Colgate-Palmolive Co. (CL)

Analysis of Inventory

Inventory Accounting Policy

Inventories are stated at the lower of cost or market. The cost of approximately 80% of inventories is determined using the first-in, first-out ("FIFO") method. The cost of all other inventories, predominantly in the U.S. and Mexico, is determined using the last-in, first-out ("LIFO") method.

Source: Colgate-Palmolive Co., Annual Report

Inventory Disclosure

Colgate-Palmolive Co., Statement of Financial Position, Inventory

USD $ in millions

 
    Dec 31, 2013 Dec 31, 2012 Dec 31, 2011 Dec 31, 2010 Dec 31, 2009
Raw materials and supplies 340  362  319  295  310 
Work-in-process 60  81  54  50  50 
Finished goods 1,025  922  954  877  849 
Inventories 1,425  1,365  1,327  1,222  1,209 

Source: Based on data from Colgate-Palmolive Co. Annual Reports

Item Description The company
Raw materials and supplies Aggregated amount of unprocessed materials to be used in manufacturing or production process and supplies that will be consumed. Colgate-Palmolive Co.'s raw materials and supplies increased from 2011 to 2012 but then slightly declined from 2012 to 2013 not reaching 2011 level.
Work-in-process Carrying amount as of the balance sheet date of merchandise or goods which are partially completed, are generally comprised of raw materials, labor and factory overhead costs, and which require further materials, labor and overhead to be converted into finished goods, and which generally require the use of estimates to determine percentage complete and pricing. Colgate-Palmolive Co.'s work-in-process increased from 2011 to 2012 but then slightly declined from 2012 to 2013 not reaching 2011 level.
Finished goods Carrying amount as of the balance sheet date of merchandise or goods held by the company that are readily available for sale. Colgate-Palmolive Co.'s finished goods declined from 2011 to 2012 but then increased from 2012 to 2013 exceeding 2011 level.
Inventories Carrying amount (lower of cost or market) as of the balance sheet date of inventories less all valuation and other allowances. Excludes noncurrent inventory balances (expected to remain on hand past one year or one operating cycle, if longer). Colgate-Palmolive Co.'s inventories increased from 2011 to 2012 and from 2012 to 2013.

Adjustment to Inventory: from LIFO to FIFO

Adjusting LIFO Inventory to FIFO (Current) Cost

USD $ in millions

 
    Dec 31, 2013 Dec 31, 2012 Dec 31, 2011 Dec 31, 2010 Dec 31, 2009
  Adjustment to Inventories
Inventories at LIFO (as reported) 1,425  1,365  1,327  1,222  1,209 
Add: Inventory LIFO reserve 37  37  30  52  55 
Inventories at FIFO (adjusted) 1,462  1,402  1,357  1,274  1,264 
  Adjustment to Current Assets
Current assets (as reported) 4,822  4,556  4,402  3,730  3,810 
Add: Inventory LIFO reserve 37  37  30  52  55 
Current assets (adjusted) 4,859  4,593  4,432  3,782  3,865 
  Adjustment to Total Assets
Total assets (as reported) 13,876  13,394  12,724  11,172  11,134 
Add: Inventory LIFO reserve 37  37  30  52  55 
Total assets (adjusted) 13,913  13,431  12,754  11,224  11,189 
  Adjustment to Total Colgate-Palmolive Company Shareholders' Equity
Total Colgate-Palmolive Company shareholders' equity (as reported) 2,305  2,189  2,375  2,675  3,116 
Add: Inventory LIFO reserve 37  37  30  52  55 
Total Colgate-Palmolive Company shareholders' equity (adjusted) 2,342  2,226  2,405  2,727  3,171 
  Adjustment to Net Income Attributable To Colgate-Palmolive Company
Net income attributable to Colgate-Palmolive Company (as reported) 2,241  2,472  2,431  2,203  2,291 
Add: Increase (decrease) in inventory LIFO reserve (22) (3)
Net income attributable to Colgate-Palmolive Company (adjusted) 2,241  2,479  2,409  2,200  2,292 

Colgate-Palmolive Co.'s inventory value on Dec 31, 2013 would be $1,462  (in millions) if the FIFO inventory method was used instead of LIFO. Colgate-Palmolive Co.'s inventories, valued on a LIFO basis, on Dec 31, 2013 were $1,425 . Colgate-Palmolive Co.'s inventories would have been $37  higher than reported on Dec 31, 2013 if the FIFO method had been used instead.

Adjusted Ratios: LIFO vs. FIFO (Summary)

Colgate-Palmolive Co., adjusted ratios

 
    Dec 31, 2013 Dec 31, 2012 Dec 31, 2011 Dec 31, 2010 Dec 31, 2009
  Current Ratio
Reported current ratio (LIFO) 1.08 1.22 1.18 1.00 1.06
Adjusted current ratio (FIFO) 1.09 1.23 1.19 1.01 1.07
  Net Profit Margin
Reported net profit margin (LIFO) 12.86% 14.47% 14.53% 14.15% 14.95%
Adjusted net profit margin (FIFO) 12.86% 14.51% 14.40% 14.14% 14.95%
  Total Asset Turnover
Reported total asset turnover (LIFO) 1.26 1.28 1.32 1.39 1.38
Adjusted total asset turnover (FIFO) 1.25 1.27 1.31 1.39 1.37
  Financial Leverage
Reported financial leverage (LIFO) 6.02 6.12 5.36 4.18 3.57
Adjusted financial leverage (FIFO) 5.94 6.03 5.30 4.12 3.53
  Return on Equity (ROE)
Reported ROE (LIFO) 97.22% 112.93% 102.36% 82.36% 73.52%
Adjusted ROE (FIFO) 95.69% 111.37% 100.17% 80.67% 72.28%
  Return on Assets (ROA)
Reported ROA (LIFO) 16.15% 18.46% 19.11% 19.72% 20.58%
Adjusted ROA (FIFO) 16.11% 18.46% 18.89% 19.60% 20.48%
Ratio Description The company
Adjusted current ratio A liquidity ratio calculated as adjusted current assets divided by current liabilities. Colgate-Palmolive Co.'s adjusted current ratio improved from 2011 to 2012 but then deteriorated significantly from 2012 to 2013.
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by revenue. Colgate-Palmolive Co.'s adjusted net profit margin improved from 2011 to 2012 but then deteriorated significantly from 2012 to 2013.
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Colgate-Palmolive Co.'s adjusted total asset turnover deteriorated from 2011 to 2012 and from 2012 to 2013.
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.
Colgate-Palmolive Co.'s adjusted financial leverage increased from 2011 to 2012 but then slightly declined from 2012 to 2013.
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders' equity. Colgate-Palmolive Co.'s adjusted ROE improved from 2011 to 2012 but then deteriorated significantly from 2012 to 2013.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Colgate-Palmolive Co.'s adjusted ROA deteriorated from 2011 to 2012 and from 2012 to 2013.

Adjusted Current Ratio

 
    Dec 31, 2013 Dec 31, 2012 Dec 31, 2011 Dec 31, 2010 Dec 31, 2009
  As Reported
Current assets (USD $ in millions) 4,822  4,556  4,402  3,730  3,810 
Current liabilities (USD $ in millions) 4,470  3,736  3,716  3,728  3,599 
   
Current ratio1 1.08 1.22 1.18 1.00 1.06
  Adjusted: from LIFO to FIFO
Adjusted current assets (USD $ in millions) 4,859  4,593  4,432  3,782  3,865 
Current liabilities (USD $ in millions) 4,470  3,736  3,716  3,728  3,599 
   
Adjusted current ratio2 1.09 1.23 1.19 1.01 1.07

2013 Calculations

1 Current ratio = Current assets ÷ Current liabilities
= 4,822 ÷ 4,470 = 1.08

2 Adjusted current ratio = Adjusted current assets ÷ Current liabilities
= 4,859 ÷ 4,470 = 1.09

Ratio Description The company
Adjusted current ratio A liquidity ratio calculated as adjusted current assets divided by current liabilities. Colgate-Palmolive Co.'s adjusted current ratio improved from 2011 to 2012 but then deteriorated significantly from 2012 to 2013.

Adjusted Net Profit Margin

 
    Dec 31, 2013 Dec 31, 2012 Dec 31, 2011 Dec 31, 2010 Dec 31, 2009
  As Reported
Net income attributable to Colgate-Palmolive Company (USD $ in millions) 2,241  2,472  2,431  2,203  2,291 
Net sales (USD $ in millions) 17,420  17,085  16,734  15,564  15,327 
   
Net profit margin1 12.86% 14.47% 14.53% 14.15% 14.95%
  Adjusted: from LIFO to FIFO
Adjusted net income attributable to Colgate-Palmolive Company (USD $ in millions) 2,241  2,479  2,409  2,200  2,292 
Net sales (USD $ in millions) 17,420  17,085  16,734  15,564  15,327 
   
Adjusted net profit margin2 12.86% 14.51% 14.40% 14.14% 14.95%

2013 Calculations

1 Net profit margin = 100 × Net income attributable to Colgate-Palmolive Company ÷ Net sales
= 100 × 2,241 ÷ 17,420 = 12.86%

2 Adjusted net profit margin = 100 × Adjusted net income attributable to Colgate-Palmolive Company ÷ Net sales
= 100 × 2,241 ÷ 17,420 = 12.86%

Ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by revenue. Colgate-Palmolive Co.'s adjusted net profit margin improved from 2011 to 2012 but then deteriorated significantly from 2012 to 2013.

Adjusted Total Asset Turnover

 
    Dec 31, 2013 Dec 31, 2012 Dec 31, 2011 Dec 31, 2010 Dec 31, 2009
  As Reported
Net sales (USD $ in millions) 17,420  17,085  16,734  15,564  15,327 
Total assets (USD $ in millions) 13,876  13,394  12,724  11,172  11,134 
   
Total asset turnover1 1.26 1.28 1.32 1.39 1.38
  Adjusted: from LIFO to FIFO
Net sales (USD $ in millions) 17,420  17,085  16,734  15,564  15,327 
Adjusted total assets (USD $ in millions) 13,913  13,431  12,754  11,224  11,189 
   
Adjusted total asset turnover2 1.25 1.27 1.31 1.39 1.37

2013 Calculations

1 Total asset turnover = Net sales ÷ Total assets
= 17,420 ÷ 13,876 = 1.26

2 Adjusted total asset turnover = Net sales ÷ Adjusted total assets
= 17,420 ÷ 13,913 = 1.25

Ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Colgate-Palmolive Co.'s adjusted total asset turnover deteriorated from 2011 to 2012 and from 2012 to 2013.

Adjusted Financial Leverage

 
    Dec 31, 2013 Dec 31, 2012 Dec 31, 2011 Dec 31, 2010 Dec 31, 2009
  As Reported
Total assets (USD $ in millions) 13,876  13,394  12,724  11,172  11,134 
Total Colgate-Palmolive Company shareholders' equity (USD $ in millions) 2,305  2,189  2,375  2,675  3,116 
   
Financial leverage1 6.02 6.12 5.36 4.18 3.57
  Adjusted: from LIFO to FIFO
Adjusted total assets (USD $ in millions) 13,913  13,431  12,754  11,224  11,189 
Adjusted total Colgate-Palmolive Company shareholders' equity (USD $ in millions) 2,342  2,226  2,405  2,727  3,171 
   
Adjusted financial leverage2 5.94 6.03 5.30 4.12 3.53

2013 Calculations

1 Financial leverage = Total assets ÷ Total Colgate-Palmolive Company shareholders' equity
= 13,876 ÷ 2,305 = 6.02

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted total Colgate-Palmolive Company shareholders' equity
= 13,913 ÷ 2,342 = 5.94

Ratio Description The company
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.
Colgate-Palmolive Co.'s adjusted financial leverage increased from 2011 to 2012 but then slightly declined from 2012 to 2013.

Adjusted Return On Equity (ROE)

 
    Dec 31, 2013 Dec 31, 2012 Dec 31, 2011 Dec 31, 2010 Dec 31, 2009
  As Reported
Net income attributable to Colgate-Palmolive Company (USD $ in millions) 2,241  2,472  2,431  2,203  2,291 
Total Colgate-Palmolive Company shareholders' equity (USD $ in millions) 2,305  2,189  2,375  2,675  3,116 
   
ROE1 97.22% 112.93% 102.36% 82.36% 73.52%
  Adjusted: from LIFO to FIFO
Adjusted net income attributable to Colgate-Palmolive Company (USD $ in millions) 2,241  2,479  2,409  2,200  2,292 
Adjusted total Colgate-Palmolive Company shareholders' equity (USD $ in millions) 2,342  2,226  2,405  2,727  3,171 
   
Adjusted ROE2 95.69% 111.37% 100.17% 80.67% 72.28%

2013 Calculations

1 ROE = 100 × Net income attributable to Colgate-Palmolive Company ÷ Total Colgate-Palmolive Company shareholders' equity
= 100 × 2,241 ÷ 2,305 = 97.22%

2 Adjusted ROE = 100 × Adjusted net income attributable to Colgate-Palmolive Company ÷ Adjusted total Colgate-Palmolive Company shareholders' equity
= 100 × 2,241 ÷ 2,342 = 95.69%

Ratio Description The company
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders' equity. Colgate-Palmolive Co.'s adjusted ROE improved from 2011 to 2012 but then deteriorated significantly from 2012 to 2013.

Adjusted Return On Assets (ROA)

 
    Dec 31, 2013 Dec 31, 2012 Dec 31, 2011 Dec 31, 2010 Dec 31, 2009
  As Reported
Net income attributable to Colgate-Palmolive Company (USD $ in millions) 2,241  2,472  2,431  2,203  2,291 
Total assets (USD $ in millions) 13,876  13,394  12,724  11,172  11,134 
   
ROA1 16.15% 18.46% 19.11% 19.72% 20.58%
  Adjusted: from LIFO to FIFO
Adjusted net income attributable to Colgate-Palmolive Company (USD $ in millions) 2,241  2,479  2,409  2,200  2,292 
Adjusted total assets (USD $ in millions) 13,913  13,431  12,754  11,224  11,189 
   
Adjusted ROA2 16.11% 18.46% 18.89% 19.60% 20.48%

2013 Calculations

1 ROA = 100 × Net income attributable to Colgate-Palmolive Company ÷ Total assets
= 100 × 2,241 ÷ 13,876 = 16.15%

2 Adjusted ROA = 100 × Adjusted net income attributable to Colgate-Palmolive Company ÷ Adjusted total assets
= 100 × 2,241 ÷ 13,913 = 16.11%

Ratio Description The company
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Colgate-Palmolive Co.'s adjusted ROA deteriorated from 2011 to 2012 and from 2012 to 2013.