UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________________________________________
FORM 10-Q
_________________________________________________
(Mark One)
|
| | | | | | | |
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the quarterly period ended September 30, 2017 |
ORFor the quarterly period ended September 30, 2023
|
| | | | |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the transition period from________ to________ . |
Commission File Number: 1-644
COLGATE-PALMOLIVE COMPANY
(Exact name of registrant as specified in its charter)
|
| | | | |
DELAWAREDelaware | 13-1815595 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| | | | | | | | | | | | | | | | | | | | |
| |
300 Park Avenue New York, New York | 10022 | | | |
| New York, | New York | | | 10022 | |
(Address of principal executive offices) | | (Zip Code) | |
(212) 310-2000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | | | | | | | |
Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
Common Stock, $1.00 par value | | CL | | New York Stock Exchange |
| | | | |
0.500% Notes due 2026 | | CL26 | | New York Stock Exchange |
0.300% Notes due 2029 | | CL29 | | New York Stock Exchange |
1.375% Notes due 2034 | | CL34 | | New York Stock Exchange |
0.875% Notes due 2039 | | CL39 | | New York Stock Exchange |
| | | | |
NO CHANGES
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405) 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| | | | | | | | | | | |
Large accelerated filer | ☒ | Accelerated filer | ☐ |
Non-accelerated filer | ☐ | Smaller reporting company | ☐ |
| |
Large accelerated filer ☒
| Accelerated filer ☐
|
Non-accelerated filer ☐ (Do not check if a smaller reporting company)
| Smaller reporting company ☐
|
Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: |
| | | | | | | | | | | | | |
Class | | Shares Outstanding | | Date |
Common stock, $1.00 par value | | 878,105,223823,372,259 | | September 30, 20172023 |
PART I.FINANCIAL INFORMATION
COLGATE-PALMOLIVE COMPANY
Condensed Consolidated Statements of Income
(Dollars(Dollars in Millions Except Per Share Amounts)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, | | September 30, |
| 2023 | | 2022 | | 2023 | | 2022 |
Net sales | $ | 4,915 | | | $ | 4,455 | | | $ | 14,507 | | | $ | 13,338 | |
Cost of sales | 2,038 | | | 1,907 | | | 6,131 | | | 5,664 | |
Gross profit | 2,877 | | | 2,548 | | | 8,376 | | | 7,674 | |
Selling, general and administrative expenses | 1,822 | | | 1,634 | | | 5,348 | | | 4,932 | |
Other (income) expense, net | 26 | | | (33) | | | 116 | | | 51 | |
Operating profit | 1,029 | | | 947 | | | 2,912 | | | 2,691 | |
Non-service related postretirement costs | 15 | | | 15 | | | 338 | | | 65 | |
Interest (income) expense, net | 58 | | | 40 | | | 170 | | | 98 | |
Income before income taxes | 956 | | | 892 | | | 2,404 | | | 2,528 | |
Provision for income taxes | 209 | | | 210 | | | 709 | | | 604 | |
Net income including noncontrolling interests | 747 | | | 682 | | | 1,695 | | | 1,924 | |
Less: Net income attributable to noncontrolling interests | 39 | | | 64 | | | 113 | | | 144 | |
Net income attributable to Colgate-Palmolive Company | $ | 708 | | | $ | 618 | | | $ | 1,582 | | | $ | 1,780 | |
| | | | | | | |
Earnings per common share, basic | $ | 0.86 | | | $ | 0.74 | | | $ | 1.91 | | | $ | 2.12 | |
| | | | | | | |
Earnings per common share, diluted | $ | 0.86 | | | $ | 0.74 | | | $ | 1.90 | | | $ | 2.12 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
|
| | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, | | September 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
Net sales | $ | 3,974 |
| | $ | 3,867 |
| | $ | 11,562 |
| | $ | 11,474 |
|
Cost of sales | 1,591 |
| | 1,543 |
| | 4,610 |
| | 4,598 |
|
Gross profit | 2,383 |
| | 2,324 |
| | 6,952 |
| | 6,876 |
|
Selling, general and administrative expenses | 1,429 |
| | 1,322 |
| | 4,124 |
| | 3,996 |
|
Other (income) expense, net | 27 |
| | (69 | ) | | 163 |
| | (2 | ) |
Operating profit | 927 |
| | 1,071 |
| | 2,665 |
| | 2,882 |
|
Interest (income) expense, net | 27 |
| | 25 |
| | 74 |
| | 78 |
|
Income before income taxes | 900 |
| | 1,046 |
| | 2,591 |
| | 2,804 |
|
Provision for income taxes | 250 |
| | 300 |
| | 770 |
| | 846 |
|
Net income including noncontrolling interests | 650 |
| | 746 |
| | 1,821 |
| | 1,958 |
|
Less: Net income attributable to noncontrolling interests | 43 |
| | 44 |
| | 120 |
| | 123 |
|
Net income attributable to Colgate-Palmolive Company | $ | 607 |
| | $ | 702 |
| | $ | 1,701 |
| | $ | 1,835 |
|
| | | | | | | |
Earnings per common share, basic | $ | 0.69 |
| | $ | 0.79 |
| | $ | 1.93 |
| | $ | 2.05 |
|
| | | | | | | |
Earnings per common share, diluted | $ | 0.68 |
| | $ | 0.78 |
| | $ | 1.91 |
| | $ | 2.04 |
|
| | | | | | | |
Dividends declared per common share * | $ | 0.40 |
| | $ | 0.39 |
| | $ | 1.59 |
| | $ | 1.55 |
|
* Two dividends were declared in the first quarter of 2017 and 2016.
See Notes to Condensed Consolidated Financial Statements.
2
COLGATE-PALMOLIVE COMPANY
Condensed Consolidated Statements of Comprehensive Income
(Dollars(Dollars in Millions)
(Unaudited)
| | | Three Months Ended | | Nine Months Ended | | Three Months Ended | | Nine Months Ended |
| September 30, | | September 30, | | September 30, | | September 30, |
| 2017 | | 2016 | | 2017 | | 2016 | | 2023 | | 2022 | | 2023 | | 2022 |
Net income including noncontrolling interests | $ | 650 |
| | $ | 746 |
| | $ | 1,821 |
| | $ | 1,958 |
| Net income including noncontrolling interests | $ | 747 | | | $ | 682 | | | $ | 1,695 | | | $ | 1,924 | |
Other comprehensive income (loss), net of tax: | | | | | | | | Other comprehensive income (loss), net of tax: | |
Cumulative translation adjustments | 64 |
| | — |
| | 294 |
| | 83 |
| Cumulative translation adjustments | (79) | | | (161) | | | (9) | | | (227) | |
Retirement plans and other retiree benefit adjustments | 54 |
| | 16 |
| | 79 |
| | 39 |
| Retirement plans and other retiree benefit adjustments | 32 | | | 298 | | | 45 | | | 327 | |
Gains (losses) on available-for-sale securities | — |
| | (1 | ) | | — |
| | (1 | ) | |
Gains (losses) on cash flow hedges | (3 | ) | | 1 |
| | (16 | ) | | (3 | ) | Gains (losses) on cash flow hedges | 5 | | | (26) | | | 1 | | | 75 | |
Total Other comprehensive income (loss), net of tax | 115 |
| | 16 |
| | 357 |
| | 118 |
| Total Other comprehensive income (loss), net of tax | (42) | | | 111 | | | 37 | | | 175 | |
Total Comprehensive income including noncontrolling interests | 765 |
| | 762 |
| | 2,178 |
| | 2,076 |
| Total Comprehensive income including noncontrolling interests | 705 | | | 793 | | | 1,732 | | | 2,099 | |
Less: Net income attributable to noncontrolling interests | 43 |
| | 44 |
| | 120 |
| | 123 |
| Less: Net income attributable to noncontrolling interests | 39 | | | 64 | | | 113 | | | 144 | |
Less: Cumulative translation adjustments attributable to noncontrolling interests | 2 |
| | 2 |
| | 11 |
| | (3 | ) | Less: Cumulative translation adjustments attributable to noncontrolling interests | (3) | | | (16) | | | (44) | | | (32) | |
Total Comprehensive income attributable to noncontrolling interests | 45 |
| | 46 |
| | 131 |
| | 120 |
| Total Comprehensive income attributable to noncontrolling interests | 36 | | | 48 | | | 69 | | | 112 | |
Total Comprehensive income attributable to Colgate-Palmolive Company | $ | 720 |
| | $ | 716 |
| | $ | 2,047 |
| | $ | 1,956 |
| Total Comprehensive income attributable to Colgate-Palmolive Company | $ | 669 | | | $ | 745 | | | $ | 1,663 | | | $ | 1,987 | |
See Notes to Condensed Consolidated Financial Statements.
3
COLGATE-PALMOLIVE COMPANY
Condensed Consolidated Balance Sheets
(Dollars(Dollars in Millions)
(Unaudited)
| | | | | | | | | | | |
| September 30, 2023 | | December 31, 2022 |
Assets | | | |
Current Assets | | | |
Cash and cash equivalents | $ | 951 | | | $ | 775 | |
Receivables (net of allowances of $83 and $70, respectively) | 1,577 | | | 1,504 | |
Inventories | 1,931 | | | 2,074 | |
Other current assets | 898 | | | 760 | |
Total current assets | 5,357 | | | 5,113 | |
Property, plant and equipment: | | | |
Cost | 9,979 | | | 9,583 | |
Less: Accumulated depreciation | (5,570) | | | (5,276) | |
| 4,409 | | | 4,307 | |
Goodwill | 3,327 | | | 3,352 | |
Other intangible assets, net | 1,861 | | | 1,920 | |
Deferred income taxes | 202 | | | 135 | |
Other assets | 887 | | | 904 | |
Total assets | $ | 16,043 | | | $ | 15,731 | |
Liabilities and Shareholders’ Equity | | | |
Current Liabilities | | | |
Notes and loans payable | $ | 18 | | | $ | 11 | |
Current portion of long-term debt | 16 | | | 14 | |
Accounts payable | 1,482 | | | 1,551 | |
Accrued income taxes | 354 | | | 317 | |
Other accruals | 2,732 | | | 2,111 | |
Total current liabilities | 4,602 | | | 4,004 | |
Long-term debt | 8,690 | | | 8,741 | |
Deferred income taxes | 430 | | | 383 | |
Other liabilities | 1,915 | | | 1,797 | |
Total liabilities | 15,637 | | | 14,925 | |
Shareholders’ Equity | | | |
Common stock, $1 par value (2,000,000,000 shares authorized, 1,465,706,360 shares issued) | 1,466 | | | 1,466 | |
Additional paid-in capital | 3,762 | | | 3,546 | |
Retained earnings | 24,571 | | | 24,573 | |
Accumulated other comprehensive income (loss) | (3,974) | | | (4,055) | |
Unearned compensation | — | | | (1) | |
Treasury stock, at cost | (25,834) | | | (25,128) | |
Total Colgate-Palmolive Company shareholders’ equity | (9) | | | 401 | |
Noncontrolling interests | 415 | | | 405 | |
Total equity | 406 | | | 806 | |
Total liabilities and equity | $ | 16,043 | | | $ | 15,731 | |
|
| | | | | | | |
| September 30, 2017 | | December 31, 2016 |
Assets | | | |
Current Assets | | | |
Cash and cash equivalents | $ | 1,380 |
| | $ | 1,315 |
|
Receivables (net of allowances of $82 and $73, respectively) | 1,530 |
| | 1,411 |
|
Inventories | 1,205 |
| | 1,171 |
|
Other current assets | 621 |
| | 441 |
|
Total current assets | 4,736 |
| | 4,338 |
|
Property, plant and equipment: | |
| | |
|
Cost | 8,419 |
| | 7,942 |
|
Less: Accumulated depreciation | (4,420 | ) | | (4,102 | ) |
| 3,999 |
| | 3,840 |
|
Goodwill | 2,216 |
| | 2,107 |
|
Other intangible assets, net | 1,343 |
| | 1,313 |
|
Deferred income taxes | 265 |
| | 301 |
|
Other assets | 216 |
| | 224 |
|
Total assets | $ | 12,775 |
| | $ | 12,123 |
|
Liabilities and Shareholders’ Equity | |
| | |
|
Current Liabilities | |
| | |
|
Notes and loans payable | $ | 7 |
| | $ | 13 |
|
Current portion of long-term debt | — |
| | — |
|
Accounts payable | 1,164 |
| | 1,124 |
|
Accrued income taxes | 391 |
| | 441 |
|
Other accruals | 2,292 |
| | 1,727 |
|
Total current liabilities | 3,854 |
| | 3,305 |
|
Long-term debt | 6,520 |
| | 6,520 |
|
Deferred income taxes | 196 |
| | 246 |
|
Other liabilities | 1,938 |
| | 2,035 |
|
Total liabilities | 12,508 |
| | 12,106 |
|
Shareholders’ Equity | |
| | |
|
Common stock | 1,466 |
| | 1,466 |
|
Additional paid-in capital | 1,932 |
| | 1,691 |
|
Retained earnings | 20,207 |
| | 19,922 |
|
Accumulated other comprehensive income (loss) | (3,834 | ) | | (4,180 | ) |
Unearned compensation | (1 | ) | | (7 | ) |
Treasury stock, at cost | (19,878 | ) | | (19,135 | ) |
Total Colgate-Palmolive Company shareholders’ equity | (108 | ) | | (243 | ) |
Noncontrolling interests | 375 |
| | 260 |
|
Total equity | 267 |
| | 17 |
|
Total liabilities and equity | $ | 12,775 |
| | $ | 12,123 |
|
See Notes to Condensed Consolidated Financial Statements.
4
COLGATE-PALMOLIVE COMPANY
Condensed Consolidated Statements of Cash Flows
(Dollars in Millions)
(Unaudited)
| | | | | | | | | | | |
| Nine Months Ended |
| September 30, |
| 2023 | | 2022 |
Operating Activities | | | |
Net income including noncontrolling interests | $ | 1,695 | | | $ | 1,924 | |
Adjustments to reconcile net income including noncontrolling interests to net cash provided by operations: | | | |
Depreciation and amortization | 417 | | | 410 | |
ERISA litigation matter | 267 | | | — | |
Restructuring and termination benefits, net of cash | (17) | | | 51 | |
Stock-based compensation expense | 97 | | | 105 | |
Gain on the sale of land | — | | | (47) | |
| | | |
Deferred income taxes | (109) | | | (13) | |
| | | |
Cash effects of changes in: | | | |
Receivables | (62) | | | (171) | |
Inventories | 150 | | | (422) | |
Accounts payable and other accruals | 168 | | | 9 | |
Other non-current assets and liabilities | 3 | | | 37 | |
Net cash provided by (used in) operations | 2,609 | | | 1,883 | |
Investing Activities | | | |
Capital expenditures | (508) | | | (475) | |
Purchases of marketable securities and investments | (324) | | | (239) | |
Proceeds from sale of marketable securities and investments | 264 | | | 55 | |
Payment for acquisitions, net of cash acquired | — | | | (817) | |
Proceeds from the sale of land | — | | | 47 | |
Other investing activities | (31) | | | 1 | |
Net cash provided by (used in) investing activities | (599) | | | (1,428) | |
Financing Activities | | | |
Short-term borrowing (repayment) less than 90 days, net | (564) | | | (56) | |
Principal payments of debt | (903) | | | (2) | |
Proceeds from issuance of debt | 1,497 | | | 1,513 | |
Dividends paid | (1,243) | | | (1,206) | |
Purchases of treasury shares | (883) | | | (895) | |
Proceeds from exercise of stock options | 325 | | | 398 | |
| | | |
Other financing activities | (30) | | | (38) | |
Net cash provided by (used in) financing activities | (1,801) | | | (286) | |
Effect of exchange rate changes on Cash and cash equivalents | (33) | | | (63) | |
Net increase (decrease) in Cash and cash equivalents | 176 | | | 106 | |
Cash and cash equivalents at beginning of the period | 775 | | | 832 | |
Cash and cash equivalents at end of the period | $ | 951 | | | $ | 938 | |
Supplemental Cash Flow Information | | | |
Income taxes paid | $ | 726 | | | $ | 690 | |
Interest paid | $ | 243 | | | $ | 104 | |
|
| | | | | | | |
| Nine Months Ended |
| September 30, |
| 2017 | | 2016 |
Operating Activities | | | |
Net income including noncontrolling interests | $ | 1,821 |
| | $ | 1,958 |
|
Adjustments to reconcile net income including noncontrolling interests to net cash provided by operations: | |
| | |
|
Depreciation and amortization | 354 |
| | 329 |
|
Restructuring and termination benefits, net of cash | 80 |
| | (1 | ) |
Stock-based compensation expense | 106 |
| | 102 |
|
Gain on sale of land in Mexico | — |
| | (97 | ) |
Deferred income taxes | (2 | ) | | 50 |
|
Voluntary benefit plan contributions | (81 | ) | | (53 | ) |
Cash effects of changes in: | | | |
Receivables | (50 | ) | | (126 | ) |
Inventories | 16 |
| | 4 |
|
Accounts payable and other accruals | 39 |
| | 101 |
|
Other non-current assets and liabilities | 12 |
| | 50 |
|
Net cash provided by operations | 2,295 |
|
| 2,317 |
|
Investing Activities | |
| | |
|
Capital expenditures | (382 | ) | | (392 | ) |
Purchases of marketable securities and investments | (301 | ) | | (271 | ) |
Proceeds from sale of marketable securities and investments | 149 |
| | 158 |
|
Proceeds from sale of land in Mexico | — |
| | 60 |
|
Other | 2 |
| | — |
|
Net cash used in investing activities | (532 | ) | | (445 | ) |
Financing Activities | |
| | |
|
Principal payments on debt | (3,551 | ) | | (5,446 | ) |
Proceeds from issuance of debt | 3,478 |
| | 5,447 |
|
Dividends paid | (1,070 | ) | | (1,053 | ) |
Purchases of treasury shares | (1,055 | ) | | (913 | ) |
Proceeds from exercise of stock options | 431 |
| | 418 |
|
Net cash used in financing activities | (1,767 | ) | | (1,547 | ) |
Effect of exchange rate changes on Cash and cash equivalents | 69 |
| | 3 |
|
Net increase (decrease) in Cash and cash equivalents | 65 |
| | 328 |
|
Cash and cash equivalents at beginning of the period | 1,315 |
| | 970 |
|
Cash and cash equivalents at end of the period | $ | 1,380 |
| | $ | 1,298 |
|
Supplemental Cash Flow Information | |
| | |
|
Income taxes paid | $ | 820 |
| | $ | 696 |
|
See Notes to Condensed Consolidated Financial Statements.
5
COLGATE-PALMOLIVE COMPANY
Condensed Consolidated Statements of Changes in Shareholders’ Equity
(Dollars in Millions)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Three Months Ended September 30, 2023 |
| Colgate-Palmolive Company Shareholders’ Equity | | |
| Common Stock | | Additional Paid-in Capital | | Unearned Compensation | | Treasury Stock | | Retained Earnings | | Accumulated Other Comprehensive Income (Loss)(1) | | Noncontrolling Interests |
Balance, June 30, 2023 | $ | 1,466 | | | $ | 3,688 | | | $ | — | | | $ | (25,541) | | | $ | 24,258 | | | $ | (3,935) | | | $ | 379 | |
Net income | — | | | — | | | — | | | — | | | 708 | | | — | | | 39 | |
Other comprehensive income (loss), net of tax | — | | | — | | | — | | | — | | | — | | | (39) | | | (3) | |
Dividends ($0.48 per share) | — | | | — | | | — | | | — | | | (395) | | | — | | | — | |
Stock-based compensation expense | — | | | 60 | | | — | | | — | | | — | | | — | | | — | |
Shares issued for stock options | — | | | 29 | | | — | | | 25 | | | — | | | — | | | — | |
Shares issued for restricted stock units | — | | | (16) | | | — | | | 16 | | | — | | | — | | | — | |
Treasury stock acquired | — | | | — | | | — | | | (332) | | | — | | | — | | | — | |
| | | | | | | | | | | | | |
Other | — | | | 1 | | | — | | | (2) | | | — | | | — | | | — | |
Balance, September 30, 2023 | $ | 1,466 | | | $ | 3,762 | | | $ | — | | | $ | (25,834) | | | $ | 24,571 | | | $ | (3,974) | | | $ | 415 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Three Months Ended September 30, 2022 |
| Colgate-Palmolive Company Shareholders’ Equity | | |
| Common Stock | | Additional Paid-in Capital | | Unearned Compensation | | Treasury Stock | | Retained Earnings | | Accumulated Other Comprehensive Income (Loss)(1) | | Noncontrolling Interests |
Balance, June 30, 2022 | $ | 1,466 | | | $ | 3,402 | | | $ | — | | | $ | (24,736) | | | $ | 24,342 | | | $ | (4,306) | | | $ | 390 | |
Net income | — | | | — | | | — | | | — | | | 618 | | | — | | | 64 | |
Other comprehensive income (loss), net of tax | — | | | — | | | — | | | — | | | — | | | 127 | | | (16) | |
Dividends ($0.47 per share) | — | | | — | | | — | | | — | | | (394) | | | — | | | — | |
Stock-based compensation expense | — | | | 60 | | | — | | | — | | | — | | | — | | | — | |
Shares issued for stock options | — | | | 73 | | | — | | | 73 | | | — | | | — | | | — | |
Shares issued for restricted stock units | — | | | (16) | | | — | | | 16 | | | — | | | — | | | — | |
Treasury stock acquired | — | | | — | | | — | | | (104) | | | — | | | — | | | — | |
| | | | | | | | | | | | | |
Other | — | | | (1) | | | — | | | 2 | | | — | | | — | | | (7) | |
Balance, September 30, 2022 | $ | 1,466 | | | $ | 3,518 | | | $ | — | | | $ | (24,749) | | | $ | 24,566 | | | $ | (4,179) | | | $ | 431 | |
(1) Accumulated other comprehensive income (loss) includes cumulative translation losses of $3,458 at September 30, 2023 ($3,545 at September 30, 2022) and $3,381 at June 30, 2023 ($3,398 at June 30, 2022), respectively, and unrecognized retirement plan and other retiree benefits costs of $586 at September 30, 2023 ($717 at September 30, 2022) and $618 at June 30, 2023 ($1,015 at June 30, 2022), respectively.
See Notes to Condensed Consolidated Financial Statements.
6
COLGATE-PALMOLIVE COMPANY
Condensed Consolidated Statements of Changes in Shareholders’ Equity
(Dollars in Millions)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Nine Months Ended September 30, 2023 |
| Colgate-Palmolive Company Shareholders’ Equity | | |
| Common Stock | | Additional Paid-in Capital | | Unearned Compensation | | Treasury Stock | | Retained Earnings | | Accumulated Other Comprehensive Income (Loss)(1) | | Noncontrolling Interests |
Balance, December 31, 2022 | $ | 1,466 | | | $ | 3,546 | | | $ | (1) | | | $ | (25,128) | | | $ | 24,573 | | | $ | (4,055) | | | $ | 405 | |
Net income | — | | | — | | | — | | | — | | | 1,582 | | | — | | | 113 | |
Other comprehensive income (loss), net of tax | — | | | — | | | — | | | — | | | — | | | 81 | | | (44) | |
Dividends ($1.91 per share)* | — | | | — | | | — | | | — | | | (1,584) | | | — | | | (59) | |
Stock-based compensation expense | — | | | 97 | | | — | | | — | | | — | | | — | | | — | |
Shares issued for stock options | — | | | 145 | | | — | | | 152 | | | — | | | — | | | — | |
Shares issued for restricted stock units | — | | | (30) | | | — | | | 30 | | | — | | | — | | | — | |
Treasury stock acquired | — | | | — | | | — | | | (883) | | | — | | | — | | | — | |
| | | | | | | | | | | | | |
Other | — | | | 4 | | | 1 | | | (5) | | | — | | | — | | | — | |
Balance, September 30, 2023 | $ | 1,466 | | | $ | 3,762 | | | $ | — | | | $ | (25,834) | | | $ | 24,571 | | | $ | (3,974) | | | $ | 415 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Nine Months Ended September 30, 2022 |
| Colgate-Palmolive Company Shareholders’ Equity | | |
| Common Stock | | Additional Paid-in Capital | | Unearned Compensation | | Treasury Stock | | Retained Earnings | | Accumulated Other Comprehensive Income (Loss)(1) | | Noncontrolling Interests |
Balance, December 31, 2021 | $ | 1,466 | | | $ | 3,269 | | | $ | (1) | | | $ | (24,089) | | | $ | 24,350 | | | $ | (4,386) | | | $ | 362 | |
Net income | — | | | — | | | — | | | — | | | 1,780 | | | — | | | 144 | |
Other comprehensive income (loss), net of tax | — | | | — | | | — | | | — | | | — | | | 207 | | | (32) | |
Dividends ($1.86 per share)* | — | | | — | | | — | | | — | | | (1,564) | | | — | | | (42) | |
Stock-based compensation expense | — | | | 105 | | | — | | | — | | | — | | | — | | | — | |
Shares issued for stock options | — | | | 181 | | | — | | | 194 | | | — | | | — | | | — | |
Shares issued for restricted stock units | — | | | (39) | | | — | | | 39 | | | — | | | — | | | — | |
Treasury stock acquired | — | | | — | | | — | | | (895) | | | — | | | — | | | — | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Other | — | | | 2 | | | 1 | | | 2 | | | — | | | — | | | (1) | |
Balance, September 30, 2022 | $ | 1,466 | | | $ | 3,518 | | | $ | — | | | $ | (24,749) | | | $ | 24,566 | | | $ | (4,179) | | | $ | 431 | |
(1) Accumulated other comprehensive income (loss) includes cumulative translation losses of $3,458 at September 30, 2023 ($3,545 at September 30, 2022) and $3,491 at December 31, 2022 ($3,349 at December 31, 2021), respectively, and unrecognized retirement plan and other retiree benefits costs of $586 at September 30, 2023 ($717 at September 30, 2022) and $631 at December 31, 2022 ($1,044 at December 31, 2021), respectively.
* Two dividends were declared in each of the first quarters of 2023 and 2022.
See Notes to Condensed Consolidated Financial Statements.
7
COLGATE-PALMOLIVE COMPANY
Notes to Condensed Consolidated Financial Statements
(Dollars in Millions Except Share and Per Share Amounts)
(Unaudited)
1. Basis of Presentation
The Condensed Consolidated Financial Statements reflect all normal recurring adjustments which, in management’s opinion, are necessary for a fair statement of the results for interim periods. Results of operations for interim periods may not be representative of results to be expected for a full year. Colgate-Palmolive Company (together with its subsidiaries, the “Company” or “Colgate”) reclassifies certain prior year amounts, as applicable, to conform to the current year presentation.
For a complete set of financial statement notes, including the Company’s significant accounting policies, refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2016,2022, filed with the Securities and Exchange Commission.Commission (the “SEC”).
2. Use of Estimates
Provisions for certain expenses, including income taxes, media advertising and consumer promotion, are based on full year assumptions and are included in the accompanying Condensed Consolidated Financial Statements in proportion with estimated annual tax rates, the passage of time or estimated annual sales.sales, as applicable.
| |
3. | Recent Accounting Pronouncements |
On August 28, 2017,3. Recent Accounting Pronouncements
In October 2023, the Financial Accounting Standards Board (“FASB”(the “FASB”) issued Accounting Standards Update (“ASU”) No. 2017-12, “Derivatives2023-06, “Disclosure Improvements-Codification Amendments in Response to the SEC’s Disclosure Update and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities,Simplification Initiative.” amendingThis ASU modified the eligibility criteria for hedged itemsdisclosure and transactions to expand an entity’s ability to hedge nonfinancial and financial risk components. The new guidance eliminates the requirement to separately measure and present hedge ineffectiveness and aligns the presentation requirements of hedge gains and lossesa variety of codification topics by aligning them with the underlying hedge item. The new guidance also simplifies the hedge documentation and hedge effectiveness assessment requirements. The newSEC’s regulations. This guidance is effective for the Company beginning on January 1, 2019, with early adoption permitted. The amended presentationno later than June 30, 2027 and disclosure requirements must be adopted on a prospective basis, while any amendments to cash flow and net investment hedge relationships that exist on the date of adoption must be applied on a “modified retrospective” basis, meaning a cumulative effect adjustment to the opening balance of retained earnings as of the beginning of the year of adoption. While the Company is currently assessing the impact of the new standard on its Consolidated Financial Statements, this new guidance is not expected to have a material impact on the Company’s Consolidated Financial Statements.
On May 10, 2017,In August 2023, the FASB issued ASU No. 2017-09, “Compensation–Stock Compensation (Topic 718)2023-05, “Business Combinations-Joint Venture Formations (Subtopic 805-60): Scope of Modification Accounting,Recognition and Initial Measurement.” clarifying whenThis ASU requires a changejoint venture to the terms or conditions of a share-based payment award must be accounted for as a modification. The new guidance requires modification accounting if theinitially measure all contributions received upon its formation at fair value, vesting condition or the classification of the award is not the same immediately before and after a change to the terms and conditions of the award. The newvalue. This guidance is effective for the Companyapplicable to joint ventures with a formation date on a prospective basis beginning onor after January 1, 2018, with early adoption permitted. This new guidance is not expected to have an impact on the Company’s Consolidated Financial Statements as it is not the Company’s practice to change either the terms or conditions of share-based payment awards once they are granted.
COLGATE-PALMOLIVE COMPANY
Notes to Condensed Consolidated Financial Statements (continued)
(Dollars in Millions Except Share2025 and Per Share Amounts)
(Unaudited)
On March 10, 2017, the FASB issued ASU No. 2017-07, “Compensation–Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,” changing the presentation of the net periodic benefit cost on the Statement of Income and limiting the amount of net periodic benefit cost eligible for capitalization to assets. The new guidance permits only the service cost component of net periodic benefit cost to be eligible for capitalization. The new guidance also requires entities to present the service cost component of net periodic benefit cost together with compensation costs arising from services rendered by employees during the period. Other components of net periodic benefit cost, which include interest, expected return on assets, amortization of prior service costs and actuarial gains and losses, are required to be presented outside of Operating profit. The line item or items used to present the other components of net periodic benefit cost must be disclosed in the Notes to the Consolidated Financial Statements, if not separately described on the Statement of Income. The new presentation requirement is required to be adopted on a “full retrospective” basis, meaning the standard is applied to all of the periods presented in the financial statements, while the limitation on capitalization can only be adopted on a prospective basis. The new guidance is effective for the Company beginning on January 1, 2018, with early adoption permitted. While the Company is currently assessing the impact of the new standard on its Consolidated Financial Statements, based on its historical results, it anticipates that, as a result of the reclassification, full year Operating profit will increase by approximately $100 annually with no impact on Net income attributable to Colgate-Palmolive Company.
On January 26, 2017, the FASB issued ASU No. 2017-04, “Intangibles–Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment,” eliminating the requirement to calculate the implied fair value, essentially eliminating step two from the goodwill impairment test. The new standard requires goodwill impairment to be based upon the results of step one of the impairment test, which is defined as the excess of the carrying value of a reporting unit over its fair value. The impairment charge will be limited to the amount of goodwill allocated to that reporting unit. The standard is effective for the Company on a prospective basis beginning on January 1, 2020, with early adoption permitted. This new guidance is not expected to have a material impact on the Company’s Consolidated Financial Statements.
On January 5, 2017,In March 2023, the FASB issued ASU No. 2017-01, “Business Combinations2023-01, “Leases (Topic 805)842): ClarifyingCommon Control Arrangements.” This ASU clarified the Definition of a Business,” which provides additional guidance on evaluating whether transactions should be accountedaccounting for as acquisitions of assets or businesses. The guidance requires an entity to evaluate if substantially all of the fair value of the assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. If this threshold is met, the new guidance would define this as an asset acquisition; otherwise, the entity then evaluates whether the asset meets the requirement that a business include, at a minimum, an input and substantive process that together significantly contribute to the ability to create outputs.leasehold improvements for leases under common control. The guidance is effective for the Company on a prospective basis beginning on January 1, 2018, with early adoption permitted. This new guidance2024 and is not expected to have a material impact on the Company’s Consolidated Financial Statements.
On October 24, 2016,In September 2022, the FASB issued ASU No. 2016-16, “Income Taxes (Topic 740)2022-04, “Liabilities-Supplier Finance Programs (Subtopic 405-50): Intra-Entity TransfersDisclosure of Assets Other than Inventory,Supplier Finance Program Obligations.” which eliminatesThis ASU requires a buyer that uses supplier finance programs to make annual disclosures about the requirement to defer recognitionprograms’ key terms, the balance sheet presentation of income taxesrelated amounts, the confirmed amount outstanding at the end of the period and associated roll-forward information. The Company adopted the guidance beginning on intra-entity asset transfers until the asset is sold to an outside party. The new guidance requires the recognition of current and deferred income taxes on intra-entity transfers of assets other than inventory, such as intellectual property and property, plant and equipment, when the transfer occurs. As permitted, the Company early-adopted the new standard on a “modified retrospective” basis, meaning the standard is applied only to the most recent period presented in the financial statements, as of January 1, 2017. This new guidance did not have a material impact on2023, except for the Company’s Consolidated Financial Statements.
On August 26, 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments,”roll-forward information, which clarifies how certain cash receipts and payments are to be presented in the statement of cash flows. The guidance is effective for the Company beginning on January 1, 2018, with early adoption permitted. This new guidance is not expected to have a material impact on the Company’s Consolidated Financial Statements.2024. See Note 13, Supplier Finance Programs for additional information.
COLGATE-PALMOLIVE COMPANY
Notes to Condensed Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
(Unaudited)
OnIn March 30, 2016,2022, the FASB issued ASU No. 2016-09, “Compensation–Stock Compensation2022-02, “Financial Instruments-Credit Losses (Topic 718)326): ImprovementsTroubled Debt Restructurings and Vintage Disclosures.” This ASU eliminates the accounting guidance for troubled debt restructurings by creditors while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors made to Employee Share-Based Payment Accounting,” which amended accountingborrowers experiencing financial difficulty. The amendments also require disclosure of current period gross write-offs by the year of origination for income taxes related to share-based compensation, the related classification in the statement of cash flows and share award forfeiture accounting. The newfinancing receivables. This guidance was effective for the Company beginning on January 1, 2017. As required subsequent to the adoption of this new guidance, the Company recognized excess tax benefits of $17 and $43 (resulting from an increase in the fair value of an award from grant date to the vesting or exercise date, as applicable) in the Provision for income taxes as a discrete item during the three and nine months ended September 30, 2017, respectively. These amounts may not necessarily be indicative of future amounts that may be recognized as any excess tax benefits recognized would be dependent on future stock price, employee exercise behavior and applicable tax rates. Prior to January 1, 2017, excess tax benefits were recognized in equity. As permitted, the Company elected to classify excess tax benefits as an operating activity in the Statement of Cash Flows instead of as a financing activity on a prospective basis and did not retrospectively adjust prior periods. Also, as permitted by the new standard, the Company elected to account for forfeitures as they occur.
On March 15, 2016, the FASB issued ASU No. 2016-07, “Investments–Equity Method and Joint Ventures (Topic 323): Simplifying the Transition to the Equity Method of Accounting,” which eliminated the requirement to retroactively adjust an investment that subsequently qualifies for equity method accounting (as a result of an increase in level of ownership interest or degree of influence) as if the equity method of accounting had been applied during all prior periods that the investment was held. The new standard requires that the investor add the cost of acquiring additional ownership interest in the investee to its current basis and prospectively apply the equity method of accounting. For an available-for-sale investment, any unrealized gains or losses should be recognized in earnings at the date the investment qualifies as an equity method investment. The new guidance was effective for the Company beginning on January 1, 2017,2023 and did not have a material impact on the Company’s Consolidated Financial Statements.
On February 25, 2016, the FASB issued its final standard on lease accounting, ASU No. 2016-02, “Leases (Topic 842),” which supersedes Topic 840, “Leases.” The new accounting standard requires the recognition of right-of-use assets and lease liabilities for all long-term leases, including operating leases, on the balance sheet. The new standard also provides additional guidance on the measurement of the right-of-use assets and lease liabilities and will require enhanced disclosures about the Company’s leasing arrangements. Under current accounting standards, substantially all of the Company’s leases are considered operating leases and, as such, are not recognized on the Consolidated Balance Sheet. This new standard is effective for the Company beginning on January 1, 2019, with early adoption permitted. The standard requires a “modified retrospective” adoption, meaning the standard is applied to leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The Company is currently assessing the impact of the new standard on its Consolidated Financial Statements.
On January 5, 2016,In March 2022, the FASB issued ASU No. 2016-01, “Financial Instruments–Overall (Subtopic 825-10)2022-01, “Derivatives and Hedging (Topic 815): RecognitionFair Value Hedging-Portfolio Layer Method.” This ASU clarifies the accounting and Measurement of Financial Assets and Financial Liabilities.” The updated guidance enhancespromotes consistency in reporting for hedges where the reporting model for financial instruments which includes amendments to address aspects of recognition, measurement, presentation and disclosure. The amendment to the standardportfolio layer method is effective for the Company beginning on January 1, 2018. While the Company is currently assessing the impact of the new standard, it does not expect this new guidance to have a material impact on its Consolidated Financial Statements.
On July 22, 2015, the FASB issued ASU No. 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory,” which simplifies the subsequent measurement of inventories by replacing the lower of cost or market test with a lower of cost and net realizable value test. The guidance applies only to inventories for which cost is determined by methods other than last-in first-out (“LIFO”) and the retail inventory method. The newapplied. This guidance was effective for the Company beginning on January 1, 2017. This new guidance2023 and did not have a materialan impact on the Company’s Consolidated Financial Statements.
COLGATE-PALMOLIVE COMPANY
Notes to Condensed Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
(Unaudited)
On May 28, 2014,In October 2021, the FASB and the International Accounting Standards Board issued their final converged standard on revenue recognition. The standard, issued as ASU No. 2014-09,2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.” This ASU requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASU No. 2016-10, “Revenue from Contracts with Customers (Topic 606).” byThis guidance was effective for the FASB, provides a comprehensive revenue recognition model for all contracts with customersCompany beginning on January 1, 2023 and supersedes current revenue recognition guidance. The revenue standard contains principles thatdid not have an entity will apply to determineimpact on the measurement of revenue and timing of when it is recognized. The underlying principle is that an entity will recognize revenue to depict the transfer of goods or services to its customers at an amount that the entity expects to be entitled to in exchange for those goods or services. The new standard also includes enhanced disclosures. During 2016,Company’s Consolidated Financial Statements.
In March 2020, the FASB issued several accounting updates (ASUASU No. 2016-08, 2016-10 and 2016-12) to clarify implementation guidance and correct unintended application2020-04, “Reference Rate Reform (Topic 848): Facilitation of the guidance. The standard allowsEffects of Reference Rate Reform on Financial Reporting,” which provides optional expedients and exceptions for either full retrospective adoptionapplying generally accepted accounting principles (“GAAP”) to contracts, hedging relationships and other transactions that reference LIBOR or modified retrospective adoption. The Company plansanother reference rate expected to adoptbe discontinued because of reference rate reform. In January 2021, the new standard on January 1, 2018, on a “modified retrospective” basis.FASB issued ASU No. 2021-01, “Reference Rate Reform (Topic 848): Scope,” which clarified that certain optional expedients and exceptions in Topic 848 apply to derivatives that are affected by the discounting transition due to reference rate reform. In December 2022, the FASB issued ASU No. 2022-06, “Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848,” which defers the sunset date of Topic 848 from December 31, 2022 to December 31, 2024, after which entities will no longer be permitted to apply the relief under Topic 848. The Company has substantially completed its assessmentevaluation of significant contracts under this ASU. Certain of the reviewed contracts have been modified to apply a new standard and continues to make progress on its implementation. Based onreference rate, primarily the progress to date, the Company doesSecured Overnight Financing Rate (SOFR). The guidance has not expect the new standard will havehad a material impact on its revenue recognition accounting policy or itsthe Company’s Consolidated Financial Statements.
| |
4. | Restructuring and Related Implementation Charges |
In the fourth quarter of 2012, the Company commenced a restructuring program (as subsequently expanded, as described below, the “Global Growth and Efficiency Program”) for sustained growth. The program’s initiatives are expected to help Colgate ensure sustained solid worldwide growth in unit volume, organic sales, operating profit and earnings per share and enhance its global leadership positions in its core businesses.
On October 23, 2014, the Company’s Board of Directors (the “Board”) approved an expansion of the Global Growth and Efficiency Program to take advantage of additional savings opportunities.
On October 29, 2015, the Board approved the reinvestment of the funds from the sale of the Company’s laundry detergent business in the South Pacific to expand the Global Growth and Efficiency Program and extend it for one year through December 31, 2017. The Board approved the implementation plan for this expansion on March 10, 2016.
Building on the Company’s successful implementation of the Global Growth and Efficiency Program to date, on October 26, 2017, the Board approved an expansion of the Global Growth and Efficiency Program and an extension of the program through December 31, 2019 to take advantage of additional opportunities to streamline the Company’s operations.
Initiatives under the Global Growth and Efficiency Program continue to fit within the program’s three focus areas of expanding commercial hubs, extending shared business services and streamlining global functions and optimizing the global supply chain and facilities.
As a result of the expansion, cumulative pretax charges resulting from the Global Growth and Efficiency Program, once all phases are approved and implemented, are now estimated to be in the range of $1,730 to $1,885 ($1,280 to $1,380 aftertax) as compared to the previous estimate of $1,500 to $1,585 ($1,120 to $1,170 aftertax). The Company now anticipates that pretax charges for 2017 will approximate $340 to $380 ($250 to $280 aftertax) as compared to the previous estimate of $275 to $360 ($210 to $260 aftertax). It is expected that substantially all charges resulting from the Global Growth and Efficiency Program will be incurred by December 31, 2019.
The pretax charges resulting from the Global Growth and Efficiency Program are currently estimated to be comprised of the following categories: Employee-Related Costs, including severance, pension and other termination benefits (50%); asset-related costs, primarily Incremental Depreciation and Asset Impairments (10%); and Other charges, which include contract termination costs, consisting primarily of related implementation charges resulting directly from exit activities (20%) and the implementation of new strategies (20%). Over the course of the Global Growth and Efficiency Program, it is currently estimated that approximately 80% of the charges will result in cash expenditures.
COLGATE-PALMOLIVE COMPANY
Notes to Condensed Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
(Unaudited)
4. Acquisitions
Red Collar Pet Foods
On September 30, 2022, the Company acquired a business that operates three dry pet food manufacturing plants in the United States from Red Collar Pet Foods Holdings, Inc. and Red Collar Pet Foods Holdings, L.P. (collectively, “Red Collar Pet Foods”) for cash consideration of $719 to further support the global growth of its Hill’s Pet Nutrition business. The acquisition was financed with a combination of debt and cash and was accounted for as a business combination in accordance with ASC 805.
During the fourth quarter of 2022, the Company finalized its purchase price allocation and the final purchase price of $719 was allocated to the net assets acquired based on their respective estimated fair values as follows:
| | | | | |
Inventories | $ | 33 | |
Property, plant and equipment | 362 | |
Goodwill | 413 | |
Current liabilities | (5) | |
Intangible liability | (16) | |
Deferred income taxes | (68) | |
Fair value of net assets acquired | $ | 719 | |
Goodwill of $413 was allocated to the Pet Nutrition segment. Goodwill will not be deductible for tax purposes.
Pro forma results of operations have not been presented as the impact on the Company’s Consolidated Financial Statements is not material.
Nutriamo S.r.l.
On April 28, 2022, the Company acquired a business that operates a pet food manufacturing plant from Nutriamo S.r.l., a canned pet food manufacturer based in Italy, which gives the Company additional capacity for the Hill’s wet pet nutrition diets, particularly in Europe. This acquisition was accounted for as a business combination in accordance with ASC 805. The impact of this acquisition on the Company’s Consolidated Financial Statements was not material.
COLGATE-PALMOLIVE COMPANY
Notes to Condensed Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
(Unaudited)
5. Restructuring and Related Implementation Charges
On January 27, 2022, the Company’s Board of Directors (the “Board”) approved a targeted productivity program (the “2022 Global Productivity Initiative”). The program is intended to reallocate resources towards the Company’s strategic priorities and faster growth businesses, drive efficiencies in the Company’s operations and streamline the Company’s supply chain to reduce structural costs.
Implementation of the 2022 Global Productivity Initiative, which is expected to be substantially completed by mid-year 2024, is estimated to result in cumulative pretax charges, once all phases are approved and implemented, in the range of $200 to $240 ($170 to $200 aftertax), which is currently expectsestimated to be comprised of the following: employee-related costs, including severance, pension and other termination benefits (80%); asset-related costs, primarily accelerated depreciation and asset write-downs (10%); and other charges (10%), which include contract termination costs, consisting primarily of implementation-related charges resulting directly from exit activities and the implementation of new strategies. It is estimated that approximately 80% to 90% of the charges will result in cash expenditures.
It is expected that the cumulative pretax charges, once all projects are approved and implemented, will relate to initiatives undertaken in North America (15%), Europe (20%(5%), Latin America (5%(10%), Europe (45%), Asia Pacific (5%), Africa/Eurasia (5%(10%), Hill’s Pet Nutrition (10%) and Corporate (40%(15%), which includes substantially all of the costs related to the implementation of new strategies, noted above, on a global basis. The Company now expects that, when it has been fully implemented, the Global Growth and Efficiency Program will contribute a net reduction of approximately 3,800 to 4,400 positions from the Company’s global employee workforce..
For the three andmonths ended September 30, 2023, charges resulting from the 2022 Global Productivity Initiative were $2 pretax ($2 aftertax). For the three months ended September 30, 2022, charges resulting from the 2022 Global Productivity Initiative were $2 pretax ($2 aftertax).
For the nine months ended September 30, 20172023 and 2016, restructuring and related implementationSeptember 30, 2022, charges resulting from the 2022 Global Productivity Initiative are reflected in the Condensed Consolidated Statements of Incomeincome statement as follows:
|
| | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, | | September 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
Cost of sales | $ | 16 |
| | $ | 11 |
| | $ | 51 |
| | $ | 31 |
|
Selling, general and administrative expenses | 22 |
| | 9 |
| | 60 |
| | 49 |
|
Other (income) expense, net | 20 |
| | 22 |
| | 135 |
| | 76 |
|
Total Global Growth and Efficiency Program charges, pretax | $ | 58 |
| | $ | 42 |
| | $ | 246 |
| | $ | 156 |
|
| | | | | | | |
Total Global Growth and Efficiency Program charges, aftertax | $ | 39 |
| | $ | 32 |
| | $ | 185 |
| | $ | 114 |
|
| | | | | | | | | | | |
| Nine Months Ended September 30, |
| 2023 | | 2022 |
Gross Profit | $ | 1 | | | $ | — | |
Selling, general and administrative expenses | 2 | | | 4 | |
Other (income) expense, net | 22 | | | 75 | |
Non-service related postretirement costs | 4 | | | 13 | |
Total 2022 Global Productivity Initiative charges, pretax | $ | 29 | | | $ | 92 | |
| | | |
Total 2022 Global Productivity Initiative charges, aftertax | $ | 23 | | | $ | 72 | |
Restructuring and related implementation charges in the preceding table arewere recorded in the Corporate segment as these initiatives are predominantly centrally directed and controlled and are not included in internal measures of segment operating performance.
Total charges incurred for the Global Growth and Efficiency Program relate to initiatives undertaken by the following reportable operating segments:
|
| | | | | | | | | | | | | | |
| Three Months Ended |
| Nine Months Ended |
| Program-to-date |
| September 30, |
| September 30, |
| Accumulated Charges |
| 2017 |
| 2016 |
| 2017 |
| 2016 |
|
|
North America | 27 | % |
| 30 | % |
| 23 | % |
| 32 | % |
| 18 | % |
Latin America | 2 | % |
| 3 | % |
| 3 | % |
| 5 | % |
| 3 | % |
Europe | (11 | )% |
| 19 | % |
| 29 | % |
| 10 | % |
| 23 | % |
Asia Pacific | 7 | % |
| 4 | % |
| 4 | % |
| 6 | % |
| 3 | % |
Africa/Eurasia | 2 | % |
| 12 | % |
| 2 | % |
| 14 | % |
| 6 | % |
Hill’s Pet Nutrition | 9 | % |
| 5 | % |
| 5 | % |
| 8 | % |
| 7 | % |
Corporate | 64 | % |
| 27 | % |
| 34 | % |
| 25 | % |
| 40 | % |
Since the inception of the Global Growth and Efficiency Program in the fourth quarter of 2012, the Company has incurred cumulative pretax charges of $1,474 ($1,092 aftertax) in connection with the implementation of various projects as follows: |
| | | |
| Cumulative Charges |
| as of September 30, 2017 |
Employee-Related Costs | $ | 594 |
|
Incremental Depreciation | 88 |
|
Asset Impairments | 29 |
|
Other | 763 |
|
Total | $ | 1,474 |
|
COLGATE-PALMOLIVE COMPANY
Notes to Condensed Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
(Unaudited)
The majority of costsTotal charges incurred since inceptionfor the 2022 Global Productivity Initiative relate to initiatives undertaken by the following projects:reportable operating segments:
| | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, | | Program-to-date Accumulated Charges |
| 2023 | | 2022 | | |
North America | 14 | % | | 11 | % | | 11 | % |
Latin America | 1 | % | | 16 | % | | 15 | % |
Europe | 20 | % | | 16 | % | | 19 | % |
Asia Pacific | 21 | % | | 9 | % | | 11 | % |
Africa/Eurasia | 10 | % | | 12 | % | | 11 | % |
Hill's Pet Nutrition | 14 | % | | 10 | % | | 12 | % |
Corporate | 20 | % | | 26 | % | | 21 | % |
Total | 100 | % | | 100 | % | | 100 | % |
Since the inception of the 2022 Global Productivity Initiative, the Company has incurred cumulative pretax charges of $139 ($110 aftertax) in connection with the implementation of the Company’s overall hubbing strategy; the extension of shared business services and streamlining of global functions; the consolidation of facilities; the closing of the Morristown, New Jersey personal care facility; the simplification and streamlining of the Company’s research and development capabilities and oral care supply chain, both in Europe; redesigning the European commercial organization; restructuring how the Company will provide future retirement benefits to substantially all of the U.S.-based employees participating in the Company’s defined benefit retirement plan by shifting them to the Company’s defined contribution plan.various projects as follows:
| | | | | |
| Cumulative Charges |
| as of September 30, 2023 |
Employee-Related Costs | $ | 125 | |
Incremental Depreciation | — | |
Asset Impairments | 1 | |
Other | 13 | |
Total | $ | 139 | |
The following tables summarize the activity for the restructuring and related implementation charges discussed above and the related accruals:
|
| | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, 2017 |
| | Employee-Related Costs | | Incremental Depreciation | | Asset Impairments | | Other | | Total |
Balance at June 30, 2017 | | $ | 138 |
| | $ | — |
| | $ | — |
| | $ | 116 |
| | $ | 254 |
|
Charges | | 21 |
| | 2 |
| | — |
| | 35 |
| | 58 |
|
Cash payments | | (16 | ) | | — |
| | — |
| | (42 | ) | | (58 | ) |
Charges against assets | | (15 | ) | | (2 | ) | | — |
| | — |
| | (17 | ) |
Foreign exchange | | — |
| | — |
| | — |
| | — |
| | — |
|
Balance at September 30, 2017 | | $ | 128 |
| | $ | — |
| | $ | — |
| | $ | 109 |
| | $ | 237 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, 2023 |
| | Employee-Related Costs | | Incremental Depreciation | | Asset Impairments | | Other | | Total |
Balance at December 31, 2022 | | $ | 30 | | | $ | — | | | $ | 1 | | | $ | 3 | | | $ | 34 | |
Charges | | 23 | | | — | | | — | | | 6 | | | 29 | |
Cash Payments | | (38) | | | — | | | — | | | (8) | | | (46) | |
Charges against assets | | (4) | | | — | | | (1) | | | — | | | (5) | |
Foreign exchange | | 5 | | | — | | | — | | | — | | | 5 | |
Balance at September 30, 2023 | | $ | 16 | | | $ | — | | | $ | — | | | $ | 1 | | | $ | 17 | |
| | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, 2017 |
| | Employee-Related Costs | | Incremental Depreciation | | Asset Impairments | | Other | | Total |
Balance at December 31, 2016 | | $ | 56 |
| | $ | — |
| | $ | — |
| | $ | 125 |
| | $ | 181 |
|
Charges | | 129 |
| | 8 |
| | 2 |
| | 107 |
| | 246 |
|
Cash payments | | (43 | ) | | — |
| | — |
| | (124 | ) | | (167 | ) |
Charges against assets | | (17 | ) | | (8 | ) | | (2 | ) | | — |
| | (27 | ) |
Foreign exchange | | 3 |
| | — |
| | — |
| | 1 |
| | 4 |
|
Balance at September 30, 2017 | | $ | 128 |
| | $ | — |
| | $ | — |
| | $ | 109 |
| | $ | 237 |
|
Employee-Related Costs primarily include severance and other termination benefits and are calculated based on long-standing benefit practices, written severance policies, local statutory requirements and, in certain cases, voluntary termination arrangements. Employee-Related Costs also include pension and other retiree benefit enhancements amounting to $15 and $17of $4 for the three and nine months ended September 30, 2017, respectively,2023, which are reflected as Charges against assets within Employee-Related Costs in the preceding tables as the corresponding balance sheet amounts are reflected as a reduction of pension assets or an increase in pension and other retiree benefit liabilities (see Note 9, Retirement Plans and Other Retiree Benefits).liabilities.
Incremental Depreciation is recorded to reflect changes in useful lives and estimated residual values for long-lived assets that will be taken out of service prior to the end of their normal service period. Asset Impairments are recorded to write down assets held for sale or disposal to their fair value based on amounts expected to be realized. Charges against assets within Asset Impairments are net of cash proceeds pertaining to the sale of certain assets.
Other charges consist primarily of charges resulting directly from exit activities and the implementation of new strategies as a result of the Global Growth and Efficiency Program. These charges for the three and nine months ended September 30, 2017 include third-party incremental costs related to the development and implementation of new business and strategic initiatives of $33 and $103, respectively, and contract termination costs and charges resulting directly from exit activities of $2 and $4, respectively. These charges were expensed as incurred.
COLGATE-PALMOLIVE COMPANY
Notes to Condensed Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
(Unaudited)
5.6. Inventories
Inventories by major class arewere as follows:
| | | | | | | | | | | |
| September 30, 2023 | | December 31, 2022 |
Raw materials and supplies | $ | 568 | | | $ | 666 | |
Work-in-process | 52 | | | 48 | |
Finished goods | 1,414 | | | 1,508 | |
Total Inventories, net | $ | 2,034 | | | $ | 2,222 | |
Non-current inventory, net | $ | (103) | | | $ | (148) | |
Current Inventories, net | $ | 1,931 | | | $ | 2,074 | |
|
| | | | | | | |
| September 30, 2017 | | December 31, 2016 |
Raw materials and supplies | $ | 249 |
| | $ | 266 |
|
Work-in-process | 47 |
| | 42 |
|
Finished goods | 909 |
| | 863 |
|
Total Inventories | $ | 1,205 |
| | $ | 1,171 |
|
6. Shareholders’ Equity
Changes in the components of Shareholders’ Equity for the nine months endedSeptember 30, 2017 are as follows:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Colgate-Palmolive Company Shareholders’ Equity | | Noncontrolling Interests |
| Common Stock | | Additional Paid-in Capital | | Unearned Compensation | | Treasury Stock | | Retained Earnings | | Accumulated Other Comprehensive Income (Loss) | | |
Balance, December 31, 2016 | $ | 1,466 |
| | $ | 1,691 |
| | $ | (7 | ) | | $ | (19,135 | ) | | $ | 19,922 |
| | $ | (4,180 | ) | | $ | 260 |
|
Net income | |
| | |
| | |
| | |
| | 1,701 |
| | | | 120 |
|
Other comprehensive income (loss), net of tax | |
| | |
| | |
| | |
| | | | 346 |
| | 11 |
|
Dividends | |
| | |
| | |
| | |
| | (1,406 | ) | | |
| | (16 | ) |
Stock-based compensation expense | |
| | 106 |
| | |
| | |
| | |
| | |
| | |
|
Shares issued for stock options | |
| | 166 |
| | |
| | 274 |
| | |
| | |
| | |
|
Shares issued for restricted stock units | | | (33 | ) | | | | 33 |
| | | | | | |
Treasury stock acquired | |
| | |
| | |
| | (1,055 | ) | | |
| | |
| | |
|
Other | |
| | 2 |
| | 6 |
| | 5 |
| | (10 | ) | | |
| |
|
|
Balance, September 30, 2017 | $ | 1,466 |
| | $ | 1,932 |
| | $ | (1 | ) | | $ | (19,878 | ) | | $ | 20,207 |
| | $ | (3,834 | ) | | $ | 375 |
|
Accumulated other comprehensive income (loss) includes cumulative translation losses of $2,929 and $3,212 at September 30, 2017 and December 31, 2016, respectively, and unrecognized retirement plan and other retiree benefits costs of $898 and $977 at September 30, 2017 and December 31, 2016, respectively.
COLGATE-PALMOLIVE COMPANY
Notes to Condensed Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
(Unaudited)
7. Earnings Per Share
|
| | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended |
| September 30, 2017 | | September 30, 2016 |
| Net income attributable to Colgate-Palmolive Company | | Shares (millions) | | Per Share | | Net income attributable to Colgate-Palmolive Company | | Shares (millions) | | Per Share |
Basic EPS | $ | 607 |
| | 880.7 |
| | $ | 0.69 |
| | $ | 702 |
| | 891.9 |
| | $ | 0.79 |
|
Stock options and restricted stock units | | | 5.6 |
| | |
| | |
| | 7.3 |
| | |
|
Diluted EPS | $ | 607 |
| | 886.3 |
| | $ | 0.68 |
| | $ | 702 |
| | 899.2 |
| | $ | 0.78 |
|
For the three months ended September 30, 20172023 and 2016,2022, earnings per share were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended |
| September 30, 2023 | | September 30, 2022 |
| Net income attributable to Colgate-Palmolive Company | | Shares (millions) | | Per Share | | Net income attributable to Colgate-Palmolive Company | | Shares (millions) | | Per Share |
Basic EPS | $ | 708 | | | 825.6 | | | $ | 0.86 | | | $ | 618 | | | 835.7 | | | $ | 0.74 | |
Stock options and restricted stock units | | | 1.7 | | | | | | | 2.8 | | | |
Diluted EPS | $ | 708 | | | 827.3 | | | $ | 0.86 | | | $ | 618 | | | 838.5 | | | $ | 0.74 | |
For the three months ended September 30, 2023 and 2022, the average number of stock options and restricted stock units that were anti-dilutive and not included in diluted earnings per share calculations were 9,502,32913,538,153 and 1,980,457,2,891,324, respectively.
|
| | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended |
| September 30, 2017 | | September 30, 2016 |
| Net income attributable to Colgate-Palmolive Company | | Shares (millions) | | Per Share | | Net income attributable to Colgate-Palmolive Company | | Shares (millions) | | Per Share |
Basic EPS | $ | 1,701 |
| | 883.0 |
| | $ | 1.93 |
| | $ | 1,835 |
| | 893.2 |
| | $ | 2.05 |
|
Stock options and restricted stock units | | | 6.3 |
| | |
| | |
| | 7.0 |
| | |
|
Diluted EPS | $ | 1,701 |
| | 889.3 |
| | $ | 1.91 |
| | $ | 1,835 |
| | 900.2 |
| | $ | 2.04 |
|
For the nine months endedSeptember 30, 20172023 and 2016,2022, earnings per share were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended |
| September 30, 2023 | | September 30, 2022 |
| Net income attributable to Colgate-Palmolive Company | | Shares (millions) | | Per Share | | Net income attributable to Colgate-Palmolive Company | | Shares (millions) | | Per Share |
Basic EPS | $ | 1,582 | | | 828.8 | | | $ | 1.91 | | | $ | 1,780 | | | 837.7 | | | $ | 2.12 | |
Stock options and restricted stock units | | | 1.7 | | | | | | | 2.7 | | | |
Diluted EPS | $ | 1,582 | | | 830.5 | | | $ | 1.90 | | | $ | 1,780 | | | 840.4 | | | $ | 2.12 | |
For the nine months ended September 30, 2023 and 2022, the average number of stock options and restricted stock units that were anti-dilutive and not included in diluted earnings per share calculations were 9,209,06013,504,588 and 1,212,685,3,709,818, respectively.
Basic and diluted earnings per share are computed independently for each quarter and any year-to-date period presented. As a result of changes in the number of shares outstanding during the year and rounding, the sum of the quarters’quarters’ earnings per share may not necessarily equal the earnings per share for any year-to-date period.
COLGATE-PALMOLIVE COMPANY
Notes to Condensed Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
(Unaudited)
| |
8. | 8. Other Comprehensive Income (Loss) |
Additions to and reclassifications out of Accumulated other comprehensive income (loss) attributable to the Company for the three months ended September 30, 20172023 and 20162022 were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2023 | | 2022 |
| | Pretax | | Net of Tax | | Pretax | | Net of Tax |
Cumulative translation adjustments | | $ | (46) | | | $ | (76) | | | $ | (93) | | | $ | (145) | |
Retirement plans and other retiree benefits: | | | | | | | | |
Net actuarial gain (loss) and prior service costs arising during the period | | 40 | | | 27 | | | 379 | | | 291 | |
Amortization of net actuarial loss, transition and prior service costs (1) | | 7 | | | 5 | | | 9 | | | 7 | |
Retirement plans and other retiree benefit adjustments | | 47 | | | 32 | | | 388 | | | 298 | |
Cash flow hedges: | | | | | | | | |
Unrealized gains (losses) on cash flow hedges | | 3 | | | 2 | | | (28) | | | (23) | |
Reclassification of (gains) losses into net earnings on cash flow hedges (2) | | 4 | | | 3 | | | (4) | | | (3) | |
Gains (losses) on cash flow hedges | | 7 | | | 5 | | | (32) | | | (26) | |
Total Other comprehensive income (loss) | | $ | 8 | | | $ | (39) | | | $ | 263 | | | $ | 127 | |
|
| | | | | | | | | | | | | | | | |
| | 2017 | | 2016 |
| | Pretax | | Net of Tax | | Pretax | | Net of Tax |
| | | | | | | | |
Cumulative translation adjustments | | $ | 48 |
| | $ | 62 |
| | $ | (10 | ) | | $ | (2 | ) |
Retirement plans and other retiree benefits: | | | | | | | | |
Net actuarial gain (loss) and prior service costs arising during the period | | 72 |
| | 45 |
| | 9 |
| | 7 |
|
Amortization of net actuarial loss, transition and prior service costs (1) | | 15 |
| | 9 |
| | 15 |
| | 9 |
|
Retirement plans and other retiree benefits adjustments | | 87 |
| | 54 |
| | 24 |
| | 16 |
|
Available-for-sale securities: | | | | | | | | |
Unrealized gains (losses) on available-for-sale securities | | — |
| | — |
| | — |
| | — |
|
Reclassification of (gains) losses into net earnings on available-for-sale securities | | — |
| | — |
| | (1 | ) | | (1 | ) |
Gains (losses) on available-for-sale securities | | — |
| | — |
| | (1 | ) | | (1 | ) |
Cash flow hedges: | | | | | | | | |
Unrealized gains (losses) on cash flow hedges | | (8 | ) | | (5 | ) | | 1 |
| | — |
|
Reclassification of (gains) losses into net earnings on cash flow hedges (2) | | 4 |
| | 2 |
| | 1 |
| | 1 |
|
Gains (losses) on cash flow hedges | | (4 | ) | | (3 | ) | | 2 |
| | 1 |
|
Total Other comprehensive income (loss) | | $ | 131 |
| | $ | 113 |
| | $ | 15 |
| | $ | 14 |
|
(1)These components of Other comprehensive income (loss) are included in the computation of total pension cost. See Note 9, Retirement Plans and Other Retiree Benefits for additional details.
(2) These (gains) losses are reclassified into Cost of sales. See Note 13,12, Fair Value Measurements and Financial Instruments for additional details.
There were no tax impacts on Other comprehensive income (loss) (“OCI”) attributable to Noncontrolling interests.
COLGATE-PALMOLIVE COMPANY
Notes to Condensed Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
(Unaudited)
Additions to and reclassifications out of Accumulated other comprehensive income (loss) attributable to the Company for the nine months endedSeptember 30, 20172023 and 20162022 were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2023 | | 2022 |
| | Pretax | | Net of Tax | | Pretax | | Net of Tax |
Cumulative translation adjustments | | $ | 60 | | | $ | 35 | | | $ | (67) | | | $ | (195) | |
Retirement plans and other retiree benefits: | | | | | | | | |
Net actuarial gain (loss) and prior service costs arising during the period | | 40 | | | 27 | | | 379 | | | 291 | |
Amortization of net actuarial loss, transition and prior service costs (1) | | 23 | | | 18 | | | 46 | | | 36 | |
Retirement plans and other retiree benefit adjustments | | 63 | | | 45 | | | 425 | | | 327 | |
Cash flow hedges: | | | | | | | | |
Unrealized gains (losses) on cash flow hedges | | 3 | | | 2 | | | 113 | | | 88 | |
Reclassification of (gains) losses into net earnings on cash flow hedges (2) | | (2) | | | (1) | | | (15) | | | (13) | |
Gains (losses) on cash flow hedges | | 1 | | | 1 | | | 98 | | | 75 | |
Total Other comprehensive income (loss) | | $ | 124 | | | $ | 81 | | | $ | 456 | | | $ | 207 | |
|
| | | | | | | | | | | | | | | | |
| | 2017 | | 2016 |
| | Pretax | | Net of Tax | | Pretax | | Net of Tax |
| | | | | | | | |
Cumulative translation adjustments | | $ | 208 |
| | $ | 283 |
| | $ | 76 |
| | $ | 86 |
|
Retirement plans and other retiree benefits: | | | | | | | | |
Net actuarial gain (loss) and prior service costs arising during the period | | 72 |
| | 45 |
| | 9 |
| | 7 |
|
Amortization of net actuarial loss, transition and prior service costs (1) | | 52 |
| | 34 |
| | 47 |
| | 32 |
|
Retirement plans and other retiree benefits adjustments | | 124 |
| | 79 |
| | 56 |
| | 39 |
|
Available-for-sale securities: | | | | | | | | |
Unrealized gains (losses) on available-for-sale securities | | — |
| | — |
| | — |
| | — |
|
Reclassification of (gains) losses into net earnings on available-for-sale securities | | — |
| | — |
| | (1 | ) | | (1 | ) |
Gains (losses) on available-for-sale securities | | — |
| | — |
| | (1 | ) | | (1 | ) |
Cash flow hedges: | | | | | | | | |
Unrealized gains (losses) on cash flow hedges | | (28 | ) | | (17 | ) | | (6 | ) | | (4 | ) |
Reclassification of (gains) losses into net earnings on cash flow hedges (2) | | 2 |
| | 1 |
| | 1 |
| | 1 |
|
Gains (losses) on cash flow hedges | | (26 | ) | | (16 | ) | | (5 | ) | | (3 | ) |
Total Other comprehensive income (loss) | | $ | 306 |
| | $ | 346 |
| | $ | 126 |
| | $ | 121 |
|
(1)These components of Other comprehensive income (loss) are included in the computation of total pension cost. See Note 9, Retirement Plans and Other Retiree Benefits for additional details.
(2) These (gains) losses are reclassified into Cost of sales. See Note 13,12, Fair Value Measurements and Financial Instruments for additional details.
There were no tax impacts on Other comprehensive income (loss)OCI attributable to Noncontrolling interests.
COLGATE-PALMOLIVE COMPANY
Notes to Condensed Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
(Unaudited)
| |
9. | 9. Retirement Plans and Other Retiree Benefits |
Components of Net periodic benefit cost for the three and nine months ended September 30, 20172023 and 20162022 were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, |
| Pension Benefits | | Other Retiree Benefits |
| United States | | International | | | | |
| 2023 | | 2022 | | 2023 | | 2022 | | 2023 | | 2022 |
Service cost | $ | — | | | $ | — | | | $ | 3 | | | $ | 2 | | | $ | 2 | | | $ | 5 | |
Interest cost | 20 | | | 16 | | | 6 | | | 8 | | | 7 | | | 11 | |
Expected return on plan assets | (20) | | | (23) | | | (5) | | | (5) | | | — | | | — | |
Amortization of actuarial loss (gain) | 12 | | | 10 | | | 1 | | | 2 | | | (6) | | | (3) | |
Net periodic benefit cost | $ | 12 | | | $ | 3 | | | $ | 5 | | | $ | 7 | | | $ | 3 | | | $ | 13 | |
Other postretirement charges | — | | | (1) | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | |
Total pension cost | $ | 12 | | | $ | 2 | | | $ | 5 | | | $ | 7 | | | $ | 3 | | | $ | 13 | |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Pension Benefits | | Other Retiree Benefits |
| United States | | International | | | | |
| Three Months Ended September 30, |
| 2017 | | 2016 | | 2017 | | 2016 | | 2017 | | 2016 |
Service cost | $ | — |
| | $ | — |
| | $ | 4 |
| | $ | 4 |
| | $ | 3 |
| | $ | 4 |
|
Interest cost | 23 |
| | 27 |
| | 6 |
| | 7 |
| | 9 |
| | 10 |
|
ESOP offset | — |
| | — |
| | — |
| | — |
| | (1 | ) | | — |
|
Expected return on plan assets | (28 | ) | | (27 | ) | | (5 | ) | | (6 | ) | | — |
| | — |
|
Amortization of transition and prior service costs (credits) | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Amortization of actuarial loss (gain) | 12 |
| | 10 |
| | 2 |
| | 2 |
| | 1 |
| | 3 |
|
Net periodic benefit cost | $ | 7 |
| | $ | 10 |
| | $ | 7 |
| | $ | 7 |
| | $ | 12 |
| | $ | 17 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, |
| Pension Benefits | | Other Retiree Benefits |
| United States | | International | | | | |
| |
| 2023 | | 2022 | | 2023 | | 2022 | | 2023 | | 2022 |
Service cost | $ | — | | | $ | 1 | | | $ | 9 | | | $ | 10 | | | $ | 6 | | | $ | 16 | |
Interest cost | 68 | | | 48 | | | 22 | | | 14 | | | 29 | | | 30 | |
Expected return on plan assets | (61) | | | (75) | | | (14) | | | (10) | | | — | | | (1) | |
| | | | | | | | | | | |
Amortization of actuarial loss (gain) | 34 | | | 33 | | | 3 | | | 5 | | | (14) | | | 8 | |
Net periodic benefit cost | $ | 41 | | | $ | 7 | | | $ | 20 | | | $ | 19 | | | $ | 21 | | | $ | 53 | |
Other postretirement charges | 4 | | | 12 | | | — | | | — | | | — | | | 1 | |
ERISA litigation matter | 267 | | | — | | | — | | | — | | | — | | | — | |
Total pension cost | $ | 312 | | | $ | 19 | | | $ | 20 | | | $ | 19 | | | $ | 21 | | | $ | 54 | |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Pension Benefits | | Other Retiree Benefits |
| United States | | International | | | | |
| Nine Months Ended September 30, |
| 2017 | | 2016 | | 2017 | | 2016 | | 2017 | | 2016 |
Service cost | $ | 1 |
| | $ | 1 |
| | $ | 11 |
| | $ | 12 |
| | $ | 11 |
| | $ | 10 |
|
Interest cost | 70 |
| | 80 |
| | 16 |
| | 19 |
| | 30 |
| | 32 |
|
ESOP offset | — |
| | — |
| | — |
| | — |
| | (1 | ) | | (1 | ) |
Expected return on plan assets | (83 | ) | | (82 | ) | | (15 | ) | | (17 | ) | | — |
| | — |
|
Amortization of transition and prior service costs (credits) | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Amortization of actuarial loss (gain) | 36 |
| | 30 |
| | 7 |
| | 6 |
| | 9 |
| | 11 |
|
Net periodic benefit cost | $ | 24 |
| | $ | 29 |
| | $ | 19 |
| | $ | 20 |
| | $ | 49 |
| | $ | 52 |
|
ForThere were no other postretirement charges for the three months ended September 30, 2023. Other postretirement charges for the three months ended September 30, 2022 included an adjustment of $1 related to the 2022 Global Productivity Initiative. Other postretirement charges for the nine months ended September 30, 20172023 and 2016,2022 included pension and other charges of $4 and $13, respectively, incurred pursuant to the 2022 Global Productivity Initiative.
For the three and nine months ended September 30, 2023 and 2022, the Company made no voluntary contributions to its U.S. postretirement plansplans.
In the first quarter of $812023, the Company recorded a charge of $267 as a result of a decision of the United States Court of Appeals for the Second Circuit (the “Second Circuit”) affirming a grant of summary judgment to the plaintiffs in a lawsuit under the Employee Retirement Income Security Act seeking the recalculation of benefits and $53, respectively.other relief associated with a 2005 residual annuity amendment to the Colgate-Palmolive Company Employees’ Retirement Income Plan (the “Retirement Plan”). The impact of the decision will result in an increase in the obligations of the Retirement Plan, which based on the current funded status of the Retirement Plan will require no immediate cash contribution by the Company. See Note 10, Contingencies for additional information.
In the third quarter of 2022, the Company amended its domestic postretirement plan to limit eligibility for certain existing employees and change the way medical coverage and subsidies are delivered for certain current and future retirees. As required, the Company remeasured the obligation for the domestic postretirement plan, which resulted in the reduction of the projected benefit obligation and a corresponding actuarial gain of $398. The reduction of the projected benefit
COLGATE-PALMOLIVE COMPANY
Notes to Condensed Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
(Unaudited)
On March 30, 2016, the FASB issued ASU No. 2016-09, “Compensation–Stock Compensation (Topic 718): Improvementsobligation and actuarial gain were primarily due to Employee Share-Based Payment Accounting,” which amended accounting for income taxes related to share-based compensation. As a result of adopting the standard effective January 1, 2017, the Company recognized excess tax benefits of $17 and $43 (resulting from an increase in the fair valuediscount rate since December 31, 2021 and the impact of an award from the grant date to the vesting or exercise date, as applicable)plan amendment. The actuarial gain was recorded in the Provision forAccumulated other comprehensive income taxes as a discrete item during the three and nine months ended September 30, 2017, respectively. These amounts may not necessarily be indicative ofis being amortized over future amounts that may be recognized as any excess tax benefits recognized would be dependent on future stock price, employee exercise behavior and applicable tax rates. Prior to January 1, 2017, excess tax benefits were recognized in equity. See Note 3, Recent Accounting Pronouncements for additional information.periods.
The Company has taken a tax position in a foreign jurisdiction since 2002 that has been challenged by the local tax authorities. In May 2015, the Company became aware of several rulings by the Supreme Court in this foreign jurisdiction disallowing certain tax deductions which had the effect of reversing prior decisions. The Company had taken deductions in prior years similar to those disallowed by such court and as a result, as required, reassessed its tax position and increased its unrecognized tax benefits in 2015.
10. Contingencies
During the quarter ended June 30, 2016, the Supreme Court in this foreign jurisdiction decided the matter in the Company’s favor for the years 2002 through 2005 and, as a result, the Company recorded a net tax benefit of $13, including interest. During the quarter ended September 30, 2016, the Administrative Court in this jurisdiction also decided the matter in the Company’s favor for the years 2008 through 2011 by acknowledging the Supreme Court’s ruling for the years 2002 through 2005, which eliminated the possibility for future appeals. As a result, the Company recorded a tax benefit of $17, including interest, in the quarter ended September 30, 2016.
The tax benefit of deductions related to this tax position taken for the years 2006 through 2007 and 2012 through 2014 totals approximately $15 at current exchange rates. These deductions are currently being challenged by the tax authorities either in the lower courts or at the administrative level and, if resolved in the Company’s favor, will result in the Company recording additional tax benefits, including interest.
As a global company serving consumers in more than 200 countries and territories, the Company is routinely subject to a wide variety of legal proceedings. These include disputes relating to intellectual property, contracts, product liability, marketing, advertising, foreign exchange controls, antitrust and trade regulation, as well as labor and employment, pension, data privacy and security, environmental and tax matters and consumer class actions. Management proactively reviews and monitors the Company’s exposure to, and the impact of, environmental matters. The Company is party to various environmental matters and, as such, may be responsible for all or a portion of the cleanup, restoration and post-closure monitoring of several sites.
The Company establishes accruals for loss contingencies when it has determined that a loss is probable and that the amount of loss, or range of loss, can be reasonably estimated. Any such accruals are adjusted thereafter as appropriate to reflect changes in circumstances.
The Company also determines estimates of reasonably possible losses or ranges of reasonably possible losses in excess of related accrued liabilities, if any, when it has determined that a loss is reasonably possible and it is able to determine such estimates. For those matters disclosed below for which the amount of any potential losses can be reasonably estimated, the Company currently estimates that the aggregate range of reasonably possible losses in excess of any accrued liabilities is $0 to approximately $250 (based on current exchange rates). The estimates included in this amount are based on the Company’s analysis of currently available information and, as new information is obtained, these estimates may change. Due to the inherent subjectivity of the assessments and the unpredictability of outcomes of legal proceedings, any amounts accrued or included in this aggregate amountrange may not represent the ultimate loss to the Company. Thus, the Company’s exposure and ultimate losses may be higher or lower, and possibly significantly so, than the amounts accrued or the range disclosed above.
COLGATE-PALMOLIVE COMPANY
Notes to Condensed Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
(Unaudited)
Based on current knowledge, management does not believe that the ultimate resolution of loss contingencies arising from the matters discussed herein will have a material effect on the Company’s consolidated financial position or its ongoing results of operations or cash flows. However, in light of the inherent uncertainties noted above, an adverse outcome in one or more matters could be material to the Company’s results of operations or cash flows for any particular quarter or year.
Brazilian Matters
There are certain tax and civil proceedings outstanding, as described below, related to the Company’sCompany’s 1995 acquisition of the Kolynos oral care business from Wyeth (the “Seller”“Seller”).
The Brazilian internal revenue authority has disallowed interest deductions and foreign exchange losses taken by the Company’s Brazilian subsidiary for certain years in connection with the financing of the Kolynos acquisition. The tax assessments with interest, penalties and any court-mandated fees, at the current exchange rate, are approximately $171.$128. This amount includes additional assessments received from the Brazilian internal revenue authority in April 2016 relating to net operating loss carryforwards used by the Company’s Brazilian subsidiary to offset taxable income that had also been deducted from the authority’s original assessments. The Company has been disputing the disallowances by appealing the assessments since October 2001. Appeals are currently pending at the administrative level.
In the eventeach of September 2015, February 2017, September 2018, April 2019 and August 2020, the Company is ultimately unsuccessfullost an administrative appeal and subsequently challenged these assessments in its administrative appeals, further appeals are available within the Brazilian federal courts.
In September 2015, Currently, there are three lawsuits pending in the Company lost oneLower Federal Court and two cases have progressed to the Federal Court of its appeals at the administrative level and filed a lawsuit in Brazilian federal court. In February 2017, the Company lost an additional administrative appeal and filed a similar action in Brazilian federal court.Appeals. Although there can be no assurances, management believes, based on the opinion of its Brazilian legal counsel, that the disallowances are without merit and that the Company should ultimately prevail. The Company is challenging these disallowances vigorously.
In July 2002, the Brazilian Federal Public Attorney filed a civil action against the federal government of Brazil, Laboratorios Wyeth-Whitehall Ltda. (the Brazilian subsidiary of the Seller) and the Company, as represented by its Brazilian subsidiary, in the 6th. Lower Federal Court in the City of São Paulo, seeking to annul an April 2000 decision by
COLGATE-PALMOLIVE COMPANY
Notes to Condensed Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
(Unaudited)
the Brazilian Board of Tax Appeals that found in favor of the Seller’s Brazilian subsidiary on the issue of whether it had incurred taxable capital gains as a result of the divestiture of Kolynos. The action seeks to make the Company’s Brazilian subsidiary jointly and severally liable for any tax due from the Seller’s Brazilian subsidiary. The case has been pending since 2002, and the Lower Federal Court has not issued a decision. Although there can be no assurances, management believes, based on the opinion of its Brazilian legal counsel, that the Company should ultimately prevail in this action. The Company is challenging this action vigorously.
In December 2005, the Brazilian internal revenue authority issued to the Company’s Brazilian subsidiary a tax assessment with interest, penalties and any court-mandated fees of approximately $77,$56, at the current exchange rate, based on a claim that certain purchases of U.S. Treasury bills by the subsidiary and their subsequent disposition during the period 2000 to 2001 were subject to a tax on foreign exchange transactions. The Company had been disputing the assessment within the internal revenue authority’s administrative appeals process. However, in November 2015, the Superior Chamber of Administrative Tax Appeals denied the Company’s final administrative appeal, and the Company has filed a lawsuit in the Brazilian federal court. In the event the Company is unsuccessful in this filing,lawsuit, further appeals are available within the Brazilian federal courts. Although there can be no assurances, management believes, based on the opinion of its Brazilian legal counsel, that the tax assessment is without merit and that the Company should ultimately prevail. The Company is challenging this assessment vigorously.
COLGATE-PALMOLIVE COMPANY
Notes to Condensed Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
(Unaudited)
Competition MattersMatter
Certain of the Company’s subsidiaries have beenwere historically subject to investigations,actions and, in some cases, fines, by governmental authorities in a number of countries related to alleged competition law violations. Substantially all of these matters also have involved other consumer goods companies and/or retail customers. These investigations often continue for several years and can result in substantial fines for violations that are found as well as associated private actions for damages. While the Company cannot predict the final financial impact of pending competition law matters, as these matters may change, the Company evaluates developments in these matters quarterly and accrues liabilities as and when appropriate. The Company’s policy is to comply with antitrust and competition laws and, if a violation of any such laws is found, to take appropriate remedial action and to cooperate fully with any related governmental inquiry. The current status of pending competition law matters as of September 30, 20172023 of such competition law matters pending against the Company during the nine months ended September 30, 2023 is set forth below.
| |
▪ | In December 2014, the French competition law authority found that 13 consumer goods companies, including the Company’s French subsidiary, exchanged competitively sensitive information related to the French home care and personal care sectors, for which the Company’s French subsidiary was fined $57. In addition, as a result of the Company’s acquisition of the Sanex personal care business in 2011 from Unilever N.V. and Unilever PLC (together with Unilever N.V., “Unilever”), pursuant to a Business and Share Sale and Purchase Agreement (the “Sale and Purchase Agreement”), the French competition law authority found that the Company’s French subsidiary, along with Hillshire Brands Company (formerly Sara Lee Corporation (“Sara Lee”)), were jointly and severally liable for fines of $25 assessed against Sara Lee’s French subsidiary. The Company is entitled to indemnification for this fine from Unilever as provided in the Sale and Purchase Agreement. The fines were confirmed by the Court of Appeal in October 2016. The Company is appealing the decision of the Court of Appeal on behalf of the Company and Sara Lee in the French Supreme Court. |
▪In July 2014, the Greek competition law authority issued a statement of objections alleging a restriction of parallel imports into Greece. The Company responded to this statement of objections. In July 2017, the Company received the decision from the Greek competition law authority in which the Company was fined $11. The Company appealed the decision to the Greek courts. In April 2019, the Greek courts affirmed the judgment against the Company’s Greek subsidiary, but reduced the fine to $10.5 and dismissed the case against Colgate-Palmolive Company. The Company’s Greek subsidiary and the Greek competition authority appealed the decision to the Greek Supreme Court.
| |
▪ | In July 2014, the Greek competition law authority issued a statement of objections alleging a restriction of parallel imports into Greece. The Company responded to this statement of objections. In July 2017, the Company received the decision from the Greek competition law authority in which the Company was fined $11 (based on current exchange rates), which approximates reserves previously taken by the Company for this matter. The Company is appealing the decision to the Greek courts. |
Talcum Powder Matters
The Company has been named as a defendant in civil actions alleging that certain talcum powder products that were sold prior to 1996 were contaminated with asbestos. Mostasbestos and/or caused mesothelioma and other cancers. Many of these actions involve a number of co-defendants from a variety of different industries, including suppliers of asbestos and manufacturers of products that, unlike the Company’s products, were designed to contain asbestos.
As of September 30, 2017,2023, there were 171271 individual cases pending against the Company in state and federal courts throughout the United States, as compared to 174251 cases as of June 30, 2017, 146 cases as of March 31, 20172023 and 115227 cases as of December 31, 2016.2022. During the three months ended September 30, 2017, 222023, 33 new cases were filed and 2513 cases were resolved by voluntary dismissal appeal or settlement. During the nine months ended September 30, 2017, 992023, 136 new cases were filed and 4392 cases were resolved by voluntary dismissal, appealsettlement or settlement.dismissal by the court. The value of the settlements in the quarter and the year-to-date periodperiods presented was not material, either individually or in the aggregate, to each such period’speriods’ results of operations.
A number of the pending cases are expected to go to trial in 2017. The Company believes that a significant portion of itsthe Company’s costs incurred in defending and resolving these claims has been, and the Company believes that a portion of the costs will continue to be, covered by insurance policies issued by several primary, excess and excessumbrella insurance carriers, subject to deductibles, exclusions, retentions, policy limits and policy limits.insurance carrier insolvencies.
While the Company and its legal counsel believe that these cases are without merit and intend to challenge them vigorously, there can be no assurances regarding the ultimate resolution of these matters. Since the amount of any potential losses from these cases currently cannot be reasonably estimated, the range of reasonably possible losses in excess of accrued liabilities disclosed above does not include any amount relating to these cases.
COLGATE-PALMOLIVE COMPANY
Notes to Condensed Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
(Unaudited)
N8
The Company was a defendant in a lawsuit that was brought in Utah federal court by N8 Medical, Inc. (“N8 Medical”), Brigham Young University (“BYU”) and N8 Pharmaceuticals, Inc. (“N8 Pharma”). The complaint, originally filed in November 2013, alleged breach of contract and other torts arising out of the Company’s evaluation of a technology owned by BYU and licensed, at various times, to Ceragenix Pharmaceuticals, Inc., now in bankruptcy, N8 Medical and N8 Pharma.
In 2016, the Company resolved the claims brought by BYU and N8 Medical. These claims were each resolved in an amount that is not material to the Company’s results of operations. In the first quarter of 2017, the court dismissed the claims of N8 Pharma and, in the third quarter of 2017, N8 Pharma appealed the decision.
ERISA Matter
In June 2016, a putative class action claiming that residual annuity payments made to certain participants in the Colgate-Palmolive Company Employees’ Retirement Income Plan (the “Plan”) did not comply with the Employee Retirement Income Security Actlawsuit was filed against the Plan, the Company and certain individuals (the “Company Defendants”) in the United States District Court for the Southern District of New York. This action has been certified asYork (the “District Court”) against the Retirement Plan, the Company and certain individuals (the “Company Defendants”) claiming that residual annuity payments associated with a class action.2005 residual annuity amendment to the Retirement Plan were improperly calculated for certain Retirement Plan participants in violation of the Employee Retirement Income Security Act (“ERISA”). The relief sought includesincluded recalculation of benefits, pre- and post-judgment interest and attorneys’ fees. TheThis action was certified as a class action in July 2017. In July 2020, the Court dismissed certain claims, and in August 2020 granted the plaintiffs' motion for summary judgment on the remaining claims. In September 2020, the Company appealed to the Second Circuit. In March 2023, the Second Circuit affirmed the grant of summary judgment to the plaintiffs.
In light of the Second Circuit decision, the Company recorded a charge to earnings of $267 in the quarter ended March 31, 2023, which is contestingcomprised of the recalculation of benefits and interest. Possible additional charges associated with this action vigorously. Since the amount of any potential loss from this case currently cannotmatter are expected to be reasonably estimated,immaterial and, where estimable, are reflected in the range of reasonably possible losses disclosed above. The impact of the decision will result in excessan increase in the obligations of accrued liabilities disclosed above does not include any amount relatingthe Retirement Plan, which based on the current funded status of the Retirement Plan will require no immediate cash contribution by the Company. In June 2023, the Company filed a petition for certiorari to the case.United States Supreme Court requesting permission for an appeal to that court and that petition was denied in October 2023. Also in June 2023, the plaintiffs filed a motion to enter a revised final judgment in the District Court to address certain unresolved calculation issues, which the Company opposed.
COLGATE-PALMOLIVE COMPANY
Notes to Condensed Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
(Unaudited)
11. Segment Information
The Company operates in two product segments: Oral, Personal and Home Care; and Pet Nutrition.
The operations of the Oral, Personal and Home Care product segment are managed geographically in five reportable operating segments: North America, Latin America, Europe, Asia Pacific and Africa/Eurasia.
The Company evaluates segment performance based on several factors, including Operating profit. The Company uses Operating profit as a measure of operating segment performance because it excludes the impact of Corporate-driven decisions related to interest expense and income taxes.
The accounting policies of the operating segments are generally the same as those described in Note 2, Summary of Significant Accounting Policies to the Company’s Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.2022. Intercompany sales have been eliminated. Corporate operations include costs related to stock options and restricted stock units, research and development costs, Corporate overhead costs, restructuring and related implementation charges and gains and losses on sales of non-core product lines and assets. The Company reports these items within Corporate operations as they relate to Corporate-based responsibilities and decisions and are not included in the internal measures of segment operating performance used by the Company to measure the underlying performance of the operating segments.
COLGATE-PALMOLIVE COMPANY
Notes to Condensed Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
(Unaudited)
Net sales and Operating profit by segment were as follows:
| | | Three Months Ended | | Nine Months Ended | | Three Months Ended | | Nine Months Ended |
| September 30, | | September 30, | | September 30, | | September 30, |
| 2017 | | 2016 | | 2017 | | 2016 | | 2023 | | 2022 | | 2023 | | 2022 |
Net sales | | | | | | | | Net sales | | | | | | | |
Oral, Personal and Home Care | | | | | | | | Oral, Personal and Home Care | | | | |
North America | $ | 795 |
| | $ | 800 |
| | $ | 2,319 |
| | $ | 2,393 |
| North America | $ | 990 | | | $ | 958 | | | $ | 2,926 | | | $ | 2,850 | |
Latin America | 985 |
| | 924 |
| | 2,911 |
| | 2,710 |
| Latin America | 1,194 | | | 997 | | | 3,447 | | | 2,970 | |
Europe | 642 |
| | 609 |
| | 1,784 |
| | 1,803 |
| Europe | 725 | | | 632 | | | 2,053 | | | 1,925 | |
Asia Pacific | 728 |
| | 723 |
| | 2,111 |
| | 2,163 |
| Asia Pacific | 682 | | | 709 | | | 2,084 | | | 2,131 | |
Africa/Eurasia | 251 |
| | 250 |
| | 738 |
| | 720 |
| Africa/Eurasia | 266 | | | 287 | | | 822 | | | 809 | |
Total Oral, Personal and Home Care | 3,401 |
| | 3,306 |
| | 9,863 |
| | 9,789 |
| Total Oral, Personal and Home Care | 3,857 | | | 3,583 | | | 11,332 | | | 10,685 | |
Pet Nutrition | 573 |
| | 561 |
| | 1,699 |
| | 1,685 |
| Pet Nutrition | 1,058 | | | 872 | | | 3,175 | | | 2,653 | |
Total Net sales | $ | 3,974 |
| | $ | 3,867 |
| | $ | 11,562 |
| | $ | 11,474 |
| Total Net sales | $ | 4,915 | | | $ | 4,455 | | | $ | 14,507 | | | $ | 13,338 | |
| | | | | | | | |
Operating profit | |
| | |
| | | | | |
Oral, Personal and Home Care | |
| | |
| | | | | |
North America | $ | 249 |
| | $ | 273 |
| | $ | 723 |
| | $ | 762 |
| |
Latin America | 301 |
| | 298 |
| | 878 |
| | 829 |
| |
Europe | 162 |
| | 158 |
| | 447 |
| | 437 |
| |
Asia Pacific | 220 |
| | 230 |
| | 644 |
| | 668 |
| |
Africa/Eurasia | 44 |
| | 50 |
| | 134 |
| | 138 |
| |
Total Oral, Personal and Home Care | 976 |
| | 1,009 |
| | 2,826 |
| | 2,834 |
| |
Pet Nutrition | 161 |
| | 162 |
| | 481 |
| | 479 |
| |
Corporate | (210 | ) | | (100 | ) | | (642 | ) | | (431 | ) | |
Total Operating profit | $ | 927 |
| | $ | 1,071 |
| | $ | 2,665 |
| | $ | 2,882 |
| |
Approximately 75%two-thirds of the Company’s Net sales are generated from markets outside the U.S., with approximately 50%45% of the Company’s Net sales coming from emerging markets (which consist of Latin America, Asia (excluding Japan), Africa/Eurasia and Central Europe).
For the three months ended September 30, 2017, Corporate Operating profit (loss) included charges of $58 resulting from the Global Growth and Efficiency Program. For the nine months ended September 30, 2017, Corporate Operating profit (loss) included charges of $246 resulting from the Global Growth and Efficiency Program.20
For the three months ended September 30, 2016, Corporate Operating profit (loss) included charges of $42 resulting from the Global Growth and Efficiency Program, a charge of $6 for a previously disclosed litigation matter and a gain of $97 on the sale of land in Mexico. For the nine months ended September 30, 2016, Corporate Operating profit (loss) included charges of $156 resulting from the Global Growth and Efficiency Program, a charge of $6 for a previously disclosed litigation matter and a gain of $97 on the sale of land in Mexico.
For further information regarding the Global Growth and Efficiency Program, refer to Note 4, Restructuring and Related Implementation Charges.
COLGATE-PALMOLIVE COMPANY
Notes to Condensed Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
(Unaudited)
The Company’s Net sales of Oral, Personal and Home Care and Pet Nutrition products accounted for the following percentages of the Company’s Net sales:
| |
13. | Fair Value Measurements and Financial Instruments |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, | | September 30, |
| 2023 | | 2022 | | 2023 | | 2022 |
Net sales | | | | | | | |
Oral Care | 43 | % | | 44 | % | | 42 | % | | 44 | % |
Personal Care | 19 | % | | 19 | % | | 19 | % | | 19 | % |
Home Care | 17 | % | | 17 | % | | 17 | % | | 17 | % |
Pet Nutrition | 21 | % | | 20 | % | | 22 | % | | 20 | % |
Total Net sales | 100 | % | | 100 | % | | 100 | % | | 100 | % |
Operating profit by segment was as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, | | September 30, |
| 2023 | | 2022 | | 2023 | | 2022 |
Operating profit | | | | | | | |
Oral, Personal and Home Care | | | | | | | |
North America | $ | 231 | | | $ | 198 | | | $ | 651 | | | $ | 557 | |
Latin America | 372 | | | 289 | | | 1,050 | | | 818 | |
Europe | 162 | | | 127 | | | 412 | | | 410 | |
Asia Pacific | 193 | | | 185 | | | 564 | | | 556 | |
Africa/Eurasia | 66 | | | 66 | | | 196 | | | 160 | |
Total Oral, Personal and Home Care | 1,024 | | | 865 | | | 2,873 | | | 2,501 | |
Pet Nutrition | 201 | | | 201 | | | 575 | | | 617 | |
Corporate | (196) | | | (119) | | | (536) | | | (427) | |
Total Operating profit | $ | 1,029 | | | $ | 947 | | | $ | 2,912 | | | $ | 2,691 | |
Corporate Operating profit (loss) for the three months ended September 30, 2023 included charges resulting from the 2022 Global Productivity Initiative of $2.
Corporate Operating profit (loss) for the nine months ended September 30, 2023 included product recall costs of $25 and charges resulting from the 2022 Global Productivity Initiative of $25.
Corporate Operating profit (loss) for the three and nine months ended September 30, 2022 included charges resulting from the 2022 Global Productivity Initiative of $3 and $79, respectively, and a gain on the sale of land in Asia Pacific of $47 and acquisition-related costs of $17 in both periods.
COLGATE-PALMOLIVE COMPANY
Notes to Condensed Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
(Unaudited)
12. Fair Value Measurements and Financial Instruments
The Company uses available market information and other valuation methodologies in assessing the fair value of financial instruments. Judgment is required in interpreting market data to develop the estimates of fair value and, accordingly, changes in assumptions or the estimation methodologies may affect the fair value estimates. The Company is exposed to the risk of credit loss in the event of nonperformance by counterparties to financial instrument contracts; however, nonperformance is considered unlikely and any nonperformance is unlikely to be material, as it is the Company’s policy to contract only with diverse, credit-worthy counterparties based upon both strong credit ratings and other credit considerations.
The Company is exposed to market risk from foreign currency exchange rates, interest rates and commodity price fluctuations. Volatility relating to these exposures is managed on a global basis by utilizing a number of techniques, including working capital management, sourcing strategies, selling price increases, selective borrowings in local currencies and entering into selective derivative instrument transactions, issued with standard features, in accordance with the Company’s treasury and risk management policies, which prohibit the use of derivatives for speculative purposes and leveraged derivatives for any purpose. It is the Company’s policy to enter into derivative instrument contracts with terms that match the underlying exposure being hedged. Hedge ineffectiveness, if any, is not material for any period presented.
The Company’s derivative instruments include interest rate swap contracts, forward-starting interest rate swaps, foreign currency contracts, and commodity contracts. The Company utilizes interest rate swap contracts to manage its targeted mix of fixed and floating rate debt, and these swaps are valued using observable benchmark rates (Level 2 valuation). The Company utilizes forward-starting interest rate swaps to mitigate the risk of variability in interest rate for future debt issuances and these swaps are valued using observable benchmark rates (Level 2 valuation). The Company utilizes foreign currency contracts, including forward and swap contracts, option contracts, local currency deposits and local currency borrowings to hedge portions of its foreign currency purchases, assets and liabilities arising in the normal course of business and the net investment in certain foreign subsidiaries. These contracts are valued using observable market rates (Level 2 valuation). Commodity futures contracts are utilized to hedge the purchases of raw materials used in production. These contracts are measured using quoted commodity exchange prices (Level 1 valuation). The duration of foreign currency and commodity contracts generally does not exceed 12 months.
COLGATE-PALMOLIVE COMPANY
Notes to Condensed Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
(Unaudited)
The following table summarizes the fair value of the Company’s derivative instruments and other financial instruments which are carried at fair value in the Company’s Condensed Consolidated Balance Sheets at September 30, 20172023 and December 31, 2016:2022:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Assets | | Liabilities |
| Account | | Fair Value | | Account | | Fair Value |
Designated derivative instruments | | September 30, 2023 | | December 31, 2022 | | | | September 30, 2023 | | December 31, 2022 |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Foreign currency contracts | Other current assets | | $ | 47 | | | $ | 19 | | | Other accruals | | $ | 23 | | | $ | 15 | |
| | | | | | | | | | | |
Commodity contracts | Other current assets | | — | | | 4 | | | Other accruals | | 2 | | | — | |
Total designated | | $ | 47 | | | $ | 23 | | | | | $ | 25 | | | $ | 15 | |
| | | | | | | | | | | |
Other financial instruments | | | | | | | | | | |
Marketable securities | Other current assets | | $ | 247 | | | $ | 175 | | | | | | | |
Total other financial instruments | | $ | 247 | | | $ | 175 | | | | | | | |
COLGATE-PALMOLIVE COMPANY
Notes to Condensed Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
(Unaudited)
|
| | | | | | | | | | | | | | | | | | | |
| Assets | | Liabilities |
| Account | | Fair Value | | Account | | Fair Value |
Designated derivative instruments | | 9/30/17 | | 12/31/16 | | | | 9/30/17 | | 12/31/16 |
Interest rate swap contracts | Other current assets | | $ | — |
| | $ | 1 |
| | Other accruals | | $ | — |
| | $ | — |
|
Interest rate swap contracts | Other assets | | — |
| | 1 |
| | Other liabilities | | 2 |
| | — |
|
Foreign currency contracts | Other current assets | | 9 |
| | 29 |
| | Other accruals | | 36 |
| | 4 |
|
Foreign currency contracts | Other assets | | — |
| | 5 |
| | Other liabilities | | 40 |
| | — |
|
Commodity contracts | Other current assets | | — |
| | — |
| | Other accruals | | — |
| | — |
|
Total designated | | | $ | 9 |
| | $ | 36 |
| | | | $ | 78 |
| | $ | 4 |
|
| | | | | | | | | | | |
Derivatives not designated | | | |
| | |
| | | | | | |
|
Foreign currency contracts | Other current assets | | $ | 1 |
| | $ | — |
| | Other accruals | | $ | 1 |
| | $ | — |
|
Total not designated | | | $ | 1 |
|
| $ | — |
| | | | $ | 1 |
| | $ | — |
|
| | | | | | | | | | | |
Total derivative instruments | | $ | 10 |
| | $ | 36 |
| | | | $ | 79 |
| | $ | 4 |
|
| | | | | | | | | | | |
Other financial instruments | | |
| | |
| | | | |
| | |
|
Marketable securities | Other current assets | | $ | 186 |
| | $ | 23 |
| | | | |
| | |
|
Total other financial instruments | | $ | 186 |
| | $ | 23 |
| | | | |
| | |
|
The carrying amount of cash, cash equivalents, marketable securities, accounts receivable and short-term debt approximated fair value as of September 30, 20172023 and December 31, 2016.2022. The estimated fair value of the Company’s long-term debt, including the current portion, as of September 30, 20172023 and December 31, 2016,2022, was $6,740$8,000 and $6,717,$8,184, respectively, and the related carrying value was $6,520 as$8,706 and $8,755, respectively. In August 2022, the Company issued $500 of each balance sheet date.three-year Senior Notes at a fixed coupon rate of 3.100%, $500 of five-year Senior Notes at a fixed coupon rate of 3.100% and $500 of ten-year Senior Notes at a fixed coupon rate of 3.250%. In March 2023, the Company issued $500 of three-year Senior Notes at a fixed coupon rate of 4.800%, $500 of five-year Senior Notes at a fixed coupon rate of 4.600% and $500 of ten-year Senior Notes at a fixed coupon rate of 4.600%. The estimated fair value of long-term debt was derived principally from quoted prices on the Company’s outstanding fixed-term notes (Level 2 valuation).
The following tables present the notional values as of:
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2023 |
| Foreign Currency Contracts | | Foreign Currency Debt | | | | | | Commodity Contracts | | Total |
Fair Value Hedges | $ | 1,404 | | | $ | — | | | | | | | $ | — | | | $ | 1,404 | |
Cash Flow Hedges | 864 | | | — | | | | | | | 42 | | | 906 | |
Net Investment Hedges | 409 | | | 4,137 | | | | | | | — | | | 4,546 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2022 |
| Foreign Currency Contracts | | Foreign Currency Debt | | | | | | Commodity Contracts | | Total |
Fair Value Hedges | $ | 609 | | | $ | — | | | | | | | $ | — | | | $ | 609 | |
Cash Flow Hedges | 840 | | | — | | | | | | | 26 | | | 866 | |
Net Investment Hedges | 138 | | | 4,797 | | | | | | | — | | | 4,935 | |
COLGATE-PALMOLIVE COMPANY
Notes to Condensed Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
(Unaudited)
Fair Value Hedges
The Company has designated all interest rate swap contractsfollowing tables present the location and certain foreign currency forward and option contracts as fair value hedges, for which the gain or lossamount of gains (losses) recognized on the derivative and the offsetting gain or loss on the hedged item are recognized in current earnings. The impactCompany’s Condensed Consolidated Statements of foreign currency contracts is primarily recognized in Selling, general and administrative expenses and the impact of interest rate swap contracts is recognized in Interest (income) expense, net.Income:
Activity related to fair value hedges recorded during the three and nine months ended September 30, 2017 and 2016 was as follows: | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, |
| 2023 | | 2022 |
| Cost of sales | | Selling, general and administrative expenses | | Interest (income) expense, net | | Cost of sales | | Selling, general and administrative expenses | | Interest (income) expense, net |
Interest rate swaps designated as fair value hedges: | | | | | | | | | | | |
Derivative instrument | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | (12) | |
Hedged items | — | | | — | | | — | | | — | | | — | | | 12 | |
Foreign currency contracts designated as fair value hedges: | | | | | | | | | | | |
Derivative instrument | — | | | (17) | | | — | | | — | | | 17 | | | — | |
Hedged items | — | | | 17 | | | — | | | — | | | (17) | | | — | |
Foreign currency contracts designated as cash flow hedges: | | | | | | | | | | | |
Amount reclassified from OCI | (5) | | | — | | | — | | | 4 | | | — | | | — | |
Commodity contracts designated as cash flow hedges: | | | | | | | | | | | |
Amount reclassified from OCI | (1) | | | — | | | — | | | — | | | — | | | — | |
Forward-starting interest rate swaps designated as cash flow hedges: | | | | | | | | | | | |
Amount reclassified from OCI | — | | | — | | | 2 | | | — | | | — | | | — | |
Total gain (loss) on hedges recognized in income | $ | (6) | | | $ | — | | | $ | 2 | | | $ | 4 | | | $ | — | | | $ | — | |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| 2017 | | 2016 |
| Foreign Currency Contracts | | Interest Rate Swaps | | Total | | Foreign Currency Contracts | | Interest Rate Swaps | | Total |
Notional Value at September 30, | $ | 1,095 |
| | $ | 600 |
| | $ | 1,695 |
| | $ | 239 |
| | $ | 1,250 |
| | $ | 1,489 |
|
Three months ended September 30, | | | | | | | | | | | |
Gain (loss) on derivatives | (14 | ) | | (1 | ) | | (15 | ) | | 1 |
| | (6 | ) | | (5 | ) |
Gain (loss) on hedged items | 14 |
| | 1 |
| | 15 |
| | (1 | ) | | 6 |
| | 5 |
|
Nine months ended September 30, | | | | | | | | | | | |
Gain (loss) on derivatives | (15 | ) | | (3 | ) | | (18 | ) | | (4 | ) | | 3 |
| | (1 | ) |
Gain (loss) on hedged items | 15 |
| | 3 |
| | 18 |
| | 4 |
| | (3 | ) | | 1 |
|
Cash Flow Hedges
All of the Company’s commodity contracts and certain foreign currency forward contracts have been designated as cash flow hedges, for which the effective portion of the gain or loss is reported as a component of Other comprehensive income (“OCI”) and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings.
Activity related to cash flow hedges recorded during the three and nine months ended September 30, 2017 and 2016 was as follows:
|
| | | | | | | | | | | | | | | | | | | | | | | |
| 2017 | | 2016 |
| Foreign Currency Contracts | | Commodity Contracts | | Total | | Foreign Currency Contracts | | Commodity Contracts | | Total |
Notional Value at September 30, | $ | 724 |
| | $ | 1 |
| | $ | 725 |
| | $ | 690 |
| | $ | 8 |
| | $ | 698 |
|
Three months ended September 30, | | | | | | | | | | | |
Gain (loss) recognized in OCI | (8 | ) | | — |
| | (8 | ) | | 3 |
| | (2 | ) | | 1 |
|
Gain (loss) reclassified into Cost of sales | (4 | ) | | — |
| | (4 | ) | | (1 | ) | | — |
| | (1 | ) |
Nine months ended September 30, | | | | | | | | | | | |
Gain (loss) recognized in OCI | (28 | ) | | — |
| | (28 | ) | | (6 | ) | | — |
| | (6 | ) |
Gain (loss) reclassified into Cost of sales | (2 | ) | | — |
| | (2 | ) | | (1 | ) | | — |
| | (1 | ) |
The net gain (loss) recognized in OCI for both foreign currency contracts and commodity contracts is generally expected to be recognized in Cost of sales within the next twelve months.
COLGATE-PALMOLIVE COMPANY
Notes to Condensed Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, |
| 2023 | | 2022 |
| Cost of sales | | Selling, general and administrative expenses | | Interest (income) expense, net | | Cost of sales | | Selling, general and administrative expenses | | Interest (income) expense, net |
| | | | | | | | | | | |
Interest rate swaps designated as fair value hedges: | | | | | | | | | | | |
Derivative instrument | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | (6) | |
Hedged items | — | | | — | | | — | | | — | | | — | | | 6 | |
Foreign currency contracts designated as fair value hedges: | | | | | | | | | | | |
Derivative instrument | — | | | 6 | | | — | | | — | | | 31 | | | — | |
Hedged items | — | | | (6) | | | — | | | — | | | (31) | | | — | |
Foreign currency contracts designated as cash flow hedges: | | | | | | | | | | | |
Amount reclassified from OCI | (2) | | | — | | | — | | | 9 | | | — | | | — | |
Commodity contracts designated as cash flow hedges: | | | | | | | | | | | |
Amount reclassified from OCI | (1) | | | — | | | — | | | 6 | | | — | | | — | |
Forward-starting interest rate swaps designated as cash flow hedges: | | | | | | | | | | | |
Amount reclassified from OCI | — | | | — | | | 5 | | | — | | | — | | | — | |
Total gain (loss) on hedges recognized in income | $ | (3) | | | $ | — | | | $ | 5 | | | $ | 15 | | | $ | — | | | $ | — | |
Net Investment Hedges
The Company has designated certain foreign currency forwardfollowing table presents the location and option contracts and certain foreign currency-denominated debt as net investment hedges, for which the gain or loss on the instrument is reported as a componentamount of Cumulative translation adjustments within OCI, along with the offsetting gain or loss on the hedged items.unrealized gains (losses) included in OCI:
Activity related to net investment hedges recorded during the three and nine months ended September 30, 2017 and 2016 was as follows: | | | | | | | | | | | |
| Three Months Ended |
September 30, |
2023 | | 2022 |
Foreign currency contracts designated as cash flow hedges: | | | |
Gain (loss) recognized in OCI | $ | 5 | | | $ | 11 | |
| | | |
Forward-starting interest rate swaps designated as cash flow hedges: | | | |
Gain (loss) recognized in OCI | (2) | | | (39) | |
| | | |
Commodity contracts designated as cash flow hedges: | | | |
Gain (loss) recognized in OCI | — | | | — | |
Foreign currency contracts designated as net investment hedges: | | | |
Gain (loss) on instruments | (37) | | | 12 | |
Gain (loss) on hedged items | 37 | | | (12) | |
Foreign currency debt designated as net investment hedges: | | | |
Gain (loss) on instruments | 50 | | | 276 | |
Gain (loss) on hedged items | (50) | | | (276) | |
Total unrealized gain (loss) on hedges recognized in OCI | $ | 3 | | | $ | (28) | |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| 2017 | | 2016 |
| Foreign Currency Contracts | | Foreign Currency Debt | | Total | | Foreign Currency Contracts | | Foreign Currency Debt | | Total |
Notional Value at September 30, | $ | 749 |
| | $ | 590 |
| | $ | 1,339 |
| | $ | 917 |
| | $ | 1,190 |
| | $ | 2,107 |
|
Three months ended September 30, | | | | | | | | | | | |
Gain (loss) on instruments | (23 | ) | | (22 | ) | | (45 | ) | | (4 | ) | | (13 | ) | | (17 | ) |
Gain (loss) on hedged items | 22 |
| | 22 |
| | 44 |
| | 4 |
| | 13 |
| | 17 |
|
Nine months ended September 30, | | | | | | | | | | | |
Gain (loss) on instruments | (69 | ) | | (115 | ) | | (184 | ) | | (20 | ) | | (36 | ) | | (56 | ) |
Gain (loss) on hedged items | 69 |
| | 115 |
| | 184 |
| | 20 |
| | 36 |
| | 56 |
|
Derivatives not Designated as Hedging Instruments
Derivatives not designated as hedging instruments for the third quarter of 2017 include foreign currency contracts for which the gain or loss on the instrument is recognized in Other (income) expense, net for the three and nine months ended September 30, 2017. During the second quarter of 2017, the Company de-designated foreign currency forward contracts previously designated as net investment hedges and entered into new derivative instruments with offsetting terms. Gains or losses on these de-designated derivatives were substantially offset by gains and losses on the new derivative instruments.
Derivatives not designated as hedging instruments for the third quarter of 2016 consist of a cross-currency swap that serves as an economic hedge of a foreign currency deposit, for which the gain or loss on the instrument and the offsetting gain or loss on the hedged item are recognized in Other (income) expense, net for each period.
Activity related to these contracts during the three and nine months ended September 30, 2017 and 2016 was as follows:
|
| | | | | | | | |
| | 2017 | | 2016 |
| | Foreign Currency Contracts | | Foreign Currency Contracts |
Notional Value at September 30, | | $ | 42 |
| | $ | 6 |
|
Three months ended September 30, | | | |
|
|
Gain (loss) on instruments | | — |
| | — |
|
Gain (loss) on hedged items | | — |
| | — |
|
Nine months ended September 30, | | | |
|
|
Gain (loss) on instruments | | — |
| | 5 |
|
Gain (loss) on hedged items | | — |
| | (5 | ) |
COLGATE-PALMOLIVE COMPANY
Notes to Condensed Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
(Unaudited)
| | | | | | | | | | | |
| Nine Months Ended |
September 30, |
2023 | | 2022 |
Foreign currency contracts designated as cash flow hedges: | | | |
Gain (loss) recognized in OCI | $ | (4) | | | $ | 24 | |
Forward-starting interest rate swaps designated as cash flow hedges: | | | |
Gain (loss) recognized in OCI | 13 | | | 85 | |
Commodity contracts designated as cash flow hedges: | | | |
Gain (loss) recognized in OCI | (6) | | | 4 | |
Foreign currency contracts designated as net investment hedges: | | | |
Gain (loss) on instruments | (19) | | | 15 | |
Gain (loss) on hedged items | 19 | | | (15) | |
Foreign currency debt designated as net investment hedges: | | | |
Gain (loss) on instruments | 90 | | | 636 | |
Gain (loss) on hedged items | (90) | | | (636) | |
Total unrealized gain (loss) on hedges recognized in OCI | $ | 3 | | | $ | 113 | |
Other
COLGATE-PALMOLIVE COMPANY
Notes to Condensed Consolidated Financial InstrumentsStatements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
Other(Unaudited)
13. Supplier Finance Programs
The Company has agreements to provide supplier finance programs which facilitate participating suppliers’ ability to finance payment obligations of the Company with designated third-party financial instrumentsinstitutions. Participating suppliers may, at their sole discretion, elect to finance one or more payment obligations of the Company prior to their scheduled due dates at a discounted price to participating financial institutions. The Company’s obligations to its suppliers, including amounts due and scheduled payment dates, are classifiednot impacted by suppliers’ decisions to finance amounts under these arrangements. The outstanding payment obligations under the Company’s supplier finance programs are included in Accounts Payable in the Condensed Consolidated Balance Sheets and were not material as Other current assetsof September 30, 2023 or Other assets.December 31, 2022.
Other financial instruments classified
14. Income Taxes
The effective income tax rate was 21.9% for the third quarter of 2023 as Other current assets include marketable securities consistingcompared to 23.5% for the third quarter of bank deposits2022. The primary driver of $186 with original maturities greater than 90 days carried at fair value (Level 1 valuation) and the current portion of bonds issueddecrease in the effective income tax rate is described below. The quarterly provision for income taxes is determined based on the Company’s estimated full year effective income tax rate adjusted by the Argentinian government in the amount of $36 classifiedtax attributable to infrequent or unusual items that are separately recognized on a discrete basis in the income tax provision in the quarter in which they occur. The Company’s current estimate of its full year effective income tax rate before discrete period items is 23.7%, as held-to-maturity and carried at amortized cost.compared to 23.8% in the comparable period of 2022.
Through its subsidiaryIn the third quarter of 2023, the Internal Revenue Service (the “IRS”) issued a notice giving taxpayers temporary relief from the effects of certain U.S. tax regulations that were issued in Argentina,December 2021, which place greater restrictions on foreign taxes that are creditable against U.S. taxes on foreign-source income. This notice allows taxpayers to defer the application of these new regulations until 2024 which is the primary driver of the decrease in the effective tax rate in the third quarter of 2023.
In the second quarter of 2023, the Company has investedreassessed with its legal and tax advisers certain tax deductions taken in U.S. dollar-linked, devaluation-protected bondsprior years by one of its subsidiaries and Argentinian peso-denominated bonds issuedconcluded that it is more likely than not that the deductions would not be sustained by the Argentinian government. Ascourts in that jurisdiction. The value of the tax deductions was not material to the Company in any year in which they were taken. The cumulative effect of the change in tax position of $148 was reflected as a discrete item in the second quarter’s income tax expense, partially offset by the reversal of certain prior years’ withholding tax reserves of $22 that are no longer required. The tax liability was paid in the quarter ended September 30, 2017,2023. The current year impact of these changes is included in the amortized costCompany’s estimated full year effective income tax rate.
The Company has ongoing federal, state and international income tax audits in various jurisdictions and evaluates uncertain tax positions that may be challenged by local tax authorities and not fully sustained. All U.S. federal income tax returns through December 31, 2013 have been audited by the IRS and there are limited matters which the Company plans to appeal for years 2010 through 2013. One such matter relates to the IRS assessment of taxes on the Company by imputing income on certain activities within one of our international operations, which is also under audit for the years 2014 through 2018. There was $36 and their approximate fair value was $36 (Level 2 valuation).a U.S. Tax Court ruling in February 2023 in favor of the IRS against an unrelated third party on a similar matter. Despite the recent U.S. Tax Court ruling, the Company continues to believe that the tax assessment against the Company is without merit. While there can be no assurances, the Company believes this matter will ultimately be decided in favor of the Company. The amount of tax plus interest for the years 2010 through 2018 is estimated to be approximately $145, which is not included in the Company’s uncertain tax positions.
COLGATE-PALMOLIVE COMPANY
Management’sManagement’s Discussion and Analysis of Financial
Condition and Results of Operations
(Dollars in Millions Except Per Share Amounts)
Executive Overview and Outlook
Business Organization
Colgate-Palmolive Company (together with its subsidiaries, “we,” “us,” “our,” the “Company” or “Colgate”) seeksis a caring, innovative growth company reimagining a healthier future for all people, their pets and our planet. We seek to deliver strong, consistent business resultssustainable, profitable growth through science-led, core and premium innovation and superior shareholder returns, as well as to provide Colgate people with an innovative and inclusive work environment. We do this by providing consumersdeveloping and selling products globally with products that make people’s and their pets’ lives healthier and more enjoyable.enjoyable and by embracing our sustainability and social impact and diversity, equity and inclusion (“DE&I”) strategies across our organization.
To this end, the Company isWe are tightly focused on two product segments: Oral, Personal and Home Care; and Pet Nutrition. Within these segments, the Company followswe follow a closely defined business strategy to developgrow our key product categories and increase our overall market leadership positionsshare. Within the categories in key product categories. These product categories are prioritizedwhich we compete, we prioritize our efforts based on their capacity to maximize the use of the organization’s core competencies and strong global equities and to deliver sustainable, profitable long-term growth.
Operationally, the Company iswe are organized along geographic lines with management teams having responsibility for the business and financial results in each region. The Company competesWe compete in more than 200 countries and territories worldwide with established businesses in all regions contributing to the Company’sour sales and profitability. Approximately 75%two-thirds of the Company’sour Net sales are generated from markets outside the U.S., with approximately 50%45% of the Company’sour Net sales coming from emerging markets (which consist of Latin America, Asia (excluding Japan), Africa/Eurasia and Central Europe). This geographic diversity and balance help to reduce the Company’sour exposure to business and other risks in any one country or part of the world.
The Oral, Personal and Home Care product segment is managed geographically in five reportable operating segments: North America, Latin America, Europe, Asia Pacific and Africa/Eurasia, all of which sell primarily to a variety of retailtraditional and wholesale customerseCommerce retailers, wholesalers, distributors, dentists and distributors. The Company, throughskin health professionals. Through Hill’s Pet Nutrition, we also competescompete on a worldwide basis in the pet nutrition market, selling its products principally through authorized pet supply retailers, veterinarians and veterinarians. The Company’seCommerce retailers. We also sell certain of our products direct-to-consumer. We are also sold online through various e-commerce platformsengaged in manufacturing and retailers.sourcing of products and materials on a global scale and have major manufacturing facilities, warehousing facilities and distribution centers in every region around the world.
On an ongoing basis, management focuses on a variety of key indicators to monitor business health and performance. These indicators include market share, net sales (including volume, pricing and foreign exchange components), organic sales growth (net sales growth excluding the impact of foreign exchange, acquisitions and divestments), a non-GAAP financial measure, and gross profit margin, selling, general and administrative expenses, operating profit, net income and earnings per share, in each case, on a GAAP and non-GAAP basis, as well as measures used to optimize the management of working capital, capital expenditures, cash flow and return on capital. In addition, we review market share and other data to assess how our brands are performing within their categories on a global and regional basis. The monitoring of these indicators and the Company’sour Code of Conduct and corporate governance practices help to maintain business health and strong internal controls. For additional information regarding non-GAAP financial measures and the Company’s use of market share data and the limitations of such data, see “Non-GAAP Financial Measures” and “Market Share Information” below.
COLGATE-PALMOLIVE COMPANY
Management’s Discussion and Analysis of Financial
Condition and Results of Operations
(Dollars in Millions Except Per Share Amounts)
COVID-19
The COVID-19 pandemic and government steps to reduce the spread and address the impact of COVID-19 have had and may continue to have an impact on the way people live, work, interact, travel and shop. During the COVID-19 pandemic, many of the communities in which we manufacture, market and sell our products experienced and may in the future experience “stay at home” orders, travel or movement restrictions and other government actions to address the pandemic. While the impact of COVID-19 on our business has largely abated at this time, uncertainties continue, particularly in China where we have substantial manufacturing facilities and business, and in the travel retail channel, where we have experienced and may continue to experience disruptions particularly in our Filorga business. While we currently expect to be able to continue operating our business as described above, uncertainty resulting from COVID-19 could result in unforeseen additional disruptions to our business, including to our global supply chain and retailer network, and/or require us to incur additional operational costs.
For more information about the anticipated COVID-19 impact, see “Outlook” below.
The War in Ukraine
The war in Ukraine, and the related geopolitical tensions, have had and continue to have a significant impact on our operations in Ukraine and Russia, though it has not been material to our Consolidated Financial Statements. The safety of our employees and partners in Ukraine has been and remains our first priority. While our ability to do business in Ukraine has been significantly impacted, we remain committed to rebuilding our business there and to providing access to our products to people in the region. In Russia, we are importing and selling a reduced portfolio of health and hygiene products for everyday use. We have no manufacturing facilities in Russia and have ceased all capital investments and media activities. While our Eurasia business has been impacted by the war in Ukraine, the war has not had a material impact on our consolidated results of operations, cash flow or financial condition. For the nine months ended September 30, 2023, our Eurasia business constituted approximately 2% of our consolidated net sales and approximately 4% of our consolidated operating profit (the majority of which was Russia). We also continue to monitor the impact of sanctions, export controls and import restrictions imposed in response to the war in Ukraine on our business. The situation is evolving and uncertainties remain regarding the full impact of the war and the related impact on the global economy and geopolitical relations generally, and on our business in particular. We have seen and expect to continue to see the war’s impact on the global economy and our business including, among other things, the cost of raw and packaging materials and commodities (including the price of oil and natural gas), supply chain and logistics challenges and foreign currency volatility. For more information about factors that could impact our business, including due to the war in Ukraine, refer to Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2022.
COLGATE-PALMOLIVE COMPANY
Management’s Discussion and Analysis of Financial
Condition and Results of Operations
(Dollars in Millions Except Per Share Amounts)
Business Strategy
To achieve itsour business and financial objectives, we are focused on driving organic sales growth and long-term profitable growth through science-led, core and premium innovation; pursuing higher-growth adjacent categories and segments; expanding in faster-growing channels and markets, and delivering margin expansion through operating leverage and efficiency. We continue to prioritize our investments in high growth segments within our Oral Care, Personal Care and Pet Nutrition businesses. We are also seeking to maximize the Company focuses the organization on initiativesimpact of our environmental, social and governance programs and to drive and fund growth. The Company seeks to capture significant opportunities for growth by identifying and meeting consumer needs within its core categories, through its focus on innovation and the deployment of valuable consumer and shopper insightslead in the development of successful new products regionally,human capital, including our sustainability and social impact and DE&I strategies, which we are then rolled out on a global basis. To enhance these efforts, the Company has developed keyworking to integrate across our organization. We are strengthening and leveraging our capabilities in areas such as innovation, digital, artificial intelligence, eCommerce and data and analytics, enabling us to be more responsive in today’s rapidly changing world. In particular, we believe our digital transformation is of paramount importance to our success going forward. We continue to invest behind our brands, including through advertising, and to develop initiatives to build strong relationships with consumers, dental, veterinary and veterinaryskin health professionals and retail customers. In addition, the Company has strengthened its capabilities in e-commerce, developing its relationships with online-only retailerstraditional and its digital marketing capabilities. GrowtheCommerce retailers. We also continue to broaden our eCommerce offerings, including direct-to-consumer and subscription services. We continue to believe that growth opportunities are greater in those areas of the world in which economic development and rising consumer incomes expand the size and number of markets for the Company’sour products.
COLGATE-PALMOLIVE COMPANYWe are also changing the way we work to drive growth and how we approach innovation with focus, empowerment, experimentation and digitalization to respond to the dynamic retail landscape and the evolving preferences of our customers and consumers. The retail landscape, the ease of new entrants into the market in many of our categories and the evolving preferences of our customers and consumers demand that we work differently and faster in an agile, authentic and culturally relevant manner to drive innovation.
Management’s Discussion and Analysis of Financial
Condition and Results of Operations
(Dollars in Millions Except Per Share Amounts)
The investments needed to supportdrive growth are developedsupported through continuous, Company-wide initiatives to lower costs and increase effective asset utilization. Through these initiatives, which are referred to as the Company’sour funding-the-growth initiatives, the Company seekswe seek to become even more effective and efficient throughout itsour businesses. These initiatives are designed to reduce costs associated with direct materials, indirect expenses, distribution and logistics and advertising and promotional materials, among other things, and encompass a wide range of projects, examples of which include raw material substitution, reduction of packaging materials, consolidating suppliers to leverage volumes and increasing manufacturing efficiency through SKU reductions and formulation simplification.
Significant Items Impacting Comparability
During the quarter ended June 30, 2023, we reassessed with our legal and tax advisers certain tax deductions taken in prior years by one of our subsidiaries and concluded that it is more likely than not that the deductions would not be sustained by the courts in that jurisdiction. The Company also continuesvalue of the tax deductions was not material to prioritize its investments toward its higher margin businesses, specifically Oral Care, Personal Care and Pet Nutrition.
Effective December 31, 2015,us in any year in which they were taken. The cumulative effect of the Company concluded it no longer met the accounting criteria for consolidationchange in tax position of its Venezuelan subsidiary (“CP Venezuela”) and began accounting for CP Venezuela using the cost method of accounting. As such, effective December 31, 2015, the Company’s Consolidated Balance Sheet no longer includes the assets and liabilities of CP Venezuela. Prior periods have not been restated and CP Venezuela’s Net sales, Operating profit and Net income are included$148 was reflected as a discrete item in the Company’s Consolidated Statementssecond quarter’s income tax expense, partially offset by the reversal of Income through December 31, 2015.
Since January 1, 2016, under the cost methodcertain prior years’ withholding tax reserves of accounting, the Company no longer includes the local operating results of CP Venezuela in its Consolidated Financial Statements and includes income relating to CP Venezuela only to the extent it receives cash for sales of inventory to CP Venezuela or for dividends or royalties remitted by CP Venezuela, all of which have been immaterial. Although CP Venezuela’s local operating results$22 that are no longer required (hereinafter referred to as the “foreign tax matter”). The tax liability was paid in the quarter ended September 30, 2023. The current year impact of these changes is included in our estimated full year effective income tax rate. See Note 14, Income Taxes, to the Company’sCondensed Consolidated Financial Statements for accounting purposes, under current tax rules,additional information.
During the Company is required to continue including CP Venezuela in its consolidated U.S. federal income tax return. In the first quarter ended March 31, 2023, we recorded a charge of 2016, Provision for income taxes included a $210 U.S. income tax benefit principally related to changes in Venezuela’s foreign exchange regime implemented in March 2016.
In the fourth quarter of 2012, the Company commenced a restructuring program (as subsequently expanded,$267 as described below, the “Global Growth and Efficiency Program”) for sustained growth. The program’s initiatives are expected to help the Company ensure sustained solid worldwide growth in unit volume, organic sales, operating profit and earnings per share and enhance its global leadership positions in its core businesses.
On October 23, 2014, the Company’s Board of Directors (the “Board”) approved an expansion of the Global Growth and Efficiency Program to take advantage of additional savings opportunities. On October 29, 2015, the Board approved the reinvestment of the funds from the sale of the Company’s laundry detergent business in the South Pacific to expand the Global Growth and Efficiency Program and extend it through December 31, 2017. The Board approved the implementation plan for this expansion on March 10, 2016.
Implementation of the Global Growth and Efficiency Program remains on track. Building on the Company’s successful implementation of the Global Growth and Efficiency Program to date, on October 26, 2017, the Board approved an expansion of the Global Growth and Efficiency Program and an extension of the program through December 31, 2019 to take advantage of additional opportunities to streamline the Company’s operations.
The initiatives under the Global Growth and Efficiency Program continue to be focused on the following areas:
| |
▪ | Expanding Commercial Hubs |
| |
▪ | Extending Shared Business Services and Streamlining Global Functions |
| |
▪ | Optimizing Global Supply Chain and Facilities |
As a result of a decision of the expansion, savings, substantially allUnited States Court of which are expectedAppeals for the Second Circuit affirming a grant of summary judgment to increase future cash flows, are now projectedthe plaintiffs in a lawsuit under the Employee Retirement Income Security Act seeking the recalculation of benefits and other relief associated with a 2005 residual annuity amendment to bethe Colgate-Palmolive Company Employees’ Retirement Income Plan (the “Retirement Plan”). The decision will result in an increase in the rangeobligations of $560 to $635 pretax ($500 to $575 aftertax) annually, once all projects are approved and implemented, as comparedthe Retirement Plan, which based on the current funded status of the Retirement Plan will require no immediate cash contribution by the Company. In June 2023, we filed a petition for certiorari to the previous estimate of $455United States Supreme Court requesting permission for an appeal to $495 pretax ($425that court, which was denied in October 2023, and the plaintiffs filed a motion to $475 aftertax). Cumulative pretax charges resulting from the Global Growth and Efficiency Program, once all phases are approved and implemented, are now estimated to beenter a revised final judgment in the range of $1,730District Court to $1,885 ($1,280 to $1,380 aftertax), as comparedaddress certain unresolved calculation issues, which we opposed. See Note 10, Contingencies to the previous estimateCondensed Consolidated Financial Statements for additional information.
During the quarter ended March 31, 2023, we announced a voluntary recall of $1,500 to $1,585 ($1,120 to $1,170 aftertax).
Inselect Fabuloso multi-purpose cleaner products sold in the threeUnited States and Canada. The costs associated with the voluntary recall had a $25 impact on our Operating profit for the nine months ended September 30, 2017, the Company incurred aftertax costs of $392023 and $185, respectively, associated with the Global Growth and Efficiency Program.are not expected to have a material impact in future periods.
COLGATE-PALMOLIVE COMPANY
Management’sManagement’s Discussion and Analysis of Financial
Condition and Results of Operations
(Dollars in Millions Except Per Share Amounts)
On September 30, 2022, the Company acquired a business that operates three dry pet food manufacturing plants in the United States, from Red Collar Pet Foods Holdings, Inc. and Red Collar Pet Foods Holdings, L.P. (collectively, “Red Collar Pet Foods”) for $719 in order to further support the global growth of the Hill’s Pet Nutrition business. See Note 4, Acquisitions to the Consolidated Financial Statements for additional information.
In July 2022, one of the Company’s subsidiaries in Asia Pacific completed the sale of land and recognized a pretax gain of $47 ($15 aftertax attributable to the Company).
On January 27, 2022, our Board of Directors (the “Board”) approved a targeted productivity program (the “2022 Global Productivity Initiative”). The program is intended to reallocate resources towards our strategic priorities and faster growth businesses, drive efficiencies in our operations and streamline our supply chain to reduce structural costs. Implementation of the 2022 Global Productivity Initiative, which is expected to be substantially completed by mid-year 2024, is estimated to result in cumulative pretax charges, once all phases are approved and implemented, in the range of $200 to $240 ($170 to $200 aftertax). Annualized pretax savings are projected to be in the range of $90 to $110 ($70 to $85 aftertax), once all projects are approved and implemented. For more information regarding the 2022 Global Growth and Efficiency Program,Productivity Initiative, see “Restructuring and Related Implementation Charges” below.
For both the three months ended September 30, 2023 and 2022, we incurred pretax costs of $2 (aftertax costs of $2), resulting from the 2022 Global Productivity Initiative.
In the nine months ended September 30, 2023 and 2022, we incurred pretax costs of $29 (aftertax costs of $23) and $92 (aftertax costs of $72), respectively, resulting from the 2022 Global Productivity Initiative.
Outlook
Looking forward, the Company expectswe expect global macroeconomic, political and market conditions to remain highly challenging, including as a result of inflation and rising interest rates. During the nine months ended September 30, 2023, we experienced significantly higher raw and packaging material costs. We have taken and are taking additional pricing to try to offset these increases in raw and packaging material costs. This has negatively impacted and may continue to negatively impact consumer demand for our products. Additionally, inflation is impacting the broader economy with consumers around the world facing widespread rising prices as well as rising interest rates resulting from measures to address inflation. Such inflation and rising interest rates may negatively impact consumer consumption or discretionary spending and/or change their purchasing patterns by foregoing purchasing certain of our products or by switching to “private label” or to our lower-priced product offerings. Although we continue to devote significant resources to support our brands and market our products at multiple price points, these changes could reduce demand for and sales volumes of our products or result in a shift in our product mix from higher margin to lower margin product offerings. In light of this challenging environment, we expect increased volatility across all of our categories and it is therefore difficult to predict category growth rates toin the near term.
Given that approximately two-thirds of our Net sales originate in markets outside the U.S., we have experienced and will likely continue to be slow. experience volatile foreign currency fluctuations. As discussed above, we have also experienced higher raw and packaging material costs. While we have taken, and will continue to take, measures to mitigate the effect of these conditions, such as the 2022 Global Productivity Initiative and our funding-the-growth and revenue growth management initiatives, including additional pricing, in the current environment, it may become increasingly difficult to implement certain of these mitigation strategies. Should these conditions persist, they could adversely affect our future results.
While the global marketplace in which the Company operateswe operate has always been highly competitive, the Company continueswe continue to experience heightened competitive activity in certain markets from strong local competitors, and from other large multinational companies, some of which have greater resources than we do, and from new entrants into the Company does.market in many of our categories. Such activities have included more aggressive product claims and marketing challenges, as well as increased promotional spending and geographic expansion.
We have been negatively affected by changes in the policies and practices of our trade customers in key markets, such as inventory destocking, fulfillment requirements, limitations on access to shelf space, delisting of our products and certain sustainability, supply chain and packaging standards or initiatives. In addition, the emergenceretail landscape in many of new salesour markets continues to evolve as a result of the continued growth of eCommerce, changing consumer preferences (as consumers increasingly shop online and via mobile and social applications) and the increased presence of alternative retail channels, for the Company’s products, such as e-commerce, may affect consumer preferencessubscription services and market dynamics. Given that approximately 75% of the Company’s Net sales originate in markets outside the U.S., the Company continuesdirect-to-consumer businesses. We plan to experience volatile foreign currency fluctuations and high raw and packaging material costs. While the Company has taken, and will continue to take, measures to mitigate the effect of these conditions, should they persist, they could adversely affect the Company’s future results. For additional information on factors that could impact the Company’s results, see “Cautionary Statement on Forward-Looking Statements” below.invest behind our digital and analytics
31
The Company believes it is well prepared to meet the challenges ahead due to its strong financial condition, experience operating in challenging environments and continued focus on the Company’s strategic initiatives: engaging to build our brands; innovation for growth; effectiveness and efficiency; and leading to win. This focus, together with the strength of the Company’s global brands, its broad international presence in both developed and emerging markets and initiatives, such as the Global Growth and Efficiency Program, should position the Company well to increase shareholder value over the long term.
COLGATE-PALMOLIVE COMPANY
Management’sManagement’s Discussion and Analysis of Financial
Condition and Results of Operations
(Dollars in Millions Except Per Share Amounts)
capabilities and higher growth businesses. The substantial growth in eCommerce and the emergence of alternative retail channels have created and may continue to create pricing pressures and/or adversely affect our relationships with our key retailers.
We continue to closely monitor the impact of the war in Ukraine, the Israel-Hamas war, COVID-19 and the challenging market conditions discussed above on our business and the related uncertainties and risks. While we have taken, and will continue to take, measures to mitigate the effects of these conditions, we cannot estimate with certainty the full extent of their impact on our business, results of operations, cash flows and/or financial condition. For more information about factors that could impact our business, see “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022.
We believe that we are well prepared to meet the challenges ahead due to our strong financial condition, experience operating in challenging environments, resilient global supply chain, dedicated and diverse global team and focused business strategy. Our strategy is based on driving organic sales growth and long-term profitable growth through science-led, core and premium innovation; pursuing higher-growth adjacent categories and segments, expanding in faster-growing channels and markets and delivering margin expansion through operating leverage and efficiency. We are also seeking to maximize the impact of our environmental, social and governance programs and to lead in the development of human capital, including our sustainability and social impact and DE&I strategies, which we are working to integrate across our organization. Our commitment to these priorities, the strength of our brands, the breadth of our global footprint and a commitment to profitability and driving efficiency in cash generation should position us well to manage through the challenges we face and increase shareholder value over time.
COLGATE-PALMOLIVE COMPANY
Management’s Discussion and Analysis of Financial
Condition and Results of Operations
(Dollars in Millions Except Per Share Amounts)
Results of Operations
Three Months
Worldwide Net sales were $3,974$4,915 in the third quarter of 2017,2023, up 3.0%10.5% from the third quarter of 2016, driven by2022, due to volume growth of 1.5%0.5%, net selling price increases of 9.5% and positive foreign exchange of 1.5%, while net selling prices were flat.0.5%. Acquisitions contributed 1.0% to volume. Organic sales (Net sales excluding the impact of foreign exchange, acquisitions and divestments), a non-GAAP financial measure, increased 1.5%9.0% in the third quarter of 2017.2023. A reconciliation of net sales growth to organic sales growth is provided under “Non-GAAP Financial Measures” below.
Net sales in the Oral, Personal and Home Care product segment were $3,401$3,857 in the third quarter of 2017,2023, up 3.0%7.5% from the third quarter of 2016, driven2022, due to net selling price increases of 8.5%, partially offset by volume growthdeclines of 1.5% and positive1.0% while foreign exchange of 1.5%, while net selling prices wereremained flat. Organic sales in the Oral, Personal and Home Care product segment increased 1.5%7.5% in the third quarter of 2017.2023.
The Company’s share of the global toothpaste market was 43.5%41.0% on a year-to-date basis, down 0.3up 1.1 share points from the year ago period, and its share of the global manual toothbrush market was 32.6%31.5% on a year-to-date basis, down 0.6 share points fromflat with the year ago period. Year-to-date market shares in toothpaste were up in North AmericaEurope, Asia Pacific and Africa/Eurasia, flat in Latin America and down in LatinNorth America Europe and Asia Pacific versus the comparable 20162022 period. In the manual toothbrush category, year-to-date market shares were up in Africa/EurasiaEurope, flat in Latin America and Asia/Pacific and down in North America Latin America, Europe and Asia PacificAfrica/Eurasia versus the comparable 20162022 period. For additional information regarding market shares, see “Market Share Information” below.
Net sales in the Hill’s Pet Nutrition segment were $573$1,058 in the third quarter of 2017,2023, up 2.0%21.5% from the third quarter of 2016, driven by2022, due to volume growth of 1.0%9.0%, net selling price increases of 12.0% and positive foreign exchange of 1.0%, while net selling prices were flat.0.5%. Acquisitions contributed 6.0% to volume. Organic sales in the Hill’s Pet Nutrition segment increased 1.0%15.0% in the third quarter of 2017.
Gross Profit/Margin
Worldwide Gross profit increased to $2,383 in the third quarter of 2017 from $2,324 in the third quarter of 2016. Gross profit in both periods included charges resulting from the Global Growth and Efficiency Program. Excluding these charges in both periods, Gross profit increased to $2,399 in the third quarter of 2017 from $2,335 in the third quarter of 2016. This increase in Gross profit reflects an increase of $64 resulting from higher Net sales.
Worldwide Gross profit margin decreased to 60.0% in the third quarter of 2017 from 60.1% in the third quarter of 2016. Excluding charges resulting from the Global Growth and Efficiency Program in both periods, Gross profit margin was 60.4% in the third quarter of 2017, even with the third quarter of 2016, as cost savings from the Company’s funding-the-growth initiatives (210 bps) were offset by higher raw and packaging material costs (210 bps).2023.
|
| | | | | | | | |
| | Three Months Ended September 30, |
| | 2017 | | 2016 |
Gross profit, GAAP | | $ | 2,383 |
| | $ | 2,324 |
|
Global Growth and Efficiency Program | | 16 |
| | 11 |
|
Gross profit, non-GAAP | | $ | 2,399 |
| | $ | 2,335 |
|
|
| | | | | | | | | |
| | Three Months Ended September 30, |
| | 2017 | | 2016 | | Basis Point Change |
Gross profit margin, GAAP | | 60.0 | % | | 60.1 | % | | (10 | ) |
Global Growth and Efficiency Program | | 0.4 |
| | 0.3 |
| | |
Gross profit margin, non-GAAP | | 60.4 | % | | 60.4 | % | | — |
|
COLGATE-PALMOLIVE COMPANY
Management’sManagement’s Discussion and Analysis of Financial
Condition and Results of Operations
(Dollars in Millions Except Per Share Amounts)
Gross Profit/Margin
Selling, General and Administrative Expenses
Selling, general and administrative expensesWorldwide Gross profit increased 8% to $1,429$2,877 in the third quarter of 2017 from $1,3222023 compared to $2,548 in the third quarter of 2016. Selling, general and administrative expenses2022. Worldwide Gross profit in both periodsthe third quarter of 2023 included charges resulting from the 2022 Global Growth and Efficiency Program.Productivity Initiative. Excluding these charges in both periods, Selling, general and administrative expenses increased to $1,407resulting from the 2022 Global Productivity Initiative in the third quarter of 2017 from $1,3132023, worldwide Gross profit increased to $2,878 in the third quarter of 2016, reflecting increased advertising investment of $66 and higher overhead expenses of $28.
Selling, general and administrative expenses as a percentage of Net sales increased2023 compared to 36.0%$2,548 in the third quarter of 20172022, reflecting an increase of $262 resulting from 34.2%higher Net sales and an increase of $68 resulting from higher Gross profit margin.
Worldwide Gross profit margin increased to 58.5% in the third quarter of 2016.2023 from 57.2% in the third quarter of 2022. Excluding charges resulting from the 2022 Global Growth and Efficiency Program in both periods, Selling, general and administrative expenses as a percentage of Net sales increased by 140 bps to 35.4%Productivity Initiative in the third quarter of 2017 as compared2023, worldwide Gross profit margin increased to 34.0%58.6% in the third quarter of 2016. This increase was due to increased advertising investment as a percentage of Net sales (140 bps). In the third quarter of 2017, advertising investment increased 19% to $405, as compared with $3392023 from 57.2% in the third quarter of 2016,2022. This increase in Gross profit margin was due to higher pricing (360 bps) and increased as a percentage of Netcost savings from the Company’s funding-the-growth initiatives (290 bps), partially offset by significantly higher raw and packaging material costs (460 bps) and unfavorable mix due to private label sales to 10.2% in the third quarter of 2017 from 8.8% in the third quarter of 2016.
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| | | | | | | | |
| | Three Months Ended September 30, |
| | 2017 | | 2016 |
Selling, general and administrative expenses, GAAP | | $ | 1,429 |
| | $ | 1,322 |
|
Global Growth and Efficiency Program | | (22 | ) | | (9 | ) |
Selling, general and administrative expenses, non-GAAP | | $ | 1,407 |
| | $ | 1,313 |
|
|
| | | | | | | | |
| | Three Months Ended September 30, |
| | 2017 | | 2016 | | Basis Point Change |
Selling, general and administrative expenses as a percentage of Net sales, GAAP | | 36.0 | % | | 34.2 | % | | 180 |
Global Growth and Efficiency Program | | (0.6 | ) | | (0.2 | ) | | |
Selling, general and administrative expenses as a percentage of Net sales, non-GAAP | | 35.4 | % | | 34.0 | % | | 140 |
Other (Income) Expense, Net
Other (income) expense, net was $27 in the third quarter of 2017, as compared to $(69) in the third quarter of 2016. Other (income) expense, net in both periods included charges resulting from the Global Growth and Efficiency Program. Other (income) expense, net in the third quarter of 2016 also included a gain on the sale of land in Mexico and a charge for a previously disclosed litigation matter. Excluding these items in both periods as applicable, Other (income) expense, net was $7 in the third quarteracquisitions of 2017, as compared to $0 in the third quarter of 2016.pet food businesses (50 bps).
| | | | | | | | | | | | | | |
| | Three Months Ended September 30, |
| | 2023 | | 2022 |
Gross profit, GAAP | | $ | 2,877 | | | $ | 2,548 | |
2022 Global Productivity Initiative | | 1 | | | — | |
Gross profit, non-GAAP | | $ | 2,878 | | | $ | 2,548 | |
| | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, |
| | 2023 | | 2022 | | Basis Point Change |
Gross profit margin, GAAP | | 58.5 | % | | 57.2 | % | | 130 | |
2022 Global Productivity Initiative | | 0.1 | % | | — | | | |
Gross profit margin, non-GAAP | | 58.6 | % | | 57.2 | % | | 140 | |
|
| | | | | | | | |
| | Three Months Ended September 30, |
| | 2017 | | 2016 |
Other (income) expense, net, GAAP | | $ | 27 |
| | $ | (69 | ) |
Global Growth and Efficiency Program | | (20 | ) | | (22 | ) |
Gain on sale of land in Mexico | | — |
| | 97 |
|
Charge for a previously disclosed litigation matter | | — |
| | (6 | ) |
Other (income) expense, net, non-GAAP | | $ | 7 |
| | $ | — |
|
COLGATE-PALMOLIVE COMPANY
Management’sManagement’s Discussion and Analysis of Financial
Condition and Results of Operations
(Dollars in Millions Except Per Share Amounts)
Selling, General and Administrative Expenses
Operating Profit
Operating profit decreased 13%Selling, general and administrative expenses increased 12% to $927$1,822 in the third quarter of 2017 from $1,0712023 compared to $1,634 in the third quarter of 2016. Operating profit2022. Selling, general and administrative expenses in both periodsthe third quarter of 2022 included charges resulting from the 2022 Global Growth and Efficiency Program. Operating profitProductivity Initiative. Excluding charges resulting from the 2022 Global Productivity Initiative in the third quarter of 2016 also2022, Selling, general and administrative expenses increased to $1,822 in the third quarter of 2023 from $1,633 in the third quarter of 2022, reflecting increased advertising investment of $112 and higher overhead expenses of $77.
Selling, general and administrative expenses as a percentage of Net sales increased by 40 bps to 37.1% in the third quarter of 2023 as compared to 36.7% in the third quarter of 2022. This increase was due to increased advertising investment (130 bps), partially offset by lower overhead expenses (90 bps). Lower overhead expenses were driven by lower logistics costs (140 bps), partially offset by higher other overhead expenses (50 bps). In the third quarter of 2023, advertising investment increased as a percentage of Net sales to 12.2% from 10.9% in the third quarter of 2022, or 23% in absolute terms to $598 as compared with $486 in the third quarter of 2022.
| | | | | | | | | | | | | | |
| | Three Months Ended September 30, |
| | 2023 | | 2022 |
Selling, general and administrative expense, GAAP | | $ | 1,822 | | | $ | 1,634 | |
2022 Global Productivity Initiative | | — | | | (1) | |
| | | | |
Selling, general and administrative expenses, non-GAAP | | $ | 1,822 | | | $ | 1,633 | |
| | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, |
| | 2023 | | 2022 | | Basis Point Change |
| | | | | | |
| | | | | | |
| | | | | | |
Selling, general and administrative expenses as a percentage of Net sales | | 37.1 | % | | 36.7 | % | | 40 | |
Other (Income) Expense, Net
Other (income) expense, net was $26 and $(33) in the third quarter of 2023 and 2022, respectively. Other (income) expense, net in the third quarter of 2023 included charges resulting from the 2022 Global Productivity Initiative. Other (income) expense, net in the third quarter of 2022 included charges resulting from the 2022 Global Productivity Initiative, a gain on the sale of land in MexicoAsia Pacific and a charge for a previously disclosed litigation matter.acquisition-related costs. Excluding these items in both periods, as applicable, Operating profitOther (income) expense, net was $985$25 and $(5) in the third quarter of 2017, compared2023 and 2022, respectively.
| | | | | | | | | | | | | | |
| | Three Months Ended September 30, |
| | 2023 | | 2022 |
Other (income) expense, net, GAAP | | $ | 26 | | | $ | (33) | |
| | | | |
2022 Global Productivity Initiative | | (1) | | | (2) | |
Gain on the sale of land in Asia Pacific | | — | | | 47 | |
Acquisition-related costs | | — | | | (17) | |
| | | | |
Other (income) expense, net, non-GAAP | | $ | 25 | | | $ | (5) | |
COLGATE-PALMOLIVE COMPANY
Management’s Discussion and Analysis of Financial
Condition and Results of Operations
(Dollars in Millions Except Per Share Amounts)
Operating Profit
Operating profit increased 9% to $1,022$1,029 in the third quarter of 2016,2023 from $947 in the third quarter of 2022. Operating profit in third quarter of 2023 included charges resulting from the 2022 Global Productivity Initiative. Operating profit in the third quarter of 2022 included charges resulting from the 2022 Global Productivity Initiative, a decreasegain on the sale of 4%,land in Asia Pacific and acquisition-related costs. Excluding these items described in both periods, as an increaseapplicable, Operating profit increased 12% to $1,031 in Gross profit was more than offset by an increasethe third quarter of 2023 from $920 in Selling, general and administrative expenses.the third quarter of 2022.
Operating profit margin was 23.3%20.9% in the third quarter of 2017,2023, a decrease of 44040 bps compared to 27.7%21.3% in the third quarter of 2016.2022. Excluding the items described above in both periods, as applicable, Operating profit margin was 24.8%21.0% in the third quarter of 2017, a decrease2023, an increase of 16030 bps as compared to 26.4%20.7% in the third quarter of 2016.2022. This decreaseincrease in Operating profit margin was primarily due to an increase in Gross profit (140 bps), partially offset by an increase in Selling, general and administrative expenses (40 bps) and an increase in Other (income) expense, net (70 bps), all as a percentage of Net sales (140 bps), reflecting increased advertising investment.sales.
|
| | | | | | | | | | | |
| | Three Months Ended September 30, |
| | 2017 | | 2016 | | % Change |
Operating profit, GAAP | | $ | 927 |
| | $ | 1,071 |
| | (13 | )% |
Global Growth and Efficiency Program | | 58 |
| | 42 |
| | |
Gain on sale of land in Mexico | | — |
| | (97 | ) | | |
Charge for a previously disclosed litigation matter | | — |
| | 6 |
| | |
Operating profit, non-GAAP | | $ | 985 |
| | $ | 1,022 |
| | (4 | )% |
| | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, |
| | 2023 | | 2022 | | % Change |
Operating profit, GAAP | | $ | 1,029 | | | $ | 947 | | | 9 | % |
| | | | | | |
2022 Global Productivity Initiative | | 2 | | | 3 | | | |
Gain on the sale of land in Asia Pacific | | — | | | (47) | | | |
Acquisition-related costs | | — | | | 17 | | | |
| | | | | | |
Operating profit, non-GAAP | | $ | 1,031 | | | $ | 920 | | | 12 | % |
| | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, |
| | 2023 | | 2022 | | Basis Point Change |
Operating profit margin, GAAP | | 20.9 | % | | 21.3 | % | | (40) | |
| | | | | | |
2022 Global Productivity Initiative | | 0.1 | % | | 0.1 | % | | |
Gain on the sale of land in Asia Pacific | | — | % | | (1.1) | % | | |
Acquisition-related costs | | — | % | | 0.4 | % | | |
| | | | | | |
Operating profit margin, non-GAAP | | 21.0 | % | | 20.7 | % | | 30 | |
Non-Service Related Postretirement Costs |
| | | | | | | | | |
| | Three Months Ended September 30, |
| | 2017 | | 2016 | | Basis Point Change |
Operating profit margin, GAAP | | 23.3 | % | | 27.7 | % | | (440 | ) |
Global Growth and Efficiency Program | | 1.5 |
| | 1.1 |
| | |
Gain on sale of land in Mexico | | — |
| | (2.5 | ) | | |
Charge for a previously disclosed litigation matter | | — |
| | 0.1 |
| | |
Operating profit margin, non-GAAP | | 24.8 | % | | 26.4 | % | | (160 | ) |
Non-service related postretirement costs were $15 in the third quarter of 2023 and 2022. Non-service related postretirement costs in the third quarter of 2022 included an adjustment related to the 2022 Global Productivity Initiative. Excluding the adjustment related to the 2022 Global Productivity Initiative in the third quarter of 2022, Non-service related postretirement costs were $15 in the third quarter of 2023 and $16 in the third quarter of 2022.
| | | | | | | | | | | | | | |
| | Three Months Ended September 30, |
| | 2023 | | 2022 |
Non-service related postretirement costs, GAAP | | $ | 15 | | | $ | 15 | |
| | | | |
2022 Global Productivity Initiative | | — | | | 1 | |
Non-service related postretirement costs, non-GAAP | | $ | 15 | | | $ | 16 | |
Interest (Income) Expense, Net
Interest (income) expense, net was $27$58 in the third quarter of 20172023 as compared to $25$40 in the third quarter of 2016,2022, primarily due to higher average interest rates on debt.debt and higher debt balances.
COLGATE-PALMOLIVE COMPANY
Management’sManagement’s Discussion and Analysis of Financial
Condition and Results of Operations
(Dollars in Millions Except Per Share Amounts)
Net Income Attributable to Colgate-Palmolive Company and Earnings Per Share
Net income attributable to Colgate-Palmolive Company for the third quarter of 2017 decreased to $607 from $702 in the third quarter of 2016, and Earnings per common share on a diluted basis decreased to $0.68 per share in the third quarter of 2017 from $0.78 in the third quarter of 2016. Net income attributable to Colgate-Palmolive Company in both periods included charges resulting from the Global Growth and Efficiency Program. Net income attributable to Colgate-Palmolive Company in the third quarter of 2016 also2023 increased to $708 from $618 in the third quarter of 2022, and Earnings per common share on a diluted basis increased to $0.86 per share in the third quarter of 2023 from $0.74 in the third quarter of 2022. Net Income attributable to Colgate-Palmolive Company in the third quarter of 2023 included charges resulting from the 2022 Global Productivity Initiative. Net Income attributable to Colgate-Palmolive Company in the third quarter of 2022 included charges resulting from the 2022 Global Productivity Initiative, a gain on the sale of land in Mexico, benefits from previously disclosed tax matters (see “Income taxes” below for further information)Asia Pacific and a charge for a previously disclosed litigation matter.acquisition-related costs.
Excluding the items described above in both periods as applicable, Net income attributable to Colgate-Palmolive Company in the third quarter of 2017 decreased 1%2023 increased 15% to $646,$710 from $620 in the third quarter of 2022, and Earnings per common share on a diluted basis increased 16% to $0.86 in the third quarter of 2017 was $0.73, even with2023 from $0.74 in the third quarter of 2016.2022.
| | | Three Months Ended September 30, 2017 | | Three Months Ended September 30, 2023 |
| Income Before Income Taxes | | Provision For Income Taxes(1) | | Net Income Including Noncontrolling Interests | | Net Income Attributable To Colgate-Palmolive Company | | Diluted Earnings Per Share(2) | | Income Before Income Taxes | | Provision For Income Taxes(1) | | Net Income Including Noncontrolling Interests | | Less: Income Attributable to Noncontrolling Interests | | Net Income Attributable To Colgate-Palmolive Company | | | Diluted Earnings Per Share(2) |
As Reported GAAP | $ | 900 |
| | $ | 250 |
| | $ | 650 |
| | $ | 607 |
| | $ | 0.68 |
| As Reported GAAP | $ | 956 | | | $ | 209 | | | $ | 747 | | | $ | 39 | | | $ | 708 | | | | $ | 0.86 | |
Global Growth and Efficiency Program | 58 |
| | 19 |
| | 39 |
| | 39 |
| | 0.05 |
| |
| 2022 Global Productivity Initiative | | 2022 Global Productivity Initiative | 2 | | | — | | | 2 | | | — | | | 2 | | | | — | |
Non-GAAP | $ | 958 |
| | $ | 269 |
| | $ | 689 |
| | $ | 646 |
| | $ | 0.73 |
| Non-GAAP | $ | 958 | | | $ | 209 | | | $ | 749 | | | $ | 39 | | | $ | 710 | | | | $ | 0.86 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, 2022 |
| Income Before Income Taxes | | Provision For Income Taxes(1) | | Net Income Including Noncontrolling Interests | | Less: Income Attributable to Noncontrolling Interests | | Net Income Attributable To Colgate-Palmolive Company | | | Diluted Earnings Per Share(2) |
As Reported GAAP | $ | 892 | | | $ | 210 | | | $ | 682 | | | $ | 64 | | | $ | 618 | | | | $ | 0.74 | |
2022 Global Productivity Initiative | 2 | | | — | | | 2 | | | — | | | 2 | | | | — | |
Gain on the sale of land in Asia Pacific | (47) | | | (11) | | | (36) | | | (21) | | | (15) | | | | (0.02) | |
Acquisition-related costs | 17 | | | 2 | | | 15 | | | — | | | 15 | | | | 0.02 | |
Non-GAAP | $ | 864 | | | $ | 201 | | | $ | 663 | | | $ | 43 | | | $ | 620 | | | | $ | 0.74 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, 2016 |
| Income Before Income Taxes | | Provision For Income Taxes(1) | | Net Income Including Noncontrolling Interests | | Net Income Attributable To Colgate-Palmolive Company | | Diluted Earnings Per Share(2) |
As Reported GAAP | $ | 1,046 |
| | $ | 300 |
| | $ | 746 |
| | $ | 702 |
| | $ | 0.78 |
|
Global Growth and Efficiency Program | 42 |
| | 10 |
| | 32 |
| | 32 |
| | 0.04 |
|
Gain on sale of land in Mexico | (97 | ) | | (34 | ) | | (63 | ) | | (63 | ) | | (0.07 | ) |
Benefits from previously disclosed tax matters | — |
| | 22 |
| | (22 | ) | | (22 | ) | | (0.02 | ) |
Charge for a previously disclosed litigation matter | 6 |
| | 2 |
| | 4 |
| | 4 |
| | — |
|
Non-GAAP | $ | 997 |
| | $ | 300 |
| | $ | 697 |
| | $ | 653 |
| | $ | 0.73 |
|
(1) The income tax effect on non-GAAP items is calculated based upon the tax laws and statutory income tax rates applicable in the tax jurisdiction(s) of the underlying non-GAAP adjustment.
(2) The impact of non-GAAP adjustments on diluted earnings per share may not necessarily equal the difference between “GAAP” and “non-GAAP” as a result of rounding.
COLGATE-PALMOLIVE COMPANY
Management’sManagement’s Discussion and Analysis of Financial
Condition and Results of Operations
(Dollars in Millions Except Per Share Amounts)
Net Sales and Operating Profit by Segment
Oral, Personal and Home Care
North America
| | | Three Months Ended September 30, | | Three Months Ended September 30, |
| 2017 | | 2016 | | Change | | 2023 | | 2022 | | Change |
Net sales | $ | 795 |
| | $ | 800 |
| | (0.5 | ) | % | Net sales | $ | 990 | | | $ | 958 | | | 3.5 | | % |
Operating profit | $ | 249 |
| | $ | 273 |
| | (9 | ) | % | Operating profit | $ | 231 | | | $ | 198 | | | 17 | | % |
% of Net sales | 31.3 | % | | 34.1 | % | | (280 | ) | bps | % of Net sales | 23.3 | % | | 20.7 | % | | 260 | | bps |
Net sales in North America decreased 0.5%increased 3.5% in the third quarter of 20172023 to $795, as volume growth of 3.0% and positive foreign exchange of 0.5% were more than offset$990, driven by net selling price decreasesincreases of 7.5%, partially offset by volume declines of 4.0%., while foreign exchange was flat. Organic sales in North America decreased 1.0%increased 3.5% in the third quarter of 2017.2023. Organic sales growth was led by the United States.
The decreaseincrease in organic sales in North America in the third quarter of 20172023 versus the third quarter of 2016 was due to a decrease in Personal Care and Home Care organic sales, partially offset by an increase in organic sales in the Oral Care category. The decrease in Personal Care was due to a decline in organic sales in the liquid hand soap, underarm protection and shower gel categories. The decrease in Home Care2022 was primarily due to a declineincreases in Oral Care and Personal Care organic sales in the hand dish and fabric softener categories, partially offset by an increase in organic sales in the liquid cleaners category.sales. The increase in Oral Care was primarily due to organic sales growth in the toothpaste and manual toothbrush categories. The increase in Personal Care was primarily due to organic sales growth in the underarm protection and bar soap categories, partially offset by organic sales declines in the body wash category.
Operating profit in North America decreased 9%increased 17% in the third quarter of 20172023 to $249,$231, or 280260 bps to 31.3%23.3% as a percentage of Net sales. This decreaseincrease in Operating profit as a percentage of Net sales was primarily due to a decreasean increase in Gross profit (40(250 bps) and an increase in Selling, general and administrative expenses (220 bps), both as a percentage of Net sales. This decreaseincrease in Gross profit was primarily driven bydue to higher rawpricing and packaging material costs (140 bps) and lower pricing, partially offset by cost savings from the Company’s funding-the-growth initiatives (210 bps) and the Global Growth and Efficiency Program (50 bps). This increase in Selling, general and administrative expenses was due to increased advertising investment (250(240 bps), partially offset by lower overhead expenses (30significantly higher raw and packaging material costs (280 bps).
COLGATE-PALMOLIVE COMPANY
Management’sManagement’s Discussion and Analysis of Financial
Condition and Results of Operations
(Dollars in Millions Except Per Share Amounts)
Latin America
| | | Three Months Ended September 30, | | Three Months Ended September 30, |
| 2017 | | 2016 | | Change | | 2023 | | 2022 | | Change |
Net sales | $ | 985 |
| | $ | 924 |
| | 6.5 |
| % | Net sales | $ | 1,194 | | | $ | 997 | | | 20.0 | | % |
Operating profit | $ | 301 |
| | $ | 298 |
| | 1 |
| % | Operating profit | $ | 372 | | | $ | 289 | | | 29 | | % |
% of Net sales | 30.6 | % | | 32.3 | % | | (170 | ) | bps | % of Net sales | 31.2 | % | | 29.0 | % | | 220 | | bps |
Net sales in Latin America increased 6.5% to $98520.0% in the third quarter of 2017,2023 to $1,194, driven by volume growth of 3.0%5.5%, net selling price increases of 2.5%9.5% and positive foreign exchange of 1.0%5.0%. Organic sales in Latin America increased 5.5%15.0% in the third quarter of 2017. Volume gains were2023. Organic sales growth was led by Argentina, Mexico, Brazil and the Southern Cone region.Colombia.
The increase in organic sales in Latin America in the third quarter of 20172023 versus the third quarter of 20162022 was due to increases in Oral Care, Personal Care and Home Care organic sales. The increase in Oral Care was primarily due to organic sales growth in the toothpaste, category.mouthwash and manual toothbrush categories. The increase in Personal Care was primarily due to organic sales growth in the underarm protection, bar soap and shampoohair care categories. The increase in Home Care was primarily due to organic sales growth in the liquidsurface cleaners and fabric softenerhand dish categories.
Operating profit in Latin America increased 1%29% in the third quarter of 20172023 to $301, while$372, or 220 bps to 31.2% as a percentage of Net sales, it decreased 170 bps to 30.6% of Net sales. This decreaseincrease in Operating profit as a percentage of Net sales was primarily due to an increase in Gross profit (50(410 bps), which was more thanpartially offset by an increase in Selling, general and administrative expenses (200(40 bps) and an increase in Other (income) expense, net (150 bps), bothall as a percentage of Net sales. This increase in Gross profit was primarily due to higher pricing and cost savings from the Company’s funding-the-growth initiatives (170 bps), and higher pricing, partially offset by higher raw and packaging material costs (280 bps). This increase in Selling, general and administrative expenses was due to increased advertising investment (100 bps) and higher overhead expenses (100 bps).
COLGATE-PALMOLIVE COMPANY
Management’s Discussion and Analysis of Financial
Condition and Results of Operations
(Dollars in Millions Except Per Share Amounts)
Europe
|
| | | | | | | | | | | |
| Three Months Ended September 30, |
| 2017 | | 2016 | | Change |
Net sales | $ | 642 |
| | $ | 609 |
| | 5.5 |
| % |
Operating profit | $ | 162 |
| | $ | 158 |
| | 3 |
| % |
% of Net sales | 25.2 | % | | 25.9 | % | | (70 | ) | bps |
Net sales in Europe increased 5.5% in the third quarter of 2017 to $642 as volume growth of 3.0% and positive foreign exchange of 4.5% were partially offset by net selling price decreases of 2.0%. Organic sales in Europe increased 1.0% in the third quarter of 2017. Volume gains were led by France, Italy, the Netherlands and Poland.
The increase in organic sales in Europe in the third quarter of 2017 versus the third quarter of 2016 was driven by Oral Care with organic sales growth in the toothpaste category. Home Care also contributed to organic sales growth with gains in the fabric softener category.
Operating profit in Europe increased 3% in the third quarter of 2017 to $162, while as a percentage of Net sales, it decreased 70 bps to 25.2% of Net sales. This decrease in Operating profit as a percentage of Net sales was primarily due to an increase in Gross profit (10 bps), which was more than offset by an increase in Selling, general and administrative expenses (100 bps), both as a percentage of Net sales. This increase in Gross profit was primarily driven by cost savings from the Company’s funding-the-growth initiatives (220 bps) and the Global Growth and Efficiency Program (20 bps), partially offset by higher raw and packaging material costs (230 bps). This increase in Selling, general and administrative expenses was due to increased advertising investment (190(90 bps), partially offset by lower overhead expenses (50 bps). This increase in Other (income) expense, net was primarily due to a value added tax refund in the third quarter of 2022.
Europe
| | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, |
| 2023 | | 2022 | | Change |
Net sales | $ | 725 | | | $ | 632 | | | 14.5 | | % |
Operating profit | $ | 162 | | | $ | 127 | | | 28 | | % |
% of Net sales | 22.3 | % | | 20.1 | % | | 220 | | bps |
Net sales in Europe increased 14.5% in the third quarter of 2023 to $725, driven by net selling price increases of 11.0% and positive foreign exchange of 7.5%, partially offset by volume declines of 4.0%. Organic sales in Europe increased 7.0% in the third quarter of 2023. Organic sales growth was led by Germany and the United Kingdom.
The increase in organic sales in Europe in the third quarter of 2023 versus the third quarter of 2022 was primarily due to increases in Oral Care and Personal Care organic sales. The increase in Oral Care was primarily due to organic sales growth in the toothpaste category. The increase in Personal Care was primarily due to organic sales growth in the underarm protection and body wash categories.
Operating profit in Europe increased 28% in the third quarter of 2023 to $162, or 220 bps to 22.3% as a percentage of Net sales. This increase in Operating profit as a percentage of Net sales was due to an increase in Gross profit (310 bps) and a decrease in Other (income) expense, net (80 bps), partially offset by an increase in Selling, general and administrative expenses (170 bps), all as a percentage of Net sales. This increase in Gross profit was primarily due to higher pricing, cost savings from the Company’s funding-the-growth initiatives (290 bps) and favorable mix (90 bps), partially offset by significantly higher raw and packaging material costs (530 bps). This increase in Selling, general and administrative expenses was due to increased advertising investment (170 bps). This decrease in Other (income) expense, net was primarily due to lower amortization expenses.
COLGATE-PALMOLIVE COMPANY
Management’s Discussion and Analysis of Financial
Condition and Results of Operations
(Dollars in Millions Except Per Share Amounts)
Asia Pacific
| | | Three Months Ended September 30, | | Three Months Ended September 30, |
| 2017 | | 2016 | | Change | | 2023 | | 2022 | | Change |
Net sales | $ | 728 |
| | $ | 723 |
| | 0.5 |
| % | Net sales | $ | 682 | | | $ | 709 | | | (4.0) | | % |
Operating profit | $ | 220 |
| | $ | 230 |
| | (4 | ) | % | Operating profit | $ | 193 | | | $ | 185 | | | 4 | | % |
% of Net sales | 30.2 | % | | 31.8 | % | | (160 | ) | bps | % of Net sales | 28.3 | % | | 26.1 | % | | 220 | | bps |
Net sales in Asia Pacific increased 0.5%decreased 4.0% in the third quarter of 20172023 to $728 as$682, driven by volume declines of 7.0% and negative foreign exchange of 2.5%, partially offset by net selling prices were flat, while foreign exchange was positive 0.5%price increases of 5.5%. Organic sales in Asia Pacific were even withdecreased 1.5% in the third quarter of 2016. Volume gains2023. Organic sales declines in the Greater China region were partially offset by organic sales growth in India and the Philippines were offset by volume declinesPhilippines.
The decrease in Australia and India.
Organicorganic sales in Asia Pacific in the third quarter of 2017 were even with2023 versus the third quarter of 2016,2022 was primarily due to a decrease in Oral Care organic sales, partially offset by an increase in Personal Care organic sales. The decrease in Oral Care was primarily due to organic sales declines in the toothpaste category. The increase in Personal Care was primarily due to organic sales growth in the hair care, body wash and bar soap categories.
Operating profit in Asia Pacific increased 4% in the third quarter of 2023 to $193, or 220 bps to 28.3% as a percentage of Net sales. This increase in Operating profit as a percentage of Net sales was primarily due to an increase in Gross profit (230 bps), as a percentage of Net sales. This increase in Gross profit was due to cost savings from the Company’s funding-the-growth initiatives (310 bps) and higher pricing, partially offset by significantly higher raw and packaging material costs (270 bps).
Africa/Eurasia
| | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, |
| 2023 | | 2022 | | Change |
Net sales | $ | 266 | | | $ | 287 | | | (7.5) | | % |
Operating profit | $ | 66 | | | $ | 66 | | | — | | % |
% of Net sales | 24.8 | % | | 23.0 | % | | 180 | | bps |
Net sales in Africa/Eurasia decreased 7.5% in the third quarter of 2023 to $266, driven by negative foreign exchange of 23.0%, partially offset by volume growth of 4.0% and net selling price increases of 11.5%. Organic sales in Africa/Eurasia increased 15.5% in the third quarter of 2023. Organic sales growth was led by Türkiye, the Eurasia region, Nigeria and South Africa.
The increase in organic sales in Africa/Eurasia in the third quarter of 2023 versus the third quarter of 2022 was primarily due to increases in Oral Care was offset by declines in organic sales in theand Personal Care category.organic sales. The increase in Oral Care was primarily due to organic sales growth in the toothpaste category. The decreaseincrease in Personal Care was primarily due to declinesorganic sales growth in the bar soap, body wash and underarm protection categories.
Operating profit in Africa/Eurasia was flat in the third quarter of 2023 at $66, while as a percentage of Net sales it increased 180 bps to 24.8%. This increase in Operating profit as a percentage of Net sales was primarily due to a decrease in Selling, general and administrative expenses (290 bps), partially offset by a decrease in Gross profit (140 bps), both as a percentage of Net sales. This decrease in Gross profit was due to significantly higher raw and packaging material costs (1,000 bps), including foreign exchange transaction costs, partially offset by cost savings from the Company’s funding-the-growth initiatives (490 bps) and higher pricing. This decrease in Selling, general and administrative expense was primarily due to lower overhead expenses (250 bps), driven by lower logistics costs (200 bps).
COLGATE-PALMOLIVE COMPANY
Management’s Discussion and Analysis of Financial
Condition and Results of Operations
(Dollars in Millions Except Per Share Amounts)
Hill’s Pet Nutrition
| | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, |
| 2023 | | 2022 | | Change |
Net sales | $ | 1,058 | | | $ | 872 | | | 21.5 | | % |
Operating profit | $ | 201 | | | $ | 201 | | | — | | % |
% of Net sales | 19.0 | % | | 23.1 | % | | (410) | | bps |
Net sales for Hill’s Pet Nutrition increased 21.5% in the third quarter of 2023 to $1,058, driven by volume growth of 9.0%, net selling price increases of 12.0% and positive foreign exchange of 0.5%. Acquisitions contributed 6.0% to volume. Organic sales in Hill’s Pet Nutrition increased 15.0% in the third quarter of 2023. Organic sales growth was led by the United States and Europe.
The increase in organic sales in the bar soapthird quarter of 2023 was primarily due to organic sales growth in the wellness and shampootherapeutic categories.
Operating profit in Asia Pacific decreased 4% to $220Hill’s Pet Nutrition was flat in the third quarter of 2017, or 1602023 at $201, while as a percentage of Net sales it decreased 410 bps to 30.2% of Net sales.19.0%. This decrease in Operating profit as a percentage of Net sales was primarily due to a decrease in Gross profit (60(360 bps) and an increase in Selling, general and administrative expenses (90 bps), both as a percentage of Net sales. This decrease in Gross profit was primarily driven by higher costs (330 bps), which were primarily driven bydue to significantly higher raw and packaging material costs (850 bps) and unfavorable mix due to private label sales resulting from the previously disclosed acquisitions of pet food businesses (260 bps), partially offset by higher pricing and cost savings from the Company’s funding-the-growth initiatives (260(340 bps). This increase
Corporate
| | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, |
| 2023 | | 2022 | | Change | |
Operating profit (loss) | $ | (196) | | | $ | (119) | | | 65 | | % |
Operating profit (loss) related to Corporate was $(196) in Selling, generalthe third quarter of 2023 as compared to $(119) in the third quarter of 2022. In the third quarter of 2023, Corporate Operating profit (loss) included charges of $2 resulting from the 2022 Global Productivity Initiative. In the third quarter of 2022, Corporate Operating profit (loss) included charges of $3 resulting from the 2022 Global Productivity Initiative, a gain on the sale of land in Asia Pacific of $47 and administrative expenses was due to higher overhead expenses (80 bps) and increased advertising investment (10 bps).acquisition-related costs of $17.
COLGATE-PALMOLIVE COMPANY
Management’sManagement’s Discussion and Analysis of Financial
Condition and Results of Operations
(Dollars in Millions Except Per Share Amounts)
Africa/Eurasia
|
| | | | | | | | | | | |
| Three Months Ended September 30, |
| 2017 | | 2016 | | Change |
Net sales | $ | 251 |
| | $ | 250 |
| | 0.5 |
| % |
Operating profit | $ | 44 |
| | $ | 50 |
| | (12 | ) | % |
% of Net sales | 17.5 | % | | 20.0 | % | | (250 | ) | bps |
Net sales in Africa/Eurasia increased 0.5% in the third quarter of 2017 to $251. Volume declines of 4.5% were more than offset by net selling price increases of 2.5% and the impact of positive foreign exchange of 2.5%. Organic sales in Africa/Eurasia decreased 2.0% in the third quarter of 2017. Volume declines in the Sub-Saharan Africa region and the Middle East region were partially offset by volume gains in Russia.
The decrease in organic sales in Africa/Eurasia in the third quarter of 2017 versus the third quarter of 2016 was primarily due to a decrease in Oral Care and Personal Care organic sales. The decrease in Oral Care was due to a decline in organic sales in the manual toothbrush category. The decrease in Personal Care was due to a decline in organic sales in the underarm protection and shower gel categories.
Operating profit in Africa/Eurasia decreased 12% in the third quarter of 2017 to $44, or 250 bps to 17.5% of Net sales. This decrease in Operating profit as a percentage of Net sales was primarily due to an increase in Gross profit (80 bps), which was more than offset by an increase in Selling, general and administrative expenses (290 bps), both as a percentage of Net sales. This increase in Gross profit was mainly driven by cost savings from the Company’s funding-the-growth initiatives (130 bps) and the Global Growth and Efficiency Program (20 bps), and higher pricing, partially offset by higher raw and packaging material costs (120 bps). This increase in Selling, general and administrative expenses was due to increased advertising investment (290 bps).
Hill’s Pet Nutrition
|
| | | | | | | | | | | |
| Three Months Ended September 30, |
| 2017 | | 2016 | | Change |
Net sales | $ | 573 |
| | $ | 561 |
| | 2.0 |
| % |
Operating profit | $ | 161 |
| | $ | 162 |
| | (1 | ) | % |
% of Net sales | 28.1 | % | | 28.9 | % | | (80 | ) | bps |
Net sales for Hill’s Pet Nutrition increased 2.0% in the third quarter of 2017 to $573, driven by volume growth of 1.0% and positive foreign exchange of 1.0%, while net selling prices were flat. Organic sales in Hill’s Pet Nutrition increased 1.0% in the third quarter of 2017. Volume gains in the United States and Western Europe were partially offset by volume declines in Japan. The volume declines in Japan are primarily attributable to a continued contraction in the market.
The increase in organic sales in the third quarter of 2017 versus the third quarter of 2016 was due to an increase in organic sales in the Prescription Diet category, partially offset by a decline in organic sales in the Advanced Nutrition and Naturals categories.
Operating profit in Hill’s Pet Nutrition decreased 1% in the third quarter of 2017 to $161, or 80 bps to 28.1% of Net sales. This decrease in Operating profit as a percentage of Net sales was primarily due to an increase in Gross profit (20 bps), which was more than offset by an increase in Selling, general and administrative expenses (80 bps), both as a percentage of Net sales. This increase in Gross profit was mainly driven by cost savings from the Company’s funding-the-growth initiatives (200 bps), partially offset by higher costs (180 bps), which were primarily driven by higher raw and packaging material costs. This increase in Selling, general and administrative expenses was due to increased advertising investment (130 bps), partially offset by lower overhead expenses (50 bps).
COLGATE-PALMOLIVE COMPANY
Management’s Discussion and Analysis of Financial
Condition and Results of Operations
(Dollars in Millions Except Per Share Amounts)
Corporate
|
| | | | | | | | | | |
| Three Months Ended September 30, |
| 2017 | | 2016 | | Change |
Operating profit (loss) | $ | (210 | ) | | $ | (100 | ) | | 110 | % |
Operating profit (loss) related to Corporate was ($210) in the third quarter of 2017 as compared to ($100) in the third quarter of 2016. In the third quarter of 2017, Corporate Operating profit (loss) included charges of $58 resulting from the Global Growth and Efficiency Program. In the third quarter of 2016, Corporate Operating profit (loss) included charges of $42 resulting from the Global Growth and Efficiency Program, a gain of $97 on the sale of land in Mexico and a charge of $6 for a previously disclosed litigation matter.
Nine Months
Worldwide Net sales were $11,562$14,507 in the first nine months of 2017,2023, up 1.0%9.0% as compared to the first nine months of 2016, as volume declines of 0.5% were more than offset by2022 due to net selling price increases of 1.0%11.0%, partially offset by volume declines of 0.5% and positivenegative foreign exchange of 0.5%1.5%. Acquisitions contributed 1.5% to volume. Organic sales increased 0.5%9.0% in the first nine months of 2017.2023.
Net sales in the Oral, Personal and Home Care product segment were $9,863$11,332 in the first nine months of 2017,2023, an increase of 1.0%6.0% as compared to the first nine months of 2016, as volume declines of 0.5% were more than offset by2022 due to net selling price increases of 1.0%10.5%, partially offset by volume declines of 2.5% and positivenegative foreign exchange of 0.5%2.0%. Organic sales in the Oral, Personal and Home Care product segment increased 0.5%8.0% in the first nine months of 2017.2023.
The increase in organic sales in the first nine months of 20172023 versus the first nine months of 20162022 was driven by an increase in organic salesdue to increases in Oral Care, partially offset by a decrease in organic sales in Personal Care and Home Care.Care organic sales. The increase in Oral Care was primarily due to organic sales was due to growth in the toothpaste category.and mouthwash categories. The decreaseincrease in Personal Care was primarily due to organic sales was attributable to declinesgrowth in the liquid handbar soap, and underarm protection and hair care categories. The decreaseincrease in Home Care was primarily due to organic sales was attributable to a declinegrowth in the hand dish, category, partially offset by gains in the liquid cleanerssurface cleaner and fabric softener categories.
Net sales in the Hill’s Pet Nutrition segment were $1,699$3,175 in the first nine months of 2017,2023, an increase of 1.0% as compared to19.5% from the first nine months of 2016, as2022 due to volume declinesgrowth of 1.5% were more than offset by8.5% and net selling price increases of 2.0% and positive12.0%, partially offset by negative foreign exchange of 0.5%1.0%. Acquisitions contributed 7.5% to volume. Organic sales forin the Hill’s Pet Nutrition segment increased 0.5%13.0% in the first nine months of 2017 as organic sales growth in the Prescription Diet category was partially offset by declines in organic sales in the Advanced Nutrition and Naturals categories.2023.
COLGATE-PALMOLIVE COMPANY
Management’sManagement’s Discussion and Analysis of Financial
Condition and Results of Operations
(Dollars in Millions Except Per Share Amounts)
Net Sales and Operating Profit by Segment
Net sales and Operating profit by segment were as follows:
| | | | | | | | | | | |
| Nine Months Ended September 30, |
| 2023 | | 2022 |
Net sales | | | |
Oral, Personal and Home Care | | | |
North America | $ | 2,926 | | | $ | 2,850 | |
Latin America | 3,447 | | | 2,970 | |
Europe | 2,053 | | | 1,925 | |
Asia Pacific | 2,084 | | | 2,131 | |
Africa/Eurasia | 822 | | | 809 | |
Total Oral, Personal and Home Care | 11,332 | | | 10,685 | |
Pet Nutrition | 3,175 | | | 2,653 | |
Total Net sales | $ | 14,507 | | | $ | 13,338 | |
| | | |
Operating profit | | | |
Oral, Personal and Home Care | | | |
North America | $ | 651 | | | $ | 557 | |
Latin America | 1,050 | | | 818 | |
Europe | 412 | | | 410 | |
Asia Pacific | 564 | | | 556 | |
Africa/Eurasia | 196 | | | 160 | |
Total Oral, Personal and Home Care | 2,873 | | | 2,501 | |
Pet Nutrition | 575 | | | 617 | |
Corporate | (536) | | | (427) | |
Total Operating profit | $ | 2,912 | | | $ | 2,691 | |
|
| | | | | | | |
| Nine Months Ended September 30, |
| 2017 | | 2016 |
Net sales | | | |
Oral, Personal and Home Care | | | |
North America | $ | 2,319 |
| | $ | 2,393 |
|
Latin America | 2,911 |
| | 2,710 |
|
Europe | 1,784 |
| | 1,803 |
|
Asia Pacific | 2,111 |
| | 2,163 |
|
Africa/Eurasia | 738 |
| | 720 |
|
Total Oral, Personal and Home Care | 9,863 |
| | 9,789 |
|
Pet Nutrition | 1,699 |
| | 1,685 |
|
Total Net sales | $ | 11,562 |
| | $ | 11,474 |
|
| | | |
Operating profit | |
| | |
|
Oral, Personal and Home Care | |
| | |
|
North America | $ | 723 |
| | $ | 762 |
|
Latin America | 878 |
| | 829 |
|
Europe | 447 |
| | 437 |
|
Asia Pacific | 644 |
| | 668 |
|
Africa/Eurasia | 134 |
| | 138 |
|
Total Oral, Personal and Home Care | 2,826 |
| | 2,834 |
|
Pet Nutrition | 481 |
| | 479 |
|
Corporate | (642 | ) | | (431 | ) |
Total Operating profit | $ | 2,665 |
| | $ | 2,882 |
|
Within the Oral, Personal and Home Care product segment, North America Net sales decreased 3.0%, as a result of volume declines of 1.0% and net selling price decreases of 2.0%, while foreign exchange was flat. Organic sales in North America decreased 3.0%. Latin America Net sales increased 7.5%, driven by volume growth of 2.0%, net selling price increases of 4.5% and positive foreign exchange of 1.0%. Organic sales in Latin America increased 6.5%. Europe Net sales decreased 1.0%, as volume growth of 1.0% was more than offset by net selling price decreases of 1.0% and negative foreign exchange of 1.0%. Organic sales in Europe were even with the first nine months of 2016. Asia Pacific Net sales decreased 2.5%, as a result of volume declines of 1.0%, net selling price decreases of 0.5% and negative foreign exchange of 1.0%. Organic sales in Asia Pacific decreased 1.5%. Africa/Eurasia Net sales increased 2.5%, as volume declines of 6.0% were more than offset by net selling price increases of 4.5% and positive foreign exchange of 4.0%. Organic sales in Africa/Eurasia decreased 1.5%.
In the first nine months of 2017, Operating profit (loss) related to Corporate was ($642) as compared to ($431) in the first nine months of 2016. In the first nine months of 2017, Corporate Operating profit (loss) included charges of $246 resulting from the Global Growth and Efficiency Program. In the first nine months of 2016, Corporate Operating profit (loss) included charges of $156 resulting from the Global Growth and Efficiency Program, a gain of $97 on the sale of land in Mexico and a charge of $6 for a previously disclosed litigation matter.
COLGATE-PALMOLIVE COMPANY
Management’sManagement’s Discussion and Analysis of Financial
Condition and Results of Operations
(Dollars in Millions Except Per Share Amounts)
Net sales and Organic sales change by division were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the Nine Months Ended September 30, 2023 vs. 2022 |
Oral, Personal and Home Care | | Net Sales | | Organic Sales | | As Reported Volume(1) | | | | Pricing | | Foreign Exchange |
North America | | 2.5% | | 3.0% | | (6.0)% | | | | 9.0% | | (0.5)% |
Latin America | | 16.0% | | 15.0% | | 1.0% | | | | 14.0% | | 1.0% |
Europe | | 6.5% | | 5.5% | | (4.5)% | | | | 10.0% | | 1.0% |
Asia Pacific | | (2.0)% | | 2.5% | | (3.5)% | | | | 6.0% | | (4.5)% |
Africa/Eurasia | | 1.5% | | 17.5% | | 3.0% | | | | 14.5% | | (16.0)% |
Total Oral, Personal and Home Care | | 6.0% | | 8.0% | | (2.5)% | | | | 10.5% | | (2.0)% |
Pet Nutrition | | 19.5% | | 13.0% | | 8.5% | | | | 12.0% | | (1.0)% |
Total Company | | 9.0% | | 9.0% | | (0.5)% | | | | 11.0% | | (1.5)% |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
(1)The impact of the previously disclosed acquisitions of pet food businesses on as reported volume was 1.5% and 7.5% for Total Company and Pet Nutrition, respectively.
In the first nine months of 2023, Operating profit (loss) related to Corporate was $(536) as compared to $(427) in the first nine months of 2022. Corporate Operating profit (loss) for the first nine months of 2023 included product recall costs of $25 and charges resulting from the 2022 Global Productivity Initiative of $25. Corporate Operating profit (loss) for the first nine months of 2022 included charges resulting from the 2022 Global Productivity Initiative of $79, a gain on the sale of land in Asia Pacific of $47 and acquisition-related costs of $17.
Gross Profit/Margin
Worldwide Gross profit increased to $6,952$8,376 in the first nine months of 20172023 from $6,876$7,674 in the first nine months of 2016.2022. Worldwide Gross profit in both periods included charges resulting from the Global Growth and Efficiency Program. Excluding these charges in both periods, Gross profit increased to $7,003 in the first nine months of 20172023 included charges resulting from $6,907the 2022 Global Productivity Initiative. Excluding the charges resulting from the 2022 Global Productivity Initiative in the first nine months of 2016. This increase in2023, worldwide Gross profit reflectsincreased to $8,377 from $7,674 in the first nine months of 2022, reflecting an increase of $52$671 resulting from higher Net sales and an increase of $44$32 resulting from higher Gross profit margin.
Worldwide Gross profit margin increased to 57.7% in the first nine months of 2017.
Worldwide Gross profit margin was 60.1%2023 from 57.5% in the first nine months of 2017 as compared2022, due to 59.9% in the first nine months of 2016. Excluding the charges resulting from the Global Growthhigher pricing (420 bps) and Efficiency Program in both periods, Gross profit margin increased by 40 bps to 60.6% in the first nine months of 2017, from 60.2% in the first nine months of 2016, driven by cost savings from the Company’s funding-the-growth initiatives (170(260 bps), and higher pricing (40 bps), which were partially offset by higher costs (170 bps), driven bysignificantly higher raw and packaging material costs.costs (580 bps) and unfavorable mix due to private label sales resulting from the previously disclosed acquisitions of pet food businesses (80 bps).
| | | | | | | | | | | | | | |
| | Nine Months Ended September 30, |
| | 2023 | | 2022 |
Gross profit | | $ | 8,376 | | | $ | 7,674 | |
2022 Global Productivity Initiative | | 1 | | | — | |
Gross profit, non-GAAP | | $ | 8,377 | | | $ | 7,674 | |
| | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, |
| | 2023 | | 2022 | | Basis Point Change |
Gross profit margin | | 57.7 | % | | 57.5 | % | | 20 | |
| | | | | | |
| | | | | | |
|
| | | | | | | | |
| | Nine Months Ended September 30, |
| | 2017 | | 2016 |
Gross profit, GAAP | | $ | 6,952 |
| | $ | 6,876 |
|
Global Growth and Efficiency Program | | 51 |
| | 31 |
|
Gross profit, non-GAAP | | $ | 7,003 |
| | $ | 6,907 |
|
|
| | | | | | | | |
| | Nine Months Ended September 30, |
| | 2017 | | 2016 | | Basis Point Change |
Gross profit margin, GAAP | | 60.1 | % | | 59.9 | % | | 20 |
Global Growth and Efficiency Program | | 0.5 |
| | 0.3 |
| | |
Gross profit margin, non-GAAP | | 60.6 | % | | 60.2 | % | | 40 |
COLGATE-PALMOLIVE COMPANY
Management’sManagement’s Discussion and Analysis of Financial
Condition and Results of Operations
(Dollars in Millions Except Per Share Amounts)
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased 3%8% to $4,124$5,348 in the first nine months of 20172023 from $3,996$4,932 in the first nine months of 2016.2022. Selling, general and administrative expenses in both periods included charges resulting from the 2022 Global Growth and Efficiency Program.Productivity Initiative. Excluding these charges in both periods, Selling, general and administrative expenses increased to $4,064$5,346 in the first nine months of 20172023 from $3,947$4,928 in the first nine months of 2016,2022, reflecting increased advertising investment of $73$285 and higher overhead expenses of $44.$133.
Selling, general and administrative expenses as a percentage of Net sales increaseddecreased to 35.7%36.9% in the first nine months of 20172023 from 34.8%37.0% in the first nine months of 2016.2022. Excluding charges resulting from the 2022 Global Growth and Efficiency Program,Productivity Initiative, Selling, general and administrative expenses as a percentage of Net sales were 35.1%flat at 36.9% in the first nine months of 2017, an increase of 70 bps as compared to the first nine months of 2016. This increase was a result of increased advertising investment (50 bps) and higher overhead expenses (20 bps), both as a percentage of Net sales.2023. In the first nine months of 2017,2023, advertising investment increased 6%19% in absolute terms to $1,204,$1,778 as compared with $1,131$1,493 in the first nine months of 2016,2022, while as a percentage of Net sales it increased to 10.4%12.3% from 11.2% in the first nine months of 2017 from 9.9%2022.
| | | | | | | | | | | | | | |
| | Nine Months Ended September 30, |
| | 2023 | | 2022 |
Selling, general and administrative expenses, GAAP | | $ | 5,348 | | | $ | 4,932 | |
2022 Global Productivity Initiative | | (2) | | | (4) | |
| | | | |
Selling, general and administrative expenses, non-GAAP | | $ | 5,346 | | | $ | 4,928 | |
| | | | |
| | | | |
| | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, |
| | 2023 | | 2022 | | Basis Point Change |
Selling, general and administrative expenses as a percentage of Net sales, GAAP | | 36.9 | % | | 37.0 | % | | (10) | |
2022 Global Productivity Initiative | | — | | | (0.1) | | | |
| | | | | | |
Selling, general and administrative expenses as a percentage of Net sales, non-GAAP | | 36.9 | % | | 36.9 | % | | — | |
Other (Income) Expense, Net
Other (income) expense, net was $116 and $51 in the first nine months of 2016.
|
| | | | | | | | |
| | Nine Months Ended September 30, |
| | 2017 | | 2016 |
Selling, general and administrative expenses, GAAP | | $ | 4,124 |
| | $ | 3,996 |
|
Global Growth and Efficiency Program | | (60 | ) | | (49 | ) |
Selling, general and administrative expenses, non-GAAP | | $ | 4,064 |
| | $ | 3,947 |
|
|
| | | | | | | | |
| | Nine Months Ended September 30, |
| | 2017 | | 2016 | | Basis Point Change |
Selling, general and administrative expenses as a percentage of Net sales, GAAP | | 35.7 | % | | 34.8 | % | | 90 |
Global Growth and Efficiency Program | | (0.6 | ) | | (0.4 | ) | | |
Selling, general and administrative expenses as a percentage of Net sales, non- GAAP | | 35.1 | % | | 34.4 | % | | 70 |
Other (Income) Expense, Net
Other (income) expense, net was $163 in the first nine months of 2017, as compared to $(2) in the first nine months of 2016.
Other (income) expense, net in both periods included charges resulting from the Global Growth2023 and Efficiency Program.2022, respectively. Other (income) expense, net in the first nine months of 2016 also2023 included product recall costs and charges resulting from the 2022 Global Productivity Initiative. Other (income) expense, net in the first nine months of 2022 included charges resulting from the 2022 Global Productivity Initiative, a gain on the sale of land in MexicoAsia Pacific and a charge for a previously disclosed litigation matter.acquisition-related costs. Excluding these items in both periods as applicable, Other (income) expense, net was $28$69 and $6 in the first nine months of 2017, as compared to $13 in the first nine months of 2016.2023 and 2022, respectively.
| | | | | | | | | | | | | | |
| | Nine Months Ended September 30, |
| | 2023 | | 2022 |
Other (income) expense, net, GAAP | | $ | 116 | | | $ | 51 | |
Product recall costs | | (25) | | | — | |
2022 Global Productivity Initiative | | (22) | | | (75) | |
Gain on the sale of land in Asia Pacific | | — | | | 47 | |
Acquisition-related costs | | — | | | (17) | |
Other (income) expense, net, non-GAAP | | $ | 69 | | | $ | 6 | |
|
| | | | | | | | |
| | Nine Months Ended September 30, |
| | 2017 | | 2016 |
Other (income) expense, net, GAAP | | $ | 163 |
| | $ | (2 | ) |
Global Growth and Efficiency Program | | (135 | ) | | (76 | ) |
Gain on sale of land in Mexico | | — |
| | 97 |
|
Charge for a previously disclosed litigation matter | | — |
| | (6 | ) |
Other (income) expense, net, non-GAAP | | $ | 28 |
| | $ | 13 |
|
COLGATE-PALMOLIVE COMPANY
Management’sManagement’s Discussion and Analysis of Financial
Condition and Results of Operations
(Dollars in Millions Except Per Share Amounts)
Operating Profit
Operating profit decreasedincreased 8% to $2,665$2,912 in the first nine months of 20172023 from $2,882$2,691 in the first nine months of 2016. Operating profit in both periods included charges resulting from the Global Growth and Efficiency Program.2022. Operating profit in the first nine months of 2016 also2023 included product recall costs and charges resulting from the 2022 Global Productivity Initiative. Operating profit in the first nine months of 2022 included charges resulting from the 2022 Global Productivity Initiative, a gain on the sale of land in MexicoAsia Pacific and a charge for a previously disclosed litigation matter.acquisition-related costs. Excluding these items in both periods as applicable, Operating profit for the first nine months of 2017 decreased 1%increased to $2,911 from $2,947$2,962 in the first nine months of 2016, primarily due to an increase in Selling, general and administrative expenses, partially offset by higher Gross profit.
Operating profit margin was 23.0%2023 from $2,740 in the first nine months of 2017, a decrease of 210 bps compared2022 due to 25.1%an increase in Gross profit, partially offset by increases in Selling, general and administrative expense and Other (income) expense, net.
Operating profit margin was 20.1% in the first nine months of 2016.2023, a decrease of 10 bps compared to 20.2% in the first nine months of 2022. Excluding the items described above in both periods, as applicable, Operating profit margin was 25.2%, a decrease of 50 bps from 25.7%20.4% in the first nine months of 2016. This2023, a decrease was primarilyof 10 bps compared to 20.5% in the first nine months of 2022, due to an increase in Selling, general and administrative expenses (70Other (income) expense, net (30 bps), partially offset by an increase in Gross profit margin (40(20 bps), both as a percentage of Net sales. This increase in Selling, general and administrative expenses was primarily due to increased advertising investment.
| | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, |
| | 2023 | | 2022 | | % Change |
Operating profit, GAAP | | $ | 2,912 | | | $ | 2,691 | | | 8 | % |
Product recall costs | | 25 | | | — | | | |
2022 Global Productivity Initiative | | 25 | | | 79 | | | |
Gain on the sale of land in Asia Pacific | | — | | | (47) | | | |
Acquisition-related costs | | — | | | 17 | | | |
Operating profit, non-GAAP | | $ | 2,962 | | | $ | 2,740 | | | 8 | % |
|
| | | | | | | | | | | |
| | Nine Months Ended September 30, |
| | 2017 | | 2016 | | % Change |
Operating profit, GAAP | | $ | 2,665 |
| | $ | 2,882 |
| | (8 | )% |
Global Growth and Efficiency Program | | 246 |
| | 156 |
| | |
Gain on sale of land in Mexico | | — |
| | (97 | ) | | |
Charge for a previously disclosed litigation matter | | — |
| | 6 |
| | |
Operating profit, non-GAAP | | $ | 2,911 |
| | $ | 2,947 |
| | (1 | )% |
| | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, |
| | 2023 | | 2022 | | Basis Point Change |
Operating profit margin, GAAP | | 20.1 | % | | 20.2 | % | | (10) | |
Product recall costs | | 0.2 | | | — | | | |
2022 Global Productivity Initiative | | 0.1 | | | 0.6 | | | |
Gain on the sale of land in Asia Pacific | | — | | | (0.4) | | | |
Acquisition-related costs | | — | | | 0.1 | | | |
Operating profit margin, non-GAAP | | 20.4 | % | | 20.5 | % | | (10) | |
Non-Service Related Postretirement Costs
|
| | | | | | | | | |
| | Nine Months Ended September 30, |
| | 2017 | | 2016 | | Basis Point Change |
Operating profit margin, GAAP | | 23.0 | % | | 25.1 | % | | (210 | ) |
Global Growth and Efficiency Program | | 2.2 |
| | 1.4 |
| | |
Gain on sale of land in Mexico | | — |
| | (0.8 | ) | | |
Charge for a previously disclosed litigation matter | | — |
| | — |
| | |
Operating profit margin, non-GAAP | | 25.2 | % | | 25.7 | % | | (50 | ) |
Interest (Income) Expense, Net
Interest (income) expense, net was $74Non-service related postretirement costs were $338 in the first nine months of 20172023 as compared to $78$65 in the first nine months of 2016, primarily due2022. Non-service related postretirement costs in the first nine months of 2023 included charges related to lower interest expensethe ERISA litigation matter and charges related to the 2022 Global Productivity Initiative. Non-service related postretirement costs in the first nine months of 2022 included charges resulting from the 2022 Global Productivity Initiative. Excluding these charges in both periods, as a resultapplicable, Non-service related postretirement costs were $67 and $52 in the first nine months of lower average debt balances2023 and higher interest income on investments held outside the United States.2022, respectively.
| | | | | | | | | | | | | | |
| | Nine Months Ended September 30, |
| | 2023 | | 2022 |
Non-service related postretirement costs, GAAP | | $ | 338 | | | $ | 65 | |
ERISA litigation matter | | (267) | | | — | |
2022 Global Productivity Initiative | | (4) | | | (13) | |
Non-service related postretirement costs, non-GAAP | | $ | 67 | | | $ | 52 | |
COLGATE-PALMOLIVE COMPANY
Management’sManagement’s Discussion and Analysis of Financial
Condition and Results of Operations
(Dollars in Millions Except Per Share Amounts)
Interest (Income) Expense, Net
Interest (income) expense, net was $170 in the first nine months of 2023 as compared to $98 in the first nine months of 2022. The increase was primarily due to higher average interest rates on debt and higher debt balances.
Income Taxes
The effective income tax rate was 27.8%21.9% for the third quarter of 20172023 as compared to 28.7%23.5% for the third quarter of 2016.2022. The primary driver of the decrease in the effective income tax rate is described below.
The effective income tax rate was 29.5% for the first nine months of 2023 as compared to 23.9% for the first nine months of 2022. As reflected in the table below, the non-GAAP effective income tax rate was 28.1% for the quarter ended September 30, 2017, as compared to 30.1% in the comparable period of 2016. The decrease in the non-GAAP effective income tax rate in the third quarter of 2017 was primarily due to the recognition of $17 of excess tax benefits in the Provision for income taxes in the third quarter of 2017 as a result of the adoption of ASU No. 2016-09, “Compensation–Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting” effective January 1, 2017. See Note 3, Recent Accounting Pronouncements and Note 10, Income Taxes to the Condensed Consolidated Financial Statements, for additional details.
The effective income tax rate was 29.7%23.8% for the first nine months of 20172023, as compared to 30.2% for the first nine months of 2016. As reflected in the table below, the non-GAAP effective income tax rate was 29.3% for the first nine months ended September 30, 2017, as compared to 31.0%23.7% in the comparable period of 2016. The decrease in the non-GAAP effective income tax rate in the first nine months of 2017 was primarily due to the recognition of $43 of excess tax benefits in the Provision for income taxes during the first nine months of 2017, as a result of the adoption of the new accounting guidance discussed above.2022.
The quarterly provision for income taxes is determined based on the Company’s estimated full year effective income tax rate adjusted by the amount of tax attributable to infrequent or unusual items that are separately recognized on a discrete basis in the income tax provision in the quarter in which they occur. In addition, as discussed above, effective January 1, 2017, excess tax benefits from share-based compensation are now recognized in the Provision for income taxes on a discrete basis. The Company’s current estimate of its full year effective income tax rate before discrete period items is 30.8%23.7%, compared to 31.0%23.8% in 2022.
In the third quarter of 2023, the Internal Revenue Service (the “IRS”) issued a notice giving taxpayers temporary relief from the effects of certain U.S. tax regulations that were issued in December 2021, which place greater restrictions on foreign taxes that are creditable against U.S. taxes on foreign-source income. This notice allows taxpayers to defer the application of these new regulations until 2024 which is the primary driver of the decrease in the effective tax rate in the third quarter of 2016.2023.
In the second quarter of 2023, the Company reassessed with its legal and tax advisers certain tax deductions taken in prior years by one of its subsidiaries and concluded that it is more likely than not that the deductions would not be sustained by the courts in that jurisdiction. The value of the tax deductions was not material to the Company in any year in which they were taken. The cumulative effect of the change in tax position of $148 was reflected as a discrete item in the second quarter’s income tax expense, partially offset by the reversal of certain prior years’ withholding tax reserves of $22 that are no longer required. The tax liability was paid in the quarter ended September 30, 2023. The current year impact of these changes is included in the Company’s estimated full year effective income tax rate.
On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was enacted, which among other things, implements a 15% minimum tax on book income of certain large corporations effective for years beginning after December 31, 2022. Based on the Company’s preliminary analysis, the IRA is not expected to have a material impact on the Company’s Consolidated Financial Statements. The Company will continue to evaluate the impact of this law as additional guidance and clarification becomes available.
Additionally, on December 15, 2022, the 27 member states of the European Union (“EU”) reached an agreement on a minimum level of taxation for certain large corporations to pay a minimum corporate tax rate of 15% in every jurisdiction in which they operate. This agreement, which is known as the Minimum Taxation Directive (part of the “Pillar II Model Rules”), must be transposed into the laws of all EU member states by December 31, 2023. The Company is currently evaluating the impact of this Directive on the Company’s Consolidated Financial Statements.
The Company has ongoing federal, state and international income tax audits in various jurisdictions and evaluates uncertain tax positions that may be challenged by local tax authorities and not fully sustained. All U.S. federal income tax returns through December 31, 2013 have been audited by the IRS and there are limited matters which the Company plans to appeal for years 2010 through 2013. One such matter relates to the IRS assessment of taxes on the Company by imputing income on certain activities within one of our international operations, which is also under audit for the years 2014 through 2018. There was a U.S. Tax Court ruling in February 2023 in favor of the IRS against an unrelated third party on a similar matter. Despite the recent U.S. Tax Court ruling, the Company continues to believe that the tax assessment against the Company is without merit. While there can be no assurances, the Company believes this matter will ultimately be decided in favor of the Company. The amount of tax plus interest for the years 2010 through 2018 is estimated to be approximately $145, which is not included in the Company’s uncertain tax positions.
COLGATE-PALMOLIVE COMPANY
Management’s Discussion and Analysis of Financial
Condition and Results of Operations
(Dollars in Millions Except Per Share Amounts)
|
| | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, |
| | 2017 | | 2016 |
| | Income Before Income Taxes | | Provision For Income Taxes(1) | | Effective Income Tax Rate(2) | | Income Before Income Taxes | | Provision For Income Taxes(1) | | Effective Income Tax Rate(2) |
As Reported GAAP | | $ | 900 |
| | $ | 250 |
| | 27.8 | % | | $ | 1,046 |
| | $ | 300 |
| | 28.7 | % |
Global Growth and Efficiency Program | | 58 |
| | 19 |
| | 0.3 |
| | 42 |
| | 10 |
| | (0.2 | ) |
Gain on sale of land in Mexico | | — |
| | — |
| | — |
| | (97 | ) | | (34 | ) | | (0.6 | ) |
Benefits from previously disclosed tax matters | | — |
| | — |
| | — |
| | — |
| | 22 |
| | 2.2 |
|
Charge for a previously disclosed litigation matter | | — |
| | — |
| | — |
| | 6 |
| | 2 |
| | — |
|
Non-GAAP | | $ | 958 |
| | $ | 269 |
| | 28.1 | % | | $ | 997 |
| | $ | 300 |
| | 30.1 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, |
| | 2023 | | 2022 |
| | Income Before Income Taxes | | Provision For Income Taxes(1) | | Effective Income Tax Rate(2) | | Income Before Income Taxes | | Provision For Income Taxes(1) | | Effective Income Tax Rate(2) |
As Reported GAAP | | $ | 956 | | | $ | 209 | | | 21.9 | % | | $ | 892 | | | $ | 210 | | | 23.5 | % |
2022 Global Productivity Initiative | | 2 | | | — | | | (0.1) | | | 2 | | | — | | | (0.1) | |
Gain on the sale of land in Asia Pacific | | — | | | — | | | — | | | (47) | | | (11) | | | 0.1 | |
Acquisition-related costs | | — | | | — | | | — | | | 17 | | | 2 | | | (0.2) | |
Non-GAAP | | $ | 958 | | | $ | 209 | | | 21.8 | % | | $ | 864 | | | $ | 201 | | | 23.3 | % |
|
| | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, |
| | 2017 | | 2016 |
| | Income Before Income Taxes | | Provision For Income Taxes(1) | | Effective Income Tax Rate(2) | | Income Before Income Taxes | | Provision For Income Taxes(1) | | Effective Income Tax Rate(2) |
As Reported GAAP | | $ | 2,591 |
| | $ | 770 |
| | 29.7 | % | | $ | 2,804 |
| | $ | 846 |
| | 30.2 | % |
Global Growth and Efficiency Program | | 246 |
| | 61 |
| | (0.4 | ) | | 156 |
| | 41 |
| | (0.2 | ) |
Gain on sale of land in Mexico | | — |
| | — |
| | — |
| | (97 | ) | | (34 | ) | | (0.2 | ) |
Benefits from previously disclosed tax matters | | — |
| | — |
| | — |
| | — |
| | 35 |
| | 1.2 |
|
Charge for a previously disclosed litigation matter | | — |
| | — |
| | — |
| | 6 |
| | 2 |
| | — |
|
Non-GAAP | | $ | 2,837 |
| | $ | 831 |
| | 29.3 | % | | $ | 2,869 |
| | $ | 890 |
| | 31.0 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, |
| | 2023 | | 2022 |
| | Income Before Income Taxes | | Provision For Income Taxes(1) | | Effective Income Tax Rate(2) | | Income Before Income Taxes | | Provision For Income Taxes(1) | | Effective Income Tax Rate(2) |
As Reported GAAP | | $ | 2,404 | | | $ | 709 | | | 29.5 | % | | $ | 2,528 | | | $ | 604 | | | 23.9 | % |
ERISA litigation matter | | 267 | | | 55 | | | (0.9) | | | — | | | — | | | — | |
Foreign tax matter | | — | | | (126) | | | (4.7) | | | — | | | — | | | — | |
2022 Global Productivity Initiative | | 29 | | | 5 | | | (0.1) | | | 92 | | | 19 | | | (0.1) | |
Product recall costs | | 25 | | | 6 | | | — | | | — | | | — | | | — | |
Gain on the sale of land in Asia Pacific | | — | | | — | | | — | | | (47) | | | (11) | | | — | |
Acquisition-related costs | | — | | | — | | | — | | | 17 | | | 2 | | | (0.1) | |
Non-GAAP | | $ | 2,725 | | | $ | 649 | | | 23.8 | % | | $ | 2,590 | | | $ | 614 | | | 23.7 | % |
(1) The income tax effect on non-GAAP items is calculated based upon the tax laws and statutory income tax rates applicable in the tax jurisdiction(s) of the underlying non-GAAP adjustment.
(2) The impact of non-GAAP items on the Company’s effective tax rate represents the difference in the effective tax rate calculated with and without the non-GAAP adjustment on Income before income taxes and Provision for income taxes.
COLGATE-PALMOLIVE COMPANY
Management’sManagement’s Discussion and Analysis of Financial
Condition and Results of Operations
(Dollars in Millions Except Per Share Amounts)
The Company has taken a tax position in a foreign jurisdiction since 2002 that has been challenged by the local tax authorities. In May 2015, the Company became aware of several rulings by the Supreme Court in this foreign jurisdiction disallowing certain tax deductions, which had the effect of reversing prior decisions. The Company had taken deductions in prior years similar to those disallowed by such court and, as a result, as required, reassessed its tax position and increased its unrecognized tax benefits in 2015.
During the quarter ended June 30, 2016, the Supreme Court in this foreign jurisdiction decided the matter in the Company’s favor for the years 2002 through 2005 and, as a result, the Company recorded a net tax benefit of $13, including interest. During the quarter ended September 30, 2016, the Administrative Court in this jurisdiction also decided the matter in the Company’s favor for the years 2008 through 2011 by acknowledging the Supreme Court’s ruling for the years 2002 through 2005, which eliminated the possibility for future appeals. As a result, the Company recorded a tax benefit of $17, including interest, in the quarter ended September 30, 2016. The tax benefit of deductions related to this tax position taken for the years 2006 through 2007 and 2012 through 2014 totals approximately $15 at current exchange rates. These deductions are currently being challenged by the tax authorities either in the lower courts or at the administrative level and, if resolved in the Company’s favor, will result in the Company recording additional tax benefits, including interest.
COLGATE-PALMOLIVE COMPANY
Management’s Discussion and Analysis of Financial
Condition and Results of Operations
(Dollars in Millions Except Per Share Amounts)
Net Income Attributable to Colgate-Palmolive Company and Earnings Per Share
Net income attributable to Colgate-Palmolive Company in the first nine months of 20172023 decreased to $1,701$1,582 from $1,835$1,780 in the comparable 20162022 period. Earnings per common share on a diluted basis decreased to $1.91 per share$1.90 in the first nine months of 2023 from $2.04 per share$2.12 in the comparable 20162022 period. Net income attributable to Colgate-Palmolive Company in both periods included charges resulting from the Global Growth and Efficiency Program. Net income attributable to Colgate-Palmolive Company in the first nine months of 2016 also2023 included charges resulting from the ERISA litigation matter, the foreign tax matter, the 2022 Global Productivity Initiative and product recall costs. Net income attributable to Colgate-Palmolive Company in the comparable 2022 period included charges resulting from the 2022 Global Productivity Initiative, a gain on the sale of land in Mexico, benefits from previously disclosed tax mattersAsia Pacific and a charge for a previously disclosed litigation matter.acquisition-related costs.
Excluding the items described above in both periods as applicable, Net income attributable to Colgate-Palmolive Company increased 2% to $1,886 in the first nine months of 20172023 increased 6% to $1,962 from $1,855$1,852 in the first nine months of 20162022, and Earnings per common share on a diluted basis increased 3%7% to $2.12$2.36 in the first nine months of 20172023 from $2.06$2.20 in the first nine months of 2016.2022.
| | | Nine Months Ended September 30, 2017 | | Nine Months Ended September 30, 2023 |
| Income Before Income Taxes | | Provision For Income Taxes(1) | | Net Income Including Noncontrolling Interests | | Net Income Attributable To Colgate-Palmolive Company | | Diluted Earnings Per Share(2) | | Income Before Income Taxes | | Provision For Income Taxes(1) | | Net Income Including Noncontrolling Interests | | Less: Income Attributable to Noncontrolling Interests | | Net Income Attributable To Colgate-Palmolive Company | | | Diluted Earnings Per Share(2) |
As Reported GAAP | $ | 2,591 |
| | $ | 770 |
| | $ | 1,821 |
| | $ | 1,701 |
| | $ | 1.91 |
| As Reported GAAP | $ | 2,404 | | | $ | 709 | | | $ | 1,695 | | | $ | 113 | | | $ | 1,582 | | | | $ | 1.90 | |
Global Growth and Efficiency Program | 246 |
| | 61 |
| | 185 |
| | 185 |
| | 0.21 |
| |
ERISA litigation matter | | ERISA litigation matter | 267 | | | 55 | | | 212 | | | — | | | 212 | | | | 0.26 | |
Foreign tax matter | | Foreign tax matter | — | | | (126) | | | 126 | | | — | | | 126 | | | | 0.15 | |
2022 Global Productivity Initiative | | 2022 Global Productivity Initiative | 29 | | | 5 | | | 24 | | | 1 | | | 23 | | | | 0.03 | |
Product recall costs | | Product recall costs | 25 | | | 6 | | | 19 | | | — | | | 19 | | | | 0.02 | |
Non-GAAP | $ | 2,837 |
| | $ | 831 |
| | $ | 2,006 |
| | $ | 1,886 |
| | $ | 2.12 |
| Non-GAAP | $ | 2,725 | | | $ | 649 | | | $ | 2,076 | | | $ | 114 | | | $ | 1,962 | | | | $ | 2.36 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, 2022 |
| Income Before Income Taxes | | Provision For Income Taxes(1) | | Net Income Including Noncontrolling Interests | | Less: Income Attributable to Noncontrolling Interests | | Net Income Attributable To Colgate-Palmolive Company | | | Diluted Earnings Per Share(2) |
As Reported GAAP | $ | 2,528 | | | $ | 604 | | | $ | 1,924 | | | $ | 144 | | | $ | 1,780 | | | | $ | 2.12 | |
2022 Global Productivity Initiative | 92 | | | 19 | | | 73 | | | 1 | | | 72 | | | | 0.08 | |
Gain on the sale of land in Asia Pacific | (47) | | | (11) | | | (36) | | | (21) | | | (15) | | | | (0.02) | |
Acquisition-related costs | 17 | | | 2 | | | 15 | | | — | | | 15 | | | | 0.02 | |
Non-GAAP | $ | 2,590 | | | $ | 614 | | | $ | 1,976 | | | $ | 124 | | | $ | 1,852 | | | | $ | 2.20 | |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, 2016 |
| Income Before Income Taxes | | Provision For Income Taxes(1) | | Net Income Including Noncontrolling Interests | | Less: Income Attributable To Noncontrolling Interests | | Net Income Attributable To Colgate-Palmolive Company | | Diluted Earnings Per Share(2) |
As Reported GAAP | $ | 2,804 |
| | $ | 846 |
| | $ | 1,958 |
| | $ | 123 |
| | $ | 1,835 |
| | $ | 2.04 |
|
Global Growth and Efficiency Program | 156 |
| | 41 |
| | 115 |
| | 1 |
| | 114 |
| | 0.13 |
|
Gain on sale of land in Mexico | (97 | ) | | (34 | ) | | (63 | ) | | — |
| | (63 | ) | | (0.07 | ) |
Benefits from previously disclosed tax matters | — |
| | 35 |
| | (35 | ) | | — |
| | (35 | ) | | (0.04 | ) |
Charge for a previously disclosed litigation matter | 6 |
| | 2 |
| | 4 |
| | — |
| | 4 |
| | — |
|
Non-GAAP | $ | 2,869 |
| | $ | 890 |
| | $ | 1,979 |
| | $ | 124 |
| | $ | 1,855 |
| | $ | 2.06 |
|
(1) The income tax effect on non-GAAP items is calculated based upon the tax laws and statutory income tax rates applicable in the tax jurisdiction(s) of the underlying non-GAAP adjustment.
(2) The impact of non-GAAP adjustments on diluted earnings per share may not necessarily equal the difference between “GAAP” and “non-GAAP” as a result of rounding.
COLGATE-PALMOLIVE COMPANY
Management’sManagement’s Discussion and Analysis of Financial
Condition and Results of Operations
(Dollars in Millions Except Per Share Amounts)
Restructuring and Related Implementation Charges
Global Growth and Efficiency Program
In the fourth quarter of 2012, the Company commenced the Global Growth and Efficiency Program. The program’s initiatives are expected to help Colgate ensure sustained solid worldwide growth in unit volume, organic sales, operating profit and earnings per share and enhance its global leadership positions in its core businesses.
The Global Growth and Efficiency Program is expected to produce significant benefits in the Company’s long-term business performance. The major objectives of the program include:
| |
▪ | Becoming even stronger on the ground through the continued evolution and expansion of proven global and regional commercial capabilities, which have already been successfully implemented in a number of the Company’s operations around the world.
|
| |
▪ | Simplifying and standardizing how work gets done by increasing technology-enabled collaboration and taking advantage of global data and analytic capabilities, leading to smarter and faster decisions. |
| |
▪ | Reducing structural costs to continue to increase the Company’s gross and operating profit.
|
| |
▪ | Building on Colgate’s current position of strength to enhance its leading market share positions worldwide and ensure sustained sales and earnings growth.
|
On October 23, 2014, the Board approved an expansion of the Global Growth and Efficiency Program to take advantage of additional savings opportunities. On October 29, 2015,January 27, 2022, the Board approved the reinvestment of the funds from the sale of2022 Global Productivity Initiative. The program is intended to reallocate resources towards the Company’s laundry detergent businessstrategic priorities and faster growth businesses, drive efficiencies in the South PacificCompany’s operations and streamline the Company’s supply chain to expand the Global Growth and Efficiency Program and extend it through December 31, 2017. The Board approved the implementation plan for this expansion on March 10, 2016.reduce structural costs.
Implementation of the 2022 Global Growth and Efficiency Program remains on track. Building on the Company’s successful implementation of the Global Growth and Efficiency Program to date, on October 26, 2017, the Board approved an expansion of the Global Growth and Efficiency Program and an extension of the program through December 31, 2019 to take advantage of additional opportunities to streamline the Company’s operations.
The initiatives under the Global Growth and Efficiency Program continueProductivity Initiative, which is expected to be focused on the following areas:
| |
▪ | Expanding Commercial Hubs – Building on the success of the hub structure implemented around the world, streamlining operations in ordersubstantially completed by mid-year 2024, is estimated to drive smarter and faster decision-making, strengthen capabilities available on the ground and improve cost structure. |
| |
▪ | Extending Shared Business Services and Streamlining Global Functions – Optimizing the Company’s shared service organizational model in all regions of the world and continuing to streamline global functions to improve cost structure.
|
| |
▪ | Optimizing Global Supply Chain and Facilities – Continuing to optimize manufacturing efficiencies, global warehouse networks and office locations for greater efficiency, lower cost and speed to bring innovation to market. |
As a result of the expansion, savings, substantially all of which are expected to increase future cash flows, are now projected to be in the range of $560 to $635 pretax ($500 to $575 aftertax) annually, once all projects are approved and implemented as compared to the previous estimate of $455 to $495 pretax ($425 to $475 aftertax). The Company continues to expect savings in 2017 to amount to approximately $50 to $60 pretax ($40 to $50 aftertax). Cumulativecumulative pretax charges, resulting from the Global Growth and Efficiency Program, once all phases are approved and implemented, are now estimated to be in the range of $1,730$200 to $1,885$240 ($1,280170 to $1,380$200 aftertax) as compared to the previous estimate of $1,500 to $1,585 ($1,120 to $1,170 aftertax).
COLGATE-PALMOLIVE COMPANY
Management’s Discussion and Analysis of Financial
Condition and Results of Operations
(Dollars in Millions Except Per Share Amounts)
The Company now anticipates that pretax charges for 2017 will approximate $340 to $380 ($250 to $280 aftertax) as compared to the previous estimate of $275 to $360 ($210 to $260 aftertax). It, which is expected that substantially all charges resulting from the Global Growth and Efficiency Program will be incurred by December 31, 2019.
The pretax charges resulting from the Global Growth and Efficiency Program are currently estimated to be comprised of the following categories: Employee-Related Costs,following: employee-related costs, including severance, pension and other termination benefits (50%(80%); asset-related costs, primarily Incremental Depreciationaccelerated depreciation and Asset Impairmentsasset write-downs (10%); and Otherother charges (10%), which include contract termination costs, consisting primarily of related implementationimplementation-related charges resulting directly from exit activities (20%) and the implementation of new strategies (20%). Over the course of the Global Growth and Efficiency Program, itstrategies. It is currently estimated that approximately 80% to 90% of the charges will result in cash expenditures. Annualized pretax savings are projected to be in the range of $90 to $110 ($70 to $85 aftertax), once all projects are approved and implemented.
The Company expectsIt is expected that the cumulative pretax charges, once all projects are approved and implemented, will relate to initiatives undertaken in North America (15%), Europe (20%(5%), Latin America (5%(10%), Europe (45%), Asia Pacific (5%), Africa/Eurasia (5%(10%), Hill’s Pet Nutrition (10%) and Corporate (40%(15%), which includes substantially all of.
For the costs related to the implementation of new strategies, noted above, on a global basis. The Company now expects that, when it has been fully implemented, the Global Growth and Efficiency Program will contribute a net reduction of approximately 3,800 to 4,400 positionsthree months ended September 30, 2023, charges resulting from the Company’s global employee workforce.
2022 Global Productivity Initiative were $2 pretax ($2 aftertax). For the three and nine months ended September 30, 2017 and 2016, restructuring and related implementation2022, charges resulting from the 2022 Global Productivity Initiative were $2 pretax ($2 aftertax).
For the nine months ended September 30, 2023, charges resulting from the 2022 Global Productivity Initiative are reflected in the Condensed Consolidated Statements of Incomeincome statement as follows: | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, |
| | 2023 | | 2022 |
Gross Profit | | $ | 1 | | | $ | — | |
Selling, general and administrative expenses | | 2 | | | 4 | |
Other (income) expense, net | | 22 | | | 75 | |
Non-service related postretirement costs | | 4 | | | 13 | |
Total 2022 Global Productivity Initiative charges, pretax | | $ | 29 | | | $ | 92 | |
| | | | |
Total 2022 Global Productivity Initiative charges, aftertax | | $ | 23 | | | $ | 72 | |
|
| | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, | | September 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
Cost of sales | $ | 16 |
| | $ | 11 |
| | $ | 51 |
| | $ | 31 |
|
Selling, general and administrative expenses | 22 |
| | 9 |
| | 60 |
| | 49 |
|
Other (income) expense, net | 20 |
| | 22 |
| | 135 |
| | 76 |
|
Total Global Growth and Efficiency Program charges, pretax | $ | 58 |
| | $ | 42 |
| | $ | 246 |
| | $ | 156 |
|
| | | | | | | |
Total Global Growth and Efficiency Program charges, aftertax | $ | 39 |
| | $ | 32 |
| | $ | 185 |
| | $ | 114 |
|
Restructuring and related implementation charges in the preceding table arewere recorded in the Corporate segment as these initiatives are predominantly centrally directed and controlled and are not included in internal measures of segment operating performance.
Total charges incurred for the Global Growth and Efficiency Program relate to initiatives undertaken by the following reportable operating segments:
|
| | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended | | Program-to-date |
| September 30, | | September 30, | | Accumulated Charges |
| 2017 | | 2016 | | 2017 | | 2016 | | |
North America | 27 | % | | 30 | % | | 23 | % | | 32 | % | | 18 | % |
Latin America | 2 | % | | 3 | % | | 3 | % | | 5 | % | | 3 | % |
Europe | (11 | )% | | 19 | % | | 29 | % | | 10 | % | | 23 | % |
Asia Pacific | 7 | % | | 4 | % | | 4 | % | | 6 | % | | 3 | % |
Africa/Eurasia | 2 | % | | 12 | % | | 2 | % | | 14 | % | | 6 | % |
Hill’s Pet Nutrition | 9 | % | | 5 | % | | 5 | % | | 8 | % | | 7 | % |
Corporate | 64 | % | | 27 | % | | 34 | % | | 25 | % | | 40 | % |
COLGATE-PALMOLIVE COMPANY
Management’sManagement’s Discussion and Analysis of Financial
Condition and Results of Operations
(Dollars in Millions Except Per Share Amounts)
Total charges incurred for the 2022 Global Productivity Initiative relate to initiatives undertaken by the following reportable operating segments: | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, | | Program-to-date Accumulated Charges | | |
| 2023 | | 2022 | | | | |
North America | 14 | % | | 11 | % | | 11 | % | | |
Latin America | 1 | % | | 16 | % | | 15 | % | | |
Europe | 20 | % | | 16 | % | | 19 | % | | |
Asia Pacific | 21 | % | | 9 | % | | 11 | % | | |
Africa/Eurasia | 10 | % | | 12 | % | | 11 | % | | |
Hill’s Pet Nutrition | 14 | % | | 10 | % | | 12 | % | | |
Corporate | 20 | % | | 26 | % | | 21 | % | | |
Total | 100 | % | | 100 | % | | 100 | % | | |
Since the inception of the 2022 Global Growth and Efficiency Program in the fourth quarter of 2012,Productivity Initiative, the Company has incurred cumulative pretax charges of $1,474$139 ($1,092110 aftertax) in connection with the implementation of various projects as follows:
| | | | | | | | |
| | Cumulative Charges |
| | as of September 30, 2023 |
Employee-Related Costs | | $ | 125 | |
Incremental Depreciation | | — | |
Asset Impairments | | 1 | |
Other | | 13 | |
Total | | $ | 139 | |
|
| | | |
| Cumulative Charges |
| as of September 30, 2017 |
Employee-Related Costs | $ | 594 |
|
Incremental Depreciation | 88 |
|
Asset Impairments | 29 |
|
Other | 763 |
|
Total | $ | 1,474 |
|
The majority of costs incurred since inception relate to the following projects: the implementation of the Company’s overall hubbing strategy; the extension of shared business services and streamlining of global functions; the consolidation of facilities; the closing of the Morristown, New Jersey personal care facility; the simplification and streamlining of the Company’s research and development capabilities and oral care supply chain, both in Europe; redesigning the European commercial organization; restructuring how the Company will provide future retirement benefits to substantially all of the U.S.-based employees participating in the Company’s defined benefit retirement plan by shifting them to the Company’s defined contribution plan.
The following tables summarizetable summarizes the activity for the restructuring and related implementation charges discussed above and the related accruals:
| | | | | | | | | | | | | | Nine Months Ended September 30, 2023 |
| | Three Months Ended September 30, 2017 | | | Employee-Related Costs | | Incremental Depreciation | | Asset Impairments | | Other | | Total |
| | Employee-Related Costs | | Incremental Depreciation | | Asset Impairments | | Other | | Total | |
Balance at June 30, 2017 | | $ | 138 |
| | $ | — |
| | $ | — |
| | $ | 116 |
| | $ | 254 |
| |
Balance at December 31, 2022 | | Balance at December 31, 2022 | | $ | 30 | | | $ | — | | | $ | 1 | | | $ | 3 | | | $ | 34 | |
Charges | | 21 |
| | 2 |
| | — |
| | 35 |
| | 58 |
| Charges | | 23 | | | — | | | — | | | 6 | | | 29 | |
Cash payments | | (16 | ) | | — |
| | — |
| | (42 | ) | | (58 | ) | |
Cash Payments | | Cash Payments | | (38) | | | — | | | — | | | (8) | | | (46) | |
Charges against assets | | (15 | ) | | (2 | ) | | — |
| | — |
| | (17 | ) | Charges against assets | | (4) | | | — | | | (1) | | | — | | | (5) | |
Foreign exchange | | — |
| | — |
| | — |
| | — |
| | — |
| Foreign exchange | | 5 | | | — | | | — | | | — | | | 5 | |
Balance at September 30, 2017 | | $ | 128 |
| | $ | — |
| | $ | — |
| | $ | 109 |
| | $ | 237 |
| |
Balance at September 30, 2023 | | Balance at September 30, 2023 | | $ | 16 | | | $ | — | | | $ | — | | | $ | 1 | | | $ | 17 | |
|
|
| | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, 2017 |
| | Employee-Related Costs | | Incremental Depreciation | | Asset Impairments | | Other | | Total |
Balance at December 31, 2016 | | $ | 56 |
| | $ | — |
| | $ | — |
| | $ | 125 |
| | $ | 181 |
|
Charges | | 129 |
| | 8 |
| | 2 |
| | 107 |
| | 246 |
|
Cash payments | | (43 | ) | | — |
| | — |
| | (124 | ) | | (167 | ) |
Charges against assets | | (17 | ) | | (8 | ) | | (2 | ) | | — |
| | (27 | ) |
Foreign exchange | | 3 |
| | — |
| | — |
| | 1 |
| | 4 |
|
Balance at September 30, 2017 | | $ | 128 |
| | $ | — |
| | $ | — |
| | $ | 109 |
| | $ | 237 |
|
COLGATE-PALMOLIVE COMPANY
Management’s Discussion and Analysis of Financial
Condition and Results of Operations
(Dollars in Millions Except Per Share Amounts)
Employee-Related Costs primarily include severance and other termination benefits and are calculated based on long-standing benefit practices, written severance policies, local statutory requirements and, in certain cases, voluntary termination arrangements. Employee-Related Costs also include pension and other retiree benefit enhancements amounting to $15 and $17of $4 for the three and nine months ended September 30, 2017, respectively,2023, which are reflected as Charges against assets within Employee-Related Costs in the preceding tables as the corresponding balance sheet amounts are reflected as a reduction of pension assets or an increase in pension liabilities.
COLGATE-PALMOLIVE COMPANY
Management’s Discussion and other retiree benefit liabilities (see Note 9, Retirement PlansAnalysis of Financial
Condition and Other Retiree Benefits to the Condensed Consolidated Financial Statements).Results of Operations
(Dollars in Millions Except Per Share Amounts)
Incremental Depreciation is recorded to reflect changes in useful lives and estimated residual values for long-lived assets that will be taken out of service prior to the end of their normal service period. Asset Impairments are recorded to write down assets held for sale or disposal to their fair value based on amounts expected to be realized. Charges against assets within Asset Impairments are net of cash proceeds pertaining to the sale of certain assets.
Other charges consist primarily of charges resulting directly from exit activities and the implementation of new strategies as a result of the Global Growth and Efficiency Program. These charges for the three and nine months ended September 30, 2017 include third-party incremental costs related to the development and implementation of new business and strategic initiatives of $33 and $103, respectively, and contract termination costs and charges resulting directly from exit activities of $2 and $4, respectively. These charges were expensed as incurred.
Non-GAAP Financial Measures
This Quarterly Report on Form 10-Q discusses certain financial measures on both a GAAP and a non-GAAP basis. The Company uses the non-GAAP financial measures described below internally in its budgeting process, to evaluate segment and overall operating performance and as a factor in determining compensation. The Company believes that these non-GAAP financial measures are useful in evaluating the Company’s underlying business performance and trends; however, this information should be considered as supplemental in nature and is not meant to be considered in isolation or as a substitute for the related financial information prepared in accordance with GAAP. In addition, these non-GAAP financial measures may not be the same as similar measures presented by other companies.
Net sales growth (GAAP) and organic sales growth (Net sales growth excluding the impact of foreign exchange, acquisitions and divestments) (non-GAAP) are discussed in this Quarterly Report on Form 10-Q. Management believes the organic sales growth measure provides investors and analysts with useful supplemental information regarding the Company’s underlying sales trends by presenting sales growth excluding the external factor of foreign exchange, as well as the impact of acquisitions and divestments.divestments, as applicable. A reconciliation of organic sales growth to Net sales growth for the three and nine months ended September 30, 20172023 is provided below.
Worldwide Gross profit, Gross profit margin, Selling, general and administrative expenses, Selling, general and administrative expenses as a percentage of Net sales, Other (income) expense, net, Operating profit, Operating profit margin, Non-service related postretirement costs, effective income tax rate, Net income attributable to Colgate-Palmolive Company and Earnings per share on a diluted basis are discussed in this Quarterly Report on Form 10-Q both on a GAAP basis and excluding, theas applicable, charges resulting from the ERISA litigation matter, the foreign tax matter, the 2022 Global Growth and Efficiency Program and, as applicable,Productivity Initiative, product recall costs, a gain on the sale of land in Mexico, benefits from previously disclosed tax mattersAsia Pacific and a charge for a previously disclosed litigation matter (non-GAAP).acquisition-related costs. These non-GAAP financial measures exclude items that, either by their nature or amount, management would not expect to occur as part of the Company’s normal business on a regular basis, such as restructuring charges, charges for certain litigation and tax matters, acquisition-related costs, gains and losses from certain divestitures and certain other unusual, non-recurring items. Investors and analysts use these financial measures in assessing the Company’s business performance, and management believes that presenting these financial measures on a non-GAAP basis provides them with useful supplemental information to enhance their understanding of the Company’s underlying business performance and trends. These non-GAAP financial measures also enhance the ability to compare period-to-period financial results. A reconciliation of each of these non-GAAP financial measures to the most directly comparable GAAP financial measures for the three and nine months ended September 30, 20172023 and 20162022 is presented within the applicable section of Results of Operations.
COLGATE-PALMOLIVE COMPANY
Management’s Discussion and Analysis of Financial
Condition and Results of Operations
(Dollars in Millions Except Per Share Amounts)
The following tables provide a quantitative reconciliation of Net sales growth to organic sales growth for the three and nine months ended September 30, 2017:2023:
| | | | | | | | | | | | | | |
Three Months Ended September 30, 2023 | Net Sales Growth (GAAP) | Foreign Exchange Impact | Acquisitions and Divestments Impact | Organic Sales Growth (Non-GAAP) |
Oral, Personal and Home Care | | | | |
North America | 3.5% | —% | —% | 3.5% |
Latin America | 20.0% | 5.0% | —% | 15.0% |
Europe | 14.5% | 7.5% | —% | 7.0% |
Asia Pacific | (4.0)% | (2.5)% | —% | (1.5)% |
Africa/Eurasia | (7.5)% | (23.0)% | —% | 15.5% |
Total Oral, Personal and Home Care | 7.5% | —% | —% | 7.5% |
Pet Nutrition | 21.5% | 0.5% | 6.0% | 15.0% |
Total Company | 10.5% | 0.5% | 1.0% | 9.0% |
|
| | | | |
Three Months Ended September 30, 2017 | Net Sales Growth (GAAP) | Foreign Exchange Impact | Acquisitions and Divestments Impact | Organic Sales Growth (Non-GAAP) |
Oral, Personal and Home Care | | | | |
North America | (0.5)% | 0.5% | —% | (1.0)% |
Latin America | 6.5% | 1.0% | —% | 5.5% |
Europe | 5.5% | 4.5% | —% | 1.0% |
Asia Pacific | 0.5% | 0.5% | —% | 0.0% |
Africa/Eurasia | 0.5% | 2.5% | —% | (2.0)% |
Total Oral, Personal and Home Care | 3.0% | 1.5% | —% | 1.5% |
Pet Nutrition | 2.0% | 1.0% | —% | 1.0% |
Total Company | 3.0% | 1.5% | —% | 1.5% |
|
| | | | |
Nine Months Ended September 30, 2017 | Net Sales Growth (GAAP) | Foreign Exchange Impact | Acquisitions and Divestments Impact | Organic Sales Growth (Non-GAAP) |
Oral, Personal and Home Care | | | | |
North America | (3.0)% | —% | —% | (3.0)% |
Latin America | 7.5% | 1.0% | —% | 6.5% |
Europe | (1.0)% | (1.0)% | —% | 0.0% |
Asia Pacific | (2.5)% | (1.0)% | —% | (1.5)% |
Africa/Eurasia | 2.5% | 4.0% | —% | (1.5)% |
Total Oral, Personal and Home Care | 1.0% | 0.5% | —% | 0.5% |
Pet Nutrition | 1.0% | 0.5% | —% | 0.5% |
Total Company | 1.0% | 0.5% | —% | 0.5% |
COLGATE-PALMOLIVE COMPANY
Management’sManagement’s Discussion and Analysis of Financial
Condition and Results of Operations
(Dollars in Millions Except Per Share Amounts)
| | | | | | | | | | | | | | |
Nine Months Ended September 30, 2023 | Net Sales Growth (GAAP) | Foreign Exchange Impact | Acquisitions and Divestments Impact | Organic Sales Growth (Non-GAAP) |
Oral, Personal and Home Care | | | | |
North America | 2.5% | (0.5)% | —% | 3.0% |
Latin America | 16.0% | 1.0% | —% | 15.0% |
Europe | 6.5% | 1.0% | —% | 5.5% |
Asia Pacific | (2.0)% | (4.5)% | —% | 2.5% |
Africa/Eurasia | 1.5% | (16.0)% | —% | 17.5% |
Total Oral, Personal and Home Care | 6.0% | (2.0)% | —% | 8.0% |
Pet Nutrition | 19.5% | (1.0)% | 7.5% | 13.0% |
Total Company | 9.0% | (1.5)% | 1.5% | 9.0% |
COLGATE-PALMOLIVE COMPANY
Management’s Discussion and Analysis of Financial
Condition and Results of Operations
(Dollars in Millions Except Per Share Amounts)
Liquidity and Capital Resources
The Company expects cash flow from operations and debt issuances will be sufficient to meet foreseeable business operating and recurring cash needs (including for debt service, dividends, capital expenditures, charges resulting from the Global Growthshare repurchases and Efficiency Program and stock repurchases)acquisitions). The Company believes its strong cash generation and financial position should continue to allow it broad access to global credit and capital markets.
Net cash provided by operations decreased 1%increased 39% to $2,295$2,609 in the first nine months of 2017,2023, compared with $2,317$1,883 in the comparable periodfirst nine months of 2016,2022, primarily due to the timingan improvement in working capital. The Company’s working capital was (2.1%) as a percentage of income tax payments and higher voluntary contributionsNet sales as of September 30, 2023 as compared to an employee postretirement plan.
(1.9%) as of September 30, 2022. The Company defines working capital as the difference between current assets (excluding Cash and cash equivalents and marketable securities, the latter of which is reported in Other current assets) and current liabilities (excluding short-term debt). The Company’s working capital improved to (4.6%) as a percentage of Net sales in the first nine months of 2017 as compared to (3.4%) in the first nine months of 2016, reflecting the Company’s tight focus on working capital.
Implementation of the Global Growth and Efficiency Program remains on track. Building on the Company’s successful implementation of the Global Growth and Efficiency Program to date, on October 26, 2017, the Board approved an expansion of the Global Growth and Efficiency Program and an extension of the program through December 31, 2019 to take advantage of additional opportunities to streamline the Company’s operations.
As a result of the expansion, total program charges resulting from the Global Growth and Efficiency Program are now estimated to be in the range of $1,730 to $1,885 ($1,280 to $1,380 aftertax) as compared to the previous estimate of $1,500 to $1,585 pretax ($1,120 to $1,170 aftertax). Approximately 80% of total program charges resulting from the Global Growth and Efficiency Program are expected to result in cash expenditures. Savings from the Global Growth and Efficiency Program, substantially all of which are expected to increase future cash flows, are now projected to be in the range of $560 to $635 pretax ($500 to $575 aftertax) annually, once all projects are approved and implemented, as compared to the previous estimate of $455 to $495 pretax ($425 to $475 aftertax).
The Company now anticipates that pretax charges for 2017 will approximate $340 to $380 ($250 to $280 aftertax) as compared to the previous estimate of $275 to $360 ($210 to $260 aftertax). The Company continues to expect savings in 2017 to amount to approximately $50 to $60 pretax ($40 to $50 aftertax). It is anticipated that cash requirements for the Global Growth and Efficiency Program will be funded from operating cash flows. Approximately 75% of the restructuring accrual at September 30, 2017 is expected to be paid in the next twelve months.
Investing activities used $532$599 of cash in the first nine months of 2017,2023, compared with $445 in the comparable period of 2016. Purchases of marketable securities and investments increasedto $1,428 in the first nine months of 2017 to $301 from $271 in the comparable period of 2016. Proceeds from the sale of marketable securities and investments decreased2022. Investing activities in the first nine months of 20172022 included the Company’s acquisition of businesses from Red Collar Pet Foods and Nutriamo discussed in Note 4, Acquisitions to $149 from $158 in the comparable period of 2016.Consolidated Financial Statements.
Capital spending decreasedexpenditures were $508 in the first nine months of 20172023 compared to $382 from $392$475 in the comparable periodfirst nine months of 2016.2022. Capital expenditures for 2023 are expected to be approximately 4.0% of Net sales. The Company continues to focus its capital spending on projects that are expected to yield high aftertax returns. Capital expenditures for 2017 are expected to be approximately 4.0% of Net sales, which remains higher than the Company’s historical rate of approximately 3.5%, primarily due to the Global Growth and Efficiency Program.
COLGATE-PALMOLIVE COMPANY
Management’s Discussion and Analysis of Financial
Condition and Results of Operations
(Dollars in Millions Except Per Share Amounts)
Financing activities used $1,767$1,801 of cash during the first nine months of 2017,2023, compared with $1,547$286 used in the first nine months of 2022. This primarily reflects higher repayments of commercial paper compared with the comparable period of 2016, reflecting higher purchases2022 and the principal payment of treasury shares and higher net principal payments on debt.debt in the first nine months of 2023.
Long-term debt, including the current portion, was even at $6,520decreased to $8,706 as of September 30, 2017 and2023, as compared to $8,755 as of December 31, 20162022, and total debt decreased to $6,527was $8,724 as of September 30, 2017 as2023, compared to $6,533$8,766 as of December 31, 2016.2022.
In August 2022, the Company issued $500 of three-year Senior Notes at a fixed coupon rate of 3.100%, $500 of five-year Senior Notes at a fixed coupon rate of 3.100% and $500 of ten-year Senior Notes at a fixed coupon rate of 3.250%. In March 2023, the Company issued $500 of three-year Senior Notes at a fixed coupon rate of 4.800%, $500 of five-year Senior Notes at a fixed coupon rate of 4.600% and $500 of ten-year Senior Notes at a fixed coupon rate of 4.600%. The Company’s debt issuances support itsthe Company’s capital structure strategy objectives of funding its business and growth initiatives while minimizing its risk-adjusted cost of capital. During the third quarter of 2017, the Company issued $500 of thirty-year notes at a fixed rate of 3.70%. The debt issuance was under the Company’s shelf registration statement. Proceeds from the debt issuance in the third quarter of 2017 were used for general corporate purposes, which included the retirement of commercial paper borrowings.
Domestic and foreign commercial paper outstanding was $383$1,170 and $0$1,778 as of September 30, 20172023 and 2016,December 31, 2022, respectively. Commercial paper outstanding as of September 30, 2017 is U.S. dollar-denominated. Proceeds from the outstanding commercial paper in the second quarter of 2017 were used to repay and retire $250 of U.S. dollar-denominated notes, which became due during the second quarter. Proceeds from the outstanding commercial paper in the first quarter of 2017 were used to repay and retire $400 of U.S. dollar-denominated notes, which became due during the first quarter. The average daily balances outstanding for commercial paper in the first nine months of 20172023 and 20162022 were $1,649$1,886 and $1,194,$1,823, respectively. The Company classifies commercial paper and certain current maturities of notes payable as long-term debt when it has the intent and ability to refinance such obligations on a long-term basis, including, if necessary, by utilizing its lineunused lines of credit (including under the facility discussed below) or by issuing long-term debt pursuant to an effective shelf registration statement. In November 2022, the Company entered into an amended and restated $3,000 five-year revolving credit facility with a syndicate of banks for a five-year term expiring November 2027, which replaced, on substantially similar terms, the Company’s $3,000 revolving credit facility that expireswas scheduled to expire in November 2020.August 2026. Commitment fees related to the credit facility were not material.
Certain of the agreements with respect to the Company’s bank borrowings contain financial and other covenants as well as cross-default provisions. Noncompliance with these requirements could ultimately result in the acceleration of amounts owed. The Company is in full compliance with all such requirements and believes the likelihood of noncompliance is remote.
In the first quarter of 2017, the Company increased the annualized common stock dividend by 3% Refer to $1.60 per share, effective in the second quarter of 2017.
CashNote 6, Long Term Debt and cash equivalents increased $65 during the first nine months of 2017 to $1,380 at September 30, 2017, compared to $1,315 at December 31, 2016, most of which ($1,341 and $1,273, respectively) were held by the Company’s foreign subsidiaries. The Company regularly assesses its cash needs and the available sources to fund these needs and, as part of this assessment, the Company determines the amount of foreign earnings it intends to repatriate to help fund its domestic cash needs and provides applicable U.S. income and foreign withholding taxes on such earnings.
As of December 31, 2016, the Company had approximately $3,400 of undistributed earnings of foreign subsidiaries for which no U.S. income or foreign withholding taxes have been provided as the Company considered such earnings to be indefinitely reinvested outside of the U.S. and, therefore, not subject to such taxes.
In order to fully recognize a $210 U.S. income tax benefit in 2016 principally related to changes in Venezuela’s foreign exchange regime, during the quarter ended March 31, 2016, the Company decided to repatriate in 2016 $1,500 of earnings of foreign subsidiaries it previously considered indefinitely reinvested outside of the U.S., and accordingly, recorded a tax charge of $210 during the first quarter of 2016. The Company currently does not anticipate a need to repatriate additional undistributed earnings of foreign subsidiaries. Any future repatriation would be subject to applicable U.S. income and foreign withholding taxes. As the Company operates in over 200 countries and territories throughout the world, and dueCredit Facilities to the complexitiesConsolidated Financial Statements contained in the tax laws and the assumptions that would have to be made, it is not practicable to determine the tax liability that would arise if these earnings were repatriated.
For additional information regarding liquidity and capital resources, please refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.2022 for further information about the Company’s long-term debt and credit facilities.
In the first quarter of 2023, the Company increased the quarterly common stock dividend to $0.48 per share from $0.47 per share previously, effective in the second quarter of 2023.
COLGATE-PALMOLIVE COMPANY
Management’sManagement’s Discussion and Analysis of Financial
Condition and Results of Operations
(Dollars in Millions Except Per Share Amounts)
Cash and cash equivalents increased $176 during the first nine months of 2023 to $951 at September 30, 2023, compared to $775 at December 31, 2022, the majority of which ($905 and $735 respectively) was held by the Company’s foreign subsidiaries.
For additional information regarding liquidity and capital resources, refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
Goodwill and Intangible Assets
Due primarily to the continued impact of the COVID-19 pandemic on the Filorga skin health business and the impact of significantly higher interest rates, in the fourth quarter of 2022 the Company recorded an impairment charge to adjust the carrying values of the indefinite-lived trademark, customer relationships and goodwill of its Filorga reporting unit to their respective fair values. As of the date of the annual goodwill and indefinite-lived impairment test, the fair value of the Filorga reporting unit and indefinite-lived trademark continue to approximate their carrying value.
Given the inherent uncertainties of estimating the future cash flows, the impact of interest rates and inflation on macroeconomic conditions, actual results may differ from management's current estimates which could potentially result in additional impairment charges in future periods.
COLGATE-PALMOLIVE COMPANY
Management’s Discussion and Analysis of Financial
Condition and Results of Operations
(Dollars in Millions Except Per Share Amounts)
Market Share Information
Management uses market share information as a key indicator to monitor business health and performance. References to market share in this Quarterly Report on Form 10-Q are based on a combination of consumption and market share data provided by third-party vendors, primarily Nielsen, and internal estimates. All market share references represent the percentage of the dollar value of sales of our products, relative to all product sales in the category in the countries in which the Company competes and purchases data (excluding Venezuela from all periods).
Market share data is subject to limitations on the availability of up-to-date information. In particular, market share data is currently not generally available for certain retail channels, such as eCommerce or certain discounters. The Company measures year-to-date market shares from January 1 of the relevant year through the most recent period for which market share data is available, which typically reflects a lag time of one or two months. We believeThe Company believes that the third-party vendors we use to provide data are reliable, but we have not verified the accuracy or completeness of the data or any assumptions underlying the data. In addition, market share information calculated by the Company may be different from market share information calculated by other companies due to differences in category definitions, the use of data from different countries, internal estimates and other factors.
Cautionary Statement on Forward-Looking Statements
This Quarterly Report on Form 10-Q may containcontains forward-looking statements (asas that term is defined in the U.S. Private Securities Litigation Reform Act of 1995 or by the Securities and Exchange Commission (“SEC”)SEC in its rules, regulations and releases)releases that set forth anticipated results based on management’s current plans and assumptions. Such statements may relate, for example, to sales or volume growth, net selling price increases, organic sales growth, profit or profit margin growth,levels, earnings per share growth,levels, financial goals, the impact of foreign exchange, volatility,the impact of COVID-19, the impact of the war in Ukraine, the impact of the Israel-Hamas war, cost-reduction plans including(including the 2022 Global Growth and Efficiency Program,Productivity Initiative), tax rates, the need to repatriate undistributed earnings of foreign subsidiaries,interest rates, new product introductions, digital capabilities, commercial investment levels, acquisitions, and divestitures, share repurchases or legal or tax proceedings, among other matters. These statements are made on the basis of the Company’s views and assumptions as of this time and the Company undertakes no obligation to update these statements whether as a result of new information, future events or otherwise, except as required by law or by the rules and regulations of the SEC. Moreover, the Company does not, nor does any other person, assume responsibility for the accuracy and completeness of those statements. The Company cautions 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. Actual events or results may differ materially because of factors that affect international businesses and global economic conditions, as well as matters specific to the Company and the markets it serves, including the uncertain economicmacroeconomic and political environment in different countries, including as a result of inflation and rising interest rates, and its effect on consumer spending habits, increased competition and evolving competitive practices, foreign currency rate fluctuations, exchange controls, tariffs, sanctions, price or profit controls, labor relations, changes in foreign or domestic laws, or regulations or their interpretation, political and fiscal developments, including changes in trade, tax and immigration policies, increased competition and evolving competitive practices (including from the growth of eCommerce and the entry of new competitors and business models), the ability to operate and respond effectively during a pandemic, epidemic or widespread public health concern, including COVID-19, the ability to manage disruptions in our global supply chain and/or key office facilities, the ability to manage the availability and cost of raw and packaging materials and logistics costs, the ability to maintain or increase selling prices as needed, the ability to implement the Global Growth and Efficiency Program as planned or differences between the actual and the estimated costs or savings under such program, changes in the policies of retail trade customers, the emergence of alternative retail channels, the growth of eCommerce and the rapidly changing retail landscape (as consumers increasingly shop online), the ability to develop innovative new sales channels, including e-commerce,products, the ability to continue lowering costs and operate in an agile manner, the ability to maintain the security of our information technology systems from a cyber-security incident or data breach, the ability to address the effects of climate change and achieve our sustainability and social impact goals, the ability to complete acquisitions and divestitures as planned, the ability to successfully integrate acquired businesses, the ability to attract and retain key employees and integrate DE&I initiatives across our organization, the uncertainty of the outcome of legal proceedings, whether or not the Company believes they have merit.merit, and the ability to address uncertain or unfavorable global economic conditions, including inflation, disruptions in the credit markets and tax matters. For information about these and other factors that could impact the Company’s business and cause actual results to differ materially from forward-looking statements, refer to the Company’s filings with the SEC (including, but not limited to, 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, 20162022 and subsequent Quarterly Reports on Form 10-Q)filings with the SEC).
COLGATE-PALMOLIVE COMPANY
Management’s Discussion and Analysis of Financial
Condition and Results of Operations
(Dollars in Millions Except Per Share Amounts)
Quantitative and Qualitative Disclosures about Market Risk
There is no material change in the information reported under Part II, Item 7, “Managing Foreign Currency, Interest Rate, Commodity Price and Credit Risk Exposure” contained in our Annual Report on Form 10-K for the year ended December 31, 2016.2022.
COLGATE-PALMOLIVE COMPANY
Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company’s management, under the supervision and with the participation of the Company’s Chairman of the Board, President and Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of September 30, 20172023 (the “Evaluation”). Based upon the Evaluation, the Company’s Chairman of the Board, President and Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934) are effective.
Changes in Internal Control overOver Financial Reporting
ThereThe Company is in the process of upgrading its enterprise IT system to SAP S/4 HANA. This change has not had and is not expected to have a material impact on the Company’s internal controls over financial reporting.
Except as noted above, there were no changes in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. As part of the Global Growth and Efficiency Program, the Company is implementing a shared business service organization model in all regions of the world. At this time, certain financial transaction processing activities have been transitioned to these shared business services centers. This transition has not materially affected the Company’s internal control over financial reporting.
COLGATE-PALMOLIVE COMPANY
PART II.OTHER INFORMATION
Item 1.Legal Proceedings
For information regarding legal matters, please refer to Note 11,10, Contingencies to the Condensed Consolidated Financial Statements contained in Part I of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.
Item 1A.Risk Factors
There have been no material changes from the risk factors disclosed in “Risk Factors” in Part 1, Item 1A. Risk Factors1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.2022.
COLGATE-PALMOLIVE COMPANY
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
On February 19, 2015,March 10, 2022, the Board authorized the repurchase of shares of the Company’s common stock having an aggregate purchase price of up to $5 billion under a new share repurchase program (the “2015“2022 Program”), which replaced a previously authorized share repurchase program. The Board also has authorized share repurchases on an ongoing basis to fulfill certain requirements of the Company’s compensation and benefit programs. The shares are repurchased from time to time in open market or privately negotiated transactions at the Company’s discretion, subject to market conditions, customary blackout periods and other factors.
The following table shows the stock repurchase activity for the three months in the quarter ended September 30, 2017:2023:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Month | | Total Number of Shares Purchased(1) | | Average Price Paid per Share | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(2) | | Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs(3) (in millions) |
July 1 through 31, 2023 | | 1,190,694 | | | $ | 76.36 | | | 1,189,888 | | | $ | 3,336 | |
August 1 through 31, 2023 | | 1,436,160 | | | $ | 74.95 | | | 1,433,000 | | | $ | 3,229 | |
September 1 through 30, 2023 | | 1,983,531 | | | $ | 72.47 | | | 1,846,100 | | | $ | 3,095 | |
Total | | 4,610,385 | | | $ | 74.25 | | | 4,468,988 | | | |
(1) Includes share repurchases under the 2022 Program and those associated with certain employee elections under the Company’s compensation and benefit programs.
(2) The difference between the total number of shares purchased and the total number of shares purchased as part of publicly announced plans or programs is 141,397 shares, which represents shares deemed surrendered to the Company to satisfy certain employee elections under the Company’s compensation and benefit programs.
(3) Includes approximate dollar value of shares that were available to be purchased under the publicly announced plans or programs that were in effect as of September 30, 2023.
|
| | | | | | | | | | | | | | |
Month | | Total Number of Shares Purchased(1) | | Average Price Paid per Share | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(2) | | Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs(3) (in millions) |
July 1 through 31, 2017 | | 864,006 |
| | $ | 72.63 |
| | 810,000 |
| | $ | 1,717 |
|
August 1 through 31, 2017 | | 2,660,807 |
| | $ | 71.52 |
| | 2,491,000 |
| | $ | 1,539 |
|
September 1 through 30, 2017 | | 1,821,723 |
| | $ | 72.10 |
| | 1,756,859 |
| | $ | 1,412 |
|
Total | | 5,346,536 |
| | $ | 71.90 |
| | 5,057,859 |
| | |
|
COLGATE-PALMOLIVE COMPANY
Item 3.Defaults Upon Senior Securities
None.
Item 4.Mine Safety Disclosures
Not Applicable.
Item 5.Other Information
(c)Trading Plans
During the three months ended September 30, 2023, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
COLGATE-PALMOLIVE COMPANY
Item 6.Exhibits
| | | | | | | | |
(1) Exhibit No. | Includes share repurchases under the 2015 Program and those associated with certain employee elections under the Company’s compensation and benefit programs. |
| Description |
(2) 10-A | The difference between the total number of shares purchased and the total number of shares purchased as part of publicly announced plans or programs is 288,677 shares, which represents shares deemed surrendered to the Company to satisfy certain employee elections under the Company’s compensation and benefit programs. |
| |
(3)
| Includes approximate dollar value of shares that were availableColgate-Palmolive Company Executive Severance Plan, as amended and restated through September 13, 2023 (Registrant hereby incorporates by reference Exhibit 10-A to be purchased under the publicly announced plans or programs that were in effect as ofits Current Report on Form 8-K filed on September 30, 2017. |
Item 3.Defaults Upon Senior Securities
None.
Item 4.Mine Safety Disclosures
Not Applicable.
Item 5.Other Information
None.
COLGATE-PALMOLIVE COMPANY
Item 6.Exhibits
15, 2023, File No. 1-644.)* |
| | |
Exhibit No.10-B | | Description |
10-A | | |
| | |
10-B | |
|
| | |
1210-C | | |
| | |
31-A | | |
| | |
31-B | | |
| | |
32 | | |
| | |
101 | | The following materials from Colgate-Palmolive Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2017,2023, formatted in Inline eXtensible Business Reporting Language (XBRL)(Inline XBRL): (i) the Condensed Consolidated Statements of Income; (ii) the Condensed Consolidated Statements of Comprehensive Income; (iii) the Condensed Consolidated Balance Sheets; (iv) the Condensed Consolidated Statements of Cash Flows; (v) Condensed Consolidated Statements of Changes in Shareholders’ Equity; and (v)(vi) Notes to Condensed Consolidated Financial Statements. |
| | |
104 | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
__________
* Indicates a management contract or compensatory plan.
** Filed herewith.
*** Furnished herewith.
COLGATE-PALMOLIVE COMPANY
SIGNATURES
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 thereunto duly authorized.
|
| | | | |
| COLGATE-PALMOLIVE COMPANY |
| (Registrant) |
| |
| Principal Executive Officer: |
| |
October 27, 20172023 | /s/ Ian CookNoel R. Wallace |
| Ian CookNoel R. Wallace |
| Chairman of the Board, President and Chief Executive Officer
|
| |
| Principal Financial Officer: |
| |
October 27, 20172023 | /s/ DennisStanley J. HickeySutula III |
| DennisStanley J. HickeySutula III |
| Chief Financial Officer |
| |
| Principal Accounting Officer: |
| |
October 27, 20172023 | /s/ Henning I. JakobsenGregory O. Malcolm |
| Henning I. JakobsenGregory O. Malcolm |
| Executive Vice President and Corporate Controller |