01—Abstract
Summary
Summary of the 10-K filed February 24, 2011. Cited figures are marked; the original filing is the authoritative source.
Colgate-Palmolive closed 2010 with net sales of $15,564 milliona, up 1.5% from 2009, driven by 3.0% volume growth and 3.0% organic sales growth, though a 1.5% negative foreign exchange impact offset part of the gain.
Oral, Personal and Home Care sales rose 2.0% to $13,484 millionb, while Hill's Pet Nutrition declined 2.5% to $2,080 million amid heightened competition and volume declines. Reported operating profit fell 3% to $3,489 million and diluted EPS declined to $4.31 from $4.37, primarily due to a one-time $271 million charge from adopting hyperinflationary accounting for Venezuela, $86 million in termination benefits, and higher advertising. Excluding these items, non-GAAP operating profit rose 5% to $3,796 million.
Cash generation remained solid, with operating cash flow of $3,211 millionc, though it declined from $3,277 million due to higher working capital. The company returned significant capital to shareholders, paying $1,142 million in dividends (common dividend raised to $0.53 quarterly) and repurchasing $2,020 million of stock under a new 40 million share program. Total debt rose modestly to $3,424 million, and management expects cash flow to fund operations, debt service, dividends, and capital expenditures.
Key risks flagged in the filing include Venezuela's currency devaluations and exchange controls, intensifying competition from larger multinationals, retailer consolidation, commodity cost volatility, and European competition-law investigations with pending fines. Management maintains that the Brazilian tax disputes and European competition matters are not expected to have a material impact on financial position, though the company acknowledges outcomes could affect quarterly or annual results.
02—Key points
Key Highlights
- Net sales rose 1.5% to $15,564 million, with organic sales growth of 3.0% driven by 3.0% volume growth; foreign exchange was a 1.5% headwind.
- Reported operating profit fell 3% to $3,489 million, but non-GAAP operating profit (excluding the $271M Venezuela charge, $86M termination benefits, and a $50M divestment gain) rose 5% to $3,796 million.
- Diluted EPS was $4.31 versus $4.37 in 2009, including a $0.53 per share Venezuela hyperinflation charge.
- Oral, Personal and Home Care sales grew 2.0% to $13,484 million, while Hill's Pet Nutrition declined 2.5% to $2,080 million on volume losses.
- Shareholder returns were substantial: $1,142 million in dividends and $2,020 million in share repurchases, with the quarterly common dividend raised to $0.53.
- Approximately 75% of net sales come from outside the U.S., and Venezuela (4% of sales) remains a material risk due to devaluations and exchange controls.
- Gross margin improved to 59.1% from 58.8%, supported by cost-saving initiatives, partly offset by rising commodity costs.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2010, Colgate-Palmolive kept $0.14.
- Revenue$15.56B100.0%
- Cost of revenue−$6.36B40.9%
- Gross profit$9.20B59.1%
- Operating costs−$5.71B36.7%
- Operating income$3.49B22.4%
- Interest, other & tax−$1.29B8.3%
- Net income$2.20B14.2%
Where FY2010 revenue went
$15.56B- Cost of revenue: $6.36B, 41% of revenue
- SG&A: $5.41B, 35% of revenue
- Net income: $2.20B, 14% of revenue
- R&D: $256.0M, 1.6% of revenue
- Interest, other & tax: $1.29B, 8.3% of revenue
Kept 14% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2010filed February 24, 2011Financial Statements
FY2010 against FY2009
| Line item | FY2010FY2009 | Change |
|---|---|---|
| Revenue | $15.56B$15.33B | +1.5% |
| Cost of Revenue | $6.36B$6.32B | +0.6% |
| Gross Profit | $9.20B$9.01B | +2.2% |
| R&D Expenses | $256.00M$256.00M | 0.0% |
| SG&A Expenses | $5.41B$5.28B | +2.5% |
| Operating Income | $3.49B$3.62B | −3.5% |
| Interest Expense | $69.00M$102.00M | −32.4% |
| Net Income | $2.20B$2.29B | −3.8% |
| EPS (Basic) | $2.23$2.27 | −1.8% |
| EPS (Diluted) | $2.15$2.19 | −1.4% |
| Shares Outstanding (Basic) | 975.60M999.00M | −2.3% |
| Shares Outstanding (Diluted) | 1.02B1.05B | −2.6% |
05—Questions
Frequently Asked Questions
What drove the decline in reported operating profit in 2010?
Reported operating profit fell 3% to $3,489 million, mainly due to a one-time $271 million charge for transitioning to hyperinflationary accounting in Venezuela, $86 million in termination benefits, and higher advertising spending plus negative foreign exchange. These were partly offset by a $50 million gain on sales of non-core product lines and cost-saving initiatives. Excluding the one-time items, operating profit rose 5%.
How exposed is Colgate to Venezuela and other international risks?
About 75% of net sales come from outside the U.S. Venezuela represented 4% of 2010 consolidated net sales, and its net monetary asset position was roughly $200 million, plus $96 million of devaluation-protected bonds. Continued devaluation or stricter exchange controls could further hurt results and the company's ability to repatriate earnings.
Is Colgate's debt and liquidity position under pressure?
Not materially. Total debt increased modestly to $3,424 million, and the company had $2,317 million of unused lines of credit plus a $1,600 million revolving facility expiring in November 2012. Management expects operating cash flow and debt issuance to cover operating needs, dividends, capital expenditures, and planned buybacks, and the company was in compliance with its debt covenants.
What legal or regulatory matters could affect Colgate's financial results?
Colgate faces a Brazilian tax dispute with assessments of roughly $123 million and a separate $73 million assessment, along with multiple European competition investigations, including pending formal claims in France, the Netherlands, and Germany. Recent fines (e.g., $3 million in Spain and Italy, $5 million in Switzerland) are under appeal. Management believes these will not have a material impact on financial position, though outcomes could affect individual periods.
What is the outlook for 2011 and the cost environment?
Management expects macroeconomic and market conditions to remain highly challenging, citing heightened competitive activity from multinationals, increased promotional spending, and a sharp rise in commodity costs. Capital expenditures for 2011 are expected to be about 3.5% of net sales, and 2011 postretirement cash requirements are estimated at about $208 million, including roughly $100 million of voluntary U.S. pension contributions.
06—Continue