Ratio Analysis Model - Colgate Palmolive (solved)

Prepared by Dheeraj Vaidya, CFA, FRM

dheeraj@wallstreetmojo.com
www.wallstreetmojo.com

Table of Contents
Income Statements
Balance Sheet
Cash Flows

Important
For detailed discussion and step by step calculation, please visit - https://www.wallstreetmojo.com/ratio-ana
solved)

eetmojo.com/ratio-analysis/
Colgate-Palmolive Company
Income Statement (Consolidated)

($ in Million Except Per Share Amounts) Dec-16 Dec-17 Dec-18 Dec-19

Net sales 15,195 15,454 15,544 15,693
Cost of sales 6,072 6,174 6,313 6,368
Gross profit 9,123 9,280 9,231 9,325

Selling, general and administrative expenses 5,143 5,400 5,389 5,575

Other (income) expense, net 25 173 148 196
EBIT 3,955 3,707 3,694 3,554
Non-service related postretirement costs 118 118 87 108
Interest expense, net 99 102 143 145

EBT 3,738 3,487 3,464 3,301

Provision for income taxes 1,152 1,313 906 774
Net income including noncontrolling interests 2,586 2,174 2,558 2,527
Less: Net income attributable to noncontrolling intere 145 150 158 160
Net income attributable to Colgate-Palmolive Comp 2,441 2,024 2,400 2,367
Earnings per common share, basic 2.74 2.30 2.76 2.76
Earnings per common share, diluted 2.72 2.28 2.75 2.75

Basic Weighted Average Shares 891.8 881.1 870.6 859.1

Diluted Weighted Average Shares 898.4 887.1 873.0 861.1

EBITDA

Vertical Analysis Dec-16 Dec-17 Dec-18 Dec-19

Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 40.0% 40.0% 40.6% 40.6%
Gross profit Margin 60.0% 60.0% 59.4% 59.4%

Selling, general and administrative expenses 33.8% 34.9% 34.7% 35.5%

Other (income) expense, net 0.2% 1.1% 1.0% 1.2%
Operating profit Margin (EBIT Margin) 26.0% 24.0% 23.8% 22.6%
Non-service related postretirement costs 0.6% 0.7%
Interest expense, net 0.7% 0.7% 0.9% 0.9%

Income before income taxes (EBT Margin) 24.6% 22.6% 22.3% 21.0%
Provision for income taxes 7.6% 8.5% 5.8% 4.9%
Net income Margin including noncontrolling interest 17.0% 14.1% 16.5% 16.1%
Less: Net income attributable to noncontrolling inter 5.6% 6.9% 6.2% 6.3%
Net income Margin 16.1% 13.1% 15.4% 15.1%

Effective Tax Rates 30.8% 37.7% 26.2% 23.4%

Horizontal Analysis Dec-16 Dec-17 Dec-18 Dec-19
Net sales 1.7% 0.6% 1.0%
Cost of sales 1.7% 2.3% 0.9%
Gross profit 1.7% -0.5% 1.0%

Selling, general and administrative expenses 5.0% -0.2% 3.5%

Other (income) expense, net 592.0% -14.5% 32.4%
Operating profit -6.3% -0.4% -3.8%
Interest expense, net 3.0% 40.2% 1.4%

Income before income taxes -6.7% -0.7% -4.7%

Provision for income taxes 14.0% -31.0% -14.6%
Net income including noncontrolling interests -15.9% 17.7% -1.2%
Less: Net income attributable to noncontrolling interests 3.4% 5.3% 1.3%
Net income attributable to Colgate-Palmolive Company -17.1% 18.6% -1.4%

Trend Analysis Dec-16 Dec-17 Dec-18 Dec-19

Sales 15,195 15,454 15,544 15,693
Net Profit 2,441 2,024 2,400 2,367

Sales 100.0% 101.7% 102.3% 103.3%

Net Profit 100.0% 82.9% 98.3% 97.0%

Business Risk Dec-16 Dec-17 Dec-18 Dec-19

Sales (% growth) 1.7% 0.6% 1.0%
Operating Profit (EBIT) (% growth) -6.3% -0.4% -3.8%
Net Income (% growth) -17.1% 18.6% -1.4%

Total Leverage -10.02x 31.90x -1.43x

Operating Leverage -3.68x -0.60x -3.95x
Financial Leverage 2.72x -52.97x 0.36x

Oral, Personal and Home Care

North America $ 3,117 $ 3,348 $ 3,424
% growth (yoy) 7.4% 2.3%

Latin America 3,887 3,605 3,606

% growth (yoy) -7.3% 0.0%

Europe/South Pacific 2,394 2,502 2,450

% growth (yoy) 4.5% -2.1%

Asia 2,781 2,734 2,707

% growth (yoy) -1.7% -1.0%

Africa/Eurasia 983 967 981

 % growth (yoy) -1.6% 1.4%

Total Oral, Personal and Home Care 0 13,162 13,156 13,168

0.0% 0.1%

Pet Nutrition 2,292 2,388 2,525

% growth (yoy) 4.2% 5.7%

Total Net sales $ - $ 15,454 $ 15,544 $ 15,693

Important
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Dec-20
16,471
6,454
10,017

6,019
113
3,885
74
164

3,647
787
2,860
165
2,695
3.15
3.14

856.8
859.3

Dec-20
100.0%
39.2% cost of sales has been reduced. Why?
60.8%

36.5% why is increasing?

0.7%
23.6%
0.4%
1.0%

22.1%
4.8%
17.4%
5.8%
16.4%

21.6%
 Dec-20
5.0% net sales only increase by 1% but operating profit increase pretty high 9%. Why?
1.4% COG only increase by 1% but operating profit increase pretty high 9%. Why?
7.4%

8.0%
-42.3%
9.3% the net sales increase by only 5% but the operating profit increase by 9% . Its pretty high right. Why?
13.1%

10.5%
1.7%
13.2%
3.1%
13.9%

Dec-20
16,471
2,695

108.4%
110.4%

Dec-20
5.0%
9.3%
13.9%

2.80x
1.88x
1.49x

$ 3,741
9.3%

3,418
-5.2%

2,747
12.1%

2,701
-0.2%

981
 0.0%

13,588
3.2%

2,883
14.2%

$ 16,471

mojo.com/ratio-analysis/
% . Its pretty high right. Why?
Colgate-Palmolive Company
Consolidated Balance Sheets

Dec-16 Dec-17 Dec-18 Dec-19

Assets
Current Assets
Cash and cash equivalents 1,315 1,535 726 883
Receivables 1,411 1,480 1,400 1,440
Inventories 1,171 1,221 1,250 1,400
Other current assets 441 403 417 456
Total current assets 4,338 4,639 3,793 4,179

Property, plant and equipment, net 3,840 4,072 3,881 3,750

Goodwill, net 2,107 2,218 2,530 3,508
Other intangible assets, net 1,313 1,341 1,637 2,667
Deferred income taxes 301 188 152 177
Other assets 224 218 168 753
Total assets 12,123 12,676 12,161 15,034

Liabilities and Shareholders' Equity

Current Liabilities
Notes and loans payable 13 11 12 260
Current portion of long-term debt 254
Accounts payable 1,124 1,212 1,222 1,237
Accrued income taxes 441 354 411 370
Other accruals 1,727 1,831 1,696 1,917
Total current liabilities 3,305 3,408 3,341 4,038

Revolver

Long-term debt 6,520 6,566 6,354 7,333

Deferred income taxes 246 204 235 507
Other liabilities 2,035 2,255 2,034 2,598
Total liabilities 12,106 12,433 11,964 14,476
Commitments and contingent liabilities - - - -
Shareholders' Equity
Common stock 1,466 1,466 1,466 1,466
Additional paid-in capital 1,691 1,984 2,204 2,488
Retained earnings 19,922 20,531 21,615 22,501
Accumulated other comprehensive income (4,180) (3,855) (4,188) (4,273)
Unearned compensation (7) (5) (3) (2)
Treasury stock, at cost (19,135) (20,181) (21,196) (22,063)
Total shareholders' equity (243) (60) (102) 117
Noncontrolling interests 260 303 299 441
Total shareholders' equity 17 243 197 558
Total liabilities and shareholders'
equity 12,123 12,676 12,161 15,034
 Check - - - -
Vertical Analysis
Dec-16 Dec-17 Dec-18 Dec-19
Assets
Current Assets
Cash and cash equivalents 10.8% 12.1% 6.0% 5.9%
Receivables 11.6% 11.7% 11.5% 9.6%
Inventories 9.7% 9.6% 10.3% 9.3%
Other current assets 3.6% 3.2% 3.4% 3.0%
Total current assets 35.8% 36.6% 31.2% 27.8%

Property, plant and equipment, net 31.7% 32.1% 31.9% 24.9%

Goodwill, net 17.4% 17.5% 20.8% 23.3%
Other intangible assets, net 10.8% 10.6% 13.5% 17.7%
Deferred income taxes 2.5% 1.5% 1.2% 1.2%
Other assets 1.8% 1.7% 1.4% 5.0%
Total assets 100.0% 100.0% 100.0% 100.0%

Liabilities and Shareholders' Equity

Current Liabilities
Notes and loans payable 0.1% 0.1% 0.1% 1.7%
Current portion of long-term debt 0.0% 0.0% 0.0% 1.7%
Accounts payable 9.3% 9.6% 10.0% 8.2%
Accrued income taxes 3.6% 2.8% 3.4% 2.5%
Other accruals 14.2% 14.4% 13.9% 12.8%
Total current liabilities 27.3% 26.9% 27.5% 26.9%

Revolver

Long-term debt 53.8% 51.8% 52.2% 48.8%

Deferred income taxes 2.0% 1.6% 1.9% 3.4%
Other liabilities 16.8% 17.8% 16.7% 17.3%
Total liabilities 99.9% 98.1% 98.4% 96.3%
Commitments and contingent liabilities
Shareholders' Equity 0.0% 0.0% 0.0% 0.0%
Common stock 12.1% 11.6% 12.1% 9.8%
Additional paid-in capital 13.9% 15.7% 18.1% 16.5%
Retained earnings 164.3% 162.0% 177.7% 149.7%
Accumulated other comprehensive income -34.5% -30.4% -34.4% -28.4%
Unearned compensation -0.1% 0.0% 0.0% 0.0%
Treasury stock, at cost -157.8% -159.2% -174.3% -146.8%
Total Colgate-Palmolive Company shareholde -2.0% -0.5% -0.8% 0.8%
Noncontrolling interests 2.1% 2.4% 2.5% 2.9%
Total shareholders' equity 0.1% 1.9% 1.6% 3.7%
Total liabilities and shareholders' equity 100.0% 100.0% 100.0% 100.0%
Solvency Ratios
Current ratio 1.31x 1.36x 1.14x 1.03x
Quick ratio .82x .88x .64x .58x
Cash ratio .40x .45x .22x .22x

Sales 15,195 15,454 15,544 15,693

COGS 6,072 6,174 6,313 6,368
Purchases 6,224 6,342 6,518

Turnover Ratios
Receivables turnover 10.69x 10.79x 11.05x
Inventory Turnover 5.16x 5.11x 4.81x
Payables turnover 5.33x 5.21x 5.30x

Days 365
Average receivables collection period 34.1 33.8 33.0
Average inventory processing period 70.7 71.4 75.9
Average Payable Days (payment period) 68.5 70.0 68.9
Cash Collection Cycle 36.35 35.21 40.12

Operating Efficiency
Total asset turnover (Sales / Average Assets) 1.25 1.25 1.15
Net fixed asset turnover 3.91 3.91 4.11
Equity turnover (102.01) (191.90) 2,092.40

Operating Profitability
Gross Profit Margin 60.0% 60.0% 59.4% 59.4%
Operating Profit Margin 26.0% 24.0% 23.8% 22.6%
Net Profit Margin 16.1% 13.1% 15.4% 15.1%

Return on Total Assets 29.9% 29.7% 26.1%

Return on Equity (Net Income / Total Equity) 1672.3% 1162.7% 669.4%
Return on Owner's Equity -1336.0% -2963.0% 31560.0%

ROE DuPont Analysis

Profit Margin (Net Income / Sales) 14.1% 16.5% 16.1%
Asset Turnover (Sales / Average Assets) 124.6% 125.2% 115.4%
Asset Leverage (Average Assets / Average Equity) 9538.1% 5644.8% 3602.0%
Dupont ROE 1672.3% 1162.7% 669.4%

EBIT 3694 3554

Depreciation & Amortization 511 519
Interest Expense 143 145

Long Term Debt Maturities 0 0

Net Cash Interest 119 148
Lease 188 193
 Financial Risk Ratios
Debt to equity ratio 32.31 14.06
Debt ratio 0.97 0.93
Interest coverage ratio 29 28
DSCR 12.03 10.42

Dividend Payout Ratios

Total Dividends Paid $1,508 $1,529 $1,591 $1,614

Net Income 2441 2024 2400 2367
Dividend Payout Ratio 62% 76% 66% 68%
Retention Ratio 38% 24% 34% 32%

Sustainable Growth 409.0% 391.9% 213.0%

Important
For detailed discussion and step by step calculation, please visit - https://www.wallstreetmojo.com/ratio-analysis/
 Dec-20

888
1,264
1,673
513
4,338

3,716
3,824
2,894
291
857
15,920

258
9
1,393
403
2,341
4,404

7,334
426
2,655
14,819
-

1,466
2,969
23,699
(4,345)
(1)
(23,045)
743
358
1,101

15,920 -
 -

Dec-20

5.6% decreased over the time. Why?

7.9%
10.5%
3.2%
27.2%

23.3% In 2016, it was 31.7% but in 2020 is reported as 23.3%. So it has reduced significantly over the time. W
24.0% what is excatly is this company actually doing which is leading to a higher percentage?
18.2%
1.8%
5.4%
100.0%

1.6%
0.1%
8.8%
2.5%
14.7%
27.7%

46.1% reduced significantly. Why?

2.7%
16.7%
93.1%

0.0%
9.2%
18.6%
148.9%
-27.3%
0.0%
-144.8%
4.7%
2.2%
6.9%
100.0%
 .99x
.49x
.20x

16,471
6,454
6,727

12.18x
4.20x
5.12x

30.0
86.9
71.4
45.51

1.06
4.41
38.30

60.8%
23.6%
16.4%

25.1%
344.8%
626.7%

17.4%
106.4%
1865.8%
344.8%

3885
539
164

267
153
167
 6.90
0.87
27
6.62

$1,654
2695
61%
39%

133.2%

om/ratio-analysis/
d significantly over the time. Why?
r percentage?
Colgate-Palmolive Company
Consolidated Cash Flows

Dec-16 Dec-17 Dec-18 Dec-19 Dec-20

Operating Activities
Net income including noncontrolling interests $ 2,558 $ 2,527 $ 2,860
Adjustments to reconcile net income
to net cash provided by operations:
Depreciation and amortization 511 519 539
Restructuring and termination benefits, net of cash -7 18 -71
Stock-based compensation expense 109 100 107
Loss on early extinguishment of debt 23
Charge for U.S. tax reform 80
Deferred income taxes 27 17 -120
Voluntary benefit plan contributions (67) (113)
Cash effects of changes in:
Receivables (79) 19 138
Inventories (58) (77) (251)
Accounts payable, accrued income tax & other accruals 18 36 520
Other non-current assets and liabilities (36) 87 (26)
Net cash provided by operations 3,056 3,133 3,719

Investing Activities  
Capital expenditures (436) (335) (410)
Purchases of marketable securities and investments (169) (184) (143)
Proceeds from sale of marketable securities and investments 156 131 124
Payment for acquisitions, net of cash acquired (728) (1,711) (353)
Other 7 3
Net cash used in investing activities (1,170) (2,099) (779)

Cash Flow for Financing Activities 1,886 1,034 2,940

Financing Activities  
Revolver
Short-term borrowing/(repayment) less than 90 days - net 546 294 497
Principal payments on debt (725) (1,441) (1,061)
Proceeds from issuance of debt 2,595
Dividends paid (1,591) (1,614) (1,654)
Purchases of treasury shares (1,238) (1,202) (1,476)
Proceeds from exercise of stock options and excess tax benefits 329 498 874
Purchases of non-controlling interests in subsidiaries -99
Net cash used in financing activities (2,679) (870) (2,919)

Effect of exchange rate changes on Cash and cash equivalents (16) (7) (16)
Net increase (decrease) in Cash and cash equiva 0 (809) 157 5

Cash and cash equivalents at beginning of year 1,535 726 883

Cash and cash equivalents at end of year $ - $ 726 $ 883 $ 888

Supplemental Cash Flow Information

 
Income taxes paid $ 847 $ 803 $ 845
Interest paid 194 185 188

Important
For detailed discussion and step by step calculation, please visit - https://www.wallstreetmojo.com/ratio-analysis/