10-QPeriod: Q3 FY2014

COLGATE PALMOLIVE CO Quarterly Report for Q3 Ended Sep 30, 2014

Filed October 24, 2014For Securities:CL

Summary

Colgate-Palmolive Company's (CL) third-quarter 2014 results show a slight decline in net sales, primarily due to unfavorable foreign exchange rates, despite positive volume growth and pricing increases. Net sales for the quarter were $4,379 million, a 0.5% decrease year-over-year. Diluted earnings per share (EPS) also saw a decrease, falling to $0.59 from $0.70 in the prior year's comparable quarter. This decline was impacted by significant charges, including a $66 million charge related to a foreign tax matter, Venezuela remeasurement losses totaling $61 million, and costs associated with the ongoing 2012 Restructuring Program. Despite these headwinds, the company demonstrated resilience in its core business. Organic sales, which exclude foreign exchange impacts, increased by 3.5% globally, indicating underlying demand for its products. The Oral, Personal and Home Care segment, as well as the Pet Nutrition segment, both showed positive organic sales growth. The company also continues to execute its long-term strategies, including expanding its restructuring program to drive efficiency and cost savings, which are expected to yield significant benefits in the future. Investors should note the substantial impact of currency fluctuations and the specific challenges in markets like Venezuela, which are affecting reported financial results.

Financial Highlights

49 data points
Beta

Revenue

$4.38B

58.4% Gross Margin

Net Income

$542.00M

12.4% Net Margin

EPS (Diluted)

$0.59

Total Assets

$13.69B

Cash & Equivalents

$1.35B

Free Cash Flow

$1.00B

Financial Statements
Beta
Revenue$4.38B
Cost of Revenue$1.82B
Gross Profit$2.56B
SG&A Expenses$1.50B
Operating Income$948.00M
Net Income$542.00M
EPS (Basic)$0.59
EPS (Diluted)$0.59
Shares Outstanding (Basic)913.80M
Shares Outstanding (Diluted)922.80M

Key Highlights

  • 1Net sales for Q3 2014 decreased by 0.5% to $4,379 million compared to Q3 2013, primarily driven by a 4.0% negative foreign exchange impact.
  • 2Diluted Earnings Per Share (EPS) decreased to $0.59 in Q3 2014 from $0.70 in Q3 2013.
  • 3Organic sales, a key metric excluding foreign exchange, acquisitions, and divestitures, increased by 3.5% globally, indicating underlying business strength.
  • 4The company incurred significant charges, including a $66 million foreign tax matter charge and $61 million in Venezuela remeasurement losses, which negatively impacted net income.
  • 5The 2012 Restructuring Program was expanded, with estimated cumulative pretax charges now ranging from $1,285 to $1,435 million, aimed at driving future efficiencies and savings.
  • 6The Oral, Personal and Home Care segment and the Pet Nutrition segment both reported positive organic sales growth, demonstrating continued demand for core products.
  • 7Approximately 80% of net sales are generated from international markets, highlighting the company's significant exposure to global economic conditions and foreign currency fluctuations.

Frequently Asked Questions

The primary reason for the decrease in net sales was a significant negative foreign exchange impact of 4.0%. For earnings per share, in addition to the foreign exchange impact, several charges negatively affected profitability. These included a $66 million charge related to a foreign tax matter, $61 million in Venezuela remeasurement losses, and costs associated with the ongoing 2012 Restructuring Program.

The company demonstrated resilience on an organic basis, with global organic sales increasing by 3.5% in the third quarter of 2014. This indicates that the underlying business performance, excluding the impact of currency fluctuations, acquisitions, and divestitures, remains positive across its product segments.

The 2012 Restructuring Program is a long-term initiative focused on improving efficiency, reducing costs, and driving sustained growth. The recent expansion of this program signals the company's commitment to further optimize its operations, with increased estimated charges for the program and projected higher future savings. This strategic move aims to enhance future profitability and shareholder value.

The company faces significant challenges due to its extensive international operations, with approximately 80% of net sales generated outside the U.S. Key challenges include volatile foreign currency fluctuations, economic uncertainty in various countries, and specific operational difficulties in markets like Venezuela, which include currency devaluations, high inflation, and governmental restrictions. These factors collectively impact financial results and the ability to repatriate earnings.