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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2002.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to .
-------------------- ------------------
Commission File Number 1-644
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COLGATE-PALMOLIVE COMPANY
-------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 13-1815595
- ----------------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
300 PARK AVENUE, NEW YORK, NEW YORK 10022
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(212) 310-2000
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
NO CHANGES
- --------------------------------------------------------------------------------
(Former name, former address, and former fiscal year, if changed
since last report).
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date:
Class Shares Outstanding Date
- ------------------------- ------------------------- ------------------
Common, $1.00 par value 542,588,723 June 30, 2002
PART I. FINANCIAL INFORMATION
COLGATE-PALMOLIVE COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Millions Except Per Share Amounts)
(Unaudited)
- ---------------------------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2002 2001 2002 2001
---- ---- ---- ----
Net sales $ 2,297.0 $ 2,238.7 $ 4,492.2 $ 4,450.9
Cost of sales 1,053.0 1,050.5 2,045.4 2,082.3
---------- ---------- ---------- ----------
Gross profit 1,244.0 1,188.2 2,446.8 2,368.6
Selling, general and administrative
expenses 726.2 718.6 1,468.3 1,457.5
---------- ---------- ---------- ----------
Operating profit 517.8 469.6 978.5 911.1
Interest expense 39.1 45.9 76.0 93.3
Interest income (2.0) (3.0) (4.0) (6.8)
---------- ---------- ---------- ----------
Income before income taxes 480.7 426.7 906.5 824.6
Provision for income taxes 153.7 139.5 289.8 269.5
---------- ---------- ---------- ----------
Net income $ 327.0 $ 287.2 $ 616.7 $ 555.1
========== ========== ========== ==========
Earnings per common share:
Basic $ .59 $ .50 $ 1.11 $ .97
========== ========== ========== ==========
Diluted $ .55 $ .47 $ 1.04 $ .91
========== ========== ========== ==========
Dividends declared per common share* $ - $ - $ .36 $ .32
========== ========== ========== ==========
* Includes two dividend declarations in each of the first quarter periods.
See Notes to Condensed Consolidated Financial Statements.
2
COLGATE-PALMOLIVE COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Millions)
(Unaudited)
- ------------------------------------------------------------------------------------------------------------
ASSETS
June 30, December 31,
2002 2001
----------- -----------
Current assets:
Cash and cash equivalents $ 247.4 $ 172.7
Receivables (less allowances of $44.9 and $45.6) 1,164.6 1,124.9
Inventories 713.5 677.0
Other current assets 232.1 228.8
----------- -----------
2,357.6 2,203.4
Property, plant and equipment:
Cost 4,500.3 4,408.9
Less: Accumulated depreciation 2,043.6 1,895.4
----------- -----------
2,456.7 2,513.5
Goodwill and other intangible assets 1,837.1 1,904.0
Other assets 482.8 363.9
----------- -----------
$ 7,134.2 $ 6,984.8
=========== ===========
See Notes to Condensed Consolidated Financial Statements.
3
COLGATE-PALMOLIVE COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Millions)
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
June 30, December 31,
2002 2001
---------- ----------
Current liabilities:
Notes and loans payable $ 136.1 $ 101.6
Current portion of long-term debt 353.9 325.5
Accounts payable 663.5 678.1
Accrued income taxes 144.3 195.0
Other accruals 869.9 823.3
---------- ----------
2,167.7 2,123.5
Long-term debt 3,283.7 2,812.0
Deferred income taxes 450.3 480.6
Other liabilities 759.9 722.3
Shareholders' equity:
Preferred stock 332.0 341.3
Common stock 732.9 732.9
Additional paid-in capital 1,136.2 1,168.7
Retained earnings 6,052.5 5,643.6
Accumulated other comprehensive income (1,683.4) (1,491.2)
---------- ----------
6,570.2 6,395.3
Unearned compensation (342.3) (345.4)
Treasury stock, at cost (5,755.3) (5,203.5)
---------- ----------
472.6 846.4
---------- ----------
$ 7,134.2 $ 6,984.8
========== ==========
See Notes to Condensed Consolidated Financial Statements.
4
COLGATE-PALMOLIVE COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Millions)
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------
Six Months Ended
June 30,
2002 2001
-------- ---------
Operating Activities:
Net income $ 616.7 $ 555.1
Adjustments to reconcile net income to net cash
provided by operations:
Depreciation and amortization 145.2 167.2
Deferred income taxes (21.5) 12.5
Cash effects of changes in:
Receivables (5.0) 0.8
Inventories (41.6) (48.6)
Accounts payable and other accruals 47.3 (126.1)
Income taxes payable (27.5) 28.9
Other non-current assets and liabilities (14.5) 32.1
------- --------
Net cash provided by operating activities 699.1 621.9
Investing Activities:
Capital expenditures (121.6) (122.3)
Voluntary long-term investment in benefit plan assets (50.0) (44.8)
(Investment in) sale of marketable securities (8.8) 0.9
Payments for acquisitions, net of cash acquired - (10.2)
Other (13.0) 8.7
------- --------
Net cash used for investing activities (193.4) (167.7)
Financing Activities:
Principal payments on debt (310.9) (190.9)
Proceeds from issuance of debt 701.4 660.3
Dividends paid (207.8) (187.1)
Purchase of common stock (631.5) (706.0)
Other 16.8 17.4
------- --------
Net cash used for financing activities (432.0) (406.3)
Effect of exchange rate changes on
cash and cash equivalents 1.0 (3.4)
------- ---------
Net increase in cash and cash equivalents 74.7 44.5
Cash and cash equivalents at beginning of period 172.7 206.6
------- --------
Cash and cash equivalents at end of period $ 247.4 $ 251.1
======= ========
See Notes to Condensed Consolidated Financial Statements.
5
COLGATE-PALMOLIVE COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and Shares in Millions Except Per Share Amounts)
(Unaudited)
- --------------------------------------------------------------------------------
1. The Condensed Consolidated Financial Statements reflect all normal
recurring adjustments which, in management's opinion, are necessary for a
fair presentation of the results for interim periods. Results of operations
for the interim periods may not be representative of results to be expected
for a full year.
Reference is made to the Company's Annual Report on Form 10-K filed with
the Securities and Exchange Commission for the year ended December 31, 2001
for a complete set of financial notes including the Company's significant
accounting policies.
2. Provision for certain expenses, including income taxes, media advertising
and consumer promotion are based on full year assumptions. Such amounts are
recorded in the year incurred and are included in the accompanying
Condensed Consolidated Financial Statements in proportion with estimated
annual tax rates, the passage of time or annual sales.
3. Sales Incentives and Promotional Expenses
On January 1, 2002, the Company adopted the requirements of the Financial
Accounting Standards Board's Emerging Issues Task Force (EITF) Issue No.
00-14 "Accounting for Certain Sales Incentives" and Issue No. 00-25 "Vendor
Income Statement Characterization of Consideration Paid to a Reseller of
the Vendor's Products" that relate to the classification of various types
of sales incentives and promotional expenses. Under this guidance, the
Company's net sales reflect units shipped at selling list prices reduced by
sales returns and the cost of current and continuing promotional programs.
Current promotional programs are predominantly new product listing
allowances, which are recorded at the beginning of the program, and
introductory price reductions, which are reflected in net sales as the
products are sold to the trade. Continuing promotional programs are
predominantly consumer coupons and volume-based sales incentive
arrangements with trade customers. The redemption cost of consumer coupons
is based on historical redemption experience and is recorded when coupons
are distributed. Volume-based incentives offered to trade customers are
based on the estimated cost of the program and are recorded as products are
sold.
The adoption of this new accounting resulted in the reclassification of
certain sales incentives and promotional expenses from selling, general and
administrative expenses to a reduction of net sales and cost of sales, but
had no impact on the Company's net income or earnings per share. The
Condensed Consolidated Statements of Income reflect these reclassifications
which reduced net sales and cost of sales by $90.9 and $0.5, respectively,
for the three months ended June 30, 2001, and $171.3 and $1.5,
respectively, for the six months ended June 30, 2001, with an offsetting
reduction in selling, general and administrative expenses.
6
COLGATE-PALMOLIVE COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and Shares in Millions Except Per Share Amounts)
(Unaudited)
- --------------------------------------------------------------------------------
4. Goodwill and Other Intangible Assets
The Company adopted Statement of Financial Accounting Standards (SFAS) No.
142 "Goodwill and Other Intangible Assets" effective January 1, 2002.
Under the new standard, goodwill and indefinite life intangible assets,
such as the Company's global brands, are no longer amortized but are
subject to annual impairment tests. Other intangible assets with finite
lives, such as non-compete agreements, will continue to be amortized over
their useful lives. The transitional impairment tests were completed and
did not result in an impairment charge.
In accordance with SFAS 142, prior period amounts were not restated. A
reconciliation of the previously reported net income and earnings per
share for the three months and six months ended June 30, 2001 to the
amounts adjusted for the reduction of amortization expense, net of the
related income tax effect, is as follows:
Three Months Ended June 30, 2001 Six Months Ended June 30, 2001
--------------------------------------- --------------------------------------
Net Income Basic EPS Diluted EPS Net Income Basic EPS Diluted EPS
---------- --------- ----------- ---------- --------- -----------
Reported $ 287.2 $ .50 $ .47 $ 555.1 $ .97 $ .91
Add: amortization adjustment 11.0 .02 .02 22.2 .04 .03
-------- ----- ----- -------- ------ -----
Adjusted $ 298.2 $ .52 $ .49 $ 577.3 $ 1.01 $ .94
======== ===== ===== ======== ====== =====
The net carrying value of goodwill and other intangible assets as of June
30, 2002 is comprised of the following:
Goodwill $ 1,223.6
Indefinite life intangible assets 357.5
Finite life intangible assets 256.0
-----------
$ 1,837.1
===========
The change in the net carrying amount of goodwill and other intangible
assets during the three months and six months ended June 30, 2002 is due
to the impact of foreign currency translation adjustments and
amortization of finite life intangible assets.
The net carrying value of goodwill as of June 30, 2002 by operating
segment is as follows:
North America $ 253.4
Latin America 483.5
Europe 368.9
Asia/Africa 102.8
-----------
Total Oral, Personal and
Household Care 1,208.6
Total Pet Nutrition 15.0
-----------
$ 1,223.6
===========
7
COLGATE-PALMOLIVE COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and Shares in Millions Except Per Share Amounts)
(Unaudited)
- --------------------------------------------------------------------------------
Finite life intangible assets as of June 30, 2002, subject to amortization expense, are comprised
of the following:
Gross Carrying Accumulated
Amount Amortization Net
------ ------------ ---
Trademarks $ 368.8 $ (117.3) $ 251.5
Other 42.7 (38.2) 4.5
--------- ---------- ---------
$ 411.5 $ (155.5) $ 256.0
========= ========== =========
Amortization expense for trademarks and other intangible assets with finite lives was $3.1 and $6.3 for
the three months and six months ended June 30, 2002, respectively. Annual estimated amortization
expense for each of the five succeeding fiscal years is expected to approximate $12.0.
5. Inventories by major classes were as follows:
June 30, December 31,
2002 2001
------ ------------
Raw materials and supplies $ 187.2 $ 188.0
Work-in-process 31.9 27.9
Finished goods 494.4 461.1
--------- ---------
$ 713.5 $ 677.0
========= =========
6. Earnings Per Share:
Three Months Ended June 30, 2002 Three Months Ended June 30, 2001
-------------------------------- --------------------------------
Per Per
Income Shares Share Income Shares Share
------ ------ ----- ------ ------ -----
Net income $327.0 $287.2
Preferred dividends (5.4) (5.0)
------ ------
Basic EPS 321.6 545.0 $.59 282.2 560.6 $.50
==== ====
Stock options 7.5 8.9
ESOP conversion 5.2 39.3 4.9 41.2
------ ----- ------ -----
Diluted EPS $326.8 591.8 $.55 $287.1 610.7 $.47
====== ===== ==== ====== ===== ====
8
COLGATE-PALMOLIVE COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and Shares in Millions Except Per Share Amounts)
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------
Six Months Ended June 30, 2002 Six Months Ended June 30, 2001
------------------------------ ------------------------------
Per Per
Income Shares Share Income Shares Share
------ ------ ----- ------ ------ -----
Net income $616.7 $555.1
Preferred dividends (11.1) (10.1)
------ ------
Basic EPS 605.6 547.1 $1.11 545.0 562.6 $.97
===== ====
Stock options 7.7 9.1
ESOP conversion 10.9 39.7 9.9 41.4
------ ----- ------ -----
Diluted EPS $616.5 594.5 $1.04 $554.9 613.1 $.91
====== ===== ===== ====== ===== ====
7. Comprehensive income
Comprehensive income is comprised of net earnings, currency translation
gains and losses, and gains and losses from derivative instruments
designated as cash flow hedges. Total comprehensive income for the three
months ended June 30, 2002 and 2001 was $155.8 and $280.6, respectively.
Total comprehensive income for the six months ended June 30, 2002 and 2001
was $424.5 and $480.8, respectively. The difference from net income
primarily consists of foreign currency translation adjustments,
predominantly in Latin America. Accumulated other comprehensive income, as
reflected in the Condensed Consolidated Balance Sheets, primarily consists
of cumulative foreign currency translation adjustments.
9
COLGATE-PALMOLIVE COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions)
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------
8. Segment information:
Three Months Ended June 30, Six Months Ended June 30,
2002 2001 2002 2001
------------ ------------ ----------- -----------
Net Sales
North America $ 553.0 $ 560.6 $ 1,129.7 $ 1,117.5
Latin America 587.0 591.1 1,122.3 1,156.2
Europe 489.8 453.0 934.5 901.2
Asia/Africa 375.0 364.1 743.5 742.9
----------- ----------- ---------- -----------
Total Oral, Personal and Household
Care 2,004.8 1,968.8 3,930.0 3,917.8
Total Pet Nutrition 292.2 269.9 562.2 533.1
----------- ----------- ---------- -----------
Net Sales $ 2,297.0 $ 2,238.7 $ 4,492.2 $ 4,450.9
=========== =========== ========== ===========
Earnings
North America $ 136.2 $ 137.7 $ 279.8 $ 265.2
Latin America 171.1 162.1 329.2 320.7
Europe 99.3 86.7 194.8 171.9
Asia/Africa 57.5 49.2 112.5 104.7
----------- ----------- ---------- -----------
Total Oral, Personal and Household
Care 464.1 435.7 916.3 862.5
Total Pet Nutrition 86.6 75.1 152.1 137.6
Corporate overhead and other (32.9) (41.2) (89.9) (89.0)
----------- ----------- ---------- -----------
Operating profit 517.8 469.6 978.5 911.1
Interest expense, net (37.1) (42.9) (72.0) (86.5)
----------- ----------- ---------- -----------
Income before income taxes $ 480.7 $ 426.7 $ 906.5 $ 824.6
=========== =========== ========== ===========
The Company evaluates segment performance based on several factors, including operating profit. The Company uses
operating profit as a measure of the basic health of the operating segments because it excludes the impact of corporate-
driven decisions affecting interest expense and income taxes. Segment operating profit is reconciled in the table above
to operating profit as shown on the Condensed Consolidated Statements of Income.
10
COLGATE-PALMOLIVE COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Dollars in Millions Except Per Share Amounts)
- --------------------------------------------------------------------------------
Results of Operations
Worldwide sales reached $2,297.0 in the second quarter of 2002. Sales increased
3.0%, excluding divestitures, as compared to the 2001 second quarter, reflecting
unit volume gains of 4.0% offset by a decline in foreign currencies. Sales would
have risen 4.0%, excluding the effect of foreign exchange.
Second quarter sales in the Oral, Personal and Household Care segment were
$2,004.8 up 2.0% from 2001 on volume growth of 3.5% offset by foreign
currencies.
Colgate-North America sales declined 1.5% in the second quarter of 2002 to
$553.0 on volume gains of 2.5%, offset by modest foreign currency declines in
Canada and the Caribbean, and increased promotional spending. Volume growth was
driven by products such as Colgate Total Plus Whitening and Colgate Fresh
Confidence toothpastes, Palmolive Spring Sensations dishwashing liquid, Irish
Spring Vitamins bar soap and Softsoap Vitamins body wash.
Colgate-Latin America sales, excluding divested businesses, were generally flat
at $587.0 on volume gains of 3.5%, offset by the impact of foreign exchange.
Volume growth in Mexico, Brazil, Colombia, Venezuela, the Dominican Republic and
Peru was partially offset by volume declines in Argentina. Excluding the impact
of foreign currency, continuing sales would have risen 10%. Recent introductions
driving growth in Oral Care include Colgate Total Plus Whitening, Colgate Herbal
and Colgate Herbal Plus Whitening toothpastes, and Colgate Active Flexible and
Colgate Premier Ultra toothbrushes. Contributing to growth in the Personal Care
category were Palmolive Naturals and Caprice hair care lines, Mennen Power of
Nature deodorants and Lady Speed Stick boutique scented deodorants.
Colgate-Europe sales increased 8.0% to $489.8 on volume gains of 4.5% and the
impact of the stronger Euro. Sales in local currencies increased 2%. Volume
increases were achieved in the United Kingdom, France, Hungary, Russia and
Turkey. Colgate Total Plus Whitening, Colgate Herbal and Colgate Tartar
ControlPlus Whitening toothpastes and Colgate 2in1 toothpaste and mouthwash
contributed to gains in Oral Care. Recently introduced products adding to volume
gains in other categories include Palmolive Aromatherapy shower gel and bath
foam, Palmolive Fruit Essentials bar soap, Lady Speed Stick Invisible Dry
deodorant, Soupline Lily of the Valley fabric conditioner and Ajax glass and all
purpose cleaner wipes.
Colgate-Asia/Africa sales increased 3.0% to $375.0 on volume gains of 4.5%.
Volume growth was driven by China, Malaysia, Thailand, Taiwan, the Philippines,
Vietnam, Senegal and South Africa. Growth in Oral Care in this region was led by
Colgate Herbal, Colgate Herbal Plus Whitening and Colgate Triple Action
toothpastes and Colgate 2in1 toothpaste and mouthwash. Also contributing to
volume growth in this region was the performance of Palmolive Naturals shampoo
and bar soap.
11
COLGATE-PALMOLIVE COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Dollars in Millions Except Per Share Amounts)
- --------------------------------------------------------------------------------
Hill's Pet Nutrition sales increased 8.5% to $292.2 in the second quarter on
unit volume gains of 6.0%. Domestic volume rose as a result of veterinary
endorsements and innovative new products featuring antioxidant benefits, weight
management and geriatric focused programs. Internationally, Hill's volume growth
was led by Europe, Asia and South Pacific, partially offset by volume declines
in Latin America resulting from local economic conditions. The recent launch of
Science Diet Oral Care contributed to gains across these regions.
Sales in the Oral, Personal and Household Care segment for the six months ended
June 30, 2002 increased slightly to $3,930.0 from the comparable period in 2001
as volume rose 3.0% offset by a decline in foreign currencies. Within this
segment, Colgate-North America sales increased 1.0% on volume growth of 3.0%;
Colgate-Latin America sales decreased 2.5%, excluding divested businesses, on
volume growth of 1.5% due to declines in foreign currencies; Colgate-Europe
sales increased 3.5% on volume growth of 4.5%; and Colgate-Asia/Africa sales
were flat on volume growth of 4.0%, offset by foreign currency declines. Hill's
sales increased 5.5% to $562.2 on volume gains of 5.0% for the six months ended
June 30, 2002 as compared to 2001.
Worldwide gross profit margin for the second quarter of 2002 increased to 54.2%
from 53.1% for the comparable period in 2001 and to 54.5% from 53.2% for the
first half of 2002 as compared to 2001. The Company continued to benefit from
manufacturing cost reduction initiatives, global sourcing and other cost
reduction programs.
Selling, general and administrative expenses as a percentage of sales decreased
to 31.6% in the second quarter of 2002 from 32.1% in 2001, and were 32.7% in the
first half of both 2002 and 2001. The decrease in the second quarter was due to
unrealized gains on foreign currency (Euro) contracts, partially offset by the
negative impact of other foreign currencies.
Operating profit increased 10% to $517.8 in the second quarter of 2002, and
reached a level of 22.5% of sales versus 21.0% in second quarter of 2001. For
the first half of 2002, operating profit increased 7% to $978.5, a level of
21.8% of sales as compared to 20.5% in 2001.
Interest expense, net of interest income, decreased to $37.1 in the second
quarter of 2002 compared with $42.9 in 2001 and to $72.0 in the first half of
2002 compared with $86.5 in 2001. Decreases in these periods were due to lower
interest rates partially offset by higher debt levels in 2002.
The effective tax rate for the second quarter and first half of 2002 was 32.0%
versus 32.7% for the comparable periods of 2001. The 32.0% rate reflects the
Company's current estimate of its full year effective income tax rate.
12
COLGATE-PALMOLIVE COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Dollars in Millions Except Per Share Amounts)
- --------------------------------------------------------------------------------
Net income for the second quarter of 2002 increased 14% to $327.0 or $.55 per
share on a diluted basis compared with $287.2 or $.47 per share in the prior
year. For the first half of 2002, net income increased 11% to $616.7 or $1.04
per share on a diluted basis compared with $555.1 or $.91 per share in the prior
year. If results for the second quarter and first half of 2001 were adjusted for
the impact of the change in accounting for goodwill and intangible assets (SFAS
142), operating profit, net income and diluted earnings per share for 2001 would
have been $483.2, $298.2 and $.49 for the second quarter and $938.7, $577.3 and
$.94 for the first half. Net income for the second quarter of 2002 includes a
one-time $2 million after-tax loss comprised of a $13 million after-tax gain
related to the settlement of a legal matter, offset by $15 million of after-tax
charges associated with unrelated legal proceedings and certain rationalization
programs. The impact of foreign exchange resulted in a net $6 million gain
after-tax in the second quarter related to the strong Euro, as discussed above,
partially offset by other foreign exchange negatives, primarily in Latin
America. The impact of foreign exchange in the first half resulted in a net $7
million charge after-tax driven by foreign currencies in Latin America.
Liquidity and Capital Resources
Net cash provided by operations increased 12% to $699.1 in the first half of
2002 compared with $621.9 in 2001 as a result of improved profitablity and
working capital management. Net cash from operations is net of increased tax
payments of $338.8 in 2002 versus $228.1 in 2001. The 2002 tax payments include
$40.7 in estimated tax payments for the fourth quarter of 2001 which were
deferred to the first quarter of 2002 pursuant to U.S. Government relief granted
to New York City based corporate taxpayers due to the September 11th terrorist
attacks. Total tax payments for 2002 are expected to exceed payments made in the
prior year.
During the first half of 2002, net proceeds from the issuance of debt were
$390.5, used primarily to fund common stock repurchases.
At June 30, 2002, $521.2 of commercial paper was classified as long-term debt in
accordance with the Company's intent and ability to refinance these obligations
on a long-term basis.
Certain of the Company's financing arrangements require the maintenance of a
minimum ratio of operating cash flow to debt. The ESOP notes guaranteed by the
Company and certain amounts payable to banks contain cross-default provisions.
Non-compliance with these requirements could ultimately result in the
acceleration of amounts owed. The Company is in full compliance with all such
requirements and believes the likelihood of non-compliance is remote.
Reference should be made to the Company's 2001 Annual Report on Form 10-K for
additional information regarding liquidity and capital resources.
13
COLGATE-PALMOLIVE COMPANY
PART II. OTHER INFORMATION
- --------------------------------------------------------------------------------
Item 1. Legal Proceedings
For information regarding legal matters refer to Item 3 on page 4
of the registrant's Annual Report on Form 10-K for the year ended
December 31, 2001 and Note 14 to the consolidated financial
statements included therein on page 38.
Item 4. Submission of Matters to a Vote of Security Holders
The Company's annual meeting of stockholders was held on May 8,
2002. The matters voted on and the results of the vote were as
follows:
(a) Jill K. Conway, Ronald E. Ferguson, Carlos M.
Gutierrez, Ellen M. Hancock, David W. Johnson, Richard
J. Kogan, Delano E. Lewis, Reuben Mark and Howard B.
Wentz, Jr. were elected directors of the Company. The
results of the vote were as follows:
Votes Received Votes Withheld
-------------- --------------
Jill K. Conway 490,336,620 10,540,365
Ronald E. Ferguson 490,571,914 10,305,071
Carlos M. Gutierrez 493,149,610 7,727,375
Ellen M. Hancock 490,023,389 10,853,596
David W. Johnson 492,724,431 8,152,554
Richard J. Kogan 493,058,597 7,818,388
Delano E. Lewis 493,018,017 7,858,968
Reuben Mark 493,170,378 7,706,607
Howard B. Wentz, Jr. 490,129,377 10,747,608
(b) A stockholder proposal regarding workplace human rights
was not approved. The results of the vote were as
follows:
Votes For Votes Against Abstentions Broker Non-Votes
------------- ------------- ----------- ----------------
33,732,661 367,360,769 28,460,813 71,322,742
14
COLGATE-PALMOLIVE COMPANY
PART II. OTHER INFORMATION (continued)
- --------------------------------------------------------------------------------
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit Exhibit 4-A Amendment, dated as of March 14, 2002, to
the Rights Agreement between First
Chicago Trust Company of New York and
Colgate-Palmolive Company dated
October 23, 1998.
Exhibit 10-N U.S. $1,250,000,000 Five Year Credit
Agreement dated as of May 10, 2002 among
Colgate-Palmolive Company as Borrower,
the Banks named therein as Banks, Bank of
America, N.A., BNP Paribas, JP Morgan
Chase Bank and Societe Generale as
Co-Syndication Agents, Citibank, N.A. as
Administrative Agent and Salomon Smith
Barney, Inc. as Arranger.
Exhibit 12 Ratio of Earnings to Fixed Charges.
Exhibit 99-A Certificate of the Chairman and Chief
Executive Officer of Colgate-Palmolive
Company pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
Exhibit 99-B Certificate of the Chief Financial
Officer of Colgate-Palmolive Company
pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K.
On April 12, 2002 the Company filed a report on Form 8-K
including certain reclassified income statement information
for 2001 and 2000 pursuant to new accounting requirements
enacted by the Emerging Issues Task Force.
On May 16, 2002 the Company filed a report on Form 8-K
relating to the change in its certifying accountant.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COLGATE-PALMOLIVE COMPANY
-------------------------
(Registrant)
Principal Executive Officer:
August 2, 2002 /s/ Reuben Mark
---------------------------------------
Reuben Mark
Chairman and Chief Executive Officer
Principal Financial Officer:
August 2, 2002 /s/ Stephen C. Patrick
---------------------------------------
Stephen C. Patrick
Chief Financial Officer
Principal Accounting Officer:
August 2, 2002 /s/ Dennis J. Hickey
---------------------------------------
Dennis J. Hickey
Vice President and
Corporate Controller
16