... (2.4) (3.6) (7.1) (18.4)
Foreign exchange contracts.... (8.7) (13.0) 10.3 9.0
Equity:
Foreign exchange contracts.... (2.9) (2.7) 1.4 6.6
</TABLE>
(to hedge investment in subsidiaries)
34
<PAGE>
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements--(continued)
(Dollars in Millions Except Per Share Amounts)
As of December 31, 1998 and 1997, the Company had interest rate agreements
outstanding with an aggregate notional amount of $825.0 and $929.8,
respectively, with maturities through 2018.
As of December 31, 1998 and 1997, the Company had approximately $411.1 and
$657.2, respectively, of outstanding foreign exchange contracts. At December
31, 1998, approximately 8% of outstanding foreign exchange contracts served to
hedge net investments in foreign subsidiaries, 15% hedged intercompany loans
and 77% hedged third-party debt and other firm commitments.
The Company is exposed to credit loss in the event of nonperformance by
counterparties on interest rate agreements and foreign exchange contracts;
however, nonperformance by these counterparties is considered remote as it is
the Company's policy to contract with diversified counterparties that have a
long-term debt rating of A or higher. The amount of any such exposure is
generally the unrealized gain on such contracts, which at December 31, 1998
was not significant.
12. Restructured Operations
In September 1995, a reserve of $460.5 was established to cover a worldwide
restructuring of manufacturing and administrative operations. The primary
elements of the reserve related to employee termination costs and expenses
associated with the realignment of the Company's global manufacturing
operations, as well as settlement of contractual obligations. As planned, the
restructuring has produced savings that increase pretax earnings by over $150
annually.
The planned restructuring projects, primarily in North America and Europe
but also affecting Hill's Pet Nutrition and Colgate locations in Asia/Africa
and certain Latin America locations, are substantially completed. The
remaining reserve amount of $39.6 primarily covers the reconfiguring of two
factories in Asia/Africa and the consolidation of administrative operations
following the implementation of SAP and related process changes in Europe and
Asia/Africa. All remaining projects will be completed in 1999. The financing
for remaining cash requirements will come from operations.
A summary of the changes in the restructuring reserve is as follows:
<TABLE>
<CAPTION>
Manufacturing Contractual
Workforce Plants Settlements Total
--------- ------------- ----------- -------
<S> <C> <C> <C> <C>
Original reserve................ $210.0 $ 204.1 $ 46.4 $ 460.5
1995 activity................... (4.2) (7.2) (13.5) (24.9)
1996 activity................... (93.4) (118.6) (20.4) (232.4)
1997 activity................... (45.0) (48.0) (11.0) (104.0)
------ ------- ------ -------
Balance at December 31, 1997.... 67.4 30.3 1.5 99.2
1998 activity................... (37.1) (22.5) -- (59.6)
------ ------- ------ -------
Balance at December 31, 1998.... $ 30.3 $ 7.8 $ 1.5 $ 39.6
====== ======= ====== =======
</TABLE>
In total the headcount reductions resulting from the restructuring projects
are 4,655. The cumulative headcount reductions as of 1996, 1997 and 1998 were
2,275, 3,133 and 3,986, respectively. Factory closures and/or reconfigurations
will total 25. The cumulative factory closures and/or reconfigurations as of
1996, 1997 and 1998 were 14, 20 and 23, respectively. The costs of completing
the restructuring activities to date approximated the original reserve. The
headcount and factory totals were increased by 513 and 1, respectively, as a
result of refinements of original estimates.
Of the restructuring reserve remaining as of December 31, 1998 and 1997,
$39.6 and $79.0, respectively, is classified as a current liability, and $0
and $20.2, respectively, as a reduction of fixed assets.
35
<PAGE>
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements--(continued)
(Dollars in Millions Except Per Share Amounts)
13. Quarterly Financial Data (Unaudited)
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
-------- -------- -------- --------
<S> <C> <C> <C> <C>
1998
Net sales.................................. $2,159.5 $2,256.5 $2,265.4 $2,290.2
Gross profit............................... 1,123.5 1,172.6 1,192.6 1,192.6
Net income................................. 196.0 203.5 214.9 234.2
Earnings per common share:
Basic.................................... .65 .67 .71 .78
Diluted.................................. .60 .62 .66 .73
1997
Net sales.................................. $2,147.1 $2,300.9 $2,297.2 $2,311.5
Gross profit............................... 1,080.6 1,168.1 1,166.7 1,179.8
Net income................................. 169.6 175.8 188.6 206.4
Earnings per common share:
Basic.................................... .56 .58 .62 .68
Diluted.................................. .52 .54 .58 .63
</TABLE>
14. Market and Dividend Information (Unaudited)
The Company's common stock and $4.25 Preferred Stock are 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 amount of
dividends paid per share has increased for 36 consecutive years.
<TABLE>
<CAPTION>
Market Price Common Stock $4.25 Preferred Stock
--------------------------- ---------------------------
Quarter Ended 1998 1997 1998 1997
- ------------- ------------- ------------- ------------- -------------
High Low High Low High Low High Low
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
March 31................ $87.81 $67.88 $56.88 $45.44 $79.50 $72.50 $72.50 $67.00
June 30................. 91.44 82.44 66.50 49.75 81.00 76.50 73.00 70.50
September 30............ 96.94 65.56 77.13 61.81 87.00 80.50 74.50 68.94
December 31............. 94.75 68.00 74.50 62.25 88.00 85.00 78.00 69.50
Closing Price........... $92.88 $73.50 $88.00 $76.50
Dividends Paid Per Share
<CAPTION>
Quarter Ended 1998 1997 1998 1997
- ------------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
March 31................ $.275 $.235 $1.0625 $1.0625
June 30................. .275 .275 1.0625 1.0625
September 30............ .275 .275 1.0625 1.0625
December 31............. .275 .275 1.0625 1.0625
----- ----- ------- -------
Total................. $1.10 $1.06 $ 4.25 $ 4.25
===== ===== ======= =======
</TABLE>
36
<PAGE>
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements--(continued)
(Dollars in Millions Except Per Share Amounts)
15. Earnings Per Share
<TABLE>
<CAPTION>
For the Year Ended 1998 For the Year Ended 1997 For the Year Ended 1996
-------------------------- -------------------------- --------------------------
Per Per Per
Income Shares Share Income Shares Share Income Shares Share
-------- -------- ------- -------- -------- ------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net income.............. $ 848.6 $ 740.4 $ 635.0
Preferred dividends..... (20.9) (21.1) (21.4)
-------- -------- --------
Basic EPS............... 827.7 295.0 $ 2.81 719.3 295.3 $ 2.44 613.6 293.3 $ 2.09
======= ======= =======
Stock options........... 6.8 6.9 5.1
ESOP conversion......... 18.4 22.4 17.9 22.9 16.1 23.3
-------- ------- -------- ------- -------- -------
Diluted EPS............. $ 846.1 324.2 $ 2.61 $ 737.2 325.1 $ 2.27 $ 629.7 321.7 $ 1.96
======== ======= ======= ======== ======= ======= ======== ======= =======
</TABLE>
16. Commitments and Contingencies
Minimum rental commitments under noncancellable operating leases, primarily
for office and warehouse facilities, are $67.3 in 1999, $63.5 in 2000, $56.2
in 2001, $51.0 in 2002, $48.9 in 2003 and $122.6 thereafter. Rental expense
amounted to $102.7 in 1998, $94.4 in 1997 and $93.3 in 1996. Contingent
rentals, sublease income and capital leases, which are included in fixed
assets, are not significant.
The Company has various contractual commitments to purchase raw materials,
products and services totaling $60.6 that expire through 2001.
The Company is a party to various superfund and other environmental matters
and is contingently liable with respect to lawsuits, taxes and other matters
arising out of the normal course of business. Management proactively reviews
and manages its exposure to, and the impact of, environmental matters and
other contingencies.
On September 8, 1998, one of the Company's Brazilian subsidiaries, Kolynos
do Brasil Ltda. ("Kolynos"), received notice of an administrative proceeding
from the Central Bank of Brazil. The notice primarily takes issue with certain
filings made with the Central Bank in connection with financing arrangements
related to the acquisition of Kolynos in January 1995. The Central Bank seeks
to impose fines prescribed by statute, and it, in no way, challenges or seeks
to unwind the acquisition. Management believes, based on the opinion of its
Brazilian legal counsel, that the filings challenged by the Central Bank fully
complied with Brazilian law and that the issues raised in the notice are
without merit.
While it is possible that the Company's cash flows and results of operations
in particular quarterly or annual periods could be affected by the one-time
impacts of the resolution of the above contingencies, it is the opinion of
management that the ultimate disposition of these matters, to the extent not
previously provided for, will not have a material impact on the Company's
financial condition or ongoing cash flows and results of operations.
37
<PAGE>
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
For the Year Ended December 31, 1998
(Dollars in Millions Except Per Share Amounts)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
-------- ---------- ---------------- ---------- -------------
Additions
----------------
Balance at Charged to
Beginning Costs and Balance at
Description of Period Expenses Other Deductions End of Period
----------- ---------- ---------- ----- ---------- -------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts............... $ 35.8 $12.3 $ -- $12.2(/1/) $ 35.9
====== ===== ===== ===== ======
Accumulated amortization
of goodwill and other
intangibles............ $475.0 $81.7 $ -- $ -- $556.7
====== ===== ===== ===== ======
Valuation allowance for
deferred tax assets.... $124.3 $ -- $69.6(/2/) $71.1(/2/) $122.8
====== ===== ===== ===== ======
</TABLE>
- --------
NOTES:
(/1/) Uncollectible accounts written off and cash discounts allowed.
(/2/) Increase/decrease in allowance for tax loss and tax credit carryforward
benefits which more likely to not be utilized in the future.
38
<PAGE>
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
For the Year Ended December 31, 1997
(Dollars in Millions Except Per Share Amounts)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
-------- ---------- ---------------- ---------- -------------
Additions
----------------
Balance at Charged to
Beginning Costs and Balance at
Description of Period Expenses Other Deductions End of Period
----------- ---------- ---------- ----- ---------- -------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts............... $ 33.8 $14.0 $ -- $12.0(/1/) $ 35.8
====== ===== ===== ===== ======
Accumulated amortization
of goodwill and other
intangibles............ $387.0 $88.0 $ -- $ -- $475.0
====== ===== ===== ===== ======
Valuation allowance for
deferred tax assets.... $114.9 $ .6 $30.8(/2/) $22.0(/2/) $124.3
====== ===== ===== ===== ======
</TABLE>
- --------
NOTES:
(/1/) Uncollectible accounts written off and cash discounts allowed.
(/2/) Increase/decrease in allowance for tax loss and tax credit carryforward
benefits which more likely to not be utilized in the future.
39
<PAGE>
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
For the Year Ended December 31, 1996
(Dollars in Millions Except Per Share Amounts)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
-------- ---------- ---------------- ---------- -------------
Additions
----------------
Balance at Charged to
Beginning Costs and Balance at
Description of Period Expenses Other Deductions End of Period
----------- ---------- ---------- ----- ---------- -------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts............... $ 31.9 $11.8 $-- $9.9(/1/) $ 33.8
====== ===== ==== ==== ======
Accumulated amortization
of goodwill and other
intangibles............ $295.3 $91.7 $-- $-- $387.0
====== ===== ==== ==== ======
Valuation allowance for
deferred tax assets.... $118.2 $ -- $-- $3.3(/2/) $114.9
====== ===== ==== ==== ======
</TABLE>
- --------
NOTES:
(/1/) Uncollectible accounts written off and cash discounts allowed.
(/2/) Increase/decrease in allowance for tax loss and tax credit carryforward
benefits which more likely to not be utilized in the future.
40
<PAGE>
Report of Independent Public Accountants
To the Board of Directors and Shareholders of
Colgate-Palmolive Company:
We have audited the accompanying consolidated balance sheets of Colgate-
Palmolive Company (a Delaware corporation) and subsidiaries as of December 31,
1998 and 1997, and the related consolidated statements of income, retained
earnings, comprehensive income and changes in capital accounts, and cash flows
for each of the three years in the period ended December 31, 1998. These
financial statements and the schedules referred to below are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Colgate-Palmolive Company
and subsidiaries as of December 31, 1998 and 1997, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1998, in conformity with generally accepted accounting
principles.
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules listed in the index to
financial statements are presented for purposes of complying with the
Securities and Exchange Commission's rules and are not part of the basic
financial statements. These schedules have been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly state in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
/s/ Arthur Andersen LLP
New York, New York
February 2, 1999
41
<PAGE>
COLGATE-PALMOLIVE COMPANY
Historical Financial Summary(/1/)
(Dollars in Millions Except Per Share Amounts)
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Continuing
Operations
Net sales........ $8,971.6 $9,056.7 $8,749.0 $8,358.2(/2/) $7,587.9 $7,141.3 $7,007.2 $6,060.3 $5,691.3 $5,038.8
Results of
operations:
Net income...... 848.6 740.4 635.0 172.0(/2/) 580.2(/3/) 189.9(/4/) 477.0 124.9(/5/) 321.0 280.0
Per share,
basic.......... 2.81 2.44 2.09 .52(/2/) 1.91(/3/) .54(/4/) 1.46 .38(/5/) 1.14 .99
Per share,
diluted........ 2.61 2.27 1.96 .51(/2/) 1.78(/3/) .53(/4/) 1.37 .38(/5/) 1.06 .95
Depreciation and
amortization
expense......... 330.3 319.9 316.3 300.3 235.1 209.6 192.5 146.2 126.2 97.0
Financial
Position
Current ratio.... 1.1 1.1 1.2 1.3 1.4 1.5 1.5 1.5 1.4 1.9
Property, plant
and equipment,
net............. 2,589.2 2,441.0 2,428.9 2,155.2 1,988.1 1,766.3 1,596.8 1,394.9 1,362.4 1,105.4
Capital
expenditures.... 389.6 478.5 459.0 431.8 400.8 364.3 318.5 260.7 296.8 210.0
Total assets..... 7,685.2 7,538.7 7,901.5 7,642.3 6,142.4 5,761.2 5,434.1 4,510.6 4,157.9 3,536.5
Long-term debt... 2,300.6 2,340.3 2,786.8 2,992.0 1,751.5 1,532.4 946.5 850.8 1,068.4 1,059.5
Shareholders'
equity.......... 2,085.6 2,178.6 2,034.1 1,679.8 1,822.9 1,875.0 2,619.8 1,866.3 1,363.6 1,123.2
Share and Other
Book value per
common share.... 7.05 7.30 6.84 5.67 6.23 6.20 8.10 6.27 5.06 4.20
Cash dividends
declared and
paid per common
share........... 1.10 1.06 .94 .88 .77 .67 .58 .51 .45 .39
Closing price.... 92.88 73.50 46.13 35.13 31.69 31.19 27.88 24.44 18.44 15.88
Number of common
shares
outstanding (in
millions)....... 292.7 295.4 294.3 291.7 288.8 298.5 320.5 294.7 266.4 264.4
Number of
shareholders of
record:
$4.25 Preferred. 296 320 350 380 400 450 470 460 500 500
Common.......... 45,800 46,800 45,500 46,600 44,100 40,300 36,800 34,100 32,000 32,400
Average number of
employees....... 38,300 37,800 37,900 38,400 32,800 28,000 28,800 24,900 24,800 24,100
</TABLE>
- --------
(/1/) All share and per share amounts have been restated to reflect both the
1997 and the 1991 two-for-one stock splits.
(/2/) Income in 1995 includes a net provision for restructured operations of
$369.2. (Excluding the charge, earnings per share would have been $1.79,
basic and $1.67, diluted.)
(/3/) Income in 1994 includes a one-time charge of $5.2 for the sale of a non-
core business, Princess House.
(/4/) Income in 1993 includes a one-time impact of adopting new mandated
accounting standards, effective in the first quarter of 1993, of $358.2.
(Excluding this charge, earnings per share would have been $1.69, basic
and $1.58, diluted.)
(/5/) Income in 1991 includes a net provision for restructured operations of
$243.0. (Excluding this charge, earnings per share would have been $1.28,
basic and $1.20, diluted.)
42
<PAGE>
COLGATE-PALMOLIVE COMPANY
EXHIBITS TO FORM 10-K
YEAR ENDED DECEMBER 31, 1998
Commission File No. 1-644
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
3-A Restated Certificate of Incorporation, as amended. (Registrant
hereby incorporates by reference Exhibit 1 to its Form 8-K dated
October 17, 1991, File No. 1-644-2.)
3-B By-laws. (Registrant hereby incorporates by reference Exhibit 3-B
to Amendment No. 1 to its Quarterly Report on Form 10-Q for the
quarter ended September 30, 1994, File No. 1-644-2.)
4-A Rights Agreement dated as of October 23, 1998 between registrant
and First Chicago Trust Company of New York. (Registrant hereby
incorporates by reference Exhibit 1 to its Form 8-K dated October
22, 1998, File No. 1-644-2.)
4-B(a) Other instruments defining the rights of security holders, includ-
ing indentures.*
(b) Colgate-Palmolive Company Employee Stock Ownership Trust Note
Agreement dated as of June 1, 1989. (Registrant hereby incorpo-
rates by reference Exhibit 4-B (b) to its Annual Report on Form
10-K for the year ended December 31, 1989, File No. 1-644-2.)
10-A Colgate-Palmolive Company 1977 Stock Option Plan, as amended.
(Registrant hereby incorporates by reference Exhibit 10-A to its
Annual Report on Form 10-K for the year ended December 31, 1986,
File No. 1-644-2.)
10-B(a) Colgate-Palmolive Company Executive Incentive Compensation Plan,
as amended. (Registrant hereby incorporates by reference Exhibit
10-B(a) to its Annual Report on Form 10-K for the year ended De-
cember 31, 1997, File No. 1-644.)
(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. 1-644-2.)
10-C(a) Colgate-Palmolive Company Supplemental Salaried Employees Retire-
ment Plan. (Registrant hereby incorporates by reference Exhibit
10-E (Plan only) to its Annual Report on Form 10-K for the year
ended December 31, 1984, File No. 1-644-2.)
(b) Colgate-Palmolive Company Supplemental Salaried Employees Retire-
ment Plan Trust. (Registrant hereby incorporates by reference Ex-
hibit 10-C (b) to its Annual Report on Form 10-K for the year
ended December 31, 1987, File No. 1-644-2.)
10-D(a) Lease dated August 15, 1978 between Harold Uris, d/b/a Uris Hold-
ing Company, and Colgate-Palmolive Company. (Registrant hereby in-
corporates by reference Exhibit 2(b) to its Annual Report on Form
10-K for the year ended December 31, 1978, File No. 1-644-2.)
(b) First Supplemental Amendment dated as of January 1, 1989, between
The Bank of New York as trustee under the will of Harold D. Uris,
deceased, d/b/a Uris Holding Company, and Colgate-Palmolive Compa-
ny. (Registrant hereby incorporates by reference Exhibit 10-D (b)
to its Quarterly Report on Form 10-Q for the quarter ended June
30, 1995, File No. 1-644.)
(c) Second Supplemental Agreement dated as of March 15, 1995, between
The Bank of New York as trustee under the will of Harold D. Uris,
deceased, and Colgate-Palmolive Company. (Registrant hereby incor-
porates by reference Exhibit 10-D (c) to its Quarterly Report on
Form 10-Q for the quarter ended June 30, 1995, File No. 1-644.)
(d) Third Supplemental Agreement dated as of June 13, 1996, between
300 Park Avenue, LLC (as successor in interest to The Bank of New
York, as Trustee under the will of Harold D. Uris, deceased) and
Colgate-Palmolive Company. (Registrant hereby incorporates by ref-
erence Exhibit 10-D(d) to its Annual Report on Form 10-K for the
year ended December 31, 1997, File No. 1-644.)
</TABLE>
43
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
10-E(a) Colgate-Palmolive Company Executive Severance Plan, as amended and
restated. (Registrant hereby incorporates by reference Exhibit 10-
E (a) to its Quarterly Report on Form 10-Q for the quarter ended
June 30, 1998, File No. 1-644.)
(b) Colgate-Palmolive Company Executive Severance Plan Trust. (Regis-
trant hereby incorporates by reference Exhibit 10-E (b) to its An-
nual Report on Form 10-K for the year ended December 31, 1987,
File No. 1-644-2.)
10-F Colgate-Palmolive Company Pension Plan for Outside Directors, as
amended and restated. (Registrant hereby incorporates by reference
Exhibit 10-F to its Annual Report on Form 10-K for the year ended
December 31, 1997, File No. 1-644.)
10-G Colgate-Palmolive Company Stock Plan for Non-Employee Directors.
(Registrant hereby incorporates by reference Exhibit 10-G to its
Annual Report on Form 10-K for the year ended December 31, 1997,
File No. 1-644.)
10-H Colgate-Palmolive Company Restated and Amended Deferred Compensa-
tion 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.)
10-I Career Achievement Plan. (Registrant hereby incorporates by refer-
ence Exhibit 10-I to its Annual Report on Form 10-K for the year
ended December 31, 1986, File No. 1-644-2.)
10-J Colgate-Palmolive Company 1987 Stock Option Plan, as amended.
(Registrant hereby incorporates by reference Exhibit 10-J to its
Annual Report on Form 10-K for the year ended December 31, 1997,
File No. 1-644.)
10-K(a) Stock Incentive Agreement between Colgate-Palmolive Company and
Reuben Mark, Chairman and Chief Executive Officer, dated January
13, 1993, pursuant to the Colgate-Palmolive Company 1987 Stock Op-
tion Plan, as amended. (Registrant hereby incorporates by refer-
ence Exhibit 10-N to its Annual Report on Form 10-K for the year
ended December 31, 1993, File No. 1-644-2.)
(b) Stock Incentive Agreement between Colgate-Palmolive Company and
Reuben Mark, Chairman and Chief Executive Officer, dated November
7, 1997, pursuant to the Colgate-Palmolive Company 1997 Stock Op-
tion Plan. (Registrant hereby incorporates by reference Exhibit
10-K(b) to its Annual Report on Form 10-K for the year ended De-
cember 31, 1997, File No. 1-644.)
10-L 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.)
10-M(a) U.S. $800,000,000 Five Year Credit Agreement dated as of May 30,
1997. (Registrant hereby incorporates by reference Exhibit 10-N to
its Quarterly Report on Form 10-Q for the quarter ended June 30,
1997, File No. 1-644.)
(b) Amendment dated as of April 1, 1998 to the Five Year Credit Agree-
ment dated as of May 30, 1997. (Registrant hereby incorporates
reference Exhibit 10-M(b) to its Quarterly Report on Form 10-Q for
the quarter ended March 31, 1998, File No. 1-644.)
10-N Colgate-Palmolive Company 1996 Stock Option Plan, as amended.
(Registrant hereby incorporates by reference Exhibit 10-N to its
Annual Report on Form 10-K for the year ended, December 31, 1997,
File No. 1-644.)
10-O Colgate-Palmolive Company 1997 Stock Option Plan. (Registrant
hereby incorporates by reference appendix A to its 1997 Notice of
Meeting and Proxy.)
11 Statement re Computation of Earnings Per Common Share.
12 Statement re Computation of Ratio of Earnings to Fixed Charges.
21 Subsidiaries of the Registrant.
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
23 Consent of Independent Public Accountants.
27 Financial Data Schedule.
</TABLE>
- --------
* 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.
The exhibits indicated above which 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
45
<PAGE>
EXHIBIT 11
Page 1 of 2
COLGATE-PALMOLIVE COMPANY
Computation of Earnings Per Common Share
Dollars in Millions Except Per Share Amounts
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
BASIC
Earnings:
Net income............................................. $ 848.6 $ 740.4 $ 635.0
Deduct: Dividends on preferred shares.................. 20.9 21.1 21.4
------- ------- -------
Net income applicable to common shares................. $ 827.7 $ 719.3 $ 613.6
======= ======= =======
Shares (in millions):
Weighted average shares outstanding.................... 295.0 295.3 293.3
======= ======= =======
Earnings per common share, basic....................... $ 2.81 $ 2.44 $ 2.09
======= ======= =======
</TABLE>
<PAGE>
EXHIBIT 11
Page 2 of 2
COLGATE-PALMOLIVE COMPANY
Computation of Earnings Per Common Share
Dollars in Millions Except Per Share Amounts
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
DILUTED
Earnings:
Net income............................................. $ 848.6 $ 740.4 $ 635.0
Deduct: Dividends on preferred shares.................. .5 .5 .5
Deduct: Replacement funding............................ 2.0 2.7 4.8
------- ------- -------
Net income applicable to common shares................. $ 846.1 $ 737.2 $ 629.7
======= ======= =======
Shares (in millions):
Weighted average shares outstanding.................... 295.0 295.3 293.3
Add: Assumed exercise of options reduced by the number
of shares purchased with the proceeds................. 6.8 6.9 5.1
Add: Assumed conversion of Series B Convertible
Preference Stock...................................... 22.4 22.9 23.3
------- ------- -------
Adjusted weighted average shares outstanding........... 324.2 325.1 321.7
======= ======= =======
Earnings per common share, diluted..................... $ 2.61 $ 2.27 $ 1.96
======= ======= =======
</TABLE>
<PAGE>
EXHIBIT 12
COLGATE-PALMOLIVE COMPANY
Computation of Ratio of Earnings to Fixed Charges
Dollars in Millions Except Per Share Amounts
<TABLE>
<CAPTION>
Year Ended
December 31, 1998
-----------------
<S> <C>
Income before income taxes................................... $1,250.1
Add:
Interest on indebtedness and amortization of debt expense and
discount or premium......................................... 204.5
Portion of rents representative of interest factor........... 34.2
Interest on ESOP debt, net of dividends...................... 3.2
Less:
Income of less than fifty-percent-owned subsidiaries......... (5.3)
--------
Income as adjusted........................................... $1,486.7
========
Fixed Charges:
Interest on indebtedness and amortization of debt expense and
discount or premium......................................... $ 204.5
Portion of rents representative of interest factor........... 34.2
Interest on ESOP debt, net of dividends...................... 3.2
Capitalized interest......................................... 12.3
--------
Total fixed charges.......................................... $ 254.2
========
Ratio of earnings to fixed charges........................... 5.8
========
</TABLE>
In June 1989, the Company's leveraged employee stock ownership plan (ESOP)
issued $410.0 long-term notes due through 2009 bearing an average interest
rate of 8.7%. These notes are guaranteed by the Company. Interest incurred on
the ESOP's notes was $32.5 in 1998. This interest is funded through preferred
and common stock dividends. The fixed charges presented above include interest
on ESOP indebtedness to the extent it is not funded through preferred and
common stock dividends.
<PAGE>
EXHIBIT 21
Page 1 of 6
SUBSIDIARIES OF THE REGISTRANT
------------------------------
State in which
Incorporated or Country
Name of Company in which Organized
- --------------- ------------------
Alexandril S.A. Uruguay
Arkay Pty Limited Australia
Asia Pioneer Co., Ltd. Hong Kong
Barbados Cosmetics Products Limited Barbados
Baser Kimya Sanayii Ve Ticaret Anonim Sirketi Turkiye
Baser Turketim Pazarlama Ve Ticaret Anonim Sirketi Turkiye
Bella, S.A. France
Black Like Me (Proprietary) Limited South Africa
C-P Peru S.A. Peru
Cachet Investments Limited Jersey Islands, U.K.
Chemtech (BVI) Co. Ltd British Virgin Islands
Chet (Chemicals) (Proprietary) Limited South Africa
CKS, Inc. Delaware
Cleaning Dimensions, Inc. Delaware
Cobelsa S.A. Argentina
Colgalive, S.A. Dominica Republic
Colgate (BVI) Limited British Virgin Islands
Colgate (Guangzhou) Co. Ltd. China
Colgate (U.K.) Limited United Kingdom
Colgate Flavors and Fragrances, Inc. Delaware
Colgate HoldingsLimited United Kingdom
Colgate, Inc. Delaware
Colgate Music Direct Delaware
Colgate Oral Pharmaceuticals, Inc. Delaware
Colgate Sports Foundation, Inc. The Philippines
Colgate Venture Company, Inc. Delaware
Colgate-Palmolive France
Colgate-Palmolive Ireland
Colgate-Palmolive & Cia Colombia
Colgate-Palmolive A.B. Sweden
Colgate-Palmolive A.G. Switzerland
Colgate-Palmolive Adria d.o.o. Slovenia
Colgate-Palmolive (America), Inc. Delaware
Colgate-Palmolive A/S Denmark
Colgate-Palmolive Belgium S.A. Belgium
Colgate-Palmolive Beteiligungsverwaltungs GmbH Germany
Colgate-Palmolive (B) Sdn. Bhd. Brunei
Colgate-Palmolive (Blantyre) Limited Malawi
Colgate-Palmolive Bolivia, Ltda Bolivia
Colgate-Palmolive (Borzesti) SRL Romania
Colgate-Palmolive (Botswana) (Proprietary) Ltd Botswana
Colgate-Palmolive (Bulgaria) Ltd Bulgaria
Colgate-Palmolive (C.A.) Inc. y Compania Limitada Guatemala
Colgate-Palmolive Cameroun S.A. Cameroon
Colgate-Palmolive Canada, Inc. Canada
<PAGE>
EXHIBIT 21
Page 2 of 6
State in which
Incorporated or Country
Name of Company in which Organized
- --------------- ------------------
Colgate-Palmolive (Caribbean), Inc. Delaware
Colgate-Palmolive (Central America), Inc. Delaware
Colgate-Palmolive Central European Management Inc. Delaware
Colgate-Palmolive (Centro America) S.A. Guatemala
Colgate-Palmolive (Ceylon) Limited Sri Lanka
Colgate-Palmolive Charitable Foundation Delaware
Colgate-Palmolive Chile S.A. Chile
Colgate-Palmolive, Cia. Delaware
Colgate-Palmolive Co. (Jamaica) Ltd. Jamaica
Colgate-Palmolive Compania Anonima Venezuela
Colgate-Palmolive Company, Distr. Puerto Rico
Colgate-Palmolive (Costa Rica), S.A. Costa Rica
Colgate-Palmolive Cote d'Ivoire, S.A. Ivory Coast
Colgate-Palmolive Czech Republic spol. s.r.o. Czechoslovakia
Colgate-Palmolive de Paraguay, S.A. Paraguay
Colgate-Palmolive de Puerto Rico, Inc. Delaware
Colgate-Palmolive del Ecuador, S.A. Ecuador
Colgate-Palmolive del Peru (Delaware) Inc.
Secursal del Peru Delaware
Colgate-Palmolive Deutschland Holding GmbH Germany
Colgate-Palmolive Development Corp. Delaware
Colgate-Palmolive Distribution Co. (Pty) Ltd Botswana
Colgate-Palmolive (Dominica), Inc. Delaware
Colgate-Palmolive (Dominican Republic), Inc. Delaware
Colgate-Palmolive (East Africa) Limited Kenya
Colgate-Palmolive (Eastern) Pte. Ltd Singapore
Colgate-Palmolive (Egypt) S.A.E. Egypt
Colgate-Palmolive Enterprises, Inc. Delaware
Colgate-Palmolive Espana, S.A Spain
Colgate-Palmolive Europe S.A. Belgium
Colgate-Palmolive (Far East) Sdn Bhd Malaysia
Colgate-Palmolive (Fiji) Limited Fiji Islands
Colgate-Palmolive (Finance) (Pty) Limited South Africa
Colgate-Palmolive G.m.b.H. Germany
Colgate-Palmolive Gabon Gabon
Colgate-Palmolive Gesellschaft G.m.b.H. Austria
Colgate-Palmolive Global Trading Company Delaware
Colgate-Palmolive (Gulf States) Ltd. British Virgin Islands
Colgate-Palmolive (Guyana) Ltd Guyana
Colgate-Palmolive Haci Sakir Sabun
Sanayi ve Ticaret Anonim Sirket Turkiye
Colgate-Palmolive (H.K.) Limited Hong Kong
Colgate-Palmolive (Hellas) S.A. I.C. Greece
Colgate-Palmolive Holding Argentina S.A. Argentina
Colgate-Palmolive Holding Inc. Delaware
Colgate-Palmolive Hungary Trading Unlimited
Partnership Hungary
Colgate-Palmolive (Hungary) Manufacturing,
Limited Liability Company Hungary
<PAGE>
EXHIBIT 21
Page 3 of 6
State in which
Incorporated or Country
Name of Company in which Organized
- --------------- ------------------
Colgate-Palmolive, Inc. Delaware
Colgate-Palmolive (India) Limited India
Colgate-Palmolive Industries (Private) Ltd Zimbabwe
Colgate-Palmolive International Holdings B.V. Netherlands
Colgate-Palmolive International Incorporated Delaware
Colgate-Palmolive Investment Co., Inc. Delaware
Colgate-Palmolive Investments, Inc. Delaware
Colgate-Palmolive Investments (PNG) Pty Ltd Papua New Guinea
Colgate-Palmolive (Latvia) SIA Latvia
Colgate-Palmolive Limited New Zealand
Colgate-Palmolive, Ltda Brazil
Colgate-Palmolive (Malaysia) Sdn Bhd Malaysia
Colgate-Palmolive (Marketing) Sdn Bhd Malaysia
Colgate-Palmolive Mennen Limited United Kingdom
Colgate-Palmolive (Middle East Exports) Ltd. British Virgin Islands
Colgate-Palmolive (Mocambique) Limitada Mozambique
Colgate-Palmolive Morocco Morocco
Colgate-Palmolive Nederland B.V. Netherlands
Colgate-Palmolive (Nepal) Private Limited Nepal
Colgate-Palmolive (New York), Inc. Delaware
Colgate-Palmolive (Nigeria) Services Ltd. Nigeria
Colgate-Palmolive NJ, Inc. New Jersey
Colgate-Palmolive Nordic A/S Denmark
Colgate-Palmolive Norge A/S Norway
Colgate-Palmolive Senegal (ex NSOA) S.A. Senegal
Colgate-Palmolive Participacoes e
Investimentos Imobiliarios, S.A. Portugal
Colgate-Palmolive The Philippines, Inc. The Philippines
Colgate-Palmolive Peru S.A. Peru
Colgate-Palmolive (PNG) Pty Ltd Papua New Guinea
Colgate-Palmolive (Poland) Sp. z 0.0. Poland
Colgate-Palmolive Pty Limited Australia
Colgate-Palmolive (Pty) Limited South Africa
Colgate-Palmolive (Research & Development), Inc. Delaware
Colgate-Palmolive (Romania) SRL Romania
Colgate-Palmolive, S.A. Portugal
Colgate-Palmolive, S.A. de C.V. Mexico
Colgate-Palmolive (Slovakia) sro Slovakia
Colgate-Palmolive Sociedad Anonima Industrial
y Commercial Argentina
Colgate-Palmolive Son Hai Limited Vietnam
Colgate-Palmolive S.p.A. Italy
Colgate-Palmolive SP Ukraine
Colgate-Palmolive Support Services Ireland
Colgate-Palmolive Temizlik Urunleri Sanayi
ve Ticart S.A Delaware
Colgate-Palmolive (Thailand) Ltd. Thailand
Colgate-Palmolive Transnational Inc. Delaware
Colgate-Palmolive (Uganda) Limited Uganda
Colgate-Palmolive (U.K.) Limited United Kingdom
<PAGE>
EXHIBIT 21
Page 4 of 6
State in which
Incorporated or Country
Name of Company in which Organized
- --------------- ------------------
Colgate-Palmolive (Zimbabwe), Inc. Delaware
Consumer Viewpoint Center, Inc. New Jersey
Cosmeticos Grasse Ltda. Chile
Cotelle S.A. France
CP Adina S.A. Colombia
CP Holding S.A. France
CP Super Management Pty Ltd Australia
CPC Funding Company Delaware
CPIF, Inc. Delaware
Cristasol, S.A. Spain
Delpha, S.A. France
Dental Pack Industria E Comercio Ltda Brazil
Dentatech (BVI) Co. Ltd British Virgin Islands
DF Soap Co. Delaware
DFW Co. Cayman Islands
Dimac Development Corp. Delaware
Direct Development, Inc. Massachusetts
Distribuidora Edison S.A. Argentina
Dominica Coconut Products Limited Dominica
EKIB, Inc. Delaware
ELM Company Limited Bermuda
Empresa de Maquilas, S.A. de C.V. Mexico
Endeavon (PNG) Pty Ltd. Papua New Guinea
Fabnac Colgate-Palmolive S.A. Haiti
Fundacion Colgate-Palmolive Dominicana, N/A, Inc. Dominican Republic
Global Trading and Supply Company Delaware
Hamol B.V. Netherlands
Hamol, Ltd Delaware
Hao Lai Chemical Co. Ltd. Taiwan
Hawley & Hazel (BVI) Company Ltd British Virgin Islands
Hawley & Hazel (Malaysia) Sdn Bhd Malaysia
Hawley & Hazel Chemical Co. (H.K.) Ltd. Hong Kong
Hawley & Hazel Chemical Co. Singapore (Pte.) Ltd. Singapore
Hawley & Hazel Chemical Company (Zhongshou) Limited China
Hawley & Hazel China Investment Limited China
Hawley & Hazel Investment Co., Ltd. Hong Kong
Hawley & Hazel Taiwan Corporation Taiwan
Herrick International Limited British Virgin Islands
Hill's Funding Company Delaware
Hill's Pet Nutrition B.V. Netherlands
Hill's International Sales FSC B.V. Netherlands
Hill's Pet Nutrition Canada Inc. Canada
Hill's Pet Nutrition de Puerto Rico, Inc. Puerto Rico
Hill's Pet Nutrition Espana, S.L. Spain
Hill's Pet Nutrition GmbH Germany
Hill's Pet Nutrition, Inc. Delaware
Hill's Pet Nutrition Ltd. United Kingdom
Hill's Pet Nutrition Manufacturing, B.V. Netherlands
<PAGE>
EXHIBIT 21
Page 5 of 6
State in which
Incorporated or Country
Name of Company in which Organized
- --------------- ------------------
Hill's Pet Nutrition Pty Limited Australia
Hill's Pet Nutrition Sales, Inc. Delaware
Hill's Pet Products (Benelux) S.A. Belgium
Hill's Pet Products de Mexico, S.A. de C.V. Mexico
Hill's Pet Products (NZ) Limited New Zealand
Hill's Pet Products Manufacturing, B.V. Netherlands
Hill's Pet Products S.p.A. Italy
Hill's Pet Products SNC France
Hill's Pet Products, Inc. Delaware
Hill's-Colgate (Japan) Ltd. Japan
HL Soap Co. Delaware
HLP Co. Cayman Islands
Hopro Liquidating Corp. Ohio
Industrial Jabonera Ecuatoriana S.A. Ecuador
Industrias Quimicas Associadas Multiquim, S.A. Ecuador
Inmobiliara Hills, S.A. de C.V. Mexico
Innovacion Creativa, S.A. de C.V. Mexico
Inter-Hamol, S.A. Luxembourg
International Equitable Assocation
(Industrial & Commercial) Limited Nigeria
JG Soap Co. Delaware
JGP Co. Cayman Islands
JPK Co. Cayman Islands
JP Soap Co. Delaware
K.G. Caviar Im-Und Export, GmbH & Co. Germany
Kolynos Corporation Delaware
Kolynos do Brasil Ltda Brazil
Lournay Sales, Inc. Delaware
Mennen de Nicaragua, S.A. Delaware
Mennen Guatemala, S.A. Guatemala
Mennen Interamerica Limited Delaware
Mennen Investments Inc. Delaware
Mennen Limited Delaware
Mennen Products (Pty) Ltd South Africa
Mennen South Africa, Ltd Delaware
Mission Hill's Property Corporation Delaware
Mission Hills, S.A. de C.V. Mexico
New Science, Inc. Delaware
Norwood International Incorporated Delaware
ODOL Sociedad Anonima Industrial y Commercial Argentina
Olive Music Publishing Corporation Delaware
Oraltech Company, Limited British Virgin Islands
Palmolive (Guangzhou) Co. Ltd. China
Paramount Research, Inc. Delaware
Pet Chemicals Inc. Florida
Polyana S.A. Uruguay
Princess House de Mexico, S.A. de C.V. Mexico
Productors Halogenados Copalven, C.A. Venezuela
<PAGE>
EXHIBIT 21
Page 6 of 6
State in which
Incorporated or Country
Name of Company in which Organized
- --------------- ------------------
P.T. Colgate-Palmolive Indonesia Indonesia
P.T. Hawley & Hazel Indonesia Indonesia
Purity Holding Company Delaware
Purity Music Publishing Corporation Delaware
Refresh Company Limited Dominica
Samuel Taylor Holdings B.V. Netherlands
Siam Purity Distribution Co. Ltd. Thailand
Societe Industriale de Bourbon, S.I.B. Reunion
Softsoap Enterprises, Inc. Massachusetts
Somerset Collections Inc. Massachusetts
Southhampton-Hamilton Company Delaware
The Lournay Company, Inc. Delaware
The Mennen Company New Jersey
The Murphy-Phoenix Company Ohio
VCA, Inc. Delaware
Veterinary Companies of America, Inc. Delaware
Village Bath Products, Inc. Minnesota
Vipont Pharmaceutical, Inc. Delaware
XEB, Inc New Jersey
ZAO Colgate-Palmolive (Russia) Russia
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report, dated February 2, 1999, included in this Form 10-K, into the
Company's previously filed Registration Statement File Nos. 2-76922, 2-96982,
33-17136, 33-27227, 33-34952, 33-15515, 33-48832, 33-48840, 33-58746, 33-61038,
33-78424, 33-58887, 33-58231, 33-64753, 333-38251 and 333-45679.
/s/ Arthur Andersen LLP
New York, New York
March 25, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 182
<SECURITIES> 13
<RECEIVABLES> 1,087
<ALLOWANCES> 36
<INVENTORY> 746
<CURRENT-ASSETS> 2,245
<PP&E> 4,127
<DEPRECIATION> 1,538
<TOTAL-ASSETS> 7,685
<CURRENT-LIABILITIES> 2,114
<BONDS> 2,301
366
0
<COMMON> 376
<OTHER-SE> 1,344
<TOTAL-LIABILITY-AND-EQUITY> 7,685
<SALES> 8,971
<TOTAL-REVENUES> 8,971
<CGS> 4,290
<TOTAL-COSTS> 3,197
<OTHER-EXPENSES> 61
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 173
<INCOME-PRETAX> 1,250
<INCOME-TAX> 401
<INCOME-CONTINUING> 849
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 849
<EPS-PRIMARY> 2.81
<EPS-DILUTED> 2.61
</TABLE>
