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 2 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 3 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.

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