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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 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
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)
Registrant's telephone number, including area code 212-310-2000
Securities Registered Pursuant to Section 12 (b) of the Act:
Name of each exchange
Title of each class on which registered
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$4.25 Preferred Stock, without par value,
cumulative dividend New York Stock Exchange
Common Stock, $1.00 par value
New York Stock Exchange
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 29, 1996 the aggregate market value of stock held by
non-affiliates was $11,437.6 million. There were 146,167,529 shares of Common
Stock outstanding as of February 29, 1996.
DOCUMENTS INCORPORATED BY REFERENCE:
Documents Form 10-K Reference
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Portions of Proxy Statement for the 1996 Part III, Items 10 through 13
Annual Meeting
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PART I
ITEM 1. BUSINESS
(a) General Development of the Business
Colgate-Palmolive Company (the "Company") is a corporation which was
organized under the laws of the State of Delaware in 1923. The Company
manufactures and markets a wide variety of products throughout the world for use
by consumers. For recent business developments, refer to the information set
forth in Part II, Item 7 of this report.
(b) Financial Information About Industry Segments
For information about industry segments refer to the information set forth
in Part II, Item 7 of this report.
(c) Narrative Description of the Business
For information regarding description of the business refer to Note 1 to the
Consolidated Financial Statements included herein; "Average number of employees"
appearing under "Historical Financial Summary" included herein; and "Research
and development" expenses appearing in Note 12 to the Consolidated Financial
Statements included herein.
Compliance with environmental rules and regulations has not significantly
affected the Company's capital expenditures, earnings or competitive position.
Capital expenditures for environmental control facilities totaled $12.7 million
in 1995 and are budgeted at $18.3 million for 1996. 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 all
applicable environmental rules and regulations.
(d) Financial Information About Foreign and Domestic Operations and Export Sales
For information concerning geographic area financial data refer to the
information set forth in Part II, Item 7 of this report.
ITEM 2. PROPERTIES
The Company owns and leases a total of 338 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 57 facilities, of which 26 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. Hill's
Pet Nutrition has major facilities in Bowling Green, Kentucky; Topeka, Kansas;
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 281 facilities, of which 113 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.
2
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
For information regarding legal matters see Note 14 to the Consolidated
Financial Statements included herein.
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 25, 1996:
DATE FIRST
ELECTED
NAME AGE OFFICER PRESENT TITLE
- ------------------------------------- --- ---------- -------------------------------------
Reuben Mark.......................... 57 1974 Chairman of the Board and Chief
Executive Officer
William S. Shanahan.................. 55 1983 President and Chief Operating Officer
Robert M. Agate...................... 60 1985 Senior Executive Vice President and
Chief Financial Officer
William G. Cooling................... 51 1981 Chief of Operations, Specialty
Marketing, International Business
Development
Craig B. Tate........................ 50 1989 Chief Technological Officer
Silas M. Ford........................ 58 1983 Executive Vice President Office of
the Chairman
Andrew D. Hendry..................... 48 1991 Senior Vice President General Counsel
and Secretary
John E. Steel........................ 66 1991 Senior Vice President Global
Marketing and Sales
Lois D. Juliber...................... 47 1991 President Colgate-North America
Stephen A. Lister.................... 54 1994 President Colgate-Asia Pacific
David A. Metzler..................... 53 1991 President Colgate-Europe
Michael J. Tangney................... 51 1993 President Colgate-Latin America
Robert C. Wheeler.................... 54 1991 President Hill's Pet Nutrition, Inc.
Steven R. Belasco.................... 49 1991 Vice President Taxation
Brian J. Heidtke..................... 55 1986 Vice President Finance and Corporate
Treasurer
Robert J. Joy........................ 49 1996 Vice President Global Human Resources
Peter D. McLeod...................... 55 1984 Vice President Manufacturing
Engineering Technology
Stephen C. Patrick................... 46 1990 Vice President Corporate Controller
Donald A. Schindel................... 62 1995 Vice President Corporate Development
John H. Tietjen...................... 53 1995 Vice President Global Business
Development
Thomas G. Davies..................... 55 1995 President Global Personal Care
Michael S. Roskothen................. 59 1993 President Global Oral Care
Barrie M. Spelling................... 52 1994 Vice President Global Business
Development, Household Surface Care
Each of the executive officers listed above has served the registrant or its
subsidiaries in various executive capacities for the past five years.
3
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.
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 15 to the Consolidated Financial Statements included
herein; the information under "Capital Stock and Stock Compensation Plans" in
Note 6 to the Consolidated Financial Statements included herein; and the "Number
of shareholders of record" and "Cash dividends declared 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)
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1995 1994 1993
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WORLDWIDE NET SALES BY BUSINESS SEGMENT
Oral, Personal and Household Care...... $7,565.7 $6,735.8 $6,306.4
Pet Nutrition and Other................ 792.5 852.1 834.9
-------- -------- --------
Total Net Sales............................ $8,358.2 $7,587.9 $7,141.3
-------- -------- --------
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SEGMENT NET SALES BY GEOGRAPHIC REGION
North America*
Oral, Personal and Household Care...... $1,784.7 $1,623.1 $1,762.5
Pet Nutrition and Other................ 689.9 776.9 774.8
-------- -------- --------
Total North America........................ 2,474.6 2,400.0 2,537.3
Europe
Oral, Personal and Household Care...... 2,159.7 1,968.2 1,843.6
Pet Nutrition and Other................ 102.6 75.2 60.1
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Total Europe............................... 2,262.3 2,043.4 1,903.7
Latin America**............................ 1,977.2 1,736.5 1,525.8
Asia/Africa**.............................. 1,644.1 1,408.0 1,174.5
-------- -------- --------
Total Net Sales............................ $8,358.2 $7,587.9 $7,141.3
-------- -------- --------
-------- -------- --------
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* Sales from the U.S., Canada and Puerto Rico are combined and presented as
North America.
** Sales in Latin America and Asia/Africa relate to the Oral, Personal and
Household Care segment only. Sales of Pet Nutrition and Other products to
these regions are primarily exported to local distributors and therefore are
included in North America.
4
NET SALES
Worldwide net sales in 1995 increased 10% to $8,358.2 reflecting growth
among all divisions. Excluding the acquisition of Kolynos in January of 1995 and
the sale of non-core businesses in 1994, net sales increased 8% as the Company's
worldwide brand presence led to overall sales gains, overcoming the effects of a
maxi-devaluation and economic recession in Mexico and the effects of a strategic
realignment at Hill's Pet Nutrition. Sales in the Oral, Personal and Household
Care segment were up 12% to $7,565.7 in 1995 benefiting from acquisitions, new
product introductions and further geographic expansion.
Sales in the Asia/Africa region were up 17% overall, led by strong volume
gains in India, Malaysia, Thailand and China, as well as the favorable effects
of the Cibaca acquisition in India and the consolidation, for a portion of the
year, of a new subsidiary in Turkiye. The success of Colgate Total toothpaste,
Palmolive Optims shampoo and Protex personal care products in Asia as well as
strong positioning of laundry bar soaps in Africa have fueled 1995 growth in
this region.
Sales in Europe were up 10% on flat volumes, primarily reflecting the
positive effects of stronger European currencies. Trade consolidation and the
lack of current economic growth continued to affect results throughout Western
Europe, while Central Europe experienced overall growth on volume gains. The
roll-out of Ajax Ultra cleaning products, the strength of Colgate Total and
Colgate Baking Soda toothpastes and the relaunch of Palmolive personal care
products are maintaining the Company's competitive position in the West, while
Colgate toothpastes and Mennen personal care products made significant
contributions to growth in Eastern Europe.
Latin America was up 14% overall, benefiting from the acquisition of the
Kolynos oral care brand, a market leader in this region. Excluding Kolynos,
Latin American results were flat as strong results from most countries offset
the significant decline in Mexico caused by that country's economic downturn.
Sales in Latin America, excluding both Mexico and the impact of the Kolynos
acquisition, grew 24% on a 19% increase in volume. Continued leadership in oral
care throughout the region as well as geographic expansion of Mennen Speed Stick
and Lady Speedstick, development of the dishwashing market under the Axion brand
and continued strength of fabric care led to growth in the region and helped
maintain market shares in Mexico.
North America posted overall sales increases in 1995 of 10% on 9% volume
growth. Contributing to the growth was the introduction of Colgate Baking Soda &
Peroxide toothpaste and increased sales of Irish Spring Waterfall Clean soap and
Palmolive dishwashing liquid & antibacterial hand soap. Year-on-year reported
sales for the Pet Nutrition and Other segment declined, reflecting the sale of
non-core businesses during 1994, partially offset by a modest sales increase of
2% at Hill's Pet Nutrition. Hill's growth for the full year was restrained by
the temporary impact of inventory liquidation by discontinued outside
distributors in the U.S. Business pace at the retail level remains strong, and
growth in Europe continues as the Company's nutritionally balanced Science Diet
and Prescription Diet products gain brand recognition and market penetration.
Worldwide net sales for 1994 were up 6% to $7,587.9 from the prior year and
were up 8% on volume growth of 7% adjusted for the sale of non-core businesses
in 1994. Asia/Africa, with sales growth of 20% on 17% higher volume, and Latin
America, with 14% sales growth on 11% higher volume, led the way on the strength
of Colgate Total toothpaste and personal care product sales. Europe improved 7%
on 6% volume growth, including 4% from acquisitions. North America was
negatively impacted by trade downstocking as sales were down 8% on volume
declines of 4%. Pet Nutrition and Other experienced rapid growth. Hill's
increased sales 16% on 14% volume growth, offset slightly by the sale of
non-core businesses in July 1994.
GROSS PROFIT
Gross profit margin was 47.9%, below the 1994 level of 48.4% but higher than
the 1993 gross profit margin of 47.8%. The 1995 decline is after a long-term
trend of increases achieved by focusing on cost reduction and shifting the
product mix towards high-margin oral care and personal care products.
5
Factors influencing 1995 include higher raw material and packaging costs, lower
volume at Hill's, as a result of the strategic realignment of the business, and
the effects of the Mexican recession.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses as a percent of sales were 34%
in 1995, 35% in 1994 and 34% in 1993. The Company continues to focus on
expense-containment strategies including its announced restructuring, discussed
below, and the consolidation in 1996 of worldwide media billings to one agency
utilizing a cost-and-performance-based compensation structure. It is anticipated
that these initiatives will provide incremental funds to further increase
investments in research and development as well as media advertising to support
growth.
PROVISION FOR RESTRUCTURED OPERATIONS
In September 1995, the Company announced a major worldwide restructuring of
its manufacturing and administrative operations designed to further enhance
profitable growth over the next several years by generating significant
efficiencies and improving competitiveness. As a result of this rationalization,
24 of the 112 factories worldwide will be closed or significantly reconfigured.
The worldwide work force will be reduced by approximately 3,000 employees, or
8.5%, of which a reduction of approximately 150 occurred during 1995.
The changes, primarily in North America and Europe, are expected to be
substantially completed during 1997 in facilities around the world. Hill's Pet
Nutrition and Colgate locations in Asia/Africa and certain Latin American
countries, including Mexico, are also affected. The charge includes employee
termination costs and expenses associated with the realignment of the Company's
global manufacturing operations, as well as settlement of contractual
obligations. The worldwide restructuring program resulted in a 1995 third
quarter pretax charge of $460.5 ($369.2 net of tax) or $2.54 per share for the
year.
OTHER EXPENSE, NET
Other expense, net of other income 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 asset sales. Amortization expense increased in each of the three years ended
1995 due to higher levels of intangible assets stemming from the Company's
recent acquisitions, most notably Kolynos in 1995, and Cibaca in India and
certain brands acquired from S.C. Johnson in 1994. Loss on disposition of
non-core businesses in 1994 and gains on sale of miscellaneous assets make up
the remainder of other expense, net in 1995 and 1994.
6
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1995
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As EXCLUDING
Reported RESTRUCTURING 1994 1993
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WORLDWIDE EARNINGS BY BUSINESS SEGMENT
Oral, Personal and Household Care................ $ 551.6 $ 916.5 $809.6 $740.6
Pet Nutrition and Other.......................... 53.0 117.7 162.0 147.8
--------- ------------- ------ ------
Total Segment Earnings............................. $ 604.6 $ 1,034.2 $971.6 $888.4
--------- ------------- ------ ------
SEGMENT EARNINGS BY GEOGRAPHIC REGION
North America*
Oral, Personal and Household Care................ $ 24.5 $ 178.3 $148.3 $187.0
Pet Nutrition and Other.......................... 55.6 111.7 158.0 143.0
--------- ------------- ------ ------
Total North America................................ 80.1 290.0 306.3 330.0
Europe
Oral, Personal and Household Care................ 59.9 207.8 198.4 167.0
Pet Nutrition and Other.......................... (2.6) 6.0 4.0 4.8
--------- ------------- ------ ------
Total Europe....................................... 57.3 213.8 202.4 171.8
Latin America**.................................... 313.7 342.9 298.4 249.6
Asia/Africa**...................................... 153.5 187.5 164.5 137.0
--------- ------------- ------ ------
TOTAL SEGMENT EARNINGS............................. 604.6 1,034.2 971.6 888.4
Unallocated Expense, Net........................... (35.7) (4.8) (5.0) (5.4)
--------- ------------- ------ ------
EARNINGS BEFORE INTEREST AND TAXES................. 568.9 1,029.4 966.6 883.0
Interest Expense, Net.............................. (205.4) (205.4) (86.7) (46.8)
--------- ------------- ------ ------
Income Before Income Taxes......................... $ 363.5 $ 824.0 $879.9 $836.2
--------- ------------- ------ ------
--------- ------------- ------ ------
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* Earnings from the U.S., Canada and Puerto Rico are combined and presented as
North America.
** Earnings in Latin America and Asia/Africa relate to the Oral, Personal and
Household Care segment only. Earnings of Pet Nutrition and Other products are
included in North America as sales to these regions are primarily exported to
local distributors.
EARNINGS BEFORE INTEREST AND TAXES
Earnings before interest and taxes (EBIT) was impacted by the provision for
restructured operations of $460.5 recorded during 1995. Excluding this charge,
EBIT for the Oral Personal and Household Care segment was up 13%, with North
America, Asia/Africa and Latin America posting gains of 20%, 14% and 15%,
respectively. Results in Europe showed modest improvement in 1995, and overall
EBIT was tempered by the 27% decline in the Pet Nutrition and Other segment,
principally due to the realignment of the sales force at Hill's as well as the
sale of non-core businesses in 1994.
EBIT increased 9% in 1994 to $966.6 compared with $883.0 in the prior year.
EBIT for the Oral, Personal and Household Care segment was up 9%, with strong
gains across all of the Company's developing markets and mixed results in the
developed world. Lower returns were experienced in the developed world due
principally to a decline in North America, as a result of trade downstocking and
increased spending on advertising and research and development to position that
region for future growth. EBIT for Europe increased 19%, primarily reflecting
sales growth and higher gross profit margins. Asia/Africa and Latin America each
increased EBIT by 20% on an already healthy base business. Pet Nutrition and
Other also contributed to the overall EBIT growth led by improvement at Hill's,
which increased EBIT while investing in developing markets to expand its
international reach.
INTEREST EXPENSE, NET
Interest expense, net of interest income, was $205.4 in 1995 compared with
$86.7 in 1994 and $46.8 in 1993. The increase in net interest expense in 1995
versus the prior two years results from higher
7
debt for the full year, incurred primarily to finance Kolynos and other
acquisitions, and slightly higher effective interest rates in 1995. The increase
in interest expense in 1994 from 1993 reflects higher debt from year to year due
to acquisitions and share repurchases.
INCOME TAXES
The effective tax rate on income was 52.7% in 1995 versus 34.1% in 1994 and
34.5% in 1993. The overall effective rate in 1995 was impacted by the provision
for restructuring, the tax benefit of which was 20% due to the effect of tax
benefits in certain jurisdictions not expected to be realized. Excluding the
charge, the effective income tax rate was 34.3% in 1995. Global tax planning
strategies benefited the rate in all three years presented.
NET INCOME
Net income was $172.0 in 1995 or $1.04 per share including the provision for
restructured operations of $369.2 or $2.54 per share. Excluding the special
charge, earnings were $541.2 or $3.58 per share compared to $580.2 or $3.82 per
share in 1994. The 1995 results were also impacted by the expected first-year
dilution caused by the acquisition of Kolynos, the recession and currency
devaluation in Mexico and the effect of the strategic realignment at Hill's.
Included in 1993 net income and per share amounts is the cumulative one-time
impact on prior years of adopting new mandated accounting standards effective
January 1, 1993 for income taxes, other postretirement benefits and
postemployment benefits.
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1995 1994 1993
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IDENTIFIABLE ASSETS
North America*
Oral, Personal and Household Care........ $2,497.7 $2,416.0 $2,420.3
Pet Nutrition and Other.................. 496.0 473.9 446.4
-------- -------- --------
Total North America.......................... 2,993.7 2,889.9 2,866.7
Europe
Oral, Personal and Household Care........ 1,271.0 1,293.8 1,169.3
Pet Nutrition and Other.................. 49.5 35.7 27.8
-------- -------- --------
Total Europe................................. 1,320.5 1,329.5 1,197.1
Latin America**.............................. 2,158.3 845.2 804.4
Asia/Africa**................................ 967.2 889.0 692.7
-------- -------- --------
7,439.7 5,953.6 5,560.9
Corporate Assets............................. 202.6 188.8 200.3
-------- -------- --------
Total Assets................................. $7,642.3 $6,142.4 $5,761.2
-------- -------- --------
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* Assets from the U.S., Canada and Puerto Rico are combined and presented as
North America.
** Assets in Latin America and Asia/Africa relate to the Oral, Personal and
Household Care segment only.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operations decreased 2% to $810.2 in 1995 compared with
$829.4 in 1994 and $710.4 in 1993. The decrease in cash generated by operating
activities in 1995 reflects the previously discussed lower earnings in Mexico
and at Hill's. Cash generated from operations was used to fund acquisitions,
capital spending and an increased dividend level.
During 1995, long-term debt increased from $1,777.5 to $3,029.0. The higher
debt levels were primarily incurred to finance acquisitions including Kolynos.
Initially, the acquisition was funded by a bridge loan from commercial banks
which was rolled into various financial instruments during 1995.
8
In April of 1995, the Company obtained a $75.0 term loan and filed a shelf
registration for $700.0 of debt securities. No notes have been issued under this
registration. In June, the Company issued $89.2 of Swiss franc bonds and $71.7
of Luxembourg franc bonds, both of which were immediately swapped into U.S.
dollar floating rate debt. During May and June, $220.0 of medium-term notes were
issued under the shelf registration filed in May 1994.
During 1995, the Company entered into $950.0 notional amount of interest
rate swaps converting floating rate debt to fixed rate debt and $50.0 of swaps
converting fixed rate debt to floating. In the fourth quarter of 1995, the
Company finalized a European commercial paper facility. As of December 31, 1995,
$1,143.0 of U.S. and European 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 $235.2 of other short-term borrowings are classified
as long-term debt at December 31, 1995, 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, 1995 such unused lines of credit
amounted to $2,093.4.
During the third quarter of 1994, the remaining outstanding principal
($32.0) of the 9.625% debentures due July 15, 2017 was retired. Also during the
third quarter, the Company obtained a $50.0 term loan. In May 1994, the Company
filed a shelf registration for $500.0 of debt securities. During the second
quarter of 1994, $208.0 of medium-term notes were issued under this registration
and $72.8 was available as of December 31, 1995.
During 1993, the Company participated in the formation of a business that
purchases receivables, including Company receivables. Outside institutions
invested $30.5 in this entity in 1995, $15.2 in 1994 and $60.0 in 1993. The
Company consolidates this entity and the amounts invested by the outside
institutions are classified as a minority interest. In the fourth quarter of
1993, $230.0 of medium-term notes were issued under an existing registration.
These notes are currently rated A1/A by Moody's and Standard & Poor's,
respectively.
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1995 1994 1993
------ ------ ------
CAPITAL EXPENDITURES
Oral, Personal and Household Care.............. $354.9 $343.1 $341.1
Pet Nutrition and Other........................ 76.9 57.7 23.2
------ ------ ------
Total Capital Expenditures....................... $431.8 $400.8 $364.3
------ ------ ------
------ ------ ------
DEPRECIATION AND AMORTIZATION
Oral, Personal and Household Care............ $273.8 $213.0 $188.7
Pet Nutrition and Other...................... 26.5 22.1 20.9
------ ------ ------
Total Depreciation and Amortization.............. $300.3 $235.1 $209.6
------ ------ ------
------ ------ ------
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Capital expenditures in 1995 of $431.8 were 5.2% of sales compared with 5.3%
of sales in 1994 and 5.1% of sales in 1993. Capital spending continues to be
focused primarily on projects that yield high aftertax returns, thereby reducing
the Company's cost structure. Capital expenditures for 1996 are expected to
continue at the current rate of approximately 5% of sales.
Other investing activities in 1995, 1994 and 1993 included strategic
acquisitions and equity investments worldwide. During 1995, the Company acquired
the Kolynos oral care brand in Latin America and Odol oral care products in
Argentina and made other regional investments. The aggregate purchase price of
all 1995 acquisitions was $1,321.9. During 1994, the Company acquired the Cibaca
toothbrush and toothpaste business in India, the NSOA laundry soap business in
Senegal and several other regional brands across the Oral, Personal and
Household Care segment. In October 1993, the Company acquired the liquid hand
and body soap brands of S.C. Johnson in Europe, the South Pacific and other
international locations. Also in 1993, the Company acquired the Cristasol glass
cleaner business in Spain, increased ownership of its Indian operation to
majority control and made other
9
investments. The aggregate purchase price of all 1994 and 1993 acquisitions was
$149.8 and $222.5, respectively.
During 1994, the Company repurchased 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 the year approximated 6.9
million shares with a total purchase price of $411.1. During 1993, 12.6 million
shares were acquired with a total purchase price of $698.1.
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 64% during 1995 from 49% in 1994. The increase in 1995
is primarily the result of the Kolynos acquisition and the restructuring charge.
The ratio of market debt to market capitalization (defined as above using fair
market values) increased to 23% during 1995 from 16% in 1994. The Company
primarily uses market value analyses to evaluate its optimal capitalization.
Dividend payments were $284.8 in 1995 ($276.5 aftertax), up from $255.6
($246.9 aftertax) in 1994. Common dividend payments increased to $1.76 per share
in 1995 from $1.54 per share in 1994 reflecting a 15% increase in the dividend
effective in the third quarter of 1995. The Series B Preference Stock dividends
were declared and paid at the stated rate of $4.88 per share in 1995 and 1994.
The increase in dividend payments in 1994 over 1993 reflects a 14% increase in
the common dividend effective in the third quarter of 1994.
The Company utilizes interest rate agreements and foreign exchange contracts
to manage interest rate and foreign currency exposures. The principal objective
of such financial derivative contracts is to manage rather than attempt to
eliminate fluctuations in interest rate and foreign currency movements. The
Company, as a matter of policy, does not speculate in financial markets and
therefore does not hold these contracts for trading purposes. The Company
utilizes what are considered straightforward instruments, such as forward
foreign exchange contracts and non-leveraged interest rate swaps, to accomplish
its objectives.
Internally generated cash flows appear to be adequate to support currently
planned business operations, acquisitions and capital expenditures. Significant
acquisitions, such as the acquisition of Kolynos discussed previously, 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 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.
OUTLOOK
Looking forward into 1996, the Company is well positioned for strong growth
in developing markets, particularly Asia and Latin America. However, economic
uncertainty in Mexico and Venezuela may continue to impact overall results from
Latin America, and its growth may be tempered until these economies become more
stable. In addition, the acquisition of Kolynos is currently under review by
antitrust authorities in Brazil, which is discussed further in Note 14
- -Commitments and Contingencies. Competitive pressures in Western European
markets are expected to persist as business in this region will continue to be
affected by low economic growth, high unemployment and retail trade
consolidation. Movements in foreign currency exchange rates can also impact
future operating results as measured in U.S. dollars. Hill's Pet Nutrition is
expected to benefit from the strategic focus of its in-house sales force.
Savings from the worldwide restructuring announced during 1995 are anticipated
to begin in the latter half of 1996 and are expected to reach $100 annually by
1998. The Company expects
10
the worldwide roll-out of Colgate Baking Soda and Colgate Baking Soda &
Peroxide, and the continued success of Colgate Total 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, the global
economic situation for 1996 is not expected to be materially different from that
experienced in 1995 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 which 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.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See the "Index to Financial Statements" which is located on page 14 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 1996 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 1996 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 1996 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 1996 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 14 of this
report.
(b) Exhibits. See the exhibit index begins on page 42.
(c) Reports on Form 8-K . None.
11
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 25, 1996 By /s/ 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 by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
(a) Principal Executive Officer (c) Principal Accounting Officer
/s/ REUBEN MARK /s/ STEPHEN C. PATRICK
................................... .................................
Reuben Mark Stephen C. Patrick
Chairman of the Board Vice President
and Chief Executive Officer Corporate Controller
Date March 25, 1996 Date March 25, 1996
(b) Principal Financial Officer (d) Directors:
/s/ ROBERT M. AGATE Vernon R. Alden, Jill K. Conway,
.................................. Ronald E. Ferguson, Ellen M. Hancock,
Robert M. Agate David W. Johnson, John P. Kendall,
Senior Executive Vice President Richard J. Kogan, Delano E. Lewis,
and Chief Financial Officer Reuben Mark, Howard B. Wentz, Jr.
Date March 25, 1996 By /s/ ANDREW D. HENDRY
................................
Andrew D. Hendry
as Attorney-in-Fact
Date March 25, 1996
12
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1995
COLGATE-PALMOLIVE COMPANY
NEW YORK, NEW YORK 10022
13
INDEX TO FINANCIAL STATEMENTS
PAGE
----
FINANCIAL STATEMENTS
Consolidated Statements of Income for the years ended December 31, 1995, 1994 and
1993.................................................................................. 15
Consolidated Balance Sheets at December 31, 1995 and 1994............................. 16
Consolidated Statements of Retained Earnings and Changes in Capital Accounts for the
years ended December 31, 1995, 1994 and 1993.......................................... 17
Consolidated Statements of Cash Flows for the years ended December 31, 1995, 1994 and
1993.................................................................................. 18
Notes to Consolidated Financial Statements............................................ 19
Financial Statement Schedules for the years ended December 31, 1995, 1994 and 1993:
II Valuation and Qualifying Accounts.............................................. 37
Report of Independent Public Accountants.............................................. 40
SELECTED FINANCIAL DATA
Historical Financial Summary.......................................................... 41
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.
14
COLGATE-PALMOLIVE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
Dollars in Millions Except Per Share Amounts
1995 1994 1993
-------- -------- --------
Net sales..................................................... $8,358.2 $7,587.9 $7,141.3
Cost of sales................................................. 4,353.1 3,913.3 3,729.9
-------- -------- --------
Gross profit.................................................. 4,005.1 3,674.6 3,411.4
Selling, general and administrative expenses.................. 2,879.6 2,625.2 2,457.1
Provision for restructured operations......................... 460.5 -- --
Other expense, net............................................ 96.1 82.8 71.3
Interest expense, net of interest income of $30.6, $34.2, and
$22.7, respectively........................................... 205.4 86.7 46.8
-------- -------- --------
Income before income taxes.................................... 363.5 879.9 836.2
Provision for income taxes.................................... 191.5 299.7 288.1
-------- -------- --------
Income before changes in accounting........................... 172.0 580.2 548.1
Cumulative effect on prior years of accounting changes........ -- -- (358.2)
-------- -------- --------
Net income................................................ $ 172.0 $ 580.2 $ 189.9
-------- -------- --------
-------- -------- --------
Earnings per common share, primary:
Income before changes in accounting......................... $ 1.04 $ 3.82 $ 3.38
Cumulative effect on prior years of accounting changes...... -- -- (2.30)
-------- -------- --------
Net income per share.................................... $ 1.04 $ 3.82 $ 1.08
-------- -------- --------
-------- -------- --------
Earnings per common share, assuming full dilution:
Income before changes in accounting......................... $ 1.02 $ 3.56 $ 3.15
Cumulative effect on prior years of accounting changes...... -- -- (2.10)
-------- -------- --------
Net income per share.................................... $ 1.02 $ 3.56 $ 1.05
-------- -------- --------
-------- -------- --------
See Notes to Consolidated Financial Statements.
15
COLGATE-PALMOLIVE COMPANY
CONSOLIDATED BALANCE SHEETS
Dollars in Millions Except Per Share Amounts
1995 1994
--------- ---------
ASSETS
Current Assets
Cash and cash equivalents......................................... $ 208.8 $ 169.9
Marketable securities............................................. 47.8 47.6
Receivables (less allowances of $31.9 and $23.1, respectively).... 1,116.9 1,049.6
Inventories....................................................... 774.8 713.9
Other current assets.............................................. 211.9 196.7
--------- ---------
Total current assets............................................ 2,360.2 2,177.7
Property, plant and equipment, net................................ 2,155.2 1,988.1
Goodwill and other intangibles, net............................... 2,741.7 1,671.8
Other assets...................................................... 385.2 304.8
--------- ---------
$ 7,642.3 $ 6,142.4
--------- ---------
--------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Notes and loans payable........................................... $ 204.4 $ 181.9
Current portion of long-term debt................................. 37.0 26.0
Accounts payable.................................................. 738.7 694.9
Accrued income taxes.............................................. 76.7 85.1
Other accruals.................................................... 696.3 541.3
--------- ---------
Total current liabilities....................................... 1,753.1 1,529.2
Long-term debt...................................................... 2,992.0 1,751.5
Deferred income taxes............................................... 237.3 295.4
Other liabilities................................................... 980.1 743.4
Shareholders' Equity
Preferred stock................................................... 403.5 408.4
Common stock, $1 par value (500,000,000 shares authorized,
183,213,295 shares issued).......................................... 183.2 183.2
Additional paid-in capital........................................ 1,033.7 1,020.4
Retained earnings................................................. 2,392.2 2,496.7
Cumulative translation adjustments................................ (513.0) (439.3)
--------- ---------
3,499.6 3,669.4
Unearned compensation............................................. (378.0) (384.1)
Treasury stock, at cost........................................... (1,441.8) (1,462.4)
--------- ---------
Total shareholders' equity...................................... 1,679.8 1,822.9
--------- ---------
$ 7,642.3 $ 6,142.4
--------- ---------
--------- ---------
See Notes to Consolidated Financial Statements.
16
COLGATE-PALMOLIVE COMPANY
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
Dollars in Millions
1995 1994 1993
-------- -------- --------
Balance, January 1............................................ $2,496.7 $2,163.4 $2,204.9
ADD:
Net income.................................................. 172.0 580.2 189.9
-------- -------- --------
2,668.7 2,743.6 2,394.8
-------- -------- --------
DEDUCT:
Dividends declared:
Series B Convertible Preference Stock, net of income
taxes......................................................... 21.1 21.1 21.1
Preferred stock........................................... .5 .5 .5
Common stock.............................................. 254.9 225.3 209.8
-------- -------- --------
276.5 246.9 231.4
-------- -------- --------
Balance, December 31.......................................... $2,392.2 $2,496.7 $2,163.4
-------- -------- --------
-------- -------- --------
CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL ACCOUNTS
Dollars in Millions
COMMON STOCK ADDITIONAL TREASURY STOCK
--------------------- PAID-IN ----------------------
SHARES AMOUNT CAPITAL SHARES AMOUNT
----------- ------ ---------- ---------- --------
Balance, January 1, 1993.............. 160,240,404 $183.2 $ 985.3 22,972,891 $ 467.3
Shares issued for stock options....... 1,408,105 -- 9.6 (1,408,105) (34.7)
Treasury stock acquired............... (12,610,423) -- -- 12,610,423 698.1
Other................................. 218,517 -- 6.0 (218,517) (6.7)
----------- ------ ---------- ---------- --------
Balance, December 31, 1993............ 149,256,603 183.2 1,000.9 33,956,692 1,124.0
Shares issued for stock options....... 1,803,574 -- 1.6 (1,803,574) (63.4)
Treasury stock acquired............... (6,923,325) -- -- 6,923,325 411.1
Other................................. 267,385 -- 17.9 (267,385) (9.3)
----------- ------ ---------- ---------- --------
Balance, December 31, 1994............ 144,404,237 183.2 1,020.4 38,809,058 1,462.4
Shares issued for stock options....... 2,252,955 -- 13.7 (2,252,955) (85.5)
Treasury stock acquired............... (1,117,099) -- -- 1,117,099 77.7
Other................................. 313,779 -- (0.4) (313,779) (12.8)
----------- ------ ---------- ---------- --------
Balance, December 31, 1995............ 145,853,872 $183.2 $ 1,033.7 37,359,423 $1,441.8
----------- ------ ---------- ---------- --------
----------- ------ ---------- ---------- --------
See Notes to Consolidated Financial Statements.
17
COLGATE-PALMOLIVE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Dollars in Millions
1995 1994 1993
--------- ------- -------
OPERATING ACTIVITIES
Net income................................................... $ 172.0 $ 580.2 $ 189.9
Adjustments to reconcile net income to net cash provided by
operations:
Cumulative effect on prior years of accounting changes..... -- -- 358.2
Restructured operations, net............................... 424.9 (39.1) (77.0)
Depreciation and amortization.............................. 300.3 235.1 209.6
Deferred income taxes and other, net....................... (62.9) 64.7 53.6
Cash effects of changes in:
Receivables.............................................. (44.1) (50.1) (103.6)
Inventories.............................................. (26.1) (44.5) 31.7
Other current assets..................................... (42.4) (7.8) (4.6)
Payables and accruals.................................... 88.5 90.9 52.6
--------- ------- -------
Net cash provided by operations........................ 810.2 829.4 710.4
--------- ------- -------
INVESTING ACTIVITIES
Capital expenditures......................................... (431.8) (400.8) (364.3)
Payment for acquisitions, net of cash acquired............... (1,300.4) (146.4) (171.2)
Sale of marketable securities and other investments.......... 6.2 58.4 33.8
Other, net................................................... (17.2) 31.1 49.2
--------- ------- -------
Net cash used for investing activities................. (1,743.2) (457.7) (452.5)
--------- ------- -------
FINANCING ACTIVITIES
Principal payments on debt................................... (17.1) (88.3) (200.8)
Proceeds from issuance of debt, net.......................... 1,220.0 316.4 782.1
Proceeds from outside investors.............................. 30.5 15.2 60.0
Dividends paid............................................... (276.5) (246.9) (231.4)
Purchase of common stock..................................... (9.0) (357.9) (657.2)
Proceeds from exercise of stock options and other, net....... 28.3 18.5 21.8
--------- ------- -------
Net cash provided by (used for) financing activities... 976.2 (343.0) (225.5)
--------- ------- -------
Effect of exchange rate changes on cash and cash
equivalents.................................................... (4.3) (2.9) (6.2)
--------- ------- -------
Net increase in cash and cash equivalents.................... 38.9 25.8 26.2
Cash and cash equivalents at beginning of year............... 169.9 144.1 117.9
--------- ------- -------
Cash and cash equivalents at end of year..................... $ 208.8 $ 169.9 $ 144.1
--------- ------- -------
--------- ------- -------
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid.............................................. $ 292.5 $ 261.1 $ 216.4
Interest paid.................................................. $ 228.6 $ 96.9 $ 59.1
Non-cash consideration in payment for acquisitions............. $ 48.9 $ 8.0 $ 36.3
Principal payments on ESOP debt, guaranteed by the Company..... $ (4.4) $ (4.0) $ (3.4)
See Notes to Consolidated Financial Statements.
18
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 toothpastes, 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 large-format
specialty pet retailers. Principal global trademarks include Colgate, Palmolive,
Mennen, Kolynos, 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:
1995 1994 1993
---- ---- ----
Oral Care................................. 30% 26% 25%
Personal Care............................. 22% 24% 24%
Household Surface Care.................... 16% 17% 17%
Fabric Care............................... 18% 18% 19%
Pet Nutrition............................. 9% 11% 11%
Company 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. Product quality, brand recognition and acceptance, and
marketing capability largely determine success in the Company's business
segments. The financial and descriptive information on the Company's geographic
area and industry segment data, appearing in the tables contained in
management's discussion, is an integral part of these financial statements. More
than half of the Company's net sales, operating profit and identifiable assets
are attributable to overseas operations. Transfers between geographic areas are
not significant.
The Company's products are generally marketed by a sales force employed by
each individual subsidiary or business unit. In some instances outside jobbers
and brokers are used. Most raw materials used worldwide are purchased from
others, are available from several sources and are generally available in
adequate supply. Products and 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.
Trademarks are considered to be of material importance to the Company's
business; consequently the practice is followed of seeking trademark protection
by all available means. Although the Company owns a number of patents, no one
patent is considered significant to the business taken as a whole.
19
COLGATE-PALMOLIVE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Dollars in Millions Except Per Share Amounts
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.
ACCOUNTING 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.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with maturities 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 equals
market.
INVENTORIES
Inventories are valued at the lower of cost or market. The last-in,
first-out (LIFO) method is used to value substantially all inventories in the
U.S. as well as in certain overseas locations. The remaining inventories are
valued using the first-in, first-out (FIFO) 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
Goodwill represents the excess of purchase price over the fair value of
identifiable tangible and intangible net assets of businesses acquired. Goodwill
and other intangibles are amortized on a straight-line basis over periods not
exceeding 40 years. The recoverability of carrying values of intangible assets
is evaluated on a recurring basis. The primary indicators of recoverability are
current and forecasted profitability of a related acquired business. For the
three-year period ended December 31, 1995, there
20
COLGATE-PALMOLIVE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Dollars in Millions Except Per Share Amounts
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
were no material adjustments to the carrying values of intangible assets
resulting from these evaluations.
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.
POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS
The cost of postretirement health care and other benefits is actuarially
determined and accrued over the service period of covered employees.
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.
GEOGRAPHIC AREAS AND INDUSTRY SEGMENTS
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.
3. ACQUISITIONS
On January 10, 1995, the Company acquired the worldwide Kolynos oral care
business ("Kolynos") from American Home Products Corporation for $1,040.0 in
cash. Kolynos is a multinational oral care business operating primarily in South
America and having a presence in Greece, Taiwan and Hungary. The acquired assets
of the Kolynos business, located principally in Argentina, Brazil, Colombia,
Ecuador, Peru and Uruguay, include trademarks and other intellectual property,
accounts receivable, inventories, and property, plant and equipment that is
utilized in the production of toothpaste, toothbrushes, dental floss and oral
rinses.
The transaction was structured as a multinational acquisition of assets and
stock and was accounted for under the purchase method of accounting, with the
results of operations of Kolynos included with the results of the Company from
January 10, 1995.
21
COLGATE-PALMOLIVE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Dollars in Millions Except Per Share Amounts
3. ACQUISITIONS--(CONTINUED)
The acquisition is currently being reviewed by antitrust regulatory
authorities in Brazil. The financing used to acquire the Kolynos business was
provided by commercial banks and refinanced during the year with long-term
obligations.
The net book value of Kolynos assets was approximately $50.0. The purchase
price was allocated to the acquired assets based upon preliminary determination
of their respective fair values and is subject to adjustment. The cost in excess
of the fair value of acquired assets is being amortized over 40 years.
The following unaudited pro forma summary combines the results of the
operations of the Company and Kolynos as if the acquisition had occurred as of
the beginning of 1994 after giving effect to certain adjustments, including
amortization of goodwill, increased interest expense on the acquisition debt
incurred and the related income tax effects.
SUMMARIZED PRO FORMA COMBINED RESULTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994
------------------------------------
Net sales............................... $7,864.0
Income before income taxes.............. 835.4
Net income.............................. 550.9
Primary earnings per common share....... 3.62
Fully diluted earnings per common share. 3.38
The pro forma financial information is not necessarily indicative of either
the results of operations that would have occurred had the Company and Kolynos
actually been combined during the year ended December 31, 1994, or the future
results of operations of the combined companies. Although the Company intends to
operate Kolynos in Brazil as a separate operation, there are certain other
benefits that are anticipated to be realized from the implementation of the
Company's integration plans which are not included in the pro forma information.
The Company believes that future growth opportunities, as well as the benefits
of such integration plans when fully implemented, will reduce and eventually
more than offset any dilutive impact on earnings per share.
In addition, during 1995, the Company acquired the Odol oral care business
in Argentina, the Barbados Cosmetic Products business in the Caribbean as well
as other regional brands in the Oral, Personal and Household Care Segment. The
aggregate purchase price of all 1995 acquisitions was $1,321.9.
During 1994, the Company acquired the Cibaca toothpaste and toothbrush
business in India, the NSOA laundry soap business in Senegal, Nevex non-chlorine
bleach in Venezuela, and Na Pancha laundry soap in Peru as well as several other
regional brands in the Oral, Personal and Household Care segment. The aggregate
purchase price of all 1994 acquisitions was $149.8.
In October 1993, the Company acquired the liquid hand and body soap brands
of S.C. Johnson in Europe, the South Pacific and other international locations.
During that year, the Company also acquired the Cristasol glass cleaner business
in Spain, increased ownership of its Indian operation to majority control and
made other investments. The aggregate purchase price of all 1993 acquisitions
was $222.5.
22
COLGATE-PALMOLIVE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Dollars in Millions Except Per Share Amounts
3. ACQUISITIONS--(CONTINUED)
All of these acquisitions have been 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 of the
respective acquisitions. The results of operations have been included in the
Consolidated Financial Statements since the respective acquisition dates. The
inclusion of pro forma financial data for all acquisitions except Kolynos prior
to the dates of acquisition would not have materially affected reported results.
4. RESTRUCTURED OPERATIONS
In September 1995, the Company announced a major worldwide restructuring of
its manufacturing and administrative operations designed to further enhance
profitable growth over the next several years by generating significant
efficiencies and improving competitiveness. As a result of this rationalization,
24 of the 112 factories worldwide will be closed or significantly reconfigured.
The worldwide workforce will be reduced by approximately 3,000 employees or
8.5%, of which a reduction of approximately 150 occurred during 1995.
The changes are expected to be substantially completed during 1997 in
facilities around the world, but primarily in North America and Europe. Hill's
Pet Nutrition and locations in Asia/Africa and certain Latin American countries,
including Mexico, are also affected. The charge includes employee termination
costs, expenses associated with the realignment of the Company's global
manufacturing operations as well as settlement of contractual obligations.
The worldwide restructuring program resulted in a 1995 pretax charge of
$460.5 ($369.2 net of tax) or $2.54 per share for the year.
A summary of the restructuring reserve established in 1995 is as follows:
ORIGINAL UTILIZED BALANCE AT
RESERVE IN 1995 END OF YEAR
-------- -------- -----------
Workforce.................................. $ 210.0 $ 4.2 $ 205.8
Manufacturing plants....................... 204.1 7.2 196.9
Settlement of contractual obligations...... 46.4 13.5 32.9
-------- -------- -----------
Total...................................... $ 460.5 $ 24.9 $ 435.6
-------- -------- -----------
-------- -------- -----------
Of the restructuring reserve remaining as of December 31, 1995, $100.0 is
classified as a current liability, $175.9 as a noncurrent liability and $159.7
as a reduction of fixed assets.
23
COLGATE-PALMOLIVE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Dollars in Millions Except Per Share Amounts
5. LONG-TERM DEBT AND CREDIT FACILITIES
Long-term debt consists of the following at December 31:
1995 1994
-------- --------
Commercial paper at interest rates ranging from 5.3% to 5.8%............ $1,143.0 $ 609.8
Other short-term borrowings, reclassified............................... 235.2 --
ESOP serial notes, guaranteed by the Company, due from 2001 through 2009
at interest rates ranging from 8.2% to 8.9%............................. 390.2 394.6
Medium-term notes due from 1996 through 2003 at interest rates ranging
from 5.5% to 7.2%....................................................... 381.8 397.5
Medium-term notes due from 1997 through 2025 at interest rates ranging
from 6.7% to 7.6%....................................................... 425.8 207.1
7.25% and 7.10% term loans due 1999 and 2000............................ 125.0 50.0
4.75% Swiss franc bonds due 1998*....................................... 89.2 --
7.50% Luxembourg franc bonds due 2001*.................................. 71.7 --
12.43% Canadian dollar notes due 2030................................... 52.8 57.9
Other................................................................... 114.3 60.6
-------- --------
3,029.0 1,777.5
Less: current portion of long-term debt................................. 37.0 26.0
-------- --------
$2,992.0 $1,751.5
-------- --------
-------- --------
- ------------
* These bonds have been swapped into U.S. dollar floating rate liabilities.
Other debt consists of capitalized leases and individual fixed and floating
rate issues of less than $30.0 with various maturities. Commercial paper and
certain other short-term borrowings are classified as long-term debt in
accordance with the Company's intent and ability to refinance such obligations
on a long-term basis. The Company has swapped the majority of these liabilities
into long-term fixed rates ranging from 5.3% to 8.2%. Scheduled maturities of
debt outstanding at December 31, 1995, excluding short-term borrowings
reclassified, are as follows: 1996--$37.0; 1997--$142.2; 1998--$179.9; 1999--
$166.5; 2000--$231.6, and $893.6 thereafter.
At December 31, 1995, the Company had unused credit facilities amounting to
$2,093.4. Commitment fees related to credit facilities are not material. The
weighted average interest rate on all short-term borrowings as of December 31,
1995 and 1994 was 7.8% and 7.9%, respectively.
6. 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 125,000 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.
24
COLGATE-PALMOLIVE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Dollars in Millions Except Per Share Amounts
6. CAPITAL STOCK AND STOCK COMPENSATION PLANS--(CONTINUED)
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 two shares of common stock, ranks junior to all series
of the Preferred Stock. At December 31, 1995 and 1994, 6,014,615 and 6,091,375
shares of Series B Convertible Preference Stock, respectively, were outstanding
and issued to the Company's ESOP.
SHAREHOLDER RIGHTS PLAN
Under the Company's Shareholder Rights Plan, each share of the Company's
common stock carries with it one Preference Share Purchase Right. The Rights
themselves will at no time have voting power or pay dividends. The Rights become
exercisable only if a person or group acquires 20% 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 20% or more of the common stock. When
exercisable, each Right entitles a holder to buy one two-hundredth of a share of
a new series of preference stock at an exercise price of $87.50.
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 30% or more of the
Company's common stock, other than pursuant to a cash tender offer for all
shares in which such person or group increases its stake from below 20% to 80%
or more of the outstanding shares, 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 30% 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 redeem the Rights
for $.005 at any time before the acquisition by a person or group of beneficial
ownership of 20% or more of its common stock. The Board of Directors is also
authorized to reduce the 20% and 30% thresholds to not less than 15%. Unless
redeemed earlier, the Rights will expire on October 24, 1998.
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 1995 and 1994, 155,094 and 80,249 shares, respectively were awarded
to employees in accordance with the provisions of the plan.
25
COLGATE-PALMOLIVE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Dollars in Millions Except Per Share Amounts
6. CAPITAL STOCK AND STOCK COMPENSATION PLANS--(CONTINUED)
STOCK OPTION PLAN
The Company's 1987 Stock Option Plan provides 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 December
31, 1995, 1,779,497 shares of common stock were available for future grants.
During 1992, an Accelerated Ownership feature was added to the 1987 Stock
Option Plan. The Accelerated Ownership feature 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:
1995 1994
---------------- ----------------
Options outstanding, January 1.......... 10,261,408 9,626,394
Granted................................. 2,581,173 2,528,109
Exercised............................... (2,252,955) (1,803,574)
Canceled or expired..................... (93,731) (89,521)
---------------- ----------------
Options outstanding, December 31........ 10,495,895 10,261,408
---------------- ----------------
---------------- ----------------
Options exercisable, December 31........ 6,770,039 6,402,658
---------------- ----------------
---------------- ----------------
Option price range at exercise.......... $13.28 to $64.88 $11.88 to $57.94
---------------- ----------------
---------------- ----------------
Option price range, December 31......... $19.53 to $99.79 $13.28 to $99.79
---------------- ----------------
---------------- ----------------
In October 1995, the Financial Accounting Standards Board issued Statement
No. 123, "Accounting for Stock-Based Compensation" (SFAS 123). This Statement is
effective beginning in 1996, with earlier application permitted. Although the
statement encourages entities to adopt the fair value based method of accounting
for employee stock options, the Company intends to continue to measure
compensation cost for those plans using the intrinsic value based method of
accounting prescribed by Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees". Adoption of SFAS 123 will require the Company to
disclose additional information relating to the stock option plan and the
Company's pro forma net income and earnings per share, as if the options granted
were expensed at their estimated fair value at the time of grant.
7. 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 recorded on 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
26
COLGATE-PALMOLIVE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Dollars in Millions Except Per Share Amounts
7. EMPLOYEE STOCK OWNERSHIP PLAN--(CONTINUED)
two common shares for the comparable six-month period. Each share may be
converted by the Trustee into two shares of common stock.
Dividends on these preferred shares, as well as common shares also held by
the ESOP, are paid to the ESOP trust and, together with Company 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 service to the sum of total principal and
interest payments over the life of the loan. At December 31, 1995, 1,190,498
shares were allocated to participant accounts.
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.
Annual expense related to the leveraged ESOP, determined as interest
incurred on the notes, less 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 $8.3 in 1995, $8.0 in 1994 and $7.9 in 1993. 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 $33.9 in 1995, $34.2 in
1994 and $34.5 in 1993. The Company paid dividends on the stock held by the ESOP
of $31.7 in 1995, $32.3 in 1994 and $32.7 in 1993. Company contributions to the
ESOP were $6.4 in 1995 and $5.7 in 1994 and 1993.
8. RETIREMENT PLANS AND OTHER POSTRETIREMENT BENEFITS
RETIREMENT PLANS
The Company, its U.S. subsidiaries and a majority of its overseas
subsidiaries maintain pension plans covering substantially all of their
employees. Most plans provide pension benefits that are based primarily on years
of service and employees' career earnings. In the Company's principal U.S.
plans, funds are contributed to trustees 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. Plan assets consist
principally of common stocks, guaranteed investment contracts with insurance
companies, investments in real estate funds and U.S. Government obligations.
Net periodic pension expense of the plans includes the following components:
1995 1994 1993
------------------ ----------------- -----------------
U.S. OVERSEAS U.S. OVERSEAS U.S. OVERSEAS
------- -------- ------ -------- ------ --------
Service cost--benefits earned during the
period....................................... $ 19.1 $ 15.4 $ 23.1 $ 17.9 $ 18.7 $ 12.3
Interest cost on projected benefit
obligation................................... 64.5 16.8 63.1 15.3 64.2 15.4
Actual return on plan assets................. (134.7) (13.0) (3.1) (2.2) (95.2) (15.2)
Net amortization and deferral................ 61.5 4.7 (69.1) (7.0) 19.5 7.1
------- -------- ------ -------- ------ --------
Net pension expense.......................... $ 10.4 $ 23.9 $ 14.0 $ 24.0 $ 7.2 $ 19.6
------- -------- ------ -------- ------ --------
------- -------- ------ -------- ------ --------
27
COLGATE-PALMOLIVE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Dollars in Millions Except Per Share Amounts
8. RETIREMENT PLANS AND OTHER POSTRETIREMENT BENEFITS--(CONTINUED)
The following table sets forth the funded status of the plans at December 31:
1995 1994
------------------- -------------------
U.S. OVERSEAS U.S. OVERSEAS
------- -------- ------- --------
Plan assets at fair value............................. $ 817.5 $ 157.2 $ 739.2 $ 137.3
------- -------- ------- --------
Actuarial present value of benefit obligations:
Vested obligation................................... 806.5 223.5 676.6 189.4
Nonvested obligation................................ 57.7 23.5 52.0 21.5
------- -------- ------- --------
Accumulated benefit obligation........................ 864.2 247.0 728.6 210.9
Additional benefits related to assumed future
compensation levels................................... 58.1 37.2 43.6 30.4
------- -------- ------- --------
Projected benefit obligation.......................... 922.3 284.2 772.2 241.3
------- -------- ------- --------
Plan assets (less than) projected benefit
obligation............................................ (104.8) (127.0) (33.0) (104.0)
Deferral of net actuarial changes and other, net...... 161.4 6.7 96.7 (3.3)
Unrecognized prior service cost....................... 21.1 2.1 21.9 3.3
Unrecognized transition asset......................... (28.3) (3.6) (36.2) (4.3)
Additional liability.................................. -- (.2) -- (.7)
------- -------- ------- --------
Prepaid (accrued) pension cost recognized in the
Consolidated Balance Sheets........................... $ 49.4 $ (122.0) $ 49.4 $ (109.0)
------- -------- ------- --------
------- -------- ------- --------
The actuarial assumptions used to determine the projected benefit obligation
of the plans were as follows:
OVERSEAS
U.S. (WEIGHTED AVERAGE)
-------------------- -----------------------
1995 1994 1993 1995 1994 1993
---- ---- ---- ----- ----- -----
Settlement rates................................... 7.00% 8.75% 7.25% 8.46% 8.38% 7.83%
Long-term rates of compensation increase........... 5.50% 5.75% 5.75% 5.47% 5.53% 5.30%
Long-term rates of return on plan assets........... 9.25% 9.25% 9.25% 10.50% 10.88% 10.32%
When remeasuring the pension obligation, the Company reassesses each
actuarial assumption. In accordance with generally accepted accounting
principles, the settlement rate assumption is pegged to long-term bond rates to
reflect the cost to satisfy the pension obligation currently, while the other
assumptions reflect the long-term outlook of rates of compensation increases and
return on assets.
OTHER POSTRETIREMENT AND POSTEMPLOYMENT 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.
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" (SFAS 106). SFAS 106 required the Company to change its
method of accounting for its postretirement life and health care benefits
provided to retirees from the "pay-as-you-go" basis to accruing such costs over
the working lives of the employees. The Company utilizes a portion of its
leveraged ESOP, in the form of
28
COLGATE-PALMOLIVE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Dollars in Millions Except Per Share Amounts
8. RETIREMENT PLANS AND OTHER POSTRETIREMENT BENEFITS--(CONTINUED)
future retiree contributions, to reduce its obligation to provide these
postretirement benefits. Postretirement benefits currently are not funded. The
Company also adopted SFAS 112, "Employers' Accounting for Postemployment
Benefits." SFAS 112 requires accrual accounting for the estimated cost of
benefits provided to former or inactive employees after employment but before
retirement.
The cumulative effect on prior years of adopting SFAS 106 and 112 as of
January 1, 1993 resulted in a pretax charge during 1993 of $195.7 ($129.2
aftertax or $.83 per share), of which $189.5 related to SFAS 106 and $6.2
related to SFAS 112. This non-cash charge represented the accumulated benefit
obligation net of related accruals previously recorded by the Company as of
January 1, 1993.
Postretirement benefits expense includes the following components:
1995 1994 1993
----- ----- -----
Service cost--benefits earned during the period...... $ 1.9 $ 2.2 $ 3.7
Annual ESOP allocation............................... (4.2) (5.7) (6.2)
Interest cost on accumulated postretirement benefit
obligation........................................... 13.7 14.2 16.4
Amortization of unrecognized net (gain).............. (3.4) (.1) --
----- ----- -----
Net postretirement expense....................... $ 8.0 $10.6 $13.9
----- ----- -----
----- ----- -----
The actuarial present value of postretirement benefit obligations included
in Other liabilities in the Consolidated Balance Sheets is comprised of the
following components, at December 31:
1995 1994
------ ------
Retirees.................................................. $145.2 $144.9
Active participants eligible for retirement............... 2.0 2.9
Other active participants................................. 9.2 17.0
------ ------
Accumulated postretirement benefit obligation............. 156.4 164.8
Unrecognized net gain..................................... 44.4 38.5
------ ------
Accrued postretirement benefit liability.................. $200.8 $203.3
------ ------
------ ------
The principal actuarial assumptions used in the measurement of the
accumulated benefit obligation were as follows:
1995 1994 1993
----- ----- -----
Discount rate.................................................... 7.00% 8.75% 7.25%
Current medical cost trend rate.................................. 8.00% 10.00% 10.00%
Ultimate medical cost trend rate................................. 5.00% 6.25% 5.00%
Medical cost trend rate decreases ratably to ultimate in year.... 1999 2001 2001
ESOP growth rate................................................. 10.00% 10.00% 10.00%
When remeasuring the accumulated benefit obligation, the Company reassesses
each actuarial assumption.
The cost of these postretirement medical benefits is dependent upon a number
of factors, the most significant of which is the rate at which medical costs
increase in the future. The effect of a 1% increase
29
COLGATE-PALMOLIVE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Dollars in Millions Except Per Share Amounts
8. RETIREMENT PLANS AND OTHER POSTRETIREMENT BENEFITS--(CONTINUED)
in the assumed medical cost trend rate would increase the accumulated
postretirement benefit obligation by approximately $12.5; annual expense would
not be materially affected.
9. INCOME TAXES
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109). The
one-time non-cash charge for the recalculation of income taxes was $229.0 ($1.47
per share), which was recorded in 1993.
The provision for income taxes on income before changes in accounting
consists of the following for the years ended December 31:
1995 1994 1993
------ ------ ------
United States................................. $ 18.0 $ 43.3 $ 75.9
Overseas...................................... 173.5 256.4 212.2
------ ------ ------
$191.5 $299.7 $288.1
------ ------ ------
------ ------ ------
Differences between accounting for financial statement purposes and
accounting for tax purposes result in taxes currently payable (lower) higher
than the total provision for income taxes as follows:
1995 1994 1993
------ ------ ------
Excess of tax over book depreciation......... $(18.9) $(32.8) $(18.7)
Net restructuring accrual (spending)......... 70.5 (19.0) (24.2)
Other, net................................... (5.3) 5.6 (13.8)
------ ------ ------
$ 46.3 $(46.2) $(56.7)
------ ------ ------
------ ------ ------
The components of income before income taxes are as follows for the three
years ended December 31:
1995 1994 1993
------- ------ ------
United States............................... $(121.1) $181.8 $256.9
Overseas.................................... 484.6 698.1 579.3
------- ------ ------
$ 363.5 $879.9 $836.2
------- ------ ------
------- ------ ------
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:
% OF INCOME BEFORE TAX 1995 1994 1993
---------------------- ---- ---- ----
Tax at U.S. statutory rate.......................... 35.0% 35.0% 35.0%
State income taxes, net of federal benefit.......... .6 .6 .7
Earnings taxed at other than U.S. statutory rate.... (.4) (.3) (.2)
Restructured operations............................. 18.4 -- --
Other, net.......................................... (.9) (1.2) (1.0)
---- ---- ----
Effective tax rate.................................. 52.7% 34.1% 34.5%
---- ---- ----
---- ---- ----
30
COLGATE-PALMOLIVE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Dollars in Millions Except Per Share Amounts
9. INCOME TAXES--(CONTINUED)
In addition, net tax benefits of $6.8 in 1995 and $16.0 in 1994 were
recorded directly through equity.
The components of deferred taxes are as follows at December 31:
1995 1994
------- -------
Deferred Taxes--Current:
Accrued liabilities, not deductible until paid..... $ 64.1 $ 68.6
Restructuring...................................... 20.0 --
Other, net......................................... 13.9 8.1
------- -------
Total deferred taxes current....................... 98.0 76.7
------- -------
Deferred Taxes--Long-term:
Intangible assets, not amortized for tax
purposes............................................. (212.2) (211.4)
Property, plant and equipment, principally due to
differences in depreciation.......................... (215.9) (196.6)
Postretirement and postemployment benefits, past
service cost......................................... 73.1 71.1
Restructuring...................................... 141.1 14.1
Tax loss and tax credit carryforwards.............. 124.8 81.5
Other, net......................................... (30.0) (21.7)
Valuation allowance................................ (118.2) (32.4)
------- -------
Total deferred taxes long-term..................... (237.3) (295.4)
------- -------
Net deferred taxes--(liabilities)................ $(139.3) $(218.7)
------- -------
------- -------
The major component of the 1995 and 1994 valuation allowance relates to tax
benefits in certain jurisdictions not expected to be realized.
10. FOREIGN CURRENCY TRANSLATION
Cumulative translation adjustments, which represent the effect of
translating assets and liabilities of the Company's non-U.S. entities, except
those in highly inflationary economies, were as follows:
1995 1994 1993
------- ------- -------
Balance, January 1............................. $(439.3) $(372.9) $(308.5)
Effect of balance sheet translations........... (73.7) (66.4) (64.4)
------- ------- -------
Balance, December 31........................... $(513.0) $(439.3) $(372.9)
------- ------- -------
------- ------- -------
Foreign currency charges, resulting from the translation of balance sheets
of subsidiaries operating in highly inflationary environments and from foreign
currency transactions, were not material in the years presented.
31
COLGATE-PALMOLIVE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Dollars in Millions Except Per Share Amounts
11. EARNINGS PER SHARE
Primary earnings per share are determined by dividing net income, after
deducting preferred stock dividends net of related tax benefits ($21.6 in 1995,
1994 and 1993) by the weighted average number of common shares outstanding
(145.2 million in 1995, 146.2 million in 1994 and 155.9 million in 1993).
Earnings per common share assuming full dilution, are calculated assuming
the conversion of all potentially dilutive securities, including convertible
preferred stock and outstanding options, unless the effect of such conversion is
antidilutive. This calculation also assumes, if applicable, reduction of
available income by pro forma ESOP replacement funding, net of income taxes.
12. INCOME STATEMENT INFORMATION
Other expense, net consists of the following for the years ended December
31:
1995 1994 1993
------ ------ ------
Amortization of intangibles....................... $ 87.7 $ 56.3 $ 51.2
Earnings from equity investments.................. (7.3) (1.3) (7.4)
Minority interest................................. 37.1 37.8 27.5
Other............................................. (21.4) (10.0) --
------ ------ ------
$ 96.1 $ 82.8 $ 71.3
------ ------ ------
------ ------ ------
The following is a comparative summary of certain expense information for
the years ended December 31:
1995 1994 1993
------ ------ ------
Interest incurred................................. $250.7 $130.6 $ 81.3
Interest capitalized.............................. 14.7 9.7 11.8
------ ------ ------
Interest expense.................................. $236.0 $120.9 $ 69.5
------ ------ ------
------ ------ ------
Research and development.......................... $156.7 $147.1 $139.9
Maintenance and repairs........................... $108.2 $110.1 $107.8
Media advertising................................. $561.3 $543.2 $508.3
13. BALANCE SHEET INFORMATION
Supplemental balance sheet information is as follows:
INVENTORIES 1995 1994
- ---------------------------------------------------------- ------ ------
[S] [C] [C]
Raw materials and supplies................................ $313.8 $280.3
Work-in-process........................................... 38.3 38.4
Finished goods............................................ 422.7 395.2
------ ------
$774.8 $713.9
------ ------
------ ------
32
COLGATE-PALMOLIVE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Dollars in Millions Except Per Share Amounts
13. BALANCE SHEET INFORMATION--(CONTINUED)
Inventories valued under LIFO amounted to $207.2 at December 31, 1995 and
$163.6 at December 31, 1994. The excess of current cost over LIFO cost at the
end of each year was $42.9 and $39.6, respectively. In 1995 and 1994, certain
inventory quantities were reduced, which resulted in liquidations of LIFO
inventory quantities. The effect was to increase income by $1.4 and $2.8 in 1995
and 1994, respectively.
PROPERTY, PLANT AND EQUIPMENT, NET 1995 1994
------------------------------------ ----- -----
Land.............................................. $ 126.0 $ 94.9
Buildings......................................... 623.1 549.3
Machinery and equipment........................... 2,850.3 2,459.2
--------- ---------
3,599.4 3,103.4
Accumulated depreciation.......................... (1,444.2) (1,115.3)
--------- ---------
$ 2,155.2 $ 1,988.1
--------- ---------
--------- ---------
GOODWILL AND OTHER INTANGIBLE ASSETS, NET 1995 1994
----------------------------------------- ----- ------
Goodwill and other intangibles.................... $ 3,037.0 $ 1,879.4
Accumulated amortization.......................... (295.3) (207.6)
-------- --------
$2,741.7 $1,671.8
-------- --------
-------- --------
OTHER ACCRUALS 1995 1994
-------------- ------ ------
[S] [C] [C]
Accrued payroll and employee benefits............... $271.0 $233.0
Accrued advertising................................. 117.6 105.4
Accrued interest.................................... 46.0 38.6
Accrued taxes other than income taxes............... 51.1 42.4
Restructuring accrual............................... 100.0 --
Other............................................... 110.6 121.9
------ ------
$696.3 $541.3
------ ------
------ ------
FAIR VALUE OF FINANCIAL INSTRUMENTS
In assessing the fair value of financial instruments at December 31, 1995
and 1994, 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.
33
COLGATE-PALMOLIVE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Dollars in Millions Except Per Share Amounts
13. BALANCE SHEET INFORMATION--(CONTINUED)
The estimated fair value of the Company's financial instruments at December
31, are summarized as follows:
1995 1994
-------------------- --------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- --------
Assets:
Cash and cash equivalents.......................... $ 208.8 $ 208.8 $ 169.9 $ 169.9
Marketable securities.............................. 47.8 47.8 47.6 47.6
Long-term investments.............................. 13.3 14.2 22.2 20.0
Liabilities:
Notes and loans payable............................ (204.4) (204.4) (181.9) (181.9)
Long-term debt, including current portion.......... (3,029.0) (3,161.1) (1,777.5) (1,760.1)
Other liabilities:
Foreign exchange contracts....................... .4 1.3 (11.0) (10.2)
Interest rate instruments........................ (11.0) (68.1) (14.2) (10.8)
Equity:
Foreign exchange contracts
--hedge investment in subsidiaries............... (2.3) (2.1) (4.0) (3.4)
FINANCIAL INSTRUMENTS AND RATE RISK MANAGEMENT
The Company utilizes interest rate agreements and foreign exchange contracts
to manage interest rate and foreign currency exposures. The principal objective
of such contracts is to manage rather than attempt to eliminate fluctuations in
interest rate and foreign currency movements. The Company, as a matter of
policy, does not speculate in financial markets and therefore does not hold
these contracts for trading purposes. The Company utilizes what it considers
straightforward instruments, such as forward foreign exchange contracts and
non-leveraged interest rate swaps, to accomplish its objectives.
The Company primarily uses interest rate swap agreements to effectively
convert a portion of its floating rate debt to fixed rate debt in order to
manage interest rate exposures in a manner consistent with achieving a targeted
fixed to variable interest rate ratio. The net effective cash payment of these
financial derivative instruments 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 carried on the balance sheets at fair value.
As of December 31, 1995 and 1994, the Company had agreements outstanding with an
aggregate notional amount of $1,142.2 and $222.0, respectively, with maturities
through 2025.
The Company uses forward exchange contracts principally to hedge foreign
currency exposures associated with its net investment in foreign operations and
overseas debt. This hedging minimizes the impact of foreign exchange rate
movements on the Company's financial position. The terms of these contracts are
generally less than five years.
As of December 31, 1995 and 1994, the Company had approximately $972.0 and
$397.6, respectively, of outstanding foreign exchange contracts. At December 31,
1995 approximately 10% of outstanding foreign exchange contracts served to hedge
net investments in foreign subsidiaries, 50% hedged intercompany loans, 30%
hedged third-party firm commitments, and the remaining 10% hedged
34
COLGATE-PALMOLIVE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Dollars in Millions Except Per Share Amounts
13. BALANCE SHEET INFORMATION--(CONTINUED)
certain transactions that are anticipated to settle in accordance with their
identified terms. The Company makes net settlements for foreign exchange
contracts at maturity, based on rates agreed to at inception of the contracts.
Gains and losses from 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 (including intercompany loans) 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 foreign exchange rates and are recorded in
the statements of income as other expense, net. These contracts mature within
eighteen months.
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 only with 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, 1995 was not
significant.
14. COMMITMENTS AND CONTINGENCIES
Minimum rental commitments under noncancellable operating leases, primarily
for office and warehouse facilities, are $68.6 in 1996, $52.7 in 1997, $44.1 in
1998, $38.7 in 1999, $38.9 in 2000 and $213.4 for years thereafter. Rental
expense amounted to $91.8 in 1995, $83.4 in 1994 and $91.5 in 1993. 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 $165.6 that expire through 1998.
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 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.
As discussed in Note 3, the acquisition of Kolynos is subject to review by
antitrust regulatory authorities in Brazil. While it is not yet possible to
definitively determine whether or not approval will be obtained, management
believes the acquisition, or some variation thereof, will eventually be
approved.
15. MARKET AND DIVIDEND INFORMATION
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
35
COLGATE-PALMOLIVE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Dollars in Millions Except Per Share Amounts
15. MARKET AND DIVIDEND INFORMATION--(CONTINUED)
paid every year since 1895, and the amount of dividends paid per share has
increased for 33 consecutive years.
MARKET PRICE
COMMON STOCK $4.25 PREFERRED STOCK
------------------------------ ------------------------------
1995 1994 1995 1994
-------------- -------------- -------------- --------------
QUARTER ENDED HIGH LOW HIGH LOW HIGH LOW HIGH LOW
- ------------------------------------- ------ ------ ------ ------ ------ ------ ------ ------
March 31............................. $67.88 $58.63 $65.38 $55.63 $67.00 $62.00 $76.00 $72.00
June 30.............................. 77.00 66.25 59.50 51.25 71.00 64.50 73.00 68.00
September 30......................... 73.13 65.75 58.63 49.50 71.00 67.50 70.50 67.00
December 31.......................... 76.38 66.13 64.75 57.00 72.00 69.00 68.50 62.50
Closing Price........................ $70.25 $63.38 $72.00 $64.00
DIVIDENDS PAID PER SHARE
QUARTER ENDED 1995 1994 1995 1994
- ------------------------------------- -------------- -------------- -------------- --------------
March 31............................. $ .41 $ .36 $1.0625 $1.0625
June 30.............................. .41 .36 1.0625 1.0625
September 30......................... .47 .41 1.0625 1.0625
December 31.......................... .47 .41 1.0625 1.0625
Total............................ $1.76 $1.54 $4.25 $4.25
16. QUARTERLY FINANCIAL DATA (UNAUDITED)
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
1995
Net sales........................................ $1,980.3 $2,090.7 $2,134.4 $2,152.8
Gross profit..................................... 969.8 980.1 1,024.7 1,030.5
Net income (loss)................................ 156.5 143.2 (250.2)(1) 122.5
Earnings (loss) per common share:
Primary........................................ 1.05 .95 (1.76)(1) .80
Assuming full dilution(2)...................... .97 .88 (1.76)(1) .76
1994
Net sales........................................ $1,770.0 $1,891.1 $1,930.7 $1,996.1
Gross profit..................................... 862.1 902.7 951.8 958.0
Net income....................................... 149.6 142.5 151.0 137.1
Earnings per common share:
Primary........................................ .98 .93 1.00 .91
Assuming full dilution......................... .91 .87 .93 .85
- ------------
(1) The third quarter of 1995 includes a provision for restructured operations
of $460.5 ($369.2 aftertax) or $2.54 per share on a primary basis and $2.50
per share on a fully diluted basis.
(2) The sum of the quarterly fully diluted earnings (loss) per share amounts in
1995 is not equal to the full year because the computations of the weighted
average number of shares outstanding and the potential impact of dilutive
securities for each quarter and for the full year are made independently.
36
SCHEDULE II
COLGATE-PALMOLIVE COMPANY
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEAR ENDED DECEMBER 31, 1995
(DOLLARS IN MILLIONS)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- -------------------------------------------- ---------- ------------------- ---------- --------
ADDITIONS
-------------------
BALANCE
BALANCE AT CHARGED TO AT END
BEGINNING COSTS AND OF
DESCRIPTION OF PERIOD EXPENSES OTHER DEDUCTIONS PERIOD
- -------------------------------------------- ---------- ---------- ----- ---------- --------
Allowance for doubtful accounts............. $ 23.1 $ 12.5 $ 4.4(4) $8.1(1) $ 31.9
---------- ----- ----- --- --------
Accumulated amortization of goodwill and
other intangibles........................... $207.6 $ 87.7 $-- -$- $295.3
---------- ----- ----- --- --------
Valuation allowance for deferred tax
assets...................................... $ 32.4 $ 69.9(3) $24.4(2) $8.5(2) $118.2
---------- ----- ----- --- --------
- ------------
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 than not will not be utilized in the future.
(3) Allowance for tax benefits from restructured operations in certain
jurisdictions not expected to be realized.
(4) Other adjustments.
37
SCHEDULE II
COLGATE-PALMOLIVE COMPANY
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEAR ENDED DECEMBER 31, 1994
(DOLLARS IN MILLIONS)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ----------------------------------------- ---------- ---------------------- ---------- --------
ADDITIONS
----------------------
BALANCE
BALANCE AT CHARGED TO AT END
BEGINNING COSTS AND OF
DESCRIPTION OF PERIOD EXPENSES OTHER DEDUCTIONS PERIOD
- ----------------------------------------- ---------- ---------- -------- ---------- --------
$5.6(1)
.6(3)
---
Allowance for doubtful accounts.......... $ 24.9 $ 4.4 $-- $6.2 $ 23.1
---------- ----- --- --- --------
Accumulated amortization of goodwill and
other intangibles........................ $151.2 $ 56.4 $-- $ -- $207.6
---------- ----- --- --- --------
Valuation allowance for deferred tax
assets................................... $ 28.3 $ 4.1(2) $-- $ -- $ 32.4
---------- ----- --- --- --------
- ------------
NOTES:
(1) Uncollectible accounts written off and cash discounts allowed.
(2) Allowance for tax loss and tax credit carryforward benefits which more
likely than not will not be utilized in the future.
(3) Other adjustments.
38
COLGATE-PALMOLIVE COMPANY
SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEAR ENDED DECEMBER 31, 1993
(DOLLARS IN MILLIONS)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- --------------------------------------------- ---------- ------------------- ---------- --------
ADDITIONS
-------------------
BALANCE
BALANCE AT CHARGED TO AT END
BEGINNING COSTS AND OF
DESCRIPTION OF PERIOD EXPENSES OTHER DEDUCTIONS PERIOD
- --------------------------------------------- ---------- ---------- ----- ---------- --------
$ 1.2(1)
9.1(2)
.2(4)
-----
Allowance for doubtful accounts.............. $ 21.8 $ 13.6 $ -- $ 10.5 $ 24.9
---------- ----- ----- ----- --------
Accumulated amortization of goodwill and
other intangibles............................ $100.0 $ 51.2 $ -- $-- $151.2
---------- ----- ----- ----- --------
Valuation allowance for deferred tax
assets....................................... $-- $ 22.0(3) $6.3 (3) $-- $ 28.3
---------- ----- ----- ----- --------
- ------------
NOTES:
(1) Adjustments arising from translation of reserve balances at year-end
exchange rates.
(2) Uncollectible accounts written off and cash discounts allowed.
(3) Allowance for tax loss and tax credit carryforward benefits which more
likely than not will not be utilized in the future. The $22.0 charged to
costs and expenses was included in the 1993 one-time charge for the adoption
of SFAS 109, "Accounting for Income Taxes."
(4) Other adjustments.
39
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, 1995 and 1994, and the related consolidated statements of income,
retained earnings, changes in capital accounts and cash flows for each of the
three years in the period ended December 31, 1995. 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, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.
As discussed in the accompanying notes to the consolidated financial
statements, in 1993, the Company adopted three new accounting standards
promulgated by the Financial Accounting Standards Board, changing its methods of
accounting for income taxes, postretirement benefits other than pensions, and
postemployment benefits.
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 7, 1996
40
COLGATE-PALMOLIVE COMPANY
HISTORICAL FINANCIAL SUMMARY(1)
Dollars in Millions Except Per Share Amounts
1995 1994 1993 1992 1991 1990 1989
-------- -------- -------- -------- -------- -------- --------
OPERATIONS
Net sales.................................. $8,358.2 $7,587.9 $7,141.3 $7,007.2 $6,060.3 $5,691.3 $5,038.8
Results of operations:
Net income................................ 172.0(2) 580.2(3) 189.9(4) 477.0 124.9(5) 321.0 280.0
Per share, primary........................ 1.04(2) 3.82(3) 1.08(4) 2.92 .77(5) 2.28 1.98
Per share, assuming full dilution......... 1.02(2) 3.56(3) 1.05(4) 2.74 .75(5) 2.12 1.90
Depreciation and amortization expense...... 300.3 235.1 209.6 192.5 146.2 126.2 97.0
FINANCIAL POSITION
Working capital............................ 607.1 648.5 676.4 635.6 596.0 516.0 907.5
Current ratio.............................. 1.3 1.4 1.5 1.5 1.5 1.4 1.9
Property, plant and equipment, net......... 2,155.2 1,988.1 1,766.3 1,596.8 1,394.9 1,362.4 1,105.4
Capital expenditures....................... 431.8 400.8 364.3 318.5 260.7 296.8 210.0
Total assets............................... 7,642.3 6,142.4 5,761.2 5,434.1 4,510.6 4,157.9 3,536.5
Long-term debt............................. 2,992.0 1,751.5 1,532.4 946.5 850.8 1,068.4 1,059.5
Shareholders' equity....................... 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................ 11.34 12.45 12.40 16.21 12.54 10.12 8.39
Cash dividends declared per common share... 1.76 1.54 1.34 1.15 1.02 .90 .78
Cash dividends paid per common share....... 1.76 1.54 1.34 1.15 1.02 .90 .78
Closing price.............................. 70.25 63.38 62.38 55.75 48.88 36.88 31.75
Number of common shares outstanding (in
millions) 145.8 144.4 149.3 160.2 147.3 133.2 132.2
Number of shareholders of record:
$4.25 Preferred........................... 380 400 450 470 460 500 500
Common.................................... 46,600 44,100 40,300 36,800 34,100 32,000 32,400
Average number of employees................ 37,300 32,800 28,000 28,800 24,900 24,800 24,100
1988 1987 1986
-------- -------- --------
OPERATIONS
Net sales.................................. $4,734.3 $4,365.7 $3,768.7
Results of operations:
Net income................................ 152.7(6) .9(8) 114.8
Per share, primary........................ 1.11(6) .01(8) .81
Per share, assuming full dilution......... 1.10(6) .01(8) .81
Depreciation and amortization expense...... 82.0 70.1 60.3
FINANCIAL POSITION
Working capital............................ 710.9 439.5 428.7
Current ratio.............................. 1.7 1.3 1.4
Property, plant and equipment, net......... 1,021.6 1,201.8 1,113.7
Capital expenditures....................... 238.7 285.8 220.9
Total assets............................... 3,217.6 3,227.7 2,845.9
Long-term debt............................. 674.3 694.1 522.0
Shareholders' equity....................... 1,150.6 941.1 979.9
SHARE AND OTHER
Book value per common share................ 8.24 6.77 6.91
Cash dividends declared per common share... .55(7) .695 .68
Cash dividends paid per common share....... .74 .695 .68
Closing price.............................. 23.50 19.63 20.44
Number of common shares outstanding (in
millions) 138.1 137.2 140.1
Number of shareholders of record:
$4.25 Preferred........................... 550 600 600
Common.................................... 33,200 33,900 35,900
Average number of employees................ 24,700 37,400 37,900
- ------------
(1) All share and per share amounts have been restated to reflect the 1991
two-for-one stock split.
(2) Income in 1995 includes a net provision for restructured operations of
$369.2 ($2.54 per share on a primary basis or $2.50 per share on a fully
diluted basis).
(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
($2.30 per share on a primary basis or $2.10 on a fully diluted basis).
(5) Income in 1991 includes a net provision for restructured operations of
$243.0 ($1.80 per share on a primary basis or $1.75 per share on a fully
diluted basis).
(6) Income in 1988 includes Hill's service agreement renegotiation net charge of
$42.0 ($.30 per share on both a primary and fully diluted basis).
(7) Due to timing differences, 1988 includes three dividend declarations while
all other years include four dividend declarations.
(8) Income in 1987 includes a net provision for restructured operations of
$144.8 ($1.06 per share on a primary basis or $1.05 per share on a fully
diluted basis).
41
COLGATE-PALMOLIVE COMPANY
EXHIBITS TO FORM 10-K
YEAR ENDED DECEMBER 31,1995
COMMISSION FILE NO. 1-644
42
EXHIBIT NO. DESCRIPTION
- ----------- ----------------------------------------------------------------------
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 13, 1988 between registrant and
Morgan Shareholder Services Trust Company. (Registrant hereby
incorporates by reference Exhibit I to its Form 8-A dated October 21,
1988, File No. 1-644-2.)
4-B a) Other instruments defining the rights of security holders, including
indentures.*
b) Colgate-Palmolive Company Employee Stock Ownership Trust Note
Agreement dated as of June 1, 1989. (Registrant hereby incorporates 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 December 31,
1994, File No. 1-644-2.)
b) Colgate-Palmolive, as amended Company Executive Incentive Compensation
Plan Trust. (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 Retirement
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 Spouse's Benefit Trust.
(Registrant hereby incorporates by reference Exhibit 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 Holding
Company, and Colgate-Palmolive Company. (Registrant hereby
incorporates 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 Company.
(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
incorporates
43
EXHIBIT NO. DESCRIPTION
- ----------- ----------------------------------------------------------------------
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.)
10-E a) Colgate-Palmolive Company Executive Severance Plan, as amended.
b) Colgate-Palmolive Company Executive Severance Plan Trust. (Registrant
hereby incorporates by reference Exhibit 10-E (b) to its Annual Report
on Form 10-K for the year ended December 31, 1987, File No. 1-644-2.)
10-F Colgate-Palmolive Company Pension Plan for Outside Directors, as
amended.
10-G Colgate-Palmolive Company Stock Purchase 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,
1988, File No. 1-644-2.)
10-H Colgate-Palmolive Company Restated and Amended Deferred Compensation
Plan for Non-Employee Directors. (Registrant hereby incorporates by
reference Exhibit 10-H to its Annual Report on Form 10-K for the year
ended December 31, 1991, File No. 1-6442.)
10-I Career Achievement Plan. (Registrant hereby incorporates by reference
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, 1992, File
No. 1-644-2.)
10-K Colgate-Palmolive Company Stock Compensation Plan for Non-Employee
Directors, as amended. (Registrant hereby incorporates by reference
Exhibit A to its Proxy Statement dated March 30, 1990, File
No. 1-644-2.)
10-L 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 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, 1993,
File No. 1-644-2.)
10-M Purchase Agreement among American Home Products Corporation,
Colgate-Palmolive Company and KAC Corp. dated as of January 9, 1995.
(Registrant hereby incorporates by reference Exhibit 2 to its Current
Report on Form 8-K dated January 10, 1995, File No. 1-644-2.)
10-N U.S, $500,000,000 Five Year Credit Agreement dated as of April 8,
1994. (Registrant hereby incorporates by reference Exhibit 10-O to its
Quarterly Report on Form 10-Q for the quarter ended June 30, 1994,
File No. 1-644-2.)
10-O U.S. $250,000,000 364 Day Credit Agreement dated as of April 8, 1994.
(Registrant hereby incorporates by reference Exhibit 10-P to its
Quaterly Report on Form 10-Q for the quarter ended June 30, 1994, File
No. 1-644-2.)
10-P U.S. $400,000,000 Credit Agreement dated as of January 8, 1995.
(Registrant hereby incorporates by reference Exhibit 10-P to its
Annual Report on Form 10-K for the year ended December 31, 1994, File
No. 1-644-2.)
44
EXHIBIT NO. DESCRIPTION
- ----------- ----------------------------------------------------------------------
10-Q U.S. $770,000,000 Five Year Credit Agreement dated as of January 8,
1995. (Registrant hereby incorporates by reference Exhibit 10-Q to its
Annual Report on Form 10-K for the year ended December 31, 1994, File
No. 1-644-2.)
10-R U.S. $330,000,000 364 Day Credit Agreement dated as of January 8,
1995. (Registrant hereby incorporates by reference Exhibit 10-R to its
Annual Report on Form 10-K for the year ended December 31, 1994, File
No. 1-644-2.)
10-S Colgate-Palmolive Company Non-Employee Director Stock Option Plan.
10-T U.S. $900,000,000 Five Year Credit Agreement dated as of March 24,
1995. (Registrant hereby incorporates by reference Exhibit 10-O to its
Quarterly Report on Form 10-Q for the quarter ended March 31, 1995,
File No. 1-644-2.)
10-U U.S. $1,000,000,000 364 Day Credit Agreement dated as of March 24,
1995. (Registrant hereby incorporates by reference Exhibit 10-P to its
Quarterly Report on Form 10-Q for the quarter ended March 31, 1995,
File No. 1-644-2.)
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.
23 Consent of Independent Public Accountants.
24 Powers of Attorney.
27 Financial Data Schedule.
- ------------
* 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