For Investors: Financial Information

Stock Quote

NYSE: CL 91.17 - 0.59
as of 2/10/12, 4:01 PM EDT

Quotes delayed at least 20 mins. Not intended for trading purposes. Click here for additional stock quote information.

2003 Annual Report

Dear Colgate Shareholder

Another Year of Double-Digit Earnings Per Share Growth

Reuben Mark:
“Colgate’s culture is firmly grounded in trust and integrity. Building this foundation has been a key driver of Colgate’s strong results. We will continue to incorporate our global values of Caring, Global Teamwork and Continuous Improvement along with a deep respect for people and the communities where they live as we pursue our business objectives worldwide.”

Bill Shanahan:
“Colgate people are committed to strengthening Colgate’s leadership in every aspect of our business. We remain focused on increasing our overall supply chain efficiency and are utilizing advanced technology to better manage a complex global business. These efforts should continue to fund accelerated brand-building activities that help drive our growth worldwide.”

Q. Please comment on the Company’s 2003 global business results.
A. Reuben Mark: Colgate’s strong performance continued in 2003 with worldwide dollar sales rising 6.5% to an all-time record $9.9 billion. Also reaching record highs were operating profit, gross profit margin and net profit margin. This is Colgate’s eighth consecutive year of double-digit earnings per share growth.

We were pleased to end the year with better-than-expected results in Latin America and strong results in Europe, Asia and Hill’s. These offset anticipated difficult comparisons in the North American market, related to the highly competitive tooth whitening category. Cash flow also exceeded expectations, with operating cash flow achieving an all-time record level for the year. Colgate’s strong cash generation and growing profitability led our Board of Directors to authorize a 33% increase in the quarterly dividend rate effective in the second quarter of 2003.

Q. Speeding innovative new products to market around the world has been key to Colgate’s success. How will the fast pace of innovation continue?
A. Bill Shanahan: In 2003, sales of new products were strong in every region, with approximately 40% coming from new products introduced in the past five years, up from 25% a decade ago. We now have Category Innovation Centers in all major regions enabling collaboration across geographies on global new product launches, and we conduct interviews with over a million consumers annually in more than 30 countries to learn about their needs, habits and product usage. Staying close to the marketplace and consumers focuses our new product development work, making research and development spending more efficient. We are especially encouraged that Colgate’s spending on research and development has increased in each of the last five years and is budgeted to increase even further in 2004.

Q. What is Colgate’s philosophy towards acquisitions?
A. Reuben Mark: As part of our fundamental global growth strategy, Colgate is open to acquisitions if the opportunity and the price are right. Colgate has a formal evaluation process that includes a thorough business and financial analysis of any prospective acquisition to assure strong synergies with Colgate and proper valuation. In late 2003, we announced an agreement to acquire GABA Holding AG, a leading European toothpaste company. Consistent with our global strategy of extreme focus and investment in our high-margin, fast-growing oral and personal care businesses, GABA is a terrific example of a strategic acquisition that will strengthen our oral care business in Europe, where Colgate is already the market leader in toothpaste.

Q. Will Colgate’s advertising investment grow in 2004? How is ad content monitored?
A. Bill Shanahan: We are committed to supporting our new products and existing brands with increasing levels of commercial investment, which rose significantly in 2003 and should rise again in 2004. Advertising and consumer promotion are important business-building activities at Colgate, funded from ongoing cost-savings programs. To assure that our advertising reflects Colgate’s reputation for quality products and business integrity, we have established global standards for content and media placement. All of our advertising follows these guidelines that set forth what is honest and fair and defines acceptable, appropriate media environments.

Q. How is Colgate benefiting from its use of advanced technology such as SAP?
A. Bill Shanahan: New technology, such as SAP, has given Colgate a competitive advantage. We have been a leader in using SAP software to drive business efficiency and to make more information-based decisions in real time. Now we are starting to achieve savings from a second generation of applications that capitalize on SAP’s capabilities outside the supply chain, in areas such as marketing, customer service, demand forecasting, human resources and others.

Additionally, we are benefiting more and more from the Internet, using it for everything from an advertising medium that better targets consumers to eTeamRooms that enable cross-functional, cross-border project collaboration among Colgate employees worldwide.

Q. Year after year Colgate’s improvement in gross profit margin has helped fund growth initiatives and increase operating profits. Can this trend continue?
A. Reuben Mark: Opportunities for savings are unending, not only from new developments in technology coming every day but also from ever-improving ways of doing business. There are still savings to be achieved as we continue to consolidate manufacturing and distribution, automate and build new plants to serve broad geographic regions, and standardize our formulas and packaging. Additionally, we continue to work closely with our business partners, such as SAP, IBM and our fragrance suppliers, to find more efficient ways of doing business together. Extreme focus on our global strategy to invest behind our high-margin, fast-growing oral care, personal care and pet nutrition businesses should also contribute to increasing Colgate’s gross profit margin even further.

Q. Amid a heightened competitive environment in the U.S., what is the outlook for Colgate’s North American business?
A. Bill Shanahan: Colgate’s leadership of the U.S. toothpaste market continued in 2003 with a full-year national ACNielsen market share of 34.2%. Although Colgate’s toothpaste market share in the U.S. declined briefly late in the fourth quarter, it has since returned to previous high levels, reaching 35.7% mid-way through first quarter 2004. As we enter 2004, we are encouraged by our continuing stream of innovative new products and have budgeted a significant increase in advertising and commercial spending behind both new and existing products. This increased support coupled with the strength of our very healthy core businesses in North America bodes well that we will continue to meet competitive challenges in the U.S. and should deliver profitable growth in North America once again in 2004.

Q. How is the Company developing its people to ensure that a strong management team is in place for the future?
A. Reuben Mark: Colgate has a formal Global Succession Planning Process that identifies next-generation leaders early in their careers. Recommended by their functional managers, future leaders are brought to the attention of senior management to ensure that they gain diverse in-market experience across geographies and functions. All senior managers are extremely knowledgeable about Colgate’s culture, practices and policies, and are truly committed to the long-term success of Colgate and its future leaders.

Q. Colgate has been cited for its excellence in corporate governance by several external organizations. What is driving this?
A. Reuben Mark: We firmly believe that good corporate governance follows good culture, which leads to good business results and value creation. In fact, corporate governance is an excellent indicator of corporate health overall. Thus, Colgate’s establishment of a corporate culture built on strong values, ethics and best practices simply makes good business sense. In establishing our culture, we are guided by sound principles of good corporate governance including having an independent board of directors to promote integrity and accountability. Directors have direct access to management and are paid primarily in Colgate stock. External organizations have recognized these efforts.

Q. Please comment on the Company’s prospects for 2004.
A. Reuben Mark: With a strong and experienced management team, established global processes and dedicated employees, we are confident that Colgate is well positioned for continued success. Although we face competitive and economic challenges in certain areas of the world, we are committed to emerging stronger than before, as we have in the past. We remain extremely focused on growing our high-margin oral care, personal care and pet nutrition businesses, and our strict focus on removing costs from the supply chain and reducing overhead continues to provide funding for a multitude of growth-building initiatives. Because of this, we are optimistic that we will deliver another year of record results in 2004.