<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF
1934 SECURITIES
For the transition period from to .
-------- --------
Commission File Number 1-644
COLGATE-PALMOLIVE COMPANY
-----------------------------------------------------------------
(Exact name of registrant as specified in its charter )
DELAWARE 13-1815595
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
300 PARK AVENUE, NEW YORK, NEW YORK 10022
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(212) 310-2000
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
NO CHANGES
- --------------------------------------------------------------------------------
(Former name, former address, and former fiscal year, if changed since last
report).
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
------- --------
Indicate the number of shares outstanding of each of the issuers classes of
common stock, as of the latest practical date:
Class Shares Outstanding Date
- ----------------------- ----------------------------- ----------------
Common, $1.00 par value 582,581,242 October 31, 1999
<PAGE>
PART I. FINANCIAL INFORMATION
- ------- ---------------------
COLGATE-PALMOLIVE COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
-------------------------------------------
(Dollars in Millions Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $2,314.0 $2,265.4 $6,774.3 $6,681.4
Cost of sales 1,060.4 1,072.8 3,133.5 3,192.7
-------- -------- -------- --------
Gross profit 1,253.6 1,192.6 3,640.8 3,488.7
Selling, general and administrative
expenses 852.0 825.1 2,484.5 2,430.9
Interest expense 54.3 52.5 162.8 153.8
Interest income (10.5) (5.8) (28.9) (19.8)
-------- -------- -------- --------
Income before income taxes 357.8 320.8 1,022.4 923.8
Provision for income taxes 118.1 105.9 345.7 309.4
-------- -------- -------- --------
Net income $ 239.7 $ 214.9 $ 676.7 $ 614.4
======== ======== ======== ========
Earnings per common share:
Basic $ .40 $ .35 $ 1.13 $ 1.01
======== ======== ======== ========
Diluted $ .38 $ .33 $ 1.06 $ .94
======== ======== ======== ========
Dividends declared per common share $ .16 $ .14 $ .43 $ .41
======== ======== ======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
2
<PAGE>
COLGATE-PALMOLIVE COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(Dollars in Millions)
(Unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
------
September 30, December 31,
1999 1998
--------------- ------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 262.5 $ 181.7
Marketable securities 9.8 12.8
Receivables (net of allowances of
$36.7 and $35.9) 1,154.9 1,085.6
Inventories 791.1 746.0
Other current assets 212.2 218.8
-------- --------
2,430.5 2,244.9
Property, plant and equipment, at cost: 4,094.9 4,127.3
Less: Accumulated depreciation 1,617.2 1,538.1
-------- --------
2,477.7 2,589.2
Goodwill and other intangible assets
(net of accumulated amortization
of $559.9 and $556.7) 2,184.7 2,524.1
Other assets 348.3 327.0
-------- --------
$7,441.2 $7,685.2
======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
3
<PAGE>
COLGATE-PALMOLIVE COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(Dollars in Millions)
(Unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
September 30, December 31,
1999 1998
--------------- ------------
<S> <C> <C>
Current Liabilities:
Notes and loans payable $ 199.1 $ 175.3
Current portion of long-term debt 423.0 281.6
Accounts payable 744.1 726.1
Accrued income taxes 67.4 74.2
Other accruals 927.8 857.2
--------- ---------
2,361.4 2,114.4
Long-term debt 2,187.1 2,300.6
Deferred income taxes 515.7 448.0
Other liabilities 678.5 736.6
Shareholders' Equity:
Preferred stock 368.9 376.2
Common stock 732.9 732.9
Additional paid-in capital 865.1 824.6
Retained earnings 4,053.2 3,641.0
Cumulative foreign currency
translation adjustments (1,129.5) (799.8)
--------- ---------
4,890.6 4,774.9
Unearned compensation (348.7) (355.5)
Treasury stock, at cost (2,843.4) (2,333.8)
--------- ---------
1,698.5 2,085.6
--------- ---------
$ 7,441.2 $ 7,685.2
========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
4
<PAGE>
COLGATE-PALMOLIVE COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(Dollars in Millions)
(Unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Nine Months Ended
-----------------
September 30,
-------------
1999 1998
-------------------- --------------------
<S> <C> <C>
Operating Activities:
- ---------------------
Net cash provided by operating activities $ 964.1 $ 835.5
Investing Activities:
- ---------------------
Capital expenditures (225.1) (237.9)
Payments for acquisitions, net of cash acquired (44.1) (0.7)
Sale of non-core product lines 91.5 50.3
Investments in marketable securities and
other investments 17.2 14.0
Other (23.5) (13.8)
------- -------
Net cash used for investing activities (184.0) (188.1)
Financing Activities:
- ---------------------
Principal payments on debt (370.3) (372.1)
Proceeds from issuance of debt 408.5 452.4
Purchase of common stock (466.8) (423.2)
Dividends paid (264.5) (256.5)
Other (4.4) (22.8)
------- -------
Net cash used for financing activities (697.5) (622.2)
Effect of exchange rate changes on
cash and cash equivalents (1.8) 1.7
------- -------
Net increase in cash and cash equivalents 80.8 26.9
Cash and cash equivalents at beginning of period 181.7 183.1
------- -------
Cash and cash equivalents at end of period $ 262.5 $ 210.0
======= =======
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
5
<PAGE>
COLGATE-PALMOLIVE COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(Dollars in Millions Except Per Share Amounts)
(Unaudited)
1. The condensed consolidated financial statements reflect all normal recurring
adjustments which, in management's opinion, are necessary for a fair
presentation of the results for interim periods. Results of operations for
the interim periods may not be representative of results to be expected for a
full year.
2. Provision for certain expenses, including income taxes, media advertising,
consumer promotion and new product introductory costs, are based on full year
assumptions. Such expenses are charged to operations in the year incurred and
are included in the accompanying condensed consolidated financial statements
in proportion with the passage of time or with estimated annual tax rates or
annual sales.
3. Inventories by major classes were as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------------- ------------------
<S> <C> <C>
Raw material and supplies $242.1 $257.9
Work-in-process 37.8 32.9
Finished goods 511.2 455.2
------ ------
$791.1 $746.0
====== ======
</TABLE>
4. Earnings Per Share:
<TABLE>
<CAPTION>
Three Months Ended
------------------
September 30, 1999 September 30, 1998
---------------------------------- ----------------------------------
Per Per
Income Shares Share Income Shares Share
------------ --------- -------- ------------ --------- --------
<S> <C> <C> <C> <C> <C> <C>
Net income $239.7 $214.9
Preferred dividends (5.3) (5.3)
------ ------
Basic EPS 234.4 582.8 $.40 209.6 590.6 $.35
===== =====
Stock options 11.9 12.8
ESOP conversion 5.2 43.8 4.7 44.9
---- ----- ---- -----
Diluted EPS $239.6 638.5 $.38 $214.3 648.3 $.33
====== ===== ===== ====== ===== =====
</TABLE>
6
<PAGE>
COLGATE-PALMOLIVE COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(Dollars in Millions Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
-----------------
September 30, 1999 September 30, 1998
---------------------------------- ----------------------------------
Per Per
Income Shares Share Income Shares Share
------------ --------- -------- ------------ --------- --------
<S> <C> <C> <C> <C> <C> <C>
Net income $676.7 $614.4
Preferred dividends (15.7) (15.7)
------ ------
Basic EPS 661.0 583.5 $1.13 598.7 591.3 $1.01
====== ======
Stock options 12.3 14.0
ESOP conversion 14.3 44.2 13.8 44.8
------ ----- ------ -----
Diluted EPS $675.3 640.0 $1.06 $612.5 650.1 $ .94
====== ===== ====== ====== ===== ======
</TABLE>
5. Comprehensive income
Comprehensive income is comprised primarily of net earnings and currency
translation gains and losses. Total comprehensive income for the three
months and nine months ended September 30, 1999 and 1998 was as follows:
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net income $239.7 $214.9 $ 676.7 $614.4
Foreign currency translation adjustment due to
devaluation of Brazilian Real (41.5) - (278.0) -
Other foreign currency translation adjustments (10.8) 8.1 (51.7) (10.4)
------ ------ ------- ------
Total comprehensive income $187.4 $223.0 $ 347.0 $604.0
====== ====== ======= ======
</TABLE>
The charge to cumulative translation adjustment resulting from the devaluation
of the Brazilian Real in the three months and nine months ended September 30,
1999 related to foreign currency denominated goodwill and property, plant and
equipment and did not include economic losses on monetary assets.
7
<PAGE>
COLGATE-PALMOLIVE COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(Dollars in Millions Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
6. Segment Information -
Three months ended Nine months ended
September 30, September 30,
1999 1998 1999 1998
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Net Sales
North America $ 538.1 $ 530.8 $1,606.3 $1,540.5
Latin America 593.8 595.6 1,741.9 1,782.7
Europe 529.0 532.6 1,525.9 1,553.7
Asia/Africa 386.8 360.6 1,125.6 1,084.6
-------- -------- -------- --------
Total Oral, Personal and Household Care 2,047.7 2,019.6 5,999.7 5,961.5
Total Pet Nutrition 266.3 245.8 774.6 719.9
-------- -------- -------- --------
Net Sales $2,314.0 $2,265.4 $6,774.3 $6,681.4
======== ======== ======== ========
Earnings by Business Segment
North America $ 100.9 $ 100.0 $ 317.0 $ 289.7
Latin America 135.8 113.7 393.8 374.4
Europe 97.0 80.5 269.0 235.5
Asia/Africa 41.1 36.6 126.4 119.7
-------- -------- -------- --------
Total Oral, Personal and Household Care 374.8 330.8 1,106.2 1,019.3
Total Pet Nutrition 56.2 43.5 151.7 122.6
Corporate (29.4) (6.8) (101.6) (84.1)
-------- -------- -------- --------
Earnings before interest and taxes 401.6 367.5 1,156.3 1,057.8
Interest expense, net (43.8) (46.7) (133.9) (134.0)
-------- -------- -------- --------
Income before income taxes $ 357.8 $ 320.8 $1,022.4 $ 923.8
======== ======== ======== ========
</TABLE>
7. On May 5, 1999, the Company's Board of Directors approved a two-for-one
common stock split effected in the form of a 100% stock dividend. As a result
of the split, shareholders received one additional share of common stock for
each share they held as of May 19, 1999, which was distributed June 30, 1999.
Par value remained at $1 per share. All share and per share amounts contained
in the Condensed Consolidated Financial Statements and Exhibits have been
restated to give effect to the stock split.
8
<PAGE>
COLGATE-PALMOLIVE COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(Dollars in Millions Except Per Share Amounts)
(Unaudited)
- --------------------------------------------------------------------------------
8. In June 1999, the Financial Accounting Standards Board deferred the effective
date of Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" to fiscal years beginning
after June 15, 2000. 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. The
statement is not expected to have a material impact on the Company's
financial position, results of operations or cash flows.
9. Reference is made to the Company's Annual Report on Form 10-K filed with the
Securities and Exchange Commission for the year 1998 for a complete set of
financial notes including the Company's significant accounting policies.
9
<PAGE>
COLGATE-PALMOLIVE COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
(Dollars in Millions Except Per Share Amounts)
- --------------------------------------------------------------------------------
Results of Operations
- ---------------------
Worldwide sales reached $2,314.0 in the third quarter of 1999, a 2% increase
from the 1998 third quarter, reflecting unit volume gains of 6% offset by a
decline in foreign currencies. Sales in the Oral, Personal and Household Care
segment were $2,047.7, up 1% from 1998 on volume growth of 5%.
Colgate-Latin America sales were level at $593.8 on volume increases of 5%,
offset by foreign currency negatives. Mexico, Venezuela, Colombia and Central
America led the region with strong volume gains. The success of products such
as Colgate Double Cool Stripe toothpaste and Colgate Sensation whitening
toothpaste, as well as the rollout of new products such as Lady Speed Stick gel
and Palmolive liquid hand soap contributed to volume growth throughout the
region.
Colgate-North America sales reached $538.1 in the third quarter of 1999. Sales
and volume, excluding divested businesses, grew 4% and 6%, respectively.
Contributing to strong growth is the continued marketing success of Colgate
Total and Colgate Total Fresh Stripe toothpaste coupled with the launch of
Speedstick Clear antiperspirant and Colgate Navigator toothbrush in the third
quarter.
Colgate-Europe third quarter sales decreased less than 1% to $529.0 on unit
volume increases of 6% offset by foreign exchange declines. Italy, Germany,
United Kingdom and France were among the countries delivering strong volume
during the quarter as a result of increased sales of new Ajax cleaning products
and Palmolive shower gels.
Colgate-Asia/Africa third quarter sales increased 7% to $386.8. The strong
performance is attributed to rebounding economies in the ASEAN countries and
strong growth in China and India. Volume increased 9% with the strongest gain
in China as a result of continued geographic expansion and new product launches
in Oral Care.
Hill's Pet Nutrition segment sales increased 8% to $266.3 on unit volume gains
of 9%. Hill's has experienced new product momentum particularly with the
continued success of Science Diet Hairball Control for cats and new Prescription
Diet formulas for the dietary management of pets with liver and renal disease.
Hill's-International benefited from new products, increased advertising in
Japan, expanded selling activities in key European markets and significant cost
savings projects.
For the nine months of 1999, sales increased 2% to $6,774.3 on 4% unit volume
growth. Sales in the Oral, Personal and Household Care segment for the nine
months ended September 30, 1999 were $5,999.7, up 1% from the comparable period
in 1998 on volume growth of 3%. Within this segment, Colgate-Latin America
sales decreased 2% on volume growth of 2%, Colgate-North America sales excluding
divested businesses increased 6% on volume growth of 8%, Colgate-Europe sales
decreased 2% on volume growth of 1% and Colgate-Asia/Africa sales increased 4%
as unit volume increased 6%. Hill's sales increased 8% on 8% volume growth.
10
<PAGE>
COLGATE-PALMOLIVE COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
(Dollars in Millions Except Per Share Amounts)
- --------------------------------------------------------------------------------
Worldwide gross profit margin for the third quarter of 1999 increased to 54.2%
from 52.6% in 1998 as the Company continued to benefit from streamlining
manufacturing costs, global sourcing and other cost reduction programs. Gross
profit margin for the first nine months of 1999 increased to 53.7% from 52.2% in
1998.
Selling, general and administrative (SG&A) expenses as a percentage of sales,
rose slightly compared with prior periods, increasing to 36.8% in the third
quarter of 1999 from 36.4% in 1998, and increasing to 36.7% in the first nine
months of 1999 from 36.4% for the comparable period in 1998, due to increased
Year 2000, restructuring and SAP implementation costs.
Earnings before interest and taxes (EBIT) increased 9% to $401.6 in the 1999
third quarter, and reached a level of 17.4% of sales versus 16.2% in the third
quarter of 1998. For the first nine months of 1999 EBIT increased 9% to
$1,156.3, a level of 17.1% of sales as compared to 15.8% in 1998.
Interest expense, net of interest income, decreased to $43.8 in the 1999 third
quarter as compared with $46.7 in 1998 due to increased cash generation. For
the first nine months of 1999, interest expense remained level at $133.9
compared with $134.0 in 1998.
The effective tax rate for the third quarter of 1999 and 1998 remained level at
33.0%. The effective rate for the first nine months of 1999 was 33.8% versus
33.5% for the same period in 1998. The 33.8% rate reflects the Company's current
estimate of its full year effective income tax rate which is slightly higher
than the 1998 full year rate. The rate in both 1999 and 1998 benefited from
global tax planning strategies, including the realization of tax credits.
Net income for the third quarter of 1999 increased 12% to $239.7 or $0.40 per
share compared with $214.9 or $0.35 per share in the prior year. For the first
nine months of 1999, net income increased 10% to $676.7 or $1.13 per share
compared with $614.4 or $1.01 per share in the prior year. Fully diluted
earnings per share increased 15% in the third quarter and 13% in the nine months
of 1999.
Liquidity and Capital Resources
- -------------------------------
Net cash provided by operations increased 15.4% to $964.1 in the first nine
months of 1999 compared with $835.5 in the comparable period of 1998. The
improvement was generated by the increase in operating profit and working
capital management. At September 30, 1999, $610.4 of commercial paper was
classified as long-term debt in accordance with the Company's intent and ability
to refinance these obligations on a long-term basis.
Reference should be made to the 1998 Annual Report on Form 10-K for additional
information regarding liquidity and capital resources.
11
<PAGE>
COLGATE-PALMOLIVE COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
(Dollars in Millions Except Per Share Amounts)
- --------------------------------------------------------------------------------
Year 2000 Update
- ----------------
The Company's plans developed to address the possible exposures related to the
year 2000 on the Company's operations were outlined in the 1998 Form 10-K. The
Company has completed its conversions to SAP, which is year 2000 compliant.
Furthermore, the Company's computer systems supporting all of the Company's
operations have either been converted to SAP (or other year 2000 compliant
software) or remediated to be year 2000 compliant.
The year 2000 project plan has not been materially changed and has progressed in
accordance with previously identified time schedules outlined in the 1998 Form
10-K. Specifically, all five phases of the plan are complete with respect to
the system testing, remediation, certification and contingency plans for
critical internal systems. In addition, we have been working closely with our
business critical suppliers to ensure that we can continue to meet consumer
demand. Progress against project plan timelines was and continues to be
monitored through a system of internal reporting and is presented, along with
the implementation of year 2000 transition plans, to senior management and the
Audit Committee of the Board of Directors or the full Board on a frequent basis.
The Company currently estimates the total incremental cost, including external
contractor costs, costs to modify existing systems and costs of internal
resources dedicated to preparing for the year 2000, to be approximately $30
million, of which over 90% has been spent to date. These costs are charged to
expense as incurred and are incremental to the investment in SAP systems.
Readers are cautioned that forward-looking statements made in Management's
Discussion and Analysis are based on management's estimates, assumptions and
projections. Some of the factors that could cause actual results to differ
materially from expectations expressed in the Company's forward-looking
statements are described in the Company's Form 8-K filed with the Securities and
Exchange Commission on November 13, 1998 under the caption "Cautionary Statement
on Forward-Looking Statements". These factors include, but are not limited to,
the risks associated with international operations, the activities of
competitors, retail trade practices, the success of new product introductions,
cost pressures and manufacturing and environmental matters.
12
<PAGE>
PART II. OTHER INFORMATION
- -------- -----------------
- --------------------------------------------------------------------------------
Item 1. Legal Proceedings
- ------- -----------------
For information regarding legal matters refer to Note 16 to the
consolidated financial statements on page 37 of the registrant's Annual
Report on Form 10-K for the year ended December 31, 1998.
Item 6. Exhibits and Reports on Form 8-K
- ------- --------------------------------
(a) Exhibits:
Exhibit 12 Ratio of Earnings to Fixed Charges.
Exhibit 27 Financial Data Schedule.
(b) Reports on Form 8-K.
None.
The exhibits indicated above which are not included with the Form 10-Q are
available upon request and payment of a reasonable fee approximating the
registrant's cost of providing and mailing the exhibits. Inquiries should be
directed to:
Colgate-Palmolive Company
Office of the Secretary (10-Q Exhibits)
300 Park Avenue
New York, NY 10022-7499
13
<PAGE>
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COLGATE-PALMOLIVE COMPANY
-------------------------
(Registrant)
Principal Financial Officer:
November 12, 1999 /s/ Stephen C. Patrick
----------------------------
Stephen C. Patrick
Chief Financial Officer
Principal Accounting Officer:
November 12, 1999 /s/ Dennis J. Hickey
----------------------------
Dennis J. Hickey
Vice President and
Corporate Controller
14
<PAGE>
Exhibit 12
----------
COLGATE-PALMOLIVE COMPANY
-------------------------
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
-------------------------------------------------
Dollars in Millions (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine Months Ended
September 30, 1999
------------------
<S> <C>
Income before income taxes $1,022.4
Add:
Interest on indebtedness and amortization of debt expense and
discount or premium 162.8
Portion of rents representative of interest factor 25.7
Interest on ESOP debt, net of dividends 2.3
Less:
Income of less than fifty-percent-owned subsidiaries (4.0)
--------
Income as adjusted $1,209.2
========
Fixed Charges:
Interest on indebtedness and amortization of debt expense and
discount or premium 162.8
Portion of rents representative of interest factor 25.7
Interest on ESOP debt, net of dividends 2.3
Capitalized interest 5.3
--------
Total fixed charges $ 196.1
========
Ratio of earnings to fixed charges 6.2
=====
</TABLE>
In June 1989, the Company's leveraged employee stock ownership plan ("ESOP")
issued $410.0 of long-term notes due through 2009 bearing an average interest
rate of 8.7%. These notes are guaranteed by the Company. Interest incurred on
the ESOP's notes for the nine months ended was $24.0. 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.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
quarterly report on Form 10-Q for the nine months ended September 30, 1999 and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 263
<SECURITIES> 10
<RECEIVABLES> 1,192
<ALLOWANCES> 37
<INVENTORY> 791
<CURRENT-ASSETS> 2,431
<PP&E> 4,095
<DEPRECIATION> 1,617
<TOTAL-ASSETS> 7,441
<CURRENT-LIABILITIES> 2,361
<BONDS> 2,187
0
369
<COMMON> 733
<OTHER-SE> 597
<TOTAL-LIABILITY-AND-EQUITY> 7,441
<SALES> 6,774
<TOTAL-REVENUES> 6,774
<CGS> 3,134
<TOTAL-COSTS> 2,485
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 134
<INCOME-PRETAX> 1,022
<INCOME-TAX> 346
<INCOME-CONTINUING> 677
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 677
<EPS-BASIC> 1.13
<EPS-DILUTED> 1.06
</TABLE>
