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Financial Model - Colgate Palmolive (solved)Prepared by Dheeraj Vaidya, CFA, [email protected]

Table of Contents

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Income StatementsBalance SheetCash FlowsDepreciation ScheduleAmortization ScheduleWorking Capital ScheduleOther Long Term ScheduleShareholder's Equity ScheduleShares Outstanding ScheduleDebt Schedule

Colgate-Palmolive Company

Income Statement (Consolidated)

($ in Million Except Per Share Amounts) Dec-10 Dec-11Net sales 15,564 16,734 Cost of sales 6,360 7,144 Gross profit 9,204 9,590

Selling, general and administrative expenses 5,414 5,758 Other (income) expense, net 301 (9)EBIT 3,489 3,841 Interest expense, net 59 52

EBT 3,430 3,789 Provision for income taxes 1,117 1,235 Net income including noncontrolling interests 2,313 2,554 Less: Net income attributable to noncontrolling interests 110 123 Net income attributable to Colgate-Palmolive Company 2,203 2,431 Earnings per common share, basic 2.23 2.49

Earnings per common share, diluted 2.16 2.47

Basic Weighted Average Shares 976.7 Diluted Weighted Average Shares 984.1

EBITDA

Vertical Analysis Dec-10 Dec-11Net sales 100.0% 100.0%Cost of sales 40.9% 42.7% Gross profit 59.1% 57.3%

Selling, general and administrative expenses 34.8% 34.4%Other (income) expense, net 1.9% -0.1% Operating profit 22.4% 23.0%Interest expense, net 0.4% 0.3%

Income before income taxes 22.0% 22.6%Provision for income taxes 7.2% 7.4% Net income including noncontrolling interests 14.9% 15.3%Less: Net income attributable to noncontrolling interests (% o 4.8% 4.8% Net income attributable to Colgate-Palmolive Company 14.2% 14.5%

Effective Tax Rates 32.6% 32.6%

Horizontal Analysis Dec-10 Dec-11Net sales 1.5% 7.5%

Cost of sales 0.6% 12.3% Gross profit 2.2% 4.2%

Selling, general and administrative expenses 2.5% 6.4%Other (income) expense, net 171.2% -103.0% Operating profit -3.5% 10.1%Interest expense, net -23.4% -11.9%

Income before income taxes -3.1% 10.5%Provision for income taxes -2.1% 10.6% Net income including noncontrolling interests -3.5% 10.4%Less: Net income attributable to noncontrolling interests 3.8% 11.8% Net income attributable to Colgate-Palmolive Company -3.8% 10.3%

Segmental InformationDec-10 Dec-11

Oral, Personal and Home Care

North America $ 2,878 % growth (yoy)

Latin America 4,895 % growth (yoy)

Europe/South Pacific 3,508 % growth (yoy)

Asia 2,074 % growth (yoy)

Africa/Eurasia 1,207 % growth (yoy)

Total Oral, Personal and Home Care 14,562

Pet Nutrition 2,172 % growth (yoy)

Total Net sales $ 16,734

Modeling Revenues and Costs

Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 17,085 17,420 $ 17,780 $ 18,146 $ 18,521 $ 18,903 $ 19,294 7,153 7,219 7,379 7,531 7,686 7,845 8,007 9,932 10,201 10,401 10,616 10,835 11,058 11,287

5,930 6,223 6,223 6,351 6,482 6,616 6,753 113 422 444 454 463 473 482 3,889 3,556 3,734 3,811 3,889 3,970 4,052 15 (9) (83) (83) (80) (89) (87)

3,874 3,565 3,816 3,894 3,970 4,059 4,138 1,243 1,155 1,240 1,265 1,290 1,319 1,345 2,631 2,410 2,576 2,628 2,679 2,740 2,793 159 169 180 184 188 192 196 2,472 2,241 2,396 2,444 2,492 2,548 2,598 2.60 2.41 2.62 2.76 2.91 3.07 3.22

2.57 2.38 2.61 2.71 2.85 3.01 3.17

952.1 930.8 913.8 884.7 857.0 830.8 805.9 960.2 939.9 918.9 901.3 872.9 845.9 820.4

4,179 4,290 4,404 4,520 4,639

Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

41.9% 41.4% 41.5% 41.5% 41.5% 41.5% 41.5%58.1% 58.6% 58.5% 58.5% 58.5% 58.5% 58.5%

34.7% 35.7% 35% 35% 35% 35% 35%0.7% 2.4% 2.5% 2.5% 2.5% 2.5% 2.5%

22.8% 20.4% 21.0% 21.0% 21.0% 21.0% 21.0%0.1% -0.1%

22.7% 20.5% 21.5% 21.5% 21.4% 21.5% 21.4%7.3% 6.6% 7.0% 7.0% 7.0% 7.0% 7.0%

15.4% 13.8% 14.5% 14.5% 14.5% 14.5% 14.5%6.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0%

14.5% 12.9% 13.5% 13.5% 13.5% 13.5% 13.5%

32.1% 32.4% 32.5% 32.5% 32.5% 32.5% 32.5%

Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-182.1% 2.0% 2.1% 2.1% 2.1% 2.1% 2.1%

0.1% 0.9% 2.2% 2.1% 2.1% 2.1% 2.1%3.6% 2.7% 2.0% 2.1% 2.1% 2.1% 2.1%

3.0% 4.9% 0.0% 2.1% 2.1% 2.1% 2.1%-1355.6% 273.5% 5.3% 2.1% 2.1% 2.1% 2.1%

1.2% -8.6% 5.0% 2.1% 2.1% 2.1% 2.1%-71.2% -160.0% 818.0% 0.4% -3.4% 11.1% -2.8%

2.2% -8.0% 7.0% 2.0% 1.9% 2.2% 2.0%0.6% -7.1% 7.4% 2.0% 1.9% 2.2% 2.0%3.0% -8.4% 6.9% 2.0% 1.9% 2.2% 2.0%

29.3% 6.3% 6.7% 2.0% 1.9% 2.2% 2.0%1.7% -9.3% 6.9% 2.0% 1.9% 2.2% 2.0%

Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18

$ 2,971 $ 3,072 3,195 3,323 3,456 3,594 3,738 3.2% 3.4% 4.0% 4.0% 4.0% 4.0% 4.0%

5,032 5,012 5,062 5,113 5,164 5,216 5,268 2.8% -0.4% 1.0% 1.0% 1.0% 1.0% 1.0%

3,417 3,396 3,430 3,464 3,499 3,534 3,569 -2.6% -0.6% 1.0% 1.0% 1.0% 1.0% 1.0%2,264 2,472 2,719 2,991 3,290 3,619 3,981 9.2% 9.2% 10.0% 10.0% 10.0% 10.0% 10.0%

1,241 1,257 1,276 1,295 1,314 1,334 1,354 2.8% 1.3% 1.5% 1.5% 1.5% 1.5% 1.5%

14,925 15,209 15,513 15,824 16,140 16,463 16,792 2.5% 1.9% 2.0% 2.0% 2.0% 2.0% 2.0%

2,160 2,211 2,266 2,323 2,381 2,441 2,502 -0.6% 2.4% 2.5% 2.5% 2.5% 2.5% 2.5%

$ 17,085 $ 17,420 $ 17,780 $ 18,146 $ 18,521 $ 18,903 $ 19,294


Consolidated Balance Sheets

Dec-10 Dec-11 Dec-12 Dec-13AssetsCurrent Assets Cash and cash equivalents 490 878 884 962 Receivables 1,610 1,675 1,668 1,636 Inventories 1,222 1,327 1,365 1,425 Other current assets 408 522 639 799 Total current assets 3,730 4,402 4,556 4,822

Property, plant and equipment, net 3,693 3,668 3,842 4,083 Total assets 11,172 12,724 13,394 13,876

Liabilities and Shareholders' EquityCurrent Liabilities Total current liabilities 3,728 3,716 3,736 4,470

Revolver

Long-term debt 2,815 4,430 4,926 4,749 Deferred income taxes 108 252 293 444 Other liabilities 1,704 1,785 2,049 1,677

Total liabilities 8,355 10,183 11,004 11,340 Commitments and contingent liabilities - - Shareholders' Equity

2,675 2,375 2,189 2,305 Noncontrolling interests 142 166 201 231 Total shareholders' equity 2,817 2,541 2,390 2,536

11,172 12,724 13,394 13,876

Check

Total Colgate-Palmolive Company shareholders' equity

Total liabilities and shareholders' equity

Dec-14 Dec-15 Dec-16 Dec-17 Dec-18

514 500 500 500 500 1,705 1,740 1,776 1,813 1,850 1,415 1,444 1,474 1,505 1,536 800 817 833 851 868 4,434 4,501 4,584 4,668 4,754

4,378 4,654 4,909 5,143 5,357 13,754 14,067 14,376 14,666 14,937

4,067 3,911 4,395 4,503 4,587

- 940 1,619 2,658 3,681

4,258 4,003 3,339 2,644 1,944 444 444 444 444 444 1,677 1,677 1,677 1,677 1,677 10,446 10,975 11,475 11,926 12,333

2,897 2,497 2,119 1,765 1,434 411 595 783 975 1,170 3,309 3,093 2,902 2,740 2,604

13,754 14,067 14,376 14,666 14,937

- - - 0 0


Consolidated Cash Flows

### Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18Operating ActivitiesNet income including noncontrolling interests $ 2,313 $ 2,554 $ 2,631 $ 2,410 $ 2,576 $ 2,628 $ 2,679 $ 2,740 $ 2,793 Adjustments to reconcile net income

Depreciation and amortization 376 421 425 439 445 479 515 550 587 Receivables 40 (130) 19 (37) (69) (35) (36) (37) (37)Inventories (10) (130) (21) (97) 10 (29) (30) (30) (31)Accounts payable and other accruals (65) 199 (5) 24 (19) 75 70 71 73 Other non-current assets and liabilities 135 54 30 13 18 (11) (11) (12) (12)

Net cash provided by operations 3,211 2,896 3,196 3,204 2,962 3,107 3,187 3,283 3,373

Investing ActivitiesCapital expenditures (550) (537) (565) (670) (711) (726) (741) (756) (772)

Net cash used in investing activities (658) (1,213) (865) (890) (711) (726) (741) (756) (772)

Cash Flow for Financing Activities 2,553 1,683 2,331 2,314 2,251 2,382 2,446 2,526 2,601

Financing ActivitiesPrincipal payments on debt (4,719) (4,429) (5,011) (7,554) (895) (491) (255) (664) (695)Proceeds from issuance of debt 5,015 5,843 5,452 7,976 Revolver 0 940 680 1,039 1,023 Dividends paid (1,142) (1,203) (1,277) (1,382) (1,318) (1,344) (1,371) (1,401) (1,429)Purchases of treasury shares (2,020) (1,806) (1,943) (1,521) (1,500) (1,500) (1,500) (1,500) (1,500)Proceeds from exercise of stock options and excess tax benefits 242 353 478 339 1,014.3 - - - -

Net cash used in financing activities (2,624) (1,242) (2,301) (2,142) (2,698) (2,396) (2,446) (2,526) (2,601)

Effect of exchange rate changes on Cash and cash equivalents (39) (53) (24) (94)

Net increase (decrease) in Cash and cash equivalents (110) 388 6 78 (448) (14) 0 0 0

Cash and cash equivalents at beginning of year 600 490 878 884 962 514 500 500 500

Cash and cash equivalents at end of year $ 490 $ 878 $ 884 $ 962 $ 514 $ 500 $ 500 $ 500 $ 500

Supplemental Cash Flow Information

Income taxes paid $ 1,123 $ 1,007 $ 1,280 $ 1,087 Interest paid 70 58 77 118


Consolidated Depreciation and Capex

Dec-07 Dec-08 Dec-09 Dec-10 Dec-11Net Sales 13,790 15,330 15,327 15,564 16,734

Capital Expenditures 550 537

Capital Expenditures as % of Net Sales 3.5% 3.2%

Beginning Net PP&ECapital Expenditures(Depreciation Expense)

Ending Net PP&E 3,015 3,119 3,516 3,693 3,668

Total Depreciation Expense

Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 17,085 17,420 17,780 18,146 18,521 18,903 19,294 565 670 711 726 741 756 772

3.3% 3.8% 4.0% 4.0% 4.0% 4.0% 4.0%

4,083.0 4,378.1 4,653.5 4,908.8 5,143.5 711.2 725.9 740.8 756.1 771.7 (416.0) (450.5) (485.6) (521.4) (558.0)

3,842 4,083 4,378.1 4,653.5 4,908.8 5,143.5 5,357.2

416.0 450.5 485.6 521.4 558.0


Consolidated Amortization & Intangible

Dec-07 Dec-08 Dec-09 Dec-10 Dec-11Net Sales 13,790 15,330 15,327 15,564 16,734

Additions to IntangiblesAdditions to Intangibles as % of Net Sales

Beginning Net IntangiblesAdditions to Intangibles(Amortization Expense)(Intangible Sales and write offs)Ending Net Intangibles

Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 17,085 17,420 17,780 18,146 18,521 18,903 19,294

1,496.0 1,467.0 1,438.0 1,409.0 1,380.0 - - - - - (29.0) (29.0) (29.0) (29.0) (29.0)

1,496.0 1,467.0 1,438.0 1,409.0 1,380.0 1,351.0


Consolidated Working Capital

Dec-09 Dec-10 Dec-11Net Sales 15,327 15,564 16,734

Cost of Sales 6,319 6,360 7,144

Working Capital Balances Receivables 1,626 1,610 1,675 Inventories 1,209 1,222 1,327 Other current assets 375 408 522

Total Non Cash Current Assets 3,210 3,240 3,524

Accounts payable 1,172 1,165 1,244 Accrued income taxes 387 272 392 Other accruals 1,679 1,682 1,700

Total Non-Debt Current Liabilities 3,238 3,119 3,336

Net Working Capital/ (Deficit) (28) 121 188

(Increase)/ Decrease in Working Capital 429 (149) (67)

Purchases 6,331 6,373 7,249

Ratios & AssumptionsAccounts Receivable, net (Collection period in days) 39 38 37 Inventory (Days outstanding) 70 70 68 Other Current Assets (% of Net Sales) 2.4% 2.6% 3.1%

Accounts Payable (Days Payable) 68 67 63 Accrued Income Taxes (% of COGS) 6.1% 4.3% 5.5%Other accruals (% of COGS) 26.6% 26.4% 23.8%

Cash Flow from Individual line items Receivables (net of allowances of $49, $53, $52, $47 (34) 16 (65) Inventories (12) (13) (105) Other current assets (9) (33) (114) Accounts payable 111 (7) 79 Accrued income taxes 115 (115) 120 Other accruals 258 3 18

(Incease)/ Decrease in Working Capital 429 (149) (67)

Check

Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 17,085 17,420 17,780 18,146 18,521 18,903 19,294 7,153 7,219 7,379 7,531 7,686 7,845 8,007

1,668 1,636 1,705 1,740 1,776 1,813 1,850 1,365 1,425 1,415 1,444 1,474 1,505 1,536 639 799 800 817 833 851 868

3,672 3,860 3,920 4,001 4,084 4,168 4,254

1,290 1,343 1,312 1,346 1,374 1,402 1,431 254 239 258 264 269 275 280 1,888 1,980 1,992 2,033 2,075 2,118 2,162

3,432 3,562 3,563 3,643 3,718 3,795 3,874

240 298 357 358 365 373 380

(52) (58) (59) (0) (7) (8) (8)

7,191 7,279 7,369 7,560 7,716 7,875 8,038

36 34 35 35 35 35 35 70 72 70 70 70 70 70

3.7% 4.6% 4.5% 4.5% 4.5% 4.5% 4.5%

65 67 65 65 65 65 65 3.6% 3.3% 3.5% 3.5% 3.5% 3.5% 3.5%

26.4% 27.4% 27.0% 27.0% 27.0% 27.0% 27.0%

7 32 (69) (35) (36) (37) (37) (38) (60) 10 (29) (30) (30) (31) (117) (160) (1) (17) (17) (17) (18) 46 53 (31) 34 28 28 29 (138) (15) 19 5 5 6 6 188 92 12 41 42 43 44

(52) (58) (59) (0) (7) (8) (8)

Number of 365


Other Long Term Asset Liability Schedule

Dec-10 Dec-11 Dec-12 Dec-13

AssetsDeferred income taxes 84.0 115.0 92.0 77.0 Other assets 472.0 541.0 905.0 924.0

LiabilityDeferred income taxes 108.0 252.0 293.0 444.0 Other liabilities 1,704.0 1,785.0 2,049.0 1,677.0

Dec-14 Dec-15 Dec-16 Dec-17 Dec-18

77.0 77.0 77.0 77.0 77.0 924.0 924.0 924.0 924.0 924.0

444.0 444.0 444.0 444.0 444.0 1,677.0 1,677.0 1,677.0 1,677.0 1,677.0


Consolidated Shareholder's Equity

Dec-10 Dec-11 Dec-12 Dec-13Beginning Equity BalanceNet IncomeIssuance/ (Repurchase) of EquityDividends PaidOption ProceedsEnding Equity Balance 2,675 2,375 2,189 2,305

Share Repurchase AssumptionsCurrent Year EPS 2.16 2.47 2.57 2.38 Assumed Current Year EPS Multiple 17.1x 19.5x 25.0xImplied Share Price 42 50 59 Shares Repurchased - millions 42.642 38.731 25.573Amount Repurchased ( $ outgo) 2,020 1,806 1,943 1,521

New Shares from Exercised OptionsNew Shares from Exercised Options - millions 11.5 12.2 7.9 Average Strike Price 30.6 39.1 43.0Option Proceeds 242 353 478 339

Restricted Stock Units (RSUs) 1.46 2.21 1.91

Dividend AssumptionsTotal Dividends Paid 1,203.0 1,277.0 1,382.0 Net Income 2,431 2,472 2,241 Dividend Payout Ratio 49.5% 51.7% 61.7%

Shares and ESOPs

Balance, January 1, 2011

Common stock acquired

Shares issued for stock options

Shares issued for restricted stock units and other

Balance, December 31, 2011









Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 2,305 2,897 2,497 2,119 1,765 2,396 2,444 2,492 2,548 2,598

(1,500) (1,500) (1,500) (1,500) (1,500) (1,318) (1,344) (1,371) (1,401) (1,429) 1,014 - - - - 2,897 2,497 2,119 1,765 1,434

2.61 2.71 2.85 3.01 3.17 19.0x 19.0x 19.0x 19.0x 19.0x

50 52 54 57 60 30.283 29.111 27.654 26.212 24.932 1,500 1,500 1,500 1,500 1,500

24.2 42.0

1,014.3

2.06 2.06 2.00 2.00 2.00

1,318 1,344 1,371 1,401 1,429 2,396 2,444 2,492 2,548 2,598

55.0% 55.0% 55.0% 55.0% 55.0%


Consolidated Shares Outstanding

Dec-10 Dec-11 Dec-12 Dec-13Beginning Balance - Basic (actual) 989.7 960.0 935.7 Shares Issued (actual realization of options) 13.0 14.4 9.8

Shares Repurchased (42.6) (38.7) (25.6)

Ending Balance - Basic (actual) 989.7 960.0 935.7 919.9

Basic Weighted Average Shares 976.7 952.1 930.8 Effects of Options & Restricted Stock Units 7.4 8.1 9.1

Diluted Weighted Average Shares 984.1 960.2 939.9

Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 919.9 913.8 884.7 857.0 830.8 24.2

(30.3) (29.1) (27.7) (26.2) (24.9) 913.8 884.7 857.0 830.8 805.9

916.9 899.3 870.9 843.9 818.4 2.1 2.1 2.0 2.0 2.0 918.9 901.3 872.9 845.9 820.4


Debt Schedule

Dec-10 Dec-11 Dec-12 Dec-13 Dec-14Cash Flow Available for Financing Activities 2,250.5

Proceeds from/ (Repurchase of) Equity (1,500.0)

Dividends (1,317.6)

Option Proceeds 1,014.3

+ Beginning Cash Balance 962.0 - Minimum Cash Balance (500.0)Cash Available for Debt Repayment 909.2 Long Term Debt Issuance - Long Term Debt (Repayments) (895.0)Cash Available for Revolving Credit Facility 14.2

Revolving Credit FacilityBeginning Balance - Discretionary (Paydown)/ Borrowings - Ending Balance - -

Long Term DebtBeginning Balance 5,644.0 Issuance(Repayment/ Amortization) (895.0)Ending Balance 5,644.0 4,749.0

Long Term Debt 4,258.0 Current Portion of Long Term Debt 491.0

Revolving Credit Facility Average Balance - Interest Rate 1.5%Interest Expense -

Long Term Debt Average Balance 5,196.5 Interest Rate 1.7%Interest Expense 90.0

Total Interest Expense 90.00

Cash Balances Average Balance 738.1 Interest Rate 1.00%Interest Income 7.38

Dec-15 Dec-16 Dec-17 Dec-18 2,381.5 2,445.9 2,526.5 2,600.9 (1,500.0) (1,500.0) (1,500.0) (1,500.0) (1,344.4) (1,370.6) (1,401.3) (1,428.8) - - - -

514.2 500.0 500.0 500.0 (500.0) (500.0) (500.0) (500.0) (448.6) (424.7) (374.9) (327.9) - - - - (491.0) (255.0) (664.0) (695.0) (939.6) (679.7) (1,038.9) (1,022.9)

- 939.6 1,619.3 2,658.2 939.6 679.7 1,038.9 1,022.9 939.6 1,619.3 2,658.2 3,681.1

4,749.0 4,258.0 4,003.0 3,339.0

(491.0) (255.0) (664.0) (695.0) (700.0) 4,258.0 4,003.0 3,339.0 2,644.0

4,003.0 3,339.0 2,644.0 1,944.0 255.0 664.0 695.0 700.0

469.8 1,279.5 2,138.8 3,169.7 1.5% 1.5% 1.5% 1.5%

7.0 19.2 32.1 47.5

4,503.5 4,130.5 3,671.0 2,991.5 1.8% 1.6% 1.7% 1.5%

81.0 66.0 62.0 44.0

88.05 85.19 94.08 91.54

507.1 500.0 500.0 500.0 1.00% 1.00% 1.00% 1.00%

5.07 5.00 5.00 5.00

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