Q3 2012 Earnings Call
October 25, 2012 11:00 am ET
Bina H. Thompson - Former Vice President of Investor Relations
Ian M. Cook - Chairman, Chief Executive Officer and President
William Schmitz - Deutsche Bank AG, Research Division
Nik Modi - UBS Investment Bank, Research Division
Dara W. Mohsenian - Morgan Stanley, Research Division
Wendy Nicholson - Citigroup Inc, Research Division
Caroline S. Levy - Credit Agricole Securities (USA) Inc., Research Division
Lauren R. Lieberman - Barclays Capital, Research Division
Javier Escalante - Consumer Edge Research, LLC
Jason Gere - RBC Capital Markets, LLC, Research Division
Ali Dibadj - Sanford C. Bernstein & Co., LLC., Research Division
Constance Marie Maneaty - BMO Capital Markets U.S.
Joe Lachky - Wells Fargo Securities, LLC, Research Division
Christopher Ferrara - BofA Merrill Lynch, Research Division
Alice Beebe Longley - The Buckingham Research Group Incorporated
John A. Faucher - JP Morgan Chase & Co, Research Division
Linda Bolton-Weiser - Caris & Company, Inc., Research Division
Jon Andersen - William Blair & Company L.L.C., Research Division
Mark S. Astrachan - Stifel, Nicolaus & Co., Inc., Research Division
Ian J. Gordon - S&P Equity Research
Previous Statements by CL
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At this time, for opening remarks, I would like to turn the call over to the Senior Vice President of Investor Relations, Ms. Bina Thompson. Please go ahead, ma'am.
Bina H. Thompson
Thanks, Brian. Let me add my welcome to our third quarter earnings release conference call. With me this morning are Ian Cook, Chairman, President and CEO; Dennis Hickey, CFO; Victoria Dolan, Corporate Controller; and Elaine Paik, Treasurer.
This conference call will include forward-looking statements, and these statements are made on the basis of our views and assumptions as of this time and are not guarantees of future performance. Actual events or results may differ materially from these statements. For information about certain factors that could cause such differences, investors should consult our most recent annual report on Form 10-K filed with the Securities and Exchange Commission and available on our website, including the information set forth under the captions Risk Factors and Cautionary Statement on Forward-looking Statements.
This conference call will also include a discussion of non-GAAP financial measures, which differ from our results prepared in accordance with GAAP. We will discuss organic sales growth, excluding foreign exchange, acquisitions and divestitures. We will also discuss gross profit, gross profit margin, operating profit, net income and earnings per share, excluding the impact of the one-time items described in the press release. A full reconciliation with the corresponding GAAP measures is included in the press release and is posted on the Investor Relations section of our website at www.colgatepalmolive.com.
So we're very pleased with the continued strong momentum in our business in the third quarter. Good organic sales growth coupled with an excellent increase in gross margin have allowed us to increase investments behind our business as well as to grow our bottom line. Market shares are strong around the world. On a year-to-date basis we're up in toothpaste, manual toothbrushes, mouthwash, bar soaps, body wash, deodorants and fabric conditioner. Our pipeline of new products is as full as it has ever been, which bodes well for continued share gains.
Our balance sheet is solid, and cash generation is strong. We continue to successfully implement the strategies with which you are all familiar, engaging to build our brands, innovation for growth, effectiveness and efficiency and leading to win. And we believe our tight focus on a limited number of categories continues to be the right approach for Colgate. This has allowed us to deliver consistent results.
Now while our strategies have not changed, the external environment is increasingly changing and at a fast pace. To help ensure continued strong results, today we announced a 4-year global growth and efficiency program. And this is truly a global program affecting all areas of the business, which is expected to help us deliver sustained profitable growth over the long-term.
We believe that these changes will help ensure the long-term success of our business in today's fast changing global marketplace. We've chosen to undertake them at a time when the business is strong to leverage our growth momentum so we continue to deliver on both our near and long-term targets, while increasing investment to strengthen our market-leading positions and commercial capabilities on the ground.
As a reminder, our key areas of focus are not new to us but rather a continuation of what we've done successfully in the past. The global growth and efficiency program represents a truly global effort to expand upon successful initiatives previously implemented in select regions, focusing on the areas of commercial hubs, shared services and global supply chain and facilities optimization.
Reflecting on 2012, when we initially gave constant dollar guidance, we were experiencing and projecting extremely volatile foreign exchange markets. That has proven to be the case throughout 2012 in all regions of the world. By managing the business on a constant currency basis, we ensured that commercial funds stayed invested in the local businesses. So as we look ahead, we see the exchange market as being somewhat less volatile and more in line with historic patterns. So while our global budget process is still in the initial stages, as Ian said in the press release, we expect to return to double-digit earnings per share growth on a dollar basis in 2013 in the 10% to 11% range. Our target for organic sales growth for 2013 remains 6% to 7%, and we expect to see increases both in gross profit and advertising.