FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000.
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________ to _________.
DELAWARE 13-1815595 ---------------------------------- ---------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 300 PARK AVENUE, NEW YORK, NEW YORK 10022 ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) |
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date:
Class Shares Outstanding Date -------------------------- ------------------------ ------------------- Common, $1.00 par value 574,377,429 July 31, 2000 |
COLGATE-PALMOLIVE COMPANY
(Dollars in Millions Except Per Share Amounts)
(Unaudited)
----------------------------------------------------------------------------------------------------------------- Three Months Ended Six Months Ended June 30, June 30, -------- -------- 2000 1999 2000 1999 ---- ---- ---- ---- Net sales $ 2,336.7 $ 2,285.0 $ 4,578.5 $ 4,460.3 Cost of sales 1,065.8 1,063.7 2,086.4 2,073.1 ---------- ---------- ---------- ---------- Gross profit 1,270.9 1,221.3 2,492.1 2,387.2 Selling, general and administrative expenses 832.8 831.5 1,649.5 1,632.5 Interest expense 51.2 54.5 100.3 108.5 Interest income (7.0) (10.3) (15.0) (18.4) ---------- ---------- ---------- ---------- Income before income taxes 393.9 345.6 757.3 664.6 Provision for income taxes 132.0 117.5 255.5 227.6 ---------- ---------- ---------- ---------- Net income $ 261.9 $ 228.1 $ 501.8 $ 437.0 ========== ========== ========== ========== Earnings per common share: Basic $ .45 $ .38 $ .85 $ .73 ========== ========== ========== ========== Diluted $ .42 $ .36 $ .80 $ .68 ========== ========== ========== ========== Dividends declared per common share* $ - $ - $ .32 $ .28 =========== =========== ========== ========== |
* Includes two dividend declarations in the first quarter periods.
See Notes to Condensed Consolidated Financial Statements.
COLGATE-PALMOLIVE COMPANY
(Dollars in Millions)
(Unaudited)
----------------------------------------------------------------------------------------------------------------- ASSETS ------ June 30, December 31, 2000 1999 ------------- ------------- Current Assets: Cash and cash equivalents $ 224.2 $ 199.6 Marketable securities 14.5 35.6 Receivables (less allowances of $38.1 and $37.2) 1,190.1 1,100.8 Inventories 751.0 783.7 Other current assets 219.2 235.1 ----------- ----------- 2,399.0 2,354.8 Property, plant and equipment: Cost 4,211.2 4,166.0 Less: Accumulated depreciation 1,692.8 1,614.9 ----------- ----------- 2,518.4 2,551.1 Goodwill and other intangible assets (net of accumulated amortization of $620.8 and $578.9) 2,129.1 2,185.4 Other assets 313.6 331.8 ----------- ----------- $ 7,360.1 $ 7,423.1 =========== =========== |
See Notes to Condensed Consolidated Financial Statements.
COLGATE-PALMOLIVE COMPANY
(Dollars in Millions)
(Unaudited)
----------------------------------------------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ June 30, December 31, 2000 1999 -------- -------- Current Liabilities: Notes and loans payable $ 151.5 $ 207.3 Current portion of long-term debt 242.9 338.9 Accounts payable 724.6 764.8 Accrued income taxes 143.5 116.6 Other accruals 797.1 845.9 ------------ ------------ 2,059.6 2,273.5 Long-term debt 2,532.3 2,243.3 Deferred income taxes 462.3 398.6 Other liabilities 665.9 674.0 Shareholders' equity: Preferred stock 358.6 366.5 Common stock 732.9 732.9 Additional paid-in capital 1,097.8 1,063.2 Retained earnings 4,522.0 4,212.3 Cumulative foreign currency translation adjustments (1,189.8) (1,136.2) ------------ ------------ 5,521.5 5,238.7 Unearned compensation (345.7) (348.6) Treasury stock, at cost (3,535.8) (3,056.4) ------------ ------------ 1,640.0 1,833.7 ------------ ------------ $ 7,360.1 $ 7,423.1 ============ ============ |
See Notes to Condensed Consolidated Financial Statements.
COLGATE-PALMOLIVE COMPANY
(Dollars in Millions)
(Unaudited)
----------------------------------------------------------------------------------------------------------------- Six Months Ended ---------------- June 30, -------- 2000 1999 -------- --------- Operating Activities: -------------------- Net cash provided by operating activities $ 657.2 $ 551.5 Investing Activities: -------------------- Capital expenditures (157.2) (145.9) Payments for acquisitions, net of cash acquired (30.0) (19.6) Sale of non-core product lines - 89.7 Sale of (investments in) marketable securities 19.1 (42.7) Proceeds from sale of long-term investments 103.5 3.2 Other (37.4) (6.7) ---------- ---------- Net cash used for investing activities (102.0) (122.0) Financing Activities: -------------------- Principal payments on debt (333.1) (303.1) Proceeds from issuance of debt 456.0 378.4 Dividends paid (191.9) (171.5) Purchase of common stock (465.4) (302.0) Other 6.4 (12.1) ---------- ---------- Net cash used for financing activities (528.0) (410.3) Effect of exchange rate changes on cash and cash equivalents (2.6) (2.8) ---------- ---------- Net increase in cash and cash equivalents 24.6 16.4 Cash and cash equivalents at beginning of period 199.6 181.7 ---------- ---------- Cash and cash equivalents at end of period $ 224.2 $ 198.1 ========== ========== |
See Notes to Condensed Consolidated Financial Statements.
COLGATE-PALMOLIVE COMPANY
(Dollars and Shares in Millions Except Per Share Amounts)
(Unaudited)
1. The Condensed Consolidated Financial Statements reflect all normal recurring adjustments which, in management's opinion, are necessary for a fair presentation of the results for interim periods. Results of operations for the interim periods may not be representative of results to be expected for a full year.
2. Provision for certain expenses, including income taxes, media advertising, consumer promotion and new product introductory costs, are based on full year assumptions. Such expenses are charged to operations in the year incurred and are included in the accompanying condensed consolidated financial statements in proportion with the passage of time or with estimated annual tax rates or annual sales.
3. Inventories by major classes were as follows:
June 30, December 31, 2000 1999 ------ ------------ Raw material and supplies $ 231.6 $ 259.6 Work-in-process 33.5 33.2 Finished goods 485.9 490.9 -------- -------- $ 751.0 $ 783.7 ======== ======== |
4. Earnings Per Share:
Three Months Ended June 30, 2000 Three Months Ended June 30, 1999 -------------------------------- -------------------------------- Per Per Income Shares Share Income Shares Share ------ ------ ----- ------ ------ ----- Net income $261.9 $228.1 Preferred dividends (5.1) (5.1) --------- --------- Basic EPS 256.8 576.3 $.45 223.0 584.1 $.38 ==== ==== Stock options 10.3 12.2 ESOP conversion 5.0 42.7 4.4 44.1 -------- ------ -------- ----- Diluted EPS $261.8 629.3 $.42 $227.4 640.4 $.36 ======== ===== ==== ====== ===== ==== |
COLGATE-PALMOLIVE COMPANY
(Dollars and Shares in Millions Except Per Share Amounts)
(Unaudited)
------------------------------------------------------------------------------------------------------------------------------ Six Months Ended June 30, 2000 Six Months Ended June 30, 1999 ------------------------------ ------------------------------ Per Per Income Shares Share Income Shares Share ------ ------ ----- ------ ------ ----- Net income $ 501.8 $ 437.0 Preferred dividends (10.4) (10.3) ------- ------- Basic EPS 491.4 577.2 $ .85 426.7 583.9 $ .73 ===== ===== Stock options 10.6 12.5 ESOP conversion 10.1 43.0 9.1 44.1 ------- ------ ------- ------ Diluted EPS $ 501.5 630.8 $ .80 $ 435.8 640.5 $ .68 ======= ====== ===== ======= ====== ===== |
5. Comprehensive income
Comprehensive income is comprised primarily of net earnings and currency translation gains and losses. Total comprehensive income for the three and six months ended June 30, 2000 and 1999 were as follows:
Three months ended Six months ended June 30, June 30, 2000 1999 2000 1999 --------- --------- --------- --------- Net income $ 261.9 $ 228.1 $ 501.8 $ 437.0 Foreign currency translation adjustment due to devaluation of Brazilian Real (15.0) (12.5) (3.2) (236.5) Other foreign currency translation adjustments (31.2) (14.6) (50.4) (40.9) --------- --------- --------- --------- Total comprehensive income $ 215.7 $ 201.0 $ 448.2 $ 159.6 ========= ========= ========= ========= |
The charge to cumulative translation adjustment resulting from the devaluation of the Brazilian Real in the six months ended June 30, 1999 related to foreign currency denominated goodwill and property, plant and equipment and did not include economic losses on monetary assets.
COLGATE-PALMOLIVE COMPANY
(Dollars in Millions)
(Unaudited)
------------------------------------------------------------------------------------------------------------------------------ 6. Segment information: Three months ended June 30, Six months ended June 30, 2000 1999 2000 1999 ----------- ----------- ----------- ----------- Net Sales North America $ 567.4 $ 534.9 $ 1,115.3 $ 1,068.2 Latin America 635.8 613.6 1,224.2 1,148.1 Europe 480.0 495.4 942.4 996.9 Asia/Africa 378.8 377.8 754.3 738.8 ----------- ----------- ----------- ----------- Total Oral, Personal and Household Care 2,062.0 2,021.7 4,036.2 3,952.0 Total Pet Nutrition 274.7 263.3 542.3 508.3 ----------- ----------- ----------- ----------- Net Sales $ 2,336.7 $ 2,285.0 $ 4,578.5 $ 4,460.3 =========== =========== =========== =========== Earnings North America $ 127.3 $ 103.1 $ 241.6 $ 216.1 Latin America 144.1 129.8 285.7 258.0 Europe 83.0 82.4 167.2 172.0 Asia/Africa 46.1 42.9 93.6 85.3 ----------- ----------- ----------- ----------- Total Oral, Personal and Household Care 400.5 358.2 788.1 731.4 Total Pet Nutrition 58.0 51.0 113.6 95.5 Corporate overhead and other (20.4) (19.4) (59.1) (72.2) ----------- ----------- ----------- ----------- Earnings before interest and taxes 438.1 389.8 842.6 754.7 Interest expense, net (44.2) (44.2) (85.3) (90.1) ----------- ----------- ----------- ----------- Income before income taxes $ 393.9 $ 345.6 $ 757.3 $ 664.6 =========== =========== =========== =========== |
7. In July 2000, the Financial Accounting Standards Board's Emerging Issues Task Force (EITF) reached a consensus on Issue No. 00-14, "Accounting for Certain Sales Incentives". This issue addresses the recognition, measurement, and income statement classification for various types of sales incentives including discounts, coupons, rebates and free products. The Company will adopt this consensus in the fourth quarter of 2000. While the impact of this consensus on the Company's consolidated financial statements is still being evaluated, it is expected to only impact revenue and expense classifications and not change reported net income.
8. Reference is made to the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year 1999 for a complete set of financial notes including the Company's significant accounting policies.
COLGATE-PALMOLIVE COMPANY
(Dollars in Millions Except Per Share Amounts)
Worldwide sales reached $2,336.7 in the second quarter of 2000, a 2% increase over the 1999 second quarter, reflecting unit volume gains of 6% partially offset by a decline in foreign currencies. Sales would have risen 7%, excluding the effect of foreign exchange declines.
Second quarter sales in the Oral, Personal and Household Care segment were $2,062.0, a 2% increase as compared to 1999 sales of $2,021.7 on volume growth of 6%.
Colgate-North America sales were $567.4 in the second quarter of 2000. Sales, excluding divested businesses, grew 8% on volume gains of 7% driven by introductions of new products in all core categories. These new products included the battery-powered Colgate Actibrush toothbrush, and Colgate Sensitive Maximum Strength and Colgate Sparkling White toothpastes. Also contributing to increased sales were Palmolive Spring Sensations dishwashing liquid and Irish Spring aloe bar soap, both introduced in late 1999.
Colgate-Latin America second quarter sales increased 4% to $635.8 on volume gains of 7%, led by strong volume growth in Mexico, Venezuela, Peru, the Dominican Republic and Central America. The regional introduction of Colgate Fresh Confidence gel toothpaste, now in 14 countries, as well as the continued success of herbal toothpastes and Palmolive Botanicals shampoo and soap strengthened market shares in the Oral and Personal Care categories.
Colgate-Europe second quarter sales decreased 3% to $480.0 as volume gains of 6% were negatively impacted by the weakened euro. Excluding the impact of foreign currency, sales would have risen 6% largely due to volume increases in the United Kingdom, Italy, Greece, Spain, Poland, Turkey and the Nordic group. The Colgate Actibrush, and Colgate Fresh Confidence and Colgate Herbal toothpastes led Oral Care market share growth in the region. Market share growth in the Personal and Household Care categories also continued, generated by Palmolive Aquarium liquid hand soap, new varieties of Palmolive shower gel, Ajax Shower Power and Palmolive Spring Sensations dishwashing liquid.
Colgate-Asia/Africa second quarter sales increased 1% to $378.8 as volume grew 6% largely as a result of strong growth in China, the Philippines, Malaysia, Australia, Vietnam and South Africa. China continued to experience significant growth through geographic expansion as well as the introduction of new products such as Softlan fabric softener and Palmolive Naturals shampoo. The region also experienced strong volume growth from new products such as Colgate Fresh Confidence, Colgate Herbal and Colgate Triple Action toothpastes. In addition, effective July 1, 2000, the Company formed a majority-owned joint venture with China's market-leading toothbrush company, Jiangsu Sanxiao Group Co. Ltd.
Hill's Pet Nutrition second quarter sales increased 4% to $274.7 with unit volume gains of 6%. Domestic volume rose through strong veterinary endorsements, higher sales from Science Diet Feline Hairball Control and its lifestage variants and effective national selling programs. Hill's-International experienced volume growth in Japan, following the launch of Science Diet Feline Hairball Control, and in Europe and Asia-Pacific, where the introduction of educational programs has led to strong sales growth of Prescription Diet products.
(Dollars in Millions Except Per Share Amounts)
Sales in the Oral, Personal and Household Care segment for the six months ended June 30, 2000 were up 2% to $4,036.2 from the comparable period in 1999 as volume rose 7% partially offset by a decline in foreign currencies. Within this segment, Colgate-North America sales excluding divested businesses increased 7% on volume growth of 6%, Colgate-Latin America sales increased 7% on volume growth of 8%, Colgate-Europe sales decreased 5% while volume grew 5% and Colgate-Asia/Africa sales increased 3% on volume growth of 7%.
Worldwide gross profit margin for the second quarter of 2000 increased 100 basis point to 54.4% from 53.4% for the comparable period in 1999. The Company continued to benefit from manufacturing cost reduction initiatives, global sourcing and product mix.
Selling, general and administrative expenses as a percentage of sales decreased to 35.6% in the second quarter of 2000 from 36.4% in 1999, and to 36.0% in the first half of 2000 from 36.6% for the comparable period in 1999, due to overhead cost efficiency programs.
Earnings before interest and taxes (EBIT) increased 12.4% to $438.1 in the second quarter of 2000, and reached a level of 18.7% of sales versus 17.1% in second quarter of 1999. For the first half of 2000 EBIT increased 11.6% to $842.6, a level of 18.4% of sales as compared to 16.9% in 1999.
Interest expense, net of interest income, remained level at $44.2 in the second quarter of 2000 as compared with 1999. For the first half of 2000 interest expense decreased to $85.3 compared with $90.1 in 1999, primarily due to strong cash generation and the lower dollar cost of foreign currency denominated debt.
The effective tax rate for the second quarter of 2000 was 33.5% versus 34.0% for the second quarter of 1999. The effective rate for the first half of 2000 was 33.7% versus 34.2% for the same period in 1999. The 33.7% rate reflects the Company's current estimate of its full year effective income tax rate which is slightly higher than the 1999 full year rate of 32.8%. The rates in both years include the benefits of global tax planning strategies, including the realization of tax credits.
Net income for the second quarter of 2000 increased 14.8% to $261.9 or $.42 per share on a diluted basis compared with $228.1 or $.36 per share in the prior year. For the first half of 2000, net income increased 14.8% to $501.8 or $.80 per share on a diluted basis compared with $437.0 or $.68 per share in the prior year.
Net cash provided by operations increased 19% to $657.2 in the 2000 first half compared with $551.5 in the 1999 first half. The improvement was primarily generated by the increase in operating profit. At June 30, 2000, $634.4 of commercial paper was classified as long-term debt in accordance with the Company's intent and ability to refinance these obligations on a long-term basis. The Company's liquidity remains strong. In March 2000, Standard and Poors increased the Company's debt rating from A to A+.
Reference should be made to the Company's 1999 Annual Report on Form 10-K for additional information regarding liquidity and capital resources.
COLGATE-PALMOLIVE COMPANY
For information regarding legal matters refer to Item 3 on page 4 of the registrant's Annual Report on Form 10-K for the year ended December 31, 1999 and Note 14 to the consolidated financial statements included therein on page 36.
The Company's annual meeting of stockholders was held on May 9, 2000. The matters voted on and the results of the vote were as follows:
(a) Jill K. Conway, Ronald E. Ferguson, Ellen M. Hancock, David W.
Johnson, John P. Kendall, Richard J. Kogan, Reuben Mark and
Howard B. Wentz, Jr. were elected directors of the Company. The
results of the vote were as follows:
Votes Received Votes Withheld -------------- -------------- Jill K. Conway 520,188,400 4,941,627 Ronald E. Ferguson 520,145,297 4,984,730 Ellen M. Hancock 520,252,837 4,877,190 David W. Johnson 520,003,027 5,127,000 John P. Kendall 519,329,489 5,800,538 Richard J. Kogan 520,382,647 4,747,380 Reuben Mark 520,173,628 4,956,399 Howard B. Wentz, Jr. 519,580,310 5,549,717 |
(b) The ratification of the selection of Arthur Andersen LLP as auditors for the year ending December 31, 2000 was approved. The results of the vote were as follows:
Votes For Votes Against Abstentions ------------- ------------- ----------- 519,282,642 3,503,968 2,343,417 |
COLGATE-PALMOLIVE COMPANY
(a) Exhibits:
Exhibit 4-B(b) Colgate-Palmolive Company Employee Stock Ownership
Trust effective as of June 1, 1989, as amended Exhibit 12 Ratio of Earnings to Fixed Charges. Exhibit 27 Financial Data Schedule. |
(b) Reports on Form 8-K.
None.
The exhibits indicated above which are not included with the Form 10-Q are available upon request and payment of a reasonable fee approximating the registrant's cost of providing and mailing the exhibits. Inquiries should be directed to:
Colgate-Palmolive Company Office of the Secretary (10-Q Exhibits) 300 Park Avenue New York, NY 10022-7499
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Principal Financial Officer:
August 10, 2000 /s/ Stephen C. Patrick --------------------------- Stephen C. Patrick Chief Financial Officer |
Principal Accounting Officer:
August 10, 2000 /s/ Dennis J. Hickey --------------------------- Dennis J. Hickey Vice President and Corporate Controller |
EXHIBIT 4-B(b)
COLGATE-PALMOLIVE COMPANY
(Between Colgate-Palmolive Company and LaSalle National Bank as Trustee)
Effective as of June 1, 1989, as amended
Page ---- Recitals ................................................................................. 1 ARTICLE I --------- ESTABLISHMENT OF TRUST ---------------------- Section 1. Name............................................................................. 2 Section 2. Trust Fund....................................................................... 2 Section 3. Entire Understanding............................................................. 2 Section 4. Administration of Plan........................................................... 2 ARTICLE II ---------- CONTRIBUTIONS TO TRUST FUND --------------------------- Section 1. Company Contributions............................................................ 2 Section 2. No Employee Contributions........................................................ 2 ARTICLE III ----------- PAYMENTS FROM TRUST FUND ------------------------ Section 1. Instructions from Committee...................................................... 2 Section 2. Trustee's Compensation and Expenses.............................................. 3 Section 3. Incapacitated Persons............................................................ 3 ARTICLE IV ---------- POWERS OF TRUSTEE ----------------- Section 1. Investment of Trust Fund......................................................... 3 (a) Investment in Series B Convertible Preference Stock......................... 3 (b) Other Investments........................................................... 4 (i) Investment of Property............................................... 4 (ii) Holding of Cash...................................................... 4 (iii) Interest-Bearing Accounts............................................ 4 (iv) Evidences of Ownership............................................... 4 (v) Voting and Other Rights Relating to Securities Other Than Company Stock................................................................ 4 (vi) Leasing of Property.................................................. 5 (vii) Borrowing............................................................ 5 (viii) Sales of Property.................................................... 5 (ix) Common Trust Funds................................................... 5 (x) Determination of Fair Market Value; Conversion of Preferred Stock.... 5 Section 2. Management of Trust Fund......................................................... 6 (a) Employment of Agents........................................................ 6 (b) Resolution of Claims........................................................ 6 |
(c) Mortgages...................................................................... 6 (d) Taxes Relating to Trust Fund................................................... 6 (e) Transactions with Other Trustees............................................... 6 Section 3. Independent Status of Trustee....................................................... 7 Section 4. Exercise of Prudence................................................................ 7 Section 5. Funding and Investment Policy....................................................... 7 Section 6. Voting Rights to Company Stock...................................................... 7 Section 7. Tender and Exchange Offers for Company Stock........................................ 8 ARTICLE V --------- INVESTMENT MANAGERS ------------------- Section 1. Appointment by Company.............................................................. 9 Section 2. Notice to Trustee................................................................... 9 Section 3. Relationship Vis-A-Vis Trustee...................................................... 9 (a) No Liability for Losses........................................................ 9 (b) Communications to Trustee...................................................... 9 (c) Compliance with Instructions................................................... 9 (d) Absence of Instructions........................................................ 9 (e) Rights with Respect to Securities.............................................. 9 (f) Common Trust Fund of Investment Manager........................................ 10 Section 4. Fiduciary Responsibility............................................................ 10 Section 5. Investment Authority................................................................ 10 ARTICLE VI ---------- ACCOUNTS OF TRUSTEE ------------------- Section 1. Maintenance of Records.............................................................. 11 Section 2. Individual Accounts................................................................. 11 Section 3. Annual Accounts..................................................................... 11 Section 4. Manner of Approval.................................................................. 11 Section 5. Release and Discharge of Trustee.................................................... 11 ARTICLE VII ----------- AMENDMENTS TO TRUST ------------------- Section 1. Right of Company.................................................................... 12 ARTICLE VIII ------------ TERMINATION OF TRUST -------------------- Section 1. Written Notice...................................................................... 12 Section 2. Application of Trust Fund upon Termination of Program............................... 12 ARTICLE IX ---------- SUCCESSION OF TRUSTEES ---------------------- Section 1. Removal by Company.................................................................. 13 |
Section 2. Resignation of Trustee................................................................ 13 Section 3. Appointment of Successor Trustee...................................................... 13 Section 4. Transfer of Assets to Successor Trustee............................................... 13 Section 5. Reorganization of Trustee............................................................. 13 ARTICLE X --------- GENERAL ADMINISTRATIVE POWERS OF THE COMPANY, THE TRUSTEE AND THE COMMITTEE --------------------------------------------------------------------------- Section 1. Reliance upon Committee............................................................... 14 Section 2. Reliance upon Company................................................................. 14 Section 3. Reliance upon Counsel................................................................. 14 Section 4. No Implied Powers or Obligations...................................................... 14 Section 5. Parties to Court Proceedings.......................................................... 14 Section 6. Notices............................................................................... 15 ARTICLE XI ---------- MISCELLANEOUS ------------- Section 1. Third Parties......................................................................... 15 Section 2. Reorganization of Company............................................................. 16 Section 3. Prohibition Against Assignment........................................................ 16 Section 4. Governing Law......................................................................... 16 Section 5. Severability of Provisions............................................................ 16 Section 6. Headings, Definitions and Incorporation of Program.................................... 16 Section 7. Co-Trustees........................................................................... 16 (a) Joint Management................................................................. 16 (b) Fiduciary Status................................................................. 17 (c) Majority Action.................................................................. 17 (d) Signatures....................................................................... 17 Section 8. Exclusive Benefit Rule................................................................ 17 (a) Contributions Conditional upon Tax Deductibility................................. 17 (b) Detrimental Tax Effect or Contributions by Mistake............................... 17 (c) Repayments....................................................................... 18 EXECUTION............................................................................................ 19 |
This Agreement is entered into as of the 1st day of June, 1989, by and between Colgate-Palmolive Company, a Delaware corporation, with principal offices at 300 Park Avenue, New York, NY 10022 (the "Company"), and LaSalle National Bank, a national banking association, with principal offices at 135 South LaSalle Street, Chicago, Illinois 60690 (the "Trustee") not in its individual or corporate capacity, but solely in its capacity as trustee of the Colgate-Palmolive Company Employee Stock Ownership Trust, which implements and forms a part of the Colgate-Palmolive Company Employees Savings and Investment Plan (the "Plan").
WITNESSETH, That Whereas:
(A) The Company maintains the Colgate-Palmolive Company Employees Savings and Investment Plan for the benefit of certain eligible employees of the Company and certain of its subsidiaries, the terms of which are expressly incorporated herein;
(B) The Plan is intended to comply with the terms of the Internal Revenue Code of 1986, as amended ("Code") and the Employee Retirement Income Security Act of 1974, as amended ("ERISA"); a portion of the Plan specifically is intended to qualify as a cash or deferred arrangement under Code Section 401(k) and a portion of the Plan (the "ESOP") specifically is intended to qualify as an employee stock ownership plan under Section 407(d)(6) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA") and Section 4975(e)(7) of the Code;
(C) The Plan provides for a trustee to receive and hold contributions under the ESOP;
(D) The Company desires by the execution and delivery of this Agreement
(i) to provide for the receipt, investment and administration of assets of,
contributions to and earnings thereon, the ESOP; and (ii) to have the trust
constitute a part of the Plan and a trust meeting the requirements of Code
Sections 401(a) and 501(a);
(E) It is a principal purpose of the ESOP to invest primarily in shares of Preferred stock and other Company Stock qualifying as "employer securities" within the meaning of Code Section 409(1) and "qualifying employer securities" within the meaning of Section 407(d)(5) of ERISA;
NOW THEREFORE, in consideration of these premises and of the mutual covenants herein contained, the Company and the Trustee agree as follows:
payments in accordance with such directions without ascertaining whether such payments are in compliance with the terms of the Plan and without responsibility to see to their application.
any agreements necessary to effectuate any refinancing or the extension of the terms thereof. The Trustee shall hold Company Stock for the benefit of Participants until otherwise directed by the Committee pursuant to the provisions of the Plan; provided, however, the Trustee, in accordance with the terms of the Plan, shall determine if, and when, Preferred Stock shall be converted into Common Stock. Except to the extent that its duties have been transferred to one or more Investment Managers pursuant to Article V, the Trustee also may invest and reinvest any portion of the Trust Fund that is not invested in Preferred Stock (or other Company Stock) in accordance with paragraph (b) below.
shall respond to tender and exchange offers, requests and invitations in accordance with Section 7 below;
the dividends and the preferential rights of the Preferred Stock, the prospect of the future release and allocation of Preferred Stock to Participants on account of the use of dividends paid on the Preferred Stock to amortize a loan incurred by the Trustee to purchase such Preferred Stock, and the best interests of Participants and their beneficiaries.
Committee and/or to receive assets from other trustees appointed under the Plan or any other plan of the Company as directed in writing by the Company or the Committee.
(a) directly or indirectly controlling or controlled by the Company or any of its affiliates or under common control with the Company or any of its affiliates; or
(b) under any authority or power of the Company to direct the time and price at which securities may be purchased, the amount of securities to be purchased, or the selection of the broker or dealer through or from whom the purchases are made.
of the exercise of voting rights, together with forms by which the Participant may confidentially instruct the Trustee, or revoke such instruction, with respect to the voting of shares of each class or series of Company Stock allocated to his Account. Upon timely receipt of directions, the Trustee shall vote each class or series of the Company Stock (with voting rights) allocated to a Participant's Account on each matter as directed by the Participant. The Trustee shall vote or not vote all Company Stock of each class or series (with voting rights) that is not allocated to a Participant's Account (e.g., shares held in the Suspense Account) and all Company Stock of each class or series (with voting rights) allocated to a Participant's Account which is not voted by the Participant, because the Participant has not directed (or not timely directed) the Trustee as to the manner in which such Company Stock is to be voted, in the same proportion as those shares of the same class or series of Company Stock for which the Trustee has received proper direction on such matter. Notwithstanding the above or any provision of the Plan to the contrary, shares of Preferred Stock shall be voted by the Trustee separately (in accordance with the procedures and rules above, applied separately to Preferred Stock) as a series with respect to any alteration, amendment or repeal of any provision of the Articles of Incorporation of the Company, as amended, or the Certificate of Designations of Series B Convertible Preference Stock of the Company, if such amendment, alteration or repeal would alter or change the powers, preferences or special rights of the Preferred Stock, all as provided in such Certificate of Designations. All such voting rights instructions and directions received by the Trustee from a Participant shall be held in confidence by the Trustee and shall not be divulged or released to any person, including directors, officers and employees of the Company or any affiliated company.
securities purchases, of which notice was given prior to the purchase of such securities, and shall have no obligation to exercise any such right unless the Trustee is informed of the existence of the right and is instructed to exercise such right, in writing, by the Investment Manager within a reasonable time prior to the expiration of such right; and
If to the Company or Committee:
Colgate-Palmolive Company
300 Park Avenue
New York, NY 10022
Attention: General Counsel
If to the Trustee:
LaSalle National Bank
135 South LaSalle Street
Chicago, Illinois 60690
Attention: Mr. Norman Rosson,
Corporate Trust Division
with a copy to:
Keck, Mahin & Cate
8300 Sears Tower
Chicago, Illinois 60606
Attention: Jared Kaplan
(i) Each person shall use reasonable care to prevent a co-Trustee from committing a breach; and
(ii) Such persons shall jointly manage and control the assets of the Trust Fund, except that this item (ii) shall not preclude any agreement (and the co-Trustees are hereby authorized to agree in a written document executed by all co-Trustees) to allocate specific responsibilities, obligations or duties among themselves, in which event a Co-Trustee to
whom certain responsibilities, obligations or duties have not been allocated shall not be liable by reason of this item (ii), either individually or as a Trustee, for any loss resulting to the Trust Fund arising from acts or omissions on the part of another co-Trustee to whom such responsibilities, obligations or duties have been allocated.
(i) such repayment shall not include any earnings attributable to that portion of the contribution that qualifies for repayment under paragraph (a) or (b) above (which earnings shall be applied to Acquisition Loan payments or allocated to Participants' Accounts as provided in the Plan), unless the repayment is being made to avoid a detrimental tax effect under Code Section 401(k), 401(m), or 402(g);
(ii) there shall be deducted from the amount of such repayment any losses attributable to that portion of the contribution which qualifies for repayment under paragraph (a) or (b) above; and
(iii) if in any event such repayment would result in any Participant's Account being reduced to a balance which is less than the balance which would have been in his Account had the amount contributed (as a result of mistake of fact or in excess of the deductible amount) not been contributed, then the amount to be repaid shall be reduced until no Participant's Account shall be reduced by reason of such repayment.
IN WITNESS WHEREOF, the Company and the Trustee have caused this Agreement to be duly executed as of the day and year first above written.
COLGATE-PALMOLIVE COMPANY
By /s/ Reuben Mark ------------------------------------ |
LASALLE NATIONAL BANK, solely in its capacity as Trustee, and not in its individual or corporate capacity.
By /s/ Leticia Peralta ----------------------------------- Its Vice President ----------------------------------- |
Dollars in Millions (Unaudited)
----------------------------------------------------------------------------------------------------- Six Months Ended June 30, 2000 ------------- Income before income taxes $ 757.3 Add: Interest on indebtedness and amortization of debt expense and 100.3 discount or premium Portion of rents representative of interest factor 17.1 Interest on ESOP debt, net of dividends 1.5 Less: Income of less than fifty-percent-owned subsidiaries (2.2) ------------- Income as adjusted $ 874.0 ============= Fixed Charges: Interest on indebtedness and amortization of debt expense and $ 100.3 discount or premium Portion of rents representative of interest factor 17.1 Interest on ESOP debt, net of dividends 1.5 Capitalized interest 2.0 ------------- Total fixed charges $ 120.9 ============= Ratio of earnings to fixed charges 7.2 ============= |
In June 1989, the Company's leveraged employee stock ownership plan ("ESOP") issued $410.0 of long-term notes due through 2009 bearing an average interest rate of 8.7%. These notes are guaranteed by the Company. Interest incurred on the ESOP notes during the first half of 2000 was $15.8. This interest is funded through preferred and common stock dividends. The fixed charges presented above include interest on ESOP indebtedness to the extent it is not funded through preferred and common stock dividends.
ARTICLE 5 |
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE QUARTERLY REPORT ON FORM 10-Q FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. |
MULTIPLIER: 1,000,000 |
PERIOD TYPE | 6 MOS |
FISCAL YEAR END | DEC 31 2000 |
PERIOD START | JAN 01 2000 |
PERIOD END | JUN 30 2000 |
CASH | 224 |
SECURITIES | 15 |
RECEIVABLES | 1,228 |
ALLOWANCES | 38 |
INVENTORY | 751 |
CURRENT ASSETS | 2,399 |
PP&E | 4,211 |
DEPRECIATION | 1,693 |
TOTAL ASSETS | 7,360 |
CURRENT LIABILITIES | 2,060 |
BONDS | 2,532 |
PREFERRED MANDATORY | 0 |
PREFERRED | 359 |
COMMON | 733 |
OTHER SE | 548 |
TOTAL LIABILITY AND EQUITY | 7,360 |
SALES | 4,579 |
TOTAL REVENUES | 4,579 |
CGS | 2,086 |
TOTAL COSTS | 1,650 |
OTHER EXPENSES | 0 |
LOSS PROVISION | 0 |
INTEREST EXPENSE | 85 |
INCOME PRETAX | 757 |
INCOME TAX | 256 |
INCOME CONTINUING | 502 |
DISCONTINUED | 0 |
EXTRAORDINARY | 0 |
CHANGES | 0 |
NET INCOME | 502 |
EPS BASIC | .85 |
EPS DILUTED | .80 |