<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 June 30, 2000.
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)
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 issuer's classes of
common stock, as of the latest practical date:
Class Shares Outstanding Date
-------------------------- ------------------------ -------------------
Common, $1.00 par value 574,377,429 July 31, 2000
<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 Six Months Ended
June 30, June 30,
-------- --------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 2,336.7 $ 2,285.0 $ 4,578.5 $ 4,460.3
Cost of sales 1,065.8 1,063.7 2,086.4 2,073.1
---------- ---------- ---------- ----------
Gross profit 1,270.9 1,221.3 2,492.1 2,387.2
Selling, general and administrative
expenses 832.8 831.5 1,649.5 1,632.5
Interest expense 51.2 54.5 100.3 108.5
Interest income (7.0) (10.3) (15.0) (18.4)
---------- ---------- ---------- ----------
Income before income taxes 393.9 345.6 757.3 664.6
Provision for income taxes 132.0 117.5 255.5 227.6
---------- ---------- ---------- ----------
Net income $ 261.9 $ 228.1 $ 501.8 $ 437.0
========== ========== ========== ==========
Earnings per common share:
Basic $ .45 $ .38 $ .85 $ .73
========== ========== ========== ==========
Diluted $ .42 $ .36 $ .80 $ .68
========== ========== ========== ==========
Dividends declared per common share* $ - $ - $ .32 $ .28
=========== =========== ========== ==========
</TABLE>
* Includes two dividend declarations in the first quarter periods.
See Notes to Condensed Consolidated Financial Statements.
2
<PAGE>
COLGATE-PALMOLIVE COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(Dollars in Millions)
(Unaudited)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
ASSETS
------
June 30, December 31,
2000 1999
------------- -------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 224.2 $ 199.6
Marketable securities 14.5 35.6
Receivables (less allowances of $38.1 and $37.2) 1,190.1 1,100.8
Inventories 751.0 783.7
Other current assets 219.2 235.1
----------- -----------
2,399.0 2,354.8
Property, plant and equipment:
Cost 4,211.2 4,166.0
Less: Accumulated depreciation 1,692.8 1,614.9
----------- -----------
2,518.4 2,551.1
Goodwill and other intangible assets
(net of accumulated amortization
of $620.8 and $578.9) 2,129.1 2,185.4
Other assets 313.6 331.8
----------- -----------
$ 7,360.1 $ 7,423.1
=========== ===========
</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
------------------------------------
June 30, December 31,
2000 1999
-------- --------
<S> <C> <C>
Current Liabilities:
Notes and loans payable $ 151.5 $ 207.3
Current portion of long-term debt 242.9 338.9
Accounts payable 724.6 764.8
Accrued income taxes 143.5 116.6
Other accruals 797.1 845.9
------------ ------------
2,059.6 2,273.5
Long-term debt 2,532.3 2,243.3
Deferred income taxes 462.3 398.6
Other liabilities 665.9 674.0
Shareholders' equity:
Preferred stock 358.6 366.5
Common stock 732.9 732.9
Additional paid-in capital 1,097.8 1,063.2
Retained earnings 4,522.0 4,212.3
Cumulative foreign currency
translation adjustments (1,189.8) (1,136.2)
------------ ------------
5,521.5 5,238.7
Unearned compensation (345.7) (348.6)
Treasury stock, at cost (3,535.8) (3,056.4)
------------ ------------
1,640.0 1,833.7
------------ ------------
$ 7,360.1 $ 7,423.1
============ ============
</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>
-----------------------------------------------------------------------------------------------------------------
Six Months Ended
----------------
June 30,
--------
2000 1999
-------- ---------
<S> <C> <C>
Operating Activities:
--------------------
Net cash provided by operating activities $ 657.2 $ 551.5
Investing Activities:
--------------------
Capital expenditures (157.2) (145.9)
Payments for acquisitions, net of cash acquired (30.0) (19.6)
Sale of non-core product lines - 89.7
Sale of (investments in) marketable securities 19.1 (42.7)
Proceeds from sale of long-term investments 103.5 3.2
Other (37.4) (6.7)
---------- ----------
Net cash used for investing activities (102.0) (122.0)
Financing Activities:
--------------------
Principal payments on debt (333.1) (303.1)
Proceeds from issuance of debt 456.0 378.4
Dividends paid (191.9) (171.5)
Purchase of common stock (465.4) (302.0)
Other 6.4 (12.1)
---------- ----------
Net cash used for financing activities (528.0) (410.3)
Effect of exchange rate changes on
cash and cash equivalents (2.6) (2.8)
---------- ----------
Net increase in cash and cash equivalents 24.6 16.4
Cash and cash equivalents at beginning of period 199.6 181.7
---------- ----------
Cash and cash equivalents at end of period $ 224.2 $ 198.1
========== ==========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
5
<PAGE>
COLGATE-PALMOLIVE COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(Dollars and Shares 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>
June 30, December 31,
2000 1999
------ ------------
<S> <C> <C>
Raw material and supplies $ 231.6 $ 259.6
Work-in-process 33.5 33.2
Finished goods 485.9 490.9
-------- --------
$ 751.0 $ 783.7
======== ========
</TABLE>
4. Earnings Per Share:
<TABLE>
<CAPTION>
Three Months Ended June 30, 2000 Three Months Ended June 30, 1999
-------------------------------- --------------------------------
Per Per
Income Shares Share Income Shares Share
------ ------ ----- ------ ------ -----
<S> <C> <C> <C> <C> <C> <C>
Net income $261.9 $228.1
Preferred dividends (5.1) (5.1)
--------- ---------
Basic EPS 256.8 576.3 $.45 223.0 584.1 $.38
==== ====
Stock options 10.3 12.2
ESOP conversion 5.0 42.7 4.4 44.1
-------- ------ -------- -----
Diluted EPS $261.8 629.3 $.42 $227.4 640.4 $.36
======== ===== ==== ====== ===== ====
</TABLE>
6
<PAGE>
COLGATE-PALMOLIVE COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(Dollars and Shares in Millions Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
Six Months Ended June 30, 2000 Six Months Ended June 30, 1999
------------------------------ ------------------------------
Per Per
Income Shares Share Income Shares Share
------ ------ ----- ------ ------ -----
<S> <C> <C> <C> <C> <C> <C>
Net income $ 501.8 $ 437.0
Preferred dividends (10.4) (10.3)
------- -------
Basic EPS 491.4 577.2 $ .85 426.7 583.9 $ .73
===== =====
Stock options 10.6 12.5
ESOP conversion 10.1 43.0 9.1 44.1
------- ------ ------- ------
Diluted EPS $ 501.5 630.8 $ .80 $ 435.8 640.5 $ .68
======= ====== ===== ======= ====== =====
</TABLE>
5. Comprehensive income
Comprehensive income is comprised primarily of net earnings and currency
translation gains and losses. Total comprehensive income for the three and
six months ended June 30, 2000 and 1999 were as follows:
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net income $ 261.9 $ 228.1 $ 501.8 $ 437.0
Foreign currency translation adjustment due to
devaluation of Brazilian Real (15.0) (12.5) (3.2) (236.5)
Other foreign currency translation adjustments (31.2) (14.6) (50.4) (40.9)
--------- --------- --------- ---------
Total comprehensive income $ 215.7 $ 201.0 $ 448.2 $ 159.6
========= ========= ========= =========
</TABLE>
The charge to cumulative translation adjustment resulting from the
devaluation of the Brazilian Real in the six months ended June 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)
(Unaudited)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
6. Segment information:
Three months ended June 30, Six months ended June 30,
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Sales
North America $ 567.4 $ 534.9 $ 1,115.3 $ 1,068.2
Latin America 635.8 613.6 1,224.2 1,148.1
Europe 480.0 495.4 942.4 996.9
Asia/Africa 378.8 377.8 754.3 738.8
----------- ----------- ----------- -----------
Total Oral, Personal and
Household Care 2,062.0 2,021.7 4,036.2 3,952.0
Total Pet Nutrition 274.7 263.3 542.3 508.3
----------- ----------- ----------- -----------
Net Sales $ 2,336.7 $ 2,285.0 $ 4,578.5 $ 4,460.3
=========== =========== =========== ===========
Earnings
North America $ 127.3 $ 103.1 $ 241.6 $ 216.1
Latin America 144.1 129.8 285.7 258.0
Europe 83.0 82.4 167.2 172.0
Asia/Africa 46.1 42.9 93.6 85.3
----------- ----------- ----------- -----------
Total Oral, Personal and
Household Care 400.5 358.2 788.1 731.4
Total Pet Nutrition 58.0 51.0 113.6 95.5
Corporate overhead and other (20.4) (19.4) (59.1) (72.2)
----------- ----------- ----------- -----------
Earnings before interest and
taxes 438.1 389.8 842.6 754.7
Interest expense, net (44.2) (44.2) (85.3) (90.1)
----------- ----------- ----------- -----------
Income before income taxes $ 393.9 $ 345.6 $ 757.3 $ 664.6
=========== =========== =========== ===========
</TABLE>
7. In July 2000, the Financial Accounting Standards Board's Emerging Issues
Task Force (EITF) reached a consensus on Issue No. 00-14, "Accounting for
Certain Sales Incentives". This issue addresses the recognition,
measurement, and income statement classification for various types of sales
incentives including discounts, coupons, rebates and free products. The
Company will adopt this consensus in the fourth quarter of 2000. While the
impact of this consensus on the Company's consolidated financial statements
is still being evaluated, it is expected to only impact revenue and expense
classifications and not change reported net income.
8. Reference is made to the Company's Annual Report on Form 10-K filed with
the Securities and Exchange Commission for the year 1999 for a complete
set of financial notes including the Company's significant accounting
policies.
8
<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 $2,336.7 in the second quarter of 2000, a 2% increase
over the 1999 second quarter, reflecting unit volume gains of 6% partially
offset by a decline in foreign currencies. Sales would have risen 7%, excluding
the effect of foreign exchange declines.
Second quarter sales in the Oral, Personal and Household Care segment were
$2,062.0, a 2% increase as compared to 1999 sales of $2,021.7 on volume growth
of 6%.
Colgate-North America sales were $567.4 in the second quarter of 2000. Sales,
excluding divested businesses, grew 8% on volume gains of 7% driven by
introductions of new products in all core categories. These new products
included the battery-powered Colgate Actibrush toothbrush, and Colgate Sensitive
Maximum Strength and Colgate Sparkling White toothpastes. Also contributing to
increased sales were Palmolive Spring Sensations dishwashing liquid and Irish
Spring aloe bar soap, both introduced in late 1999.
Colgate-Latin America second quarter sales increased 4% to $635.8 on volume
gains of 7%, led by strong volume growth in Mexico, Venezuela, Peru, the
Dominican Republic and Central America. The regional introduction of Colgate
Fresh Confidence gel toothpaste, now in 14 countries, as well as the continued
success of herbal toothpastes and Palmolive Botanicals shampoo and soap
strengthened market shares in the Oral and Personal Care categories.
Colgate-Europe second quarter sales decreased 3% to $480.0 as volume gains of 6%
were negatively impacted by the weakened euro. Excluding the impact of foreign
currency, sales would have risen 6% largely due to volume increases in the
United Kingdom, Italy, Greece, Spain, Poland, Turkey and the Nordic group. The
Colgate Actibrush, and Colgate Fresh Confidence and Colgate Herbal toothpastes
led Oral Care market share growth in the region. Market share growth in the
Personal and Household Care categories also continued, generated by Palmolive
Aquarium liquid hand soap, new varieties of Palmolive shower gel, Ajax Shower
Power and Palmolive Spring Sensations dishwashing liquid.
Colgate-Asia/Africa second quarter sales increased 1% to $378.8 as volume grew
6% largely as a result of strong growth in China, the Philippines, Malaysia,
Australia, Vietnam and South Africa. China continued to experience significant
growth through geographic expansion as well as the introduction of new products
such as Softlan fabric softener and Palmolive Naturals shampoo. The region also
experienced strong volume growth from new products such as Colgate Fresh
Confidence, Colgate Herbal and Colgate Triple Action toothpastes. In addition,
effective July 1, 2000, the Company formed a majority-owned joint venture with
China's market-leading toothbrush company, Jiangsu Sanxiao Group Co. Ltd.
Hill's Pet Nutrition second quarter sales increased 4% to $274.7 with unit
volume gains of 6%. Domestic volume rose through strong veterinary endorsements,
higher sales from Science Diet Feline Hairball Control and its lifestage
variants and effective national selling programs. Hill's-International
experienced volume growth in Japan, following the launch of Science Diet Feline
Hairball Control, and in Europe and Asia-Pacific, where the introduction of
educational programs has led to strong sales growth of Prescription Diet
products.
9
<PAGE>
COLGATE-PALMOLIVE COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
(Dollars in Millions Except Per Share Amounts)
--------------------------------------------------------------------------------
Sales in the Oral, Personal and Household Care segment for the six months ended
June 30, 2000 were up 2% to $4,036.2 from the comparable period in 1999 as
volume rose 7% partially offset by a decline in foreign currencies. Within this
segment, Colgate-North America sales excluding divested businesses increased 7%
on volume growth of 6%, Colgate-Latin America sales increased 7% on volume
growth of 8%, Colgate-Europe sales decreased 5% while volume grew 5% and
Colgate-Asia/Africa sales increased 3% on volume growth of 7%.
Worldwide gross profit margin for the second quarter of 2000 increased 100 basis
point to 54.4% from 53.4% for the comparable period in 1999. The Company
continued to benefit from manufacturing cost reduction initiatives,
global sourcing and product mix.
Selling, general and administrative expenses as a percentage of sales decreased
to 35.6% in the second quarter of 2000 from 36.4% in 1999, and to 36.0% in the
first half of 2000 from 36.6% for the comparable period in 1999, due to overhead
cost efficiency programs.
Earnings before interest and taxes (EBIT) increased 12.4% to $438.1 in the
second quarter of 2000, and reached a level of 18.7% of sales versus 17.1% in
second quarter of 1999. For the first half of 2000 EBIT increased 11.6% to
$842.6, a level of 18.4% of sales as compared to 16.9% in 1999.
Interest expense, net of interest income, remained level at $44.2 in the second
quarter of 2000 as compared with 1999. For the first half of 2000 interest
expense decreased to $85.3 compared with $90.1 in 1999, primarily due to strong
cash generation and the lower dollar cost of foreign currency denominated debt.
The effective tax rate for the second quarter of 2000 was 33.5% versus 34.0% for
the second quarter of 1999. The effective rate for the first half of 2000 was
33.7% versus 34.2% for the same period in 1999. The 33.7% rate reflects the
Company's current estimate of its full year effective income tax rate which is
slightly higher than the 1999 full year rate of 32.8%. The rates in both years
include the benefits of global tax planning strategies, including the
realization of tax credits.
Net income for the second quarter of 2000 increased 14.8% to $261.9 or $.42 per
share on a diluted basis compared with $228.1 or $.36 per share in the prior
year. For the first half of 2000, net income increased 14.8% to $501.8 or $.80
per share on a diluted basis compared with $437.0 or $.68 per share in the prior
year.
Liquidity and Capital Resources
-------------------------------
Net cash provided by operations increased 19% to $657.2 in the 2000 first half
compared with $551.5 in the 1999 first half. The improvement was primarily
generated by the increase in operating profit. At June 30, 2000, $634.4 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. The Company's liquidity remains strong. In March 2000, Standard and Poors
increased the Company's debt rating from A to A+.
Reference should be made to the Company's 1999 Annual Report on Form 10-K for
additional information regarding liquidity and capital resources.
10
<PAGE>
COLGATE-PALMOLIVE COMPANY
PART II. OTHER INFORMATION
-------- -----------------
--------------------------------------------------------------------------------
Item 1. Legal Proceedings
------- -----------------
For information regarding legal matters refer to Item 3 on page 4 of
the registrant's Annual Report on Form 10-K for the year ended
December 31, 1999 and Note 14 to the consolidated financial statements
included therein on page 36.
Item 4. Submission of Matters to a Vote of Security Holders
------- ---------------------------------------------------
The Company's annual meeting of stockholders was held on May 9, 2000.
The matters voted on and the results of the vote were as follows:
(a) Jill K. Conway, Ronald E. Ferguson, Ellen M. Hancock, David W.
Johnson, John P. Kendall, Richard J. Kogan, Reuben Mark and
Howard B. Wentz, Jr. were elected directors of the Company. The
results of the vote were as follows:
Votes Received Votes Withheld
-------------- --------------
Jill K. Conway 520,188,400 4,941,627
Ronald E. Ferguson 520,145,297 4,984,730
Ellen M. Hancock 520,252,837 4,877,190
David W. Johnson 520,003,027 5,127,000
John P. Kendall 519,329,489 5,800,538
Richard J. Kogan 520,382,647 4,747,380
Reuben Mark 520,173,628 4,956,399
Howard B. Wentz, Jr. 519,580,310 5,549,717
(b) The ratification of the selection of Arthur Andersen LLP as
auditors for the year ending December 31, 2000 was approved. The
results of the vote were as follows:
Votes For Votes Against Abstentions
------------- ------------- -----------
519,282,642 3,503,968 2,343,417
11
<PAGE>
COLGATE-PALMOLIVE COMPANY
PART II. OTHER INFORMATION (continued)
-------- ------------------
--------------------------------------------------------------------------------
Item 6. Exhibits and Reports on Form 8-K
------- --------------------------------
(a) Exhibits:
Exhibit 4-B(b) Colgate-Palmolive Company Employee Stock Ownership
Trust effective as of June 1, 1989, as
amended
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
12
<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:
August 10, 2000 /s/ Stephen C. Patrick
---------------------------
Stephen C. Patrick
Chief Financial Officer
Principal Accounting Officer:
August 10, 2000 /s/ Dennis J. Hickey
---------------------------
Dennis J. Hickey
Vice President and
Corporate Controller
13
