10-QPeriod: Q3 FY2005

COLGATE PALMOLIVE CO Quarterly Report for Q3 Ended Sep 30, 2005

Filed November 4, 2005For Securities:CL

Summary

Colgate-Palmolive Company reported solid performance for the third quarter and the first nine months of 2005, demonstrating continued revenue growth driven by volume increases across its core segments, particularly Oral, Personal and Home Care, and Pet Nutrition. Despite facing some headwinds from restructuring charges and increased advertising expenses, the company managed to increase net sales and operating profit in the third quarter. The divestiture of its North American heavy-duty laundry detergent brands was completed, contributing a gain that was offset by restructuring costs and charges related to foreign earnings repatriation and pension obligations. The company's strategic focus on core, higher-margin businesses and ongoing cost-saving initiatives are expected to support future profitability and growth.

Key Highlights

  • 1Net sales increased by 8.0% to $2,911.8 million for the third quarter of 2005, driven by a 5.0% volume increase.
  • 2Diluted earnings per share (EPS) rose to $0.63 for Q3 2005, up from $0.58 in the prior year's quarter.
  • 3The company completed the sale of its North American heavy-duty laundry detergent brands, realizing a pre-tax gain of $93.1 million.
  • 4Significant restructuring charges of $39.8 million were incurred in Q3 2005 as part of the ongoing 2004 Restructuring Program.
  • 5Operating profit for the third quarter increased by 12% to $604.3 million.
  • 6The company's Oral, Personal and Home Care segment, alongside its Pet Nutrition segment (Hill's Pet Nutrition), showed strong sales growth, indicating continued market strength.
  • 7Increased advertising and promotional spending were noted across various segments to support new product launches and market share gains.

Frequently Asked Questions

The sale of these brands in the third quarter of 2005 resulted in a pre-tax gain of $93.1 million. While this provided a positive financial contribution, it was more than offset by $29.9 million in after-tax charges related to the 2004 Restructuring Program, $36.5 million in income tax expense for repatriating foreign earnings, and $16.7 million in after-tax charges for pension obligation remeasurement.

The company is progressing with its four-year restructuring and business-building program initiated in December 2004. In the third quarter of 2005, $39.8 million ($29.9 million after-tax) in charges were incurred related to this program, impacting cost of sales, SG&A, and other expenses. The program aims to rationalize manufacturing facilities and reduce workforce, with projected annual savings expected to provide funds for investment and profitability.

Colgate-Palmolive operates globally with a balanced geographic diversification. In the third quarter of 2005, the company approved a plan to repatriate approximately $800 million of foreign earnings under the American Jobs Creation Act of 2004, resulting in an income tax charge of $36.5 million. This strategic move aims to utilize foreign earnings while adhering to tax regulations.