10-QPeriod: Q3 FY2010

COLGATE PALMOLIVE CO Quarterly Report for Q3 Ended Sep 30, 2010

Filed October 28, 2010For Securities:CL

Summary

Colgate-Palmolive Company's (CL) third quarter 2010 results show a slight decrease in net sales year-over-year, primarily due to unfavorable foreign exchange rates, although organic sales showed positive growth. Diluted Earnings Per Share (EPS) saw an increase to $1.21 from $1.12 in the prior year's third quarter, indicating improved profitability on a per-share basis. For the nine-month period, Net Sales increased, driven by volume growth, but Diluted EPS decreased year-over-year. This decrease in nine-month EPS was significantly impacted by a one-time charge related to the transition to hyperinflationary accounting in Venezuela, which masked underlying operational improvements. Despite macro-economic challenges and foreign currency headwinds, the company demonstrated resilience through strong organic sales growth in key segments like Oral, Personal and Home Care. The company continues to invest in advertising and promotional activities, particularly in the Greater Asia/Africa region which showed robust sales growth. Shareholder returns were supported by an increased quarterly dividend and a new share repurchase program, signaling management's confidence in future performance and commitment to returning value to investors.

Financial Highlights

45 data points
Beta

Revenue

$3.94B

59.4% Gross Margin

Net Income

$619.00M

15.7% Net Margin

EPS (Diluted)

$0.60

Total Assets

$11.39B

Cash & Equivalents

$654.00M

Free Cash Flow

$941.00M

Financial Statements
Beta
Revenue$3.94B
Cost of Revenue$1.60B
Gross Profit$2.34B
SG&A Expenses$1.39B
Operating Income$958.00M
Net Income$619.00M
EPS (Basic)$0.63
EPS (Diluted)$0.60
Shares Outstanding (Basic)972.00M
Shares Outstanding (Diluted)1.02B

Key Highlights

  • 1Net sales for the third quarter decreased by 1.5% year-over-year to $3,943 million, primarily due to a 4.5% negative impact from foreign exchange, though organic sales grew by 3.0%.
  • 2Diluted Earnings Per Share (EPS) increased to $1.21 in the third quarter of 2010, up from $1.12 in the same period of 2009.
  • 3For the nine months ended September 30, 2010, net sales increased by 3.0% to $11,586 million, driven by a 4.0% volume growth.
  • 4Diluted EPS for the nine months decreased to $3.07 from $3.16 in the prior year, largely impacted by a $271 million one-time charge related to Venezuela's transition to hyperinflationary accounting.
  • 5The Oral, Personal and Home Care segment's net sales saw a 1.5% decrease in the third quarter, but organic sales grew by 3.5%, with the Greater Asia/Africa region showing a strong 12.0% increase in net sales.
  • 6Hill's Pet Nutrition segment experienced a 2.0% decrease in net sales for the third quarter, with organic sales down 1.5%.
  • 7The company increased its quarterly common stock dividend by 20% and authorized a new share repurchase program for up to 40 million shares.

Frequently Asked Questions

Venezuela's transition to hyperinflationary accounting as of January 1, 2010, resulted in a one-time charge of $271 million recorded in Other (income) expense, net for the nine months ended September 30, 2010. While this significantly impacted reported net income and EPS for the nine-month period, excluding this charge, net income and EPS showed underlying growth. The ongoing devaluation of the Venezuelan bolivar will continue to adversely affect reported results, with an estimated net reduction of $0.10 to $0.15 per share in diluted EPS for 2010.

Performance varied by region. North America showed modest sales growth. Latin America faced significant headwinds from foreign exchange, though organic sales grew. Europe/South Pacific experienced a decrease in net sales and organic sales due to pricing, foreign exchange, and higher costs, despite some volume gains. Greater Asia/Africa was a strong performer with significant net sales and organic sales growth driven by volume increases. Hill's Pet Nutrition saw a slight decline in sales.

Colgate-Palmolive is actively returning value to shareholders through increased dividends and share repurchases. The quarterly common stock dividend was increased by 20% to $0.53 per share. Additionally, a new share repurchase program was authorized in February 2010, allowing for the repurchase of up to 40 million shares of common stock.

Worldwide gross profit margin improved slightly in both the third quarter and the nine-month period, driven by cost-saving initiatives that more than offset negative foreign exchange impacts and increased promotional investments. Selling, general, and administrative (SG&A) expenses as a percentage of net sales increased due to higher advertising spending, which rose 1% in the third quarter and 10% for the nine-month period.