Colgate Announces 4th Quarter and Full Year 2021 Results

Full Year 2021 Net sales increased 6.0%, Organic sales increased 4.5%

4Q 2021 Net sales increased 2.0%, Organic sales increased 3.0%

Colgate-Palmolive Company (NYSE:CL) today reported results for fourth quarter and full year 2021. Noel Wallace, Chairman, President and Chief Executive Officer, commented, “We were pleased to finish 2021 with a continuation of our strong growth momentum, particularly in our oral care and pet nutrition businesses, both of which delivered an acceleration in net and organic sales growth in full year 2021 versus 2020. We have delivered organic sales growth at or above our targeted range of 3% to 5% for three consecutive years, which gives us confidence that our investments behind our strategic priorities are delivering sustainable, profitable growth.

“As we begin 2022, our number one priority remains keeping Colgate people safe and healthy. There is still much uncertainty stemming from the COVID-19 pandemic, supply chain disruptions, increases in raw material and logistics costs and volatility in consumer demand and currencies. With costs expected to remain elevated in 2022, our funding the growth and revenue growth management initiatives, including higher pricing, will be more important than ever. We are encouraged that our investments in innovation, advertising and digital transformation are paying off and feel confident that we are well positioned to continue to deliver sustainable, profitable growth in 2022 and beyond.”

Full Year

• Net sales increased 6.0%, Organic sales* increased 4.5%
• On a GAAP basis, EPS declined 19% to $2.55 driven by goodwill and indefinite-lived intangible asset impairment charges in the fourth quarter related to the Filorga skin health business primarily due to the impact of the COVID-19 pandemic on the duty-free, travel retail and pharmacy channels
• On a Base Business basis, EPS* grew 5% to $3.21, in line with the Company's full year guidance

*Indicates a non-GAAP financial measure. Please refer to “Non-GAAP Financial Measures” later in this release for definitions of non-GAAP financial measures and to “Table 7 - Geographic Sales Analysis Percentage Changes” and “Table 9 - Non-GAAP Reconciliations” included with this release for a reconciliation of these non-GAAP financial measures to the related GAAP measures.

Fourth Quarter

• Net sales increased 2.0%, Organic sales* increased 3.0%
• On a GAAP basis, EPS declined 76% to $0.18 driven by goodwill and indefinite-lived intangible asset impairment charges related to the Filorga skin health business primarily due to the impact of the COVID-19 pandemic on the duty-free, travel retail and pharmacy channels
• On a Base Business basis, EPS* grew 3% to $0.79
• GAAP Gross profit margin and Base Business Gross profit margin* both decreased 300 basis points to 58.1%
• Net cash provided by operations was $3,325 year to date
• Colgate’s leadership in toothpaste continued with its global market share at 39.4% year to date
• Colgate’s leadership in manual toothbrushes continued with its global market share at 30.9% year to date

*Indicates a non-GAAP financial measure. Please refer to “Non-GAAP Financial Measures” later in this release for definitions of non-GAAP financial measures and to “Table 6 - Geographic Sales Analysis Percentage Changes” and “Table 8 - Non-GAAP Reconciliations” included with this release for a reconciliation of these non-GAAP financial measures to the related GAAP measures.

Goodwill and Intangible Asset Impairment

During the fourth quarter, the Company took a non-cash, after-tax charge of $518 million to adjust the carrying values of goodwill and a trade name intangible asset related to the Filorga skin health business. The impairment was due primarily to the impact of the COVID-19 pandemic on the Filorga business as a result of government restrictions and reduced consumer mobility, which negatively impacted consumption in the duty-free, travel retail and pharmacy channels. The Company continues to believe in the strength of the Filorga brand and is confident about its growth opportunities.

2022 Global Productivity Initiative

Separately, the Company announced the 2022 Global Productivity Initiative. The program is intended to reallocate resources toward the Company's strategic priorities and faster growth businesses, drive efficiencies in the Company's operations and streamline the Company’s supply chain to reduce structural costs. Implementation of the 2022 Global Productivity Initiative is projected to result in cumulative pre-tax charges, once all phases are approved and implemented, totaling between $200 and $240 million. Annualized pre-tax savings are projected to be in the range of $90 to $110 million. The Company intends to execute the majority of the Global Productivity Initiative in the current calendar year.

Full Year 2022 Guidance

Based on current spot rates:

• The Company expects net sales growth to be 1% to 4% including a low-single-digit negative impact from foreign exchange.
• The Company expects organic sales growth to be within its long-term targeted range of 3% to 5%.
• On a GAAP basis, the Company expects gross profit margin expansion, increased advertising investment and double-digit earnings-per-share growth.
• On a non-GAAP (Base Business) basis, the Company expects gross profit margin expansion, increased advertising investment and low to mid-single-digit earnings-per-share growth.

Divisional Performance

The following are comments about divisional performance for fourth quarter 2021 versus the year ago period. See attached "Table 6 - Geographic Sales Analysis Percentage Changes" and "Table 5 - Segment Information" for additional information on net sales and operating profit by division.

*Indicates a non-GAAP financial measure. Please refer to “Non-GAAP Financial Measures” later in this release for definitions of non-GAAP financial measures and to “Table 6 - Geographic Sales Analysis Percentage Changes” included with this release for a reconciliation of these non-GAAP financial measures to the related GAAP measures.

*Indicates a non-GAAP financial measure. Please refer to “Non-GAAP Financial Measures” later in this release for definitions of non-GAAP financial measures and to “Table 8 - Non-GAAP Reconciliations” included with this release for a reconciliation of these non-GAAP financial measures to the related GAAP measures.

North America (21% of Company Sales)

• The organic sales decline was driven by personal care and home care, as consumer demand in certain categories that had benefited from COVID-19-related demand declined year-over-year.
• In the United States, Colgate's share of the toothpaste market is 34.3% year to date and its share of the manual toothbrush market is 39.5% year to date.
• The decrease in Operating profit as a percentage of Net sales was primarily due to significantly higher raw and packaging material costs and higher overhead expenses, driven by higher logistics costs, partially offset by cost savings from the Company’s funding-the-growth initiatives and decreased advertising investment.

Latin America (21% of Company Sales)

• Organic sales growth was led by Brazil, Argentina, Colombia and Mexico.
• The decrease in Operating profit as a percentage of Net sales was primarily due to significantly higher raw and packaging material costs, partially offset by cost savings from the Company’s funding-the-growth initiatives, higher pricing, a valued-added tax refund and decreased advertising investment.

Europe (16% of Company Sales)

• Organic sales declines in the Filorga duty-free business and in Germany and France were partially offset by organic sales growth in Poland.
• The decrease in Operating profit as a percentage of Net sales was primarily due to significantly higher raw and packaging material costs and higher overhead expenses, primarily due to higher logistics costs, partially offset by decreased advertising investment and cost savings from the Company’s funding-the-growth initiatives.

Asia Pacific (16% of Company Sales)

• Organic sales growth was led by Indonesia, India and the Philippines.
• The decrease in Operating profit as a percentage of Net sales was primarily due to significantly higher raw and packaging material costs and higher overhead expenses, driven by higher logistics costs, partially offset by cost savings from the Company's funding-the-growth initiatives, a gain on an investment, decreased advertising investment and higher pricing.

Africa/Eurasia (6% of Company Sales)

• Organic sales growth was led by South Africa, Turkiye and the Saudi Arabia/Gulf States region.
• The increase in Operating profit as a percentage of Net sales was primarily due to decreased advertising investment, lower overhead expenses (despite significant increases in logistics costs), higher pricing and cost savings from the Company’s funding-the-growth initiatives, partially offset by significantly higher raw and packaging material costs.

Hill's Pet Nutrition (20% of Company Sales)

• Organic sales growth was led by the United States and Europe.
• The increase in Operating profit as a percentage of Net sales was primarily due to higher pricing, cost savings from the Company’s funding-the-growth initiatives, decreased advertising investment and lower overhead expenses (despite significant increases in logistics costs), partially offset by significantly higher raw and packaging material costs.

Webcast Information

At 8:30 a.m. ET today, Colgate will host a conference call regarding fourth quarter and full year results. To access this call as a webcast, please go to Colgate’s website at www.colgatepalmolive.com.

About Colgate-Palmolive

Colgate-Palmolive Company is a caring, innovative growth company reimagining a healthier future for all people, their pets and our planet. Focused on Oral Care, Personal Care, Home Care and Pet Nutrition, the Company sells its products in more than 200 countries and territories under brands such as Colgate, Palmolive, elmex, hello, meridol, Sorriso, Tom’s of Maine, EltaMD, Filorga, Irish Spring, PCA Skin, Protex, Sanex, Softsoap, Speed Stick, Ajax, Axion, Fabuloso, Soupline and Suavitel, as well as Hill’s Science Diet and Hill’s Prescription Diet. The Company is recognized for its leadership and innovation in promoting environmental sustainability and community well-being, including its achievements in saving water, reducing waste, promoting recyclability and improving children’s oral health through its Bright Smiles, Bright Futures program, which has reached more than 1.4 billion children since 1991. For more information about Colgate’s global business and how the Company is building a future to smile about, visit www.colgatepalmolive.com. CL-E

The Company's annual meeting of stockholders is currently scheduled for Friday, May 6, 2022.

Market Share Information

Management uses market share information as a key indicator to monitor business health and performance. References to market share in this press release are based on a combination of consumption and market share data provided by third-party vendors, primarily Nielsen, and internal estimates. All market share references represent the percentage of the dollar value of sales of our products, relative to all product sales in the category in the countries in which the Company competes and purchases data (excluding Venezuela from all periods). Market share data is subject to limitations on the availability of up-to-date information. In particular, market share data is currently not generally available for certain retail channels, such as eCommerce and certain club retailers and discounters. The Company measures year-to-date market shares from January 1 of the relevant year through the most recent period for which market share data is available, which typically reflects a lag time of one or two months. The Company believes that the third-party vendors it uses to provide data are reliable, but it has not verified the accuracy or completeness of the data or any assumptions underlying the data. In certain limited circumstances, the COVID-19 pandemic has impacted the ability of our third-party vendors to provide the Company with reliable updated market share data. In addition, market share information reported by the Company may be different from market share information reported by other companies due to differences in category definitions, the use of data from different countries, internal estimates and other factors.

Cautionary Statement on Forward-Looking Statements

This press release and the related webcast may contain forward-looking statements (as that term is defined in the U.S. Private Securities Litigation Reform Act of 1995 or by the Securities and Exchange Commission (SEC) in its rules, regulations and releases) that set forth anticipated results based on management’s current plans and assumptions. Such statements may relate, for example, to sales or volume growth, net selling price increases, organic sales growth, profit or profit margin levels, earnings per share levels, financial goals, the impact of foreign exchange, the impact of COVID-19, cost-reduction plans, tax rates, new product introductions, commercial investment levels, acquisitions, divestitures, share repurchases, or legal or tax proceedings, among other matters. These statements are made on the basis of the Company’s views and assumptions as of this time and the Company undertakes no obligation to update these statements whether as a result of new information, future events or otherwise, except as required by law or by the rules and regulations of the SEC. Moreover, the Company does not, nor does any other person, assume responsibility for the accuracy and completeness of these statements. The Company cautions investors that any such forward-looking statements are not guarantees of future performance and that actual events or results may differ materially from those statements. For more information about factors that could impact the Company’s business and cause actual results to differ materially from forward-looking statements, investors should refer to the Company’s filings with the SEC (including, but not limited to, the information set forth under the captions “Risk Factors” and “Cautionary Statement on Forward-Looking Statements” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 and subsequent Quarterly Reports on Form 10-Q). Copies of these filings may be obtained upon request from the Company’s Investor Relations Department or on the Company’s website at www.colgatepalmolive.com.

Non-GAAP Financial Measures

The following provides definitions and other information regarding the non-GAAP financial measures used in this press release and/or the related webcast, which may not be the same as or comparable to similar measures presented by other companies:

• Base Business: Base Business refers to non-GAAP measures of operating results that exclude certain items. Base Business operating results exclude, as applicable, goodwill and indefinite-lived intangible asset impairment charges, losses on the early extinguishment of debt, a value-added tax matter in Brazil, benefits resulting from the Global Growth and Efficiency Program, acquisition-related costs and a benefit related to a reorganization of the ownership structure of certain foreign subsidiaries and a new operating structure implemented within one of the Company's divisions.
• Organic sales growth: Net sales growth excluding the impact of foreign exchange, acquisitions and divestments.
• Free cash flow before dividends: Net cash provided by operations less Capital expenditures.

This press release discusses Net sales growth (GAAP) and Organic sales growth (non-GAAP). Management believes the organic sales growth measure provides investors and analysts with useful supplemental information regarding the Company’s underlying sales trends by presenting sales growth excluding the external factor of foreign exchange as well as the impact from acquisitions and divestments. See “Geographic Sales Analysis Percentage Changes” for the three and twelve months ended December 31, 2021 versus 2020 included with this release for a comparison of Organic sales growth to Net sales growth in accordance with GAAP.

Worldwide Gross profit, Gross profit margin, Other (income) expense, net, Operating profit, Operating profit margin, Effective income tax rate, Net income attributable to Colgate-Palmolive Company and Diluted earnings per common share are disclosed on both an as reported (GAAP) and Base Business (non-GAAP) basis. These non-GAAP financial measures exclude items that, either by their nature or amount, management would not expect to occur as part of the Company’s normal business on a regular basis, such as restructuring charges, charges for certain litigation and tax matters, gains and losses from certain acquisitions, divestitures and certain other unusual, non-recurring items. Investors and analysts use these financial measures in assessing the Company’s business performance, and management believes that presenting these financial measures on a non-GAAP basis provides them with useful supplemental information to enhance their understanding of the Company’s underlying business performance and trends. These non-GAAP financial measures also enhance the ability to compare period-to-period financial results. See “Non-GAAP Reconciliations” for the three and twelve months ended December 31, 2021 and 2020 included with this release for a reconciliation of these financial measures to the related GAAP measures.

The Company uses these financial measures internally in its budgeting process, to evaluate segment and overall operating performance and as factors in determining compensation. While the Company believes that these financial measures are useful in evaluating the Company’s underlying business performance and trends, this information should be considered as supplemental in nature and is not meant to be considered in isolation or as a substitute for the related financial information prepared in accordance with GAAP.

As management uses free cash flow before dividends to evaluate the Company’s ability to satisfy current and future obligations, pay dividends, fund future business opportunities and repurchase stock, the Company believes that it provides useful information to investors. Free cash flow before dividends is not a measure of cash available for discretionary expenditures since the Company has certain non-discretionary obligations such as debt service that are not deducted from the measure. See “Condensed Consolidated Statements of Cash Flows” for the twelve months ended December 31, 2021 and 2020 for a comparison of free cash flow before dividends to Net cash provided by operations as reported in accordance with GAAP.

(See attached tables for fourth quarter and full year results.)

Note:

(1) Emerging Markets include Latin America, Asia (excluding Japan), Africa/Eurasia and Central Europe.

Note:

(1) Emerging Markets include Latin America, Asia (excluding Japan), Africa/Eurasia and Central Europe.

The impact of non-GAAP adjustments may not necessarily equal the difference between “GAAP” and “non-GAAP” as a result of rounding.

Notes:

(1) The income tax effect on non-GAAP items is calculated based upon the tax laws and statutory income tax rates applicable in the tax jurisdiction(s) of the underlying non-GAAP adjustment.

(2) The impact of non-GAAP items on the Company’s effective tax rate represents the difference in the effective tax rate calculated with and without the non-GAAP adjustment on Income before income taxes and Provision for income taxes.