10-QPeriod: Q1 FY2006

COLGATE PALMOLIVE CO Quarterly Report for Q1 Ended Mar 31, 2006

Filed April 28, 2006For Securities:CL

Summary

Colgate-Palmolive Company reported strong first-quarter 2006 results, with net sales increasing by 4.5% to $2,870.6 million, driven by a 4.5% rise in unit volume. Diluted earnings per share grew to $0.59, up from $0.53 in the prior year's comparable quarter, reflecting improved profitability and a lower effective tax rate. The company's core Oral, Personal and Home Care segment saw robust performance, particularly in Latin America and Greater Asia/Africa, while Hill's Pet Nutrition also delivered solid sales growth. Despite challenges such as higher raw material and energy costs, Colgate-Palmolive demonstrated effective cost management and strategic execution. The company continued to invest in brand building and innovation, with new product launches contributing to volume gains across various categories. The ongoing 2004 Restructuring Program is progressing, with anticipated savings expected to fund future growth initiatives and enhance profitability. Management remains focused on increasing market leadership in key categories and delivering superior shareholder returns.

Key Highlights

  • 1Net sales increased 4.5% to $2.87 billion, driven by a 4.5% increase in unit volume.
  • 2Diluted EPS grew to $0.59 from $0.53 in the prior year's quarter.
  • 3Latin America and Greater Asia/Africa regions showed significant sales growth.
  • 4Hill's Pet Nutrition segment sales rose 7.0%.
  • 5The company incurred $65.8 million in restructuring charges related to its 2004 Restructuring Program.
  • 6Adopted SFAS 123R, resulting in incremental stock-based compensation expense of $17.6 million.
  • 7Announced agreement to purchase approximately 84% of Tom's of Maine, Inc. for about $100 million.

Frequently Asked Questions

The primary driver of Colgate-Palmolive's sales growth in the first quarter of 2006 was a 4.5% increase in unit volume, alongside a 1.5% net selling price increase, partially offset by a 1.5% negative foreign exchange impact. Excluding divestments, sales increased 7.0% on volume growth of 7.0%.

The adoption of SFAS 123R, effective January 1, 2006, required the company to recognize stock-based compensation costs. This resulted in an incremental stock-based compensation expense of $28.8 million (or $17.6 million after-tax) for the quarter, impacting Selling, general and administrative expenses and Corporate operating expenses. This adoption also led to a $0.02 reduction in both basic and diluted earnings per share.

The 2004 Restructuring Program, designed to enhance global leadership in core businesses, is progressing. In Q1 2006, the company incurred $65.8 million in charges related to this program. The program involves rationalizing manufacturing facilities, closing warehousing, and workforce reductions, with total estimated pretax charges between $750 million and $900 million, and projected annual savings of $325 million to $400 million by 2008.

Colgate-Palmolive is involved in several legal proceedings and contingencies, notably tax assessments in Brazil related to the Kolynos acquisition, which management believes are without merit and intends to contest vigorously. Additionally, there is an inquiry into potential competition law violations in France. While management believes the ultimate disposition of these matters will not have a material impact on the company's financial position or ongoing results, potential one-time impacts on cash flows and results in a particular quarter are possible.