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 March 31, 2019~~

For the quarterly period ended March 31, 2020



☐	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)



~~DELAWARE~~Delaware	13-1815595
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

~~(212)~~ (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
0.000% Notes due 2021	CL21A	New York Stock Exchange
0.500% Notes due 2026	CL26	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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit 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	☐
		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	~~858,514,915~~856,528,455	March 31, ~~2019~~2020

PART I.FINANCIAL INFORMATION

COLGATE-PALMOLIVE COMPANY

Condensed Consolidated Statements of Income

~~(Dollars~~(Dollars in Millions Except Per Share Amounts)

(Unaudited)



	Three Months Ended
	March 31,
	2020		2019
Net sales	$	4,097	$	3,884
Cost of sales	1,632		1,597
Gross profit	2,465		2,287
Selling, general and administrative expenses	1,473		1,365
Other (income) expense, net	40		43
Operating profit	952		879
Non-service related postretirement costs	21		25
Interest (income) expense, net	36		40
Income before income taxes	895		814
Provision for income taxes	147		214
Net income including noncontrolling interests	748		600
Less: Net income attributable to noncontrolling interests	33		40
Net income attributable to Colgate-Palmolive Company	$	715	$	560

Earnings per common share, basic	$	0.83	$	0.65

Earnings per common share, diluted	$	0.83	$	0.65

Three Months Ended
March 31,
2019 2018
Net sales $ 3,884
$ 4,002
Cost of sales 1,597
1,594
Gross profit 2,287
2,408
Selling, general and administrative expenses 1,365
1,392
Other (income) expense, net 43
33
Operating profit 879
983
Non-service related postretirement costs 25
24
Interest (income) expense, net 40
35
Income before income taxes 814
924
Provision for income taxes 214
246
Net income including noncontrolling interests 600
678
Less: Net income attributable to noncontrolling interests 40
44
Net income attributable to Colgate-Palmolive Company $ 560
$ 634

Earnings per common share, basic $ 0.65
$ 0.72

Earnings per common share, diluted $ 0.65
$ 0.72

See Notes to Condensed Consolidated Financial Statements.

COLGATE-PALMOLIVE COMPANY

Condensed Consolidated Statements of Comprehensive Income

~~(Dollars~~(Dollars in Millions)

(Unaudited)


	Three Months Ended						Three Months Ended
	March 31,						March 31,
	2019			2018			2020			2019
Net income including noncontrolling interests	$	600		$	678		$	748		$	600
Other comprehensive income (loss), net of tax:
Cumulative translation adjustments	26			108			(355		)	26
Retirement plans and other retiree benefit adjustments	12			14			16			12
Gains (losses) on cash flow hedges	(5		)	(1		)	18			(5		)
Total Other comprehensive income (loss), net of tax	33			121			(321		)	33
Total Comprehensive income including noncontrolling interests	633			799			427			633
Less: Net income attributable to noncontrolling interests	40			44			33			40
Less: Cumulative translation adjustments attributable to noncontrolling interests	5			3			(16		)	5
Total Comprehensive income attributable to noncontrolling interests	45			47			17			45
Total Comprehensive income attributable to Colgate-Palmolive Company	$	588		$	752		$	410		$	588

See Notes to Condensed Consolidated Financial Statements.

COLGATE-PALMOLIVE COMPANY

Condensed Consolidated Balance Sheets

~~(Dollars~~(Dollars in Millions)

(Unaudited)



	March 31, 2020			December 31, 2019
Assets
Current Assets
Cash and cash equivalents	$	854		$	883
Receivables (net of allowances of $84 and $76, respectively)	1,551			1,440
Inventories	1,301			1,400
Other current assets	542			456
Total current assets	4,248			4,179
Property, plant and equipment:
Cost	8,167			8,580
Less: Accumulated depreciation	(4,680		)	(4,830		)
	3,487			3,750
Goodwill	3,559			3,508
Other intangible assets, net	2,822			2,667
Deferred income taxes	179			177
Other assets	775			753
Total assets	$	15,070		$	15,034
Liabilities and Shareholders’ Equity
Current Liabilities
Notes and loans payable	$	255		$	260
Current portion of long-term debt	255			254
Accounts payable	1,216			1,237
Accrued income taxes	485			370
Other accruals	2,232			1,917
Total current liabilities	4,443			4,038
Long-term debt	7,336			7,333
Deferred income taxes	415			507
Other liabilities	2,535			2,598
Total liabilities	14,729			14,476
Shareholders’ Equity
Common stock	1,466			1,466
Additional paid-in capital	2,623			2,488
Retained earnings	22,481			22,501
Accumulated other comprehensive income (loss)	(4,578		)	(4,273		)
Unearned compensation	(1		)	(2		)
Treasury stock, at cost	(22,104		)	(22,063		)
Total Colgate-Palmolive Company shareholders’ equity	(113		)	117
Noncontrolling interests	454			441
Total equity	341			558
Total liabilities and equity	$	15,070		$	15,034

March 31,
2019 December 31,
2018
Assets
Current Assets
Cash and cash equivalents $ 843
$ 726
Receivables (net of allowances of $84 and $82, respectively) 1,547
1,400
Inventories 1,278
1,250
Other current assets 465
417
Total current assets 4,133
3,793
Property, plant and equipment:

Cost 8,398
8,336
Less: Accumulated depreciation (4,577 ) (4,455 )
3,821
3,881
Goodwill 2,517
2,530
Other intangible assets, net 1,612
1,637
Deferred income taxes 164
152
Other assets 636
168
Total assets $ 12,883
$ 12,161
Liabilities and Shareholders’ Equity

Current Liabilities

Notes and loans payable $ 5
$ 12
Current portion of long-term debt 1
—
Accounts payable 1,215
1,222
Accrued income taxes 400
411
Other accruals 2,244
1,696
Total current liabilities 3,865
3,341
Long-term debt 6,655
6,354
Deferred income taxes 306
235
Other liabilities 2,267
2,034
Total liabilities 13,093
11,964
Shareholders’ Equity

Common stock 1,466
1,466
Additional paid-in capital 2,241
2,204
Retained earnings 21,436
21,615
Accumulated other comprehensive income (loss) (4,160 ) (4,188 )
Unearned compensation (3 ) (3 )
Treasury stock, at cost (21,532 ) (21,196 )
Total Colgate-Palmolive Company shareholders’ equity (552 ) (102 )
Noncontrolling interests 342
299
Total equity (210 ) 197
Total liabilities and equity $ 12,883
$ 12,161

See Notes to Condensed Consolidated Financial Statements.

COLGATE-PALMOLIVE COMPANY

Condensed Consolidated Statements of Cash Flows

(Dollars in Millions)

(Unaudited)


	Three Months Ended						Three Months Ended
	March 31,						March 31,
	2019			2018			2020			2019
Operating Activities
Net income including noncontrolling interests	$	600		$	678		$	748		$	600
Adjustments to reconcile net income including noncontrolling interests to net cash provided by operations:
Depreciation and amortization	128			129			133			128
Restructuring and termination benefits, net of cash	5			(25		)	(30		)	5
Stock-based compensation expense	17			28			16			17
Deferred income taxes	53			13			(99		)	53
Voluntary benefit plan contributions	(102		)	—			—			(102		)
Cash effects of changes in:
Receivables	(145		)	(211		)	(211		)	(145		)
Inventories	(32		)	(33		)	29			(32		)
Accounts payable and other accruals	44			33			220			44
Other non-current assets and liabilities	37			4			(38		)	37
Net cash provided by operations	605			616			768			605
Investing Activities
Capital expenditures	(71		)	(118		)	(82		)	(71		)
Purchases of marketable securities and investments	(27		)	(38		)	(42		)	(27		)
Proceeds from sale of marketable securities and investments							16			—
Payment for acquisitions, net of cash acquired	—			(727		)	(351		)	—
Other	—			2
Net cash used in investing activities	(98		)	(881		)	(459		)	(98		)
Financing Activities
Principal payments on debt	(1,774		)	(2,079		)	(1,200		)	(1,774		)
Proceeds from issuance of debt	2,076			2,226			1,188			2,076
Dividends paid	(366		)	(352		)	(373		)	(366		)
Purchases of treasury shares	(399		)	(351		)	(220		)	(399		)
Proceeds from exercise of stock options	71			119			297			71
Net cash used in financing activities	(392		)	(437		)
Net cash provided by (used in) financing activities							(308		)	(392		)
Effect of exchange rate changes on Cash and cash equivalents	2			18			(30		)	2
Net increase (decrease) in Cash and cash equivalents	117			(684		)	(29		)	117
Cash and cash equivalents at beginning of the period	726			1,535			883			726
Cash and cash equivalents at end of the period	$	843		$	851		$	854		$	843
Supplemental Cash Flow Information
Income taxes paid	$	149		$	163		$	128		$	149

See Notes to Condensed Consolidated Financial Statements.

COLGATE-PALMOLIVE COMPANY

Condensed Consolidated Statements of Changes in Shareholders’ Equity

(Dollars in Millions)

(Unaudited)


Three Months Ended March 31, 2019
Three Months Ended March 31, 2020																					Three Months Ended March 31, 2020
	Colgate-Palmolive Company Shareholders’ Equity																	Noncontrolling Interests			Colgate-Palmolive Company Shareholders’ Equity
	Common Stock		Additional Paid-in Capital			Unearned Compensation			Treasury Stock			Retained Earnings			Accumulated Other Comprehensive Income (Loss)⁽¹⁾						Common Stock		Additional Paid-in Capital			Unearned Compensation			Treasury Stock			Retained Earnings			Accumulated Other Comprehensive Income (Loss)⁽¹⁾			Noncontrolling Interests
Balance, December 31, 2018	$	1,466	$	2,204		$	(3	)	$	(21,196	)	$	21,615		$	(4,188	)	$	299
Balance, December 31, 2019																					$	1,466	$	2,488		$	(2	)	$	(22,063	)	$	22,501		$	(4,273	)	$	441
Net income												560						40														715						33
Other comprehensive income (loss), net of tax															28			5																	(305		)	(16		)
Dividends ($0.85/per share)*												(734		)				(2		)
Dividends ($0.87/per share)*																																(738		)				(4		)
Stock-based compensation expense			17																				16
Shares issued for stock options			33						49														133						164
Shares issued for restricted stock units			(13		)				13														(15		)				15
Treasury stock acquired									(399		)																		(220		)
Other									1			(5		)									1			1						3
Balance, March 31, 2019	$	1,466	$	2,241		$	(3	)	$	(21,532	)	$	21,436		$	(4,160	)	$	342
Balance, March 31, 2020																					$	1,466	$	2,623		$	(1	)	$	(22,104	)	$	22,481		$	(4,578	)	$	454


Three Months Ended March 31, 2018
Three Months Ended March 31, 2019																					Three Months Ended March 31, 2019
	Colgate-Palmolive Company Shareholders’ Equity																		Noncontrolling Interests		Colgate-Palmolive Company Shareholders’ Equity
	Common Stock		Additional Paid-in Capital			Unearned Compensation			Treasury Stock			Retained Earnings			Accumulated Other Comprehensive Income (Loss)⁽¹⁾						Common Stock		Additional Paid-in Capital			Unearned Compensation			Treasury Stock			Retained Earnings			Accumulated Other Comprehensive Income (Loss)⁽¹⁾			Noncontrolling Interests
Balance, December 31, 2017	$	1,466	$	1,984		$	(5	)	$	(20,181	)	$	20,531		$	(3,855	)		$	303
Balance, December 31, 2018																					$	1,466	$	2,204		$	(3	)	$	(21,196	)	$	21,615		$	(4,188	)	$	299
Net income												634							44													560						40
Other comprehensive income (loss), net of tax															118				3																28			5
Dividends ($0.82/per share)*												(718		)
Dividends ($0.85)/per share)*																																(734		)				(2		)
Stock-based compensation expense			28																				17
Shares issued for stock options			48						77														33						49
Shares issued for restricted stock units			(12		)				12														(13		)				13
Treasury stock acquired									(351		)																		(399		)
Other			(1		)	3			2			134			(163		)	(2)											1			(5		)
Balance, March 31, 2018	$	1,466	$	2,047		$	(2	)	$	(20,441	)	$	20,581		$	(3,900	)		$	350
Balance, March 31, 2019																					$	1,466	$	2,241		$	(3	)	$	(21,532	)	$	21,436		$	(4,160	)	$	342

⁽¹⁾Accumulated other comprehensive income (loss) includes cumulative translation losses of ~~$3,134~~$3,467 at March 31, ~~2019~~2020 ($~~2,832~~3,134 at March 31, ~~2018)~~2019) and ~~$3,155~~$3,128 at December 31, ~~2018~~2019 ($~~2,927~~3,155 at December 31, ~~2017)~~2018), respectively, and unrecognized retirement plan and other retiree benefits costs of ~~$1,026~~$1,122 at March 31, ~~2019~~2020 ($~~1,062~~1,026 at March 31, ~~2018)~~2019) and ~~$1,038~~$1,138 at December 31, ~~2018~~2019 ($~~923~~1,038 at December 31, ~~2017)~~2018), respectively.

⁽²⁾As a result of the early adoption of ASU 2018-02, the Company reclassified the stranded tax effects in Accumulated other comprehensive income (loss) resulting from the Tax Cuts and Jobs Act (the “TCJA” or “U.S. tax reform”) to Retained earnings. See Note 2, Summary of Accounting Policies in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 for additional information.

* ~~Two~~NaN dividends were declared in each of the first quarters of ~~2019~~2020 and ~~2018.~~2019

See Notes to Condensed Consolidated Financial Statements.

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, ~~2018~~,2019, filed with the Securities and Exchange Commission (the “SEC”).


2.	Use of Estimates

Provisions for certain expenses, including income taxes, 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, as applicable.


3.	Recent Accounting Pronouncements

In ~~October 2018,~~March 2020, the Financial Accounting Standards Board ~~(“FASB”~~(the “FASB”) issued Accounting Standards Update (“ASU”) No. ~~2018-16, “Derivatives and Hedging~~2020-04, “Reference Rate Reform (Topic ~~815)~~848): ~~Inclusion~~Facilitation of the ~~Secured Overnight Financing~~Effects of Reference Rate ~~(“SOFR”) Overnight Index Swap (“OIS”) Rate as Benchmark Interest Rate for Hedge Accounting Purposes.~~Reform on Financial Reporting.” The ~~new guidance permits the use~~ASU provides optional expedients and exceptions for applying generally accepted accounting principles (GAAP) to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of ~~the OIS~~reference rate based on the SOFR as a U.S. benchmark interest rate for hedge accounting purposes under Topic 815. The new guidance was effective for the Company on a prospective basis beginning on January 1, 2019, concurrently with the adoption of ASU 2017-12 and did not have an impact on the Company’s Consolidated Financial Statements.

In August 2018, the FASB issued ASU No. 2018-15, “Intangibles-Goodwill and Other-Internal-Use Software (Topic 350): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract.” This new guidance aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.reform. This new guidance is effective upon issuance of this ASU for ~~the Company~~contract modifications and hedging relationships on a prospective ~~or retrospective basis beginning on January 1, 2020, with early adoption permitted. The Company elected to adopt this guidance early, beginning on January 1, 2019 on a prospective~~ basis. ~~The new guidance did not have a material impact on the Company’s Consolidated Financial Statements.~~

In August 2018, the FASB issued ASU No. 2018-14, “Compensation-Retirement Benefits-Defined Benefit Plans-General (Topic 715): Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans.” This new guidance removes certain disclosures that are not considered cost beneficial, clarifies certain required disclosures and requires certain additional disclosures. This new guidance is effective for the Company on a retrospective basis beginning in the year ending December 31, 2020, with early adoption permitted. While the Company is currently assessing the impact of the new guidance, it is not expected to have a material impact on the Company’s Consolidated Financial Statements.

In March 2020, FASB issued ASU No. 2020-03, "Codification to Financial Instruments." This ASU improves and clarifies various financial instruments topics, including the current expected credit losses (CECL) standard issued in 2016. The ASU includes seven different issues that describe the areas of improvement and the related amendments to GAAP, intended to make the standards easier to understand and apply by eliminating inconsistencies and providing clarifications. The amendments related to Issue 1, Issue 2, Issue 4, and Issue 5 were effective upon issuance of this update. The amendments related to Issue 3, Issue 6 and Issue 7 were effective for the Company beginning on January 1, 2020. The new guidance did not have a material impact on the Company’s Consolidated Financial Statements.

In January 2020, the FASB issued ASU No. 2020-01, “Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323) and Derivatives and Hedging (Topic 815) - Clarifying the Interactions between Topic 321, Topic 323, and Topic 815.” The guidance provides clarification of the interaction of rules for equity securities, the equity method of accounting and forward contracts and purchase options on certain types of securities. This new guidance is effective for the Company beginning on January 1, 2021, with early adoption permitted. This new guidance is not expected to have a material impact on the Company’s Consolidated Financial Statements.

In December 2019, the FASB issued ASU No. 2019-12, “Income taxes (Topic 740): Simplifying the Accounting for Income Taxes.” This ASU simplifies the accounting for income taxes by removing certain exceptions to the general principles in ASC 740 and also clarifies and amends existing guidance to improve consistent application. This new guidance is effective for the Company beginning on January 1, 2021, with early adoption permitted. This new guidance is not expected to have a material impact on the Company’s Consolidated Financial Statements.

In April 2019, the FASB issued ASU No. 2019-04, “Codification Improvements to Financial Instruments-Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Financial Instruments (Topic 825).” This ASU clarifies three topics related to financial instruments accounting. This new guidance was effective for the Company beginning on January 1, 2020. The new guidance did not have a material 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)

In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement.” This new guidance removes certain disclosure requirements related to the fair value hierarchy, modifies existing disclosure requirements related to measurement uncertainty and adds new disclosure requirements. The new disclosure requirements include disclosing the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. This new guidance iswas effective for the Company beginning on January 1, 2020 with early adoption permitted. Certain disclosure requirements in the new guidance will need to be applied on a retrospective basis and others on a prospective basis. While the Company is currently assessing the impact of the new guidance, it is not expected to have a material impact on the Company’s Consolidated Financial Statements.

In August 2017, the FASB issued ASU No. 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities,” amending the eligibility criteria for hedged items 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 of hedge gains and losses with the underlying hedge item. The new guidance also simplifies the hedge documentation and hedge effectiveness assessment requirements. The amended presentation 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. The new guidance was effective for the Company on January 1, 2019 and did not have a material impact on the Company’s Consolidated Financial Statements.

In January 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 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 iswas 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 an impact on the Company’s Consolidated Financial Statements.~~

In February 2016, the FASB issued its final standard on lease accounting, ASU No. 2016-02, “Leases (Topic 842),” which superseded Topic 840, “Leases,” which was further modified in ASU No. 2018-10, “Codification Improvements to Topic 842, Leases,” ASU No. 2018-11, “Leases (Topic 842) Targeted Improvements” and ASU No. 2019-01 “Leases (Topic 842) Codification Improvements” to clarify the implementation guidance. The new accounting standard was effective for the Company beginning on January 1, 2019 and required the recognition on the balance sheet of right-of-use assets and lease liabilities for all long-term leases, including operating leases, on the balance sheet. The Company elected the optional transition method and adopted the new guidance on January 1, 2019 on a modified retrospective basis with no restatement of prior period amounts. As allowed under the new accounting standard, the Company elected to apply practical expedients to carry forward the original lease determinations, lease classifications and accounting of initial direct costs for all asset classes at the time of adoption. The Company also elected not to separate lease components from non-lease components and to exclude short-term leases from its Consolidated Balance Sheet. The Company’s adoption of the new standard resulted in the recognition of right-of-use assets of $458 and liabilities of $574, with no material cumulative effect adjustment to equity as of the date of adoption. In connection with the adoption of this guidance, as required, the Company reclassified certain restructuring reserves incurred in connection with the Global Growth and Efficiency Program (see Note 4, Restructuring and Related Implementation Charges for additional information) and deferred rent liabilities as reductions to lease assets. Adoption of the new standard did not have a material impact on the Company’s Consolidated ~~Statements~~Financial Statements.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments-Credit Losses (Topic 326)” Codification Improvements to Financial Instruments-Credit Losses (Topic 326). Subsequent updates were released in November 2018 (ASU No. 2018-19), November 2019 (ASU No. 2019-10 and 2019-11) and February 2020 (ASU No. 2020-02) that provided additional guidance on this Topic. This ASU introduces the current expected credit loss (CECL) model, which will require an entity to measure credit losses for certain financial instruments and financial assets, including trade receivables. Under this update, on initial recognition and at each reporting period, an entity will be required to recognize an allowance that reflects the entity’s current estimate of ~~Income or Cash Flows. See Note 13, Leases~~credit losses expected to be incurred over the life of the financial instrument. The Company adopted the new standard, which primarily impacts the Company’s trade receivables and related methodology for ~~additional information.~~assessing the collectability of its customer accounts, on January 1, 2020, on a “modified retrospective” basis. The adoption of this ASU did not have a material 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)


4.	Acquisitions

Hello Products LLC

On January 31, 2020, the Company acquired Hello Products LLC, an oral care business, for cash consideration of $351. The acquisition was financed with a combination of debt and cash. This acquisition is part of the Company’s strategy to focus on high growth segments within its Oral Care, Personal Care and Pet Nutrition businesses.

The total purchase price consideration of $351 has been allocated to the net assets acquired based on their respective preliminary estimated fair values as follows:



Receivables	$	11
Inventories	13
Other assets and liabilities, net	(4		)
Other intangible assets	200
Goodwill	131
Fair value of net assets acquired	$	351

Other intangible assets acquired include trademarks of $155, which are considered to have an indefinite useful life, and customer relationships of $45, which have a finite useful life. Goodwill of $131 was allocated to the North America segment.

The preliminary estimates of the fair value of identifiable assets acquired and liabilities assumed are subject to revisions, which may result in adjustments to the preliminary values discussed above. The Company expects to finalize the purchase price allocation no later than the first quarter of 2021.

Pro forma results of operations have not been presented as the impact on the Company’s Condensed Consolidated Financial Statements is not material.

Laboratoires Filorga Cosmétiques (“Filorga”)

On September 19, 2019 (the “Acquisition Date”), the Company acquired the Filorga skin health business for cash consideration of €1,516 (approximately $1,674), which included interest on the equity purchase price, plus additional consideration of €32 (approximately $38), the majority of which related to repayment of loans from former shareholders of Filorga. Filorga is a premium anti-aging skin health brand focused primarily on facial care. This acquisition is part of the Company’s strategy to focus on high growth segments within its Oral Care, Personal Care and Pet Nutrition businesses, including by expanding its portfolio in premium skin health.

COLGATE-PALMOLIVE COMPANY

Notes to Condensed Consolidated Financial Statements (continued)

(Dollars in Millions Except Share and Per Share Amounts)

(Unaudited)

The total purchase price consideration of $1,712 has been allocated to the net assets acquired based on their respective preliminary estimated fair values as follows:



Cash	$	30
Receivables	53
Inventories	70
Other current assets	18
Other intangible assets	1,051
Goodwill	923
Other current liabilities	(67		)
Deferred income taxes	(276		)
Noncontrolling interests	(90		)
Fair value of net assets acquired	$	1,712

Other intangible assets acquired include trademarks of $774, which are considered to have an indefinite useful life, and customer relationships of $277, which have an estimated life of 14 years. Goodwill of $923 was allocated to the Europe segment. The Company expects that goodwill will not be deductible for tax purposes.

The preliminary estimates of the fair value of identifiable assets acquired and liabilities assumed are subject to revisions, which may result in adjustments to the preliminary values discussed above. The Company continues to evaluate potential contingencies that may have existed as of the acquisition date and expects to finalize the purchase price allocation no later than the third quarter of 2020.

Pro forma results of operations have not been presented as the impact on the Company’s Condensed Consolidated Financial Statements is not material.

Nigeria Joint Venture

On August 15, 2019, the Company acquired a 51% controlling interest in Colgate Tolaram Pte. Ltd., a joint venture which owns the Nigeria-based Hypo Homecare Products Limited, for $31.

Pro forma results of operations have not been presented as the impact on the Company’s Condensed Consolidated Financial Statements is 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

InThe Company’s restructuring program (the "Global Growth and Efficiency Program"), which commenced in the fourth quarter of 2012, the Company commenced a restructuring program (the “Global Growth and Efficiency Program”). The program was expanded in 2014 and expanded and extended in each of 2015 and 2017. The program runs throughconcluded on December 31, 2019.

Initiatives under the Global Growth and Efficiency Program ~~continue to~~ fit within the ~~program’s~~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. There were 0 restructuring and implementation-related charges incurred for the three months ended March 31, 2020.

Cumulative pretax charges resulting from the Global Growth and Efficiency Program, once all phases are approved and implemented, are estimated to be in the range of $1,820 to $1,870 ($1,350 to $1,380 aftertax). The Company anticipates that pretax charges for 2019 will approximate $100 to $150 ($70 to $100 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 estimated to be comprised of the following categories: Employee-Related Costs, including severance, pension and other termination benefits (40%); 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 (30%) and the implementation of new strategies (20%). Over the course of the Global Growth and Efficiency Program, it is estimated that approximately 75% of the charges will result in cash expenditures.

The Company expects that the cumulative pretax charges, once all projects are approved and implemented, will relate to initiatives undertaken in North America (15%), Europe (20%), Latin America (5%), Asia Pacific (5%), Africa/Eurasia (5%), Hill’s Pet Nutrition (10%) and Corporate (40%), which includes substantially all of the costs related to the implementation of new strategies, noted above, on a global basis. The Company expects that, when it has been fully implemented, the Global Growth and Efficiency Program will have contributed a net reduction of approximately 4,000 to 4,400 positions from the Company’s global employee workforce.

For the three months ended March 31, 2019 ~~and 2018,~~ restructuring and ~~related implementation~~implementation-related charges are reflected in the ~~Condensed Consolidated Statements of Income~~income statement as follows:



	Three Months Ended
	March 31, 2019
Cost of sales		$	11
Selling, general and administrative expenses		4
Other (income) expense, net		13
Non-service related postretirement costs		1
Total Global Growth and Efficiency Program charges, pretax		$	29

Total Global Growth and Efficiency Program charges, aftertax		$	22

Three Months Ended
March 31,
2019 2018
Cost of sales $ 11
$ 6
Selling, general and administrative expenses 4
5
Other (income) expense, net 13
13
Non-service related postretirement costs 1
4
Total Global Growth and Efficiency Program charges, pretax $ 29
$ 28

Total Global Growth and Efficiency Program charges, aftertax $ 22
$ 20

Restructuring and ~~related implementation~~implementation-related charges in the preceding table ~~are~~were recorded in the Corporate segment as these ~~initiatives are~~decisions were predominantly centrally directed and controlled and ~~are~~were not included in internal measures of segment operating performance.

The following table summarizes the activity for restructuring accrual:



	Three Months Ended March 31, 2020
	Employee-Related Costs			Incremental Depreciation		Asset Impairments		Other			Total
Balance at December 31, 2019	$	26		$	—	$	—	$	74		$	100
Charges	—			—		—		—			—
Cash payments	(15		)	—		—		(15		)	(30		)
Charges against assets	—			—		—		—			—
Foreign exchange	(1		)	—		—		—			(1		)
Other	—			—		—		—			—
Balance at March 31, 2020	$	10		$	—	$	—	$	59		$	69

COLGATE-PALMOLIVE COMPANY

Notes to Condensed Consolidated Financial Statements (continued)

(Dollars in Millions Except Share and Per Share Amounts)

(Unaudited)

~~Total charges incurred for the Global Growth and Efficiency Program relate to initiatives undertaken by the following reportable operating segments:~~

6. Inventories

Three Months Ended
Program-to-date

March 31,
Accumulated Charges

2019
2018

North America 8 %
37 %
18 %
Latin America 40 %
12 %
5 %
Europe 8 %
2 %
19 %
Asia Pacific 6 %
18 %
4 %
Africa/Eurasia — %
2 %
6 %
Hill’s Pet Nutrition
12 %
19 %
8 %
Corporate 26 %
10 %
40 %
Total 100 % 100 % 100 %

Since the inception of the Global Growth and Efficiency Program in the fourth quarter of 2012, the Company has incurred cumulative pretax charges of $1,751 ($1,300 aftertax) in connection with the implementation of various projects as follows:

Cumulative Charges
as of March 31, 2019
Employee-Related Costs $ 691
Incremental Depreciation 97
Asset Impairments 58
Other 905
Total $ 1,751

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; and the implementation of a Corporate efficiencies program.

~~The following table summarizes the activity for the restructuring and related implementation charges discussed above and the related accruals:~~

Three Months Ended March 31, 2019
Employee-Related
Costs Incremental
Depreciation Asset
Impairments Other Total
Balance at December 31, 2018 $ 60
$ —
$ —
$ 142
$ 202
Charges 10
5
6
8
29
Cash payments (16 ) —
—
(8 ) (24 )
Charges against assets (1 ) (5 ) (6 ) —
(12 )
Foreign exchange (1 ) —
—
—
(1 )
Other —
—
—
(48 ) (48 )
Balance at March 31, 2019 $ 52
$ —
$ —
$ 94
$ 146

~~COLGATE-PALMOLIVE COMPANY~~

~~Notes to Condensed Consolidated Financial Statements (continued)~~

~~(Dollars in Millions Except Share and Per Share Amounts)~~

~~(Unaudited)~~

Employee-Related Costs primarily include severance and other termination benefits and are calculated based on long-standing benefit practices, local statutory requirements and, in certain cases, voluntary termination arrangements. Employee-Related Costs also include pension and other retiree benefit enhancements amounting to $1 for the three months ended March 31, 2019, which are reflected as Charges against assets within Employee-Related Costs in the preceding table 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 8, Retirement Plans and Other Retiree Benefits for additional information.

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 inventories and 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 months ended March 31, 2019 include third-party incremental costs related to the development and implementation of new business and strategic initiatives of $5, and contract termination costs and charges resulting directly from exit activities of $3. These charges were expensed as incurred.

Other decreases to the restructuring accruals reflects the reclassification of restructuring accruals to lease assets as a result of the Company’s adoption of ASU No. 2018-10, “Codification Improvements to Topic 842, Leases,” on January 1, 2019. See Note 3, Recent Accounting Pronouncements and Note 13, Leases for additional information.

~~5. Inventories~~

Inventories by major class are as follows:



	March 31, 2020			December 31, 2019
Raw materials and supplies	$	329		$	305
Work-in-process	46			49
Finished goods	976			1,056
Total Inventories, net	$	1,351		$	1,410
Non-current inventory, net	$	(50	)	$	(10	)
Current Inventories, net	$	1,301		$	1,400

March 31,
2019 December 31,
2018
Raw materials and supplies $ 242
$ 253
Work-in-process 43
37
Finished goods 993
960
Total Inventories $ 1,278
$ 1,250

6.7. Earnings Per Share

For the three months ended March 31, ~~2019~~2020 and ~~2018~~2019, earnings per share were as follows:



	Three Months Ended
	March 31, 2020					March 31, 2019
	Net income attributable to Colgate-Palmolive Company		Shares (millions)	Per Share		Net income attributable to Colgate-Palmolive Company		Shares (millions)	Per Share
Basic EPS	$	715	856.9	$	0.83	$	560	862.0	$	0.65
Stock options and restricted stock units			1.5					1.2
Diluted EPS	$	715	858.4	$	0.83	$	560	863.2	$	0.65

Three Months Ended
March 31, 2019 March 31, 2018
Net income attributable to Colgate-Palmolive Company
Shares
(millions)

Per
Share
Net income attributable to Colgate-Palmolive Company
Shares
(millions)

Per
Share
Basic EPS $ 560
862.0
$ 0.65
$ 634
875.4
$ 0.72
Stock options and
restricted stock units
1.2

4.5

Diluted EPS $ 560
863.2
$ 0.65
$ 634
879.9
$ 0.72

For the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, the average number of stock options and restricted stock units that were anti-dilutive and not included in diluted earnings per share calculations were 20,965,110 and 21,980,033, ~~and 16,287,263,~~ respectively.

COLGATE-PALMOLIVE COMPANY

Notes to Condensed Consolidated Financial Statements (continued)

(Dollars in Millions Except Share and Per Share Amounts)

(Unaudited)


7.8.	Other Comprehensive Income (Loss)

Additions to and reclassifications out of Accumulated other comprehensive income (loss) attributable to the Company for the three months ended March 31, ~~2019~~2020 and ~~2018~~2019 were as follows:


	2019						2018
	Pretax			Net of Tax			Pretax			Net of Tax			2020						2019
													Pretax			Net of Tax			Pretax			Net of Tax
Cumulative translation adjustments	$	27		$	21		$	96		$	105		$	(320	)	$	(339	)	$	27		$	21
Retirement plans and other retiree benefits:
Net actuarial gain (loss) and prior service costs arising during the period	(1		)	(1		)	—			—			2			1			(1		)	(1		)
Amortization of net actuarial loss, transition and prior service costs ⁽¹⁾	17			13			18			14			17			15			17			13
Retirement plans and other retiree benefits adjustments	16			12			18			14			19			16			16			12
Cash flow hedges:
Unrealized gains (losses) on cash flow hedges	(2		)	(2		)	(8		)	(6		)	25			20			(2		)	(2		)
Reclassification of (gains) losses into net earnings on cash flow hedges ⁽²⁾	(4		)	(3		)	6			5			(3		)	(2		)	(4		)	(3		)
Gains (losses) on cash flow hedges	(6		)	(5		)	(2		)	(1		)	22			18			(6		)	(5		)
Total Other comprehensive income (loss)	$	37		$	28		$	112		$	118		$	(279	)	$	(305	)	$	37		$	28

⁽¹⁾These components of Other comprehensive income (loss) are included in the computation of total pension cost. See Note 8,9, Retirement Plans and Other Retiree Benefits for additional details.

⁽²⁾These (gains) losses are reclassified into Cost of sales. See Note ~~12,~~13, Fair Value Measurements and Financial Instruments for additional details.

There were no tax impacts on Other comprehensive income (loss) (“OCI”) attributable to Noncontrolling interests.


8.9.	Retirement Plans and Other Retiree Benefits

Components of Net periodic benefit cost for the three months ended March 31, ~~2019~~2020 and ~~2018~~2019 were as follows:


	Pension Benefits												Other Retiree Benefits					Three Months Ended March 31,
	United States						International											Pension Benefits												Other Retiree Benefits
	Three Months Ended March 31,																	United States						International
	2019			2018			2019			2018			2019			2018		2020			2019			2020			2019			2020		2019
Service cost	$	—		$	—		$	4		$	4		$	4		$	4	$	—		$	—		$	4		$	4		$	6	$	4
Interest cost	23			21			5			6			11			10		19			23			5			5			11		11
Expected return on plan assets	(26		)	(29		)	(5		)	(6		)	(1		)	—		(27		)	(26		)	(4		)	(5		)	—		(1		)
Amortization of actuarial loss (gain)	13			12			2			2			2			4		11			13			1			2			5		2
Net periodic benefit cost	$	10		$	4		$	6		$	6		$	16		$	18	$	3		$	10		$	6		$	6		$	22	$	16

For the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, the Company made voluntary contributions to its U.S. postretirement plans of ~~$102~~$0 and ~~$0,~~$102, respectively.

COLGATE-PALMOLIVE COMPANY

Notes to Condensed Consolidated Financial Statements (continued)

(Dollars in Millions Except Share and Per Share Amounts)

(Unaudited)


9.10.	Income Taxes

~~On December 22,~~The provision for income taxes for the quarter ended March 31, 2020 includes $71 of income tax benefits recorded on a discrete period basis of which $45 relates to previously recorded foreign withholding taxes and $26 relates to a previously recorded valuation allowance against a deferred tax asset. As more fully described below, both items were previously recorded in connection with the charge recorded by the Company in 2017 and revised in 2018 related to the Tax Cuts and Jobs ~~Act~~Acts (the ~~“TCJA” or “U.S. tax reform”~~"TCJA") ~~was enacted, which, among other things, lowered~~.

As part of the U.S. corporate income tax rate to 21% from 35% and established a modified territorial system requiring a mandatory deemed repatriation tax on undistributed earnings of foreign subsidiaries. Beginning in 2018,previously recorded charge for the TCJA, ~~also requires~~the Company had provided for foreign withholding taxes expected to be paid on the remittance of earnings from certain overseas subsidiaries no longer deemed indefinitely reinvested. As a ~~minimum tax on~~result of a recent reorganization of the ownership structure of certain ~~earnings generated by~~ foreign subsidiaries, ~~while providing~~the Company has now determined that 0 withholding taxes will be due on the remittance by certain subsidiaries of earnings previously deemed reinvested and, accordingly, reversed $45 of previously recorded foreign withholding taxes.

Also as part of the previously recorded charge for ~~tax-free repatriation~~the TCJA, the Company provided a valuation allowance against a deferred tax asset related to foreign tax credit carry-forwards that the Company did not expect to be able to use due to changes made by the TCJA. As a result of ~~such earnings through~~ a ~~100% dividends-received deduction. The Company’s effective income~~new operating structure being implemented within one of the Company's divisions, the Company now believes the use of these foreign tax ~~rate in 2017 included a provisional charge of $275, recorded~~credit carry-forwards will not be limited in the ~~fourth quarter~~future and, accordingly, reversed the previously recorded valuation allowance of 2017, based on its initial analysis of the TCJA. During 2018, the Company finalized its assessment of the impact of the TCJA and recognized an additional tax expense of $80 reflecting the impact of transition tax guidance issued by the U.S. Treasury and the update of certain estimates and calculations based on information available through the end of 2018.$26.

The impact, if any, of further transitional tax guidance that may be issued by the U.S. Treasury would be reflected in the Company’s provision for income tax in the period such guidance is effective.


~~10.~~11.	Contingencies

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 ~~$225~~$175 (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 amount 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.

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.

COLGATE-PALMOLIVE COMPANY

Notes to Condensed Consolidated Financial Statements (continued)

(Dollars in Millions Except Share and Per Share Amounts)

(Unaudited)

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”).

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 ~~$151.~~$118. 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~~There is 1 case currently ~~pending~~on appeal at the administrative level. In the event the Company is ultimately unsuccessful in ~~its~~this administrative ~~appeals,~~appeal, further appeals are available within the Brazilian federal courts.

In September 2015, the Company lost ~~one~~1 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 lawsuit in Brazilian federal court. In April 2019, the Company lost another administrative appeal and filed a lawsuit in Brazilian federal court. 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 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 ~~$64,~~$49, 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 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 ~~Matters~~Matter

Certain of the Company’s subsidiaries have historically been subject to investigations, 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 involved other consumer goods companies and/or retail customers. 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 status ~~of pending competition law matters~~ as of March 31, ~~2019~~2020 of such competition law matters pending against the Company during the three months ended March 31, 2020 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 indemnified for these fines by Unilever pursuant to the Sale and Purchase Agreement. The fines were confirmed by the Court of Appeal in October 2016. The Company appealed the decision of the Court of Appeal on behalf of the Company and Sara Lee in the French Supreme Court. In March 2019, the French Supreme Court denied the Company’s appeal.

▪

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 ~~is appealing~~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 have appealed the decision to the Greek Supreme Court.

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. Most 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 March 31, 2020 and December 31, 2019, there were ~~229~~121 individual cases pending against the Company in state and federal courts throughout the United ~~States, as compared to 239 cases as of December 31, 2018.~~States. During the three months ended March 31, ~~2019, 37~~2020, 5 new cases were filed and 475 cases were resolved by voluntary dismissal or settlement. The value of the settlements in the quarter presented was not material, either individually or in the aggregate, to the ~~Company’s~~period’s results of ~~operations for the quarter ended March 31, 2019.~~operations.

The Company believes that a significant portion of its costs incurred in defending and resolving these claims will be covered by insurance policies issued by several primary, excess and umbrella insurance carriers, subject to deductibles, exclusions, retentions and policy limits.

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~~With the ~~amount~~exception of ~~any potential losses from these cases currently cannot be reasonably estimated,~~1 case where the Company received an adverse jury verdict in the second quarter of 2019 that the Company has appealed, the range of reasonably possible losses in excess of accrued liabilities disclosed above does not include any amount relating to these ~~cases.~~cases because the amount of any possible losses from such cases currently cannot be reasonably estimated.

~~COLGATE-PALMOLIVE COMPANY~~

~~Notes to Condensed Consolidated Financial Statements (continued)~~

~~(Dollars in Millions Except Share and Per Share Amounts)~~

~~(Unaudited)~~

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 Act was filed against the Plan, the Company and certain individuals in the United States District Court for the Southern District of New York. This action has been certified as a class action. The relief sought includes recalculation of benefits, pre- and post-judgment interest and attorneys’ fees. The Company is contesting this action vigorously. Since the amount of any potential loss from this case 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 the case.

COLGATE-PALMOLIVE COMPANY

Notes to Condensed Consolidated Financial Statements (continued)

(Dollars in Millions Except Share and Per Share Amounts)

(Unaudited)


~~11.~~12.	Segment Information

The Company operates in ~~two~~2 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~~5 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, ~~2018.~~2019. 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.

Net sales by segment were as follows:



	Three Months Ended
	March 31,
	2020		2019
Net sales
Oral, Personal and Home Care
North America	$	929	$	853
Latin America	889		889
Europe	675		602
Asia Pacific	633		700
Africa/Eurasia	252		240
Total Oral, Personal and Home Care	3,378		3,284
Pet Nutrition	719		600
Total Net sales	$	4,097	$	3,884

Three Months Ended
March 31,
2019 2018
Net sales
Oral, Personal and Home Care
North America $ 853
$ 827
Latin America 889
929
Europe 602
648
Asia Pacific 700
759
Africa/Eurasia 240
255
Total Oral, Personal and Home Care 3,284
3,418
Pet Nutrition 600
584
Total Net sales $ 3,884
$ 4,002

Approximately 70% 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).

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:


	Three Months Ended				Three Months Ended
	March 31,				March 31,
	2019		2018		2020		2019
Net sales
Oral Care	48	%	49	%	44	%	48	%
Personal Care	19	%	19	%	20	%	19	%
Home Care	18	%	17	%	18	%	18	%
Pet Nutrition	15	%	15	%	18	%	15	%
Total Net sales	100	%	100	%	100	%	100	%

Operating profit by segment was as follows:



	Three Months Ended
	March 31,
	2020			2019
Operating profit
Oral, Personal and Home Care
North America	$	258		$	249
Latin America	248			232
Europe	154			151
Asia Pacific	161			189
Africa/Eurasia	56			46
Total Oral, Personal and Home Care	877			867
Pet Nutrition	203			164
Corporate	(128		)	(152		)
Total Operating profit	$	952		$	879

Three Months Ended
March 31,
2019 2018
Operating profit
Oral, Personal and Home Care
North America $ 249
$ 257
Latin America 232
273
Europe 151
162
Asia Pacific 189
226
Africa/Eurasia 46
50
Total Oral, Personal and Home Care 867
968
Pet Nutrition 164
164
Corporate (152 ) (149 )
Total Operating profit $ 879
$ 983

~~For~~Corporate Operating profit (loss) for the three months ended March 31, 2020 included a charge for acquisition-related costs of $6. Corporate Operating profit (loss) for the three months ended March 31, 2019, ~~and 2018, Corporate Operating profit (loss)~~ included charges of $28 ~~and $24, respectively,~~ resulting from the Global Growth and Efficiency ~~Program.~~Program, which ended on December 31, 2019.

~~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)


~~12.~~13.	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.

The Company’s derivative instruments include interest rate swap contracts, 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 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.

The company adopted ASU No. 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities,” beginning on January 1, 2019. Refer to Note 3, Recent Accounting Pronouncements.

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 Consolidated Balance Sheets at March 31, ~~2019~~2020 and December 31, ~~2018:~~2019:



	Assets					Liabilities
	Account	Fair Value				Account	Fair Value
Designated derivative instruments		March 31, 2020		December 31, 2019			March 31, 2020		December 31, 2019
Interest rate swap contracts	Other current assets	$	—	$	—	Other accruals	$	—	$	—
Interest rate swap contracts	Other assets	16		4		Other liabilities	—		—
Foreign currency contracts	Other current assets	58		6		Other accruals	8		15
Foreign currency contracts	Other assets	—		—		Other liabilities	9		14
Commodity contracts	Other current assets	—		—		Other accruals	1		—
Total designated		$	74	$	10		$	18	$	29

Other financial instruments
Marketable securities	Other current assets	$	43	$	23
Total other financial instruments		$	43	$	23

Assets Liabilities

Account
Fair Value Account Fair Value
Designated derivative instruments 3/31/19 12/31/18 3/31/19 12/31/18
Interest rate swap contracts Other current assets $ —
$ —
Other accruals $ —
$ 1
Interest rate swap contracts Other assets —
—
Other liabilities 4
8
Foreign currency contracts Other current assets 14
20
Other accruals 13
8
Foreign currency contracts Other assets —
—
Other liabilities 15
21
Commodity contracts Other current assets —
—
Other accruals 1
—
Total designated $ 14
$ 20
$ 33
$ 38

Other financial instruments

Marketable securities Other current assets $ 37
$ 10

Total other financial instruments $ 37
$ 10

COLGATE-PALMOLIVE COMPANY

Notes to Condensed Consolidated Financial Statements (continued)

(Dollars in Millions Except Share and Per Share Amounts)

(Unaudited)

The carrying amount of cash, cash equivalents, marketable securities, accounts receivable and short-term debt approximated fair value as of March 31, ~~2019~~2020 and December 31, ~~2018.~~2019. The estimated fair value of the Company’s long-term debt, including the current portion, as of March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, was ~~$6,783~~$7,909 and ~~$6,434,~~$8,056, respectively, and the related carrying value was ~~$6,656~~$7,591 and ~~$6,354,~~$7,587, respectively. 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 amounts were recorded on the Condensed Consolidated Balance Sheet related to cumulative basis adjustment for fair value hedges as of:



	March 31, 2020		December 31, 2019
Long-term debt:
Carrying amount of hedged item	$	415	$	403
Cumulative hedging adjustment included in the carrying amount	16		4

March 31, 2019 December 31, 2018
Long-term debt:
Carrying amount of hedged item $ 394
$ 888
Cumulative hedging adjustment included in the carrying amount 4
10

The following ~~table presents~~tables present the notional values as of:


	March 31, 2019										March 31, 2020
	Foreign Currency Contracts		Foreign Currency Debt		Interest Rate Swaps		Commodity Contracts		Total		Foreign Currency Contracts		Foreign Currency Debt		Interest Rate Swaps		Commodity Contracts		Total
Fair Value Hedges	$	708	$	—	$	400	$	—	$	1,108	$	535	$	—	$	400	$	—	$	935
Cash Flow Hedges	791		—		—		12		803		718		—		—		21		739
Net Investment Hedges	490		2,212		—		—		2,702		473		3,752		—		—		4,225



	December 31, 2019
	Foreign Currency Contracts		Foreign Currency Debt		Interest Rate Swaps		Commodity Contracts		Total
Fair Value Hedges	$	388	$	—	$	400	$	—	$	788
Cash Flow Hedges	761		—		—		20		781
Net Investment Hedges	478		3,856		—		—		4,334

December 31, 2018

Foreign
Currency
Contracts
Foreign Currency Debt Interest Rate Swaps Commodity Contracts

Total
Fair Value Hedges $ 327
$ —
$ 900
$ —
$ 1,227
Cash Flow Hedges 782
—
—
14
796
Net Investment Hedges 482
1,396
—
—
1,878

COLGATE-PALMOLIVE COMPANY

Notes to Condensed Consolidated Financial Statements (continued)

(Dollars in Millions Except Share and Per Share Amounts)

(Unaudited)

The following table presents the location and amount of gains (losses) recognized on the Company’s Condensed Consolidated Statements of Income:


	Three Months Ended March 31,																	Three Months Ended March 31,
	2019								2018									2020								2019
	Cost of sales		Selling, general and administrative expenses			Interest (income) expense, net			Cost of sales			Selling, general and administrative expenses			Interest (income) expense, net			Cost of sales		Selling, general and administrative expenses			Interest (income) expense, net			Cost of sales		Selling, general and administrative expenses			Interest (income) expense, net
Gain (loss) on hedges recognized in income:
Interest rate swaps designated as fair value hedges:
Derivative instrument	$	—	$	—		$	(3	)	$	—		$	—		$	(10	)	$	—	$	—		$	(12	)	$	—	$	—		$	(3	)
Hedged items	—		—			3			—			—			10			—		—			12			—		—			3
Foreign currency contracts designated as fair value hedges:
Derivative instrument	—		(1		)	—			—			(13		)	—			—		24			—			—		(1		)	—
Hedged items	—		1			—			—			13			—			—		(24		)	—			—		1			—
Foreign currency contracts designated as cash flow hedges:
Amount reclassified from OCI	3		—			—			(6		)	—			—			2		—			—			3		—			—
Commodity contracts designated as cash flow hedges:
Amount reclassified from OCI	1		—			—			—			—			—			1		—			—			1		—			—
Total gain (loss) on hedges recognized in income	$	4	$	—		$	—		$	(6	)	$	—		$	—		$	3	$	—		$	—		$	4	$	—		$	—

The following table presents the location and amount of unrealized gains (losses) included in ~~Other Comprehensive Income (OCI):~~OCI:



	Three Months Ended
	March 31,
	2020			2019
Foreign currency contracts designated as cash flow hedges:
Gain (loss) recognized in OCI	$	25		$	(3	)
Commodity contracts designated as cash flow hedges:
Gain (loss) recognized in OCI	—			1
Foreign currency contracts designated as net investment hedges:
Gain (loss) on instruments	25			6
Gain (loss) on hedged items	(25		)	(6		)
Foreign currency debt designated as net investment hedges:
Gain (loss) on instruments	65			29
Gain (loss) on hedged items	(65		)	(29		)
Total unrealized gain (loss) on hedges recognized in OCI	$	25		$	(2	)

Three Months Ended
March 31,
2019 2018
Foreign currency contracts designated as cash flow hedges:
Gain (loss) recognized in OCI $ (3 ) $ (8 )
Commodity contracts designated as cash flow hedges:
Gain (loss) recognized in OCI 1
—
Foreign currency contracts designated as net investment hedges:
Gain (loss) on instruments 6
(18 )
Gain (loss) on hedged items (6 ) 18
Foreign currency debt designated as net investment hedges:
Gain (loss) on instruments 29
(19 )
Gain (loss) on hedged items (29 ) 19
Total unrealized gain (loss) on hedges recognized in other comprehensive income (OCI) $ (2 ) $ (8 )

~~COLGATE-PALMOLIVE COMPANY~~

~~Notes to Condensed Consolidated Financial Statements (continued)~~

~~(Dollars in Millions Except Share and Per Share Amounts)~~

~~(Unaudited)~~

~~13. Leases~~

The Company adopted ASU No. 2016-02 “Leases (Topic 842)” on January 1, 2019, resulting in the recognition of right-of-use assets of $458 and liabilities of $574. The Company enters into leases for land, office space, warehouses and equipment. A number of the leases include one or more options to renew the lease terms, purchase the leased property or terminate the lease. The exercise of these options is at the Company’s discretion and is therefore recognized on the balance sheet when it is reasonably certain the Company will exercise such options.

~~Substantially all of the Company’s leases are considered operating leases. Finance leases were not material as of~~ ~~March 31, 2019 or for the~~ ~~three~~ ~~months ended March 31, 2019.~~

~~As of March 31, 2019, the Company~~’~~s right-of use assets and liabilities for operating leases were as follows:~~

Other assets $ 422

Other accruals $ 161
Other liabilities 369
Total operating lease liabilities $ 530

~~Lease commitments under noncancellable operating leases were as follows:~~

Years Ending December 31,
As of
March 31, 2019

As of
December 31, 2018
2019 $ 137
* $ 193
2020 154
165
2021 119
123
2022 97
102
2023 45
51
Thereafter 21
32
Total lease commitments $ 573
$ 666
Less: Interest (43 )
Present value of lease liabilities $ 530

* ~~As of~~ ~~March 31, 2019~~, ~~$137~~ ~~represents the lease commitments for the nine-months remaining until December 31, 2019.~~

~~The components of the Company’s operating lease cost for the three months ended March 31, 2019 were as follows:~~

Operating lease cost $ 45
Short-term lease cost 2
Variable lease cost 10
Sublease income —
Total lease cost $ 57

Short-term lease cost represents the Company’s cost with respect to leases with a duration of 12 months or less and are not reflected on the Company’s Consolidated Balance Sheets. Variable lease costs are comprised of costs such as the Company’s proportionate share of actual costs for utilities, common area maintenance, property taxes and insurance that are not included in the lease liability and are recognized in the period in which they are incurred.

COLGATE-PALMOLIVE COMPANY

~~Notes to Condensed Consolidated Financial Statements (continued)~~

~~(Dollars in Millions Except Share and Per Share Amounts)~~

~~(Unaudited)~~

~~Supplemental cash flow information related to operating leases for the three months ended March 31, 2019 was as follows:~~


▪	~~Payments against amounts included in the measurement of lease liabilities: $57~~


▪	~~Lease assets obtained in exchange for lease liabilities: $22~~

~~The weighted-average remaining lease term for operating leases was 4 years. The weighted-average discount rate for operating leases was 4.0%.~~

~~There were no material operating leases that the Company had entered into and that were yet to commence as of March 31, 2019.~~

~~COLGATE-PALMOLIVE COMPANY~~

Management’s Discussion and Analysis of Financial

Condition and Results of Operations

(Dollars in Millions Except Per Share Amounts)

Executive Overview

Business Organization

Colgate-Palmolive Company (together with its subsidiaries, “we,” the “Company” or “Colgate”) seeks to deliver strong, consistent business results and superior shareholder returns by providing consumers globally with products that make their lives healthier and more enjoyable.

To this end, ~~the Company is~~we are tightly focused on two product segments: Oral, Personal and Home Care; and Pet Nutrition. Within these segments, ~~the Company follows~~we follow a closely defined business strategy to grow our key product categories and increase our overall market share. Within the categories in which ~~the Company competes, the Company prioritizes its~~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 long-term growth.

Operationally, ~~the Company is~~we are organized along geographic lines with management teams having responsibility for the business and financial results in each region. ~~The Company competes~~We compete in more than 200 countries and territories worldwide with established businesses in all regions contributing to ~~the Company’s~~our sales and profitability. Approximately 70% of ~~the Company’s~~our Net sales are generated from markets outside the U.S., with approximately ~~50%~~45% of ~~the Company’s~~our 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’s~~our 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 traditional and eCommerce retailers, wholesalers and distributors. ~~The Company, through~~Through Hill’s Pet Nutrition, we also ~~competes~~compete on a worldwide basis in the pet nutrition market, selling ~~its~~ products principally through authorized pet supply retailers, veterinarians and eCommerce retailers. We are engaged in manufacturing and sourcing of products and materials on a global scale and have major manufacturing, 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 ~~as applicable,~~ the impact of foreign exchange, acquisitions and divestments), a non-GAAP financial measure, and gross profit margin, 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 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’s~~our 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.

COVID-19

The novel coronavirus (“COVID-19”) has had a profound impact on the way people live, work, interact and shop and has severely restricted economic activity around the world. We have a well-established Crisis Management Team (“CMT”) process, and the CMT, together with our senior management team and Colgate people around the world, are working to respond to the challenges presented by COVID-19.

During the quarter ended March 31, 2020, many of the communities in which we manufacture, market and sell our products have experienced unprecedented “stay at home” orders, travel or movement restrictions and other government actions. Because the vast majority of our products (such as oral care products, soaps and other personal hygiene products, home cleaners and pet food) have been deemed essential for the health and well-being of people and their pets, we have, in most instances, been able to continue operating our business. In so doing, the health and safety of Colgate employees has been our first priority and, wherever possible, we have asked our employees globally to work from home, including most employees in our New York City headquarters, Piscataway, New Jersey technology campus, hubs and subsidiaries worldwide and shared business service centers. In those instances where our employees cannot work from home, such as in our factories and in certain of our laboratories, we have implemented additional safety measures and social distancing protocols, consistent with government recommendations and/or requirements, to help to ensure their safety. Even with such measures in place, we have experienced

COLGATE-PALMOLIVE COMPANY

Management’s Discussion and Analysis of Financial

Condition and Results of Operations

(Dollars in Millions Except Per Share Amounts)

some limited factory closures, particularly in India, and in some instances we have seen increased instances of absenteeism. In addition, some of our suppliers, customers, distributors and service providers have experienced disruptions to their businesses.

We saw a significant increase in demand across most of our categories in the quarter ended March 31, 2020. While some of this increase has been caused by consumers’ pantry-loading activity, we believe that some of the increased demand for our health and hygiene products (for example, liquid hand soap) is the result of increased consumption and may be sustainable. At the same time, we experienced declines in Greater China, India and in certain channels, including professional sales and travel retail, due to the economic slowdown and restricted consumer movement. We have also seen changes in the purchasing patterns of our consumers, including the frequency of visits by consumers to retailers and a shift in many markets to purchasing our products online. During the quarter ended March 31, 2020, in some instances, we were not able to keep up with the increased consumer demand for our products and our products were at times out of stock on retailers’ shelves. We expect that this may continue for a period of time as we continue to ramp up production of in-demand products.

Government actions in response to COVID-19 could, in the future, impact our consumers’ ability to purchase and our ability to manufacture and distribute our products. Nonetheless, we believe that, in the long-term, consumer demand for products in our categories will be strong. However, uncertainty continues surrounding the timing and extent of recovery, when travel and movement restrictions will abate, the timing and impact of consumer pantry-loading activity in certain markets, product demand trends and the impact of COVID-19 on the global economy. Our retail customers are also being impacted by the global pandemic; their success in addressing COVID-19 and maintaining their operations could impact consumer access to and sales of our products.

While we currently expect to be able to continue operating our business as described above and we intend to continue to work with government authorities and to follow the necessary protocols to maintain the health and safety of our employees and contract providers, uncertainty resulting from COVID-19 could result in an unforeseen additional disruption to our business, including our global supply chain and retailer network.

For more information about the anticipated COVID-19 impact, see “Outlook” below.

Business Strategy

To achieve ~~its~~our business and financial objectives, we are focused on innovating our core businesses; improving our brand building activities with an elevated brand purpose model and the ~~Company focuses the organization on initiatives~~use of equity advertising; innovating to gain market share in high growth segments and adjacencies; expanding into new channels and markets; maximizing growth online; and investing to drive ~~and fund growth. The Company seeks~~consumption in growing populations. We continue 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 insights in the development of successful new products. To enhance these efforts, the Company has developed keydevelop initiatives to build strong relationships with consumers, dental, veterinary and skin ~~care~~health professionals and traditional and eCommerce retailers. In addition, ~~the Company has enhanced its digital marketing~~we continue to invest behind our brands, not just in terms of advertising, but also to build key growth capabilities in areas such as innovation and ~~intends~~data and analytics. We also continue to broaden ~~its~~our eCommerce offerings, including direct-to-consumer and subscription services. ~~Growth~~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’s products. We are also working to integrate our sustainability strategy across our organization.

We are also changing the way we work to drive growth and how we approach innovation 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.

The investments needed to support growth are developed through continuous, Company-wide initiatives to lower costs and increase effective asset utilization. Through these initiatives, which are referred to as ~~the Company’s~~our funding-the-growth initiatives, ~~the Company seeks~~we seek to become even more effective and efficient throughout ~~its~~our 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. ~~The Company~~We also ~~continues~~continue to prioritize ~~its~~our investments ~~toward its higher margin businesses, specifically~~in high growth segments within our Oral Care, Personal Care and Pet ~~Nutrition.~~Nutrition businesses, including by expanding our portfolio in premium skin health.

COLGATE-PALMOLIVE COMPANY

Management’s Discussion and Analysis of Financial

Condition and Results of Operations

(Dollars in Millions Except Per Share Amounts)

Significant Items Impacting Comparability

On ~~December 22,~~January 31, 2020, the Company acquired Hello Products LLC, an oral care business, for cash consideration of $351. The acquisition was financed with a combination of debt and cash. This acquisition is part of the Company's strategy to focus on high growth segments within its Oral Care, Personal Care and Pet Nutrition businesses. See Note 4, Acquisitions to the Condensed Consolidated Financial Statements for additional information.

The provision for income taxes for the quarter ended March 31, 2020 includes $71 of income tax benefits recorded on a discrete period basis of which $45 relates to previously recorded foreign withholding taxes and $26 relates to a previously recorded valuation allowance against a deferred tax asset. As more fully described in “Results of Operations-Income Taxes,” and in Note 10, Income Taxes to the Condensed Consolidated Financial Statements, both items were previously recorded in connection with the charge recorded in 2017 and revised in 2018 related to the Tax Cuts and Jobs Act (the “TCJA” ~~or “U.S. tax reform”~~) was enacted, which, among other things, lowered the U.S. corporate income tax rate to 21% from 35% and established a modified territorial system requiring a mandatory deemed repatriation tax on undistributed earnings of foreign subsidiaries. Beginning in 2018, the TCJA also requires a minimum tax on certain future earnings generated by foreign subsidiaries while providing for future tax-free repatriation of such earnings through a 100% dividends-received deduction..

~~During 2018,~~On September 19, 2019, the Company ~~finalized its assessment~~acquired Laboratoires Filorga Cosmétiques S.A. (“Filorga”), a skin health business, for cash consideration of ~~the impact~~€1,548 (approximately $1,712). Filorga is a premium anti-aging skin health brand focused primarily on facial care. The acquisition was financed with a combination of ~~the TCJA~~debt and ~~recognized tax expense~~cash. This acquisition is part of ~~$80 reflecting the impact of transition tax guidance issued~~our strategy to focus on high growth segments within our Oral Care, Personal Care and Pet Nutrition businesses, including by ~~the U.S. Treasury and the update of certain estimates and calculations based on information available through the end of 2018. Any further guidance issued after December 31, 2018 may have an impact~~expanding our portfolio in premium skin health. See Note 4, Acquisitions to the ~~Company’s Provision for income tax in the period such guidance is effective. Refer to “Results of Operations-Income Taxes” below~~Condensed Consolidated Financial Statements for additional ~~details.~~information.

~~The Company’s~~Our restructuring program, known as the ~~“Global~~"Global Growth and Efficiency Program,~~” runs through~~" concluded on December 31, 2019. The ~~program’s~~program's initiatives ~~are expected~~were designed to help ~~the Company~~us ensure sustained solid worldwide growth in unit volume, organic sales, operating profit and earnings per share and to enhance ~~its~~our global leadership positions in ~~its~~our core businesses. ~~Implementation of the Global Growth and Efficiency Program remains on track and is in its final year.~~

~~The initiatives under the Global Growth and Efficiency Program are focused on the following areas:~~


▪	~~Expanding Commercial Hubs~~


▪	~~Extending Shared Business Services and Streamlining Global Functions~~


▪	~~Optimizing Global Supply Chain and Facilities~~

Savings, substantially all of which are expected to increase future cash flows, are projected to be in the range of $590 to $635 pretax ($550 to $575 aftertax) annually, once all projects are approved and implemented. Cumulative pretax charges resulting from the Global Growth and Efficiency Program, once all phases are approved and implemented, are estimated to be in the range of $1,820 to $1,870 ($1,350 to $1,380 aftertax).

~~In the three months ended March 31, 2019 and 2018, the Company incurred aftertax costs of $22 and $20, respectively, resulting from the Global Growth and Efficiency Program.~~

~~For more information regarding the Global Growth and Efficiency Program, see “Restructuring and Related Implementation Charges” below and~~See Note 4,5, Restructuring and Related Implementation Charges to the Condensed Consolidated Financial ~~Statements.~~Statements for additional information.

COLGATE-PALMOLIVE COMPANY

Management’s Discussion and Analysis of Financial

Condition and Results of Operations

(Dollars in Millions Except Per Share Amounts)

Outlook

Looking forward, ~~the Company expects~~we expect global macroeconomic, political and market conditions to remain ~~challenging. While~~challenging, especially due to the ~~Company has recently~~COVID-19 crisis. Although we have seen short-term improvement in category growth rates ~~the Company expects~~due to consumer pantry-loading activity, we have seen increased volatility in consumption rates in our categories and expect category growth rates to slow going forward as pantry inventory diminishes and to remain below historical levels. While the global marketplace in which ~~the Company operates~~we operate has always been highly competitive, ~~the Company continues~~we 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. ~~The Company has also~~We expect promotional activities to increase as retailers try aggressively to get consumers back into the stores after prolonged “stay at home” and other government restrictions ease over the coming months. We have been negatively affected by changes in the policies or practices of ~~its~~our retail trade customers in key markets, such as inventory de-stocking, limitations on access to shelf space or delisting of ~~the Company’s~~our products. In addition, the retail landscape in many of ~~the Company’s~~our markets continues to be impacted by the rapid growth of eCommerce retailers, changing consumer preferences (as consumers increasingly shop online) and the emergence of alternative retail channels, such as subscription services and direct-to-consumer businesses. These trends have been magnified due to the COVID-19 crisis in many of our geographies and we plan to continue to invest behind our eCommerce capabilities. This rapid growth in eCommerce and the emergence of alternative retail channels have created and may continue to create pricing pressures and/or adversely affect ~~the Company’s~~our relationships with ~~its~~our key retailers. In addition, given that approximately 70% of ~~the Company’s~~our Net sales originate in markets outside the U.S., ~~the Company has~~we have experienced and ~~may~~will likely continue to experience increasingly volatile foreign currency fluctuations and ~~high~~higher raw and packaging material costs. While ~~the Company has~~we have taken, and will continue to take, measures to mitigate the effect of these conditions, ~~should they~~in the current environment, it may become increasingly difficult to implement certain of these mitigation strategies. Should these conditions persist, they could adversely affect ~~the Company’s~~our future results.

As discussed above, we continue to closely monitor the impact of COVID-19 on our business. While we have taken, and will continue to take, measures to mitigate the effects of COVID-19, we cannot estimate with certainty the full extent of COVID-19’s impact on our business, results of operations, cash flows and/or financial condition. For more information about factors that could impact our business, including due to COVID-19, see “Risk Factors” in Part II, Item IA of this Quarterly Report and Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2019.

In summary, ~~the Company believes it is~~we believe we are well prepared to meet the challenges ahead due to ~~its~~our strong financial condition, experience operating in challenging environments, resilient global supply chain and continued focus on ~~the Company’s~~our key priorities: growing sales through engaging with consumers, developing world-class innovation and working with retail partners; driving efficiency on every line of the income statement to increase margins; generating strong cash flow performance and utilizing that cash effectively to enhance total shareholder return; and leading to win by staying true to the Company’s culture and focusing on its stakeholders. ~~The Company’s~~Our key focus is to sustain the underlying momentum of our business, to adapt our financial plans to deliver on 2020, while leaving us well positioned for a return to stronger growth in 2021. Our commitment to these priorities, together with the strength of ~~the Company’s~~our global brands, ~~its~~our broad international presence in both developed and emerging markets and cost-saving initiatives, such as ~~the Company’s~~our funding-the-growth initiatives, ~~and the Global Growth and Efficiency Program,~~ should position us well to manage through the ~~Company well~~COVID-19 crisis and to increase shareholder value over the long term.

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 ~~$3,884~~$4,097 in the first quarter of ~~2019, down 3.0%~~2020, up 5.5% from the first quarter of ~~2018,~~2019, as volume growth of ~~1.0%~~7.0% and net selling price increases of 2.0% were ~~more than~~partially offset by negative foreign exchange of ~~6.0%~~3.5%. Acquisitions contributed 1.5% to volume. Organic sales (Net sales excluding the impact of foreign exchange, acquisitions and divestments), a non-GAAP financial measure, increased ~~3.0%~~7.5% in the first quarter of ~~2019.~~2020. 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 ~~$3,284~~$3,378 in the first quarter of ~~2019, down 4.0%~~2020, up 3.0% from the first quarter of ~~2018,~~2019, as volume growth of ~~1.0%~~5.5% and net selling price increases of 1.5% were ~~more than~~partially offset by negative foreign exchange of ~~6.5%~~4.0%. Acquisitions contributed 2.0% to volume. Organic sales in the Oral, Personal and Home Care product segment increased ~~2.5%~~5.0% in the first quarter of ~~2019.~~2020.

The Company’s share of the global toothpaste market was ~~41.7%~~40.5% on a year-to-date basis, down ~~1.0~~0.9 share ~~point~~points from the year ago period, and its share of the global manual toothbrush market was ~~31.6%~~32.1% on a year-to-date basis, ~~down 1.1~~up 0.5 share points from the year ago period. Year-to-date market shares in toothpaste were up in ~~Africa/Eurasia~~Latin America and Europe and down in North America, ~~Latin America, Europe~~Asia Pacific and ~~Asia Pacific~~Africa/Eurasia versus the comparable ~~2018~~2019 period. In the manual toothbrush category, year-to-date market shares were up in Latin America, Europe and Asia Pacific, flat in Africa/Eurasia and down in North America ~~Latin America, Europe, Asia Pacific and Africa/Eurasia~~ versus the comparable ~~2018~~2019 period. For additional information regarding market shares, see “Market Share Information” below.

Net sales in the Hill’s Pet Nutrition segment were ~~$600~~$719 in the first quarter of ~~2019,~~2020, up ~~3.0%~~20.0% from the first quarter of ~~2018,~~2019, as volume growth of ~~2.0%~~17.0% and net selling price increases of 4.0% were partially offset by negative foreign exchange of ~~3.0%~~1.0%. Organic sales in the Hill’s Pet Nutrition segment increased ~~6.0%~~21.0% in the first quarter of ~~2019.~~2020.

~~Gross Profit/Margin~~

Worldwide Gross profit decreased to $2,287 in the first quarter of 2019 from $2,408 in the first quarter of 2018. Gross profit in both periods included charges resulting from the Global Growth and Efficiency Program. Excluding these charges in both periods, Gross profit decreased to $2,298 in the first quarter of 2019 from $2,414 in the first quarter of 2018. This decrease in Gross profit reflects a decrease of $72 resulting from lower Net sales and a decrease of $44 resulting from lower Gross profit margin.

Worldwide Gross profit margin decreased to 58.9% in the first quarter of 2019 from 60.2% in the first quarter of 2018. Excluding charges resulting from the Global Growth and Efficiency Program in both periods, Gross profit margin decreased by 110 basis points (bps) to 59.2% in the first quarter of 2019 from 60.3% in the first quarter of 2018. This decrease in Gross profit margin was due to higher raw and packaging material costs (320 bps), which included foreign exchange transaction costs, partially offset by cost savings from the Company’s funding-the-growth initiatives (150 bps) and higher pricing (70 bps).

Three Months Ended March 31,
2019 2018
Gross profit, GAAP $ 2,287
$ 2,408
Global Growth and Efficiency Program 11
6
Gross profit, non-GAAP $ 2,298
$ 2,414

Three Months Ended March 31,
2019 2018 Basis Point Change
Gross profit margin, GAAP 58.9 % 60.2 % (130 )
Global Growth and Efficiency Program 0.3
0.1

Gross profit margin, non-GAAP 59.2 % 60.3 % (110 )

COLGATE-PALMOLIVE COMPANY

Management’s Discussion and Analysis of Financial

Condition and Results of Operations

(Dollars in Millions Except Per Share Amounts)

~~Selling, General and Administrative Expenses~~Gross Profit/Margin

~~Selling, general and administrative expenses decreased 2%~~Worldwide Gross profit increased to ~~$1,365~~$2,465 in the first quarter of ~~2019~~2020 from ~~$1,392~~$2,287 in the first quarter of ~~2018. Selling, general and administrative expenses~~2019. Gross profit in ~~both periods~~the first quarter of 2020 included acquisition-related costs. Gross profit in the first quarter of 2019 included charges resulting from the Global Growth and Efficiency Program. Excluding ~~these charges in both periods, Selling, general and administrative expenses decreased to $1,361~~acquisition-related costs in the first quarter of ~~2019 from $1,387 in the first quarter of 2018, reflecting lower overhead expenses of $39, partially offset by increased advertising investment of $13.~~

~~Selling, general~~2020 and ~~administrative expenses as a percentage of Net sales increased to 35.1% in the first quarter of 2019 from 34.8% in the first quarter of 2018. Excluding~~ charges resulting from the Global Growth and Efficiency Program in ~~both periods, Selling, general and administrative expenses as a percentage~~the first quarter of ~~Net sales~~2019, Gross profit increased ~~by 30 bps~~ to ~~35.0%~~$2,469 in the first quarter of 2020 from $2,298 in the first quarter of 2019, ~~as compared~~reflecting an increase of $126 resulting from higher Net sales and an increase of $45 resulting from higher Gross profit margin.

Worldwide Gross profit margin increased to ~~34.7%~~60.2% in the first quarter of ~~2018.~~2020 from 58.9% in the first quarter of 2019. Excluding the items described above in both periods as applicable, Gross profit margin increased by 110 basis points (bps) to 60.3% in the first quarter of 2020 from 59.2% in the first quarter of 2019. This increase in Gross profit margin was due to ~~increased advertising investment (60~~cost savings from the Company’s funding-the-growth initiatives (150 bps), higher pricing (70 bps) and favorable mix (20 bps), partially offset by ~~lower overhead expenses (30~~higher raw and packaging material costs (130 bps), both as a percentage of Net sales. In the first quarter of 2019, advertising investment increased as a percentage of Net sales to 11.0% from 10.4% in the first quarter of 2018 or 3% in absolute terms to $429, as compared with $416 in the first quarter of 2018.

which included foreign exchange transaction costs.

Three Months Ended March 31,
2019 2018
Selling, general and administrative expenses, GAAP $ 1,365
$ 1,392
Global Growth and Efficiency Program (4 ) (5 )
Selling, general and administrative expenses, non-GAAP $ 1,361
$ 1,387



	Three Months Ended March 31,
	2020		2019
Gross profit, GAAP	$	2,465	$	2,287
Acquisition-related costs	4		—
Global Growth and Efficiency Program	—		11
Gross profit, non-GAAP	$	2,469	$	2,298

Three Months Ended March 31,
2019 2018 Basis Point Change
Selling, general and administrative expenses as a percentage of Net sales, GAAP 35.1 % 34.8 % 30
Global Growth and Efficiency Program (0.1 ) (0.1 )
Selling, general and administrative expenses as a percentage of Net sales, non-GAAP 35.0 % 34.7 % 30



	Three Months Ended March 31,
	2020		2019		Basis Point Change
Gross profit margin, GAAP	60.2	%	58.9	%	130
Acquisition-related costs	0.1		—
Global Growth and Efficiency Program	—		0.3
Gross profit margin, non-GAAP	60.3	%	59.2	%	110

COLGATE-PALMOLIVE COMPANY

Management’s Discussion and Analysis of Financial

Condition and Results of Operations

(Dollars in Millions Except Per Share Amounts)

~~Operating Profit~~Selling, General and Administrative Expenses

~~Operating profit decreased 11%~~Selling, general and administrative expenses increased 8% to ~~$879~~$1,473 in the first quarter of ~~2019~~2020 from ~~$983~~$1,365 in the first quarter of ~~2018. Operating profit~~2019. Selling, general and administrative expenses in ~~both periods~~the first quarter of 2019 included charges resulting from the Global Growth and Efficiency Program. Excluding ~~these~~ charges ~~in both periods, Operating profit decreased 10% to $907~~resulting from the Global Growth and Efficiency Program in the first quarter of 2019, ~~from $1,007~~Selling, general and administrative expenses increased to $1,473 in the first quarter of ~~2018, as a decrease in Gross profit was partially offset by a decrease in Selling, general and administrative expenses.~~

~~Operating profit margin was 22.6%~~2020 from $1,361 in the first quarter of 2019, reflecting higher overhead expenses of $57 and increased advertising investment of $55.

Selling, general and administrative expenses as a ~~decrease~~percentage of ~~200 bps compared~~Net sales increased to ~~24.6%~~36.0% in the first quarter of ~~2018.~~2020 from 35.1% in the first quarter of 2019. Excluding charges resulting from the Global Growth and Efficiency Program in the first quarter of 2019, Selling, general and administrative expenses as a percentage of Net sales increased by 100 bps to 36.0% in the first quarter of 2020 as compared to 35.0% in the first quarter of 2019. This increase was due to increased advertising investment (80 bps) and higher overhead expenses (20 bps) primarily due to higher logistics costs, both ~~periods, Operating profit margin was 23.4%~~as a percentage of Net sales. In the first quarter of 2020, advertising investment increased as a percentage of Net sales to 11.8% from 11.0% in the first quarter of 2019 ~~a decrease of 180 bps~~or 13% in absolute terms to $484, as compared ~~to 25.2%~~with $429 in the first quarter of 2018. This decrease in Operating profit margin was primarily due to a decrease in Gross profit (110 bps) and an increase in Selling, general and administrative expenses (30 bps), both as a percentage of Net sales.2019.

Three Months Ended March 31,
2019 2018 % Change
Operating profit, GAAP $ 879
$ 983
(11 )%
Global Growth and Efficiency Program 28
24

Operating profit, non-GAAP $ 907
$ 1,007
(10 )%



	Three Months Ended March 31,
	2020		2019
Selling, general and administrative expenses, GAAP	$	1,473	$	1,365
Global Growth and Efficiency Program	—		(4		)
Selling, general and administrative expenses, non-GAAP	$	1,473	$	1,361

Three Months Ended March 31,
2019 2018 Basis Point Change
Operating profit margin, GAAP 22.6 % 24.6 % (200 )
Global Growth and Efficiency Program 0.8
0.6

Operating profit margin, non-GAAP 23.4 % 25.2 % (180 )



	Three Months Ended March 31,
	2020		2019		Basis Point Change
Selling, general and administrative expenses as a percentage of Net sales, GAAP	36.0	%	35.1	%	90
Global Growth and Efficiency Program	—		(0.1	)
Selling, general and administrative expenses as a percentage of Net sales, non-GAAP	36.0	%	35.0	%	100

~~Non-Service Related Postretirement Costs~~

Non-service related postretirement costs were $25 in the first quarter of 2019, as compared to $24 in the first quarter of 2018. Non-service related postretirement costs in both periods included charges resulting from the Global Growth and Efficiency Program. Excluding these charges in both periods, Non-service related postretirement costs were $24 in the first quarter of 2019, as compared to $20 in the first quarter of 2018.

Three Months Ended March 31,
2019 2018
Non-service related postretirement costs, GAAP $ 25
$ 24
Global Growth and Efficiency Program (1 ) (4 )
Non-service related postretirement costs, non-GAAP $ 24
$ 20

~~Interest (Income) Expense, Net~~

~~Interest (income) expense, net was $40 in the first quarter of 2019 as compared to $35 in the first quarter of 2018, primarily due to higher average interest rates on debt.~~

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 8% to $952 in the first quarter of 2020 from $879 in the first quarter of 2019. Operating profit in the first quarter of 2020 included acquisition-related costs. Operating profit in the first quarter of 2019 included charges resulting from the Global Growth and Efficiency Program. Excluding acquisition-related costs in the first quarter of 2020 and charges resulting from the Global Growth and Efficiency Program in the first quarter of 2019, Operating profit increased to $958 in the first quarter of 2020 from $907 in the first quarter of 2019, as an increase in Gross profit was partially offset by an increase in Selling, general and administrative expenses.

Operating profit margin was 23.2% in the first quarter of 2020, an increase of 60 bps compared to 22.6% in the first quarter of 2019. Excluding the items described above in both periods as applicable, Operating profit margin was 23.4% in the first quarter of 2020, even with the first quarter of 2019, as higher Gross profit (110 bps) was largely offset by increases in Selling, general and administrative expenses (100 bps), both as a percentage of Net sales.



	Three Months Ended March 31,
	2020		2019		% Change
Operating profit, GAAP	$	952	$	879	8	%
Global Growth and Efficiency Program	—		28
Acquisition-related costs	6		—
Operating profit, non-GAAP	$	958	$	907	6	%



	Three Months Ended March 31,
	2020		2019		Basis Point Change
Operating profit margin, GAAP	23.2	%	22.6	%	60
Global Growth and Efficiency Program	—		0.8
Acquisition-related costs	0.2		—
Operating profit margin, non-GAAP	23.4	%	23.4	%	—

Non-Service Related Postretirement Costs

Non-service related postretirement costs were $21 in the first quarter of 2020, as compared to $25 in the first quarter of 2019. Non-service related postretirement costs in the first quarter of 2019 included charges resulting from the Global Growth and Efficiency Program. Excluding charges resulting from the Global Growth and Efficiency Program in the first quarter of 2019, Non-service related postretirement costs were $21 in the first quarter of 2020, as compared to $24 in the first quarter of 2019.



	Three Months Ended March 31,
	2020		2019
Non-service related postretirement costs, GAAP	$	21	$	25
Global Growth and Efficiency Program	—		(1		)
Non-service related postretirement costs, non-GAAP	$	21	$	24

Interest (Income) Expense, Net

Interest (income) expense, net was $36 in the first quarter of 2020 as compared to $40 in the first quarter of 2019, primarily due to lower average interest rates on debt.

COLGATE-PALMOLIVE COMPANY

Management’s Discussion and Analysis of Financial

Condition and Results of Operations

(Dollars in Millions Except Per Share Amounts)

Income Taxes

The effective income tax rate was 16.4% for the first quarter of 2020 as compared to 26.3% for the first quarter of ~~2019 as compared to 26.6% for the first quarter of 2018.~~2019. As reflected in the table below, the non-GAAP effective income tax rate was ~~26.2%~~24.4% for the ~~first~~ quarter ~~of 2019,~~ended March 31, 2020, as compared to ~~26.7%~~26.2% in the comparable period of ~~2018.~~2019.

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. The Company’s current estimate of its full year effective income tax rate before discrete period items is ~~26.1%~~24.7%, compared to ~~27.3%~~26.1% in the first quarter of ~~2018.~~2019. See Note 10, Income Taxes to the Condensed Consolidated Financial Statements for additional details.


	Three Months Ended March 31,												Three Months Ended March 31,
	2019						2018						2020						2019
	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⁾		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	$	814	$	214	26.3	%	$	924	$	246	26.6	%	$	895	$	147	16.4	%	$	814	$	214	26.3	%
Global Growth and Efficiency Program	29		7		(0.1	)	28		8		0.1		—		—		—		29		7		(0.1	)
Subsidiary and operating structure initiatives													—		71		7.9	%	—		—		—
Acquisition-related costs													6		2		0.1	%	—		—		—
Non-GAAP	$	843	$	221	26.2	%	$	952	$	254	26.7	%	$	901	$	220	24.4	%	$	843	$	221	26.2	%

⁽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.

On December 22, 2017, the TCJA was enacted, which, among other things, lowered the U.S. corporate income tax rate to 21% from 35% and established a modified territorial system requiring a mandatory deemed repatriation tax on undistributed earnings of foreign subsidiaries. Beginning in 2018, the TCJA also requires a minimum tax on certain earnings generated by foreign subsidiaries while providing for tax-free repatriation of such earnings through a 100% dividends-received deduction. The Company’s effective income tax rate in 2017 included a provisional charge of $275, recorded in the fourth quarter of 2017, based on its initial analysis of the TCJA. During 2018, the Company finalized its assessment of the impact of the TCJA and recognized an additional tax expense of $80 reflecting the impact of transition tax guidance issued by the U.S. Treasury and the update of certain estimates and calculations based on information available through the end of 2018.

The ~~impact, if any, of further transitional tax guidance that may be issued by the U.S. Treasury would be reflected in the Company’s~~ provision for income taxes for the quarter ended March 31, 2020 includes $71 of income tax benefits recorded on a discrete period basis of which $45 relates to previously recorded foreign withholding taxes and $26 relates to a previously recorded valuation allowance against a deferred tax asset. As more fully described below, both items were previously recorded in connection with the charge recorded by the Company in 2017 and revised in 2018 related to the TCJA.

As part of the previously recorded charge for the TCJA, the Company had provided for foreign withholding taxes expected to be paid on the remittance of earnings from certain overseas subsidiaries no longer deemed indefinitely reinvested. As a result of a recent reorganization of the ownership structure of certain foreign subsidiaries, the Company has now determined that no withholding taxes will be due on the remittance by certain subsidiaries of earnings previously deemed reinvested and, accordingly, reversed $45 of previously recorded foreign withholding taxes.

Also as part of the previously recorded charge for the TCJA, the Company provided a valuation allowance against a deferred tax asset related to foreign tax credit carry-forwards that the Company did not expect to be able to use due to changes made by the TCJA. As a result of a new operating structure being implemented within one of the Company's divisions, the Company now believes the use of these foreign tax credit carry-forwards will not be limited in the ~~period such guidance is effective.~~future and, accordingly, reversed the previously recorded valuation allowance of $26.

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 for the first quarter of ~~2019 decreased~~2020 increased to ~~$560~~$715 from ~~$634~~$560 in the first quarter of ~~2018,~~2019, and Earnings per common share on a diluted basis ~~decreased~~increased to ~~$0.65~~$0.83 per share in the first quarter of ~~2019~~2020 from ~~$0.72~~$0.65 in the first quarter of ~~2018.~~2019. Net income attributable to Colgate-Palmolive Company in ~~both periods~~the first quarter of 2020 included ~~charges resulting from the Global Growth~~acquisition-related costs and ~~Efficiency Program.~~

~~Excluding charges resulting from the Global Growth~~a benefit related to subsidiary and ~~Efficiency Program in both periods,~~operating structure initiatives and Net income attributable to Colgate-Palmolive Company in the first quarter of 2019 ~~decreased 11%~~included charges resulting from the Global Growth and Efficiency Program. See Note 10, Income Taxes for additional information.

Excluding the items described above in both periods as applicable, Net income attributable to ~~$582 from $654~~Colgate-Palmolive Company in the first quarter of ~~2018,~~2020 increased 11% to $648 from $582 in the first quarter of 2019, and Earnings per common share on a diluted basis ~~decreased 9%~~increased 12% to $0.75 in the first quarter of 2020 from $0.67 in the first quarter of ~~2019 from $0.74 in the first quarter of 2018.~~2019.



	Three Months Ended March 31, 2020
	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	$	895	$	147	$	748		$	715		$	0.83
Subsidiary and operating structure initiatives	—		71		(71		)	(71		)	(0.08		)
Acquisition-related costs	6		2		4			4			—
Non-GAAP	$	901	$	220	$	681		$	648		$	0.75



	Three Months Ended March 31, 2019
	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	$	814	$	214	$	600	$	560	$	0.65
Global Growth and Efficiency Program	29		7		22		22		0.02
Non-GAAP	$	843	$	221	$	622	$	582	$	0.67

Three Months Ended March 31, 2018
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 $ 924
$ 246
$ 678
$ 634
$ 0.72
Global Growth and Efficiency Program 28
8
20
20
0.02
Non-GAAP $ 952
$ 254
$ 698
$ 654
$ 0.74

⁽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’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 March 31,									Three Months Ended March 31,
	2019			2018			Change			2020			2019			Change
Net sales	$	853		$	827		3.0		%	$	929		$	853		9.0		%
Operating profit	$	249		$	257		(3	)	%	$	258		$	249		4		%
% of Net sales	29.2		%	31.1		%	(190	)	bps	27.8		%	29.2		%	(140	)	bps

Net sales in North America increased ~~3.0%~~9.0% in the first quarter of ~~2019~~2020 to ~~$853,~~$929, as volume growth of ~~2.0% and net selling price increases of 1.5% were~~9.5% was partially offset by negative foreign exchange of 0.5%., while net selling prices were flat. The Company's acquisition of Hello Products LLC contributed 1.5% to volume in North America. Organic sales in North America increased ~~3.5%~~8.0% in the first quarter of ~~2019.~~2020. Organic sales growth was led by the United States.

The increase in organic sales in North America in the first quarter of ~~2019~~2020 versus the first quarter of ~~2018 was primarily due to an increase in Oral Care organic sales. The increase in Oral Care was primarily due to organic sales growth in the toothpaste category.~~

~~Operating profit in North America decreased 3% in the first quarter of~~ 2019 to $249, or 190 bps to 29.2% of Net sales. This decrease in Operating profit as a percentage of Net sales was primarily due to a decrease in Gross profit (160 bps) and an increase in Selling, general and administrative expenses (70 bps), both as a percentage of Net sales. This decrease in Gross profit was primarily due to higher raw and packaging material costs (270 bps), partially offset by cost savings from the Company’s funding-the-growth initiatives (130 bps). This increase in Selling, general and administrative expenses was primarily due to higher overhead expenses (70 bps), driven by higher logistics costs.

~~Latin America~~

Three Months Ended March 31,
2019 2018 Change
Net sales $ 889
$ 929
(4.5 ) %
Operating profit $ 232
$ 273
(15 ) %
% of Net sales 26.1 % 29.4 % (330 ) bps

Net sales in Latin America decreased 4.5% to $889 in the first quarter of 2019, as volume growth of 2.5% and net selling price increases of 3.5% were more than offset by negative foreign exchange of 10.5%. Volume gains were led by Mexico, Brazil and Colombia. Organic sales in Latin America increased 6.0% in the first quarter of 2019.

~~The increase in organic sales in Latin America in the first quarter of 2019 versus the first quarter of 2018~~ 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, manual toothbrush and prescription dental categories, partially offset by a decline in organic sales in the mouthwash category. The increase in Personal Care was primarily due to organic sales growth in the ~~bar~~skin health, liquid hand soap and ~~shampoo~~bar soap categories. The increase in Home Care was primarily due to organic sales growth in the ~~fabric softener,~~hand dish, liquid cleaner and ~~hand dish~~fabric softener categories.

~~COLGATE-PALMOLIVE COMPANY~~

~~Management~~’~~s Discussion and Analysis of Financial~~

~~Condition and Results of Operations~~

~~(Dollars in Millions Except Per Share Amounts)~~

Operating profit in ~~Latin~~North America ~~decreased 15%~~increased 4% in the first quarter of ~~2019~~2020 to ~~$232, or 330~~$258, while as a percentage of Net sales it decreased 140 bps to ~~26.1% of Net sales.~~27.8%. This decrease in Operating profit as a percentage of Net sales was ~~primarily~~ due to ~~a decrease in Gross profit (230 bps) and an increase~~increases in Selling, general and administrative expenses ~~(70~~(100 bps) and Other (income) expense, net (50 bps), ~~both~~partially offset by an increase in Gross profit (10 bps), all as a percentage of Net sales. This ~~decrease~~increase in Gross profit was primarily due to ~~higher raw and packaging material costs (420 bps), which included foreign exchange transaction costs, partially offset by~~ cost savings from the Company’s funding-the-growth initiatives ~~(160~~(120 bps), partially offset by higher raw and packaging material costs (60 bps) and unfavorable mix (30 bps). This increase in Selling, general and administrative expenses was primarily due to increased advertising investment (80 bps) and higher overhead expenses ~~(40~~(20 bps), primarily driven by higher logistics ~~costs, and increased advertising investment (30 bps).~~costs.

~~Europe~~Latin America


	Three Months Ended March 31,									Three Months Ended March 31,
	2019			2018			Change			2020			2019			Change
Net sales	$	602		$	648		(7.0	)	%	$	889		$	889		—	%
Operating profit	$	151		$	162		(7	)	%	$	248		$	232		7	%
% of Net sales	25.1		%	25.0		%	10		bps	27.9		%	26.1		%	180	bps

Net sales in ~~Europe decreased 7.0%~~Latin America in the first quarter of 2020 were $889, even with the first quarter of 2019, ~~to $602,~~ as volume growth of ~~1.5% was more than offset by~~4.0% and net selling price ~~decreases~~increases of ~~1.0% and~~6.5% were offset by negative foreign exchange of ~~7.5%~~10.5%. ~~Volume gains were led by the United Kingdom and the Nordic region.~~ Organic sales in ~~Europe~~Latin America increased ~~0.5%~~10.5% in the first quarter of ~~2019.~~2020. Organic sales growth was led by Argentina, Brazil and Mexico.

The increase in organic sales in ~~Europe~~Latin America in the first quarter of ~~2019~~2020 versus the first quarter of ~~2018~~2019 was ~~primarily~~ due to ~~an increase~~increases in Oral Care, ~~organic sales partially offset by a decrease in~~ Personal Care and Home Care organic sales. The increase in Oral Care was primarily due to organic sales growth in the toothpaste, ~~category.~~manual toothbrush and mouthwash categories. The ~~decrease~~increase in Personal Care was primarily due to ~~a decline in~~ organic sales growth in the ~~underarm protection,~~ bar soap and underarm protection categories. The increase in Home Care was primarily due to organic sales growth in the liquid cleaner and hand ~~soap~~dish categories.

COLGATE-PALMOLIVE COMPANY

Management’s Discussion and Analysis of Financial

Condition and Results of Operations

(Dollars in Millions Except Per Share Amounts)

Operating profit in ~~Europe decreased~~Latin America increased 7% in the first quarter of ~~2019~~2020 to ~~$151 and increased 10~~$248, or 180 bps to ~~25.1%~~27.9% of Net sales. This increase in Operating profit as a percentage of Net sales was primarily due to an increase in Gross profit ~~(50~~(140 bps) 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 (200 bps), partially offset by higher raw and packaging material costs (240 bps), which included foreign exchange transaction costs.

Europe



	Three Months Ended March 31,
	2020			2019			Change
Net sales	$	675		$	602		12		%
Operating profit	$	154		$	151		2		%
% of Net sales	22.8		%	25.1		%	(230	)	bps

Net sales in Europe increased 12.0% in the first quarter of 2020 to $675, as volume growth of 16.5% was partially offset by net selling price decreases of 1.5% and negative foreign exchange of 3.0%. The Company's acquisition of the Filorga skin health business contributed 8.5% to volume in Europe. Organic sales in Europe increased 6.5% in the first quarter of 2020. Organic sales growth was led by the United Kingdom and Germany.

The increase in organic sales in Europe in the first quarter of 2020 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, partially offset by declines in organic sales in the prescription dental and battery-powered toothbrush categories. The increase in Personal Care was primarily due to an increase in organic sales in the liquid hand soap, body wash and bar soap categories. The increase in Home Care was primarily due to organic sales growth in the spray and liquid cleaners, household bleach and hand dish categories.

Operating profit in Europe increased 2% in the first quarter of 2020 to $154, while as a percentage of Net sales it decreased 230 bps to 22.8%. This decrease in Operating profit as a percentage of Net Sales was due to increases in Selling, general and administrative expenses (230 bps) and Other (income) expense, net (130 bps), partially offset by an increase in Gross profit (130 bps), all as a percentage of Net sales. This increase in Gross profit was primarily due to favorable mix (140 bps) and cost savings from the Company’s funding-the-growth initiatives (110 bps), partially offset by higher raw and packaging material costs (60 bps), which included foreign exchange transaction costs, and lower pricing. This increase in Selling, general and administrative expenses was due to higher overhead expenses (170 bps) and increased advertising investment (60 bps). This increase in Other (income) expense, net was due to the incremental amortization expense related to the Filorga acquisition (130 bps).

Asia Pacific



	Three Months Ended March 31,
	2020			2019			Change
Net sales	$	633		$	700		(9.5	)	%
Operating profit	$	161		$	189		(15	)	%
% of Net sales	25.4		%	27.0		%	(160	)	bps

Net sales in Asia Pacific decreased 9.5% in the first quarter of 2020 to $633, as volume declines of 8.5% and negative foreign exchange of 2.0% were partially offset by net selling price increases of 1.0%. Organic sales in Asia Pacific decreased 7.5% in the first quarter of 2020. Organic sales declines in the Greater China region and India were partially offset by organic sales growth in Australia.

The decrease in organic sales in Asia Pacific in the first quarter of 2020 was primarily due to a decrease in Oral Care organic sales. The decrease in Oral Care was primarily due to declines in organic sales in the toothpaste and manual toothbrush categories.

COLGATE-PALMOLIVE COMPANY

Management’s Discussion and Analysis of Financial

Condition and Results of Operations

(Dollars in Millions Except Per Share Amounts)

Operating profit in Asia Pacific decreased 15% in the first quarter of 2020 to $161, or 160 bps to 25.4% of Net Sales. This decrease in Operating profit as a percentage of Net sales was primarily due to an increase in Selling, general and administrative expenses (180 bps), partially offset by an increase in Gross profit (10 bps), both as a percentage of Net sales. This increase in Gross profit was primarily due to cost savings from the Company’s funding-the-growth initiatives (180 bps), partially offset by higher raw and packaging material costs (150 bps), which included foreign exchange transaction costs. This increase in Selling, general and administrative expenses was due to higher overhead expenses (140 bps), primarily driven by higher logistics costs, and increased advertising investment (40 bps).

Africa/Eurasia



	Three Months Ended March 31,
	2020			2019			Change
Net sales	$	252		$	240		5.0	%
Operating profit	$	56		$	46		22	%
% of Net sales	22.2		%	19.2		%	300	bps

Net sales in Africa/Eurasia increased 5.0% in the first quarter of 2020 to $252, as volume growth of 10.0% was partially offset by net selling price decreases of 0.5% and negative foreign exchange of 4.5%. The Company’s acquisition of a 51% controlling interest in Colgate Tolaram Pte. Ltd., a joint venture which owns the Nigeria-based Hypo Homecare Products Limited (the “Nigeria Joint Venture”), contributed 1.5% to volume in Africa/Eurasia. Organic sales in Africa/Eurasia increased 8.0% in the first quarter of 2020. Organic sales growth was led by Turkey and Russia.

The increase in organic sales in Africa/Eurasia in the first quarter of 2020 versus the first quarter of 2019 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 and manual toothbrush categories. The increase in Personal Care was primarily due to organic sales growth in the bar soap and body wash categories.

Operating profit in Africa/Eurasia increased 22% in the first quarter of 2020 to $56, or 300 bps to 22.2% of Net sales. This increase in Operating profit as a percentage of Net sales was primarily due to an increase in Gross profit (270 bps) and a decrease in Selling, general and administrative expenses (40 bps), both as a percentage of Net sales. This increase in Gross profit was primarily due to cost savings from the Company’s funding-the-growth initiatives ~~(80~~(230 bps) and lower raw and packaging material costs (40 bps). This decrease in Selling, general and administrative expenses was due to lower overhead expenses (230 bps), partially offset by increased advertising investment (190 bps).

Hill’s Pet Nutrition



	Three Months Ended March 31,
	2020			2019			Change
Net sales	$	719		$	600		20.0	%
Operating profit	$	203		$	164		24	%
% of Net sales	28.2		%	27.3		%	90	bps

Net sales for Hill’s Pet Nutrition increased 20.0% in the first quarter of 2020 to $719, as volume growth of 17.0% and net selling price increases of 4.0% were partially offset by negative foreign exchange of 1.0%. Organic sales in Hill’s Pet Nutrition increased 21.0% in the first quarter of 2020. Organic sales growth was led by the United States and Europe.

The increase in organic sales in the first quarter of 2020 versus the first quarter of 2019 was primarily due to increases in organic sales in the Prescription Diet and Science Diet categories.

COLGATE-PALMOLIVE COMPANY

Management’s Discussion and Analysis of Financial

Condition and Results of Operations

(Dollars in Millions Except Per Share Amounts)

Operating profit in Hill’s Pet Nutrition increased 24% in the first quarter of 2020 to $203, or 90 bps to 28.2% of Net sales. This increase in Operating profit as a percentage of Net sales was primarily due to an increase in Gross profit (120 bps), partially offset by an increase in Selling, general and administrative expenses (50 bps), both as a percentage of Net sales. This increase in Gross profit was primarily due to cost savings from the Company’s funding-the-growth initiatives (130 bps) and higher pricing, partially offset by higher raw and packaging material costs ~~(70~~(170 bps). This increase in Selling, general and administrative expenses was due to increased advertising investment ~~(80~~(210 bps), partially offset by lower overhead expenses ~~(40~~(160 bps).

~~Asia Pacific~~

Three Months Ended March 31,
2019 2018 Change
Net sales $ 700
$ 759
(8.0 ) %
Operating profit $ 189
$ 226
(16 ) %
% of Net sales 27.0 % 29.8 % (280 ) bps

Net sales in Asia Pacific decreased 8.0% in the first quarter of 2019 to $700, due to volume declines of 2.5% and negative foreign exchange of 5.5%, while net selling prices were flat. Volume declines in the Greater China region were partially offset by volume gains in India, Australia, Thailand and the Philippines. Organic sales in Asia Pacific in the first quarter of 2019 decreased 2.5%.

The decrease in organic sales in Asia Pacific in the first quarter of 2019 was due to a decrease in Oral Care organic sales. The decrease in Oral Care was due to declines in organic sales in the toothpaste and manual toothbrush categories.

~~COLGATE-PALMOLIVE COMPANY~~

~~Management~~’~~s Discussion and Analysis of Financial~~

~~Condition and Results of Operations~~

~~(Dollars in Millions Except Per Share Amounts)~~

Operating profit in Asia Pacific decreased 16% in the first quarter of 2019 to $189, or 280 bps to 27.0% of Net sales. This decrease in Operating profit as a percentage of Net sales was primarily due to a decrease in Gross profit (130 bps) and an increase in Selling, general and administrative expenses (140 bps), both as a percentage of Net sales. This decrease in Gross profit was primarily due to higher raw and packaging material costs (340 bps), which included foreign exchange transaction costs, partially offset by cost savings from the Company’s funding-the-growth initiatives (190 bps). This increase in Selling, general and administrative expenses was due to increased advertising investment (110 bps) and higher overhead expenses (30 bps), driven by higher logistics costs.

~~Africa/Eurasia~~

Three Months Ended March 31,
2019 2018 Change
Net sales $ 240
$ 255
(6.0 ) %
Operating profit $ 46
$ 50
(8 ) %
% of Net sales 19.2 % 19.6 % (40 ) bps

Net sales in Africa/Eurasia decreased 6.0% in the first quarter of 2019 to $240, as net selling price increases of 7.0% were more than offset by negative foreign exchange of 13.0%, while volume was flat. Volume gains in Russia and the Gulf States were offset by volume declines in South Africa and Saudi Arabia. Organic sales in Africa/Eurasia increased 7.0% in the first quarter of 2019.

The increase in organic sales in Africa/Eurasia in the first quarter of 2019 versus the first quarter of 2018 was primarily due to an increase in Oral Care organic sales. The increase in Oral Care was primarily due to organic sales growth in the toothpaste and manual toothbrush categories.

Operating profit in Africa/Eurasia decreased 8% in the first quarter of 2019 to $46, or 40 bps to 19.2% of Net sales. This decrease in Operating profit as a percentage of Net sales was primarily due to a decrease in Gross profit (130 bps), partially offset by a decrease in Selling, general and administrative expenses (80 bps), both as a percentage of Net sales. This decrease in Gross profit was primarily due to higher raw and packaging material costs (560 bps), which included foreign exchange transaction costs, partially offset by cost savings from the Company’s funding-the-growth initiatives (170 bps) and higher pricing. This decrease in Selling, general and administrative expenses was due to lower overhead expenses (190 bps), partially offset by increased advertising investment (110 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 March 31,
2019 2018 Change
Net sales $ 600
$ 584
3.0
%
Operating profit $ 164
$ 164
—
%
% of Net sales 27.3 % 28.1 % (80 ) bps

Net sales for Hill’s Pet Nutrition increased 3.0% in the first quarter of 2019 to $600, as volume growth of 2.0% and net selling price increases of 4.0% were partially offset by negative foreign exchange of 3.0%. Volume gains in the United States and Western Europe were partially offset by volume declines in South Africa and Russia. Organic sales in Hill’s Pet Nutrition increased 6.0% in the first quarter of 2019.

The increase in organic sales in the first quarter of 2019 versus the first quarter of 2018 was due to increases in organic sales in the Prescription Diet and Advanced Nutrition categories, partially offset by decline in organic sales in the Naturals category.

Operating profit in Hill’s Pet Nutrition was $164 in the first quarter of 2019, even with the first quarter of 2018, while as a percentage of Net sales it decreased 80 bps to 27.3%. This decrease in Operating profit as a percentage of Net sales was due to a decrease in Gross profit (10 bps) and an increase in Selling, general and administrative expenses (80 bps), both as a percentage of Net sales. This decrease in Gross profit was primarily due to higher raw and packaging material costs (260 bps), partially offset by cost savings from the Company’s funding-the-growth initiatives (170 bps) and higher pricing. This increase in Selling, general and administrative expenses was due to increased advertising investment (200 bps), partially offset by lower overhead expenses (120 bps).

During the quarter ended March 31, 2019, Hill’s announced a voluntary recall, which was subsequently expanded, of select canned dog food products due to potentially elevated levels of Vitamin D resulting from a supplier error. In the United States, the voluntary recall was conducted in cooperation with the U.S. Food and Drug Administration. Following the announcement of the voluntary recall, and as of March 31, ~~2019,~~2020, Hill’s and/or the Company have been named as defendants in 1837 putative class action lawsuits, one putative class action filed on behalf of a European Union class and one individual action, all related to the voluntary recall and filed in various jurisdictions in the United ~~States~~States. In addition, two putative class actions related to the voluntary recall ~~two~~have been filed in Canada. Eight of ~~which were~~the putative class actions lawsuits in the United States and one of the putative class action lawsuits in Canada have been voluntarily dismissed. Hill’s is entitled to indemnification from the supplier related to the voluntary recall. Sales of products voluntarily recalled represent less than 2% of Hill’s annual Net sales. The sales loss and other costs associated with the voluntary recall and subsequent expansion did not have a material impact on the Company’s Net sales or Operating profit ~~for the quarter ended March 31, 2019 and~~ are not expected to have a material impact in future periods.

Corporate

Three Months Ended March 31,
2019 2018 Change
Operating profit (loss) $ (152 ) $ (149 ) 2 %



	Three Months Ended March 31,
	2020			2019			Change
Operating profit (loss)	$	(128	)	$	(152	)	(16	)	%

Operating profit (loss) related to Corporate was ($128) in the first quarter of 2020 as compared to ($152) in the first quarter of ~~2019 as compared to ($149) in~~2019. In the first quarter of ~~2018.~~2020, Corporate Operating profit (loss) included acquisition-related costs of $6. In the first quarter of 2019, Corporate Operating profit (loss) included charges of $28 resulting from the Global Growth and Efficiency ~~Program. In the first quarter of 2018, Corporate Operating profit (loss) included charges of $24 resulting from the Global Growth and Efficiency Program.~~Program, which concluded on December 31, 2019.

COLGATE-PALMOLIVE COMPANY

Management’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 was expanded in 2014 and expanded and extended in each of 2015 and 2017. The program runs through December 31, 2019.

Initiatives under the Global Growth and Efficiency Program are expected to help the Company ensure sustained solid worldwide growth in unit volume, organic sales, operating profit and earnings per share and to enhance its global leadership positions in its core businesses, producing 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.~~


▪	~~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.~~

~~The initiatives under the Global Growth and Efficiency Program continue 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 order 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.

Implementation of the Global Growth and Efficiency Program remains on track and is in its final year. Savings, substantially all of which are expected to increase future cash flows, are projected to be in the range of $590 to $635 pretax ($550 to $575 aftertax) annually, once all projects are approved and implemented. The Company expects savings in 2019 to be approximately $25 to $55 pretax ($40 to $60 aftertax).

~~COLGATE-PALMOLIVE COMPANY~~

~~Management~~’~~s Discussion and Analysis of Financial~~

~~Condition and Results of Operations~~

~~(Dollars in Millions Except Per Share Amounts)~~

~~For the three months ended March 31, 2019 and 2018, restructuring and related implementation charges are reflected in the Condensed Consolidated Statements of Income as follows:~~

Restructuring and related implementation charges in the preceding table are 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 Program-to-date
March 31, Accumulated Charges
2019 2018
North America 8 % 37 % 18 %
Latin America 40 % 12 % 5 %
Europe 8 % 2 % 19 %
Asia Pacific 6 % 18 % 4 %
Africa/Eurasia — % 2 % 6 %
Hill’s Pet Nutrition
12 % 19 % 8 %
Corporate 26 % 10 % 40 %
Total 100 % 100 % 100 %

~~COLGATE-PALMOLIVE COMPANY~~

~~Management~~’~~s Discussion and Analysis of Financial~~

~~Condition and Results of Operations~~

~~(Dollars in Millions Except Per Share Amounts)~~

Cumulative Charges
as of March 31, 2019
Employee-Related Costs $ 691
Incremental Depreciation 97
Asset Impairments 58
Other 905
Total $ 1,751

~~The following table summarizes the activity for the restructuring and related implementation charges discussed above and the related accruals:~~

~~COLGATE-PALMOLIVE COMPANY~~

~~Management~~’~~s Discussion and Analysis of Financial~~

~~Condition and Results of Operations~~

~~(Dollars in Millions Except Per Share Amounts)~~

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 months ended March 31, 2019 include third-party incremental costs related to the development and implementation of new business and strategic initiatives of $5 and contract termination costs and charges resulting directly from exit activities of $3. These charges were expensed as incurred.

~~COLGATE-PALMOLIVE COMPANY~~

~~Management~~’~~s Discussion and Analysis of Financial~~

~~Condition and Results of Operations~~

~~(Dollars in Millions Except Per Share Amounts)~~

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, as applicable. A reconciliation of organic sales growth to Net sales growth for the three months ended March 31, ~~2019~~2020 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, as applicable, the charges resulting from the Global Growth and Efficiency ~~Program.~~Program, acquisition-related costs and a benefit related to a recent reorganization of the ownership structure of certain foreign subsidiaries and a new operating structure being implemented within one of the Company's divisions. 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, gains and losses from certain acquisition, divestitures and certain 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 months ended March 31, ~~2019~~2020 and ~~2018~~2019 is presented within the applicable section of Results of Operations.

The following table provides a quantitative reconciliation of Net sales growth to organic sales growth for the three months ended March 31, ~~2019~~2020:


Three Months Ended March 31, 2019	Net Sales Growth (GAAP)	Foreign Exchange Impact	Acquisitions and Divestments Impact	Organic Sales Growth (Non-GAAP)
Three Months Ended March 31, 2020					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%	(0.5)%	—%	3.5%	9.0%	(0.5)%	1.5%	8.0%
Latin America	(4.5)%	(10.5)%	—%	6.0%	—%	(10.5)%	—%	10.5%
Europe	(7.0)%	(7.5)%	—%	0.5%	12.0%	(3.0)%	8.5%	6.5%
Asia Pacific	(8.0)%	(5.5)%	—%	(2.5)%	(9.5)%	(2.0)%	—%	(7.5)%
Africa/Eurasia	(6.0)%	(13.0)%	—%	7.0%	5.0%	(4.5)%	1.5%	8.0%
Total Oral, Personal and Home Care	(4.0)%	(6.5)%	—%	2.5%	3.0%	(4.0)%	2.0%	5.0%
Pet Nutrition	3.0%	(3.0)%	—%	6.0%	20.0%	(1.0)%	—%	21.0%
Total Company	(3.0)%	(6.0)%	—%	3.0%	5.5%	(3.5)%	1.5%	7.5%

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 Growth and Efficiency Program~~ and stock repurchases). 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 2%~~increased 27% to ~~$605~~$768 in the first three months of ~~2019,~~2020, compared with ~~$616~~$605 in the comparable period of ~~2018,~~2019, primarily due to ~~lower~~higher net income, ~~and higher~~lower voluntary contributions to the Company’s pension plans ~~partially offset by the change in~~and lower income tax payments. The Company continues to be tightly focused on working capital. The Company’s working capital was ~~(3.9%~~(3.6%) as a percentage of Net sales in the first three months of ~~2019~~2020 as compared to ~~(2.7%~~(3.9%) in the first three months of ~~2018. This change in working capital as a percent of sales is primarily due to the Company’s adoption of the new lease accounting standard effective January, 1,~~ 2019. ~~See Note 13, Leases for additional information.~~ 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 continues to be tightly focused on working capital.~~

Implementation of the Global Growth and Efficiency Program remains on track and is in its final year. Including the most recent expansion, total program charges resulting from the Global Growth and Efficiency Program are estimated to be in the range of $1,820 to $1,870 ($1,350 to $1,380 aftertax). Approximately 75% 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 projected to be in the range of $590 to $635 pretax ($550 to $575 aftertax) annually, once all projects are approved and implemented.

The Company anticipates that pretax charges for 2019 will approximate $100 to $150 ($70 to $100 aftertax). The Company expects savings in 2019 to amount to approximately $25 to $55 pretax ($40 to $60 aftertax). It is anticipated that cash requirements for the Global Growth and Efficiency Program will be funded from operating cash flows. Approximately 80% of the restructuring accrual at March 31, 2019 is expected to be paid in the next twelve months.

Investing activities used ~~$98~~$459 of cash in the first three months of ~~2019,~~2020, compared with ~~$881~~$98 in the comparable period of ~~2018. Investing~~2019. As more fully described below, investing activities in 2018 includes the Company’s acquisition of the outstanding equity interests of Physicians Care Alliance, LLC and Elta MD Holdings, Inc., professional skin care businesses, for aggregate cash consideration of approximately $730. Capital spending was $71 in the first three months of 2020 include the Company’s acquisition of Hello Products LLC.

On September 19, 2019, the Company acquired Filorga for cash consideration of €1,516 (approximately $1,674) plus additional consideration of €32 (approximately $38), the majority of which related to repayment of loans from former shareholders of Filorga. On August 15, 2019, the Company acquired a 51% controlling interest in the Nigeria Joint Venture for $31. On January 31, 2020, the Company acquired Hello Products LLC for cash consideration of $351.

These acquisitions were financed with a combination of debt and cash. As a result of the incremental debt related to these acquisitions, the Company moderated its share repurchases in the first quarter of 2020 and will continue to do so into 2021 in order to reduce debt levels.

Capital spending was $82 in the first three months of 2020 compared to ~~$118~~$71 in the comparable period of ~~2018.~~2019. Capital expenditures for ~~2019~~2020 are expected to be approximately ~~2.3%~~2.5% to ~~2.6%~~3.0% of Net sales. The Company continues to focus its capital spending on projects that are expected to yield high aftertax returns.

Financing activities used ~~$392~~$308 of cash during the first three months of ~~2019,~~2020, compared with ~~$437~~$392 used in the comparable period of ~~2018,~~2019, primarily reflecting higher ~~net~~ proceeds ~~on debt~~from the exercise of stock options in the first three months of ~~2019~~2020 compared towith the ~~first three months~~comparable period of ~~2018.~~2019.

Long-term debt, including the current portion, increased to ~~$6,656~~$7,591 as of March 31, ~~2019~~2020 as compared to ~~$6,354~~$7,587 as of December 31, ~~2018,~~2019 and total debt ~~increased to $6,661~~was $7,846 as of March 31, ~~2019~~2020 as compared to ~~$6,366~~$7,847 as of December 31, ~~2018 primarily due to higher debt, partially offset by lower outstanding commercial paper.~~2019. During the first quarter of 2019, the Company issued €500 of seven-year notes at a fixed coupon rate of ~~0.50%~~0.500% and €500 of fifteen-year notes at a fixed coupon rate of 1.375%. The debt issuances were under the Company’s shelf registration statement. The debt issuances support the Company’s capital structure objectives of funding its business and growth initiatives while minimizing its risk-adjusted cost of capital. Proceeds from the debt issuances were used for general corporate purposes, which ~~includes~~included the retirement of commercial paper and the repayment of the Company’s $500 1.75% fixed rate notes, which became due in March 2019, and €500 floating rate notes, which ~~become~~became due May 2019.

COLGATE-PALMOLIVE COMPANY

Management’s Discussion and Analysis of Financial

Condition and Results of Operations

(Dollars in Millions Except Per Share Amounts)

Domestic and foreign commercial paper outstanding was ~~$216~~$858 and ~~$156~~$216 as of March 31, ~~2019~~2020 and ~~2018,~~2019, respectively. The average daily balances outstanding for commercial paper in the first three months of 2020 and 2019 were $1,694 and ~~2018 were~~ $1,548, ~~and $1,936,~~ 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 ~~line~~unused lines of credit of approximately $4,500 (including under the facilities discussed below) or by issuing medium-term notes pursuant to an effective shelf registration statement. In November 2018, the Company entered into an amended and restated $2,650 revolving credit facility with a syndicate of banks that was scheduled to expire in November 2023. In August 2019, the term of the facility was extended by one year and it now expires in November ~~2023.~~2024. In August 2019, the Company entered into a $1,500 364-day credit facility with a syndicate of banks that is scheduled to expire in August 2020. Commitment fees related to the credit facilities are 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. Refer to Note 6, Long term Debt and Credit Facilities, on the Company’s Annual ~~report~~Report on Form 10-K for the year ended December 31, ~~2018~~2019 for further information about the Company’s long-term debt and credit facilities.

In the first quarter of ~~2019,~~2020, the Company increased the ~~annualized~~quarterly common stock dividend to ~~$1.72~~$0.44 per share from ~~$1.68~~$0.43 per share previously, effective in the second quarter of ~~2019.~~2020.

Cash and cash equivalents ~~increased $117~~decreased $29 during the first three months of ~~2019~~2020 to ~~$843~~$854 at March 31, ~~2019,~~2020, compared to ~~$726~~$883 at December 31, ~~2018,~~2019, most of which ($~~782~~794 and ~~$651,~~$798, respectively) were held by the Company’s foreign subsidiaries.

During the quarter ended March 31, 2020, COVID-19 did not have a significant impact on the Company’s access to global credit and capital markets needed to maintain sufficient liquidity for its continued operating and cash needs. For more information regarding the anticipated impact of COVID-19, see “Executive Overview” and “Risk Factors” in Part II, Item 1A of this Quarterly Report and in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

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, ~~2018.~~2019.

COLGATE-PALMOLIVE COMPANY

Management’s Discussion and Analysis of Financial

Condition and Results of Operations

(Dollars in Millions Except Per Share Amounts)

Goodwill and Indefinite-Lived Intangible Assets

As a result of the COVID-19 pandemic, the Company assessed whether a “triggering event” had occurred indicating a possible impairment of its goodwill and indefinite life intangible assets. As a result of this assessment, the Company determined that a “triggering event” had occurred relative to its recently acquired Filorga skin health business and, as required, performed a quantitative analysis, with the assistance of a third-party valuation firm, of the value of the Filorga reporting unit and its indefinite-life intangible assets. Based on the analysis, the Company determined that the fair value of the Filorga reporting unit and the related indefinite life intangible assets continue to exceed their carrying values and were not impaired as of March 31, 2020.

Determining the fair value of the Filorga reporting unit and indefinite-lived intangible assets requires significant judgment and estimates by management regarding several key inputs, including future cash flows consistent with management’s strategic plans, sales growth rates and the selection of royalty rates and a discount rate, amongst others. Estimating sales growth rates requires significant judgment by management in areas such as future economic conditions, category and industry growth rates, product pricing, consumer tastes and preferences and future expansion expectations. Given the inherent uncertainties in estimating the future impacts of the COVID-19 pandemic on global macroeconomic conditions and interest rates in general and on the Filorga business in particular, actual results may differ from management’s current estimates and could have an adverse impact on one or more of the assumptions used in our quantitative models related to the Filorga reporting unit, resulting in potential impairment charges in subsequent periods. As of March 31, 2020, the fair value of the Filorga reporting unit exceeded its carrying value by 10%. A reduction in the long-term growth rate of 50 basis points or an increase in the discount rate of 25 basis points would result in a reduction of the fair value of the Filorga reporting unit of approximating 5%. Given the recent acquisition of Filorga, where there is inherently a lower surplus of fair value over carrying value, management will continue to assess triggering events that may necessitate additional qualitative or quantitative analyses of our reporting units and indefinite-lived intangible assets 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. The Company believes that the third-party vendors it uses to provide data are reliable, but it has not verified the accuracy or completeness of the data or any assumptions underlying the data. In addition, market share information reported by the Company may be different from market share information reported 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 contain forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995 or by the SEC in its rules, regulations and 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, earnings per share growth, financial goals, the impact of foreign exchange, ~~volatility,~~the impact of COVID-19, cost-reduction plans, ~~including the Global Growth and Efficiency Program,~~ tax rates, ~~U.S. tax reform,~~ new product introductions, 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 economic and political environment in different countries and its effect on consumer spending habits, ~~increased competition and evolving competitive practices,~~ foreign currency rate fluctuations, exchange controls, tariffs, 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, disruptions in global supply chain, the availability and cost of raw and packaging materials, 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 new sales channels, the growth of eCommerce and the changing retail landscape (as consumers increasingly shop online), the ability to ~~lower~~develop innovative new 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 achieve our sustainability 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 the uncertainty of the outcome of legal proceedings, whether or not the Company believes they have merit. 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, ~~2018~~2019, this Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 and subsequent Quarterly Reports on Form 10-Q).

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, ~~2018.~~2019.

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 ~~the~~ 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 March 31, ~~2019~~2020 (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 Over Financial Reporting

~~There~~The Company is in the process of upgrading its enterprise IT system to SAP S/4 HANA. This change 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.

COLGATE-PALMOLIVE COMPANY

PART II.OTHER INFORMATION

Item 1.Legal Proceedings

For information regarding legal matters, please refer to Note ~~10,~~11, 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~~With the exception of the change in risk factors discussed below, there have been no material changes from the risk factors disclosed in Part 1, Item 1A. Risk Factors of the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2018.~~2019.

We face various risks related to pandemics, epidemics or similar widespread public health concerns, which may have a material adverse effect on our business, results of operations, cash flows and financial condition.

We face various risks related to pandemics, epidemics or similar widespread public health concerns, including the novel coronavirus pandemic (“COVID-19”). A pandemic, epidemic or similar widespread health concern could have, and COVID-19 has had and may continue to have, a variety of impacts on our business, results of operations, cash flows and financial condition, including:

Our ability to continue to maintain and support the health and safety of our employees, including key employees;

Volatility in the demand for and availability of our products, which may be caused by the temporary inability of our consumers to purchase our products due to illness, financial hardship, quarantine, government actions mandating the closure of our distributors or retailers or imposing travel or movement restrictions, shifts in demand away from more discretionary or higher priced products to lower priced products, or pantry-loading activity;

Changes in purchasing patterns of our consumers, including the frequency of visits by consumers to retail locations and a shift to purchasing our products online from eCommerce retailers;

Inability to meet our customers' needs and achieve our cost targets due to temporary or long-term disruptions in the manufacture, sourcing and distribution of our products or materials despite our business continuity and contingency plans in place for key manufacturing sites and the supply of raw and packaging materials;

Failure of third parties on which we rely, including our suppliers, contract manufacturers, customers, commercial banks, joint venture partners and external business partners, to meet their obligations to us, or significant disruptions in their ability to do so, which may be caused by their own financial or operational difficulties;

Significant changes in the economic and political conditions of the markets in which we operate, which could restrict and have restricted our employees’ ability to work and travel, could mandate and have mandated or caused the closure of certain distributors or retailers, our offices, shared business service centers and/or operating and manufacturing facilities or otherwise could prevent and have prevented us as well as our third-party partners, suppliers or customers from sufficiently staffing operations, including operations necessary for the manufacture, distribution, sale and support of our products; and/or

Disruptions and volatility in the global capital markets, which may increase the cost of capital and adversely impact our access to capital, and currency and commodity prices.

Despite our efforts to manage these impacts, their ultimate impact also depends on factors beyond our knowledge or control, including the duration, severity and geographic scope of an outbreak, including COVID-19, and the actions taken to contain its spread and mitigate its public health and economic effects.

COLGATE-PALMOLIVE COMPANY

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

On June 18, 2018, 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 “2018 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 March 31, ~~2019:~~2020:

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)
January 1 through 31, 2019 1,388,756
$ 61.78
1,333,935
$ 4,344
February 1 through 28, 2019 2,161,743
$ 65.96
2,001,000
$ 4,212
March 1 through 31, 2019 2,547,228
$ 66.08
2,500,378
$ 4,047
Total 6,097,727
$ 65.06
5,835,313



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)
January 1 through 31, 2020	797,787	$	69.81	762,303	$	3,229
February 1 through 29, 2020	1,294,084	$	74.52	1,183,595	$	3,141
March 1 through 31, 2020	1,031,036	$	67.36	993,383	$	3,074
Total	3,122,907	$	70.95	2,939,281

⁽¹⁾Includes share repurchases under the 2018 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 ~~262,414~~183,626 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 March 31, ~~2019.~~2020.

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



Exhibit No.		Description
1010-A		Form of Performance Stock Unit Award Agreement for the ~~2019-2021~~2020-2022 Performance ~~Cycle (Registrant hereby incorporates by reference Exhibit 99 to its Current Report on Form 8-K filed on March 20, 2019, File No. 1-644.)~~Cycle.* **

31-A		Certificate of the Chairman of the Board, President and Chief Executive Officer of Colgate-Palmolive Company pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934. **

31-B		Certificate of the Chief Financial Officer of Colgate-Palmolive Company pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.**

32		Certificate of the Chairman of the Board, President and Chief Executive Officer and the Chief Financial Officer of Colgate-Palmolive Company pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. § 1350.***

101		The following materials from Colgate-Palmolive Company’s Quarterly Report on Form 10-Q for the period ended March 31, ~~2019,~~2020, 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 (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 or arrangement.


**	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:

~~April 26, 2019~~May 1, 2020	/s/ Noel R. Wallace
	Noel R. Wallace
	Chairman of the Board, President and Chief Executive Officer

	Principal Financial Officer:

~~April 26, 2019~~May 1, 2020	/s/ Henning I. Jakobsen
	Henning I. Jakobsen
	Chief Financial Officer

	Principal Accounting Officer:

~~April 26, 2019~~May 1, 2020	/s/ Philip G. Shotts
	Philip G. Shotts
	Vice President and Controller

4746



	March 31, 2019			December 31, 2018
Assets
Current Assets
Cash and cash equivalents	$	843		$	726
Receivables (net of allowances of $84 and $82, respectively)	1,547			1,400
Inventories	1,278			1,250
Other current assets	465			417
Total current assets	4,133			3,793
Property, plant and equipment:
Cost	8,398			8,336
Less: Accumulated depreciation	(4,577		)	(4,455		)
	3,821			3,881
Goodwill	2,517			2,530
Other intangible assets, net	1,612			1,637
Deferred income taxes	164			152
Other assets	636			168
Total assets	$	12,883		$	12,161
Liabilities and Shareholders’ Equity
Current Liabilities
Notes and loans payable	$	5		$	12
Current portion of long-term debt	1			—
Accounts payable	1,215			1,222
Accrued income taxes	400			411
Other accruals	2,244			1,696
Total current liabilities	3,865			3,341
Long-term debt	6,655			6,354
Deferred income taxes	306			235
Other liabilities	2,267			2,034
Total liabilities	13,093			11,964
Shareholders’ Equity
Common stock	1,466			1,466
Additional paid-in capital	2,241			2,204
Retained earnings	21,436			21,615
Accumulated other comprehensive income (loss)	(4,160		)	(4,188		)
Unearned compensation	(3		)	(3		)
Treasury stock, at cost	(21,532		)	(21,196		)
Total Colgate-Palmolive Company shareholders’ equity	(552		)	(102		)
Noncontrolling interests	342			299
Total equity	(210		)	197
Total liabilities and equity	$	12,883		$	12,161



	Three Months Ended				Program-to-date
	March 31,				Accumulated Charges
	2019		2018
North America	8	%	37	%	18	%
Latin America	40	%	12	%	5	%
Europe	8	%	2	%	19	%
Asia Pacific	6	%	18	%	4	%
Africa/Eurasia	—	%	2	%	6	%
Hill’s Pet Nutrition	12	%	19	%	8	%
Corporate	26	%	10	%	40	%
Total	100	%	100	%	100	%



	Cumulative Charges
	as of March 31, 2019
Employee-Related Costs	$	691
Incremental Depreciation	97
Asset Impairments	58
Other	905
Total	$	1,751



	Three Months Ended
	March 31, 2019					March 31, 2018
	Net income attributable to Colgate-Palmolive Company		Shares (millions)	Per Share		Net income attributable to Colgate-Palmolive Company		Shares (millions)	Per Share
Basic EPS	$	560	862.0	$	0.65	$	634	875.4	$	0.72
Stock options and restricted stock units			1.2					4.5
Diluted EPS	$	560	863.2	$	0.65	$	634	879.9	$	0.72



	March 31, 2019		December 31, 2018
Long-term debt:
Carrying amount of hedged item	$	394	$	888
Cumulative hedging adjustment included in the carrying amount	4		10



Years Ending December 31,	As of March 31, 2019				As of December 31, 2018
2019	$	137		*	$	193
2020	154				165
2021	119				123
2022	97				102
2023	45				51
Thereafter	21				32
Total lease commitments	$	573			$	666
Less: Interest	(43		)
Present value of lease liabilities	$	530



Operating lease cost	$	45
Short-term lease cost	2
Variable lease cost	10
Sublease income	—
Total lease cost	$	57

300 Park Avenue ~~New York,~~

(Address of principal executive offices)

(Zip Code)