x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

COLGATE-PALMOLIVE COMPANY

(Exact name of registrant as specified in its charter)

DELAWARE

13-1815595

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

300 PARK AVENUE, NEW YORK, NEW YORK

10022

(Address of principal executive offices)

(Zip Code)

(212) 310-2000

(Registrant’s telephone number, including area code)

NO CHANGES

(Former name, former address, and former fiscal year, if changed since last report).

Yes

x

No

o

Class

Shares Outstanding

Date

Common, $1.00 par value

 538,263,274

October 31, 2002

Three Months Ended
September 30,

Nine Months Ended
September 30,

2002

2001

2002

2001

Net sales

$

2,381.7

$

2,304.9

$

6,873.9

$

6,755.8

Cost of sales

1,079.1

1,072.5

3,124.5

3,154.8

Gross profit

1,302.6

1,232.4

3,749.4

3,601.0

Selling, general and administrative expenses

788.5

757.0

2,256.8

2,214.5

Operating profit

514.1

475.4

1,492.6

1,386.5

Interest expense

40.7

46.2

116.7

139.5

Interest income

(2.0

)

(2.7

)

(6.0

)

(9.5

)

Income before income taxes

475.4

431.9

1,381.9

1,256.5

Provision for income taxes

144.7

135.7

434.5

405.2

Net income

$

330.7

$

296.2

$

947.4

$

851.3

Earnings per common share:

Basic

$

.60

$

.52

$

1.71

$

1.49

Diluted

$

.57

$

.49

$

1.60

$

1.40

Dividends declared per common share

$

.18

$

.18

$

.54

$

.50

September 30,
2002

December 31,
2001

Current assets:

Cash and cash equivalents

$

200.7

$

172.7

Receivables (net of allowances of $44.9 and $45.6)

1,129.0

1,124.9

Inventories

689.6

677.0

Other current assets

214.2

228.8

2,233.5

2,203.4

Property, plant and equipment:

Cost

4,488.1

4,408.9

Less:  Accumulated depreciation

2,075.2

1,895.4

2,412.9

2,513.5

Goodwill and other intangible assets

1,757.2

1,904.0

Other assets

524.7

363.9

$

6,928.3

$

6,984.8

September 30,
2002

December 31,
2001

Current liabilities:

Notes and loans payable

$

126.9

$

101.6

Current portion of long-term debt

444.1

325.5

Accounts payable

653.8

678.1

Accrued income taxes

127.2

195.0

Other accruals

938.9

823.3

2,290.9

2,123.5

Long-term debt

3,072.1

2,812.0

Deferred income taxes

475.2

480.6

Other liabilities

766.7

722.3

Shareholders’ equity:

Preferred stock

325.8

341.3

Common stock

732.9

732.9

Additional paid-in capital

1,119.2

1,168.7

Retained earnings

6,285.2

5,643.6

Accumulated other comprehensive income

(1,812.3

)

(1,491.2

)

6,650.8

6,395.3

Unearned compensation

(340.3

)

(345.4

)

Treasury stock, at cost

(5,987.1

)

(5,203.5

)

323.4

846.4

$

6,928.3

$

6,984.8

Nine Months Ended
September 30,

2002

2001

Operating Activities:

Net income

$

947.4

$

851.3

Adjustments to reconcile net income to net cash provided by operations:

Depreciation and amortization

218.7

250.2

Deferred income taxes

16.1

60.8

Cash effects of changes in:

Receivables

(17.8

)

27.8

Inventories

(34.4

)

(64.2

)

Accounts payable and other accruals

148.8

(88.2

)

Income taxes payable

(30.6

)

42.9

Other non-current assets and liabilities

5.3

17.2

Net cash provided by operating activities

1,253.5

1,097.8

Investing Activities:

Capital expenditures

(214.0

)

(199.5

)

Voluntary long-term investment in benefit plan assets

(50.0

)

(55.7

)

Other

(13.0

)

1.7

Net cash used for investing activities

(277.0

)

(253.5

)

Financing Activities:

Principal payments on debt

(624.2

)

(195.8

)

Proceeds from issuance of debt

857.8

762.1

Dividends paid

(305.8

)

(287.7

)

Purchase of common stock

(903.9

)

(1,059.2

)

Other

27.1

21.0

Net cash used for financing activities

(949.0

)

(759.6

)

Effect of exchange rate changes on cash and cash equivalents

0.5

(1.7

)

Net increase in cash and cash equivalents

28.0

83.0

Cash and cash equivalents at beginning of period

172.7

206.6

Cash and cash equivalents at end of period

$

200.7

$

289.6

1.

The Condensed Consolidated Financial Statements reflect all normal recurring adjustments which, in management’s opinion, are necessary for a fair presentation of the results for interim periods.  Results of operations for the interim periods may not be representative of results to be expected for a full year.

Reference is made to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2001 for a complete set of financial notes including the Company’s significant accounting policies.

2.

Provision for certain expenses, including income taxes, media advertising and consumer promotion are based on full year assumptions.  Such amounts are recorded in the year incurred and are included in the accompanying Condensed Consolidated Financial Statements in proportion with estimated annual tax rates, the passage of time or annual sales.

3.

Sales Incentives and Promotional Expenses

On January 1, 2002, the Company adopted the requirements of the Financial Accounting Standards Board’s Emerging Issues Task Force (EITF) Issue No. 00-14 “Accounting for Certain Sales Incentives” and Issue No. 00-25 “Vendor Income Statement Characterization of Consideration Paid to a Reseller of the Vendor’s Products” that relate to the classification of various types of sales incentives and promotional expenses. Under this guidance, the Company’s net sales reflect units shipped at selling list prices reduced by sales returns and the cost of current and continuing promotional programs.  Current promotional programs are predominantly new product listing allowances, which are recorded at the beginning of the program, and introductory price reductions, which are reflected in net sales as the products are sold to the trade.  Continuing promotional programs are predominantly consumer coupons and volume-based sales incentive arrangements with trade customers. The redemption cost of consumer coupons is based on historical redemption experience and is recorded when coupons are distributed.  Volume-based incentives offered to trade customers are based on the estimated cost of the program and are recorded as products are sold.

The adoption of this new accounting resulted in the reclassification of certain sales incentives and promotional expenses from selling, general and administrative expenses to a reduction of net sales and cost of sales, but had no impact on the Company’s net income or earnings per share. The Condensed Consolidated Statements of Income reflect these reclassifications which reduced net sales by $86.3 and increased cost of sales by $0.5, for the three months ended September 30, 2001, and decreased net sales and cost of sales by $257.6 and $1.0, respectively, for the nine months ended September 30, 2001, with an offsetting reduction in selling, general and administrative expenses.

4.

Goodwill and Other Intangible Assets

The Company adopted Statement of Financial Accounting Standards (SFAS) No. 142 “Goodwill and Other Intangible Assets” effective January 1, 2002.  Under the new standard, goodwill and indefinite life intangible assets, such as the Company’s global brands, are no longer amortized but are subject to annual impairment tests.  Other intangible assets with finite lives, such as non-compete agreements, will continue to be amortized over their useful lives. The transitional impairment tests were completed and did not result in an impairment charge.