01—Abstract
Summary
Summary of the 10-K filed February 18, 2021. Cited figures are marked; the original filing is the authoritative source.
Colgate-Palmolive's 2020 10-K shows a company that grew through the COVID-19 pandemic.
Worldwide Net sales rose 5.0% to $16,471 milliona, driven by 5.5% volume growth and 3.0% net selling price increases, partly offset by a 3.5% foreign exchange headwind. Organic sales grew 7.0%. Pantry-loading boosted categories like liquid hand soap, dish liquid, bar soap and cleaners, though management expects some of that demand to normalize and warns of heightened competition.
Gross margin expanded 140 bps to 60.8% on GAAP, supported by funding-the-growth savings, while advertising spend rose 15% to $1,948 millionb, pressuring SG&A. GAAP diluted EPS was $3.14 versus $2.75 in 2019; excluding one-time items, non-GAAP diluted EPS rose 8% to $3.06. The GAAP results were lifted by a $71 million tax benefit and a $16 million restructuring reversal, partly offset by a $23 million debt extinguishment loss.
Cash generation was strong, with operating cash flow up to $3,719 millionc from $3,133 million. Capital expenditures were $410 million, and dividends paid were $1,654 million. Management guided capex to 3.0% to 3.5% of sales for 2021.
Share repurchases were moderated during the year because of the hello and Filorga acquisitions and the pandemic-driven pause. Total debt declined to $7,601 milliond. Management expects share repurchases to return to historical levels in 2021.
Risks flagged in the filing include concentrated retailer power (Wal-Mart is about 12% of sales), exposure to emerging markets (about 45% of sales), commodity and logistics cost inflation, a Brazilian tax dispute totaling about $113 million, and a Hill's voluntary recall class action that was settled. Litigation exposure is disclosed as $0 to about $425 million in reasonably possible losses above accruals, though management does not expect a material impact.
02—Key points
Key Highlights
- Net sales grew 5.0% to $16.5 billion, with organic sales up 7.0%, led by Pet Nutrition (+14.5% organic) and Oral, Personal and Home Care (+6.0% organic).
- GAAP gross margin rose 140 bps to 60.8%, driven by funding-the-growth savings (230 bps) and pricing (130 bps), partly offset by raw material cost inflation (230 bps).
- GAAP diluted EPS was $3.14 (up from $2.75); non-GAAP diluted EPS was $3.06 (up 8%), excluding a $71 million tax benefit and other one-time items.
- Operating cash flow rose 19% to $3.7 billion, and the company returned about $3.1 billion to shareholders through dividends ($1.65 billion) and buybacks ($1.48 billion).
- Advertising investment rose 15% to $1.95 billion (11.9% of sales), which weighed on SG&A and operating margin, which was 23.6% on a GAAP basis.
- Pantry-loading boosted hand soap, dish liquid and cleaners, but management expects volatility and heightened competition as demand normalizes.
- Total debt fell to $7.6 billion, and the company redeemed $800 million of notes early at a $23 million loss, while maintaining substantial liquidity of $4.7 billion.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2020, Colgate-Palmolive kept $0.16.
- Revenue$16.47B100.0%
- Cost of revenue−$6.45B39.2%
- Gross profit$10.02B60.8%
- Operating costs−$6.13B37.2%
- Operating income$3.88B23.6%
- Interest, other & tax−$1.19B7.2%
- Net income$2.69B16.4%
Where FY2020 revenue went
$16.47B- Cost of revenue: $6.45B, 39% of revenue
- SG&A: $6.02B, 37% of revenue
- Net income: $2.69B, 16% of revenue
- R&D: $290.0M, 1.8% of revenue
- Interest, other & tax: $1.19B, 7.2% of revenue
Kept 16% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2020filed February 18, 2021Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $16.47B$15.69B | +5.0% |
| Cost of Revenue | $6.45B$6.37B | +1.4% |
| Gross Profit | $10.02B$9.32B | +7.4% |
| R&D Expenses | $290.00M$281.00M | +3.2% |
| SG&A Expenses | $6.02B$5.58B | +8.0% |
| Operating Income | $3.88B$3.55B | +9.3% |
| Interest Expense | $184.00M$193.00M | −4.7% |
| Net Income | $2.69B$2.37B | +13.9% |
| EPS (Basic) | $3.15$2.76 | +14.1% |
| EPS (Diluted) | $3.14$2.75 | +14.2% |
| Shares Outstanding (Basic) | 856.80M859.10M | −0.3% |
| Shares Outstanding (Diluted) | 859.30M861.10M | −0.2% |
05—Questions
Frequently Asked Questions
How did Colgate perform in 2020 despite the COVID-19 pandemic?
Colgate grew net sales 5.0% to $16.5 billion, with 7.0% organic growth. Demand surged in hygiene categories such as hand soap, dish liquid and cleaners, while professional and travel retail channels declined. Pet Nutrition was a standout, with 14% sales growth driven by volume and pricing.
What is the difference between Colgate's GAAP and non-GAAP earnings in 2020?
GAAP diluted EPS was $3.14, while non-GAAP diluted EPS was $3.06. The difference reflects a net benefit: a $71 million tax benefit and Global Growth and Efficiency Program reversals, partly offset by a $23 million loss on early debt extinguishment and acquisition costs. Excluding these items, EPS grew 8%.
What are the main risks to Colgate's business outlook?
Key risks include retailer concentration (Wal-Mart is about 12% of sales) and the growth of eCommerce and private label, exposure to foreign currency and emerging markets (about 70% of sales from outside the U.S.), commodity and logistics cost inflation, and COVID-19 demand volatility. Legal exposure includes a Brazilian tax dispute of about $113 million and talc-related lawsuits, though management does not expect material impact.
How is Colgate managing its capital allocation and balance sheet?
Colgate paid $1.65 billion in dividends (a $1.75 per share annual rate, up from $1.71) and repurchased $1.48 billion of stock. It funded acquisitions of hello and Filorga with debt and cash, and it paused buybacks in Q2 2020 before resuming moderately. Management expects buybacks to return to historical levels in 2021, and it guided capex to 3.0% to 3.5% of sales.
06—Continue