Colgate... Creating Opportunity and Value

Colgate... Creating opportunity and value

Colgate-Palmolive Company 1987 Annual Report

QE-CPC00003537 Colgate-Palmolive is one of the world's best-known consumer products companies. It is a leading world wide provider ofproducts for household and personal care-laundry detergents and softeners, dishwashing liquids, household cleaners, toothpaste and oral care items bar and liquid soaps and preparations for hair care, shaving and grooming. Renowned brands in clude Colgate, Palmolive, Ajax, Fab and Irish Spring. Colgate, through its Kendall subsidiary, is among the country's largest suppliers ofhealth care products for hospitals and the home-surgical dressings, tapes, catheters, elastic stockings and intravenous solutions. Widely known brands are Curity, Curad, McGaw Telfa, 'IE.D. and Futuro. The Specialty Marketing group reaches consumers through targeted distri bution. Products include Hill's pet foods, Princess House crystal and Sterno cooking products.

Contents Chairman's Statement 2 Colgate ...Creating Opportunity and Value 4 Busine Review 16 Financial Report 20 Directors 38 Management 39 Shareholder Information 41

QE-CPC00003538 Highlights of the Year Colgate ... Creating opportunity and value In Thousands Except Per Share mount 1987 1986

Net sales $5,647,460 $4,984,576 Tills report features Gro profit 2,478,137 2.092,254 Gro profit percentage 44 42 Colgate people using et income 54,022* 177,465 their talent and deter Per common share .78* 2.52 mination in many Average common shares out tanding 68,577 70,230 parts ofthe Company's *The Company undertook a major restructuring in 1987. affecting 30 installations world wide and overhead at corporate headquarters. Colgate- .S. and Kendall. The charge was worldwide operations 150 million after taxes. or $2.19 per share. to create new business The Company' profit momentum is strong. Earnings per share would have opportunity and been $2.97, excluding the re tructuring, vs. $2.52 in 1986-an 18% rise. increase shareholder value. A special section Colgate generated record sale in 1987, due in large part to 9% growth in unit volume. Successful new products around the world contributed to begins on page 4. the strong advance-Colgate Tartar Control (toothpa te and mouthwa h), Palmolive Automatic dishwashing detergent (Galaxy in Europe), Fab I Shot detergent and many others.

The Company improved its return on capital to 12.7% in 1987 (excluding the restructuring provi ion) from 11.2% in 1986. The return on shareholders' equity advanced to 21.2% in 1987 (excluding the restructuring) from 18.8% in 1986.

Colgate and the Henkel group ofWest Germany announced an agreement, subject to French government approval, that will add to the Company's household products bu ine and provide acce to specialized packaging technolog.

The Company became the leading factor in the U.S. liquid oap segment by acquiring the Softsoap. Sesame Street and Village Bath lines of Minnetonka Corporation.

The Directors raised the cash dividend on Colgate common stock by 9%. The new rate is $.37 quarterly, or $1.48 annually.

QE-CPC00003539 Chairman's Statement Colgate-Palmolive has momen Progress toward tum. We are building on the Com pany's competitive and financial 1991 goals strengths to create new opportu We are mo ing forward toward nity for our busine es and higher the achievement ofa vital bu ine s value for Colgate hareholders. goal: reaching a 15 percent return et sales for 1987 ro e 13 per on capital. The year 1988 marks cent to $5.6 billion, while the 9 the halfway point in our thrust percent unit volume growth toward thi key objective, a goal was the highest in more than a we establi hed in 19 4 when our decade. Gross profit increased 18 return on capital wa 9.1 percent. percent to $2.5 billion, repre ent By 1987 year-end, we reached 12.7 ing 44 percent ofsale versus 42 percent, excluding the re tructur percent in 1986. Cost reduction ing. Achieving our objective ofa program ,improved product mix 15 percent return will help en ure and favorable raw materials prices financial flexibility for marketing, contributed to higher gross mar research, capital expenditure. gin -evident in all three core dividend and acqui ition . Key to business egments. Earning from this goal is Colgate u taining a Reuben Mark presided oller operations rose 15 percent to $204 trong rate of unit volume growth, a worldwide relliew ofR&D million, or $2.97 per hare versus continuing our recent trend of budgets and nell' product strate $2.52 in 1986. before reflecting a reducing fixed and variable co t gies in December 1987 at the re tructuring charge in the 1987 relative to sales. and increa ing Research and Development Center third quarter of$150 million after our net return on sale . in Piscataway, ew Jersey. taxes, or $2.19 per share. After the charge, net income totaled $54 Excellent year for million, or $.7 per share. unit volume growth The Company' unit volume grew 9 percent in 1987. Colgate-U.S. volume rose 17 percent during a year ofcontinued bu ine build ing and extraordinary new prod ucts activity. Inten ified re earch in Household and Personal Care categorie led to a total ofover 200 new product introduction around the world. adding to vol ume growth. In Specialty Market ing, Hill's Pet Products continued to build market hare, benefiting from capacity expansion brought on line early in 1987. Led by growth in it oversea market , Prince Hou e improved re ults from the depressed 1986 levels and anticipate further improvement in 1988. In Health Care. Kendall

QE-CPC00003540 expanded into selected oversea Acquisitions, partner our 34 acre in Jersey City on the market ,while restructuring Hudson River overlooking Man efforts increased it competitive shjps and divestments hattan into a prime mixed-use ne in the U.S. Several acqui itions and other new complex. The construction and ventures were elected in 1987 to marketing ofthe project will be Cost reduction broaden Colgate's product lines largely financed by developers and programs and strengthen our manufacturing other investors. Since 1984. Colgate's gross profit and distribution capabilities. We al 0 completed the sale of margin has increa ed by 4 per Specifically, we acquired the liquid Kendall' Fiber Product divi ion the Lutravil joint venture and ' centage points, with most of the soap busine of Minnetonka Cor savings reinvested in research and poration, including Softsoap, the other investments not related to marketing. We have been consoli nation's leading brand of liquid our core busine e. Proceed of dating operations, controlling the soap. Colgate and the Henkel $223 million were applied to growth in personnel and improv group announced an agreement, reduce hort-term debt. ing management information subject to French government Dividend increase system. Two-third ofcapital approval, relating to Cotelle SA expenditures are being allocated laundry and cleaning product , In keeping with our commitment to project that generate identified which will add to our household to build shareholder value, the savings over the short to medium products bu ine and provide Board increased the ca h dividend term. access to advanced technology in on common tock by 9 percent As part ofthis drive, the Com low-cost plastic packaging. Hill's and liberalized the Dividend pany in late 1987 established the Pet Products acquired Veterinary Reinvestment Plan. restructuring provision of$150 Companies of America, Inc., a Programs and people million aftertax. The bulk of the large distributor of pet products, charge covers 30 manufacturing further strengthening it coverage geared to further gains ofthe animal health market. in tallations worldwide, where we A we move toward realizing our Kendall acquired a line ofintra are streamlining processes and long-term financial goals, we venous infusion devices to round improving quality through plant exp ct continued increase in out the IV. systems supply capabil redesign, clo ings and relocations. sale , profits and productivity. In ities ofKendall McGaw, and We al 0 have implified the Com the letter to employees announc strengthened its international pany' organizational structure. ing the re tructuring, I wrote: "We business through acquisitions in This will broaden executive are ucce ful because we are will Germany, Malaysia and Australia. respon ibilitie , reduce manage ing to et difficult objective, focu In December, we announced ~lent layers and improve respon- on priority busine project, take a long-term project to transform Iveness. umerous changes ri ks and reward re ult ." As this include the elimination of 600 process continues, Colgate deeply positions within corporate head appreciates the ongoing upport of quarters, Colgate-U.S. and hareholders and the contribution Kendall. Benefits of the restruc of the Board of Directors, employee , turing began in 1987 and will advertising agencies and suppliers increase over the next few years. ...the worldwide partners in our enterpri e.

Reuben Mark Chairman ofthe Board Pre ident and ' Chief Executive Officer

QE-CPC00003541 QE-CPC00003542 Fab 1Shot scores Celebrating below are key Colgate ... members ofthe team that made a first for Colgate it possible: Senior Product Growing Moving aggressively to benefit Manager ancy Rogers, R&D from changing consumer needs, Manager Dr. Sue Wil on, Package Colgate developed new Fab I Shot Engineering Supervisor Steven with new to provide greater laundry conve 1bgel and Research Associate nience with no loss ofperformance. Dr. Richard Adams. products and Introduced in 1987, it is aJl example This is one ofthe many ways ofhow the Company can create a that Colgate is extending its businesses market opportunity. The Fab I Shot product and market reach. packet contains pre-measured Through internal development amounts ofdetergent,fabric soft and acquisitions, much was ener and anti-static ingredients in accomplished in 1987. More one dose, eliminating the need to examples are cited on the use three separate products. following pages. Colgate wasfirst to introduce such a washer-to-dryer packet to the important US. market.

QE-CPC00003543 Colgate maintained its stepped-up pace ofnew product introductions and new ventures in 1987. Below is a sampling:

'0. I liquid soap United States

Line extension for o. I brand Germany

e\\ shampoo Italy

.. _......

High-fiber formula for overweight dogs niled States New French venture to technology in packaging highly concentroted cleaning product in add household categories flexible plastic pouches. Such A proposed agreement with the packaging provides consumers Automatic Henkel group ofr#st Germany, added c011l'enience and price dishwasher liquid savings, because the concentrates Europe and relating to Henkel's subsidiary Australia Cotelle S.A. ofFrance, will broaden are reconstituted at home with Colgate's household products line, water in reusable containers. pendingfinal approval ofthe Cotelle's proprietary plastic sachet French government. refill gil'es Colgate a safe, 1011' Colgate has begun to distribute cost form ofpackaging, which Axion certain Cotelle products in France. has especially good potential in dishwashing pa Ie La Croix chlorine bleach is a good developing countrie . Thailand example ofCotelle 's leading

6 (oll:at~ Growing with new products and businesses

QE-CPC00003544 lUll Product sourcing in Southeast Asia Seeking greater profitability in tll'O high-growth categories, latex disposable examination gloves KEnDA and urological catheters, Colgate I!!IillI established low-cost product sourcing in Malaysia, where rubber is abundant. In 1987, the Kendall unit purchased a majority interest in Lovytex Latex Glove Company. Mediquip, a maker of urological products, was acquired ill 1986. Gloves alld catheters had previously been purchasedfrom outside; the in-house operations are providing equal or better qual it)', at considerably lower cost.

• Superior tartar control technology Using its superior tartar control technolog)', Colgate mOI'ed quickly in 1987 to be the first with a tartar comrol mouthwash. Beingfirst in the fast-developing U.S. oral care market gil'es Colgate a competi til'e edge-supported b)' the global success ofColgate Tartar Control toothpaste, now in over 35 markets. The new mouthwash comes in two flavors, and has been specifi cally del'eloped to reduce tartar buildup as well as to provide clean, fresh breath. Rapid category expansion re quires a team approach. More than 20 expertsfrom R&D, Purchasing, Marketing, Hoyt Labs and Man ufacturing made up the total team. Pictured here are two ofthe expert specialists: Stephen Shymon, Research Fellow/ChiefFlavorist, and James orfleet, Director for Oral Care Development.

QE-CPC00003545 Multi-country success formed a multi-country taskforce consisting ofR&D, Engineering, for dishwasher liquids Manufacturing, Global Marketing A basic Colgate strength is its and the European Coordination ability to develop successful new Group. Its mandate was to provide products and then extend them for the product's global launch and quickly to the global marketplace. establish centralized production. In 1986, the Company pioneered One necessity was to obtain the Kansas with the first liquid detergentfor technical cooperation ofEuropean City Fl1Ince automatic dishwashers to enter dishwasher manufacturers to US. national distribution. Now establish the safety and efficacy of Centralized production at after only 18 months, the product the new liquid products, as opposed three high-volume plants is established and growing in J2 to the traditional powders. Just Essential to the successful countries-marketed under the such a program is under discus introduction ofGalaxyjPalmolive Galaxy or Palmolive Automatic sion in the photo below, involving was obtaining the neededproduc brand name. Togethet; these (from the right): Michel Donnay, tion capacity. To ensure low costs markets accountfor 95 percent of Siemens Marketing Director and efficient distribution,produc worldwide dishwasher detergent for Belgium; Myriam Delvaux, tion was centralized in three sales. It was a true partnership Dishcare Section Head at the high-volume plants: Kansas City, effort, which began with the origi European Research Center; Anne serving the US. and Canada; nalformula beingjointly developed Gosset, Product Manager; and Compiegne, France, serving all of by Colgate's US. and Ewvpean Paul DeVaster, Director ofI#Jrld Europe; and the Sydney suburb of R&D groups. Then Colgate wide Sales. Villa wood, serving Australia.

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8 ('olj:ate...Growing with new products and businesses

QE-CPC00003546 Colgate ... Investing capital and ideas to Improve• margms•

Bold concepts directly from the production line· and the plant is located in the ge~ pay otT at graphic center ofthe .S. heavy new Ohio plant duty liquid detergent market. More than a major new facility, Qosely involved in the January the centralized liquid detergents 1988 start-lip ofthe new plant were plant at Cambridge, Ohio, incor Stuart Hulke, Director ofFacilities porates bold changes ofthe kind Engineering; Beth Powers, Logis Colgate is making throughout its tics Coordinator; and Ublter operations to create opportunit}\ Golembeski, Plant Director. The plQ/lt's highly efficient lay In this case, the $49 million plant is expected to save $29 million out makes possible low-cost pro duction ofall Colgate's heavy dut) annually. Among the innovations: the plant carries virtually no liquid detergents plus its hand inventory; employees can be dishwashing liquids. j/exibl) deployed throughout the plant; blow molding ofthe bottles is on-site; trucks are always there to take product to the marketplace

QE-CPC00003547 Blow molding of bottles reduces packaging costs in France Through vertical integration, the Company has assured the timely OI'ailabilityofsupplies improl'ed product quality and reduced pack aging costs. Colgate has installed equipmentfor making key pack aging items at Compiegne, France (shown here), and uch locations as Denmark, Greece, the US., Colombia and the Philippines. The Compiegne plant, with its 13 blow molding line, makes 60 per cent ofthe bottle requirementsfor Colgate-France, including the brightly colored containers for Souplinefabric oftenel: Jean Reymondon, the Section Headjor Package Engineering (left), inspect the automated process with Viviane Larrlot. France's manufacturing group has shared its experti e with other Colgate subsidiaries seeking the same benefits in packaging integration.

Innovative display isfierce, and store managers shipper, but can instantly be made closely monitor product turnover, into a display by slipping out shipper benefits shelfusage and other sales factors. remol'able piece. Palletized config distribution Addressing this trade marketing uration ofopen-top display ship concern at Colgate-Germany, pers are also OI'ailable for certain In today's competitive merchan Klaus Bruck, Marketing Manager in- tore situations. Colgate's trade dising environment, a product's customers have enthusiastically success can depend on how easy for Household Products, and Harold Prahs, Packaging Man received the Palmolive Variocase. and economical it isfor the retailer to attractively display the ager, fostered the development of braJld. Competition for shelfspace the JiJriocase, a multi-use displa) shipping casefor Palmolive dish washing liquid. The Variocase costs no more than an ordinary

10 (JlgatE Investing capital and ideas to improve margins

QE-CPC00003548 ....--- Automated heat sealing at new pet food plant Hill's Pet Products, a Colgate divi sion, pioneered the development of therapeutic, nutritional petfoods. Sold through veterinarians and approl'ed pet shops, the products have been extraordinarily success ful. Hill's annual volume growth has exceeded 20 percent over the past three years. A new $18 million plant at Bowling Green, Kentucky, came on line in early 1987 to meet the growing demand. The plant uses the most adl'QJlced equipment available to mix, cook, extrude and package the product Here, Lisa Haley adjusts the controlsfor the automatic packaging lines. Bowling Green is one ofthe most automated pet food plants in the world.

QE-CPC00003549 Regional cooperation Colgate ... on TV commercials Raising the Achieving creative excellence in commercials callsfor resourceful ness and teamwork. Here, a pre sophistication production meeting gets underway in a ~nezuelan TVstudio for a ofmarketing new commercial on Colgate's Sofian for Trinidad. The commer and sales cialwill be in English but produced in a Spanish-speaking county)~ The Colgate General Manager in Trinidad, Earle de Govia, sought the extensive production facilities available on the mainland. He contacted Guillermo Fernandez, Colgate's General Manager in ~nezueLa, to Locate a studio that could producejirst-quality commercials in English. The two general managers are with Pedro Fuenmay01; head ofCinejilms 7I.

Accelerating the growth of anti-embolism products Sales ofKendall's T.E.D. Anti Embolism Stockings and the related Sequential Compre ion Del'ice were well ahead ofindustry expansion in 1987. With its leading products and technological superiority, Kendall was able to take advantage ofimportant research that increased the medical profession sacceptance 0/ compression therapy for retarding embolisms that can develop after surget"}( The ational Institutes of

QE-CPC00003550 Computers add punch to trade marketing Colgate is arming its ales force with powerful tools to move prod uct in the retail marketplnce. For example, the innovative use oflap top computers was a key factor in the successful launch ofPalmolive shampoo in Puerto Rico in 1987. Such introductions start with Colgate representatives convincing retailers to stock and prominently display the product With the computer screen, they are able to u e lively animated graphics to describe the product, its benefits and Colgate's supporting cam paign. Here, Martin Colon, Colgate's Key Account Manager, calls on Jose Soto, Manager ofthe G,wlde Supermarket at the San FlWlcisco shopping center in San Juan. The computer also i used for on-the- pot shelfspace plan ning, pLacing orders and respond ing to customer inquiries.

Health concluded not only that post-operative deep-vein blood clots were a major health problem but also that compression treat ment was both effictive and safe. As the pioneering company in the field, Kendall's research, product innovations, educational progmms and marketing effictiveness have fostered a highly successful product line while also making an important contribution to the quality o/health care. Spearhead ing the interdepartmental effort are Tina Keible, Senior Product Manager, and DI: James Hasty, Senior Scientist, who have been collaborating on the anti-embolism products for over six years.

QE-CPC00003551 Business partnership better understand each others' Colgate ... operations. Here, they are working with outside supplier to reduce changeover and make Giving More and more, Colgate has ready time on the production line drawn its valued suppliers into for Banner soap, afamity deodorant partner-like relationships, realizing bar similar to Irish Spring. The employees that only very dose cooperation meeting include Rodrigo COlI ensure the short delivery times Rodrigue:, Colgate's lIT Coordi the power required by 'Just-in-time" inven nator; Anthony Ui!ir from Union tory concepts. This case in point Grafica; and Orlando Parra, the to increase involves a J.f!nezuelan packaging Mechanical Foreman. vendOl; Union Grafica. Managers and workers ofboth companies profits meet regularly-sometimes at Colgate, sometimes at the supplier's plant-to improve package design, to increase production efficiencies, to solve problems and simply to

\ \ C-f' • ~

QE-CPC00003552 Quality control at the source-on the production line Colgate is empowering employees at all levels to playa larger part in quality control, cost containment and productivity improvement. For example, the new ABC con centrated laundry detergent, which was introduced to the Italian market in 1987, has to hal'e the right pouring characteristicsfor consumers to measure preci e small dosages. Operators like Benedetto Lauri and Alessandro Ricci perform flow tests at their work stations right on the produc tion line, playing a direct role in quality control. Such tests were previously done by inspectors, who are now free for statistical analysis ofplant-wide quality control.

Laurene Love Jim Maxwell, Focused Don Jame Teamwork fosters Operator Factory Manager Project Engineer gains in productivity Loren Zollman Tina Street Jim Evrard Karen Davidson Maintenance Operator Electrician Operator The upbeat spirit at Colgate's dentifrice plant in Jeffersonville, Indiana, reflects pride in config uring production lines for max imum efficiency. Standard, straightfilling lines were to be installedfor the new wide-body Colgate pump dispenser. Instead, the team's winning suggestion was to redesign the lines into V-shapes so that operators would have the flexibility to monitor and control allfunctions within a smaller space. This idea and its imple mentation have resulted in higher productivity.

QE-CPC00003553 1987 Business Review Household and cent respectively. ew product contributing incremental unit Personal Care volume for Colgate-U.S. include Colgate Tartar Controltoothpa te Sales Opera/ing Prqfll and Palmolive Automatic dish Representative Brands washer detergent, introduced in ($ billions) ( millions) Oral Care 1986. a well as Colgate Tartar Colgale Colgate Tarwr (immx 4 Control mouthwa hand Fab Ultra Brile I Shot laundry detergent, both Tonigencyl Denrogard 2 1987 introduction. Defend Co/gale Plus toothbrush ~ The expansion ofColgate Tartar Dishwashing o Control toothpa te, now being PaimolilY' 5 Ajax marketed in over 35 countries, wa Effect of Rcwuctu'In!! PaicCitron A, Reponcd the driving force behind oral care Palmo/ilY' AIILOmatic Galaxy category growth in both market AXIOI1 ~ Colgate-Palmolive manufacture share and volume. In 1987, Colgate Heavy Dut) and sell many ofthe world's most continued the worldwide introduc DetergenlS popular products for hou ehold tion of the Colgate diamond head Ajax Dvnamo2 and personal use-laundry deter toothbru h. ow being marketed DinamoJ gents and softeners, toothpaste in 30 countries, it tapered head Fob Fresh SUJrt and oral care item , dishwa hing makes it ea ier to clean teeth Cold POIIY'r liquids, bar and liquid soaps, effectively. ABC Gente hou ehold cleaners, and prepara ~ Fabric Softeners tions for hair care, shaving and Heavy duty detergent products Siflarz,&filan groomIng. the biggest component of segment Soup/ine sales, achieved volume growth of Sw·Sofi SUQvitei ~ Physical volume for the egment Cleaners grew 9 percent in 1987, paced by Ajax the exceptional performance of Fabuloso SpraJ' '/I Wi/X" Colgate-U.S. and Colgate-Far Bath Soap East-up 17 percent and 14 per- Palmolil'l' PaimolilY' Foam Irish Spring Protex SoffSQ(Jp Cashmere Bouquet Cleopatra Cadum Laundry Soap ala Odex Bingo Ajax Octogon Hair Care Paimoli,Y' GarrJ Halo Caprice Alert Deodorants Irish Spring Palmoli'Y' Sqfi 'n Gentle Shave Preps CoIgale Palmolive Global soap Heavy duty Fab super conccntrate. Rapid Shave brands detergent. Italy Hong Kong

QE-CPC00003554 8 percent. Colgate' ongoing ~ In hand dishwa hing products, ~ Palmolive oap, long the world' growth in fabric care reflects the global volume advanced for the No.2 brand, picked up market Company' emphasis on conve sixth consecutive year. Lead share and added volume interna nient detergent/fabric oftener brand Palmolive wa joined by a tionally with an impro ed formula combinations and on the fast lemon-lime line extension, now and more modern package. A growing liquid detergent egment. available in nine countrie world product tran formation for Iri h In 1987, Colgate-U.S. pioneered wide. Axion dishwashing paste Spring, reintroduced with skin with Fab I Shot. the first unitized was expanded to three developing conditioners, re ulted in igni fica nt do e that goes from wa her to countrie , bringing the number of gains in U.S. market hare in 1987. dryer. Colgate-Mexico introduced markets where pa te is sold to 21. In the premium egment, Cleopatra Fab Softergent. bringing to ten the beauty bar, developed in France. number ofcountries where Col ew product activitie in hair care i now being ucce fully extended gate sell a detergent/fabric soft extended Colgate's growing world to other European markets and ener. Colgate ha also developed a wide market hare in the shampoo ustralia. super-concentrated laundry category. The Australian unit product for markets in the Far achieved the o. 2 market po ition ~ Taking the initiative to expand it East. and recently introduced the almost immediately with its Palm personal care busine ,Colgate super concentrate in Australia. olive shampoo and conditioner introduced a variety of ha e launch early in 19 7. During the preparations, deodorant and ~ Colgate has moved quickly to place year. Colgate introduced hair body cologne in 1987. Palmolive's its liquid detergent for automatic conditioning product in 20 world having product line, popular dishwashers in all key markets in wide market -from Puerto Rico throughout Europe, i being orth America. Europe and Austra to Indonesia. broadened through the introduc lia. Selling the products under the tion ofafter have lotion in Palmolive Automatic or Galaxy selected market . Colgate-Mexico names, the Company by year-end introduced two new toiletrie expanded to 12 countrie -markets line, Charmi for women and that represent 95 percent ofworld Stefano for men, while Malaysia wide di hwa her detergent ale . expanded it Code 10 brand name to a full range ofhair care and body care item for men.

No. I in hair care. New women's cologne. After shave. EasY-Io-use pump Popular cleaner German~ Mexico Portugal! pain and toolhbrush throughout Europe

QE-CPC00003555 Health Care emphasis placed on the worldwide venou solutions. The acqui ition health care market. In 1987, now make Kendall McGaw a full Sales OperQ/ing Profi/ Kendall made good progress in service IV. upplier to ho pital . reducing costs in its .S. ho pital ($ bolltons) ( millions) ~ Kendall' Re piratory Care. Inc. business, where pricing pre ure achieved 15 percent volume have re trained sale growth. growth in 19 7, partly as a re ult of Strong ale increase were new product introduction that achieved in the home health care, should provide additional growth overseas health care and pecialty in the future. industrial areas. ~ Polyken Technologie made trong ~ Following the late 19 6 acqui it ion advance in ale and earning. It Effect of Re .... lruclUring ofthe Futuro and Rampon line. A, Reponed engineers continue to develop new Kendall consolidated all of it applications for Polyken adhe ivc ~ Among the nation's top five health home health care bu iness in the products such a pecialized wet care companie ,The Kendall Kendall-Futuro Company. located ting agent and tape that make Company manufacture ho pital in Cincinnati. The combined the critical task ofa besto supplie and product for the grow business gives Kendall-Futuro the removal both ca ier and safer. ing home health care market. a broadest product line in the home well as indu trial tape . adhesives health care industry. which i ~ Kendall-International achieved and pipeline coating. Principal growing at a 15 percent e timated higher sales and earning, with lines include medical dressings, annual rate. The Futuro name i Brazil and Germany the tandout intrdvenous olutions, re piratory well known in drugstore on such performers. During the year. therapy device ,anti-embolism products as elastic brace and up Kendall acquired Lovytex, a latex tocking and products designed porters, convale cent wheelchairs glove manufacturer in Mala ia, for home health care. and crutches, and graduated com and Fankhaenel and Sohn ofWe t pre ion tocking. The Curity Germany, a leading manufacturer ~ Through restructuring, Kendall brand is well known for wound ofcompre ion tockings. lready ha decentralized to improve the care and incontinence products, the world's large t manufacturer of growth opportunitie and profit as well as new home diagno tic such tocking, Kendall' German ability of its individual business devices. acquisition add proprietar_ man unit . Busine es not directly ufacturing technology for indi id involved in it core product areas ~ Kendall McGaw purcha ed from ually fitted com pre ion tocking. have been dive ted and renewed Quest Medical a line of infu ion pumps and electronic controllers that supplement its line of intra-

Representative Brands CUrl/\' CUraLl KI.'r1u Tel/a Eidloll Versa/Oil l-li1Jcol ":ellguard TED f-il/unJ Concha AquapaJ.. PoM".'1I Ke;,dall Md;lIl1' lIepa/Alllill£' Fr£'AIIIIIl£' ·FLO? PAS AcculII£'d Em'l Electron ic I. . Curity products ...and professional Elastic brace from 11I/l1/iXI.'II/ PUIllP infu ion controller for skin care .. \\ound care Kendall-Futuro

QE-CPC00003556 Specialty Marketing tenancc industries with cooking formula. to help prevent weight fuel and equipment as well a gain in dog. The increa ed Sale.\' Operalitlg Proju institutional cleaning supplies. awareness ofhealth and diet in Colgate also has an equity interest America is contributing to rdpid ($ mtillons) ( millions) in Institutional Financing Services gJOwth ofthis new product. 400 (I FS). wh ich provide' product· to ~upport 'chool fund rdising. ~ Ovep.>ea~ e pan ion continued a 200 Hill" uccessfully introduced its ~ Hill's Pet Product continued its Pr cription Diet produ 15 into exceptional record in the animal Fmnce. o health care industry. with ph) 'ieal HI5 6 ~7 volume again increasing b more ~ Prince" Hou~e increa ed it sales. Eneci of Rc'lruclUnng A, Reponed than 20 percent in 1987. To earning' and volume over 19 6. broaden its market base. Hill's which had been a disappointing ~ The units within Colgate's Specialty acquired Veterinary Companie year in the direct selling industry. Marketing group employ targeted of America (VCA.) in September Strong growth v a achicved in di tribution methods to reach 1987. Long the largest indepen international market -particularly con umers. Hill' Pet Products dent distributor of Hill"s product . England. Canada and ustrdlia. manufactures Prescription Diet VC . is a full-line veterinar) therapeutic pet foods. which products distribution company. ~ The mo t extensive new products are available only through veteri progrdm in it hi tor saw Prince' narian . as well as Science Diet ~ Additional capacity WdS added by Hou e introduce 43 items. includ nutritional products, sold through Hill's in 1987 to meet rdpidly ing 'uch gift idea a lace table veterinarians. kennels and autho growing demand. It opened a ncw cloth~. lri h coffee mug and rized pet shop . As the leading 18 million plant at Bowling mmiature cr tal animals. provider oftherdpeutic product. Grcen. Kentucky. which expanded Hill's employs the largest veteri production ofdry foods by 50 per ~ CPL lndustrie increased nary staffofany pet food com cent and reduced the pcr-pound in~titutional volume for terno pany in the world. Princess House cost of production. and Handy Fuel portable heat i a successful direct marketing product in 19 7 and also made company which sells fine crystal ~ As part ofthe therdpeutic line. ale gains in it major line of and decorative acce ories Hill's introduced Prescription Diet leaning supplie . through independent ale repre w/d-a high-tiber, low-caloric sentatives. CPL lndustrie erve ~ IFS. which has one ofthe large t the food service. lodging and main- and mo t experienced sale organi zation in the fund rai ing indu try. introduced a complete new line of ilver jewelry during 1987.

Representative Brands Princess House Princess HOtISR Princess IleriUJge Fat/wia Highligll/s in Lead Crystal RO)rJl HighlighlS Hills Pel Products Scien

QE-CPC00003557 Financial Report Financial Review

Results of Operations

Contents Net Sales In 1987, Colgate-Palmolive achieved record sale and the Financial Review 20 highest unit volume growth in more than a decade. World wide sales increased to $5.6 billion, exceedmg 19 6 sal by Scope ofBusiness 24 13%. This improvement reflected global ph ical volume Geographic Area Data 24 growth of9%, with increase reported by all bu iness seg ments and in all geographic region. Continued weakening Industry Segment Data 25 ofthe .S. dollar against mo t European currencie also Market and Dividend contributed to the sal dollar growth. The record sale in Information 26 1987 were preceded in 1986 by increased sale of 10% and expanded volume of6% as compared to 19 5. In 1986, sales Quarterly Financial Data 26 were impacted favorably by the strength ofboth European Report ofManagement 27 operation and currency value and by the inclusion ofa full year ofoperations ofthe McGaw intravenous solutions Report ofIndependent busine . Reported sales in 1985 grew 4% to $4.5 billion Accountant 27 primarily as a result ofunit volume improvement. Consolidated Statement Sales in the Household and Personal Care segment. rep ofIncome 28 resenting 75% ofthe Company' total sales, advanced 15% in 1987 to $4.2 billion. Substantial sales gain were regi Consolidated Balance Sheet 29 tered in both the United States and oversea markets during Consolidated Statement of 1987, with segment unit volume up 9%. Despite competitive Retained Earnings 30 pressure , ph~ ical volume improved by 17% in the .S. Household and Personal Care bu iness during 1987. The Consolidated Statement of advance in volume was generated primarily by incremental Changes in Capital Accounts 30 sales ofColgate Tartar Control toothpaste and mouthwash, Consolidated Statement of Palmolive Automatic and Lemon Lime dishwashing deter Changes in Financial gents, Fab detergent and Iri h Spring bar soap. The gains in Po ition 31 the .S. Household and Personal Care busine were com plemented by a sales increase of 16% in oversea market ote to Consolidated during 1987. All oversea geographi regions experienced Financial Statement 32 sales increases of17% to 19% over 1986 level ,with unit Historical Financial Summary 40 volume growth in all area ofthe world. Thi trength reflects the implementation ofglobal marketing strategie and the large number ofnew products introduced during the year. The trength ofEuropean exchange rate also had a positive impact on reported oversea sale in 19 7. The sale increase of 15% in the Household and Personal Care segment in 1987 followed increases of % in 1986 and 2% in 1985. In 1986, particular strength was een in European operations from both volume advances and cur rency strength. while sales in the U.S. busine were rela tively flat. Volume advance achieved in 19 5 in both the .S., from the introduction ofa toothpaste pump dispenser, and in oversea operations "''ere partiall offset by the effects ofa strong .S. dollar and unfavorable economic conditions in certain Far East countrie . Sales in the Health Care segment were $1.0 billion in 1987, a 3% increase over 1986. Included in Health Care seg ment results in 1987 are sales of$160 million relating to fiber products businesses which were sold in late December.

QE-CPC00003558 u.s. sales and volume remained relatively con tant in Cost ofSales 19 7 on a comparable basi .excluding the acqui it ion ofa The Company continues to benefit from co t reduct ion home health care operation and the dive tment ofthe program currently in place. Gro profit on sale improved industrial fabrics and baby apparel businesses. The impact in all bu ine segments in 1987 to 44% on a worldwide ofpricing pressure on .S. ho pital bu ine sales wa basi. a compared to 42% in 19 6 and 41% in 1985. These offset by higher sale of Polyken pipewrap. Oversea sale higher margin are the result ofmore efficient manufa tur increased due to ph ical volume growth, acqui itions ing facilitie . a more favorable product/busines mix and \ and the impact ofstrong European currencies. In 1986, lower price for certain raw material . sales and volume in the Health Care segment advanced 22% to $995 million. Excluding the impact ofthe McGaw Marketing andSelling Expenses acqui ition and the indu trial fabrics and baby apparel Marketing and selling expense totaled 1.5 billion or 27% ofsales in 1987, a compared to 1.3 billion or 26% ofsale Gross Profit Margin in 1986 and $1.1 billion or r% ofsale in 19 5. The increase over the past three years were due to higher adver ti ing co t . primarily to upport new produ t introductions and product relaunche in the Household and Personal 45% Care segment.

Research and DeIV!iopl1lent

($ millions)

40% 100

35% 60

0% 40

1985 1986 1987 20 divestment, sale and unit volume increased 6% and 7%, re pectively. Improved sale oftapes, nonwoven fabric and computer disk liners contributed to the increase. Sales o in 1985 were $813 million. up 7% from 19 4, due principally to volume growth in the ho pitaI sector, home health care 1985 1986 1987 market and from fiber sale. The pecialty Marketing egment reported sales of$384 General and Adll7inistratil'e Expense million in 1987, a 22% increase from 1986. Continued strong General and administrative expenses, which include demand for nutritionally balanced pet food from Hill's Pet research and development, totaled $554 million or 10% of Products was upplemented by increased physical volume sale in 1987. as compared to $458 million in 19 6 and 422 from Prince House overseas operation. The 1986 sale of million in 1985 or 9% ofsales in both years. Expenditure $31- million remained relatively unchanged from 1985 sales for product research and development increa ed 8% to of 30 million because the sale increase at Hill's Pet $102 million in 1987, an !nve tment that upport current Products was offset by a decline in direct selling activity at bu iness growth level, after increa ing 15% in 1986 and 9% Prince House. Sale for thi segment in 198- increased 15% in 1985. Also included in general and administrative primarily from volume growth in both pet food products expen es are foreign currency charges of$22.1 million in and crystal tableware sales at Princess House. 19 7, as compared to $2.2 million and $ .2 million in 19 6 and 1985, respectively. The e charge primarily repre ent exchange losses arising from tran lating into .S. dollars the local currency financial tatements of ubsidiarie operating in highly inflationary economies, in addition to foreign currency transaction.

QE-CPC00003559 P1vvisioll for Restructured Operat iOIl Liquidity and Capital Resources During 1987, the Company announced major new tep to further the ongoing restructuring ofits businesses, including Since late 1984, Colgate-Palmolive ha significantly changed organizational realignments, manufacturing reconfigura it capital structure and realigned the Company' bu ine' tions and the disposition ofthe Company's fiber product mix with the objective of increa ing operating return . bu inesses and certain other inve tments. In connection From 1985 through 1987. the Company repurchased almo t with this re tructuring, consolidated results ofoperations for 16 million common hare at an overall co t ofapproxi 1987 include a charge of$150 million, after income tax mately $510 million, thereby reducing the number of hare benefit of$61 million. outstanding by 17%. During thi same period. the om- pany divested busine and inve tment whi h were not Inlere~l Illcome alld expense During 19 7, net intere t expense increased $17 million to Capital Expenditures $63 million, primarily as a re ult ofdebt incurred to repur tS mIllions) cha e stock and to fund acquisitions. During 1986, due to a hare repurchase program that commenced in September of 250 1985, average borrowing levels were higher, which caused net interest expense to increase $35 million to $46 million. During 1985, net interest expense increased by $12 million, 200 primarily as are ult ofthe share repurchase program.

Income Ta.xe~ 150 The Company" effective income tax rate was 56% in 19 7, 40% in 1986 and 39% in 19 5. The higher tax rate in 1987 wa due principally to lower tax benefits recognized on 100 certain element ofthe provision for restructured opera tions. Excluding the impact of re tructured operation, the 50 eHective tax rate wa 39%. The Company al 0 continue to benefit from favordble outcome relating to asses ments in its many tax jurisdiction. o In December 1987, the Financial Accounting Standards Board issued Statement o. 96, "Accounting for Income Taxes." which will be required for fiscal years beginning 19 5 19 6 19 7 after December IS. 19 . The Company is reviewing the fundamental to its core consumer and health care opera statement to e timate it impact on operations and to deter tions, realizing proceed of$455 million. The operation mine the method and timing ofadoption. disposed ofinclude Riviana Food . Inc., Bike Athletic Company, Etonic, Inc., and the industrial fabric, fiber Income fivm Continuing Operatiolls products and baby apparel busine e ofThe Kendall Com Income from continuing operations was $54 million or $.78 pany. Acquisitions were made in both the .S. and interna per share in 1987, a compared to $177 million or $2.52 per tionally to complement core businesse . for an aggregate hare in 1986 and $168 million or $2.13 per share in 1985. con ideration of$439 million. Significant investments Excluding the effect of the provi ion for re tructured opera included the McGaw intravenou solution bu ine and a tions, income from continuing operations for 1987 increased manufacturer and marketer oftoothpaste in the Far East in 15% to $204 million or $2.97 per share, an 18% increase. 19 5, a home health care operation in late 19 6 and the liquid soap bu ine of Minnetonka and a veterinary prod uct di tribution company in 19 7. Also impacting the Company' capital tructure were programs to reconfigure manufacturing operations and to realign Colgate-Palmolive's organization tru ture. In late 1984, the Company initiated a plan to restructure world wide production activities to achieve improved long-term productivity and lower manufacturing co ts, which resulted

QE-CPC00003560 in a charge to net income of$114 million. In 1987, major Retllm on Equit.l' new teps were announced to further the ongoing restruc turing ofthe business, resulting in a charge to net income of$150 million. 20% The Company's focus on streamlining manufacturing processes and reducing production costs is also e idenced by the level ofcapital spending. Capital expenditure were $286 million in 1987, with aggregate spending for 1985-1987 15% of$715 million. These ignificant investment demonstrate the Company' commitment to modernization ofmanufac turing facilitie , to enhancement ofproduct quality and to 10% utilization oftechnological advances. These expenditures are favorably impacting unit costs and profit margins. In connection with the Company's redirection of resource, business realignments and general restructuring 50/<

Relllrn on Capili11

0');: Effecl of Re,lruclUnng 15% 1985 1986 19 7 1991 Goal Management is committed to increasing hareholder 12",{- value and established goal in 1984 for improving return on capital to 15% by 1991. During 1987, the Company improved its return on capital to 12.7% (excluding the restructuring 9"k provision) from 11.2% in 1986 and 10.2% in 1985. In deter mining capital. the Company includes in capital all debt and all noncurrent liabilities. The return on shareholders' equity advanced to 21.2% in 1987 (excluding the re tructur ing charge) from 18.8% in 1986 and 15.7% in 1985. 3% Operating fund generated continued to increase to $326 million from $274 million and $254 million in 1986 and 1985, respectively. Cash available from operation wa $35 million in 1987, $30 million in 1986 and $228 million in 1985. In 1987. operating working capital need increased 19 196 19 7 to upport current and anticipated sales growth, including new product introductions. Total working capital remained effort, the Company has utilized a portion ofits substantial stable; the ratio ofcurrent assets to current liabilitie wa 1.3 leverage capability to alter its capital tructure. The debt-to at December 31,1987, as compared to 1.4 and 1.5 in 1986 equity ratio ha increased from .34 to 1at December 31,1984. and 1985, respectively. Cash and short-term inve tments to .97 to 1at December 31. 19 7. Long-term debt ha continue to decline as the Company inve ts uch fund in increased to $694 million at December 31,1987, from $282 the busine to obtain greater returns. million at December 31,1984. Dividends paid per common hare increa ed for the Colgate-Palmolive's credit tanding remains sound. On twenty-fifth consecutive year to $1.39 per hare from July 2, 1987, the Compan filed a Registration Statement $1.36. Total dividend paid to shareholders amounted to with the Securitie and Exchange Commi ion under which S96 million in 19 7 and 1986 a compared to 104 million the Company will offer for sale from time to time up to in 1985. $300 million of unsecured indebtedness. On July 20,1987, $150 million of30 year debenture were i ued, recei ing an A1/A+ rating from Moody's and Standard & Poor's. re pec tively. Further, at year-end. the Company had unused credit facilitie ofapproximately 925 million.

QE-CPC00003561 COLGATE-PALMOLIVE COOPANY Scope ofBusiness

The Company markets a wide variety of products \\'Ond are attributable to oversea operation. Export sal and wide for use by consumers and health care profe ionals. transfers between geographic area are not ignificant. These products have been cla ified by industry segment in Principal products in each ofthe business segment are a accordance with the markets served. The geographic area follows: information combines activitie in related economic, mone Household and Personal Care product include laundry tary and political environments. and di hwashing detergent. fabric softene .cleaners and Company product are marketed under conditions which cleansers, toothpa te . toothbrushe . bar and liquid soap , are highly competitive. Success in the Household and hair care and shave products and other item. Laundry and Personal Care and Specialty Marketing segment is based dishwa hing detergent and oral product accounted for primarily upon product quality, brand acceptance and the following percentage of\\'Orldwide sale for the past marketing capability, while success in the Health Care seg three years: ment is based upon technical competence, product quality and marketing capability. Products similar to those pro Laundry and dishwa hing detergent 33% 32% 32% duced and sold by the Company are available from others Oral products I7 160;0 17% in the nited State and elsewhere. As shown in the geo graphic area data that follow, approximately half ofthe Health Care products include upplie for health care Company' net sale, operating profit and identifiable assets facilities. ph icians and home health care. Specialty Marketing product include food and medical products for pet , crystal tableware and portable fuel and related equipment for warming food.

Geographic Area Data

Thousands of Dollars 19 7 196 195

et sale: United State 2.4 6.930 $2.286.007 2,169,98 Europe 1.618.193 1,384.293 1,039.492 Western Hemi phere 958.259 821,952 43,378 Far East and Africa 584.07 492.324 470.820 $5.647.460 $4.984,576 4.523.678 Operating profit: United State 163.609* $ 188,697 196.205 Europe 23.229* 69,770 26,907 We tern Hemisphere 83.850* 82,712 74.839 Far East and Africa 23.317* 20,510 30. 24 294.005* $ 361.689 $ 328.775 Identifiable a t : United State 1.742.115 l.557,093 1.431.3 2 Europe 7 0.944 614,124 4 3,315 Western Hemisphere 373.583 308,550 317,980 Far East and Africa 298.585 225,736 206.801 3.19:.227 $2.705,503 $2,439,478

QE-CPC00003562 COLGATE-PALMOLIVE COMP~.NY Industry Segment Data

Thousands of Dollars 1987 1986 1985

et sales: Household and personal care $4,241.661 $3,403,23 Health care 1.021,718 812,701 pecialty marketing 384,081 307.739 $5,647,460 $4523,67

Operating profit: Hou ehold and personal care $ 127.653* 202,177 J70,596 Health care 92.888* 92, 03 71,130 Specialty marketing 73,464* 66709 87,049 294,005* 361,6 9 328,775 nallocated expen es, net 171,188** 64,679 53,320 Income from continuing operation before income taxe $ 122.817* $ 297,010 $ 275,45 -

Identiliable assets: Household and personal care $2,288.159 $1,789,115 $1,578,217 Health care 713.427 7 I. 47 749,719 Specialty marketing 193.641 134,541 11U42 3.195.227 2.705, 03 2,439,47 orporate asset 32.426 140,432 374,527 Total asset $3,227,653 $2, 45,935 $2,814,005

Capital expenditures: Household and personal care $ 227.533 $ 150,666 $ Health care 47.633 47,456 Specialty marketing 10.625 22,789 Discontinued operations 285.791 $ 220,911

Depreciation and amortization: Hou ehold and personal care $ 64.162 $ 55,763 $ 45,701 Health care 31.244 28,975 22,531 Specialty marketing 5,896 4,543 3,996 $ 101.302 $ 89,281 $ 72,22

*Operating profit for geographic area and segment data in 1987 includes the effect ofthe charge for re tructured operations of$2!1,OOO. The effects on geographic area data were to reduce the operating profit ofthe United Stales, Europe, Western Hemisphere, and Far East and Africa by $37,500, $67,800, $14,200 and $20,100, respectively. The operating profit ofthe Household and Personal Care, Health Care and Specialty Marketing egments was reduced by $128,300, $5,300 and $6.000, respectively. ** et unallocated expenses include general corporate expen eand income, net interest, earnings from equity investments and certain 1987 charges for restructured operations.

QE-CPC00003563 COLGATE-PALMOUVECQMPANY Market and Dividend Information

The Company's common stock and $4.25 preferred stock are Ii ted on the ew York Stock Exchange. The trading ymbol for the common stock is CL. Dividend on the common tock have been paid every year since 1895, and the amount ofdividend paid per hare has increased for 25 consecutive years.

Market Price Common Stock 1987 196 Quaner Ended High Low High Low High Low High Low

March 31 $48.88 $41.13 $39.25 $30.38 $65.50 $63.63 -4.50 -0.50 June 30 51.63 38.00 43.50 36.13 64.00 55.00 59.00 54.00 September 30 52.63 46.50 43.00 35.63 61.00 56.00 61.50 3.00 December 31 51.75 28.00 47.00 36.63 56.50 51.88 67.00 57.00 Closing price $39.25 $40.88 $52.00 $64.38

Dividends Paid Per Share Quarter Ended 1987 1986 1987 1986

March 31 $ .34 $ .34 1.0625 $1.0625 June 30 .34 .34 1.0625 1.0625 September 30 .34 .34 1.0625 1.0625 December 31 .37 .34 1.0625 1.0625 Total $1.39 $1.36 $4.2500 4.2500

Quarterly Financial Data (Unaudited)

Thousands of Dollars First Second Third Fourth Except Per Share Amounts Quarter Quarter Quarter Quarter Year

1987 et sale $1,313,248 $1,437,083 $1,432,02 1,465,101 5,647,460 Gross profit 576,361 621,807 621.523 658,446 2,47 ,137 et income (loss) 56,405 56,100 (96,870)* 3 ,387 54,022* Earnings (10 ) per common share .81 .82 (1.42) .56 .7

1986 et sales $1,206,920 $1,246,600 $1,281.588 $1.249,468 $4,984,-76 Gross profit 497,868 519,037 547,128 -2 ,221 2,092,254 et income 49,324 50,105 4 ,0-3 29,9 3 177,465 Earnings per common hare .70 .71 .6 .43 2.52

* Includes a provision for restructured operations of$150,000 (net ofincome tax benefit of$6I,ooO). The sum ofthe quarterly earnings per share amounts in 1987 is less than the full year because the computations for each quarter and for the full year are made independently.

QE-CPC00003564 Report ofManagement Report ofIndependent Accountants

The management ofColgate-Palmolive Company ha pre To the Board ofDirectors and Shareholders of pared the accompanying financial statements and is respon Colgate-Palmolive Company: sible for their content and other information contained in this annual report. The Company' financial statements We have examined the consolidated balance heet of were prepared in accordance with generally accepted Colgate-Palmolive Company (a Delaware corporation) and accounting principle and include amounts that are based ubsidiarie a of December 31, 1987 and 1986. and the on management' be t etiOlates and judgments. Arthur related consolidated statements ofincome, retained earn Andersen & Co.. independent accountants, has examined ing . change in capital account and change in financial the financial statements and presented an independent position for each ofthe three years in the period ended opinion thereon. December 31,1987. Our examinations were made in accor Colgate-Palmolive maintains a system of internal dance with generally accepted auditing tandard and, accounting control designed to provide reasonable assur accordingly, included such test ofthe accounting record ance that transactions are executed in accordance with and such other auditing procedures as we considered nece proper authorization and are recorded properly, and that sary in the circumstance . assets are safeguarded. Effectiveness ofinternal controls is In our opinion. the consolidated financial tatement enhanced by the communication offormal policie regard referred to above present fuirl the financial po ition of ing corporate conduct to all level ofemployees and by Colgate-Palmolive Company and subsidiaries as of Decem staffing managerial po ition with professionally trained ber 31,1987 and 1986. and the results of their operations and and qualified personnel. The control ystem is monitored by the change in their financial po ition for each ofthe three internal auditors who examine financial reports, test the years in the period ended December 31. 19 7, in conformity accuracy oftransactions and otherwi e obtain a Urance with generally accepted accounting principle applied on a that the S) tem i operating in accordance with the Com con i tent basi . pany's stated objectives. The udit Committee ofthe Board of Directors is com ew York, ew York posed entirely ofnon-employee directors. The Committee February 10, 198 meets periodically and independently with management. internal auditors and the independent accountants to dis cuss the Company' internal accounting controls, auditing and financial reporting matters. The internal auditors and independent accountant have unrestricted access to the Audit Committee.

Reuben Mark Robert M. Agate Chairman, Pre ident and Executive Vice President and Chief Executive Officer Chief Financial Officer

QE-CPC00003565 COLGATE·PALMOLIVECOMPANY Consolidated Statement ofIncome

Thousands of Dollars Except Per Share Amounts 1987 196 198

et sales $5.647,460 $4,984,576 4,523,678 Cost ofsales 3,169,323 2,892,322 2,680,693 Gro profit 2,478.137 2,092,254 1 842,9 5 Operating expense and other items: Marketing and selling 1.539.783 1,302,262 1,144.623 General and administrative 554,466 457,705 421,604 Provision for restructured operations 211.000 Interest expense 89.014 76,235 53,90 Interest income (26.173) (30,3 I) (43,291) Earnings from equity investments (12.770) (10,577) (9,314) Total operating expenses and other items :U55.320 1,795,244 1.567.530 Income from continuing operations before income taxes 122.817 297.010 275,455 Provision for income taxes 68.795 119,545 107,654 Income from continuing operations 54.0n 177,465 167,801

Discontinued operations: Income from discontinued operations, net ofincome taxes 4,091 Lo on disposal ofdi continued operations, net of income taxes (62,450) et income $ 54.022 $ 177,465 109,442

Earnings (10 ) per common share: Continuing operations $ .78 2.52 2.13 Discontinued operations .05 Di posal ofdiscontinued operations (.79) Total S 2.52 1.39

Average number ofcommon hares out tanding (in thousands) 68.577 70.230 78.605

See otes to Consolidated Financial Statements.

QE-CPC00003566 COL(;ArE-PALMQUIIFCOMPANY Consolidated Balance Sheet

Thousands ofDollars 1987 196

As ets Current Asset Cash and short-term inve tments $ 57,137 $ 165,136 Receivables (Ie allowance for doubtful accounts of$13,843 and $14,705) 1'23,297 553,393 Inventories 753,376 637,098 Other current assets 182,669 128,660 Total current assets 1.716,479 1,484,287 Property, plant and equipment, net l,201.762 l,I 13,72 Other asset 309,412 247,920 $3,227,653 $2,845,935

Liabilities and Shareholders' Equity Current Liabilities otes and loans payable $ 192,126 $ 129,933 Current portion oflong-term debt 25,024 25636 Account payable 496,521 413,722 Accrued income taxes 68,055 59,104 Other accruals 495,241 427,240 Total current liabilitie L276,967 1,055,635

Long-term debt 694,130 522,023 Deferred income taxes 126.525 140,510 Other liabilities 188,8 8 147,851

Shareholders' Equity Preferred stock 12.562 12,562 Common stock 83,691 83,485 Additional paid-in capital 126,409 121,963 Ret

See otes to Consolidated Financial Statements.

QE-CPC00003567 COu;ATE-PALMOLlVECOMPMtr Consolidated Statement of Retained Earnings

Thousands of DoUars 1987 1986 1985

Balance January I $1,423,845 $1,342,036 $1,333,883 Add: et income 54,022 177,465 109,442 1,477,867 1,519,501 1,443,325

Deduct: Dividend declared: Preferred stock 533 533 533 Common stock 96,995 95,123 100,756 97,528 95,656 101,289 Balance, December 31 $U80,339 $1,423,845 $1,342,036

Consolidated Statement ofChanges in Capital Accounts Additional Common Stock Paid-In Treasury Stock Dollars in Thousands Shares Amount Capital Shares Amount

Balance, January I, 1985 83,009,145 $83,009 $109,644 $ Shares issued for tock options 201,694 202 4,420 Treasury stock acquired (12,706,579) 12,706,579 375,243 Other 154,896 6 (154,329) (3,994)

Balance. December 31,1985 70.659,156 83,211 114,070 12.552,2 -0 371,249 Shares issued for stock options 273,434 274 6,728 Treasury stock acquired (1,020,119) 1,020,119 37,965 Other 113,106 1,165 (113,106) (3,473)

Balance. December 31,1986 70,025,577 83,485 121.963 13.459,263 405,741 Shares issued for tock option 205,813 206 5,593 Shares i ued in a merger transaction 528,735 (1,154) (528,735) (21,510) Treasury stock acquired (2,249,095) 2,249,095 96,299 Other 89,299 7 (89,299) (3,282)

Balance, December 31,1987 68,600,329 $83,691 $126,409 15,090,324 $477,248

See Notes to Consolidated Financial Statements.

QE-CPC00003568 COLGATE-PALMOLIVE l e-IMPA.N., Consolidated Statement of Changes in Financial Position

Thousands of Dollars For the Years Ended December 31. 1987 1986 19 5

Operations Continuing operations: Income 54.022 $177,465 $167,801 dd (deduct) items not affecting ca h: Provision for re tructured operations. net 192,rO Depreciation and amortization 101.302 89,2 I 72,228 Deferred income taxe and liabilitie (21.744) 7,108 (1,006) 326,330 273,854 239,023 Discontinued operation 15,113 Total operating funds generated 326.330 273,854 254,136 Fund (used for) provided by current assets/liabilitie : Receivables (194,549) (25.347) (20,572) Inventorie (136.623) (50,454) 60,674 Other current assets ( 7.265) (21,939) (30,8 I5) et assets ofdiscontinued operation (132,256) Payables and accruals 97.123 123,121 93,187 Effect ofexchange rate changes on working capital 29.878 9,216 4,140 (29 I.436) 34,597 (25,642) Cash available from operations 34.894 308,45 I 228,494 Dividends Dividend paid (96.176) (95,8 0) (103,85 ) Plant and Other Investments Proceeds from sale of businesse 223.1 7 0 232,182 Capital expenditures (285.791 ) (220,911) (208,584) et noncurrent assets of businesse acquired (114.385) (51,826) (89,635) Net noncurrent a set ofdiscontinued operations 36,973 Inve tment in nonconsolidated companies (7.308) (5 6) (81,395) Other, net (10.848) 1,766 33,400 Cash used for inve tment activities (195.162) (39,375) (309,241) Financing Purchase ofcommon stock (96.299) (37.965) (3r,243) hare i ued in a merger transaction 20.3~6 Proceeds from long-term debt 199.689 308,774 316,122 Reduction oflong-term debt (36. 2) (326997) (74,374) et increase (decrease) in note and current debt 61.581 (211,333) 225,863 Cash provided by (used for) financing acti ities 148.445 (267,521 ) 92,368 et decrease in cash and short-term inve tment (107.999) (94,325) (92,237) Ca h and short-term investments at beginning of year 16~,136 259,461 351,698 Cash and hort-term investments at end ofyear :7.137 $165,136 $259,461

See otes to Consolidated Financial Statements.

QE-CPC00003569 COI.GI4TE-PALMOUVECOA¥'IINY Notes to Consolidated Financial Statements Dollars in Thousands Except Per Share Amounts l. Summary ofSignificant Accounting Policies taxes that will be payable on remittances ofoversea earn ings; no provision is made for taxe on oversea retained Principle. ojConsolidalion earnings that are deemed to be permanent! reinvested. The consolidated financial statements include the accounts ofColgate-Palmolive Company and its majority-owned Pension subsidiarie . Intercompany transactions and balances have For the year ended December 31,1987, United State pen been eliminated. Investments in companie in which the ion expense was determined in accordance with the Company's interest is between 20% and 50% are accounted requirements ofStatement ofFinancial Accounting for using the equity method. Standards 0.87, '"Employers' Accounting for Pensions." Overseas pension expense for all years and United State Trans/arion ojOrerseas Currencies pension expense for years prior to 1987 were determined a The assets and liabilitie ofsubsidiaries, other than those required by Accounting Principle Board Opinion o. 8, operating in highly inflationary environments, are translated "Accounting for the Cost of Pension Plans." into US. dollars at year-end exchange rates. Resulting translation gains and losses are accumulated in a separate Earnings Per Common Share component ofshareholders' equity. Income and expense Earnings per common hare i determined b, di iding net items are converted into US. dollars at average rates of earnings (after deducting dividend on preferred hares) by exchange prevailing during the year. the weighted average number ofshares out tanding. The For ubsidiaries operating in highly inflationary environ dilution that could re ult from the exercise of tock options ments, inventories and property, plant and equipment, and conversion ofsecond preferred tock i not material. including related expenses, are translated at the rate of exchange on the date the assets were acquired, while other 2. Restructured Operations, Discontinued assets and liabilitie are translated at year-end exchange Operations and Other Dispositions rate . Translation adjustments for these operations are included in net income. During 1987, the Compan instituted a re tructuring pro gram that includes organizational realignments, certain Inventories manufacturing reconfigurations, the sale ofthe fiber prod Inventories are valued at the lower ofcost or market. The ucts businesse of The Kendall Company ("Kendall"), a last-in, first-out (LIFO) method is used to value substan wholly owned subsidiary, and dispo itions ofcertain other tially all inventories in the US. a well as in certain overseas inve tments. A pretax pro ision of 211,000 wa recorded in locations. The remaining inventories are valued using the the third quarter of 19 7 to cover the e timated co t. After first-in. first-out (FIFO) method. con idering the e timated income tax benefit of 61,000 associated with this charge, the effect was to reduce net PropertJ{ P!alll and Equipmem income in 1987 by $150,000 or $2.19 per hare. In the Land, buildings and machinery and equipment are stated fourth quarter of 1987, the Company sold the fiber product at cost. Depreciation is provided, primarily using the bu inesses of Kendall and dispo ed of the other investments traight-line method, over estimated useful lives ranging for aggregate proceed of$223.000. The net gain on such from 3 to 40 years. transactions wa not material.

IncomeTaxe Deferred taxes re ult from differences between the time cer tain items are recognized for financial statement purposes and for income tax purpo es. Investment tax credits reduce the provision for income taxes in the year the related prop erty is placed in service. Provision is made currently for

QE-CPC00003570 In 19 6, a part of it divestment program, the Company 4. Inventories sold Riviana Foods, Inc., Bike Athletic Company, Etoruc. Inc., and Medasonics, Inc., a ubsidiary of Kendall. [n Inventories consi t ofthe following at December 31: ovember 19 5, the Company disposed of DM Corpora tion and the Anatros division of Medasonics, Inc. (see ote 1987 1986 3). In connection with the 1986 and 1985 dispositions. a Raw materials and supplies $289,lt8 241,4 5 charge to discontinued operations of$62,450 (net ofincome WOrk-in-process 46,964 39,757 tax benefit of$15,251) was recorded in 1985 to provide for Finished goods 417.294 355, 56 realized and e timated unrealized net losses. In addition to $753,376 $637,098 the 1986 and 1985 discontinued operations and as part of its dive tment program, the Company sold the industrial fab Inventories valued under UFO amounted to $314,694 at rics and baby apparel busine e of Kendall in 19 6. December 31. 1987, and $281,651 at December 31,19 6. The excess ofcurrent cost over U Fa co t at the end ofeach 3. ACQuisitions and Investments year was $37,968 and $44,983, respectively. During 1987, the Company acquired several businesses, 5. Property, Plant and Equipment, et including a liquid soap bu ine ,effected in a merger trans action, and a veterinary products di tribution company, Property, plam and equipment con i ts ofthe following at having an aggregate value of$144,461. [n 1986, the Com December 31: pany acquired businesse for an aggregate purcha e price of $64,375. The re ults ofoperations of the acquired bu ine se 1987 1986 in 1987 and 1986 are not material to the respective years Land $ 71.875 66,661 and have been included in the consolidated statement of Buildings 389.909 316.259 income from their re pective dates ofacquisition. Machinery and equipment 1.504,480 1.382,134 In ovember 1985, the Company acquired the McGaw 1,966.264 1.765,054 divi ion ofAmerican Ho pitaISupply Corporation, a man Accumulated depreciation 764.502 651,326 ufacturer of intravenous solutions and other related prod $1.201.762 $1,113,72 ucts, for $117,100 in ca h and the transfer ofcertain asset and liabilitie of DM Corporation and the Anatros divi- ion ofMedasoruc ,Inco The result ofoperations of 6. Other Accrua[s McGaw from ovember 26 1985 are included in the con solidated statement of income. Other accruals consi t ofthe following at December 31: In [987, the Company announced an agreement, subject to French government approval, with the Henkel group of 1987 19 6 We t Germany ("Henkel") relating to the acquisition of Accrued payroll $ 86.193 $ 4,861 certain elements of Henkel' sub idiary. Cotelle, S.A., a Accrued adverti ing 79.204 6,0-9 major household products company in France. The Com Accrued benefit cost 39,430 34.243 Accrued taxes, other than pany' propo ed investment ofapproximately $160,000 will income taxes 33,622 2 ,689 add to the Company' household cleaning products busi Dividends payable 25,154 23,802 ness, including chlorine bleach. and provide technology irr Other 231.638 169.586 low-co t plastics packaging. If the transaction is not com $495.241 $427,240 pleted by June 30, 1988, the Company ha agreed to provide a loan to Henkel in the amount ofthe propo ed inve tmem.

QE-CPC00003571 7. Long-Term Debt and Credit Facilities Depo it rates. London Interbank Offered Rate or other hort-term borrowing rate. Iso included in total unu ed Long-term debt consist ofthe following at December 31: credit facilitie i a $200,000 revolving multicurrency under written agreement which expire in July 1990. Thi facility 1987 1986 ha .S.-based and London-based borrowing options at $150,000 face amount debentures short-term borrowing rate. 0 borrowing were outstand due 2017 (less unamortized ing under either ofthese credit agreement at December 31. discount of$3.660) at an 1987. Commitment fee and compen ating balance require effective intere t rate of 9.9 % $146.340 $ 8,4% notes with various maturi- ment related to credit facilitie are not material. ties through 1998 125.000 137,500 $100,000 face amount Eurodollar 8. Leases notes due 1996 (less unamortized discount of$I,315) at an At December 31. 1987. future minimum rental payments effective interest rdte of9.5% 98.685 98,525 European Currency Unit notes under capital and operating lease were a follows: due 1991 at an effective interest rateof7.7% 75.300 70,000 Year Ending December 31. Capital Operating 62,400 face amount bonds due 1995 (less unamortized dis- 1988 10.255 $ 4 .100 count of $7,027) at an effective 1989 6.644 37.905 interest rate of 10.3% 55.373 54,190 1990 3,275 31.094 Swiss franc notes due 1993 at an 1991 2.503 22.634 effective interest rate of 8.9% 50.000 50.000 1992 1.66 20.344 Australian currency notes due Later years 6.369 103.653 1991 at a variable interest rate 47.500 47,500 Domestic term loan due 1990 at an effective interest rate of Total minimum lease payments 30.714 263,730 10.25% 37.500 Minimum sublease rental income (21.132) French notes with variou maturities 11.2 9 13.801 et minimum lease payment 30.714 $242.598 Obligations under capital leases 13.423 23,244 Other (principally overseas) 48.744 52,899 Le :Interest and executory cost 7.291 719.154 547.659 Le : Current portion of long- term debt 25.024 25,636 Present value of net minimum lease payments $23.423 694.130 $522,023

Rent expense for all operating lea e totaled 48.525 in 1987. Scheduled maturitie oflong-term debt outstanding at $48,435 in 1986 and $49,775 in 1985. December 31,1987, exclusive ofcapitalized lease obligations. are as follows: 1988-$16,999; 1989-$33,126; 1990-$6 .271: 9. Contingent Liabilitie 1991-$136,2 I; 1992-$18,933. On July 2, 1987. the Company filed a registration state The Company and its ub idiarie are contingently liable ment on Form S-3 with the Securitie and Exchange Com with re pect to law uit , taxe and other matters an ing out mission under which the Company will offer for sale from ofthe normal course ofbu ine . In management' opinion, time to time up to $300,000 ofunsecured indebtedness the resolution ofthe e contingencie will not have a mate pursuant to Rule 415 under the Securities Act of 1933, as rial impact on the financial condition ofthe Company. amended. Under this registration statement, the Company sold $150,000 of30 year debenture on July 20, 1987. At December 31,19 7, the Company had unused credit facilities amounting to $925,000. Included in thi total is a $400,000 revolving credit agreement, providing for dome tic borrowings, expiring in ovember 1989. Intere ton borrowings under the agreement is based on Certificate of

QE-CPC00003572 10. Retirement Plans and The a umed rate of return on plan a et was 9% in 1987. Other Postemployment Benefits Measurement ofthe projected benefit obligation in 1987 wa based on a 9.5% a umed ettlement rate and a 6.5% The Company, its United State ub idiarie and a majority assumed long-term rate ofcompensation increa e. of it overseas subsidiaries maintain pension plans covering At December 31,1986. based primaril. on January I, sub tantially all oftheir employees. Most plans provide 1986 actuarial valuation ofUnited State plans, ve ted pension benefits that are based primarily on years ofservice benefits amounted to $504,361; nonve ted benefit and employees' pa near retirement. In the Company's amounted to $26.944: and the net assets available for principal U. . plan, funds are contributed to tru tee as benefit were $761,362. The weighted average assumed rate nece ar to provide for current service and for any ofreturn u ed in determining the actuarial pre ent value of unfunded projected benefit obligation over a reasonable the accumulated plan benefits in 1986 was 8.8%. period. To the extent these requirements are exceeded by Overseas subsidiaries do not report under the Employee plan asset. a contribution may not be made in a particular Retirement Income Security Act of 1974 (ERISA) and do year. Plan a ets consist principally ofcommon stock , not generally determine the actuarial present value ofaccu depo it administration contract with in urance companie mulated benefit or net a sets available for benefit as calcu and U. .Government obligations. lated and disclosed above. For these plan. the value ofthe Effective January I. 1987, the Company adopted State pen ion funds and balance sheet accruals exceeded the ment of Financial ccounting Standards (SFAS) 0.87, present value ofvested benefit for both 19 7 and 19 6. "Employers' Accounting for Pensions," for its United State In addition to pro iding pen ion benefits, the Company pension plan. The net effect ofthe change wa to reduce and certain ofit United State ubsidiaries provide health pen ion expense in 1987 by approximately 7,500 ($.07 per care and life in urance benefits for retired employees. The share). co t ofproviding these benefits is generally recognized by Pen ion expense wa 7.348 in 1987, 12,197 in 1986 and expensing the annual insurance premium . These co t $14,147 in 1985. et periodic pension expense for 1987 approximated $9,900 in 19 7. includes the following components: 11. Income Taxes Service cost-benefits earned during the period $ 21.344 Interest cost on projected benefit obligation 59.653 ctual return on plan assets 16,295 The provision for income taxe from continuing operations et amortization and deferral (101,338) con ist ofthe following at December 31: et pension income for U.S. pension plans (4,046) let pension expense for overseas plans 11.394 et pension expense $ 7,348 United States Foreign

The following table sets forth the funded status ofthe nited State plans at December 31,1987:

Plan assets at fair value $797,825

Actuarial present value of benefit obligations: Vested benefit obligation 567,418 onvested benefit obligation 41,3 2 Accumulated benefit obligation 60 ,800 Additional benefits related to assumed future compensation levels 85,477 Projected benefit obligation 694,277 Plan assets in exce of projected benefit obligation 103.548 Unrecognized net loss 36.071 Unrecognized transition asset ( 125,443) Prepaid pen ion co t recognized in the consolidated balance sheet 14,176

QE-CPC00003573 The tax effects oftiming differences. resulting from vari Common Stot/, ance between accounting for financial tatement purpose Common sto k consi t of2-0,OOO.000 authorized hal' . and accounting for tax purpo . are a follows: $1 par value. t the re"pe tive year-end. 445. and 3 0.114 share were held for di tribution under the ecu tive Incentive Compensation Plan, whi h provide for ca h Excess oftax over and common stock award for officers and other executives book depreciation $ 14.056 $24.205 23.199 ofthe Compan. and it major ub idiarie . The co I oflhe e et restructuring shares Iotaled $11.217 al December 31. 19 7. and .43 al (accrual) spending (41.000) 14.540 16,062 Business disposals (~~.993) (5.5 4) December 31. 19 6. and ha been offi et against the related Other, net 4.677 (5,44-) noncurrent liabilit~ in the consolidated balance heet. $(45.260) $27,716 On December 31,19 7, the Company had out tanding 68.600.329 common stock purcha e rights ("Righi "). The Rights were originally i ued in October 19 4 a a dividend The difference between the latutory nited tates federal to holders ofthe common Slock at the rate ofone Right for income lax rate and the Company's effective tax rate a each hare ofcommon stock out tanding. Ea h Righi enti reOected in the financial latement i as follows: tle the holder thereof. until 0 tober 31. 1994. to buy one half(I/2) ofa hare ofcommon stock al an exercise priee %of Income Before Tax 1987 1986 \985 of$37.50. The exercise price and Ihe number ofshare of Tax at .S. statutory rate 40.0% 46.0% 46.0% common stock is uable upon Ihe exercise ofthe Right are Restructured operations 19.1 subject to adjustment in certain ca e to prey nt dilulion. State income taxes, net of federal The Rights are evidenced by Ihe commontod. certificate. benefit 4.3 1.9 2.2 and are not exercisable. or tran ferable apart from the com Earnings taxed at other than U.S. statutory rate (~.~) (6.1 ) (3.2) mon stock, until ten day after a person acquire 20% or Investment tax credits ( .3) ( 1.2) (3.5) more or make a lender offer for 30% or more oflhe com Other, net (4.9) (.4) (2.4) mon stock. In the event Ihe Company i. acquired in a Provision for income taxe 56.0 40.2% 39.1% merger or other bu in - combination transaction (in luding one in which the Company i Ihe u.... i\ ing corporation). it is provided that each Right will entitle it holder \0 pur 12. Capital Stock and Stock Option Plans chase, al the then current exerci. e price ofthe RighI. Ihat number ofshare ofcommon tock ofIhe u.... ivmg com Pr~krred SLOck pany which at the time of uch transaction would have a The preferred tock consist of250.000 authorized share market valueoflwotime Iheexerci priceofth RighI. without par value. The preferred tock is issuable in serie , The Rights do nOI have an. vOling righl and are ofwhich a eries of 125,000 hare, designated $4.25 pre redeemable, al the option oflhe Company. at a price of .10 ferred stock, with a lated and redeemable value of$100 per per Right prior to an~ pelon acquiring beneficial owner- share. has been issued and is ou; tanding. Dividends on the hip ofat lea t 20% ofthe common tock. The Right 4.2 - preferred tock are cumulative. expire on October 31. 1994. So long a the Right are not The $3.00 convertible second preferred tock i without eparately tran ferable.lhe Company will issue one Right par alue and redeemable at 110 per hare plus accrued with each ne~ hare ofcommon LOck i u d. dividend. The hare may be converted into common stock at 9.45 common shares for each uch preferred share. There were -64 hares with a stated value of$62 outstanding at December 31, 1987 and 1986. Under the provi ions ofthe Certificate ofIncorporation, both series ofpreferred tock are subject to redemption only at the option ofthe Company.

QE-CPC00003574 Stock Option Plans The following i an analysi ofthe change in the epa rate The Company's 1987 tock Option Plan provides for the component ofshareholders' equity for cumulative foreign i uance ofnon-qualified tock option and qualified incen currenc tran lation adju tments: tive stock option (lSOs) to officers and key employee . The non-qualified tock options permit optionees to acquire common stock ofthe Company upon cash or tock pay Balance, January I ments. In certain case, stock appreciation right (SAR ) Aggregate translalion adjustments 5 .1'2 17.384 362 and equity unit (EU) may al 0 be granted. Options are Reduction due 10 granted at price not Ie than the fair market value on the disposition of date ofgrant. At December 31, 1987,4.579.644 hares were certain overseas available for future grant. The Company' 1977 Stock operations 13.436 33.170 Option Plan terminated during 1987. except as to options Balance as of granted. Stock option plan activity i ummarized below: December 31 1 4.6IC) (256,19 ) (273.5 2)

19 7 1986 Options outstanding. J4. Supplementary Information January I 2.729.552 2.202.400 Granted 1.744 1.193.634 The following presents a comparative ummary ofcertain Exercised (196.682) (240.532) expense information for the years ended December 31: Exchanged for ARsjE s ( 6.4 0) (369.750) Cancelled or expired (19.210) ('6.200) Options outstanding, Interest incurred December 31 3.30 .924 2,729.'52 Interest capitalized Options exercisable at Intere t expense December 31 2.427,420 1.544.668 Research and Option price range at development 102.402 95.000 82.256 exercise $12.5010 417:' $12.50to$26.56 Maintenance and repairs 115.76' 106.702 9',0 Option price range at Media advertising co ts 3, -.046 333.76 269,669 December 31 $12.50 to $41.75 IS.lndu try Segments and Geographic Areas 13. Overseas Operations Reference i made to pages 24 and 25 ofthis annual report Oversea income before taxe wa 112,390 in 1987, for financial and de criptive information concerning the 12 , 84 in 1986 and 88,987 in 19 5. The 1987 decline in Company' indu try egment and geographic area. Thi oversea income before taxes relate to the provision for information covers the three years 1985 through 19 7 and re tructured operations recorded during the year. Included i an integral part ofthe e financial statement. in net income were foreign currency charges. resulting from the translation ofbalance heet ofsubsidiaries operating in highly inflationary environment and from foreign cur rency transaction. of 19,175 in 1987, $6,284 in 1986 and $10,313 in 1985.

QE-CPC00003575 Board of Directors

Reuben Mark a.b.d Chairman ofthe Board. President and Chief Executive Officer

Keith Crane a.b.d Director and former Chairman of the Board

Vernon R. Aldena.c.d Director and Trustee: former Chairman ofThe Boston Company, Inc.

Howard W Blauvelt a.b Director and Consultant; former Chairman ofConoco Inc.

Joh n B. Carter a.d President and Chief Executive Officer ofThe Equitable Life Assurance Society ofthe United States: Director

Albert V. Caseyb.c.d Distinguished Professor of Business Policy, School of Business, Southern Methodist University; former Chairman and Chief Executive Officer of AM R Corp.jAmerican Airlines, Inc. Jill K. Conwaya.c Visiting Scholar, Massachusetts Institute of Technology; former Pre ident, Smith College, orthampton, Massachusetts

Ronald E. Ferguson b Chairman. President and Chief Executive Officer ofGeneral Re Corporation; Director

John P. Kendall a.b.c.d Director and Trustee; venture capitalist; former Chairman of The Kendall Company

Howard B. Wentz, Jr.b.c Chairman, President and Chief Executive Officer ofAmstar Corporation; Director

Thomas R. Wilcox b.c.d Director

Member of: • Personnel & Organization Committee b Finance Committee c Audit Committee dominating Committee

QE-CPC00003576 Company Management Thomas G. Davies Douglas L. Meyer Vice President. Fabric Care Vice President and General Manager Corporate Officers Global Marketing Oral Care Herbert L. Davis William R. Peters Reuben Mark Vice President. Manufacturing Legal Counsel Chairman ofthe Board. President EngineeringTechnology. Ph} ical ciences Grace E. Richardson and Chief Executive Officer Walter A. Fogarty Vice President, Consumer Affairs William S. Shanahan Vice President, Worldwide Sales Cyrill R. Siewert Senior Executive Vice Pre ident Gerald Z. Gibian Vice President. ew Business ChiefofOperations-Colgate Vice President. Real Estate Development Development and Market Planning 1. Dale Sherratt Alberto F Hidalgo Robert L. winney Senior Executive Vice President Vice President. Research and Development Vice Pre ident, Operations ChiefofOperations-Kendall Physical Sciences Horace C. Moses 11/ Roderick L. Turner Michael L. Hoye General Manager Senior Executive Vice President Vice President Colgate-Hoyt Laboratories ChiefofOperations-Specialty Worldwide Marketing Effectiveness Grant L. Wood Marketing Raymond W Kunsman, Jr. Vice President and President John M. Watkin Vice President Softsoap Enterprises. Inc. Worldwide New Business E pansion Senior Executive Vice President Colgale- Overseas Richard T. Palmer Robert M. Agate Brian E Bergin Vice President Executive Vice President Vice President Information Resources Management Chief Financial Officer European Operations Robert A. Patterson William G. Cooling David A. Metzler Vice President. Facilities Engineering/ Executive Vice President Vice Pre ident Project Management ChiefTechnological Officer Latin American Operations John T. Reid Silas M. Ford A. John Salter Vice President. Strategic Planning Executive Vice President Vice President, President and Reuven M. acher Office ofthe Chairman General Manager, Colgate-Philippines Vice President, Research and Development Jules Blake Michael 1. Tangney Life Sciences Vice Pre ident Vice President, President and Donald A. Schindel Corporate Scientific Affairs General Manager, Colgate-Mexico Benjamin C. Davis. Jr. Vice President. Corporate Development Vice President Barrie M. Spelling Health Care Human Resource Vice President Kendall Brian 1. Heidtke President, Colgate Venture Company 1. Dale Sherratt Vice President. Finance and Katharine R. Tarbox enior Executive Vice Pre idem ofthe Corporate Treasurer Vice President, Investor Relations Corporation; President and Chief Peter D. McLeod Craig B. Tate Executive Officer ofThe Kendall Company Vice President. Manufacturing Vice President. Global Marketing Michael S. Roskothen Engineering Technology Clay S. Timon Executive Vice President Harold Obstler Vice President, Worldwide Advertising The Kendall Company Vice President Robert C. Wheeler Thomas E. Tierney General Counsel and Secretar} Vice President Executive Vice President, Health Care ector A. Courtenay Shepard President, Hill's Pet Products Dominick A. Arena Vice President Douglas R. Wright President, Respiratory Care, Inc. President. Colgate- .5. Vice President. Surface Care Charles P. Bruen Frederick O. Cowles Global Marketing Pre ident. Kendall McGaw Laboratories, Inc. Associate General Counsel Maclin B. Cogbill Assistant Secretary Operating Officers and Executh'es ice President and General Manager William R. Peters Divisions and Subsidiaries Kendall-I nternational Associate General Counsel Joseph 1. Guarnieri Assistant Secretary Household and Personal Care President, Kendall-Futuro Co/gale-US William R. Lean Other Principal Operating, A. Courtenay Shepard President, Kendall Health Care Products Planning and StaffOfficer ice President ofthe Corporation; Frederick 1. Zeitvogel President. Colgate-U.S. President, Polyken Technologies P. Gordon McArthur Edgar 1. Field pecialty Marketing Group Vice President Executive Vice President, Colgme- .S. Ariel A. Allen Hi/I's Pel ProdL«:1S International Business Development Robert C. Wheeler Emilio Alvarez-Recio Vice President, Creative Services Robert E. Blanchard President ice Pre ident. Worldwide Princess House Vice President and General Manager Personal Care Products Richard C. Brown Home Care Steven R. Belasco President David G. Bluestein Vice President. Taxation CPL lnduslries Vice President and General Manager Robert H. Burg Kenneth E. Snyder Vice President. Compensation Body Care Ralph A. Champlin President and Development InslirwlOnal Financing erl'/ces Geoffrey J. Dance Vice President. Sale Robert 1. Joy E. Peter Raisbeck Vice President. Financial President Business Development Vice President, Human Resources 39

QE-CPC00003577 COLGIlTE·PIILMOLIVE CO\<'l'WY Historical Financial Summary

Dollars in Thousands Except Per Share Amounts 1987 1986 1985 19 4 1983 1982

et sale 5,647.460 4,984,576 4,523,67 4,369,179 4,27 , 49 4.334.695 Income from continuing operation: Amount 54,022* 177,465 167,801 42,66 * 175,652 175,643 Per common share .78 2.52 2.13 .51 2.1 2.15 Working capital 439.512 428,652 517,988 806,804 977,00 981A03 Ratio ofcurrent assets to current liabilitie 1.3 1.4 1.5 2.0 2.2 2.2 Capital expenditure 2 -.791 220,911 20 ,584 243,7 I 2,541 119,150 Depreciation expense 96,151 87,126 71,050 59,67 55,24 ' ,170 Property, plant and equipment, net 1,201.762 1,113,728 978,273 814,7 4 761,215 692,722 Total assets 3.227,653 2,845,935 2,814,005 2,568,343 2,663,965 2.574,413 Long-term debt 694.130 522,023 529,255 282,371 292,945 255,835 Shareholders' equity 941,143 979.916 907,048 1.231,991 1,341,668 1,321.324 Book value per common hare 13.54 13.81 12.66 14.69 16.21 1'.97 umber ofcommon share out tanding (in thousands) 6 .600 70,026 70.659 83,009 2,010 1,9'7 Cash dividend declared per common share 1.39 1.36 1.32 1.2 1.2 1.20 umber ofshareholders: Preferred 600 600 700 700 800 00 Common 33.900 35,900 39,600 45,300 4 ,300 0,100 Average number ofemployee 37.400 37,900 40,600 42,800 43.000 43,700

*Include a net pro~ision for restructured operations ($150,000 in 1987 and $114.000 in 19 4).

...... (right to left) Katharine Tarbox ice President. Investor Relations Anne Crawford Director.ln~estor Informauon Tom Allen Associate Director. Strategic Planning

... (below) Peggie Miller Shareholder Relations oordinator

Meeting with investors Investment Oubs (. fAIC) in Detroit. SharehoLders are invited Colgate management meets with to visit with Colgate representatives many investors during the year at the 1988 NAIC Congress-to be here, at the 1987 Congress ofthe in PhiLadelphia, October 26,29 at National Association of the Adams Mark Hotel.

QE-CPC00003578 Shareholder Information

Tran fer gent and Regi trar ECForm IO-K Anoual Meeting Common Stock. 4.25 Preferred Stock The Compan files annual reports under The annual meeting ofshareholders ,,;11 and 3.00 Convertible Second Preferred cover ofForm 10-K with the Securities be held on ThuJ1iday, May S. 1988 at Stock: and Exchange Commission in Washing 10:00 a.m. in the Broadway Ballroom of ton, D.C. the Marriott Marquis Hotel. Sixth Floor. Morgan hareholder Services Broadwav at 45th Street. 'ew York. Trust Company Shareholders and others wishing a copy ewYork. 30 West Broadway of the 1987 report may request it by writ 'e" York. ew York 10007-2192 ingto: We urge y.ou to sign and return your proxy promptly even if you plan to attend Principal tock Exchanges Office ofthe Secretary (IO-K) the meeting. 'ew )brk tock Exchange (CLl Colgate-Palmolive Company Amsterdam 300 Park Avenue Corporate Commitment to Frankfurt 'ew York. 'ew York 10022 'on-Discrimination London Colgate-Palmolive does busine in more Paris Be certain to include your name. address than tOO countries worldWIde. affecting Zurich and zip code. Form 10-K will be avail the Ii ofa highly diverse population able on or shortly after April 1.1988. ofemplo_ttS. customers. shareholders. I ndependent Accountant business associates and friends. Arthur Andersen &Co. Automatic Dividend Reimestment Plan We believe in the dignity ofthe indi For information regarding our Automatic vidual and are unalterably opposed to orporate Ileadquarlers Dividend Reinvestment Plan, contact: discrimination against individuals based 300 Park Avenue on factors such as age. sex. race or religion. ew York. ew York 10022 Morgan hareholder Services This commitment is fundamental to (212) 310-2000 Trust Company the c nduct and management oflhe Dividend Reinvestment Plan Company's activities. including recruiting P.O. Box 3506 and employ ment practices. career Church Street Station advancement. advertising and promo ew York, 'ew York 10242-3506 tional policies. and sponsorship ofcom munityactivities. Be certain to include a reference to Colgate-Palmolive Company.

QE-CPC00003579 cit COLGATE-PALMOLIVE COMPA Y 300 Park Averue ew York NY 10022

QE-CPC00003580