Item 8.01. Other Events.
As described in Note 18 to the Companys Consolidated
Financial Statements included in its Annual Report on Form 10-K for the year
ended December 31, 2009, there were two events subsequent to December 31, 2009
that impacted the Companys subsidiary in Venezuela. The first event was
the designation, effective January 1, 2010, of Venezuela as hyper-inflationary.
The second event, announced on January 8, 2010, was the decision by the Venezuelan
government to devalue its currency and implement a two-tier exchange rate structure.
Following guidance provided by the staff of the Securities
and Exchange Commission (SEC) on March 18, 2010, the Company will
change its accounting retroactive to January 1, 2010 related to the conversion
of Venezuela to hyper-inflationary status, as more fully described below. The
SEC staffs guidance does not affect the Companys previously
disclosed preliminary estimate of the impact of the devaluation.
As a result of Venezuela having been designated as
hyper-inflationary effective January 1, 2010, the functional currency of the
subsidiary in Venezuela changed from the Venezuelan bolivar to the U.S. dollar.
As previously disclosed in Note 18 referenced above, this change resulted in
a one-time charge of approximately $275
million, which primarily represented the premium paid to acquire U.S. dollar-denominated
cash and bonds at the parallel market rate. Prior to January 1, 2010, these assets
had been remeasured at the parallel market rate and then translated for financial
reporting purposes at the official rate of 2.15. Prior to the SEC staffs
guidance, and with the concurrence of its auditors, the Company recorded
million charge in its balance sheet as of January 1, 2010 as a Cumulative translation
adjustment in Other comprehensive income (loss).
On March 10, 2010, the Financial Accounting Standards
Board asked its Emerging Issues Task Force (the EITF) to consider
the application of the guidance in Accounting Standards Codification Topic 830:
Foreign Currency Issues when, as in Venezuela, multiple exchange rates are present.
On March 18, 2010, at an open meeting of the EITF, the SEC staff provided interim
guidance, pending the EITFs
completion of its deliberations, in response to inquiries it had received regarding
certain foreign currency issues relating to Venezuela. In its guidance, the SEC
staff indicated that as part of the conversion to hyper-inflationary status in
Venezuela, any differences that had previously arisen from the remeasurement
of U.S. dollar-denominated assets and liabilities at the parallel rate and their
subsequent translation for financial reporting purposes at the official rate
should be recognized in the income statement. In accordance with this guidance,
the Company will retroactively change its accounting, with the result that the $275
million charge referred to above that was originally recorded in its balance
sheet as of January 1, 2010 as a Cumulative translation adjustment in Other comprehensive
income (loss), will now be recorded as a one-time charge against earnings in
the Companys Consolidated Financial Statements
as of and for the quarter ending March 31, 2010, reducing first quarter and
full year 2010 diluted earnings per share by approximately $0.53.
The SEC staffs guidance pertains only to the
accounting for the impact of Venezuela converting to hyper-inflationary status
and does not affect the Companys previously disclosed preliminary estimate
of the impact of the devaluation, which is expected to result in a net reduction
of full year 2010 diluted earnings per share of between $0.06 and $0.10
Cautionary Statement on Forward-Looking Statements
This current report on Form 8-K contains forward-looking
statements relating to the impact of the designation of Venezuela as hyper-inflationary
and the devaluation of its currency. These statements are
made on the basis of our views and assumptions as of this time and we undertake no obligation to update these statements. We caution 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. Investors should consult the Company's filings with the Securities and Exchange Commission (including 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, 2009) for information about certain factors that could cause such differences. Copies of these filings may
be obtained upon request from the Company's Investor Relations Department or the Company's web site at http://www.colgate.com.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: March 22, 2010
Stephen C. Patrick
Name: Stephen C.
Title: Chief Financial