Investing For Global Growth
Winning With Focus
Colgate-Palmolive Company n 2017 Annual Report
30693 CPAR17_FINAL_021518 cc18.indd 1
3/15/18 1:19 PM
Financial Highlights
(Dollars in Millions Except Per Share Amounts)
2017
2016
Change
Worldwide Net Sales
Organic Sales Growth
Gross Profit Margin
Operating Profit
Operating Profit Margin
Net Income Attributable to Colgate-Palmolive Company (1)
Diluted Earnings Per Share (1)
Dividends Paid Per Share
Operating Cash Flow
Year-end Stock Price
$15,454
$ 15,195
60.0%
$ 3,589
23.2%
$ 2,024
$ 2.28
$ 1.59
$ 3,054
$ 75.45
60.0%
$ 3,837
25.3%
$ 2,441
$ 2.72
$ 1.55
$ 3,141
$ 65.44
+1.5%
+1.0%
–
-6%
-210 basis points
-17%
-16%
+3%
-3%
+15%
20% North America
25% Latin America
(1) Net income attributable to Colgate-Palmolive Company and diluted earnings per share in 2017 include charges related to the Global Growth and Efficiency
Program and a provisional charge related to U.S. tax reform. Net income attributable to Colgate-Palmolive Company and diluted earnings per share in 2016
include a gain from the sale of land in Mexico, charges related to the Global Growth and Efficiency Program and certain other items.
18% Asia Pacific
16% Europe
2017 NET SALES BY GEOGRAPHIC REGION
2017 NET SALES BY MARKET MATURITY
6% Africa/Eurasia
15% Hill’s Pet Nutrition
20% North America
25% Latin America
16% Europe
18% Asia Pacific
6% Africa/Eurasia
15% Hill’s Pet Nutrition
50% Developed Markets
50% Emerging Markets
NET SALES
($ billions)
17.4
17.3
16.0
15.5
15.2
GROSS PROFIT MARGIN
(1)
DILUTED EARNINGS
(2)
DIVIDENDS PAID
(% of sales)
($ per share)
($ per share)
60.3(1)
50% Developed Markets
60.0
50% Emerging Markets
60.5 (1)
60.0
58.8 (1)
58.7 (1)
58.7 (1)
58.6
58.5
58.6
2.93 (2)
2.84 (2)
2.81(2)
2.81(2)
2.87(2)
2.72
1.33
2.38
2.36
2.28
1.59
1.55
1.50
1.42
1.52
’13
’14
’15
’16
’17
’13
’14
’15
’15
’16
’17
’13
’14
’15
’16
’17
’13
’14
’15
’16
’17
(1) 2013-2017 exclude charges related to the Global Growth and Efficiency Program. A complete reconciliation between reported results (GAAP) and results
excluding these items (non-GAAP), including a description of such items, is available on Colgate’s website and on page 12 of this report.
(2) 2017 excludes charges related to the Global Growth and Efficiency Program and a provisional charge related to U.S. tax reform. 2016 excludes a gain from
the sale of land in Mexico, charges related to the Global Growth and Efficiency Program and certain other items. 2015 excludes a gain from the sale of the
Company’s laundry detergent business in the South Pacific, a charge related to the deconsolidation of the Company’s Venezuelan operations, charges related
to the Global Growth and Efficiency Program and certain other items. 2013-2014 exclude charges related to the Global Growth and Efficiency Program,
remeasurement charges resulting from devaluations and effective devaluations in Venezuela and certain other items. A complete reconciliation between
reported results (GAAP) and results excluding these items (non-GAAP), including a description of such items, is available on Colgate’s website and on page 12
of this report.
Cover: Photo taken in India.
30693 CPAR17_FINAL_021518 cc18.indd 2
3/15/18 1:19 PM
Dear Colgate Shareholders
Faced with difficult macroeconomic conditions and slowing
category growth worldwide, 2017 was a challenging year. Net
sales increased 1.5% from 2016 and organic sales, or net sales
excluding foreign exchange, acquisitions and divestments, grew
1.0%. Pleasingly, we did see both net sales growth and organic
sales growth accelerate in the second half of the year, as the
benefits from our increased advertising investment began to
pay off. Advertising investment increased 10.2% in 2017 and
advertising as a percent to sales increased 80 basis points to
10.2%. Gross profit margin, net income and diluted earnings per
share all increased in 2017.*
We maintained our strong balance sheet and cash flow, which
led the Board of Directors to authorize a 3% increase in the
quarterly cash dividend, effective in the second quarter of 2017.
This represents our 55th consecutive year of dividend increases
and our 122nd consecutive year paying a dividend.
Our market shares remain strong around the world and our
global leadership in toothpaste widened in 2017 with our global
share at 43.3% for the year. As referenced in the title of this
year’s annual report, “Investing For Global Growth, Winning With
Focus,” 2017 was a year of strong investment behind our brands
worldwide and we deployed that investment sharply focused on
our long-standing business strategies: Engaging To Build Our
Brands, Innovation For Growth, Effectiveness And Efficiency
and Leading To Win to continue to deliver sustained profitable
growth.
Strengthening Consumer Engagement To Drive Growth
We are focused more than ever on strengthening consumer
engagement to drive growth. Throughout 2017, we consistently
increased our advertising investment behind new products, our
base businesses and consumption-building activities. We are
creating more meaningful brand experiences for consumers by
taking advantage of a broad range of communication channels,
including our growing use of digital media.
We are committed to shifting more spending into digital, which
in 2017 accounted for 25% of our global media spend and over
80% of Hill’s media spend. Digital covers a wide spectrum of
activities including mobile, online video and building relationships
with social media influencers. At Hill’s, for example, we are using
geo-location capabilities to send customized messaging based
on shopper location. We send mobile ads about Hill’s products
Ian Cook
Chairman, President
and Chief Executive Officer
* The Company’s results are discussed compared to 2016
and excluding a provisional charge related to U.S. tax
reform in 2017, charges related to the Global Growth
and Efficiency Program in both periods and certain
other items in 2016. A complete reconciliation between
reported results (GAAP) and results excluding these
items (non-GAAP), including a description of such items,
is available on Colgate’s website and on page 12 of
this report.
2017 Annual Report | 1
30693 CPAR17_FINAL_021518 cc18.indd 1
2/22/18 12:34 PM
which provide consumers the ability to click through to find the
nearest store where the product is available for purchase.
Beyond television and digital, creating a more impactful brand
experience encompasses developing effective and attractive
packaging, increasing visibility on store shelves and digital
devices of all sizes, and invoking emotional connections between
consumers and our brands. Recently, we have done a lot of work
putting our advertising solidly behind a broad platform of brand
purpose or brand belief, rather than focusing on a particular
variant or benefit. This engagement with consumers goes well
beyond the rational benefit of giving people something to buy. It
touches them emotionally with an idea to buy into, creating a more
meaningful brand experience. For example, the Colgate brand
belief is “Everyone deserves a future they can smile about,” and
for Suavitel fabric conditioner it is, “Wherever they are, they always
feel your love.” Our research shows that equity advertising around
Using Technology To Bring
Professional Oral Care Advice
To Consumers In India
Most people living in rural India have never visited a
dentist and have no access to reliable dental advice.
As part of our efforts to Keep India Smiling, Colgate is
using mobile technology to provide consumers in rural
India with real-time access to free professional oral
care advice. Available on-demand from every mobile
phone at no cost, consumers dial the number provided,
hang up, and receive an instant call back from
Colgate’s Pocket Dentist automated response system.
Based on the strong consumer response, the program
is being expanded nationally in 2018.
these brand beliefs results in higher volume lift and has
a higher return on investment than traditional product
benefit advertising.
Longer term, we believe we have a significant
opportunity to increase penetration and consumption in
growing populations, even in markets where we already
have strong market shares. For instance, nearly 70% of
the population in markets where we do business lives
in countries where, on average, people brush their teeth
less than once per day. We estimate that toothpaste
category volume would grow by 38% if these markets
saw brushing frequency increase to an average of
once per day. We are increasing our investment behind
consumption-building activities, such as Colgate’s
Bright Smiles, Bright Futures™ oral health education
program, and have found that the return on that
investment is three times the return on traditional media
spending. When we started this program over 25 years
ago, we used to give each child one toothbrush with every
tube of toothpaste. We now often give two or more, because many
times children go home and are the ambassadors to teach their
parents to brush their teeth as well.
Focused On Innovation
While we continue to focus on innovation across our full portfolio,
we are placing special emphasis on fewer, more distinctive new
2 | Colgate-Palmolive Company
30693 CPAR17_FINAL_021518 cc18.indd 2
2/22/18 12:34 PM
Colgate’s Global Business Strategies
Effectiveness
And Efficiency
Integral to Colgate’s global
strategy is the ability to
generate funds to invest in
business growth. Through
both established efficiency
programs applied to all
aspects of our business and
ongoing identification of new
ways to find savings, the
Company constantly strives
to improve its organizational
capabilities and speed, while
reducing costs.
Innovation
For Growth
The Company’s Consumer
Innovation Centers, in
strategic locations
throughout the world, are
focused on developing
insight-driven innovation
that provides value-added
new products across all
price points. Marketing
personnel work closely with
consumers, scientists and
other researchers, external
organizations and academia
to ensure we have the
technology in place to meet
both short- and long-term
consumer needs.
Leading
To Win
At Colgate, employees at all
levels learn to take personal
responsibility for being
leaders, and they commit
to conducting business
with the highest integrity,
incorporating Colgate’s
values of Caring, Continuous
Improvement and Global
Teamwork into all business
activities. Colgate also
demonstrates leadership
as a member of the global
community. Through our
sustainability efforts, we are
ensuring that our business
grows responsibly and
benefits those we serve
globally, while promoting
the well-being of future
generations.
Engaging To
Build Our Brands
Driving growth and building
our brands requires
the strongest possible
engagement:
n With Consumers
n With The Profession
n With Our Customers
We are developing
deeper and more relevant
consumer insights and
using them to strengthen
product development and
to create impactful brand
experiences through our
marketing communications.
These campaigns include
a sharpened focus on
digital and social media,
and on shopper marketing
programs that customize
communications for different
retail outlets and shoppers.
We are driving engagement
and building our leadership
with dental and veterinary
professionals to strengthen
their endorsement of
our brands, and are
collaborating with our retail
partners to share expertise
and provide shoppers with
the best value and service.
Photo taken in Brazil.
30693 CPAR17_FINAL_021518 cc18.indd 3
2/19/18 9:04 AM
2017 Annual Report | 3
Succeeding In Personal
Care In Western Europe
Sanex Zero% shower gels and
deodorants with fewer chemical
ingredients are winning with
consumers across Western Europe.
Driven by this success, net sales for
the Sanex brand grew over 30% in
the region in 2017 with market shares
for the brand reaching all-time highs
in both the shower gel and deodorant
categories for the year.
products in several areas: on the naturals megatrend in oral care
and personal care, on innovation across all price points and on
entering attractive new categories.
One of the advantages of having such a broad innovation
framework around the world is that we can interpret and tailor
megatrends, such as naturals, to each market, as preferences
and local ingredients vary. In developed markets, for example,
the naturals trend is more about what is not in the
product, and we are represented by our Tom’s
of Maine and Sanex Zero% brands. In emerging
markets, naturals are about incorporating tradi-
tional local natural extracts. In India, we launched
two toothpastes in this category, Colgate Cibaca
Vedshakti and Colgate Swarna Vedshakti, at
different price points, both inspired by traditional
Ayurvedic beliefs. Leveraging learnings from our
premium-priced Colgate Naturals range in China,
we introduced Colgate Ancient Secrets toothpaste
in Russia where the notion of local Chinese ingre-
dients resonates strongly with consumers. These
products are adding incremental market share and
we plan to have a naturals toothpaste offering in
each of our geographic regions by mid-2018.
Building on the strength of Colgate’s broad
portfolio of product offerings at all price points,
we have sharpened our focus on innovating at the
entry-level end of our portfolio. In South Africa, we
re-launched two entry-level products calling out
new ingredients on their packaging and slightly
increasing prices to differentiate and separate
our offerings within this end of our portfolio. As a
result, in 2017 our South African business achieved
double-digit, profitable net sales growth and reached
its highest toothpaste market share in a decade. We are now
expanding this strategy globally.
Innovation at Colgate also means entering new categories.
We recently purchased PCA Skin and EltaMD, two of the fastest-
growing brands in professional skin care. Their complementary
product portfolios and sales forces, strong professional support
and similar distribution channels will advance Colgate’s presence
in the premium global skin care category.
4 | Colgate-Palmolive Company
30693 CPAR17_FINAL_021518 cc18.indd 4
2/22/18 12:34 PM
Collaborating With Our Retail Partners For Profitable Growth
As our customers increasingly seek partners that can help
them grow their businesses profitably, we continue to evolve
our engagement and collaboration with them. We invite our
customers to explore our newly designed Customer
Engagement Center, located within our Global
Technology Center in New Jersey, to work with
us collaboratively in this unique, high-tech
environment built with our customers in mind. The
center features a retail lab equipped with virtual
store capabilities, shelving and display areas for
visualizing what a state-of-the-art store could look
like, and product demonstration areas that replicate
in-home settings. Here we share expertise, provide
innovative in-store marketing and merchandising
techniques, and together develop business
planning initiatives to achieve mutual growth in the
categories in which we compete.
Another big area of focus for us is e-commerce.
While still relatively small in our product categories,
we are investing ahead of the curve to adapt our
organization and develop techniques that will allow
us to be a leader online just as we are in brick-and-
mortar stores. This includes a combination of paid and organic
search optimization so that we are well represented on the
first page of major shopping websites, linking search to digital
media to educate consumers before they buy, and designing
packaging specifically for products sold online to create a more
enticing presentation upon arrival. When you do this, consumer
satisfaction and repeat levels rise, resulting in high online ratings
for our brands which helps keep them at the top of the search
page. In toothpaste, these initiatives have helped Colgate achieve
market leadership online in 2017 in the U.S., the U.K. and China,
three of the most developed e-commerce markets.
At Hill’s, our investment in e-commerce best practices is also
paying off, especially in the area of packaging. After receiving
some negative reviews when our pet food bags were arriving
damaged, we partnered with Amazon to improve the shipping
carton. The new carton is certified by Amazon as Frustration Free
Packaging, is the exact size and shape of the bag and is made of
100% recyclable materials. It also includes Hill’s messaging and
Driving Growth In
Pet Nutrition
Hill’s Science Diet Youthful Vitality,
which helps fight effects of aging in
cats and dogs ages seven and older,
is adding incremental market share in
the U.S. and is now rolling out globally.
As part of its impactful ad campaign,
Hill’s Science Diet Youthful Vitality
worked with Animal Planet on the web
series “Mission Adoptable,” to tell
heartwarming stories about older cats
and dogs to encourage adoption in this
age group.
2017 Annual Report | 5
30693 CPAR17_FINAL_021518 cc18.indd 5
2/22/18 12:34 PM
has handles to make it easier to manage
from the front door to the kitchen. As a
result, we saw the online ratings for the
brand improve to 4.5 stars on average.
Increasing Productivity Everywhere
As we have often said, productivity
is at the core of everything we do at
Colgate. We believe deeply that business
simplification and operational efficiencies
increase our agility so we can be smarter
and faster. Along those lines, we are in the
midst of a restructuring program, which
we refer to as the “Global Growth and
Efficiency Program,” which runs through
December 31, 2019. We have made good
progress since starting the program in
2012 and implementation of the Global
Growth and Efficiency Program remains
on track.
Initiatives under the Global Growth and Efficiency Program
continue to be focused on the following areas: expanding
commercial hubs, extending shared business services and
streamlining global functions, and optimizing the global supply
chain and facilities.
Additionally, we continuously look for savings and efficiencies
as part of our ongoing funding-the-growth cost-saving initiatives.
For example, by performing advanced analytics and redesigning
the process for our global ocean freight routes, we saved
approximately $20 million in 2017 and, by using sophisticated
transportation technology, we saved more than $3 million on fuel
by identifying actual fuel consumption by our carriers and paying
them based on real-time market prices.
Living Our Values
Guided by our values of Caring, Continuous Improvement and
Global Teamwork, Colgate seeks to be a leader in caring for the
communities where Colgate people live and work and where
Colgate sells its products. In addition to our Bright Smiles, Bright
Futures™ oral health education program, we continue to put a
lot of focus on the areas of sustainability and good corporate
governance.
Promoting Daily
Brushing In Mexico
Colgate partnered with the Mexican
Dental Association Foundation
to advocate for the Mexico City
Congress to pass a new law calling
for the inclusion of an oral hygiene
regimen during each school day
for every child enrolled in a public
primary school in Mexico City. This
impacts one million children each
year, creating improved oral health
habits that will last a lifetime.
6 | Colgate-Palmolive Company
30693 CPAR17_FINAL_021518 cc18.indd 6
2/22/18 12:34 PM
Sustainability, focused around our commitment to people,
performance and planet, is built into our commercial plans from
the start. One area of focus is the idea of making every drop of
water count. Our global Save Water initiative empowers people
to make a difference in a simple way by turning off the faucet
while they brush their teeth. We bring this to life in many ways.
In the U.S., we partnered with Walmart to feature special in-store
displays running Colgate’s award-winning “Turn Off the Tap” video
together with Save Water digital communications on the Walmart
website. Our goal is to promote water conservation awareness to
all our global consumers by 2020.
Governance is an ongoing commitment shared by our Board
of Directors, our management and all Colgate people. We review
our business strategies and areas of risk with the Board on a
regular basis, and continue to refresh the Board’s
composition to ensure a diverse skill set consistent
with Colgate’s strategy.
Partnering For
Innovation In China
Colgate Dare to Love toothpaste,
launched around “Love Teeth Day,”
a national oral health awareness
campaign in China, was developed as
a collaboration with one of our Chinese
e-commerce partners. It went from
concept to launch in just five months,
and was the top-selling item in the
Colgate flagship store on this e-tailer’s
site throughout the campaign.
Outlook
Looking to 2018, while uncertainty in global
markets and category growth worldwide remain
challenging, we are maintaining our heightened
focus on brand building and increased productivity.
We are planning for another year of increased
advertising investment behind new products, our
base businesses and longer-term consumption-
building activities, and are deeply committed
to acting with greater speed and agility to drive
sustained profitable growth worldwide.
As we move ahead together, I wish to thank
all Colgate people worldwide for their personal
commitment to achieving our goals with the
highest ethical standards, and express appreciation
for the support of our customers, suppliers,
shareholders and directors.
Ian Cook
Chairman, President
and Chief Executive Officer
30693 CPAR17_FINAL_021518 cc18.indd 7
2/22/18 12:34 PM
2017 Annual Report | 7
Colgate’s Global Brands
Oral Care
48% of Net Sales
Personal Care
19% of Net Sales
Home Care
18% of Net Sales
Pet Nutrition
15% of Net Sales
8 | Colgate-Palmolive Company
30693 CPAR17_FINAL_021518 cc18.indd 8
2/27/18 11:23 AM
Sustainability Commitment
Colgate is pleased to report excellent progress in 2017 on the Company’s 2015 to 2020 Sustainability Strategy commitment.
The Company was named to both the 2017 Dow Jones Sustainability World and North America Indices, was recognized as a
U.S. EPA ENERGY STAR 2017 Partner of the Year for the 7th year in a row, and was named to both the CDP Water A List and
the CDP Climate A List in 2017. In addition to the highlights below, more about Colgate’s Sustainability Strategy progress is
available in the Sustainability section of Colgate’s website at www.colgatepalmolive.com.
PEOPLE
Helping Colgate People and Their Families Live Better
n In 2017, the Global Health Risk Assessment (HRA) tool was available in 15 countries, providing access to 60% of
Colgate’s workforce. The HRA tool helps Colgate employees self-evaluate health status and understand health risks,
and provides confidential feedback to motivate behavioral change.
n In each of the past five years, over 60% of Colgate employees participated in our Global Healthy Activity Challenge.
In 2017, employees logged 27 million minutes of healthy activity.
n Colgate is working to support employees in their effort to be financially secure at every stage of their lives.
Employees in over 100 countries now have access to a financial wellness toolkit, available in seven languages.
Contributing to the Communities Where We Live and Work
n Colgate has the unique ability to improve the oral health of children and their families around the world. The Colgate
Bright Smiles, Bright Futures® oral health education program reached over 50 million children in 2017, for a total of
over 950 million children since its inception in 1991.
n Since 2002, Hill’s Food, Shelter & Love™ program has provided over $290 million in pet food to more than 1,000 pet
shelters and helped over nine million pets find their forever homes.
n Colgate is working with public health officials, academia and local schools and clinics to educate millions of children
and their families about the health and hygiene benefits of handwashing with soap. In 2017, Colgate reached over
60 million people through media campaigns, community events and educational programs in schools throughout
various geographies.
PERFORMANCE
Brands That Delight Consumers and Sustain Our World
n Approximately 82% of the products evaluated with Colgate’s Product Sustainability Scorecard were determined to
be “more sustainable,” showing an improvement in at least one of the following areas: responsible sourcing and raw
materials, energy and greenhouse gases, water, waste, ingredient profile, packaging and social metrics.(1)
n Approximately 41% of our packaging materials, by weight globally, now come from recycled sources and 78% of our
packaging is considered recyclable.(2)
n Colgate has made great strides in its commitment to improving the sustainability profile of our products by eliminat-
ing the use of microbeads, phthalates and parabens as ingredients.
PLANET
Making Every Drop of Water Count
n In 2017, Colgate reduced water use per ton of production by nearly 47% vs. 2002, avoiding enough water use
to fill approximately 22,000 Olympic-sized swimming pools.(3)
n Colgate continues to scale up our Save Water campaign globally to promote water conservation awareness with
on-package messaging, in-store communications, social media and a partnership with The Nature Conservancy in
the U.S.
n Colgate’s contributions to Water For People’s Everyone Forever program helped them reach over 370,000 people
since 2013 with water, sanitation systems and/or health and hygiene education in Guatemala, Peru and India.
Reducing Our Impact on Climate and the Environment
n Colgate continues to reduce its absolute greenhouse gas emissions. So far, we have reduced our absolute green-
house gas emissions by approximately 28% compared to 2002.(3)
n Working toward the Company’s goal of “Zero Waste,” Colgate has reduced the amount of waste per ton of
production sent to landfills by over 45% since 2010.(3)
n Colgate continues to make progress on its commitment to mobilize resources to achieve zero net deforestation by
2020 as stated in our policy on No Deforestation.
(1) The performance results are based on representative products from the product portfolio evaluated against comparable Colgate products across seven impact
areas to characterize likely improvement in the sustainability profile, based on review of quantitative and qualitative data.
(2) Packages meeting all three criteria are considered recyclable: 1) the package is made of a material that is widely accepted for recycling, 2) the package can be
separated into material(s) that can be recycled, and 3) the package material can be reprocessed into a preferred valuable feedstock.
Subject to final certification by a third-party auditor.
(3)
2017 Annual Report | 9
30693 CPAR17_FINAL_021518 cc18.indd 9
3/6/18 8:35 AM
Board Of Directors
IAN COOK
ELLEN M. HANCOCK, INDEPENDENT DIRECTOR
Chairman, President and Chief Executive Officer of
Colgate-Palmolive Company
Former President of Jazz Technologies, Inc.
(formerly Acquicor Technology), 2005-2007
Mr. Cook joined Colgate in the United Kingdom in 1976
and progressed through a series of senior management
roles around the world. He became Chief Operating
Officer in 2004, with responsibility for operations in North America, Europe,
Central Europe, Asia and Africa. In 2005, Mr. Cook was promoted to President
and Chief Operating Officer, responsible for all Colgate operations worldwide,
and was promoted to Chief Executive Officer in 2007. Elected director in 2007
and Chairman in 2009. Age 65
CHARLES A. BANCROFT, INDEPENDENT DIRECTOR
Executive Vice President, Chief Financial Officer
and Global Business Operations of Bristol-Myers
Squibb Company
Mr. Bancroft joined Bristol-Myers Squibb in 1984 and
held a series of positions of increasing responsibility
within Bristol-Myers Squibb’s finance organization, including international
assignments, as well as senior leadership positions in the global
pharmaceutical business. He became Chief Financial Officer in 2010 and has
served in his current role since 2016. Elected director in 2017. Age 58
JOHN P. BILBREY, INDEPENDENT DIRECTOR
Non-Executive Chairman of The Hershey Company
Mr. Bilbrey has been Non-Executive Chairman of Hershey
since 2017. He previously served as President and Chief
Executive Officer of Hershey from 2011 and Chairman
from 2015 until his retirement in 2017. Mr. Bilbrey joined
the management team of Hershey as Senior Vice President, President Hershey
International in 2003, serving as Senior Vice President, President Hershey
North America from 2007 to 2010 and as Executive Vice President and Chief
Operating Officer from 2010 to 2011. He previously spent 22 years at The
Procter & Gamble Company. Elected director in 2015. Age 61
JOHN T. CAHILL, INDEPENDENT DIRECTOR
Vice Chairman of The Kraft Heinz Company
Mr. Cahill has been Vice Chairman of The Kraft Heinz
Company since 2015. He previously served as Chairman
and Chief Executive Officer of Kraft Foods Group from
2014 to 2015 and Chairman from 2012 to 2014. Prior
to joining Kraft Foods, Mr. Cahill was an industrial partner at Ripplewood
Holdings LLC from 2008 to 2011. Mr. Cahill was CEO of The Pepsi Bottling
Group, Inc. from 2001 to 2003, Chairman and CEO from 2003 to 2006, and
Executive Chairman from 2006 to 2007. Elected director in 2005. Age 60
HELENE D. GAYLE, INDEPENDENT DIRECTOR
President and Chief Executive Officer of
The Chicago Community Trust
Prior to joining The Chicago Community Trust in October
2017, Dr. Gayle was Chief Executive Officer of McKinsey
Social Initiative from 2015 to 2017 and President and Chief
Executive Officer of CARE USA from 2006 to 2015. Prior to that, Dr. Gayle
was an executive in the Global Health program at the Bill and Melinda Gates
Foundation from 2001 to 2006. She previously held multiple key positions at
the U.S. Centers for Disease Control. Elected director in 2010. Age 62
10 | Colgate-Palmolive Company
Mrs. Hancock previously was Chairman and Chief
Executive Officer of Exodus Communications, Inc.,
Executive Vice President and Chief Operating Officer at
National Semiconductor and Senior Vice President at IBM. Elected director
in 1988. Age 74
C. MARTIN HARRIS, INDEPENDENT DIRECTOR
Associate Vice President of the Health Enterprise and
Chief Business Officer of the Dell Medical School at The
University of Texas at Austin
Dr. Harris has been Associate Vice President of the
Health Enterprise and Chief Business Officer of the Dell
Medical School at The University of Texas at Austin since 2016. Previously,
he was CIO and Chairman of the Information Technology Division of The
Cleveland Clinic Foundation and a Staff Physician for The Cleveland Clinic
Hospital and The Cleveland Clinic Foundation Department of General Internal
Medicine from 1996 to 2016. Elected director in 2016. Age 61
LORRIE M. NORRINGTON, INDEPENDENT DIRECTOR
Operating Partner of Lead Edge Capital LLC
Prior to joining Lead Edge Capital in 2013, Ms.
Norrington held several senior management roles at
eBay from 2005 to 2010, including President of Global
eBay Marketplaces, Chief Operating Officer of eBay
Marketplaces, President of eBay International and CEO of Shopping.com.
Previously, she held senior roles at Intuit, Inc. and General Electric Company.
Elected director in 2015. Age 58
MICHAEL B. POLK, INDEPENDENT DIRECTOR
Chief Executive Officer of Newell Brands Inc.
Mr. Polk was also President and Chief Executive Officer
of Newell Rubbermaid Inc. from 2011 to 2016. Prior to
joining Newell Rubbermaid in 2011, Mr. Polk held a series
of key positions at Unilever from 2003 to 2011, including
President, Global Foods, Home and Personal Care. He previously spent
16 years at Kraft Foods. Elected director in 2014. Age 57
STEPHEN I. SADOVE, INDEPENDENT DIRECTOR
Founding Partner, JW Levin Management Partners LLC
Prior to joining JW Levin Management Partners, a private
equity firm, in 2015, Mr. Sadove was Chief Executive
Officer of Saks Incorporated from 2006 to 2013 and
Chairman of Saks Incorporated from 2007 to 2013. Mr.
Sadove joined the management team of Saks as Vice Chairman in 2002,
serving as Chief Operating Officer from 2004 to 2006. He previously held a
series of key positions at Bristol-Myers Squibb. Elected director in 2007.
Age 66
More information about Colgate’s corporate governance commitment is
available on Colgate’s website at www.colgatepalmolive.com.
30693 CPAR17_FINAL_021518 cc18.indd 10
2/22/18 12:35 PM
Management Team
*Ian Cook
Chairman, President
and Chief Executive
Officer (See biographical
information on page 10.)
Maria Elisa Carvajal
VP, Global Marketing
Communications
Martin J. Collins
VP, Hill’s Pet Nutrition
*Franck J. Moison
Vice Chairman
*Dennis Hickey
Chief Financial Officer
*Jennifer M. Daniels
Chief Legal Officer
and Secretary
*P. Justin Skala
Chief Operating Officer,
North America, Europe,
Africa/Eurasia and
Global Sustainability
*Noel Wallace
Chief Operating Officer,
Global Innovation &
Growth and Hill’s Pet
Nutrition
Biographical information
for the above executives
is available on
Colgate’s website at
www.colgatepalmolive.com.
Issam Bachaalani
VP & GM, Colgate-
India & South Asia
Daniel Bagley
VP, Global R&D
Dave Baloga
VP, Hill’s Pet Nutrition
Don Beatty
VP, Hill’s Pet Nutrition
Angel Dario Belalcazar
VP, Global R&D
Joseph M. Bertolini
VP, Global Finance
Jose Borrell
VP, Hill’s Pet Nutrition
Yves Briantais
VP, Colgate-Europe
*Peter Brons-Poulsen
President & CEO,
Hill’s Pet Nutrition
Marsha Butler
VP, Global Oral Care
Scott Cain
VP, Global Finance
Burc Cankat
VP & GM,
Colgate-North
Africa Middle East
Rosario Carlino
VP, Colgate-
Africa/Eurasia
*Michael A. Corbo
Chief Supply
Chain Officer
Mike Crowe
Chief Information
Officer
Rich Cuprys
VP, Global R&D
Marianne DeLorenzo
VP, Global Information
Technology
*Mukul Deoras
Chief Marketing Officer
Catherine Dillane
VP, Colgate-
Latin America
Julie Dillon
VP & GM, Colgate-
South Pacific
Joanna Dumont
VP, Global Oral Care
Philip Durocher
VP & GM, Colgate-
Northern Europe
*John Faucher
SVP, Investor Relations
Kimberly Faulkner
VP, Colgate-
Latin America
*Jean-Luc Fischer
President,
Colgate-Africa/Eurasia
Betsy Fishbone
VP, Global Legal
Laura Flavin
VP, Global Human
Resources
Nadine Flynn
VP, Global Legal
David Foster
VP, Global Information
Technology
Diana Geofroy
VP, Colgate-Mexico
Derek Gordon
VP & GM,
Colgate-Canada
Taylor Gordy
Chief Customer Officer
Peter Graylin
VP, Global Legal
*Thomas Greene
Chief Information &
Business Services
Officer
Jan Guifarro
VP, Corporate
Communications &
Community Giving
Elise Halvorson
VP, Enterprise
Risk Management
*Suzan F. Harrison
President,
Global Oral Care
John Hazlin
VP & GM, Global
Personal & Home Care
Raymond Ho
VP, Colgate-
Asia Pacific
Robert Hofmann
VP, Colgate-Europe
& Africa/Eurasia
Henry Hu
VP, Colgate-
Asia Pacific
Nina Huffman
VP, Global Legal
Traci Hughes-Velez
VP, Colgate-Europe
*John J. Huston
SVP, Chief of Staff
*Henning Jakobsen
VP & Corporate
Controller
N. Jay Jayaraman
VP, Global R&D
Elyse Kane
VP, Colgate-
North America
Eugene Kelly
VP, Global Diversity
& Inclusion
Iain Kielty
VP, Colgate-
Asia Pacific
Brian King
VP, Colgate-
U.S. Company
Charalabos Klados
VP, Global Legal
Raj Kohli
VP, Global R&D
John Kooyman
VP, Colgate-
North America
Wojciech Krol
VP & GM, Colgate-
Central Europe East
Andrea Lagioia
VP & GM,
Colgate-Brazil
Michael Larrain
CEO, Professional
Skin Care
Stephen Lau
VP & GM, Colgate-
Greater China
*Al Lee
Chief Ethics &
Compliance Officer
Adriana Leite
VP & GM, Colgate-
Southern Cone
Stephane Lionnet
VP, Colgate-
North America
Javier Llinas
VP, Global Information
Technology
Diane Loiselle
VP, Hill’s Pet Nutrition
Moira Loten
VP, Global Oral Care
Gregory Malcolm
VP, Corporate Audit
*Daniel B. Marsili
Chief Human
Resources Officer
Pablo Mascolo
VP, Colgate-
Latin America
Sally Massey
VP, Global Human
Resources
Paul McGarry
VP, Global Information
Technology
Thomas Mintel
VP, Global R&D
Pascal Montilus
VP, Colgate-
North America
Anne-Marie Motte
VP & GM, Colgate-
North America
Francisco Muñoz
VP & GM, Colgate-
Central America
Josue M. Muñoz
VP, Global
Supply Chain
*Vinod Nambiar
President, Colgate-
Asia Pacific
Eddie Niem
VP & GM,
Hawley & Hazel
Jesper Nordengaard
VP & GM, Hill’s
Pet Nutrition-U.S.
Godfrey Nthunzi
VP, Colgate-
Africa/Eurasia
Edward Oblon
VP, Hill’s Pet Nutrition
*Elaine Paik
VP & Corporate
Treasurer
Nancy Pak
VP & GM,
Tom’s of Maine
Mori Seguchi
VP & GM, Hill’s
Pet Nutrition-Japan
*Prabha Parameswaran
President,
Colgate-Europe
Julio Semanate
VP, Colgate-
Latin America
Terrell Partee
VP, Global R&D
Hector Pedraza
VP & GM,
Colgate-Andina
Brent Peterson
VP, Global Human
Resources
Spencer Pingel
VP, Global Analytics
Massimo Poli
VP & GM,
Colgate-Mexico
Warren Pruitt
VP, Global
Supply Chain
Ram Raghavan
VP, Colgate-
Asia Pacific
Christopher Rector
VP & GM,
Global Toothbrush
Riccardo Ricci
VP, Colgate-
Southern Europe
Lauren Richardson
Chief Procurement
Officer
Sophie Roger
VP, Colgate-
North America
Michele Ross
VP, Hill’s Pet Nutrition
Paolo Rossetto
VP, Colgate-Europe
Debashish Roy
VP, Colgate-
Africa/Eurasia
Maria Ryan
Chief Dental Officer
Bernal Saborio
VP & GM,
Colgate-Caribbean
Arvind Sachdev
VP & GM,
Colgate-Philippines
Ivan Sandoval
VP, Global Legal
David Scharf
VP, Hill’s Pet Nutrition
Dany Schmidt
VP & GM, Colgate-
Central Europe West
Sara Scrittore
VP, Hill’s Pet Nutrition
Alain Semeneri
VP & GM,
Hill’s Pet Nutrition-
Europe & Russia
Jose Fernando Serrano
VP, Colgate-
Latin America
Andrew Shepard
VP & GM, Colgate-
Western Europe
Philip Shotts
VP, Global Finance
Luciano Sieber
VP, Colgate-Europe
& Africa/Eurasia
Lynne Tapper
VP, Global Human
Resources
Orlando Tenorio
VP, Colgate-
South Africa
Richard Thorogood
VP, Global Insights
Linda Topping
VP, Global
Supply Chain
Ann Tracy
VP, Global
Supply Chain
*Panagiotis Tsourapas
President, Colgate-
Latin America
Bill Van de Graaf
VP & GM, Colgate-
North America
*Patricia Verduin
Chief Technology
Officer
Mauro Watanabe
VP, Colgate-
Asia Pacific
Cliff Wilkins
VP, Global Legal
Alan Wolpert
VP & GM,
Colgate-Eurasia
Ruben Young
VP & GM, Colgate-
Greater Indo-China
*Juan Pablo Zamorano
President, Colgate-
North America
Alberico Zenzola
VP, Global
Supply Chain
*Corporate Officer
2017 Annual Report | 11
30693 CPAR17_FINAL_021518 cc18.indd 11
3/6/18 8:23 AM
Reconciliation Of
Non-GAAP Financial Measures
The following is provided to supplement certain
financial measures discussed in the letter
to shareholders and the financial highlights
section of this report both as reported (GAAP)
and excluding the impact of certain items
(non-GAAP), as explained to the right. Investors
and analysts use these financial measures to
assess 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 perfor-
mance and trends. These non-GAAP financial
measures also enhance the ability to compare
period-to-period financial results. The Company
uses these financial measures internally in its
budgeting process, to evaluate segment and
overall operating performance and as factors in
determining compensation. While the Company
believes that these financial measures are useful
to evaluate the Company’s underlying business
performance and trends, 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. This report also discusses
organic sales growth, which is net sales growth
excluding the impact of foreign exchange,
acquisitions and divestments. For a reconcilia-
tion of organic sales growth to net sales growth
for full year 2017, see page 41 of the Company’s
Annual Report on Form 10-K.
(1) Represents charges related to the Global Growth and
Efficiency Program.
(2) Represents a provisional charge related to U.S. tax reform.
(3) In 2016, represents a gain on the sale of land in Mexico. In
2014 and 2013, represents costs related to the sale of land
in Mexico.
(4) Represents charges for litigation matters.
(5) Represents income tax (benefits) charges related to tax
matters.
(6) Represents a charge resulting from the deconsolidation of
the Company’s Venezuelan operations.
(7) Represents a gain on the sale of the Company’s laundry
detergent business in the South Pacific.
(8) In 2015 and 2014, represents remeasurement charges
related to effective devaluations in Venezuela. In 2013,
represents a charge related to a devaluation in Venezuela.
12 | Colgate-Palmolive Company
(Dollars in Millions
Except Per Share Amounts)
Gross Profit Operating
Profit
Margin
Net
Income
Diluted
EPS
2017
As Reported (GAAP)
Global Growth and
Efficiency Program (1)
U.S. Tax Reform (2)
Excluding Items (Non-GAAP)
2016
As Reported (GAAP)
Global Growth and
Efficiency Program (1)
Mexico Land Sale (3)
Litigation Matters (4)
Tax Matters (5)
Excluding Items (Non-GAAP)
2015
As Reported (GAAP)
Venezuela Deconsolidation (6)
Global Growth and
Efficiency Program (1)
Sale of Non-Core Product Line (7)
Venezuela Remeasurements (8)
Litigation Matters (4)
Tax Matters (5)
Excluding Items (Non-GAAP)
2014
As Reported (GAAP)
Global Growth and
Efficiency Program (1)
Venezuela Remeasurements (8)
Litigation Matters (4)
Mexico Land Sale (3)
Tax Matters (5)
Excluding Items (Non-GAAP)
2013
As Reported (GAAP)
Global Growth and
Efficiency Program (1)
Venezuela Remeasurements (8)
Litigation Matters (4)
Mexico Land Sale (3)
Excluding Items (Non-GAAP)
60.0% $3,589 $2,024 $2.28
0.5%
–
333
–
246
275
0.28
0.31
60.5% $3,922 $2,545
$2.87
60.0% $3,837 $2,441 $2.72
0.3%
–
–
–
168
(63)
11
(35)
60.3% $3,985 $2,522
228
(97)
17
–
0.19
(0.07)
0.01
(0.04)
$2.81
58.6% $2,789 $1,384 $1.52
–
1,084
1,058
1.16
0.1%
–
–
–
–
183
(120)
22
14
15
58.7% $3,988 $2,556
254
(187)
34
14
–
0.20
(0.13)
0.02
0.02
0.02
$2.81
58.5% $3,557 $2,180 $2.36
0.2%
–
–
–
–
0.23
0.23
0.04
–
0.07
58.7% $4,215 $2,712 $2.93
208
214
41
3
66
286
327
41
4
–
58.6% $3,556 $2,241 $2.38
0.2%
–
–
–
0.30
0.12
0.03
0.01
58.8% $4,140 $2,665 $2.84
371
172
23
18
278
111
23
12
30693 CPAR17_FINAL_021518 cc18.indd 12
2/22/18 12:35 PM
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended December 31, 2017
or
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
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
300 Park Avenue, New York, New York
(Address of principal executive offices)
13-1815595
(I.R.S. Employer Identification No.)
10022
(Zip Code)
Registrant’s telephone number, including area code 212-310-2000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Name of each exchange on which registered
Common Stock, $1.00 par value
Floating Rate Notes due 2019
New York Stock Exchange
New York Stock Exchange
No
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes
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
No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes
No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained
herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
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 the 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
Smaller reporting company
Non-accelerated filer
(Do not check if a 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
The aggregate market value of Colgate-Palmolive Company Common Stock held by non-affiliates as of June 30, 2017 (the last
No
business day of its most recently completed second quarter) was approximately $65.1 billion.
There were 875,326,736 shares of Colgate-Palmolive Company Common Stock outstanding as of January 31, 2018.
Documents
Portions of Proxy Statement for the 2018 Annual Meeting of Stockholders
Form 10-K Reference
Part III, Items 10 through 14
DOCUMENTS INCORPORATED BY REFERENCE:
Colgate-Palmolive Company
Table of Contents
Part I
Business
Item 1.
Item 1A. Risk Factors
Item 1B.
Item 2.
Item 3.
Item 4.
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Part II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Part III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Part IV
Item 15.
Item 16.
Signatures
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Certain Relationships and Related Transactions and Director Independence
Principal Accountant Fees and Services
Exhibits and Financial Statement Schedules
Form 10-K Summary
Page
1
4
12
13
14
16
17
17
18
54
55
55
55
55
56
56
57
57
57
58
62
63
ITEM 1.
BUSINESS
(a) General Development of the Business
PART I
Colgate-Palmolive Company (together with its subsidiaries, the “Company” or “Colgate”) is a leading consumer
products company whose products are marketed in over 200 countries and territories throughout the world. Colgate was
founded in 1806 and incorporated under the laws of the State of Delaware in 1923.
For recent business developments and other information, refer to the information set forth under the captions
“Management’s Discussion and Analysis of Financial Condition and Results of Operations–Executive Overview,” “–
Outlook,” “–Results of Operations,” “–Restructuring and Related Implementation Charges” and “– Liquidity and Capital
Resources” in Part II, Item 7 of this report.
(b) Financial Information about Segments
Worldwide Net sales and Operating profit by business segment and geographic region during the last three years
appear under the caption “Results of Operations” in Part II, Item 7 of this report and in Note 15, Segment Information to
the Consolidated Financial Statements.
(c) Narrative Description of the Business
The Company operates in two product segments: Oral, Personal and Home Care; and Pet Nutrition. Colgate is a global
leader in Oral Care with the leading toothpaste and manual toothbrush brands throughout many parts of the world
according to market share data. Colgate’s Oral Care products include Colgate Total, Colgate Maximum Cavity Protection
plus Sugar Acid Neutralizer, Colgate Triple Action, Darlie Double Action, Colgate Max Fresh, Colgate Optic White and
Colgate Whitening toothpastes, Colgate 360°, Colgate Extra Clean and Colgate Slim Soft manual toothbrushes and Colgate
Plax, meridol and Colgate Total mouthwashes. Colgate’s Oral Care business also includes pharmaceutical products for
dentists and other oral health professionals.
Colgate is a leader in many product categories of the Personal Care market with global leadership in liquid hand soap,
which it sells under the Softsoap, Palmolive and Protex brands. Colgate’s Personal Care products also include Palmolive,
Sanex and Softsoap brand shower gels, Palmolive, Protex and Irish Spring bar soaps and Speed Stick, Lady Speed Stick
and Sanex deodorants and antiperspirants. Colgate is the market leader in liquid hand soap in the U.S. with its line of
Softsoap brand products according to market share data. Colgate’s Personal Care business outside the U.S. also includes
Palmolive and Caprice shampoos and conditioners.
Colgate manufactures and markets a wide array of products for the Home Care market, including Palmolive and Ajax
dishwashing liquids and Fabuloso, Murphy’s Oil Soap and Ajax household cleaners. Colgate is a market leader in fabric
conditioners with leading brands, including Suavitel in Latin America, Soupline in Europe and Cuddly in the South Pacific
according to market share data.
Sales of Oral, Personal and Home Care products accounted for 48%, 19% and 18%, respectively, of the Company’s
total worldwide Net sales in 2017. Geographically, Oral Care is a significant part of the Company’s business in Asia
Pacific, comprising approximately 82% of Net sales in that region for 2017.
Colgate, through its Hill’s Pet Nutrition segment (“Hill’s” or “Pet Nutrition”), is a world leader in specialty pet
nutrition products for dogs and cats with products marketed in over 80 countries worldwide. Hill’s markets pet foods
primarily under three brands: Hill’s Science Diet, a range of products for everyday nutritional needs; Hill’s Prescription
Diet, a range of therapeutic products to help nutritionally manage disease conditions in dogs and cats; and Hill’s Ideal
Balance, a range of products with natural ingredients. Sales of Pet Nutrition products accounted for 15% of the Company’s
total worldwide Net sales in 2017.
1
For more information regarding the Company’s worldwide Net sales by product category, refer to Note 1, Nature of
Operations and Note 15, Segment Information to the Consolidated Financial Statements.
For additional information regarding market share data, see “Market Share Information” in Part II, Item 7 of this
report.
Research and Development
Strong research and development capabilities and alliances enable Colgate to support its many brands with
technologically sophisticated products to meet consumers’ oral, personal and home care and pet nutrition needs. The
Company’s spending related to research and development activities was $285 million in 2017, $289 million in 2016 and
$274 million in 2015.
Distribution; Raw Materials; Competition; Trademarks and Patents
The Company’s products are marketed by a direct sales force at individual operating subsidiaries or business units, and
by distributors or brokers. The Oral, Personal and Home Care products are sold to a variety of retail and wholesale
customers and distributors. Pet Nutrition products are sold by authorized pet supply retailers and veterinarians. Many of the
Company’s products are also sold online through various e-commerce platforms and retailers. The Company’s sales to Wal-
Mart Stores, Inc. and its affiliates represent approximately 11% of the Company’s Net sales in 2017. No other customer
represents more than 10% of the Company’s Net sales.
The majority of raw and packaging materials used in the Company’s products are purchased from other companies and
are available from several sources. No single raw or packaging material represents, and no single supplier provides, a
significant portion of the Company’s total material requirements. For certain materials, however, new suppliers may have
to be qualified under industry, governmental and Colgate standards, which can require additional investment and take some
period of time. Raw and packaging material commodities such as resins, pulp, essential oils, tropical oils, tallow, poultry,
corn and soybeans are subject to market price variations.
The Company’s products are sold in a highly competitive global marketplace which has experienced increased trade
concentration and the growing presence of e-commerce retailers, large-format retailers and discounters. Products similar to
those produced and sold by the Company are available from multinational and local competitors in the U.S. and overseas.
Certain of the Company’s competitors are larger and have greater resources than the Company. In certain geographies,
particularly in the emerging markets, the Company also faces strong local competitors, who may be more agile and have
better local consumer insights than the Company. In addition, private label brands sold by retail trade chains are a source of
competition for certain of the Company’s product lines. Product quality, innovation, brand recognition, marketing
capability and acceptance of new products largely determine success in the Company’s operating segments.
The Company considers trademarks to be of material importance to its business. The Company follows a practice of
seeking trademark protection in the U.S. and throughout the world where the Company’s products are sold. Principal global
and regional trademarks include Colgate, Palmolive, Speed Stick, Lady Speed Stick, Softsoap, Irish Spring, Protex,
Sorriso, Kolynos, elmex, Tom’s of Maine, Sanex, Ajax, Axion, Fabuloso, Soupline and Suavitel, as well as Hill’s Science
Diet, Hill’s Prescription Diet and Hill’s Ideal Balance. The Company’s rights in these trademarks endure for as long as they
are used and/or registered. Although the Company actively develops and maintains a portfolio of patents, no single patent
is considered significant to the business as a whole.
Environmental Matters
The Company has programs that are designed to ensure that its operations and facilities meet or exceed standards
established by applicable environmental rules and regulations. Capital expenditures for environmental control facilities
totaled approximately $54 million for 2017. For future years, expenditures are currently expected to be of a similar
magnitude. For additional information regarding environmental matters refer to Note 13, Commitments and Contingencies,
to the Consolidated Financial Statements.
2
Employees
As of December 31, 2017, the Company employed approximately 35,900 employees.
Executive Officers of the Registrant
The following is a list of executive officers as of February 15, 2018:
Name
Ian Cook
Franck J. Moison
Dennis J. Hickey
P. Justin Skala
Noel R. Wallace
John J. Huston
Daniel B. Marsili
Victoria L. Dolan
Patricia Verduin
Jennifer M. Daniels
Mukul Deoras
Henning I. Jakobsen
Age
65
64
69
58
53
63
57
58
58
54
54
57
Date First Elected
Officer
1996
2002
1998
2008
2009
2002
2005
2011
2011
2014
2015
2017
Present Title
Chairman of the Board
President and Chief Executive Officer
Vice Chairman
Chief Financial Officer
Chief Operating Officer,
North America, Europe, Africa/Eurasia
and Global Sustainability
Chief Operating Officer,
Global Innovation and Growth
and Hill’s Pet Nutrition
Senior Vice President, Chief of Staff
Chief Human Resources Officer
Chief Transformation Officer
Chief Technology Officer
Chief Legal Officer and Secretary
Chief Marketing Officer
Vice President
and Corporate Controller
Each of the executive officers listed above has served the registrant or its subsidiaries in various executive capacities
for the past five years with the exception of Jennifer M. Daniels, who joined the Company in 2014 as Chief Legal Officer
and Secretary. Prior to joining the Company, Ms. Daniels was Senior Vice President, General Counsel and Secretary of
NCR Corporation, which she joined in 2010.
Under the Company’s By-Laws, the officers of the corporation hold office until their respective successors are chosen
and qualified or until they have resigned, retired or been removed by the affirmative vote of a majority of the Board of
Directors of the Company (the “Board”). There are no family relationships between any of the executive officers, and there
is no arrangement or understanding between any executive officer and any other person pursuant to which the executive
officer was elected.
(d) Financial Information about Geographic Areas
For financial data by geographic region, refer to the information set forth under the caption “Results of Operations” in
Part II, Item 7, of this report and in Note 15, Segment Information to the Consolidated Financial Statements. For a
discussion of risks associated with our international operations, see Item 1A “Risk Factors.”
3
(e) Available Information
The Company’s website address is www.colgatepalmolive.com. The information contained on the Company’s website
is not included as a part of, or incorporated by reference into, this Annual Report on Form 10-K. The Company makes
available, free of charge, on its website its Annual Reports on Form 10-K, its Quarterly Reports on Form 10-Q, its
interactive data files posted pursuant to Rule 405 of Regulation S-T, its Current Reports on Form 8-K and amendments to
such reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the “Exchange
Act”) as soon as reasonably practicable after the Company has electronically filed such material with, or furnished it to, the
United States Securities and Exchange Commission (the “SEC”). Also available on the Company’s website are the
Company’s Code of Conduct and Board Guidelines on Significant Corporate Governance Issues, the charters of the
Committees of the Board, Form SD and the related Conflict Minerals Disclosure and Report, reports under Section 16 of
the Exchange Act of transactions in Company stock by directors and officers and its proxy statements.
ITEM 1A. RISK FACTORS
In addition to the risks described elsewhere in this report, set forth below is a summary of the material risks to an
investment in our securities. These risks are not the only ones we face. Additional risks not presently known to us or that
we currently deem immaterial may also have an adverse effect on us. If any of these risks actually occur, our business,
results of operations, cash flows and financial condition could be materially and adversely impacted, which might cause the
value of our securities to decline.
We face risks associated with significant international operations, including exposure to foreign currency
fluctuations.
We operate on a global basis serving consumers in more than 200 countries and territories with approximately 75% of
our Net sales originating in markets outside the U.S. While geographic diversity helps to reduce our exposure to risks in
any one country or part of the world, it also means that we are subject to the full range of risks associated with significant
international operations, including, but not limited to:
changes in exchange rates for foreign currencies, which may reduce the U.S. dollar value of revenues, profits and
cash flows from non-U.S. markets or increase our supply costs, as measured in U.S. dollars, in those markets;
exchange controls and other limits on our ability to import or export raw materials or finished product or to
repatriate earnings from overseas;
political or economic instability, social or labor unrest or changing macroeconomic conditions in our markets,
including as a result of volatile commodity prices, including the price of oil;
lack of well-established or reliable legal systems in certain countries where we operate;
foreign ownership restrictions and the potential for nationalization or expropriation of property or other resources;
and
other foreign or domestic legal and regulatory requirements, including those resulting in potentially adverse tax
consequences or the imposition of onerous trade restrictions and/or tariffs, price controls, labor laws, travel or
immigration restrictions, profit controls or other government controls.
These risks could have a significant impact on our ability to sell our products on a competitive basis and may
adversely affect our business, results of operations, cash flows and financial condition.
In an effort to minimize the impact on earnings of foreign currency rate movements, we engage in a combination of
selling price increases, where permitted, sourcing strategies, cost-containment measures and selective hedging of foreign
currency transactions. However, the impact of these measures may not fully offset any negative impact of foreign currency
rate movements on our business and results of operations.
4
Significant competition in our industry could adversely affect our business.
We face vigorous competition worldwide, including from strong local competitors and from other large, multinational
companies, some of which may have greater resources than we do. We face this competition in several aspects of our
business, including, but not limited to, the pricing of products, promotional activities, new product introductions and
expansion into new geographies. Some of our competitors may spend more aggressively on advertising and promotional
activities than we do, introduce competing products more quickly and/or respond more effectively to changing business
and economic conditions. Such competition also extends to administrative and legal challenges of product claims and
advertising. Our ability to compete also depends on the strength of our brands and on our ability to enforce and defend our
intellectual property, including patent, trademark, copyright, trade secret and trade dress rights against infringement and
legal challenges by competitors.
We may be unable to anticipate the timing and scale of such initiatives or challenges by competitors or to successfully
respond to them, which could harm our business. In addition, the cost of responding to such initiatives and challenges,
including management time, out-of-pocket expenses and price reductions, may affect our performance in the relevant
period. A failure to compete effectively could adversely affect our business, results of operations, cash flows and financial
condition.
Our business is subject to legal and regulatory risks in the U.S. and abroad.
Our business is subject to extensive legal and regulatory requirements in the U.S. and abroad. Such legal and
regulatory requirements apply to most aspects of our products, including their development, ingredients, manufacture,
packaging, labeling, storage, transportation, distribution, export, import, advertising and sale. U.S. federal authorities,
including the U.S. Food and Drug Administration (the “FDA”), the Federal Trade Commission, the Consumer Product
Safety Commission and the Environmental Protection Agency, regulate different aspects of our business, along with
parallel authorities at the state and local levels and comparable authorities overseas. Also, our selling practices are
regulated by competition law authorities in the U.S. and abroad.
New or more stringent legal or regulatory requirements, or more restrictive interpretations of existing requirements,
could adversely impact our business, results of operations, cash flows and financial condition. For example, from time to
time, various regulatory authorities in Europe, the U.S. and other countries review the use of various ingredients in
consumer products. Triclosan, an ingredient used by us in Colgate Total toothpaste, is an example of an ingredient that has
undergone reviews by various regulatory authorities worldwide, both by itself and in the context of its use in specific
products or types of products. In the U.S., Colgate Total toothpaste is subject to the FDA’s rigorous New Drug Application
(“NDA”) process for safety and efficacy. Effective September 2017, the FDA restricted the use of 19 active ingredients,
including triclosan and triclocarban, in antibacterial consumer soaps in the U.S. Our consumer soaps do not contain
triclosan or triclocarbon. Some states and municipalities in the U.S. have proposed, and Minnesota has passed, legislation
banning the sale of certain consumer products containing triclosan. The Minnesota legislation does not cover Colgate Total
toothpaste. In November 2016, the Canadian government finalized its review of the potential human and environmental
risks of triclosan, concluding that triclosan does not enter the environment in quantities or conditions that pose a danger in
Canada to human life or health, and that triclosan is neither bioaccumulative nor persistent, but that triclosan could be
entering the environment at levels that could potentially cause harm to some aquatic organisms. The Canadian government
is now working with stakeholders to ensure triclosan remains under a level it has determined to be safe, and we will
participate in this process. Triclosan is also currently being evaluated under the European Union’s Regulation for the
Registration, Evaluation, Authorization and Restriction of Chemicals, which evaluation process is expected to take several
years to complete.
A decision by a regulatory or governmental authority that triclosan, or any other of our ingredients, should not be used
in certain consumer products or should otherwise be newly regulated, could adversely impact our business, as could
negative reactions by our consumers, trade customers or non-governmental organizations to our use of such ingredients.
Additionally, an inability to develop new or reformulated products containing alternative ingredients or to obtain regulatory
approval of such products on a timely basis could likewise adversely affect our business.
5
Because of our extensive international operations, we could be adversely affected by violations of the U.S. Foreign
Corrupt Practices Act (the “FCPA”) and similar worldwide anti-bribery laws. The FCPA and similar worldwide anti-bribery
laws generally prohibit companies and their intermediaries from making improper payments to government officials or
other third parties for the purpose of obtaining or retaining business. While our policies mandate compliance with these
anti-bribery laws, we cannot provide assurance that our internal control policies and procedures will always protect us from
reckless or criminal acts committed by our employees, joint-venture partners or agents. Violations of these laws, or
allegations of such violations, could disrupt our business and adversely affect our reputation and our business, results of
operations, cash flows and financial condition.
While it is our policy and practice to comply with all legal and regulatory requirements applicable to our business, a
finding that we are in violation of, or out of compliance with, applicable laws or regulations could subject us to civil
remedies, including fines, damages, injunctions or product recalls, or criminal sanctions, any of which could adversely
affect our business, results of operations, cash flows and financial condition. Even if a claim is unsuccessful, is without
merit or is not fully pursued, the negative publicity surrounding such assertions regarding our products, processes or
business practices could adversely affect our reputation and brand image. For information regarding our legal and
regulatory matters, see Item 3 “Legal Proceedings” and Note 13, Commitments and Contingencies to the Consolidated
Financial Statements.
Increasing dependence on key retailers in developed markets, changes in the policies of our retail trade customers,
the emergence of new sales channels and the growing presence of e-commerce retailers may adversely affect our
business.
Our products are sold in a highly competitive global marketplace which has experienced increased trade concentration
and the growing presence of large-format retailers and discounters. With the growing trend toward retail trade
consolidation, we are increasingly dependent on key retailers, and some of these retailers, including large-format retailers,
may have greater bargaining strength than we do. They may use this leverage to demand higher trade discounts, allowances
or slotting fees, which could lead to reduced sales or profitability. The loss of a key customer or a significant reduction in
sales to a key customer could adversely affect our business, results of operations, cash flows and financial condition. For
additional information regarding our customers, see “Distribution; Raw Materials; Competition; Trademarks and Patents”
in Item 1 “Business.”
We also have been and may continue to be negatively affected by changes in the policies or practices of our retail trade
customers, such as inventory de-stocking, limitations on access to shelf space, delisting of our products, environmental or
sustainability initiatives and other conditions. For example, a determination by a key retailer that any of our ingredients
should not be used in certain consumer products could adversely impact our business, results of operations, cash flows and
financial condition. In addition, private label products sold by retail trade chains, which are typically sold at lower prices
than branded products, are a source of competition for certain of our product lines. The emergence of new sales channels
for our products may affect, and the growing presence of e-commerce retailers have affected and may continue to affect,
consumer preferences and market dynamics and could also adversely impact our business, results of operations, cash flows
and financial condition.
6
The growth of our business depends on the successful identification, development and launch of innovative new
products.
Our growth depends on the continued success of existing products, as well as the successful launch of innovative new
products and line extensions. Our ability to launch new products and line extensions and to sustain existing products is
affected by whether we can successfully:
identify, develop and fund technological innovations;
obtain and maintain necessary intellectual property protection and avoid infringing intellectual property rights of
others;
obtain approvals and registrations of regulated products, including from the FDA and other regulatory bodies in
the U.S. and abroad; and
anticipate and respond to consumer needs and preferences.
The identification, development and introduction of innovative new products and line extensions involve considerable
costs, and any new product or line extension may not generate sufficient customer and consumer interest and sales to
become a profitable product or to cover the costs of its development and promotion. Our ability to achieve a successful
launch of a new product or line extension could also be adversely affected by preemptive actions taken by competitors in
response to the launch, such as increased promotional activities and advertising.
The failure to develop and launch successful new products could hinder the growth of our business and any delay in
the development or launch of a new product could result in us not being the first to market, which could compromise our
competitive position and adversely affect our business, results of operations, cash flows and financial condition.
If, in the course of identifying or developing new products, we are found to have infringed the trademark, trade secret,
copyright, patent or other intellectual property rights of others, directly or indirectly, through the use of third-party ideas or
technologies, such a finding could adversely affect our ability to develop innovative new products and adversely affect our
business, results of operations, cash flows and financial condition. Even if we are not found to infringe a third party’s
intellectual property rights, claims of infringement could adversely affect us, including by increasing costs and by delaying
the launch of new products.
We may not realize the benefits that we expect from our Global Growth and Efficiency Program.
Our restructuring program, which we refer to as the “Global Growth and Efficiency Program,” is ongoing. The Global
Growth and Efficiency Program’s initiatives are expected to help us ensure sustained solid worldwide growth in unit
volume, organic sales, operating profit and earnings per share and enhance our global leadership positions in our core
businesses. While implementation of the Global Growth and Efficiency Program is well underway and many of the
initiatives under the program have been successfully implemented or are nearing completion, the successful
implementation of the remainder of the program presents significant organizational challenges and, in some cases, may
require successful negotiations with third parties. As a result, we may not be able to realize all of the remaining anticipated
benefits from the Global Growth and Efficiency Program. Events and circumstances, such as financial or strategic
difficulties, delays and unexpected costs may occur that could result in our not realizing all of the remaining anticipated
benefits or our not realizing such benefits on our expected timetable. In addition, changes in foreign exchange rates or in
tax, labor or immigration laws may result in our not achieving the remaining anticipated cost savings as measured in U.S.
dollars. If we are unable to realize the remaining anticipated savings of the Global Growth and Efficiency Program, our
ability to fund other initiatives and enhance profitability may be adversely affected. Any failure to implement the Global
Growth and Efficiency Program in accordance with our expectations could adversely affect our business, results of
operations, cash flows and financial condition. For additional information regarding the Global Growth and Efficiency
Program, refer to Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations
– Significant Items Impacting Comparability” and “– Restructuring and Related Implementation Charges.”
7
There is no guarantee that our ongoing efforts to reduce costs will be successful.
One way that we generate funds needed to support the growth of our business is through our continuous, Company-
wide initiatives to lower costs and increase effective asset utilization, which we refer to as our funding-the-growth
initiatives. These initiatives are designed to reduce costs associated with direct materials, indirect expenses, distribution
and logistics, and advertising and promotional materials, among other things. The achievement of our funding-the-growth
goals depends on our ability to successfully identify and realize additional savings opportunities. Events and
circumstances, such as financial or strategic difficulties, delays and unexpected costs may occur that could result in our not
realizing any or all of the anticipated benefits or our not realizing the anticipated benefits on our expected timetable. If we
are unable to realize the anticipated savings of our funding-the-growth initiatives, our ability to fund other initiatives and
achieve our profitability goals may be adversely affected. Any failure to implement our funding-the-growth initiatives in
accordance with our expectations could adversely affect our business, results of operations, cash flows and financial
condition. For additional information regarding our funding-the-growth initiatives, refer to Part II, Item 7 “Management’s
Discussion and Analysis of Financial Condition and Results of Operations – Executive Overview.”
Damage to our reputation could have an adverse effect on our business.
Maintaining our strong reputation with consumers and our trade partners globally is critical to selling our branded
products. Accordingly, we devote significant time and resources to programs designed to protect and preserve our
reputation, such as our Ethics and Compliance, Sustainability, Brand Protection and Product Safety, Regulatory and Quality
initiatives. Adverse publicity about us, our brands, our supply chain or our ingredients regarding health concerns, legal or
regulatory proceedings, environmental impacts (including packaging, energy and water use and waste management) or
other sustainability or policy issues, whether or not deserved, could jeopardize our reputation. In addition, widespread use
of digital and social media by consumers has greatly increased the accessibility of information and the speed of its
dissemination. Negative publicity, posts or comments on social media about us, our brands or our products, whether true or
untrue, could damage our brands and our reputation. The success of our brands could also suffer if our marketing initiatives
do not have the desired impact on a brand’s image or its ability to attract consumers.
Additionally, due to the scale and scope of our business, we must rely on relationships with third parties, including our
suppliers, distributors, contractors, joint venture partners and other external business partners, for certain functions. While
we have policies and procedures for managing these relationships, they inherently involve a lesser degree of control over
business operations, governance and compliance, thereby potentially increasing our reputational and legal risk.
In addition, third parties sell counterfeit versions of our products, which are inferior or may pose safety risks. As a
result, consumers of our brands could confuse our products with these counterfeit products, which could cause them to
refrain from purchasing our brands in the future and in turn could impair our brand equity and adversely affect our
business, results of operations, cash flows and financial condition.
Damage to our reputation or loss of consumer confidence in our products for these or any other reasons could
adversely affect our business, results of operations, cash flows and financial condition, as well as require resources to
rebuild our reputation.
Volatility in material and other costs could adversely impact our profitability.
Raw and packaging material commodities such as resins, pulp, essential oils, tropical oils, tallow, poultry, corn and
soybeans are subject to wide price variations. Increases in the costs and availability of these commodities and the costs of
energy, transportation and other necessary services have affected and may continue to adversely affect our profit margins if
we are unable to pass along such higher costs in the form of price increases or otherwise achieve cost efficiencies, such as
in manufacturing and distribution. As a result, fluctuations in such prices and costs could have a material adverse effect on
our business, results of operations and financial condition. See “Disruption in our global supply chain or key office
facilities could adversely impact our business” below for additional information.
8
Legal claims and proceedings could adversely impact our business.
As a global company serving consumers in more than 200 countries and territories, we may be subject to a wide
variety of legal claims and proceedings, including disputes relating to intellectual property, contracts, product liability,
marketing, advertising, foreign exchange controls, antitrust and trade regulation, as well as labor and employment, pension,
privacy, environmental and tax matters and consumer class actions. Regardless of their merit, these claims can require
significant time and expense to investigate and defend. Since litigation is inherently uncertain, there is no guarantee that we
will be successful in defending ourselves against such claims or proceedings, or that our assessment of the materiality of
these matters, including any reserves taken in connection therewith, will be consistent with the ultimate outcome of such
matters. In addition, if one of our products, or a raw material contained in our products, is perceived or found to be
defective or unsafe, we may need to recall some of our products. Whether or not a legal claim or proceeding is successful,
or a recall is required, such assertions could have an adverse effect on our business, results of operations, cash flows and
financial condition, and the negative publicity surrounding them could harm our reputation and brand image. See Item 3
“Legal Proceedings” and Note 13, Commitments and Contingencies to the Consolidated Financial Statements for
additional information on certain of our legal claims and proceedings.
Disruption in our global supply chain or key office facilities could adversely impact our business.
We are engaged in manufacturing and sourcing of products and materials on a global scale. Our operations and those
of our suppliers could be disrupted by a number of factors, including, but not limited to:
environmental events;
strikes and other labor disputes;
disruptions in logistics;
loss or impairment of key manufacturing sites;
loss of key suppliers;
supplier capacity constraints;
raw material and product quality or safety issues;
industrial accidents or other occupational health and safety issues;
the impact on our suppliers of tighter credit or capital markets; and
natural disasters, including climatic events and earthquakes, acts of war or terrorism and other external factors
over which we have no control.
In addition, we purchase certain key raw and packaging materials from single-source suppliers or a limited number of
suppliers and new suppliers may have to be qualified under industry, governmental and Colgate standards, which can
require additional investment and take a significant period of time.
While we believe that the supplies of raw materials needed to manufacture our products are adequate and have
business continuity and contingency plans in place for key manufacturing sites and the supply of raw and packaging
materials, significant disruption of manufacturing or sourcing of products or materials for any reason, including any of the
above reasons, could interrupt product supply and, if not remedied, have an adverse impact on our business, results of
operations, cash flows and financial condition.
In addition, as a result of our clustering of single-country subsidiaries into regional commercial hubs and our
implementation of a global shared service organizational model, certain of our functions, such as marketing, finance and
accounting, customer service and logistics, and human resources, have become more concentrated in key office facilities. A
significant disruption to any of our key office facilities for any reason, including natural disasters, acts of war or terrorism,
could adversely affect our business, results of operations, cash flows and financial condition.
9
A cyber-security incident, data breach or a failure of a key information technology system could adversely impact
our business or reputation.
We rely extensively on information technology systems (“IT Systems”), including some which are managed, hosted,
provided and/or used by third parties and their vendors, in order to conduct our business. Our uses of these systems
include, but are not limited to:
communicating within our company and with other parties, including our customers and consumers;
ordering and managing materials from suppliers;
converting materials to finished products;
receiving and processing orders from and shipping products to our customers;
marketing products to consumers;
collecting and storing customer, consumer, employee, investor and other stakeholder information and personal
data;
processing transactions, including but not limited to employee payroll, employee and retiree benefits and
payments to customers and vendors;
hosting, processing and sharing confidential and proprietary research, business plans and financial information;
complying with legal, regulatory and tax requirements;
providing data security; and
handling other processes involved in managing our business.
Although we have a broad array of information security measures in place, our IT Systems, including those of third-
party service providers with whom we have contracted, have been, and will likely continue to be, subject to computer
viruses or other malicious codes, unauthorized access attempts, phishing and other cyber-attacks. Cyber-attacks and other
cyber incidents are occurring more frequently, are constantly evolving in nature, are becoming more sophisticated and are
being made by groups and individuals with a wide range of expertise and motives. Such cyber-attacks and cyber incidents
can take many forms, including cyber extortion, social engineering, password theft or introduction of viruses or malware,
such as ransomware through phishing emails. We cannot guarantee that our security efforts will prevent breaches or
breakdowns of our, or our third-party service providers’, IT Systems since the techniques used in these attacks change
frequently and may be difficult to detect for periods of time. In addition, although we have policies and procedures in place
to ensure that all personal information collected by us or our third-party service providers is securely maintained, data
breaches due to human error or intentional or unintentional conduct have occurred and likely will continue to occur.
Although we have seen no material impact on our business operations from the cyber-security attacks and data breaches we
have experienced to date, if we suffer a loss or disclosure of confidential business or stakeholder information as a result of
a breach of our IT Systems, including those of third-party service providers with whom we have contracted, we may suffer
reputational, competitive and/or business harm, incur significant costs and be subject to government investigations,
litigation, fines and/or damages, which may adversely impact our business, results of operations, cash flows and financial
condition.
Furthermore, while we have disaster recovery and business continuity plans in place, if our IT Systems are damaged,
breached or cease to function properly for any reason, including the poor performance of, failure of or cyber-attack on
third-party service providers, catastrophic events, power outages, cyber-security breaches, network outages, failed upgrades
or other similar events and, if the disaster recovery and business continuity plans do not effectively resolve such issues on a
timely basis, we may suffer interruptions in our ability to manage or conduct business as well as reputational harm, and
may be subject to governmental investigations and litigation, any of which may adversely impact our business, results of
operations, cash flows and financial condition.
10
Uncertain global economic conditions and disruptions in the credit markets may adversely affect our business.
Uncertain global economic conditions could adversely affect our business. Recent global economic trends pose
challenges to our business and could result in declining revenues, profitability and cash flows. Although we continue to
devote significant resources to support our brands and market our products at multiple price points, during periods of
economic uncertainty consumers may reduce consumption or switch to economy brands, which could reduce sales volumes
of our products or result in a shift in our product mix from higher margin to lower margin product offerings. Additionally,
retailers may increase pressure on our selling prices or increase promotional activity for lower-priced or value offerings as
they seek to maintain sales volumes and margins.
While we currently generate significant cash flows from ongoing operations and have access to global credit markets
through our various financing activities, a disruption in the credit markets could negatively impact the availability or cost
of funding. Reduced access to credit or increased costs could adversely affect our liquidity and capital resources or
significantly increase our cost of capital. In addition, if any financial institutions that hold our cash or other investments or
that are parties to our revolving credit facilities supporting our commercial paper program or other financing arrangements,
such as interest rate or foreign exchange hedging instruments, were to declare bankruptcy or become insolvent, they may
be unable to perform under their agreements with us. This could leave us with reduced borrowing capacity or unhedged
against certain interest rate, foreign currency or commodity price exposures. In addition, tighter credit markets may lead to
business disruptions for certain of our suppliers, contract manufacturers or trade customers which could, in turn, adversely
impact our business, results of operations, cash flows and financial condition.
Our success depends upon our ability to attract and retain key employees and the succession of senior management.
Our success largely depends on the performance of our management team and other key employees. If we are unable
to attract and retain talented, highly qualified senior management and other key people, our business, results of operations,
cash flows and financial condition could be adversely affected. In addition, if we are unable to effectively provide for the
succession of senior management, including our Chief Executive Officer, our business, results of operations, cash flows
and financial condition may be adversely affected. While we follow a disciplined, ongoing succession planning process and
have succession plans in place for senior management and other key executives, these do not guarantee that the services of
qualified senior executives will continue to be available to us at particular moments in time.
We have pursued and may continue to pursue acquisitions and divestitures, which could adversely impact our
results.
We have pursued and may continue to pursue acquisitions of brands, businesses or technologies from third parties.
Acquisitions and their pursuit involve numerous potential risks, including, among other things:
realizing the full extent of the expected benefits or synergies as a result of a transaction, within the anticipated
time frame, or at all;
successfully integrating the operations, technologies, services, products and systems of the acquired brands or
businesses in an effective, timely and cost-efficient manner;
receiving necessary consents, clearances and approvals in connection with a transaction;
diverting management’s attention from other business priorities;
successfully operating in new lines of business or markets;
retaining key employees, partners, suppliers and customers of the acquired business;
conforming standards, controls, procedures and policies of the acquired business with our own;
developing or launching products with acquired technologies; and
other unanticipated problems or liabilities.
11
Moreover, acquisitions could result in substantial additional debt, exposure to contingent liabilities, such as litigation
(including for infringement of intellectual property) or earn-out obligations, the potential impairment of goodwill or other
intangible assets, or transaction costs. Any of these risks, should they materialize, could adversely impact our business,
results of operations, cash flows and financial condition.
We also may periodically divest brands or businesses. These divestitures may adversely impact our results of
operations if we are unable to offset the dilutive impacts from the loss of revenue associated with the divested brands or
businesses, or otherwise achieve the anticipated benefits or cost savings from the divestitures. In addition, businesses under
consideration for, or otherwise subject to, divestiture may be adversely impacted prior to the divestiture, which could
negatively impact our results of operations.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
12
ITEM 2.
PROPERTIES
The Company owns or leases approximately 320 properties which include manufacturing, distribution, research and
office facilities worldwide. Our corporate headquarters is located in leased property at 300 Park Avenue, New York, New
York.
In the U.S., the Company operates in approximately 70 properties, of which 14 are owned. Major U.S. manufacturing
and warehousing facilities used by the Oral, Personal and Home Care product segment of our business are located in
Greenwood, South Carolina; Morristown, Tennessee; and Cambridge, Ohio. The Pet Nutrition segment has major
manufacturing and warehousing facilities in Bowling Green, Kentucky; Topeka, Kansas; Emporia, Kansas; and Richmond,
Indiana. The primary research center for Oral, Personal and Home Care products is located in Piscataway, New Jersey, and
the primary research center for Pet Nutrition products is located in Topeka, Kansas. Our global data center is also located in
Piscataway, New Jersey.
Overseas, the Company operates in approximately 250 properties, of which 68 are owned, in over 80 countries. Major
overseas manufacturing and warehousing facilities used by the Oral, Personal and Home Care product segment of our
business are located in Australia, Brazil, China, Colombia, France, Greece, Guatemala, India, Italy, Mexico, Poland, South
Africa, Thailand, Turkey, Venezuela and Vietnam. The Pet Nutrition segment has major manufacturing and warehousing
facilities in the Czech Republic and the Netherlands.
The Company has shared business service centers in Mexico, Poland and India, which are located in leased properties.
All of the facilities we operate are well maintained and adequate for the purpose for which they are intended.
13
ITEM 3.
LEGAL PROCEEDINGS
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,
privacy, environmental and tax matters, and consumer class actions. Management proactively reviews and monitors the
Company’s exposure to, and the impact of, environmental matters. The Company is party to various environmental matters
and, as such, may be responsible for all or a portion of the cleanup, restoration and post-closure monitoring of several sites.
The Company establishes accruals for loss contingencies when it has determined that a loss is probable and that the
amount of loss, or range of loss, can be reasonably estimated. Any such accruals are adjusted thereafter as appropriate to
reflect changes in circumstances.
The Company also determines estimates of reasonably possible losses or ranges of reasonably possible losses in excess
of related accrued liabilities, if any, when it has determined that a loss is reasonably possible and it is able to determine
such estimates. For those matters disclosed below for which the amount of any potential losses can be reasonably
estimated, the Company currently estimates that the aggregate range of reasonably possible losses in excess of any accrued
liabilities is $0 to approximately $250 million (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.
Brazilian Matters
There are certain tax and civil proceedings outstanding, as described below, related to the Company’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 $165
million. This amount includes additional assessments received from the Brazilian internal revenue authority in April 2016
relating to net operating loss carryforwards used by the Company’s Brazilian subsidiary to offset taxable income that had
also been deducted from the authority’s original assessments. The Company has been disputing the disallowances by
appealing the assessments since October 2001. Appeals are currently pending at the administrative level. In the event the
Company is ultimately unsuccessful in its administrative appeals, further appeals are available within the Brazilian federal
courts.
In September 2015, the Company lost one of its appeals at the administrative level and filed a lawsuit in Brazilian
federal court. In February 2017, the Company lost an additional administrative appeal and filed a similar action in Brazilian
federal court. 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.
14
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 $74 million, at the current exchange rate,
based on a claim that certain purchases of U.S. Treasury bills by the subsidiary and their subsequent disposition during the
period 2000 to 2001 were subject to a tax on foreign exchange transactions. The Company had been disputing the
assessment within the internal revenue authority’s administrative appeals process. However, in November 2015, the
Superior Chamber of Administrative Tax Appeals denied the Company’s final administrative appeal and the Company has
filed a lawsuit in the Brazilian federal court. In the event the Company is unsuccessful in this filing, 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.
Competition Matters
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 December 31,
2017 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 million. 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 million assessed against Sara Lee’s French
subsidiary. The Company is entitled to indemnification for this fine from Unilever as provided in the Sale and
Purchase Agreement. The fines were confirmed by the Court of Appeal in October 2016. The Company is
appealing the decision of the Court of Appeal on behalf of the Company and Sara Lee in the French Supreme
Court.
In July 2014, the Greek competition law authority issued a statement of objections alleging a restriction of
parallel imports into Greece. The Company responded to this statement of objections. In July 2017, the
Company received the decision from the Greek competition law authority in which the Company was fined
$11 million. The Company is appealing the decision to the Greek courts.
15
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 December 31, 2017, there were 193 individual cases pending against the
Company in state and federal courts throughout the United States, as compared to 115 cases as of December 31, 2016.
During the year ended December 31, 2017, 132 new cases were filed and 54 cases were resolved by voluntary dismissal,
appeal in the Company’s favor or settlement. The value of settlements in the years presented was not material, either
individually or in the aggregate, to each such period’s results of 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 and excess 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 the amount of any potential
losses from these cases currently cannot be reasonably estimated, the range of reasonably possible losses in excess of
accrued liabilities disclosed above does not include any amount relating to these cases.
N8
The Company was a defendant in a lawsuit that was brought in Utah federal court by N8 Medical, Inc. (“N8
Medical”), Brigham Young University (“BYU”) and N8 Pharmaceuticals, Inc. (“N8 Pharma”). The complaint, originally
filed in November 2013, alleged breach of contract and other torts arising out of the Company’s evaluation of a technology
owned by BYU and licensed, at various times, to Ceragenix Pharmaceuticals, Inc., now in bankruptcy, N8 Medical and N8
Pharma.
In 2016, the Company resolved the claims brought by BYU and N8 Medical. These claims were each resolved in an
amount that is not material to the Company’s results of operations. In the first quarter of 2017, the court dismissed the
claims of N8 Pharma and, in the third quarter of 2017, N8 Pharma appealed the decision.
ERISA Matter
In June 2016, a putative class action claiming that residual annuity payments made to certain participants in the
Colgate-Palmolive Company Employees’ Retirement Income Plan (the “Plan”) did not comply with the Employee
Retirement Income Security 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.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
16
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
For information regarding the market for the Company’s common stock, including quarterly market prices and
dividends and stock price performance graphs, refer to “Market and Dividend Information” included in Part IV, Item 15 of
this report. For information regarding the number of common shareholders of record, refer to “Historical Financial
Summary” included in Part IV, Item 15 of this report. For information regarding the securities authorized for issuance
under our equity compensation plans, refer to “Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters” included in Part III, Item 12 of this report.
Issuer Purchases of Equity Securities
On February 19, 2015, the Company’s Board of Directors (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 share repurchase program (the
“2015 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, blackout periods and other factors.
The following table shows the stock repurchase activity for each of the three months in the quarter ended
December 31, 2017:
Month
October 1 through 31, 2017
November 1 through 30, 2017
December 1 through 31, 2017
Total
Total Number of
Shares Purchased(1)
675,610
2,045,446
2,073,066
4,794,122
$
$
$
$
Average Price
Paid per Share
71.53
72.05
74.25
72.93
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)
622,000
2,031,250
2,024,900
4,678,150
1,367
1,221
1,071
_______
(1)
Includes share repurchases under the 2015 Program and those associated with certain employee elections under the Company’s compensation and
benefit programs.
(2)
(3)
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 115,972 shares, all of which relate to shares deemed surrendered to the Company to satisfy certain employee elections under the
Company’s compensation and benefit programs.
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 December 31, 2017.
ITEM 6.
SELECTED FINANCIAL DATA
Refer to the information set forth under the caption “Historical Financial Summary” included in Part IV, Item 15 of
this report.
17
(Dollars in Millions Except Per Share Amounts)
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Executive Overview
Colgate-Palmolive Company (together with its subsidiaries, 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 tightly focused on two product segments: Oral, Personal and Home Care; and Pet
Nutrition. Within these segments, the Company follows a closely defined business strategy to develop and increase market
leadership positions in key product categories. These product categories are prioritized 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 organized along geographic lines with management teams having responsibility for the
business and financial results in each region. The Company competes in more than 200 countries and territories worldwide
with established businesses in all regions contributing to the Company’s sales and profitability. Approximately 75% of the
Company’s Net sales are generated from markets outside the U.S., with approximately 50% of the Company’s 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 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 to a variety of retail and
wholesale customers and distributors. The Company, through Hill’s Pet Nutrition, also competes on a worldwide basis in
the pet nutrition market, selling its products principally through authorized pet supply retailers and veterinarians. Many of
the Company’s products are also sold online through various e-commerce platforms and retailers.
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, divestments and the
deconsolidation of the Company’s Venezuelan operations), 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. The monitoring
of these indicators and the Company’s Code of Conduct and corporate governance practices help to maintain business
health and strong internal controls. For additional information regarding non-GAAP financial measures, see “Non-GAAP
Financial Measures” below.
To achieve its business and financial objectives, the Company focuses the organization on initiatives to drive and fund
growth. The Company seeks to capture significant opportunities for growth by identifying and meeting consumer needs
within its core categories, through its focus on innovation and the deployment of valuable consumer and shopper insights
in the development of successful new products regionally, which are then rolled out on a global basis. To enhance these
efforts, the Company has developed key initiatives to build strong relationships with consumers, dental and veterinary
professionals and retail customers. In addition, the Company has strengthened its capabilities in e-commerce, including by
developing its relationships with online-only retailers and enhancing its digital marketing capabilities. 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.
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 funding-the-
growth initiatives, the Company seeks to become even more effective and efficient throughout its 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 also continues
to prioritize its investments toward its higher margin businesses, specifically Oral Care, Personal Care and Pet Nutrition.
18
(Dollars in Millions Except Per Share Amounts)
Significant Items Impacting Comparability
On December 22, 2017, 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.
The Company recorded a provisional charge of $275 based on its initial analysis of the TCJA using available
information and estimates. As a result, applicable U.S. and foreign taxes have been provided on substantially all of the
Company’s accumulated earnings of foreign subsidiaries previously considered indefinitely reinvested. Given the
significant complexity of the TCJA, anticipated guidance from the U.S. Treasury about implementing the TCJA and the
potential for additional guidance from the SEC or the FASB related to the TCJA or additional information becoming
available, the Company’s provisional charge may be adjusted during 2018 and is expected to be finalized no later than the
fourth quarter of 2018. Other provisions of the TCJA that impact future tax years are still being assessed. Refer to “Results
of Operations – Income Taxes” below for additional details.
In September 2016, the Company’s Mexican subsidiary completed the sale to the United States of America of the
Mexico City site on which its commercial operations, technology center and soap production facility were previously
located and received $60 as the third and final installment of the sale price. The total sale price (including the third
installment and the previously received first and second installments) was $120. The Company recognized a pretax gain of
$97 ($63 aftertax gain) in the third quarter of 2016, net of costs primarily related to site preparation.
In August 2015, the Company completed the sale of its laundry detergent business in the South Pacific to Henkel AG
& Co. KGaA for an aggregate purchase price of approximately 310 Australian dollars ($221) and recorded a pretax gain of
$187 ($120 aftertax or $0.13 per diluted share) in Other (income) expense, net. The gain is net of charges related to the
right-sizing of the Company’s South Pacific business, asset write-offs related to the divested laundry detergent business
and other costs related to the sale.
Effective December 31, 2015, the Company concluded it no longer met the accounting criteria for consolidation of its
Venezuelan subsidiary (“CP Venezuela”) and began accounting for CP Venezuela using the cost method of accounting. As
such, effective December 31, 2015, the Company’s Consolidated Balance Sheet no longer includes the assets and liabilities
of CP Venezuela. As a result of this change in accounting, the Company recorded an aftertax charge of $1,058 ($1,084
pretax) or $1.16 per diluted share in 2015. The charge primarily consists of an impairment of the Company’s investment in
CP Venezuela of $952, which includes intercompany receivables from CP Venezuela, and $111 related to the
reclassification of cumulative translation losses. Prior periods have not been restated and CP Venezuela’s Net sales,
Operating profit and Net income are included in the Company’s Consolidated Statements of Income through December 31,
2015. See Note 14, Venezuela to the Consolidated Financial Statements for additional details.
Since January 1, 2016, under the cost method of accounting, the Company no longer includes the local operating
results of CP Venezuela in its Consolidated Financial Statements and includes income relating to CP Venezuela only to the
extent it receives cash for sales of inventory to CP Venezuela or for dividends or royalties remitted by CP Venezuela, all of
which have been immaterial. Although CP Venezuela’s local operating results are no longer included in the Company’s
Consolidated Financial Statements for accounting purposes, under current tax rules, the Company is required to continue
including CP Venezuela in its consolidated U.S. federal income tax return. In the first quarter of 2016, Provision for
income taxes included a $210 U.S. income tax benefit principally related to changes in Venezuela’s foreign exchange
regime implemented in March 2016. See Note 11, Income Taxes to the Consolidated Financial Statements for additional
details.
Prior to the change in accounting, CP Venezuela’s functional currency was the U.S. dollar since Venezuela had been
designated hyper-inflationary and, as such, Venezuelan currency fluctuations were reported in income. The Company
remeasured the financial statements of CP Venezuela at the end of each month at the rate at which it expected to remit
future dividends which, based on the advice of legal counsel, was the SICAD rate (formerly known as the SICAD I rate).
During the year ended December 31, 2015, the Company incurred pretax losses of $34 ($22 aftertax or $0.02 per diluted
common share) related to the remeasurement of CP Venezuela’s local currency-denominated net monetary assets at the
quarter-end SICAD rate for the second and third quarters of 2015. The SICAD rate did not revalue during the fourth
quarter of 2015 and was 13.50 bolivares per dollar as of December 31, 2015. The remeasurement losses incurred in the
second and third quarters of 2015 are referred to as the “Venezuela Remeasurements.”
19
(Dollars in Millions Except Per Share Amounts)
Included in the Venezuela Remeasurements were charges related to the devaluation-protected bonds issued by the
Venezuelan government and held by CP Venezuela. Because the official exchange rate remained at 6.30 bolivares per
dollar, the devaluation-protected bonds did not revalue at the SICAD rate but remained at the official exchange rate,
resulting in an impairment in the fair value of the bonds.
The Company is in the midst of a restructuring program known as the “Global Growth and Efficiency Program,”
which following the most recent expansion and extension approved by the Company’s Board of Directors on October 26,
2017, runs through December 31, 2019. The program’s initiatives are expected to help the Company ensure sustained solid
worldwide growth in unit volume, organic sales, operating profit and earnings per share and to enhance its global
leadership positions in its core businesses. Implementation of the Global Growth and Efficiency Program remains on track.
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 $560
to $635 pretax ($500 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 $1,730 to $1,885 ($1,280 to $1,380 aftertax).
In 2017, 2016 and 2015, the Company incurred aftertax costs of $246, $168 and $183, respectively, associated with
the Global Growth and Efficiency Program. For more information regarding the Global Growth and Efficiency Program,
see “Restructuring and Related Implementation Charges” below and Note 4, Restructuring and Related Implementation
Charges to the Consolidated Financial Statements.
Outlook
Looking forward, the Company expects global macroeconomic and market conditions to remain highly challenging
and category growth rates around the world to continue to be slow. While the global marketplace in which the Company
operates has always been highly competitive, the Company continues 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 the Company does. Such activities have included more aggressive product claims and marketing challenges,
as well as increased promotional spending and geographic expansion. The Company has also been negatively affected by
changes in the policies or practices of its retail trade customers in key markets, such as inventory de-stocking. In addition,
the growth of e-commerce has affected and continues to affect consumer preferences and market dynamics. Given that
approximately 75% of the Company’s Net sales originate in markets outside the U.S., the Company has experienced and
may continue to experience volatile foreign currency fluctuations and high raw and packaging material costs. While the
Company has taken, and will continue to take, measures to mitigate the effect of these conditions, should they persist, they
could adversely affect the Company’s future results.
The Company believes it is well prepared to meet the challenges ahead due to its strong financial condition,
experience operating in challenging environments and continued focus on the Company’s 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 returns; and leading to win by staying true to the Company’s culture and focusing
on its stakeholders. The Company’s commitment to these priorities, together with the strength of the Company’s global
brands, its broad international presence in both developed and emerging markets and cost-saving initiatives, such as the
Company’s funding-the-growth initiatives and the Global Growth and Efficiency Program, should position the Company
well to increase shareholder value over the long term.
20
(Dollars in Millions Except Per Share Amounts)
Results of Operations
Net Sales
Worldwide Net sales were $15,454 in 2017, up 1.5% from 2016, driven by volume growth of 0.5%, net selling price
increases of 0.5% and positive foreign exchange of 0.5%. Organic sales (Net sales excluding, as applicable, the impact of
foreign exchange, acquisitions, divestments and the deconsolidation of the Company’s Venezuelan operations), a non-
GAAP financial measure as discussed below, increased 1.0% in 2017.
Net sales in the Oral, Personal and Home Care product segment were $13,162 in 2017, up 2.0% from 2016, driven by
volume growth of 0.5%, net selling price increases of 0.5% and positive foreign exchange of 1.0%. Organic sales in the
Oral, Personal and Home Care product segment increased 1.0% in 2017.
The increase in organic sales in 2017 versus 2016 was driven by an increase in Oral Care organic sales, partially offset
by a decline in Personal Care and Home Care organic sales. The increase in Oral Care organic sales was due to organic
sales growth in the toothpaste category. The decrease in Personal Care organic sales was primarily due to declines in
organic sales in the underarm protection, liquid hand soap and shampoo categories, which were partially offset by organic
sales growth in the shower gel and bar soap categories. The decrease in the Home Care organic sales was primarily due to
declines in organic sales in the hand dish category, partially offset by organic sales growth in the liquid cleaners and fabric
conditioner categories.
The Company’s share of the global toothpaste market was 43.3% for full year 2017, down 0.4 share points from full
year 2016, and its share of the global manual toothbrush market was 32.6% for full year 2017, down 0.5 share points from
full year 2016. Full year 2017 market shares in toothpaste were up in Africa/Eurasia and down in North America, Latin
America, Europe and Asia Pacific versus full year 2016. In the manual toothbrush category, full year 2017 market shares
were up in Africa/Eurasia and down in North America, Latin America, Europe and Asia Pacific versus full year 2016. For
additional information regarding the Company’s use of market share data and limitations on such data, see “Market Share
Information” below.
Net sales for Hill’s Pet Nutrition were $2,292 in 2017, an increase of 1.0% from 2016, as net selling price increases of
1.5% and positive foreign exchange of 0.5% were partially offset by volume declines of 1.0%. Organic sales for Hill’s Pet
Nutrition increased 0.5% in 2017.
The increase in organic sales in 2017 versus 2016 was due to an increase in organic sales in the Prescription Diet
category, partially offset by a decline in organic sales in the Advanced Nutrition and Naturals categories.
Worldwide Net sales were $15,195 in 2016, down 5.0% from 2015, as net selling price increases of 2.5% were more
than offset by volume declines of 3.0% and negative foreign exchange of 4.5%. Excluding divested businesses and the
impact of the deconsolidation of the Company’s Venezuelan operations, volume increased 1.5%. Organic sales increased
4.0% in 2016.
21
(Dollars in Millions Except Per Share Amounts)
Gross Profit/Margin
Worldwide Gross profit increased 2% to $9,280 in 2017 from $9,123 in 2016. Gross profit in both periods included
charges related to the Global Growth and Efficiency Program. Excluding these charges in both periods, Gross profit
increased to $9,355 in 2017 from $9,169 in 2016, reflecting an increase of $156 resulting from higher Net sales and an
increase of $30 resulting from higher Gross profit margin, which also excludes charges related to the Global Growth and
Efficiency Program.
Worldwide Gross profit margin was 60.0% in 2017, even with 2016. Excluding charges related to the Global Growth
and Efficiency Program in both periods, Gross profit margin increased by 20 basis points (bps) to 60.5% in 2017, from
60.3% in 2016. This increase in Gross profit margin was primarily driven by cost savings from the Company’s funding-the-
growth initiatives and the Global Growth and Efficiency Program (200 bps) and higher pricing (20 bps), partially offset by
higher raw and packaging material costs (190 bps).
Worldwide Gross profit decreased 3% to $9,123 in 2016 from $9,399 in 2015. Gross profit in both periods included
charges related to the Global Growth and Efficiency Program. Excluding these items in both periods, Gross profit
decreased to $9,169 in 2016 from $9,419 in 2015, reflecting a decrease of $492 resulting from the impact of the
deconsolidation of the Company’s Venezuelan operations effective December 31, 2015 and negative foreign exchange,
partially offset by growth in organic sales. This decrease in Gross profit was partially offset by an increase of $242
resulting from higher Gross profit margin.
Worldwide Gross profit margin increased to 60.0% in 2016 from 58.6% in 2015. Excluding the charges related to the
Global Growth and Efficiency Program in both periods, Gross profit margin increased by 160 bps to 60.3% in 2016, from
58.7% in 2015. This increase in Gross profit margin was primarily driven by cost savings from the Company’s funding-the-
growth initiatives and the Global Growth and Efficiency Program (200 bps) and higher pricing (100 bps), partially offset
by higher costs (170 bps), which included higher raw and packaging material costs driven by significant foreign exchange
transaction costs and the impact of the deconsolidation of the Company’s Venezuelan operations effective December 31,
2015.
Gross profit, GAAP
Global Growth and Efficiency Program
Gross profit, non-GAAP
2017
2016
2015
$
$
9,280
75
9,355
$
$
9,123
46
9,169
$
$
9,399
20
9,419
Gross profit margin, GAAP
Global Growth and Efficiency Program
Gross profit margin, non-GAAP
2017
2016
60.0%
0.5
60.5%
60.0%
0.3
60.3%
Basis Point
Change
—
20
2015
58.6%
0.1
58.7%
Basis Point
Change
140
160
22
(Dollars in Millions Except Per Share Amounts)
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased 5% to $5,497 in 2017 from $5,249 in 2016. Selling, general and
administrative expenses in both periods included charges related to the Global Growth and Efficiency Program. Excluding
these charges in both periods, Selling, general and administrative expenses increased to $5,408 in 2017 from $5,172 in
2016, reflecting increased advertising investment of $145 and higher overhead expenses of $91.
Selling, general and administrative expenses as a percentage of Net sales increased to 35.6% in 2017 from 34.5% in
2016. Excluding charges related to the Global Growth and Efficiency Program in both periods, Selling, general and
administrative expenses as a percentage of Net sales were 35.0%, an increase of 100 bps as compared to 2016. This
increase in 2017 was driven by increased advertising investment (80 bps) and higher overhead expenses (20 bps), both as a
percentage of Net sales. In 2017, advertising investment increased 10.2% to $1,573 as compared with $1,428 in 2016, and
increased as a percentage of Net sales to 10.2% from 9.4% in 2016.
Selling, general and administrative expenses decreased 4% to $5,249 in 2016 from $5,464 in 2015. Selling, general
and administrative expenses in both periods included charges related to the Global Growth and Efficiency Program.
Excluding these charges in both periods, Selling, general and administrative expenses decreased to $5,172 in 2016 from
$5,400 in 2015, reflecting decreased advertising investment of $63 and lower overhead expenses of $165.
Selling, general and administrative expenses as a percentage of Net sales increased to 34.5% in 2016 from 34.1% in
2015. Excluding charges related to the Global Growth and Efficiency Program in both periods, Selling, general and
administrative expenses as a percentage of Net sales were 34.0%, an increase of 30 bps as compared to 2015. This increase
in 2016 was driven by increased advertising investment (10 bps) and higher overhead expenses (20 bps), both as a
percentage of Net sales. In 2016, advertising investment decreased 4.2% to $1,428 as compared with $1,491 in 2015,
while as a percentage of Net sales, it increased to 9.4% from 9.3% in 2015.
Selling, general and administrative expenses, GAAP
Global Growth and Efficiency Program
Selling, general and administrative expenses, non-GAAP
2017
2016
2015
$
$
5,497
(89)
5,408
$
$
5,249
(77)
5,172
$
$
5,464
(64)
5,400
Selling, general and administrative expenses as
a percentage of Net sales, GAAP
Global Growth and Efficiency Program
Selling, general and administrative expenses as
a percentage of Net sales, non-GAAP
2017
2016
Basis Point
Change
2015
Basis Point
Change
35.6%
(0.6)
34.5%
(0.5)
110
34.1%
(0.4)
35.0%
34.0%
100
33.7%
40
30
23
(Dollars in Millions Except Per Share Amounts)
Other (Income) Expense, Net
Other (income) expense, net was $194, $37 and $62 in 2017, 2016 and 2015, respectively. The components of Other
(income) expense, net are presented below:
Other (income) expense, net
Global Growth and Efficiency Program
Amortization of intangible assets
Gain on sale of land in Mexico
Charges for litigation matters
Venezuela remeasurement charges
Gain on sale of South Pacific laundry detergent business
Equity income
Other, net
Total Other (income) expense, net
2017
2016
2015
$
$
169
35
—
—
—
—
(11)
1
194
$
$
105
33
(97)
17
—
—
(10)
(11)
37
$
$
170
33
—
14
34
(187)
(8)
6
62
Other (income) expense, net was $194 in 2017 as compared to $37 in 2016. Other (income) expense, net in both
periods included charges related to the Global Growth and Efficiency Program. Other (income) expense, net in 2016 also
included a gain on the sale of land in Mexico and charges for litigation matters.
Other (income) expense, net was $37 in 2016 as compared to $62 in 2015. In 2015, Other (income) expense, net
included charges related to the Global Growth and Efficiency Program, a gain on the sale of the Company’s laundry
detergent business in the South Pacific, charges related to the Venezuela Remeasurements and charges for litigation
matters.
Excluding the items described above in all periods, as applicable, Other (income) expense, net was $25 in 2017, $12 in
2016 and $31 in 2015.
Other (income) expense, net, GAAP
Global Growth and Efficiency Program
Gain on sale of land in Mexico
Charges for litigation matters
Venezuela remeasurement charges
Gain on sale of South Pacific laundry detergent business
Other (income) expense, net, non-GAAP
2017
2016
2015
$
$
194
(169)
—
—
—
—
25
$
$
$
37
(105)
97
(17)
—
—
12
$
62
(170)
—
(14)
(34)
187
31
24
(Dollars in Millions Except Per Share Amounts)
Operating Profit
Operating profit decreased 6% to $3,589 in 2017 from $3,837 in 2016. Operating profit increased 38% to $3,837 in
2016 from $2,789 in 2015.
In 2017, 2016 and 2015, Operating profit included charges related to the Global Growth and Efficiency Program. In
2016 and 2015, Operating profit also included charges for litigation matters. In 2016, Operating profit also included a gain
on sale of land in Mexico. In 2015, Operating profit also included a charge related to the deconsolidation of the Company’s
Venezuelan operations, charges related to the Venezuela Remeasurements and a gain on the sale of the Company’s laundry
detergent business in the South Pacific. Excluding these items in all periods, as applicable, Operating profit decreased 2%
in 2017, primarily due to an increase in Selling, general and administrative expenses, which was partially offset by higher
Gross profit, and Operating profit in 2016 was even with 2015, primarily due to lower Gross profit, which was offset by a
decrease in Selling, general and administrative expenses.
Operating profit margin was 23.2% in 2017, compared with 25.3% in 2016 and 17.4% in 2015. Excluding the items
described above in 2017 and 2016, as applicable, Operating profit margin decreased 80 bps to 25.4% in 2017 compared to
26.2% in 2016. This decrease is due to an increase in Selling, general and administrative expenses (100 bps), partially
offset by an increase in Gross profit (20 bps), both as a percentage of Net sales. Excluding the items described above in
2016 and 2015, as applicable, Operating profit margin increased 130 bps in 2016 compared to 2015, primarily due to an
increase in Gross profit (160 bps), partially offset by an increase in Selling, general and administrative expenses (30 bps),
both as a percentage of Net sales.
Operating profit, GAAP
$
3,589
$
3,837
(6)% $
2,789
38 %
2017
2016
% Change
2015
% Change
Global Growth and Efficiency Program
Gain on sale of land in Mexico
Charges for litigation matters
Venezuela deconsolidation
Venezuela remeasurement charges
Gain on sale of South Pacific laundry detergent
business
Operating profit, non-GAAP
Operating profit margin, GAAP
Global Growth and Efficiency Program
Gain on sale of land in Mexico
Charges for litigation matters
Venezuela deconsolidation
Venezuela remeasurement charges
Gain on sale of South Pacific laundry detergent
business
Operating profit margin, non-GAAP
Interest (Income) Expense, Net
333
—
—
—
—
228
(97)
17
—
—
—
3,922
$
—
3,985
$
(2)% $
254
—
14
1,084
34
(187)
3,988
— %
2017
2016
Basis Point
Change
2015
Basis Point
Change
23.2%
25.3%
(210)
17.4%
790
2.2
—
—
—
—
—
1.5
(0.7)
0.1
—
—
—
25.4%
26.2%
(80)
1.6
—
0.1
6.8
0.2
(1.2)
24.9%
130
Interest (income) expense, net was $102 in 2017 compared with $99 in 2016 and $26 in 2015. The increase in Interest
(income) expense, net in 2017 as compared to 2016 was primarily due to higher average interest rates on debt. The change
in Interest (income) expense, net from 2015 to 2016 was primarily due to lower interest income on investments held
outside the United States, which reflects the impact of the deconsolidation of the Company’s Venezuelan operations
effective December 31, 2015, and higher interest expense as a result of higher average interest rates on debt.
25
(Dollars in Millions Except Per Share Amounts)
Income Taxes
The effective income tax rate in 2017, 2016 and 2015 was 37.7%, 30.8% and 44.0%, respectively. As reflected in the
table below, the non-GAAP effective income tax rate was 29.5% in 2017 and 31.3% in 2016 and 2015. The decrease in the
non-GAAP effective income tax rate in 2017 as compared to 2016 is due primarily to the inclusion of excess tax benefits
from stock-based compensation in the Provision for income taxes, as discussed in more detail below.
$
$
$
$
$
As Reported GAAP
Global Growth and Efficiency Program
U.S. tax reform
Non-GAAP
As Reported GAAP
Global Growth and Efficiency Program
Gain on sale of land in Mexico
Benefits from tax matters
Charge for a litigation matter
Non-GAAP
As Reported GAAP
Venezuela deconsolidation(3)
Global Growth and Efficiency Program
Venezuela remeasurement charges
Gain on sale of South Pacific laundry detergent business
Charge for a litigation matter
Charge for a tax matter
Non-GAAP
2017
Income Before
Income Taxes
Provision For
Income Taxes(1)
Effective Income
Tax Rate (2)
3,487
$
333
—
3,820
$
1,313
87
(275)
1,125
2016
37.7%
(1.0)
(7.2)
29.5%
Income Before
Income Taxes
Provision For
Income Taxes(1)
Effective Income
Tax Rate (2)
3,738
$
1,152
228
(97)
—
17
59
(34)
35
6
3,886
$
1,218
2015
30.8%
(0.3)
(0.1)
0.9
—
31.3%
Income Before
Income Taxes
Provision For
Income Taxes(1)
Effective Income
Tax Rate (2)
2,763
$
1,084
254
34
(187)
14
—
$
3,962
$
1,215
26
69
12
(67)
—
(15)
1,240
44.0%
(11.7)
(0.3)
—
(0.2)
(0.1)
(0.4)
31.3%
_______
(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)
(3)
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.
See Note 14, Venezuela to the Consolidated Financial Statements and “Significant Items Impacting Comparability” above.
26
(Dollars in Millions Except Per Share Amounts)
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 future
earnings generated by foreign subsidiaries while providing for future 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
related to the TCJA using available information and estimates. The provisional charge is comprised of $451 related to the
one-time deemed repatriation of accumulated earnings of foreign subsidiaries and related withholding taxes and $20 related
primarily to the remeasurement of net deferred tax assets as a result of the reduction in the corporate income tax rate, which
are offset by $196 of income taxes which had been previously provided for planned repatriations of undistributed earnings
of foreign subsidiaries. As a result, applicable U.S. and foreign taxes have been provided on substantially all of the
Company’s accumulated earnings of foreign subsidiaries previously considered indefinitely reinvested. Given the
significant complexity of the TCJA, anticipated guidance from the U.S. Treasury about implementing the TCJA and the
potential for additional guidance from the SEC or the FASB related to the TCJA or additional information becoming
available, the Company’s provisional charge may be adjusted during 2018 and is expected to be finalized no later than the
fourth quarter of 2018. Other provisions of the TCJA that impact future tax years are still being assessed.
The effective income tax rate in 2017 also included $47 of stock compensation excess tax benefits in the Provision for
income taxes as a result of the adoption of ASU No. 2016-09, “Compensation–Stock Compensation (Topic 718):
Improvements to Employee Share-Based Payment Accounting” effective January 1, 2017. See Note 2, Summary of
Significant Accounting Policies - Recent Accounting Pronouncements and Note 11, Income Taxes to the Consolidated
Financial Statements, for additional details.
The effective income tax rate in 2016 included a $210 U.S. income tax benefit recognized in the first quarter of 2016
principally related to changes in Venezuela’s foreign exchange regime implemented in March 2016. Although, effective
December 31, 2015, the operating results of CP Venezuela are no longer included in the Company’s Consolidated Financial
Statements, under current tax rules, the Company is required to continue including CP Venezuela’s results in its
consolidated U.S. federal income tax return. See Note 11, Income Taxes and Note 14, Venezuela to the Consolidated
Financial Statements. In order to fully utilize the above mentioned $210 tax benefit in 2016, the Company repatriated an
incremental $1,500 of earnings of foreign subsidiaries it previously considered indefinitely reinvested outside of the U.S.,
and accordingly, recorded a tax charge of $210 during the first quarter of 2016.
The Company has taken a tax position in a foreign jurisdiction since 2002 that has been challenged by the local tax
authorities. In 2015, the Company became aware of several Supreme Court rulings in the foreign jurisdiction disallowing
certain tax deductions which had the effect of reversing prior decisions. Since the Company had taken deductions in prior
years similar to those now disallowed by the Court, the Company, as required, reassessed its tax position and increased its
unrecognized tax benefits by $15.
In 2016, the Supreme Court in the foreign jurisdiction decided the matter in the Company’s favor for the years 2002
through 2005. Also in 2016, the Administrative Court in the foreign jurisdiction decided the matter in the Company’s favor
for the years 2008 through 2011 by acknowledging the Supreme Court’s ruling for the years 2002 through 2005, which
eliminated the possibility of future appeals. As a result, the Company recorded a tax benefit of $30, including interest. The
tax benefit of deductions related to this tax position taken for the years 2006 through 2007 and 2012 through 2014 totals
approximately $16 at current exchange rates. These deductions are currently being challenged by the tax authorities in the
foreign jurisdiction either in the lower courts or at the administrative level and, if resolved in the Company’s favor, will
result in the Company recording additional tax benefits, including interest.
The effective income tax rate in all years benefited from tax planning associated with the Company’s global business
initiatives.
Reflecting U.S. tax reform, the Company expects its effective income tax rate in 2018 to be in the range of 26% to
27% both on a GAAP basis and excluding charges related to the Global Growth and Efficiency Program.
27
(Dollars in Millions Except Per Share Amounts)
Net Income attributable to Colgate-Palmolive Company and Earnings per share, diluted
Net income attributable to Colgate-Palmolive Company was $2,024, or $2.28 per share on a diluted basis, in 2017
compared to $2,441, or $2.72 per share on a diluted basis, in 2016 and $1,384, or $1.52 per share on a diluted basis, in
2015. In 2017, 2016 and 2015, Net income attributable to Colgate-Palmolive Company included aftertax charges related to
the Global Growth and Efficiency Program. In 2017, Net income attributable to Colgate-Palmolive Company also included
a charge related to U.S. tax reform. In 2016 and 2015, Net income attributable to Colgate-Palmolive Company also
included charges for litigation matters. In 2016, Net income attributable to Colgate-Palmolive Company also included a
gain on sale of land in Mexico and benefits from tax matters. In 2015, Net income attributable to Colgate-Palmolive
Company also included charges related to the Venezuela Remeasurements, a charge related to the deconsolidation of the
Company’s Venezuelan operations, a gain on the sale of the Company’s laundry detergent business in the South Pacific and
a charge for a tax matter.
Excluding the items described above in all years, as applicable, Net income attributable to Colgate-Palmolive
Company increased 1% to $2,545 in 2017 and Earnings per share, diluted increased 2% to $2.87, and Net income
attributable to Colgate-Palmolive Company decreased 1% to $2,522 in 2016, as compared to $2,556 in 2015, and Earnings
per share, diluted was even at $2.81.
28
(Dollars in Millions Except Per Share Amounts)
As Reported GAAP
Global Growth and Efficiency Program
U.S. tax reform
Non-GAAP
$
$
Income
Before
Income
Taxes
3,487
333
—
3,820
$
Provision For
Income Taxes(1)
1,313
$
87
(275)
1,125
2017
Net Income
Including
Noncontrolling
Interests
Net Income
Attributable to
Colgate-
Palmolive
Company
Diluted
Earnings
Per Share
(2)
2,174
$
2,024
$
246
275
246
275
2,695
$
2,545
$
2.28
0.28
0.31
2.87
$
$
2016
Income
Before
Income
Taxes
$ 3,738
Provision
For
Income
Taxes(1)
1,152
$
Net Income
Including
Noncontrolling
Interests
Less: Income
Attributable To
Noncontrolling
Interests
Net Income
Attributable to
Colgate-
Palmolive
Company
$
2,586
$
145
$
2,441
Diluted
Earnings
Per
Share(2)
2.72
$
228
(97)
—
17
59
(34)
35
6
169
(63)
(35)
11
1
—
—
—
168
(63)
(35)
11
0.19
(0.07)
(0.04)
0.01
As Reported GAAP
Global Growth and Efficiency
Program
Gain on sale of land in Mexico
Benefits from tax matters
Charge for a litigation matter
Non-GAAP
$ 3,886
$
1,218
$
2,668
$
146
$
2,522
$
2.81
2015
Net Income
Including
Noncontrolling
Interests
Less: Income
Attributable To
Noncontrolling
Interests
Net Income
Attributable to
Colgate-
Palmolive
Company
As Reported GAAP
Venezuela deconsolidation(3)
Global Growth and Efficiency
Program
Venezuela remeasurement
charges
Gain on sale of South Pacific
laundry detergent business
Charge for a litigation matter
Charge for a tax matter
Income
Before
Income
Taxes
$ 2,763
1,084
254
34
(187)
14
—
Provision
For
Income
Taxes(1)
1,215
$
26
69
12
(67)
—
(15)
$
1,548
$
164
$
1,058
185
22
(120)
14
15
—
2
—
—
—
—
Diluted
Earnings
Per
Share(2)
1.52
$
1.16
0.20
0.02
0.02
0.02
2.81
1,384
1,058
183
22
14
15
(120)
(0.13)
Non-GAAP
$ 3,962
$
1,240
$
2,722
$
166
$
2,556
$
_______
(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.
(3)
See Note 14, Venezuela to the Consolidated Financial Statements and “Significant Items Impacting Comparability” above.
29
(Dollars in Millions Except Per Share Amounts)
Segment Results
The Company markets its products in over 200 countries and territories throughout the world in two product segments:
Oral, Personal and Home Care; and Pet Nutrition. The Company evaluates segment performance based on several factors,
including Operating profit. The Company uses Operating profit as a measure of the operating segment performance
because it excludes the impact of corporate-driven decisions related to interest expense and income taxes.
Oral, Personal and Home Care
North America
Net sales
Operating profit
% of Net sales
2017
2016
$
$
$
$
3,117
986
31.6%
3,183
1,030
32.4%
% Change
(2.0) %
(4) %
(80) bps
$
$
2015
% Change
1.0 %
6 %
3,149
974
30.9% 150 bps
Net sales in North America decreased 2.0% in 2017 to $3,117, driven by net selling price decreases of 2.0%, while
volume and foreign exchange were flat. Organic sales in North America decreased 2.0% in 2017.
The decrease in organic sales in North America in 2017 versus 2016 was primarily due to decreases in Personal Care
and Home Care organic sales. The decrease in Personal Care was due to declines in organic sales in the underarm
protection and liquid hand soap categories. The decrease in Home Care was primarily due to a decline in organic sales in
the hand dish category.
Net sales in North America increased 1.0% in 2016 to $3,183, driven by volume growth of 2.5%, which was partially
offset by net selling price decreases of 1.0% and negative foreign exchange of 0.5%. Organic sales in North America
increased 1.5% in 2016.
Operating profit in North America decreased 4% in 2017 to $986, or 80 bps to 31.6% of Net sales. This decrease in
Operating profit as a percentage of Net sales was primarily due to a decrease in Gross profit (40 bps) and an increase in
Selling, general and administrative expenses (60 bps), both as a percentage of Net sales. This decrease in Gross profit was
primarily driven by higher raw and packaging material costs (160 bps) and lower pricing due to increased in-store
promotional activities, which were partially offset by cost savings from the Company’s funding-the-growth initiatives and
the Global Growth and Efficiency Program (220 bps). This increase in Selling, general and administrative expenses was
due to increased advertising investment (60 bps).
Operating profit in North America increased 6% in 2016 to $1,030, or 150 bps to 32.4% of Net sales. This increase in
Operating profit as a percentage of Net sales was primarily due to an increase in Gross profit (100 bps) and a decrease in
Selling, general and administrative expenses (70 bps), both as a percentage of Net sales. This increase in Gross profit was
primarily driven by cost savings from the Company’s funding-the-growth initiatives (190 bps), which were partially offset
by higher raw and packaging material costs (70 bps). This decrease in Selling, general and administrative expenses was due
to lower overhead expenses (40 bps) and decreased advertising investment (30 bps), in part reflecting a shift from
advertising investment to in-store promotional activities.
30
(Dollars in Millions Except Per Share Amounts)
Latin America
Net sales
Operating profit
% of Net sales
2017
2016
$
$
$
$
3,887
1,162
29.9%
3,650
1,132
31.0%
% Change
6.5 %
3 %
(110) bps
$
$
2015
% Change
(15.5) %
(6) %
4,327
1,209
27.9% 310 bps
Net sales in Latin America increased 6.5% in 2017 to $3,887, driven by volume growth of 2.5%, net selling price
increases of 3.0% and positive foreign exchange of 1.0%. Volume gains were led by Brazil, the Southern Cone and the
Andean Region. Organic sales in Latin America increased 5.5% in 2017.
The increase in organic sales in Latin America in 2017 versus 2016 was driven by increases in Oral Care organic sales
as well as increases in Personal Care and Home Care organic sales. The increase in Oral Care was due to organic sales
growth in the toothpaste, manual toothbrush and mouthwash categories. The increase in Personal Care was due to organic
sales growth in the bar soap and shampoo categories. The increase in Home Care was due to organic sales growth in the
fabric conditioner and liquid cleaners categories, partially offset by a decline in the hand dish category.
Net sales in Latin America decreased 15.5% in 2016 to $3,650, as net selling price increases of 8.5% were more than
offset by volume declines of 14.0% and negative foreign exchange of 10.0%. Excluding the impact of the deconsolidation
of the Company’s Venezuelan operations, volume increased 1.5%, led by volume gains in Mexico, partially offset by
volume declines in Argentina. Organic sales in Latin America increased 10.0% in 2016.
Operating profit in Latin America increased 3% in 2017 to $1,162, while as a percentage of Net sales it decreased 110
bps to 29.9% 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 (40 bps), both as a
percentage of Net sales. This increase in Gross profit was mainly driven by cost savings from the Company’s funding-the-
growth initiatives (170 bps) and higher pricing, which were partially offset by higher raw and packaging material costs
(260 bps). This increase in Selling, general and administrative expenses was due to increased advertising investment (120
bps) and higher overhead expenses (60 bps).
Operating profit in Latin America decreased 6% in 2016 to $1,132, while as a percentage of Net sales it increased 310
bps to 31.0% of Net sales. This increase in Operating profit as a percentage of Net sales was primarily due to an increase in
Gross profit (390 bps), partially offset by an increase in Selling, general and administrative expenses (70 bps), both as a
percentage of Net sales. This increase in Gross profit was mainly driven by cost savings from the Company’s funding-the-
growth initiatives (150 bps) and higher pricing, which were partially offset by higher raw and packaging material costs
(100 bps), which included foreign exchange transaction costs and the impact of the deconsolidation of the Company’s
Venezuelan operations effective December 31, 2015. This increase in Selling, general and administrative expenses was due
to increased advertising investment (90 bps), which was partially offset by lower overhead expenses (20 bps).
31
(Dollars in Millions Except Per Share Amounts)
Europe
Net sales
Operating profit
% of Net sales
2017
2016
$
$
$
$
2,394
599
25.0%
2,342
579
24.7%
% Change
2.0 %
3 %
30 bps
$
$
2015
2,411
615
25.5%
% Change
(3.0) %
(6) %
(80) bps
Net sales in Europe increased 2.0% in 2017 to $2,394, as volume growth of 2.0% and positive foreign exchange of
1.0% were partially offset by net selling price decreases of 1.0%. Volume gains were led by France, the Netherlands, Spain
and Poland. Organic sales in Europe increased 1.0% in 2017.
The increase in organic sales in Europe in 2017 versus 2016 was primarily due to an increase in Oral Care organic
sales, partially offset by a decrease in organic sales in Personal Care. The increase in Oral Care was driven by organic sales
growth in the toothpaste category. The decrease in Personal Care was primarily due to declines in organic sales in the
shampoo and bar soap categories, partially offset by an increase in organic sales in the shower gel category.
Net sales in Europe decreased 3.0% in 2016 to $2,342, as volume growth of 2.5% was more than offset by net selling
price decreases of 2.5% and negative foreign exchange of 3.0%. Organic sales in Europe were flat in 2016. Volume gains
were led by Germany, the United Kingdom and Poland, partially offset by volume declines in France.
Operating profit in Europe increased 3% in 2017 to $599, or 30 bps to 25.0% of Net sales. This increase in Operating
profit as a percentage of Net sales was primarily due to an increase in Gross profit (30 bps) and a decrease in Selling,
general and administrative expenses (20 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 and the Global Growth and Efficiency Program
(230 bps) and category sales mix, which were partially offset by higher raw and packaging material costs (230 bps),
including foreign exchange transaction costs, and lower pricing due to increased in-store promotional activities. This
decrease in Selling, general and administrative expenses was due to lower overhead expenses (70 bps), which were
partially offset by increased advertising investment (50 bps).
Operating profit in Europe decreased 6% in 2016 to $579, or 80 bps to 24.7% of Net sales. This decrease in Operating
profit as a percentage of Net sales was primarily due to a decrease in Gross profit (100 bps), partially offset by a decrease
in Selling, general and administrative expenses (50 bps), both as a percentage of Net sales. This decrease in Gross profit
was primarily driven by higher costs (200 bps), primarily due to higher raw and packaging material costs, which included
foreign exchange transaction costs, and lower pricing due to increased in-store promotional activities. These decreases in
Gross profit were partially offset by cost savings from the Company’s funding-the-growth initiatives and the Global
Growth and Efficiency Program (190 bps). This decrease in Selling, general and administrative expenses was due to
decreased advertising investment (100 bps), in part reflecting a shift from advertising investment to in-store promotional
activities, which was partially offset by higher overhead expenses (50 bps).
32
(Dollars in Millions Except Per Share Amounts)
Asia Pacific
Net sales
Operating profit
% of Net sales
2017
2016
$
$
$
$
2,781
841
30.2%
2,796
887
31.7%
% Change
(0.5) %
(5) %
(150) bps
$
$
2015
% Change
(5.0) %
— %
2,937
888
30.2% 150 bps
Net sales in Asia Pacific decreased 0.5% in 2017 to $2,781, driven by volume declines of 0.5%, while net selling
prices and foreign exchange were flat. Volume declines in Australia, Thailand and India were partially offset by volume
gains in the Philippines. Organic sales in Asia Pacific declined 0.5% in 2017.
The decrease in organic sales in 2017 versus 2016 was due to a decrease in Personal Care and Home Care organic
sales, partially offset by an increase in organic sales in Oral Care. The decrease in Personal Care was primarily due to
declines in organic sales in the shampoo and bar soap categories. The decrease in Home Care was due to declines in
organic sales in the hand dish and fabric conditioner categories. The increase in Oral Care was due to an increase in organic
sales in the toothpaste category, partially offset by a decline in organic sales in the manual toothbrush category.
Net sales in Asia Pacific decreased 5.0% in 2016 to $2,796, driven by volume declines of 1.0% and negative foreign
exchange of 4.0%, while net selling prices were flat. Excluding the impact of the divestment of the Company’s laundry
detergent business in the South Pacific, volume increased 2.0%, led by volume gains in the Philippines, Australia and the
Greater China region. Organic sales in Asia Pacific grew 2.0% in 2016.
Operating profit in Asia Pacific decreased 5% in 2017 to $841, or 150 bps to 30.2% of Net sales. This decrease in
Operating profit as a percentage of Net sales was primarily due to a decrease in Gross profit (20 bps) and an increase in
Selling, general and administrative expenses (120 bps), both as a percentage of Net sales. This decrease in Gross profit was
primarily due to higher costs (290 bps), primarily driven by raw and packaging material costs, which were partially offset
by cost savings from the Company’s funding-the-growth initiatives (250 bps). This increase in Selling, general and
administrative expenses was due to higher overhead expenses (90 bps) and increased advertising investment (30 bps).
Operating profit in Asia Pacific decreased to $887 in 2016, while as a percentage of Net sales, it increased 150 bps to
31.7% of Net sales. This increase in Operating profit as a percentage of Net sales was primarily due to an increase in Gross
profit (50 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
(260 bps) and sales mix, which were partially offset by higher costs (290 bps), primarily driven by raw and packaging
material costs, which included foreign exchange transaction costs. This decrease in Selling, general and administrative
expenses was due to decreased advertising investment (10 bps), in part reflecting a shift from advertising investment to in-
store promotional activities, and lower overhead expenses (30 bps).
33
(Dollars in Millions Except Per Share Amounts)
Africa/Eurasia
Net sales
Operating profit
% of Net sales
2017
2016
$
$
$
$
983
179
18.2%
960
186
19.4%
% Change
2.5 %
(4) %
(120) bps
$
$
2015
% Change
(4.0) %
4 %
998
178
17.8% 160 bps
Net sales in Africa/Eurasia increased 2.5% in 2017 to $983, as net selling price increases of 3.5% and positive foreign
exchange of 3.5% were partially offset by volume declines of 4.5%. Volume declines in the Sub-Saharan Africa region,
Turkey and South Africa were partially offset by volume gains in Russia. Organic sales in Africa/Eurasia declined 1.0% in
2017.
The decrease in organic sales in 2017 versus 2016 was due to a decrease in Oral Care, Personal Care and Home Care
organic sales. The decrease in Oral Care was due to declines in organic sales in the manual toothbrush and mouthwash
categories. The decrease in Personal Care was primarily due to declines in organic sales in the bar soap and underarm
protection categories, partially offset by an increase in organic sales in the shampoo category. The decrease in Home Care
was primarily due to declines in organic sales in the hand dish and liquid cleaners categories, partially offset by an increase
in organic sales in the fabric conditioner category.
Net sales in Africa/Eurasia decreased 4.0% in 2016 to $960, as net selling price increases of 9.5% were more than
offset by volume declines of 4.0% and negative foreign exchange of 9.5%. Organic sales in Africa/Eurasia grew 5.5% in
2016. Volume declines in the Sub-Saharan Africa region and South Africa were partially offset by volume gains in the Gulf
States.
Operating profit in Africa/Eurasia decreased 4% in 2017 to $179, or 120 bps to 18.2% 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 (260 bps), partially offset by an increase in Gross profit (160 bps), both as a percentage of Net sales. This
increase in Gross profit was mainly driven by cost savings from the Company’s funding-the-growth initiatives (120 bps)
and higher pricing, which were partially offset by higher raw and packaging material costs (100 bps). The increase in
Selling, general and administrative expenses was due to increased advertising investment (310 bps), partially offset by
lower overhead expenses (50 bps).
Operating profit in Africa/Eurasia increased 4% in 2016 to $186, or 160 bps to 19.4% of Net sales. This increase in
Operating profit as a percentage of Net sales was primarily due to an increase in Gross profit (300 bps), partially offset by
an increase in Selling, general and administrative expenses (150 bps), both as a percentage of Net sales. This increase in
Gross profit was mainly driven by cost savings from the Company’s funding-the-growth initiatives (170 bps) and higher
pricing, which were partially offset by higher raw and packaging material costs (350 bps), driven by higher foreign
exchange transaction costs. The increase in Selling, general and administrative expenses was due to higher overhead
expenses (120 bps) and increased advertising investment (30 bps).
34
(Dollars in Millions Except Per Share Amounts)
Hill’s Pet Nutrition
Net sales
Operating profit
% of Net sales
2017
2016
$
$
$
$
2,292
653
28.5%
2,264
653
28.8%
% Change
1.0 %
— %
(30) bps
$
$
2015
% Change
2.5 %
7 %
2,212
612
27.7% 110 bps
Net sales for Hill’s Pet Nutrition increased 1.0% in 2017 to $2,292, driven by net selling price increases of 1.5% and
positive foreign exchange of 0.5%, partially offset by volume declines of 1.0%. Volume declines in the United States,
Japan and Western and Eastern Europe were partially offset by volume gains in Australia and Latin America. The volume
declines in the United States were attributable to trade disruption, while the volume declines in Japan were attributable to a
continued contraction in the market. Organic sales in Hill’s Pet Nutrition increased 0.5% in 2017.
The increase in organic sales in 2017 versus 2016 was due to an increase in organic sales in the Prescription Diet
category, partially offset by declines in organic sales in the Advanced Nutrition and Natural categories.
Net sales for Hill’s Pet Nutrition increased 2.5% in 2016 to $2,264, driven by net selling price increases of 2.5% while
volume and foreign exchange were flat. Organic sales in Hill’s Pet Nutrition increased 2.5% in 2016. Volume gains led by
Russia, Western Europe, South Africa, Canada and Taiwan were offset by volume declines in the United States and Japan.
Operating profit in Hill’s Pet Nutrition was $653 in 2017, even with 2016, while as a percentage of Net sales it
decreased 30 bps to 28.5%. This decrease in Operating profit as a percentage of Net sales was primarily due to an increase
in Selling, general and administrative expenses (90 bps), partially offset by an increase in Gross profit (60 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 (170 bps) and higher pricing, partially offset by higher raw and packaging material costs (110 bps), net of
foreign exchange transaction costs. This increase in Selling, general and administrative expenses was due to increased
advertising investment (60 bps) and higher overhead expenses (30 bps).
Operating profit in Hill’s Pet Nutrition increased 7% in 2016 to $653, or 110 bps to 28.8% of Net sales. This increase
in Operating profit as a percentage of Net sales was primarily due to an increase in Gross profit (20 bps), a decrease in
Selling, general and administrative expenses (10 bps), and a decrease in Other (income) expense, net (80 bps), all as a
percentage of Net sales. This increase in Gross profit was primarily driven by cost savings from the Company’s funding-
the-growth initiatives (190 bps) and higher pricing, partially offset by higher costs (270 bps), primarily driven by higher
raw and packaging material costs, which included higher foreign exchange transaction costs. This decrease in Selling,
general and administrative expenses was primarily due to lower overhead expenses (10 bps). This decrease in Other
(income) expense, net was in part due to a foreign sales tax benefit.
35
(Dollars in Millions Except Per Share Amounts)
Corporate
Operating profit (loss)
$
(831) $
(630)
2017
2016
% Change
32 %
2015
$
(1,687)
% Change
(63) %
Corporate operations include Corporate overhead costs, research and development costs, stock-based compensation
expense related to stock options and restricted stock unit awards, restructuring and related implementation costs and gains
and losses on sales of non-core product lines. The components of Operating profit (loss) for the Corporate segment are
presented as follows:
Global Growth and Efficiency Program
Gain on sale of land in Mexico
Charges for litigation matters
Venezuela deconsolidation
Venezuela remeasurement charges
Gain on sale of South Pacific laundry detergent business
Corporate overhead costs and other, net
Total Corporate Operating profit (loss)
Restructuring and Related Implementation Charges
Global Growth and Efficiency Program
2017
2016
2015
(333) $
—
—
—
—
—
(498)
(831) $
(228) $
97
(17)
—
—
—
(482)
(630) $
(254)
—
(14)
(1,084)
(34)
187
(488)
(1,687)
$
$
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 2015. Building on the Company’s successful implementation of the
program, on October 26, 2017, the Board approved an expansion of the Global Growth and Efficiency Program and an
extension of the program through December 31, 2019 to take advantage of additional opportunities to streamline the
Company’s operations.
Initiatives under the Global Growth and Efficiency Program 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, which have already been successfully implemented in a number of the
Company’s operations around the world.
Simplifying and standardizing how work gets done by increasing technology-enabled collaboration and
taking advantage of global data and analytic capabilities, leading to smarter and faster decisions.
Reducing structural costs to continue to increase the Company’s gross and operating profit.
Building on Colgate’s current position of strength to enhance its leading market share positions worldwide
and ensure sustained sales and earnings growth.
36
(Dollars in Millions Except Per Share Amounts)
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. Savings, substantially all of which are
expected to increase future cash flows, are projected to be in the range of $560 to $635 pretax ($500 to $575 aftertax)
annually, once all projects are approved and implemented. Savings achieved in 2017 were in line with the Company’s
previously disclosed estimate of $50 to $60 pretax ($40 to $50 aftertax). The Company expects savings in 2018 to be
approximately $90 to $120 pretax ($100 to $125 aftertax). 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 $1,730 to
$1,885 ($1,280 to $1,380 aftertax). The Company anticipates that pretax charges for 2018 will approximate $100 to $175
($75 to $125 aftertax). It is expected that substantially all charges resulting from the Global Growth and Efficiency
Program will be incurred by December 31, 2019.
The pretax charges resulting from the Global Growth and Efficiency Program are currently estimated to be comprised
of the following categories: Employee-Related Costs, including severance, pension and other termination benefits (50%);
asset-related costs, primarily Incremental Depreciation and Asset Impairments (10%); and Other charges, which include
contract termination costs, consisting primarily of related implementation charges resulting directly from exit activities
(20%) and the implementation of new strategies (20%). Over the course of the Global Growth and Efficiency Program, it is
currently estimated that approximately 80% of the charges will result in cash expenditures.
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 3,800 to
4,400 positions from the Company’s global employee workforce.
For the years ended December 31, 2017, 2016 and 2015, restructuring and related implementation charges are
reflected in the Consolidated Statements of Income as follows:
Cost of sales
Selling, general and administrative expenses
Other (income) expense, net
Total Global Growth and Efficiency Program charges, pretax
Total Global Growth and Efficiency Program charges, aftertax
2017
2016
2015
$
$
$
75
89
169
333
246
$
$
$
46
77
105
228
168
$
$
$
20
64
170
254
183
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.
37
(Dollars in Millions Except Per Share Amounts)
Total charges incurred for the Global Growth and Efficiency Program relate to initiatives undertaken by the following
reportable operating segments:
2017
2016
2015
Program-to-date
Accumulated Charges
North America
Latin America
Europe
Asia Pacific
Africa/Eurasia
Hill’s Pet Nutrition
Corporate
Total
23%
2%
21%
5%
3%
6%
40%
100%
35%
5%
12%
4%
14%
7%
23%
100%
21%
3%
14%
4%
5%
5%
48%
100%
18%
3%
22%
3%
6%
7%
41%
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 $1,561 ($1,153 aftertax) in connection with the implementation of various projects
as follows:
Employee-Related Costs
Incremental Depreciation
Asset Impairments
Other
Total
Cumulative Charges
as of December 31, 2017
$
$
628
90
36
807
1,561
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.
38
(Dollars in Millions Except Per Share Amounts)
The following table summarizes the activity for the restructuring and related implementation charges, in the respective
periods, discussed above and the related accruals:
Employee-Related
Costs
Incremental
Depreciation
Asset
Impairments
Other
Total
Balance at January 1, 2015
Charges
Cash payments
Charges against assets
Foreign exchange
Other
Balance at December 31, 2015
Charges
Cash payments
Charges against assets
Foreign exchange
Other
Balance at December 31, 2016
Charges
Cash payments
Charges against assets
Foreign exchange
Other
Balance at December 31, 2017
$
$
$
$
85
109
(85)
(17)
(8)
—
84
61
(84)
(4)
(1)
—
56
163
(74)
(21)
3
—
127
$
$
$
$
— $
20
—
(20)
—
—
— $
9
—
(9)
—
—
— $
10
—
(10)
—
—
— $
— $
5
—
(5)
—
—
— $
20
—
(20)
—
—
— $
9
—
(9)
—
—
— $
107
120
(94)
—
(2)
—
131
138
(153)
—
—
9
125
151
(170)
—
1
—
107
$
$
$
$
192
254
(179)
(42)
(10)
—
215
228
(237)
(33)
(1)
9
181
333
(244)
(40)
4
—
234
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 $21, $4 and $17 for the
years ended December 31, 2017, 2016 and 2015, respectively, 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 10, Retirement Plans and Other
Retiree Benefits to the Consolidated Financial Statements).
Incremental Depreciation is recorded to reflect changes in useful lives and estimated residual values for long-lived
assets that will be taken out of service prior to the end of their normal service period. Asset Impairments are recorded to
write down assets held for sale or disposal to their fair value based on amounts expected to be realized. Charges against
assets within Asset Impairments are net of cash proceeds pertaining to the sale of certain assets.
Other charges consist primarily of charges resulting directly from exit activities and the implementation of new
strategies as a result of the Global Growth and Efficiency Program. These charges for the years ended December 31, 2017,
2016 and 2015 include third-party incremental costs related to the development and implementation of new business and
strategic initiatives of $145, $116 and $65, respectively, and contract termination costs and charges resulting directly from
exit activities of $6, $21 and $8, respectively. These charges were expensed as incurred. Also included in Other charges for
the years ended December 31, 2017, 2016 and 2015 are other exit costs of $0, $1 and $47, respectively, related to the
consolidation of facilities.
39
(Dollars in Millions Except Per Share Amounts)
Non-GAAP Financial Measures
This Annual Report on Form 10-K 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, as applicable, the impact of foreign
exchange, acquisitions, divestments and the deconsolidation of the Company’s Venezuelan operations) (non-GAAP) are
discussed in this Annual Report on Form 10-K. 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, as applicable, the external factor of foreign exchange, as well as the impact of acquisitions, divestments
and the deconsolidation of the Company’s Venezuelan operations. A reconciliation of organic sales growth to Net sales
growth for the years ended December 31, 2017 and 2016 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, effective income tax rate, Net income attributable to Colgate-Palmolive Company and Earnings per share on a
diluted basis are discussed in this Annual Report on Form 10-K both on a GAAP basis and excluding, as applicable,
charges resulting from the Global Growth and Efficiency Program, a charge related to U.S. tax reform, a gain on the sale of
land in Mexico, charges or benefits from tax matters, charges for litigation matters, costs related to the sale of land in
Mexico, a gain on the sale of the Company’s South Pacific laundry detergent business, charges related to effective
devaluations in Venezuela and a charge for the deconsolidation of the Company’s Venezuelan operations (non-GAAP).
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 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 years ended
December 31, 2017, 2016 and 2015 is presented within the applicable section of Results of Operations.
40
(Dollars in Millions Except Per Share Amounts)
The following tables provide a quantitative reconciliation of Net sales growth to organic sales growth for each of the
years ended December 31, 2017 and 2016 versus the prior year:
Year ended December 31, 2017
Oral, Personal and Home Care
North America
Latin America
Europe
Asia Pacific
Africa/Eurasia
Total Oral, Personal and Home Care
Pet Nutrition
Total Company
Year ended December 31, 2016
Oral, Personal and Home Care
North America
Latin America
Europe
Asia Pacific
Africa/Eurasia
Total Oral, Personal and Home Care
Pet Nutrition
Total Company
Market Share Information
Net Sales Growth
(GAAP)
Foreign
Exchange
Impact
Acquisitions and
Divestments
Impact
Organic
Sales Growth
(Non-GAAP)
(2.0)%
6.5%
2.0%
(0.5)%
2.5%
2.0%
1.0%
1.5%
—%
1.0%
1.0%
—%
3.5%
1.0%
0.5%
0.5%
—%
—%
—%
—%
—%
—%
—%
—%
(2.0)%
5.5%
1.0%
(0.5)%
(1.0)%
1.0%
0.5%
1.0%
Net Sales Growth
(GAAP)
Foreign
Exchange
Impact
Acquisitions and
Divestments
Impact
Organic
Sales Growth
(Non-GAAP)
1.0%
(15.5)%
(3.0)%
(5.0)%
(4.0)%
(6.5)%
2.5%
(5.0)%
(0.5)%
(10.0)%
(3.0)%
(4.0)%
(9.5)%
(5.0)%
—%
(4.5)%
—%
(15.5)%
—%
(3.0)%
—%
(5.5)%
—%
(4.5)%
1.5%
10.0%
—%
2.0%
5.5%
4.0%
2.5%
4.0%
Management uses market share information as a key indicator to monitor business health and performance. References
to market share in this Annual Report on Form 10-K 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. The Company measures year-
to-date market shares from January 1 of the relevant year through the most recent period for which market share data is
available, which typically reflects a lag time of one or two months. We believe that the third-party vendors we use to
provide data are reliable, but we have not verified the accuracy or completeness of the data or any assumptions underlying
the data. In addition, market share information calculated by the Company may be different from market share information
calculated by other companies due to differences in category definitions, the use of data from different countries, internal
estimates and other factors.
41
(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.
Cash Flow
Net cash provided by operations was $3,054 in 2017, compared to $3,141 in 2016 and $2,949 in 2015. Net cash
provided by operations for 2017 decreased as compared to 2016 primarily due to the timing of income tax payments. The
increase in 2016 as compared to 2015 was due to strong operating earnings and the timing of income tax payments,
partially offset by the impact of the deconsolidation of the Company’s Venezuelan operations effective December 31, 2015
and voluntary contributions to employee postretirement plans.
The Company defines working capital as the difference between current assets (excluding Cash and cash equivalents
and marketable securities, the latter of which is reported in Other current assets) and current liabilities (excluding short-
term debt). The Company’s working capital as a percentage of Net sales increased to (2.0)% in 2017 as compared to (2.2)%
in 2016, reflecting the Company’s continued tight focus on working capital.
Building on the Company’s successful implementation of the Global Growth and Efficiency Program, on October 26,
2017, the Board approved an expansion of the Global Growth and Efficiency Program and an extension of the program
through December 31, 2019 to take advantage of additional opportunities to streamline the Company’s operations.
Implementation of the Global Growth and Efficiency Program remains on track. Including the most recent expansion,
total program charges resulting from the Global Growth and Efficiency Program are estimated to be in the range of $1,730
to $1,885 ($1,280 to $1,380 aftertax). Approximately 80% of total program charges resulting from the Global Growth and
Efficiency Program are expected to result in cash expenditures. Savings from the Global Growth and Efficiency Program,
substantially all of which are expected to increase future cash flows, are projected to be in the range of $560 to $635 pretax
($500 to $575 aftertax) annually, once all projects are approved and implemented. Savings achieved in 2017 were in line
with the Company’s previously disclosed estimate of $50 to $60 pretax ($40 to $50 aftertax).
The Company anticipates that pretax charges for 2018 will approximate $100 to $175 ($75 to $125 aftertax). The
Company expects savings in 2018 to amount to approximately $90 to $120 pretax ($100 to $125 aftertax). It is anticipated
that cash requirements for the Global Growth and Efficiency Program will be funded from operating cash flows.
Approximately 75% of the restructuring accrual at December 31, 2017 is expected to be paid before year-end 2018.
Investing activities used $471 of cash in 2017, compared to $499 and $685 during 2016 and 2015, respectively.
Investing activities in 2017 include $44 of proceeds from the sale of property and non-core product lines, primarily related
to the Global Growth and Efficiency Program. Purchases of marketable securities and investments increased in 2017 to
$347 from $336 in 2016. Proceeds from the sale of marketable securities and investments increased in 2017 to $391 from
$378 in 2016.
42
(Dollars in Millions Except Per Share Amounts)
In September 2016, the Company’s Mexican subsidiary completed the sale to the United States of America of the
Mexico City site on which its commercial operations, technology center and soap production facility were previously
located and received $60 as the third and final installment of the sale price. The total sale price (including the third
installment and the previously received first and second installments) was $120. The Company recognized a pretax gain of
$97 ($63 aftertax gain) in the third quarter of 2016, net of costs primarily related to site preparation.
In August 2015, the Company completed the sale of its laundry detergent business in the South Pacific to Henkel AG
& Co. KGaA for an aggregate purchase price of approximately 310 Australian dollars ($221) and recorded a pretax gain of
$187 ($120 aftertax or $0.13 per diluted share). The gain is net of charges related to the right-sizing of the Company’s
South Pacific business, asset write-offs related to the divested laundry detergent business and other costs related to the sale.
Capital expenditures in 2017 were $553, a decrease from $593 in 2016 and $691 in 2015. Capital expenditures
decreased in 2017 primarily due to lower spending on capital projects in the Global Growth and Efficiency Program.
Capital expenditures for 2018 are expected to be approximately 3.5% of Net sales. The Company continues to focus its
capital spending on projects that are expected to yield high aftertax returns.
Financing activities used $2,450 of cash during 2017 compared to $2,233 and $2,276 during 2016 and 2015,
respectively. The increase in cash used in 2017 as compared to 2016 was primarily due to lower net proceeds from the
issuance of debt and higher purchases of treasury shares. The decrease in cash used in 2016 as compared to 2015 was
primarily due to lower purchases of treasury shares and higher proceeds from the exercise of stock options and excess tax
benefits from stock-based compensation, partially offset by lower net proceeds from the issuance of debt.
Long-term debt, including the current portion, increased to $6,566 as of December 31, 2017, as compared to $6,520 as
of December 31, 2016 and total debt increased to $6,577 as of December 31, 2017 as compared to $6,533 as of
December 31, 2016. The Company’s debt issuances support its capital structure strategy objectives of funding its business
and growth initiatives while minimizing its risk-adjusted cost of capital. During the fourth quarter of 2017, the Company
issued $400 of five-year notes at a fixed rate of 2.25%. During the third quarter of 2017, the Company issued $500 of
thirty-year notes at a fixed rate of 3.70%. The debt issuances in 2017 were under the Company’s shelf registration
statement. Proceeds from the debt issuances in 2017 were used for general corporate purposes, which included the
retirement of commercial paper borrowings.
At December 31, 2017, the Company had access to unused domestic and foreign lines of credit of $2,949 (including
under the facilities discussed below) and could also issue medium-term notes pursuant to an effective shelf registration
statement. In November 2011, the Company entered into a five-year revolving credit facility with a capacity of $1,850 with
a syndicate of banks. This facility was extended for an additional year in 2012 and again in 2013. In 2014, the Company
entered into an amendment of this facility whereby the facility was extended for an additional year to November 2019 and
the capacity of the facility was increased to $2,370. In 2016, the facility was extended for an additional year to November
2020. The Company also has the ability to draw $165 from a revolving credit facility that expires in November 2018.
Commitment fees related to the credit facilities are not material.
Domestic and foreign commercial paper outstanding was $24 and $295 as of December 31, 2017 and December 31,
2016, respectively. The average daily balances outstanding of commercial paper in 2017 and 2016 were $1,606 and $1,642,
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 of credit that expires in November 2020.
43
(Dollars in Millions Except Per Share Amounts)
The following is a summary of the Company’s commercial paper and global short-term borrowings as of
December 31, 2017 and 2016:
2017
2016
Weighted
Average Interest
Rate
2.8%
1.5%
Payable to banks
Commercial paper
Total
Maturities Outstanding
11
$
24
35
2018
2018
$
Weighted Average
Interest Rate
1.6 %
(0.3)%
Maturities Outstanding
13
$
295
308
2017
2017
$
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. See Note 6, Long-Term Debt and Credit Facilities to the Consolidated Financial Statements for
further information about the Company’s long-term debt and credit facilities.
Dividend payments in 2017 were $1,529, an increase from $1,508 in 2016 and $1,493 in 2015. Dividend payments
increased to $1.59 per share in 2017 from $1.55 per share in 2016 and $1.50 per share in 2015. In the first quarter of 2017,
the Company’s Board increased the quarterly common stock cash dividend to $0.40 per share from $0.39 per share,
effective in the second quarter of 2017.
The Company repurchases shares of its common stock in the open market and in private transactions to maintain its
targeted capital structure and to fulfill certain requirements of its compensation and benefit plans. On February 19, 2015,
the Board authorized the repurchase of shares of the Company’s common stock having an aggregate purchase price of up to
$5,000 under the 2015 Program, which replaced the previous program approved by the Board in 2011 (the “2011
Program”). The Company commenced repurchase of shares of the Company’s common stock under the 2015 Program
beginning February 19, 2015. The Board also has authorized share repurchases on an ongoing basis to fulfill certain
requirements of the Company’s compensation and benefit programs.
Aggregate share repurchases in 2017 consisted of 18.3 million common shares under the 2015 Program and 0.9
million common shares to fulfill the requirements of compensation and benefit plans, for a total purchase price of $1,399.
Aggregate repurchases in 2016 consisted of 18.3 million common shares under the 2015 Program and 1.0 million common
shares to fulfill the requirements of compensation and benefit plans, for a total purchase price of $1,335. Aggregate
repurchases in 2015 consisted of 19.9 million common shares under the 2015 Program, 1.7 million common shares under
the 2011 Program and 1.2 million common shares to fulfill the requirements of compensation and benefit plans, for a total
purchase price of $1,551.
Cash and cash equivalents increased $220 during 2017 to $1,535 at December 31, 2017, compared to $1,315 at
December 31, 2016, most of which ($1,467 and $1,273, respectively) were held by the Company’s foreign subsidiaries.
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, U.S. tax reform 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.
As a result of the lower U.S. corporate income tax rate, the Company expects a reduction in its future tax payments.
For more information regarding the impact of U.S. tax reform on the Company, refer to “Critical Accounting Policies and
Use of Estimates” below and Note 11, Income Taxes to the Consolidated Financial Statements.
44
(Dollars in Millions Except Per Share Amounts)
In order to fully utilize a $210 U.S. income tax benefit in 2016 principally related to changes in Venezuela’s foreign
exchange regime, during the quarter ended March 31, 2016, the Company decided to repatriate in 2016 $1,500 of earnings
of foreign subsidiaries it previously considered indefinitely reinvested outside of the U.S., and accordingly, recorded a tax
charge of $210 during the first quarter of 2016.
The following represents the scheduled maturities of the Company’s contractual obligations as of December 31, 2017:
Long-term debt including current portion(1)
Net cash interest payments on long-term debt(2)
Leases
Purchase obligations(3)
U.S. tax reform payments
Total
Total
2018
2019
2020
2021
2022
Thereafter
$
5,843
$ — $1,097
$ 248
$ 298
$ 889
$
3,311
1,325
737
1,197
315
119
188
952
52
107
163
112
22
104
143
99
22
97
106
21
22
83
93
3
22
815
44
10
175
$
9,417
$1,311
$1,501
$ 616
$ 544
$1,090
$
4,355
_______
(1) The Company classifies commercial paper and notes maturing within the next 12 months as long-term debt when it has the intent
(2)
and ability to refinance such obligations on a long-term basis. The amounts in this table exclude such obligations.
Includes the net interest payments on fixed and variable rate debt and associated interest rate swaps. Interest payments associated
with floating rate instruments are based on management’s best estimate of projected interest rates for the remaining term of variable
rate debt.
(3) The Company had outstanding contractual obligations with suppliers at the end of 2017 for the purchase of raw, packaging and
other materials and services in the normal course of business. These purchase obligation amounts represent only those items which
are based on agreements that are legally binding and that specify all significant terms including minimum quantity, price and term
and do not represent total anticipated purchases. Additionally, purchase obligations include the aggregate purchase price for two
acquisitions completed in the first quarter of 2018. See Note 3, Acquisitions and Divestitures to the Consolidated Financial
Statements for more information.
Long-term liabilities associated with the Company’s postretirement plans are excluded from the table above due to the
uncertainty of the timing of these cash disbursements. The amount and timing of cash funding related to these benefit plans
will generally depend on local regulatory requirements, various economic assumptions (the most significant of which are
detailed in “Critical Accounting Policies and Use of Estimates” below) and voluntary Company contributions. Based on
current information, the Company is not required to make a mandatory contribution to its qualified U.S. pension plan in
2018. Management’s best estimate of voluntary contributions the Company will make to its U.S. postretirement plans for
the year ending December 31, 2018 is approximately $75. In addition, total benefit payments to be paid to participants for
the year ending December 31, 2018 from the Company’s assets are estimated to be approximately $82.
Additionally, liabilities for unrecognized income tax benefits are excluded from the table above as the Company is
unable to reasonably predict the ultimate amount or timing of a settlement of such liabilities. See Note 11, Income Taxes to
the Consolidated Financial Statements for more information.
As more fully described in Part I, Item 3 “Legal Proceedings” and Note 13, Commitments and Contingencies to the
Consolidated Financial Statements, the Company has commitments and contingencies with respect to lawsuits,
environmental matters, taxes and other matters arising in the ordinary course of business.
Off-Balance Sheet Arrangements
The Company does not have off-balance sheet financing or unconsolidated special purpose entities.
45
(Dollars in Millions Except Per Share Amounts)
Managing Foreign Currency, Interest Rate, Commodity Price and Credit Risk Exposure
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, 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. The Company’s treasury and risk management policies prohibit the use of derivatives for
speculative purposes and leveraged derivatives for any purpose.
The sensitivity of our financial instruments to market fluctuations is discussed below. See Note 2, Summary of
Significant Accounting Policies and Note 7, Fair Value Measurements and Financial Instruments to the Consolidated
Financial Statements for further discussion of derivatives and hedging policies and fair value measurements.
Foreign Exchange Risk
As the Company markets its products in over 200 countries and territories, it is exposed to currency fluctuations
related to manufacturing and selling its products in currencies other than the U.S. dollar. The Company manages its foreign
currency exposures through a combination of cost-containment measures, sourcing strategies, selling price increases and
the hedging of certain costs in an effort to minimize the impact on earnings of foreign currency rate movements. See the
“Results of Operations” section above for discussion of the foreign exchange impact on Net sales in each operating
segment.
The assets and liabilities of foreign subsidiaries are translated into U.S. dollars at year-end exchange rates with
resulting translation gains and losses accumulated in a separate component of shareholders’ equity. Income and expense
items are translated into U.S. dollars at average rates of exchange prevailing during the year.
Prior to the deconsolidation of the Company’s Venezuelan operations, which was effective December 31, 2015, the
functional currency for CP Venezuela was the U.S. dollar since Venezuela was designated as hyper-inflationary, and
Venezuelan currency fluctuations were reported in income. The local currency-denominated non-monetary assets of the
Venezuelan operations, including inventories and property, plant and equipment were remeasured at their historical
exchange rates, while local currency-denominated monetary assets and liabilities were remeasured at period-end exchange
rates. Remeasurement adjustments for these operations were included in Net income attributable to Colgate-Palmolive
Company. Refer to “Significant Items Impacting Comparability” above and to Note 14, Venezuela to the Consolidated
Financial Statements for further discussion of the Company’s Venezuelan operations.
The Company primarily utilizes foreign currency contracts, including forward and swap contracts, option contracts,
foreign and local currency deposits and local currency borrowings to hedge portions of its exposures relating to foreign
currency purchases, assets and liabilities created in the normal course of business and the net investment in certain foreign
subsidiaries. The duration of foreign currency contracts generally does not exceed 12 months and the contracts are valued
using observable market rates.
The Company’s foreign currency forward contracts that qualify for cash flow hedge accounting resulted in a net
unrealized loss of $9 and a net unrealized gain of $20 at December 31, 2017 and 2016, respectively. Changes in the fair
value of cash flow hedges are recorded in Other comprehensive income (loss) and are reclassified into earnings in the same
period or periods during which the underlying hedged transaction is recognized in earnings. At the end of 2017, an
unfavorable 10% change in exchange rates would have resulted in a net unrealized loss of $79.
46
(Dollars in Millions Except Per Share Amounts)
Interest Rate Risk
The Company manages its mix of fixed and floating rate debt against its target with debt issuances and by entering into
interest rate swaps in order to mitigate fluctuations in earnings and cash flows that may result from interest rate volatility.
The notional amount, interest payment and maturity date of the swaps generally match the principal, interest payment and
maturity date of the related debt, and the swaps are valued using observable benchmark rates.
Based on year-end 2017 variable rate debt levels, a 1% increase in interest rates would have increased Interest
(income) expense, net by $7 in 2017.
Commodity Price Risk
The Company is exposed to price volatility related to raw materials used in production, such as resins, pulp, essential
oils, tropical oils, tallow, poultry, corn and soybeans. The Company manages its raw material exposures through a
combination of cost containment measures, ongoing productivity initiatives and the limited use of commodity hedging
contracts. Futures contracts are used on a limited basis, primarily in the Hill’s Pet Nutrition segment, to manage volatility
related to anticipated raw material inventory purchases of certain traded commodities.
At December 31, 2017 and 2016, the Company’s open commodity derivative contracts, which qualify for cash flow
hedge accounting, were not material and would not have resulted in a material net unrealized loss at December 31, 2017
had there been an unfavorable 10% change in commodity futures prices.
Credit Risk
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 with diverse, credit-worthy counterparties based upon both strong credit ratings
and other credit considerations.
Recent Accounting Pronouncements
On August 28, 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update
(“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 new
guidance is effective for the Company beginning on January 1, 2019, with early adoption permitted. 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. While the Company is currently assessing the impact of the new standard, this new guidance is not expected to
have a material impact on the Company’s Consolidated Financial Statements.
On May 10, 2017, the FASB issued ASU No. 2017-09, “Compensation–Stock Compensation (Topic 718): Scope of
Modification Accounting,” clarifying when a change to the terms or conditions of a stock-based payment award must be
accounted for as a modification. The new guidance requires modification accounting if the fair value, vesting condition or
the classification of the award is not the same immediately before and after a change to the terms and conditions of the
award. The new guidance was effective for the Company on a prospective basis beginning on January 1, 2018. This new
guidance is not expected to have an impact on the Company’s Consolidated Financial Statements as it is not the Company’s
practice to change either the terms or conditions of stock-based payment awards once they are granted.
47
(Dollars in Millions Except Per Share Amounts)
On March 10, 2017, the FASB issued ASU No. 2017-07, “Compensation–Retirement Benefits (Topic 715): Improving
the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,” changing the presentation of
the net periodic benefit cost on the Statement of Income and limiting the amount of net periodic benefit cost eligible for
capitalization to assets. The new guidance permits only the service cost component of net periodic benefit cost to be
eligible for capitalization. The new guidance also requires entities to present the service cost component of net periodic
benefit cost together with compensation costs arising from services rendered by employees during the period. Other
components of net periodic benefit cost, which include interest, expected return on assets, amortization of prior service
costs and actuarial gains and losses, are required to be presented outside of Operating profit. The line item or items used to
present the other components of net periodic benefit cost must be disclosed in the Notes to the Consolidated Financial
Statements, if not separately described on the Statement of Income. The new presentation requirement is required to be
adopted on a “full retrospective” basis, meaning the standard is applied to all of the periods presented in the financial
statements, while the limitation on capitalization can only be adopted on a prospective basis. The new guidance was
effective for the Company beginning on January 1, 2018. Had the standard been effective for the year ended December 31,
2017, full year Operating profit would have increased by approximately $120 with no impact on Net income attributable to
Colgate-Palmolive Company. The Company anticipates that in future years, as a result of the reclassification, Operating
profit will increase by approximately $100 annually with no impact on Net income attributable to Colgate-Palmolive
Company.
On January 26, 2017, the FASB issued ASU No. 2017-04, “Intangibles–Goodwill and Other (Topic 350): Simplifying
the Test for Goodwill Impairment,” eliminating the requirement to calculate the implied fair value, essentially eliminating
step two from the goodwill impairment test. The new standard requires goodwill impairment to be based upon the results of
step one of the impairment test, which is defined as the excess of the carrying value of a reporting unit over its fair value.
The impairment charge will be limited to the amount of goodwill allocated to that reporting unit. The standard is effective
for the Company on a prospective basis beginning on January 1, 2020, with early adoption permitted. This new guidance is
not expected to have a material impact on the Company’s Consolidated Financial Statements.
On January 5, 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying the
Definition of a Business,” which provides additional guidance on evaluating whether transactions should be accounted for
as acquisitions of assets or businesses. The guidance requires an entity to evaluate if substantially all of the fair value of the
assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. If this threshold is met,
the new guidance would define this as an asset acquisition; otherwise, the entity then evaluates whether the asset meets the
requirement that a business include, at a minimum, an input and substantive process that together significantly contribute to
the ability to create outputs. The guidance was effective for the Company on a prospective basis beginning on January 1,
2018. This new guidance is not expected to have a material impact on the Company’s Consolidated Financial Statements.
On October 24, 2016, the FASB issued ASU No. 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets
Other than Inventory,” which eliminates the requirement to defer recognition of income taxes on intra-entity asset transfers
until the asset is sold to an outside party. The new guidance requires the recognition of current and deferred income taxes
on intra-entity transfers of assets other than inventory, such as intellectual property and property, plant and equipment,
when the transfer occurs. As permitted, the Company early-adopted the new standard on a “modified retrospective” basis,
meaning the standard was applied only to the most recent period presented in the financial statements, as of January 1,
2017. This new guidance did not have a material impact on the Company’s Consolidated Financial Statements.
On August 26, 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of
Certain Cash Receipts and Cash Payments,” which clarifies how certain cash receipts and payments are to be presented in
the statement of cash flows. The guidance was effective for the Company on January 1, 2018. This new guidance is not
expected to have a material impact on the Company’s Consolidated Financial Statements.
48
(Dollars in Millions Except Per Share Amounts)
On March 30, 2016, the FASB issued ASU No. 2016-09, “Compensation–Stock Compensation (Topic 718):
Improvements to Employee Share-Based Payment Accounting,” which amended accounting for income taxes related to
stock-based compensation, the related classification in the statement of cash flows and share award forfeiture accounting.
The new guidance was effective for the Company beginning on January 1, 2017. As required subsequent to the adoption of
this new guidance, the Company recognized excess tax benefits from stock-based compensation of $47 (resulting from an
increase in the fair value of an award from grant date to the vesting or exercise date, as applicable) in the Provision for
income taxes as a discrete item during the year ended December 31, 2017. These amounts may not necessarily be
indicative of future amounts that may be recognized as any excess tax benefits from stock-based compensation recognized
would be dependent on future stock price, employee exercise behavior and applicable tax rates. Prior to January 1, 2017,
excess tax benefits from stock-based compensation were recognized in equity. As permitted, the Company elected to
classify these excess tax benefits from stock-based compensation as an operating activity in the Statement of Cash Flows
instead of as a financing activity on a prospective basis and did not retrospectively adjust prior periods. Also, as permitted
by the new standard, the Company elected to account for forfeitures as they occur.
On March 15, 2016, the FASB issued ASU No. 2016-07, “Investments–Equity Method and Joint Ventures (Topic 323):
Simplifying the Transition to the Equity Method of Accounting,” which eliminated the requirement to retroactively adjust
an investment that subsequently qualifies for equity method accounting (as a result of an increase in level of ownership
interest or degree of influence) as if the equity method of accounting had been applied during all prior periods that the
investment was held. The new standard requires that the investor add the cost of acquiring additional ownership interest in
the investee to its current basis and prospectively apply the equity method of accounting. For an available-for-sale
investment, any unrealized gains or losses should be recognized in earnings at the date the investment qualifies as an equity
method investment. The new guidance was effective for the Company beginning on January 1, 2017, and did not have a
material impact on the Company’s Consolidated Financial Statements.
On February 25, 2016, the FASB issued its final standard on lease accounting, ASU No. 2016-02, “Leases (Topic
842),” which supersedes Topic 840, “Leases.” The new accounting standard requires the recognition of right-of-use assets
and lease liabilities for all long-term leases, including operating leases, on the balance sheet. The new standard also
provides additional guidance on the measurement of the right-of-use assets and lease liabilities and will require enhanced
disclosures about the Company’s leasing arrangements. Under current accounting standards, substantially all of the
Company’s leases are considered operating leases and, as such, are not recognized on the Consolidated Balance Sheet. This
new standard is effective for the Company beginning on January 1, 2019, with early adoption permitted. The standard
requires a “modified retrospective” adoption, meaning the standard is applied to leases existing at, or entered into after, the
beginning of the earliest comparative period presented in the financial statements. The Company is currently assessing the
impact of the new standard on its Consolidated Financial Statements.
On January 5, 2016, the FASB issued ASU No. 2016-01, “Financial Instruments–Overall (Subtopic 825-10):
Recognition and Measurement of Financial Assets and Financial Liabilities.” The updated guidance enhances the reporting
model for financial instruments, which includes amendments to address aspects of recognition, measurement, presentation
and disclosure. The amendment to the standard was effective for the Company beginning on January 1, 2018 and is not
expected to have a material impact on the Company’s Consolidated Financial Statements.
On July 22, 2015, the FASB issued ASU No. 2015-11, “Inventory (Topic 330): Simplifying the Measurement of
Inventory,” which simplifies the subsequent measurement of inventories by replacing the lower of cost or market test with
a lower of cost and net realizable value test. The guidance applies only to inventories for which cost is determined by
methods other than last-in, first-out (“LIFO”) and the retail inventory method. The new guidance was effective for the
Company beginning on January 1, 2017. This new guidance did not have a material impact on the Company’s Consolidated
Financial Statements.
49
(Dollars in Millions Except Per Share Amounts)
On May 28, 2014, the FASB and the International Accounting Standards Board issued their final converged standard
on revenue recognition. The standard, issued as ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)”
by the FASB, provides a comprehensive revenue recognition model for all contracts with customers and supersedes current
revenue recognition guidance. The revenue standard contains principles that an entity will apply to determine the
measurement of revenue and timing of when it is recognized. The underlying principle is that an entity will recognize
revenue to depict the transfer of goods or services to its customers at an amount that the entity expects to be entitled to in
exchange for those goods or services. The new standard also includes enhanced disclosures. During 2016, the FASB issued
several accounting updates (ASU No. 2016-08, 2016-10 and 2016-12) to clarify implementation guidance and correct
unintended application of the guidance. The standard allows for either full retrospective adoption or modified retrospective
adoption. The Company adopted the new standard on January 1, 2018, on a “modified retrospective” basis, which did not
have a material impact on the Company’s Consolidated Financial Statements. Although the new standard resulted in
changes to the Company’s revenue recognition accounting policy commencing on January 1, 2018, the Company does not
expect it will have a material impact in future periods on its Consolidated Financial Statements.
Critical Accounting Policies and Use of Estimates
The preparation of financial statements in accordance with accounting principles generally accepted in the United
States of America requires management to use judgment and make estimates. The level of uncertainty in estimates and
assumptions increases with the length of time until the underlying transactions are completed. Actual results could
ultimately differ from those estimates. The accounting policies that are most critical in the preparation of the Company’s
Consolidated Financial Statements are those that are both important to the presentation of the Consolidated Financial
Statements and require significant or complex judgments and estimates on the part of management. The Company’s critical
accounting policies are reviewed periodically with the Audit Committee of the Board of Directors.
In certain instances, accounting principles generally accepted in the United States of America allow for the selection of
alternative accounting methods. The Company’s significant policies that involve the selection of alternative methods are
accounting for shipping and handling costs and inventories.
Shipping and handling costs may be reported as either a component of Cost of sales or Selling, general and
administrative expenses. The Company reports such costs, primarily related to warehousing and outbound freight,
in the Consolidated Statements of Income as a component of Selling, general and administrative expenses.
Accordingly, the Company’s Gross profit margin is not comparable with the gross profit margin of those
companies that include shipping and handling charges in cost of sales. If such costs had been included in Cost of
sales, Gross profit margin would have decreased by 760 bps, from 60.0% to 52.4% in 2017 and decreased by 750
bps in 2016 and 2015, respectively, with no impact on reported earnings.
The Company accounts for inventories using both the first-in, first-out (“FIFO”) method (75% of inventories) and
the LIFO method (25% of inventories). There would have been no material impact on reported earnings for 2017,
2016 or 2015 had all inventories been accounted for under the FIFO method.
50
(Dollars in Millions Except Per Share Amounts)
The areas of accounting that involve significant or complex judgments and estimates are pensions and other retiree benefit
cost assumptions, stock-based compensation, asset impairments, uncertain tax positions, tax valuation allowances, the
provisional charge in 2017 related to U.S. tax reform, legal and other contingency reserves and, prior to the deconsolidation
of the Company’s Venezuelan operations, the selection of the exchange rate used to remeasure the financial statements of
CP Venezuela.
In pension accounting, the most significant actuarial assumptions are the discount rate and the long-term rate of
return on plan assets. The discount rate used to measure the benefit obligation for U.S. defined benefit plans was
3.73%, 4.27% and 4.93% as of December 31, 2017, 2016 and 2015, respectively. The discount rate used to
measure the benefit obligation for other U.S. postretirement plans was 3.80%, 4.41% and 4.97% as of December
31, 2017, 2016 and 2015, respectively. Discount rates used for the U.S. and international defined benefit and other
postretirement plans are based on a yield curve constructed from a portfolio of high-quality bonds whose
projected cash flows approximate the projected benefit payments of the plans. The assumed long-term rate of
return on plan assets for U.S. plans was 6.60% as of December 31, 2017 and 6.80% as of December 2016 and
2015. In determining the long-term rate of return, the Company considers the nature of the plans’ investments and
the historical rate of return.
Average annual rates of return for the U.S. plans for the most recent 1-year, 5-year, 10-year, 15-year and 25-year
periods were 14%, 8%, 6%, 8% and 8%, respectively. In addition, the current assumed rate of return for the U.S.
plans is based upon the nature of the plans’ investments with a target asset allocation of approximately 53% in
fixed income securities, 27% in equity securities and 20% in real estate and other investments. A 1% change in the
assumed rate of return on plan assets of the U.S. pension plans would impact future Net income attributable to
Colgate-Palmolive Company by approximately $14. A 1% change in the discount rate for the U.S. pension plans
would impact future Net income attributable to Colgate-Palmolive Company by approximately $2. A third
assumption is the long-term rate of compensation increase, a change in which would partially offset the impact of
a change in either the discount rate or the long-term rate of return. This rate was 3.50% as of December 31, 2017,
2016 and 2015. Refer to Note 10, Retirement Plans and Other Retiree Benefits to the Consolidated Financial
Statements for further discussion of the Company’s pension and other postretirement plans.
The assumption requiring the most judgment in accounting for other postretirement benefits is the medical cost
trend rate. The Company reviews external data and its own historical trends for health care costs to determine the
medical cost trend rate. The assumed rate of increase for the U.S. postretirement benefit plans is 6.00% for 2018,
declining to 4.75% by 2023 and remaining at 4.75% for the years thereafter. The effect on the total of service and
interest cost components of a 1% increase in the assumed long-term medical cost trend rate would decrease Net
income attributable to Colgate-Palmolive Company by $7.
The Company recognizes the cost of employee services received in exchange for awards of equity instruments,
such as stock options and restricted stock units, based on the fair value of those awards at the date of grant. The
Company uses the Black-Scholes-Merton (“Black-Scholes”) option pricing model to determine the fair value of
stock option awards. The weighted-average estimated fair value of each stock option award granted in the year
ended December 31, 2017 was $8.37. The Black-Scholes model uses various assumptions to determine the fair
value of stock option awards. These assumptions include the expected term of stock option awards, expected
volatility rate, risk-free interest rate and expected dividend yield. While these assumptions do not require
significant judgment, as the significant inputs are determined from historical experience or independent third-
party sources, changes in these inputs could result in significant changes in the fair value of stock option
awards. A one-year change in expected term would result in a change in fair value of approximately 7%. A 1%
change in volatility would change fair value by approximately 7%.
51
(Dollars in Millions Except Per Share Amounts)
Goodwill and indefinite life intangible assets, such as the Company’s global brands, are subject to impairment
tests at least annually. The Company performs either a quantitative or qualitative assessment to determine the fair
value of its reporting units for goodwill and fair value of its indefinite life intangible assets. The asset impairment
analysis is generally performed using an income method, which requires several estimates, including future cash
flows consistent with management’s strategic plans, sales growth rates, foreign exchange rates and the selection of
a discount rate. For the Company’s goodwill impairment analysis, fair value is also determined using the market
approach, which is generally derived from metrics of comparable publicly traded companies. When multiple
valuation methodologies are used in a reporting unit’s goodwill impairment analysis, the Company performs a
qualitative analysis comparing the fair value of a reporting unit under each method to assess its reasonableness
and ensure consistency of results. Other qualitative factors the Company considers, in addition to those
quantitative measures discussed above, include assessments of general macroeconomic conditions, industry-
specific considerations and historical financial performance.
The estimated fair value of the Company’s intangible assets substantially exceeds the recorded carrying value,
except for the intangible assets acquired in the Sanex acquisition in 2011, which were recorded at fair value. The
estimated fair value of the Company’s reporting units also substantially exceeds the recorded carrying value.
Therefore, it is not reasonably likely that significant changes in these estimates would occur that would result in
an impairment charge related to these assets.
The Company applies the ‘relief from royalty method’ to estimate the fair value of the intangible assets acquired
in the Sanex acquisition (the “Sanex intangible assets”). Under this method, the fair value of an intangible asset is
calculated as the present value of future royalty savings generated as a result of owning the intangible asset. The
key assumptions used in determining the Company’s estimate of the fair value of the Sanex intangible assets
include royalty rates, discount rates and long-term revenue growth rates. Estimating long-term revenue growth
rates requires significant judgment by management in areas such as future economic conditions, product pricing
and consumer tastes and preferences. In determining an appropriate discount rate, the Company considers the
current interest rate environment and its estimated cost of capital. As a result of the analysis, the Company
determined that the fair value of the Sanex intangible assets exceeded their carrying value by more than 10% and
concluded that such excess was reasonable considering the brand’s relatively recent acquisition. Based on this, the
brand’s recent performance and the Company’s future plans for it, the Company does not believe there is a
significant risk of impairment related to the Sanex intangible assets.
Asset impairment analysis related to certain fixed assets in connection with the Global Growth and Efficiency
Program requires management’s best estimate of net realizable values.
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. U.S. tax reform 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.
In accordance with ASC 740, Income Taxes, and Staff Accounting Bulletin 118, the Company recorded a
provisional charge of $275 based on its initial analysis of the TCJA using available information and estimates. The
provisional charge is comprised of $451 related to the one-time deemed repatriation of accumulated earnings of
foreign subsidiaries and related withholding taxes and $20 related primarily to the remeasurement of net deferred
tax assets as a result of the reduction in the corporate income tax rate, which are offset by $196 of income taxes
which had been previously provided for planned repatriations of undistributed earnings of foreign subsidiaries. As
a result, applicable U.S. and foreign taxes have been provided on substantially all of the Company’s accumulated
earnings of foreign subsidiaries previously considered indefinitely reinvested.
Given the significant complexity of the TCJA, anticipated guidance from the U.S. Treasury about implementing
the TCJA and the potential for additional guidance from the SEC or the FASB related to the TCJA or additional
information becoming available, the Company’s provisional charge may be adjusted during 2018 and is expected
to be finalized no later than the fourth quarter of 2018. Other provisions of the TCJA that impact future tax years
are still being assessed.
52
(Dollars in Millions Except Per Share Amounts)
The recognition and measurement of uncertain tax positions involves consideration of the amounts and
probabilities of various outcomes that could be realized upon ultimate resolution.
Tax valuation allowances are established to reduce deferred tax assets, such as tax loss carryforwards, to net
realizable value. Factors considered in estimating net realizable value include historical results by tax jurisdiction,
carryforward periods, income tax strategies and forecasted taxable income.
Legal and other contingency reserves are based on management’s assessment of the risk of potential loss, which
includes consultation with outside legal counsel and other advisors. Such assessments are reviewed each period
and revised based on current facts and circumstances, if necessary. While it is possible that the Company’s cash
flows and results of operations in a particular quarter or year could be materially affected by the impact of such
contingencies, based on current knowledge it is the opinion of management that these matters will not have a
material effect on the Company’s financial position, or its ongoing results of operations or cash flows. Refer to
Note 13, Commitments and Contingencies to the Consolidated Financial Statements for further discussion of the
Company’s contingencies.
Prior to the deconsolidation of the Company’s Venezuelan operations, the selection of the exchange rate used to
remeasure the financial statements of CP Venezuela required careful consideration by management given the
various currency exchange mechanisms that exist in Venezuela. Although access to U.S. dollars in Venezuela had
been challenging, because the majority of the products in CP Venezuela’s portfolio were designated as “essential”
by the Venezuelan government, historically CP Venezuela’s access to U.S. dollars at the official rate of 6.30
bolivares per dollar was generally sufficient to settle most of its U.S. dollar obligations for imported materials.
However, the Company believed this rate was not applicable to foreign investments and could not be used to pay
dividends. The Company also gave consideration to using the SIMADI rate to remeasure the financial statements
of CP Venezuela; however, CP Venezuela did not participate in the SIMADI market through December 31, 2015
and had no intention to do so. As a result, the Company remeasured the financial statements of CP Venezuela at
the rate at which it believed was applicable for the remittance of future dividends which, based on the advice of
legal counsel, was the SICAD rate.
Refer to “Significant Items Impacting Comparability” above and to Note 14, Venezuela to the Consolidated
Financial Statements for further discussion of the Company’s Venezuelan operations.
The Company generates revenue through the sale of well-known consumer products to trade customers under
established trading terms. While the recognition of revenue and receivables requires the use of estimates, there is a short
time frame (typically less than 60 days) between the shipment of product and cash receipt, thereby reducing the level of
uncertainty in these estimates. Refer to Note 2, Summary of Significant Accounting Policies to the Consolidated Financial
Statements for further description of the Company’s significant accounting policies.
53
(Dollars in Millions Except Per Share Amounts)
Cautionary Statement on Forward-Looking Statements
This Annual Report on Form 10-K 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, organic sales growth, profit or profit margin growth, earnings per share growth, financial goals, the impact of
foreign exchange volatility, 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, 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 environment in different countries and its effect on consumer spending habits,
increased competition and evolving competitive practices, foreign currency rate fluctuations, exchange controls, 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, 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 e-commerce, the ability to continue lowering costs, the ability to complete acquisitions and
divestitures as planned, the ability to successfully integrate acquired businesses, 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
Part I, Item 1A “Risk Factors.”
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See “Managing Foreign Currency, Interest Rate, Commodity Price and Credit Risk Exposure” in Part II, Item 7.
54
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See “Index to Financial Statements.”
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company’s management, under the supervision and with the participation of the Company’s Chairman of the
Board, President and Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of
the design and operation of the Company’s disclosure controls and procedures as of December 31, 2017 (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.
Management’s Annual Report on Internal Control Over Financial Reporting
The Company’s management is responsible for establishing and maintaining adequate internal control over financial
reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Management, under the
supervision and with the participation of the Company’s Chairman of the Board, President and Chief Executive Officer and
Chief Financial Officer, conducted an evaluation of the Company’s internal control over financial reporting based upon the
framework in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission and concluded that it is effective as of December 31, 2017.
The Company’s independent registered public accounting firm, PricewaterhouseCoopers LLP, has audited the
effectiveness of the Company’s internal control over financial reporting as of December 31, 2017, and has expressed an
unqualified opinion in their report, which appears under “Index to Financial Statements – Report of Independent
Registered Public Accounting Firm.”
Changes in Internal Control Over Financial Reporting
There were no changes in the Company’s internal control over financial reporting that occurred during the Company’s
most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal
control over financial reporting. As part of the Global Growth and Efficiency Program, the Company is implementing a
shared business service organization model in all regions of the world. At this time, certain financial transaction processing
activities have been transitioned to these shared business service centers. This transition has not materially affected the
Company’s internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
None.
55
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
See “Executive Officers of the Registrant” in Part I, Item 1 of this report.
PART III
Additional information required by this Item relating to directors, executive officers and corporate governance of the
Company and information regarding compliance with Section 16(a) of the Exchange Act is incorporated herein by
reference to the Company’s Proxy Statement for its 2018 Annual Meeting of Stockholders (the “2018 Proxy Statement”).
Code of Ethics
The Company’s Code of Conduct promotes the highest ethical standards in all of the Company’s business dealings.
The Code of Conduct satisfies the SEC’s requirements for a Code of Ethics for senior financial officers and applies to all
Company employees, including the Chairman, President and Chief Executive Officer, the Chief Financial Officer and the
Vice President and Corporate Controller, and the Company’s directors. The Code of Conduct is available on the Company’s
website at www.colgatepalmolive.com. Any amendment to the Code of Conduct will promptly be posted on the Company’s
website. It is the Company’s policy not to grant waivers of the Code of Conduct. In the extremely unlikely event that the
Company grants an executive officer a waiver from a provision of the Code of Conduct, the Company will promptly
disclose such information by posting it on its website or by using other appropriate means in accordance with SEC rules.
ITEM 11. EXECUTIVE COMPENSATION
The information regarding executive compensation set forth in the 2018 Proxy Statement is incorporated herein by
reference.
56
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
(a) The information regarding security ownership of certain beneficial owners and management set forth in the 2018
Proxy Statement is incorporated herein by reference.
(b) The registrant does not know of any arrangements that may at a subsequent date result in a change in control of
the registrant.
(c) Equity compensation plan information as of December 31, 2017:
(a)
(b)
Number of securities
to be issued upon
exercise of outstanding
options, warrants and
rights
(in thousands)
Weighted-average
exercise price of
outstanding options,
warrants and rights
(c)
Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected in
column (a))
(in thousands)
43,709 (1) $
60.94 (2)
30,867 (3)
Not applicable
43,709
$
Not applicable
60.94
Not applicable
30,867
Plan Category
Equity compensation plans
approved by security holders
Equity compensation plans not
approved by security holders
Total
_______
(1)
Consists of 40,979 options outstanding and 2,730 restricted stock units awarded but not yet vested under the Company’s 2013
Incentive Compensation Plan, as more fully described in Note 8, Capital Stock and Stock-Based Compensation Plans to the
Consolidated Financial Statements.
(2)
(3)
Includes the weighted-average exercise price of stock options outstanding of $65.00 and restricted stock units of $0.00.
Amount includes 20,997 options available for issuance and 9,870 restricted stock units available for issuance under the
Company’s 2013 Incentive Compensation Plan.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
The information regarding certain relationships and related transactions and director independence set forth in the
2018 Proxy Statement is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information regarding auditor fees and services set forth in the 2018 Proxy Statement is incorporated herein by
reference.
57
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Financial Statements and Financial Statement Schedules
PART IV
See “Index to Financial Statements.”
(b) Exhibits:
Exhibit No.
Description
3-A
3-B
Restated Certificate of Incorporation, as amended. (Registrant hereby incorporates by reference Exhibit 3-
A to its Quarterly Report on Form 10-Q for the quarter ended June 30, 2008, File No. 1-644.)
By-laws, as amended. (Registrant hereby incorporates by reference Exhibit 3.1 to its Current Report on
Form 8-K filed on January 15, 2016, File No. 1-644.)
4
a)
Indenture, dated as of November 15, 1992, between the Company and The Bank of New York Mellon
(formerly known as The Bank of New York) as Trustee. (Registrant hereby incorporates by reference
Exhibit 4.1 to its Registration Statement on Form S-3 and Post-Effective Amendment No. 1 filed on June
26, 1992, Registration No. 33-48840.)*
b)
Colgate-Palmolive Company Employee Stock Ownership Trust Agreement dated as of June 1, 1989, as
amended. (Registrant hereby incorporates by reference Exhibit 4-B (b) to its Quarterly Report on Form
10-Q for the quarter ended June 30, 2000, File No. 1-644.)
10-A a)
Colgate-Palmolive Company 2013 Incentive Compensation Plan. (Registrant hereby incorporates by
reference Annex B to its 2013 Notice of Annual Meeting and Proxy Statement, File No. 1-644.)
b)
c)
Form of Nonqualified Option Award Agreement used in connection with grants under the 2013 Incentive
Compensation Plan.**
Form of Restricted Stock Unit Award Agreement used in connection with grants under the 2013 Incentive
Compensation Plan.**
10-B a)
Colgate-Palmolive Company 2009 Executive Incentive Compensation Plan. (Registrant hereby
incorporates by reference Appendix A to its 2009 Notice of Meeting and Proxy Statement, File No.
1-644.)
b)
c)
d)
Colgate-Palmolive Company Executive Incentive Compensation Plan Trust, as amended. (Registrant
hereby incorporates by reference Exhibit 10-B (b) to its Annual Report on Form 10-K for the year ended
December 31, 1987, File No. 1-644.)
Amendment, dated as of October 29, 2007, to the Colgate-Palmolive Company Executive Incentive
Compensation Plan Trust. (Registrant hereby incorporates by reference Exhibit 10-A (b) to its Quarterly
Report on Form 10-Q for the quarter ended September 30, 2007, File No. 1-644.)
Form of Restricted Stock Award Agreement used in connection with grants to employees under the 2009
Colgate-Palmolive Company Executive Incentive Compensation Plan. (Registrant hereby incorporates
by reference Exhibit 10-P to its Annual Report on Form 10-K for the year ended December 31, 2009, File
No. 1-644.)
58
Exhibit No.
Description
10-C
Colgate-Palmolive Company Supplemental Salaried Employees’ Retirement Plan, amended and restated
as of September 27, 2017. (Registrant hereby incorporates by reference Exhibit 10-A to its Quarterly
Report on Form 10-Q for the quarter ended September 30, 2017, File No. 1-644.)
10-D a)
Colgate-Palmolive Company Executive Severance Plan, as amended and restated through September 12,
2013. (Registrant hereby incorporates by reference Exhibit 10-A to its Current Report on Form 8-K filed
on September 16, 2013, File No. 1-644.)
b)
Colgate-Palmolive Company Executive Severance Plan Trust. (Registrant hereby incorporates by
reference Exhibit 10-E (b) to its Annual Report on Form 10-K for the year ended December 31, 1987, File
No. 1-644.)
10-E
Colgate-Palmolive Company Pension Plan for Outside Directors, as amended and restated. (Registrant
hereby incorporates by reference Exhibit 10-D to its Annual Report on Form 10-K for the year ended
December 31, 1999, File No. 1-644.)
10-F
a)
Colgate-Palmolive Company Restated and Amended Deferred Compensation Plan for Non-Employee
Directors, as amended. (Registrant hereby incorporates by reference Exhibit 10-H to its Annual Report on
Form 10-K for the year ended December 31, 1997, File No. 1-644.)
b)
Amendment, dated as of September 12, 2007, to the Colgate-Palmolive Company Restated and Amended
Deferred Compensation Plan for Non-Employee Directors. (Registrant hereby incorporates by reference
Exhibit 10-F to its Quarterly Report on Form 10-Q for the quarter ended September 30, 2007, File No.
1-644.)
10-G
10-H
10-I
a)
Colgate-Palmolive Company Deferred Compensation Plan, amended and restated as of September 12,
2007. (Registrant hereby incorporates by reference Exhibit 10-G to its Quarterly Report on Form 10-Q for
the quarter ended September 30, 2007, File No. 1-644.)
Colgate-Palmolive Company Above and Beyond Plan – Officer Level. (Registrant hereby incorporates by
reference Exhibit 10-A to its Quarterly Report on Form 10-Q for the quarter ended September 30, 2004,
File No. 1-644.)
Five Year Credit Agreement dated as of November 4, 2011, Amended and Restated as of July 27, 2015 by
Amendment Number 2 thereto (the “Amended and Restated Credit Agreement”), among Colgate-
Palmolive Company as Borrower, Citibank, N.A. as Administrative Agent and the Lenders party thereto.
(Registrant hereby incorporates by reference Exhibit 10 to its Quarterly Report on Form 10-Q for the
quarter ended June 30, 2015, File No. 1-644.)
b)
Amendment No. 1 dated as of November 4, 2016 to the Amended and Restated Credit Agreement, among
Colgate-Palmolive Company, as Borrower, Citibank, N.A., as Administrative Agent, and the Lenders
party thereto. (Registrant hereby incorporates by reference Exhibit 10-I (b) to its Annual Report on Form
10-K for the year ended December 31, 2016, File No. 1-644.)
10-J
a)
Colgate-Palmolive Company Supplemental Savings and Investment Plan, amended and restated as of
September 1, 2010. (Registrant hereby incorporates by reference Exhibit 10-B to its Quarterly Report on
Form 10-Q for the quarter ended September 30, 2010, File No. 1-644.)
b)
Amendment, dated September 27, 2017, to the Colgate-Palmolive Company Supplemental Savings and
Investment Plan (Registrant hereby incorporates by reference Exhibit 10-B to its Quarterly Report on
Form 10-Q for the quarter ended September 30, 2017, File No. 1-644.)
10-K
Form of Indemnification Agreement between Colgate-Palmolive Company and its directors, executive
officers and certain key employees.**
59
Exhibit No.
Description
10-L
a)
Colgate-Palmolive Company 2005 Non-Employee Director Stock Option Plan. (Registrant hereby
incorporates by reference Appendix C to its 2005 Notice of Meeting and Proxy Statement.)
b)
c)
d)
e)
f)
g)
h)
Form of Award Agreement used in connection with grants to non-employee directors under the Colgate-
Palmolive Company 2005 Non-Employee Director Stock Option Plan. (Registrant hereby incorporates by
reference Exhibit 10-B to its Current Report on Form 8-K dated May 4, 2005, File No. 1-644.)
Amendment, dated as of September 7, 2006, to the Colgate-Palmolive Company 2005 Non-Employee
Director Stock Option Plan. (Registrant hereby incorporates by reference Exhibit 10-B to its Quarterly
Report on Form 10-Q for the quarter ended September 30, 2006, File No. 1-644.)
Amendment, dated as of December 7, 2006, to the Colgate-Palmolive Company 2005 Non-Employee
Director Stock Option Plan. (Registrant hereby incorporates by reference Exhibit 10-S (d) to its Annual
Report on Form 10-K for the year ended December 31, 2006, File No. 1-644.)
Amendment, dated as of October 29, 2007, to the Colgate-Palmolive Company 2005 Non-Employee
Director Stock Option Plan. (Registrant hereby incorporates by reference Exhibit 10-J to its Quarterly
Report on Form 10-Q for the quarter ended September 30, 2007, File No. 1-644.)
Amendment, dated as of January 13, 2011, to the Colgate-Palmolive Company 2005 Non-Employee
Director Stock Option Plan. (Registrant hereby incorporates by reference Exhibit 10-B to its Quarterly
Report on Form 10-Q for the quarter ended March 31, 2011, File No. 1-644.)
Amendment, dated as of July 14, 2011, to the Colgate-Palmolive Company 2005 Non-Employee Director
Stock Option Plan. (Registrant hereby incorporates by reference Exhibit 10-A to its Quarterly Report on
Form 10-Q for the quarter ended September 30, 2011, File No. 1-644.)
Amendment, dated as of May 11, 2012, to the Colgate-Palmolive Company 2005 Stock Plan for Non-
Employee Directors. (Registrant hereby incorporates by reference Exhibit 10-A to its Quarterly Report
on Form 10-Q for the quarter ended June 30, 2012, File No. 1-644.)
10-M a)
Colgate-Palmolive Company 2005 Employee Stock Option Plan. (Registrant hereby incorporates by
reference Appendix B to its 2005 Notice of Meeting and Proxy Statement.)
b)
c)
d)
e)
f)
Form of Award Agreement used in connection with grants to employees under the Colgate-Palmolive
Company 2005 Employee Stock Option Plan. (Registrant hereby incorporates by reference Exhibit 10-A
to its Current Report on Form 8-K dated May 4, 2005, File No. 1-644.)
Amendment, dated as of September 7, 2006, to the Colgate-Palmolive Company 2005 Employee Stock
Option Plan. (Registrant hereby incorporates by reference Exhibit 10-A to its Quarterly Report on Form
10-Q for the quarter ended September 30, 2006, File No. 1-644.)
Amendment, dated as of December 7, 2006, to the Colgate-Palmolive Company 2005 Employee Stock
Option Plan. (Registrant hereby incorporates by reference Exhibit 10-T (d) to its Annual Report on Form
10-K for the year ended December 31, 2006, File No. 1-644.)
Action, dated as of October 29, 2007, taken pursuant to the Colgate-Palmolive Company 2005 Employee
Stock Option Plan and Colgate-Palmolive Company 1997 Stock Option Plan. (Registrant hereby
incorporates by reference Exhibit 10-I to its Quarterly Report on Form 10-Q for the quarter ended
September 30, 2007, File No. 1-644.)
Amendment, dated as of February 26, 2009, to the Colgate-Palmolive Company 2005 Employee Stock
Option Plan. (Registrant hereby incorporates by reference Exhibit 10-S (f) to its Annual Report on Form
10-K for the year ended December 31, 2008, File No. 1-644.)
60
Exhibit No.
g)
10-N
12
21
23
24
Amendment, dated as of July 14, 2011, to the Colgate-Palmolive Company 2005 Employee Stock Option
Plan. (Registrant hereby incorporates by reference Exhibit 10-B to its Quarterly Report on Form 10-Q for
the quarter ended September 30, 2011, File No. 1-644.)
Business and Share Sale and Purchase Agreement dated as of March 22, 2011 among Unilever N.V.,
Unilever plc, Colgate-Palmolive Company Sarl and Colgate-Palmolive Company relating to the Sanex
personal care business. (Registrant hereby incorporates by reference Exhibit 10-C to its Quarterly Report
on Form 10-Q for the quarter ended March 31, 2011, File No. 1-644.)
Computation of Ratio of Earnings to Fixed Charges.**
Subsidiaries of the Registrant.**
Consent of Independent Registered Public Accounting Firm.**
Powers of Attorney.**
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
101
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.**
The following materials from Colgate-Palmolive Company’s Annual Report on Form 10-K for the year
ended December 31, 2017, formatted in eXtensible Business Reporting Language (XBRL): (i) the
Consolidated Statements of Income, (ii) the Consolidated Balance Sheets, (iii) the Consolidated
Statements of Changes in Shareholders’ Equity, (iv) the Consolidated Statements of Comprehensive
Income, (v) the Consolidated Statements of Cash Flows, (vi) Notes to Consolidated Financial Statements,
and (vii) Financial Statement Schedule.
__________
* Registrant hereby undertakes to furnish the Commission, upon request, with a copy of any instrument with respect to
long-term debt where the total amount of securities authorized thereunder does not exceed 10% of the total assets of
the registrant and its subsidiaries on a consolidated basis.
** Filed herewith.
The exhibits indicated above that are not included with the Form 10-K are available upon request and payment of a
reasonable fee approximating the registrant’s cost of providing and mailing the exhibits. Inquiries should be directed to:
Colgate-Palmolive Company
Office of the Secretary (10-K Exhibits)
300 Park Avenue
New York, NY 10022-7499
61
ITEM 16. FORM 10-K SUMMARY
None.
62
COLGATE-PALMOLIVE COMPANY
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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)
Date: February 15, 2018
By
/s/ Ian Cook
Ian Cook
Chairman of the Board, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on February
15, 2018, by the following persons on behalf of the registrant and in the capacities indicated.
(a) Principal Executive Officer
(d) Directors:
/s/ Ian Cook
Ian Cook
Chairman of the Board, President and
Chief Executive Officer
(b) Principal Financial Officer
/s/ Dennis J. Hickey
Dennis J. Hickey
Chief Financial Officer
(c) Principal Accounting Officer
/s/ Henning I. Jakobsen
Henning I. Jakobsen
Vice President and Corporate Controller
/s/ Ian Cook
Ian Cook
Charles A. Bancroft, John P. Bilbrey,
John T. Cahill, Helene D. Gayle,
Ellen M. Hancock, C. Martin Harris,
Lorrie M. Norrington,
Michael B. Polk, Stephen I. Sadove
/s/ Jennifer M. Daniels
Jennifer M. Daniels
As Attorney-in-Fact
63
Index to Financial Statements
Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
Consolidated Statements of Income for the years ended December 31, 2017, 2016 and 2015
Consolidated Statements of Comprehensive Income for the years ended December 31, 2017, 2016 and 2015
Consolidated Balance Sheets as of December 31, 2017 and 2016
Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, 2017, 2016 and 2015
Consolidated Statements of Cash Flows for the years ended December 31, 2017, 2016 and 2015
Notes to Consolidated Financial Statements
Financial Statement Schedule
Schedule II - Valuation and Qualifying Accounts for the years ended December 31, 2017, 2016 and 2015
Selected Financial Data
Market and Dividend Information
Historical Financial Summary
Page
65
67
68
69
70
71
72
116
117
119
All other financial statements and schedules not listed have been omitted since the required information is included in
the financial statements or the notes thereto or is not applicable or required.
64
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of
Colgate-Palmolive Company
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the consolidated financial statements, including the related notes and financial statement
schedule, of Colgate-Palmolive Company and its subsidiaries as listed in the accompanying index (collectively
referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over
financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
financial position of the Company as of December 31, 2017 and December 31, 2016, and the results of their
operations and their cash flows for each of the three years in the period ended December 31, 2017 in conformity
with accounting principles generally accepted in the United States of America. Also in our opinion, the Company
maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017,
based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective
internal control over financial reporting and for its assessment of the effectiveness of internal control over
financial reporting included in Management’s Annual Report on Internal Control over Financial Reporting,
appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial
statements and on the Company’s internal control over financial reporting based on our audits. We are a public
accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”)
and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free
of material misstatement, whether due to error or fraud, and whether effective internal control over financial
reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts
and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as well as evaluating the overall presentation of
the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our
audits also included performing such other procedures as we considered necessary in the circumstances. We
believe that our audits provide a reasonable basis for our opinions.
65
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
/s/ PRICEWATERHOUSECOOPERS LLP
New York, New York
February 15, 2018
We have served as the Company’s auditor since 2002.
66
COLGATE-PALMOLIVE COMPANY
Consolidated Statements of Income
For the years ended December 31,
(Dollars in Millions Except Per Share Amounts)
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Other (income) expense, net
Charge for Venezuela accounting change
Operating profit
Interest (income) expense, net
Income before income taxes
Provision for income taxes
Net income including noncontrolling interests
Less: Net income attributable to noncontrolling interests
Net income attributable to Colgate-Palmolive Company
Earnings per common share, basic
Earnings per common share, diluted
$
$
$
2017
2016
2015
$
15,454
$
15,195
$
16,034
6,174
9,280
5,497
194
—
3,589
102
3,487
1,313
2,174
150
2,024
2.30
2.28
$
$
$
6,072
9,123
5,249
37
—
3,837
99
3,738
1,152
2,586
145
2,441
2.74
2.72
$
$
$
6,635
9,399
5,464
62
1,084
2,789
26
2,763
1,215
1,548
164
1,384
1.53
1.52
See Notes to Consolidated Financial Statements.
67
COLGATE-PALMOLIVE COMPANY
Consolidated Statements of Comprehensive Income
For the years ended December 31,
(Dollars in Millions)
Net income including noncontrolling interests
Other comprehensive income (loss), net of tax:
Cumulative translation adjustments
Retirement plan and other retiree benefit adjustments
Gains (losses) on available-for-sale securities
Gains (losses) on cash flow hedges
Total Other comprehensive income (loss), net of tax
Total Comprehensive income including noncontrolling interests
Less: Net income attributable to noncontrolling interests
Less: Cumulative translation adjustments attributable to
noncontrolling interests
Total Comprehensive income attributable to noncontrolling interests
Total Comprehensive income attributable to Colgate-Palmolive
Company
2017
2016
2015
$
2,174
$
2,586
$
1,548
302
54
—
(14)
342
2,516
150
17
167
(137)
(109)
(1)
5
(242)
2,344
145
(12)
133
$
2,349
$
2,211
$
(645)
196
(7)
2
(454)
1,094
164
(11)
153
941
See Notes to Consolidated Financial Statements.
68
COLGATE-PALMOLIVE COMPANY
Consolidated Balance Sheets
As of December 31,
(Dollars in Millions Except Share and Per Share Amounts)
Assets
Current Assets
Cash and cash equivalents
Receivables (net of allowances of $77 and $73, respectively)
Inventories
Other current assets
Total current assets
Property, plant and equipment, net
Goodwill
Other intangible assets, net
Deferred income taxes
Other assets
Total assets
Liabilities and Shareholders’ Equity
Current Liabilities
Notes and loans payable
Current portion of long-term debt
Accounts payable
Accrued income taxes
Other accruals
Total current liabilities
Long-term debt
Deferred income taxes
Other liabilities
Total liabilities
Commitments and contingent liabilities
Shareholders’ Equity
Common stock, $1 par value (2,000,000,000 shares authorized, 1,465,706,360 shares issued)
Additional paid-in capital
Retained earnings
Accumulated other comprehensive income (loss)
Unearned compensation
Treasury stock, at cost
Total Colgate-Palmolive Company shareholders’ equity
Noncontrolling interests
Total equity
Total liabilities and equity
See Notes to Consolidated Financial Statements.
69
2017
2016
$
1,535
$
1,480
1,221
403
4,639
4,072
2,218
1,341
188
218
1,315
1,411
1,171
441
4,338
3,840
2,107
1,313
301
224
$
$
12,676
$
12,123
$
11
—
1,212
354
1,831
3,408
6,566
204
2,255
12,433
—
1,466
1,984
20,531
(3,855)
(5)
(20,181)
(60)
303
243
13
—
1,124
441
1,727
3,305
6,520
246
2,035
12,106
—
1,466
1,691
19,922
(4,180)
(7)
(19,135)
(243)
260
17
$
12,676
$
12,123
COLGATE-PALMOLIVE COMPANY
Consolidated Statements of Changes in Shareholders’ Equity
(Dollars in Millions)
Colgate-Palmolive Company Shareholders’ Equity
Common
Stock
Additional
Paid-In
Capital
Unearned
Compensation
Treasury
Stock
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Noncontrolling
Interests
Balance, January 1, 2015
Net income
Other comprehensive income (loss), net
of tax
Dividends
Stock-based compensation expense
Shares issued for stock options
Shares issued for restricted stock awards
Treasury stock acquired
Other
$
1,466
$
1,236
$
(20) $ (16,862) $
18,832
$
(3,507) $
1,384
(1,355)
(443)
125
90
(69)
56
243
69
(1,551)
(1)
8
Balance, December 31, 2015
$
1,466
$
1,438
$
(12) $ (18,102) $
18,861
$
(3,950) $
Net income
Other comprehensive income (loss), net
of tax
Dividends
Stock-based compensation expense
Shares issued for stock options
Shares issued for restricted stock awards
Treasury stock acquired
Other
2,441
(1,380)
(230)
123
128
(60)
62
242
60
(1,335)
5
Balance, December 31, 2016
$
1,466
$
1,691
$
(7) $ (19,135) $
19,922
$
(4,180) $
Net income
Other comprehensive income (loss), net
of tax
Dividends
Stock-based compensation expense
Shares issued for stock options
Shares issued for restricted stock awards
Treasury stock acquired
Other
2,024
(1,405)
325
127
197
(34)
3
313
34
(1,399)
2
6
(10)
240
164
(11)
(138)
255
145
(12)
(128)
260
150
17
(124)
Balance, December 31, 2017
$
1,466
$
1,984
$
(5) $ (20,181) $
20,531
$
(3,855) $
303
See Notes to Consolidated Financial Statements.
70
COLGATE-PALMOLIVE COMPANY
Consolidated Statements of Cash Flows
For the years ended December 31,
(Dollars in Millions)
Operating Activities
Net income including noncontrolling interests
$
2,174
$
2,586
$
1,548
Adjustments to reconcile net income including noncontrolling interests to net cash
2017
2016
2015
provided by operations:
Depreciation and amortization
Restructuring and termination benefits, net of cash
Venezuela remeasurement charges
Stock-based compensation expense
Gain on sale of land in Mexico
Gain on sale of South Pacific laundry detergent business
Charge for Venezuela accounting change
Charge for U.S. tax reform
Deferred income taxes
Voluntary benefit plan contributions
Cash effects of changes in:
Receivables
Inventories
Accounts payable and other accruals
Other non-current assets and liabilities
Net cash provided by operations
Investing Activities
Capital expenditures
Sale of property and non-core product lines
Purchases of marketable securities and investments
Proceeds from sale of marketable securities and investments
Proceeds from sale of land in Mexico
Proceeds from sale of South Pacific laundry detergent business
Payment for acquisitions, net of cash acquired
Reduction in cash due to Venezuela accounting change
Other
Net cash used in investing activities
Financing Activities
Principal payments on debt
Proceeds from issuance of debt
Dividends paid
Purchases of treasury shares
Proceeds from exercise of stock options
Net cash used in financing activities
Effect of exchange rate changes on Cash and cash equivalents
Net (decrease) increase in Cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Supplemental Cash Flow Information
Income taxes paid
Interest paid
475
91
—
127
—
—
—
275
108
(81)
(15)
(8)
(96)
4
443
(9)
—
123
(97)
—
—
—
56
(53)
(17)
(4)
100
13
449
69
34
125
—
(187)
1,084
—
(51)
—
(75)
(13)
(67)
33
3,054
3,141
2,949
(553)
44
(347)
391
—
—
—
—
(6)
(471)
(4,808)
4,779
(1,529)
(1,399)
507
(2,450)
87
220
1,315
1,535
1,037
150
$
$
$
(593)
—
(336)
378
60
—
(5)
—
(3)
(499)
(7,274)
7,438
(1,508)
(1,335)
446
(2,233)
(64)
345
970
1,315
932
162
$
$
$
(691)
9
(742)
599
—
221
(13)
(75)
7
(685)
(9,181)
9,602
(1,493)
(1,551)
347
(2,276)
(107)
(119)
1,089
970
1,259
131
$
$
$
See Notes to Consolidated Financial Statements.
71
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements
(Dollars in Millions Except Share and Per Share Amounts)
1.
Nature of Operations
The Company manufactures and markets a wide variety of products in the U.S. and around the world in two product
segments: Oral, Personal and Home Care; and Pet Nutrition. Oral, Personal and Home Care products include toothpaste,
toothbrushes and mouthwash, bar and liquid hand soaps, shower gels, shampoos, conditioners, deodorants and
antiperspirants, laundry and dishwashing detergents, fabric conditioners, household cleaners and other similar items. These
products are sold primarily to retail and wholesale customers and distributors worldwide. Pet Nutrition products include
specialty pet nutrition products manufactured and marketed by Hill’s Pet Nutrition. The principal customers for Pet
Nutrition products are authorized pet supply retailers and veterinarians. Many of the products from both product segments
are also sold to e-commerce retailers. Principal global and regional trademarks include Colgate, Palmolive, Speed Stick,
Lady Speed Stick, Softsoap, Irish Spring, Protex, Sorriso, Kolynos, elmex, Tom’s of Maine, Sanex, Ajax, Axion, Fabuloso,
Soupline and Suavitel, as well as Hill’s Science Diet, Hill’s Prescription Diet and Hill’s Ideal Balance.
The Company’s principal classes of products accounted for the following percentages of worldwide Net sales for the
past three years:
Oral Care
Personal Care
Home Care
Pet Nutrition
Total
2017
2016
2015
48%
19%
18%
15%
100%
47%
20%
18%
15%
100%
47%
20%
19%
14%
100%
2.
Summary of Significant Accounting Policies
Principles of Consolidation
The Consolidated Financial Statements include the accounts of Colgate-Palmolive Company and its majority-owned or
controlled subsidiaries. Intercompany transactions and balances have been eliminated. The Company’s investments in
consumer products companies with interests ranging between 20% and 50%, where the Company has significant influence
over the investee, are accounted for using the equity method. Net income (loss) from such investments is recorded in Other
(income) expense, net in the Consolidated Statements of Income. As of December 31, 2017 and 2016, equity method
investments included in Other assets in the Consolidated Balance Sheets were $42 and $38, respectively. Unrelated third
parties hold the remaining ownership interests in these investments. Investments with less than a 20% interest are
accounted for using the cost method. Effective December 31, 2015, the Company concluded it no longer met the
accounting criteria for consolidation of its Venezuelan subsidiary (“CP Venezuela”) and began accounting for CP Venezuela
using the cost method of accounting. As a result, effective December 31, 2015, CP Venezuela’s net assets and operating
results are no longer included in the Company’s Consolidated Financial Statements. See Note 14, Venezuela for further
information.
72
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
Use of Estimates
The preparation of financial statements in accordance with accounting principles generally accepted in the United
States of America requires management to use judgment and make estimates that affect the reported amounts of assets and
liabilities and disclosure of contingent gains and losses at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. The level of uncertainty in estimates and assumptions increases with
the length of time until the underlying transactions are completed. As such, the most significant uncertainty in the
Company’s assumptions and estimates involved in preparing the financial statements includes pension and other retiree
benefit cost assumptions, stock-based compensation, asset impairments, uncertain tax positions, tax valuation allowances,
legal and other contingency reserves, the provisional charge in 2017 related to U.S. tax reform (see Note 11, Income Taxes)
and, prior to the deconsolidation of the Company’s Venezuelan operations, the selection of the exchange rate used to
remeasure the financial statements of CP Venezuela (see Note 14, Venezuela). Additionally, the Company uses available
market information and other valuation methodologies in assessing the fair value of financial instruments and retirement
plan assets. 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. Actual results could ultimately
differ from those estimates.
Revenue Recognition
Sales are recorded at the time products are shipped to trade customers and when risk of ownership transfers. Net sales
reflect units shipped at selling list prices reduced by sales returns and the cost of current and continuing promotional
programs. Current promotional programs, such as product listing allowances and co-operative advertising arrangements,
are recorded in the period incurred. Continuing promotional programs are predominantly consumer coupons and volume-
based sales incentive arrangements with trade customers. The redemption cost of consumer coupons is based on historical
redemption experience and is recorded when coupons are distributed. Volume-based incentives offered to trade customers
are based on the estimated cost of the program and are recorded as products are sold.
Shipping and Handling Costs
Shipping and handling costs are classified as Selling, general and administrative expenses and were $1,183, $1,140
and $1,235 for the years ended December 31, 2017, 2016 and 2015, respectively.
Marketing Costs
The Company markets its products through advertising and other promotional activities. Advertising costs are included
in Selling, general and administrative expenses and are expensed as incurred. Certain consumer and trade promotional
programs, such as consumer coupons, are recorded as a reduction of sales.
Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturities of three months or less at the time of
purchase to be cash equivalents.
Inventories
The cost of approximately 75% of inventories is determined using the first-in, first-out (“FIFO”) method, which is
stated at the lower of cost or net realizable value. The cost of all other inventories, in the U.S. and Mexico, is determined
using the last-in, first-out (“LIFO”) method, which is stated at the lower of cost or market.
73
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
Property, Plant and Equipment
Land, buildings and machinery and equipment are stated at cost. Depreciation is provided, primarily using the straight-
line method, over estimated useful lives ranging from 3 to 15 years for machinery and equipment and up to 40 years for
buildings. Depreciation attributable to manufacturing operations is included in Cost of sales. The remaining component of
depreciation is included in Selling, general and administrative expenses.
Goodwill and Other Intangibles
Goodwill and indefinite life intangible assets, such as the Company’s global brands, are subject to impairment tests at
least annually. These tests were performed and did not result in an impairment charge. Other intangible assets with finite
lives, such as local brands and trademarks, customer relationships and non-compete agreements, are amortized over their
estimated useful lives, generally ranging from 5 to 40 years. Amortization expense related to intangible assets is included in
Other (income) expense, net, which is included in Operating profit.
Income Taxes
The provision for income taxes is determined using the asset and liability method. Under this method, deferred tax
assets and liabilities are recognized based upon the differences between the financial statement and tax bases of assets and
liabilities using enacted tax rates that will be in effect at the time such differences are expected to reverse. Deferred tax
assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some
portion or all of the deferred tax assets will not be realized.
The Company uses a comprehensive model to recognize, measure, present and disclose in its financial statements
uncertain tax positions that the Company has taken or expects to take on an income tax return. The Company recognizes
interest expense and penalties related to unrecognized tax benefits within Provision for income taxes.
Financial Instruments
Derivative instruments are recorded as assets and liabilities at estimated fair value based on available market
information. The Company’s derivative instruments that qualify for hedge accounting are designated as either fair value
hedges, cash flow hedges or net investment hedges. For fair value hedges, changes in the fair value of the derivative, as
well as the offsetting changes in the fair value of the hedged item, are recognized in earnings each period. For cash flow
hedges, changes in the fair value of the derivative are recorded in Other comprehensive income (loss) and are recognized in
earnings when the offsetting effect of the hedged item is also recognized in earnings. For hedges of the net investment in
foreign subsidiaries, changes in the fair value of the derivative are recorded in Other comprehensive income (loss) to offset
the change in the value of the net investment being hedged. Cash flows related to hedges are classified in the same category
as the cash flows from the hedged item in the Consolidated Statements of Cash Flows.
The Company may also enter into certain foreign currency and interest rate instruments that economically hedge
certain of its risks but do not qualify for hedge accounting. Changes in fair value of these derivative instruments, based on
quoted market prices, are recognized in earnings each period. The Company’s derivative instruments and other financial
instruments are more fully described in Note 7, Fair Value Measurements and Financial Instruments along with the related
fair value measurement considerations.
Stock-Based Compensation
The Company recognizes the cost of employee services received in exchange for awards of equity instruments, such as
stock options and restricted stock units, based on the fair value of those awards at the date of grant over the requisite
service period. The Company uses the Black-Scholes-Merton (“Black-Scholes”) option pricing model to determine the fair
value of stock option awards. Stock-based compensation plans, related expenses and assumptions used in the Black-
Scholes option pricing model are more fully described in Note 8, Capital Stock and Stock-Based Compensation Plans.
74
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
Currency Translation
The assets and liabilities of foreign subsidiaries, other than those operating in highly inflationary environments, are
translated into U.S. dollars at year-end exchange rates with resulting translation gains and losses accumulated in a separate
component of shareholders’ equity. Income and expense items are translated into U.S. dollars at average rates of exchange
prevailing during the year.
For subsidiaries operating in highly inflationary environments, local currency-denominated non-monetary assets,
including inventories, goodwill and property, plant and equipment, are remeasured at their historical exchange rates, while
local currency-denominated monetary assets and liabilities are remeasured at year-end exchange rates. Remeasurement
adjustments for these operations are included in Net income attributable to Colgate-Palmolive Company. Prior to the
deconsolidation of the Company’s Venezuelan operations in 2015, CP Venezuela was designated as hyper-inflationary and
the functional currency for CP Venezuela was the U.S. dollar. See Note 14, Venezuela for further information. Currently,
none of the Company’s subsidiaries operate in highly inflationary environments.
Recent Accounting Pronouncements
On August 28, 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update
(“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 new
guidance is effective for the Company beginning on January 1, 2019, with early adoption permitted. 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. While the Company is currently assessing the impact of the new standard on its Consolidated Financial
Statements, this new guidance is not expected to have a material impact on the Company’s Consolidated Financial
Statements.
On May 10, 2017, the FASB issued ASU No. 2017-09, “Compensation–Stock Compensation (Topic 718): Scope of
Modification Accounting,” clarifying when a change to the terms or conditions of a stock-based payment award must be
accounted for as a modification. The new guidance requires modification accounting if the fair value, vesting condition or
the classification of the award is not the same immediately before and after a change to the terms and conditions of the
award. The new guidance was effective for the Company on a prospective basis beginning on January 1, 2018. This new
guidance is not expected to have an impact on the Company’s Consolidated Financial Statements as it is not the Company’s
practice to change either the terms or conditions of stock-based payment awards once they are granted.
75
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
On March 10, 2017, the FASB issued ASU No. 2017-07, “Compensation–Retirement Benefits (Topic 715): Improving
the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,” changing the presentation of
the net periodic benefit cost on the Statement of Income and limiting the amount of net periodic benefit cost eligible for
capitalization to assets. The new guidance permits only the service cost component of net periodic benefit cost to be
eligible for capitalization. The new guidance also requires entities to present the service cost component of net periodic
benefit cost together with compensation costs arising from services rendered by employees during the period. Other
components of net periodic benefit cost, which include interest, expected return on assets, amortization of prior service
costs and actuarial gains and losses, are required to be presented outside of Operating profit. The line item or items used to
present the other components of net periodic benefit cost must be disclosed in the Notes to the Consolidated Financial
Statements, if not separately described on the Statement of Income. The new presentation requirement is required to be
adopted on a “full retrospective” basis, meaning the standard is applied to all of the periods presented in the financial
statements, while the limitation on capitalization can only be adopted on a prospective basis. The new guidance was
effective for the Company beginning on January 1, 2018. Had the standard been effective for the year ended December 31,
2017, full year Operating profit would have increased by approximately $120 with no impact on Net income attributable to
Colgate-Palmolive Company. The Company anticipates that, as a result of the reclassification, full year Operating profit
will increase in future periods by approximately $100 annually with no impact on Net income attributable to Colgate-
Palmolive Company.
On January 26, 2017, the FASB issued ASU No. 2017-04, “Intangibles–Goodwill and Other (Topic 350): Simplifying
the Test for Goodwill Impairment,” eliminating the requirement to calculate the implied fair value, essentially eliminating
step two from the goodwill impairment test. The new standard requires goodwill impairment to be based upon the results of
step one of the impairment test, which is defined as the excess of the carrying value of a reporting unit over its fair value.
The impairment charge will be limited to the amount of goodwill allocated to that reporting unit. The standard is effective
for the Company on a prospective basis beginning on January 1, 2020, with early adoption permitted. This new guidance is
not expected to have a material impact on the Company’s Consolidated Financial Statements.
On January 5, 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying the
Definition of a Business,” which provides additional guidance on evaluating whether transactions should be accounted for
as acquisitions of assets or businesses. The guidance requires an entity to evaluate if substantially all of the fair value of the
assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. If this threshold is met,
the new guidance would define this as an asset acquisition; otherwise, the entity then evaluates whether the asset meets the
requirement that a business include, at a minimum, an input and substantive process that together significantly contribute to
the ability to create outputs. The guidance was effective for the Company on a prospective basis beginning on January 1,
2018. This new guidance is not expected to have a material impact on the Company’s Consolidated Financial Statements.
On October 24, 2016, the FASB issued ASU No. 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets
Other than Inventory,” which eliminates the requirement to defer recognition of income taxes on intra-entity asset transfers
until the asset is sold to an outside party. The new guidance requires the recognition of current and deferred income taxes
on intra-entity transfers of assets other than inventory, such as intellectual property and property, plant and equipment,
when the transfer occurs. As permitted, the Company early-adopted the new standard on a “modified retrospective” basis,
meaning the standard was applied only to the most recent period presented in the financial statements, as of January 1,
2017. This new guidance did not have a material impact on the Company’s Consolidated Financial Statements.
On August 26, 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of
Certain Cash Receipts and Cash Payments,” which clarifies how certain cash receipts and payments are to be presented in
the statement of cash flows. The guidance was effective for the Company on January 1, 2018. This new guidance is not
expected to have a material impact on the Company’s Consolidated Financial Statements.
76
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
On March 30, 2016, the FASB issued ASU No. 2016-09, “Compensation–Stock Compensation (Topic 718):
Improvements to Employee Share-Based Payment Accounting,” which amended accounting for income taxes related to
stock-based compensation, the related classification in the statement of cash flows and share award forfeiture accounting.
The new guidance was effective for the Company beginning on January 1, 2017. As required subsequent to the adoption of
this new guidance, the Company recognized excess tax benefits of $47 (resulting from an increase in the fair value of an
award from grant date to the vesting or exercise date, as applicable) in the Provision for income taxes as a discrete item
during the year ended December 31, 2017. These amounts may not necessarily be indicative of future amounts that may be
recognized as any excess tax benefits from stock-based compensation recognized would be dependent on future stock
price, employee exercise behavior and applicable tax rates. Prior to January 1, 2017, excess tax benefits were recognized in
equity. As permitted, the Company elected to classify these excess tax benefits from stock-based compensation as an
operating activity in the Statement of Cash Flows instead of as a financing activity on a prospective basis and did not
retrospectively adjust prior periods. Also, as permitted by the new standard, the Company elected to account for forfeitures
as they occur.
On March 15, 2016, the FASB issued ASU No. 2016-07, “Investments–Equity Method and Joint Ventures (Topic 323):
Simplifying the Transition to the Equity Method of Accounting,” which eliminated the requirement to retroactively adjust
an investment that subsequently qualifies for equity method accounting (as a result of an increase in level of ownership
interest or degree of influence) as if the equity method of accounting had been applied during all prior periods that the
investment was held. The new standard requires that the investor add the cost of acquiring additional ownership interest in
the investee to its current basis and prospectively apply the equity method of accounting. For an available-for-sale
investment, any unrealized gains or losses should be recognized in earnings at the date the investment qualifies as an equity
method investment. The new guidance was effective for the Company beginning on January 1, 2017, and did not have a
material impact on the Company’s Consolidated Financial Statements.
On February 25, 2016, the FASB issued its final standard on lease accounting, ASU No. 2016-02, “Leases (Topic
842),” which supersedes Topic 840, “Leases.” The new accounting standard requires the recognition of right-of-use assets
and lease liabilities for all long-term leases, including operating leases, on the balance sheet. The new standard also
provides additional guidance on the measurement of the right-of-use assets and lease liabilities and will require enhanced
disclosures about the Company’s leasing arrangements. Under current accounting standards, substantially all of the
Company’s leases are considered operating leases and, as such, are not recognized on the Consolidated Balance Sheet. This
new standard is effective for the Company beginning on January 1, 2019, with early adoption permitted. The standard
requires a “modified retrospective” adoption, meaning the standard is applied to leases existing at, or entered into after, the
beginning of the earliest comparative period presented in the financial statements. The Company is currently assessing the
impact of the new standard on its Consolidated Financial Statements.
On January 5, 2016, the FASB issued ASU No. 2016-01, “Financial Instruments–Overall (Subtopic 825-10):
Recognition and Measurement of Financial Assets and Financial Liabilities.” The updated guidance enhances the reporting
model for financial instruments, which includes amendments to address aspects of recognition, measurement, presentation
and disclosure. The amendment to the standard was effective for the Company beginning on January 1, 2018 and is not
expected to have a material impact on the Company’s Consolidated Financial Statements.
On July 22, 2015, the FASB issued ASU No. 2015-11, “Inventory (Topic 330): Simplifying the Measurement of
Inventory,” which simplifies the subsequent measurement of inventories by replacing the lower of cost or market test with
a lower of cost and net realizable value test. The guidance applies only to inventories for which cost is determined by
methods other than LIFO and the retail inventory method. The new guidance was effective for the Company beginning on
January 1, 2017. This new guidance did not have a material impact on the Company’s Consolidated Financial Statements.
77
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
On May 28, 2014, the FASB and the International Accounting Standards Board issued their final converged standard
on revenue recognition. The standard, issued as ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)”
by the FASB, provides a comprehensive revenue recognition model for all contracts with customers and supersedes current
revenue recognition guidance. The revenue standard contains principles that an entity will apply to determine the
measurement of revenue and timing of when it is recognized. The underlying principle is that an entity will recognize
revenue to depict the transfer of goods or services to its customers at an amount that the entity expects to be entitled to in
exchange for those goods or services. The new standard also includes enhanced disclosures. During 2016, the FASB issued
several accounting updates (ASU No. 2016-08, 2016-10 and 2016-12) to clarify implementation guidance and correct
unintended application of the guidance. The standard allows for either full retrospective adoption or modified retrospective
adoption. The Company adopted the new standard on January 1, 2018, on a “modified retrospective” basis, which did not
have a material impact on the Company’s Consolidated Financial Statements. Although the new standard resulted in
changes to the Company’s revenue recognition accounting policy commencing on January 1, 2018, the Company does not
expect it will have a material impact in future periods on its Consolidated Financial Statements.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation.
3.
Acquisitions and Divestitures
Acquisitions
In January 2018, the Company acquired all 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.
Sale of Land in Mexico
In September 2016, the Company’s Mexican subsidiary completed the sale to the United States of America of the
Mexico City site on which its commercial operations, technology center and soap production facility were previously
located and received $60 as the third and final installment of the sale price. The total sale price (including the third
installment and the previously received first and second installments) was $120. The Company recognized a pretax gain of
$97 ($63 aftertax or $0.07 per diluted share) in the third quarter of 2016, net of costs primarily related to site preparation.
Sale of Laundry Detergent Business in the South Pacific
In August 2015, the Company completed the sale of its laundry detergent business in the South Pacific to Henkel AG
& Co. KGaA for an aggregate purchase price of approximately 310 Australian dollars ($221) and recorded a pretax gain of
$187 ($120 aftertax or $0.13 per diluted share) in Other (income) expense, net. The gain is net of charges related to the
right-sizing of the Company’s South Pacific business, asset write-offs related to the divested laundry detergent business and
other costs related to the sale. The funds from the sale were reinvested to expand the Global Growth and Efficiency
Program (see Note 4, Restructuring and Related Implementation Changes).
78
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
4.
Restructuring and Related Implementation Charges
In the fourth quarter of 2012, the Company commenced a restructuring program (the “Global Growth and Efficiency
Program”) for sustained growth. The program was expanded in 2014 and expanded and extended in 2015. Building on the
Company’s successful implementation of the program, on October 26, 2017, the Board approved an expansion of the
Global Growth and Efficiency Program and an extension of the program through December 31, 2019 to take advantage of
additional opportunities to streamline the Company’s operations.
Initiatives under the Global Growth and Efficiency Program continue to fit within the program’s three focus areas of
expanding commercial hubs, extending shared business services and streamlining global functions and optimizing the
global supply chain and facilities.
Including the most recent expansion, 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 $1,730 to $1,885 ($1,280 to
$1,380 aftertax). The Company anticipates that pretax charges for 2018 will approximate $100 to $175 ($75 to $125
aftertax). It is expected that substantially all charges resulting from the Global Growth and Efficiency Program will be
incurred by December 31, 2019.
The pretax charges resulting from the Global Growth and Efficiency Program are currently estimated to be comprised
of the following categories: Employee-Related Costs, including severance, pension and other termination benefits (50%);
asset-related costs, primarily Incremental Depreciation and Asset Impairments (10%); and Other charges, which include
contract termination costs, consisting primarily of related implementation charges resulting directly from exit activities
(20%) and the implementation of new strategies (20%). Over the course of the Global Growth and Efficiency Program, it is
currently estimated that approximately 80% of the charges will result in cash expenditures.
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 3,800 to
4,400 positions from the Company’s global employee workforce.
For the years ended December 31, 2017, 2016 and 2015, restructuring and related implementation charges are
reflected in the Consolidated Statements of Income as follows:
Cost of sales
Selling, general and administrative expenses
Other (income) expense, net
Total Global Growth and Efficiency Program charges, pretax
Total Global Growth and Efficiency Program charges, aftertax
2017
2016
2015
$
$
$
75
89
169
333
246
$
$
$
46
77
105
228
168
$
$
$
20
64
170
254
183
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.
79
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
Total charges incurred for the Global Growth and Efficiency Program relate to initiatives undertaken by the following
reportable operating segments:
2017
2016
2015
Program-to-date
Accumulated Charges
North America
Latin America
Europe
Asia Pacific
Africa/Eurasia
Hill’s Pet Nutrition
Corporate
Total
23%
2%
21%
5%
3%
6%
40%
100%
35%
5%
12%
4%
14%
7%
23%
100%
21%
3%
14%
4%
5%
5%
48%
100%
18%
3%
22%
3%
6%
7%
41%
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 $1,561 ($1,153 aftertax) in connection with the implementation of various projects
as follows:
Employee-Related Costs
Incremental Depreciation
Asset Impairments
Other
Total
Cumulative Charges
as of December 31, 2017
$
$
628
90
36
807
1,561
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.
80
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
The following table summarizes the activity for the restructuring and related implementation charges, in the
respective periods, discussed above and the related accruals:
Balance at January 1, 2015
$
85
$
— $
— $
Employee-Related
Costs
Incremental
Depreciation
Asset
Impairments
Other
107
$
Charges
Cash payments
Charges against assets
Foreign exchange
Other
Balance at December 31, 2015
$
Charges
Cash payments
Charges against assets
Foreign exchange
Other
Balance at December 31, 2016
$
Charges
Cash payments
Charges against assets
Foreign exchange
Other
109
(85)
(17)
(8)
—
84
61
(84)
(4)
(1)
—
56
163
(74)
(21)
3
—
$
$
20
—
(20)
—
—
5
—
(5)
—
—
120
(94)
—
(2)
—
— $
— $
131
$
9
—
(9)
—
—
20
—
(20)
—
—
138
(153)
—
—
9
— $
— $
125
$
10
—
(10)
—
—
9
—
(9)
—
—
151
(170)
—
1
—
Balance at December 31, 2017
$
127
$
— $
— $
107
$
Total
192
254
(179)
(42)
(10)
—
215
228
(237)
(33)
(1)
9
181
333
(244)
(40)
4
—
234
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 $21, $4 and $17 for the
years ended December 31, 2017, 2016 and 2015, respectively, 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 10, Retirement Plans and Other
Retiree Benefits).
Incremental Depreciation is recorded to reflect changes in useful lives and estimated residual values for long-lived
assets that will be taken out of service prior to the end of their normal service period. Asset Impairments are recorded to
write down assets held for sale or disposal to their fair value based on amounts expected to be realized. Charges against
assets within Asset Impairments are net of cash proceeds pertaining to the sale of certain assets.
Other charges consist primarily of charges resulting directly from exit activities and the implementation of new
strategies as a result of the Global Growth and Efficiency Program. These charges for the years ended December 31, 2017,
2016 and 2015 include third-party incremental costs related to the development and implementation of new business and
strategic initiatives of $145, $116 and $65, respectively, and contract termination costs and charges resulting directly from
exit activities of $6, $21 and $8, respectively. These charges were expensed as incurred. Also included in Other charges for
the years ended December 31, 2017, 2016 and 2015 are other exit costs of $0, $1 and $47, respectively, related to the
consolidation of facilities.
81
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
5.
Goodwill and Other Intangible Assets
The net carrying value of Goodwill as of December 31, 2017 and 2016 by segment was as follows:
Oral, Personal and Home Care
North America
Latin America
Europe
Asia Pacific
Africa/Eurasia
Total Oral, Personal and Home Care
Pet Nutrition
Total Goodwill
2017
2016
$
$
343
256
1,333
190
81
2,203
15
2,218
$
$
336
260
1,233
187
76
2,092
15
2,107
The change in the amount of Goodwill in each year is primarily due to the impact of foreign currency translation.
Other intangible assets as of December 31, 2017 and 2016 were comprised of the following:
2017
2016
Trademarks
Other finite life intangible assets
Indefinite life intangible assets
Total Other intangible assets
Gross
Carrying
Amount
$
$
547
249
985
1,781
$
Accumulated
Amortization
$
Gross
Carrying
Amount
539
231
938
1,708
Net
210
146
985
1,341
$
$
$
Accumulated
Amortization
$
Net
222
153
938
1,313
(317) $
(78)
—
(395) $
(337) $
(103)
—
(440) $
The changes in the net carrying amounts of Other intangible assets during 2017, 2016 and 2015 were primarily due to
amortization expense of $35, $33 and $33, respectively, as well as the impact of foreign currency translation. Annual
estimated amortization expense for each of the next five years is expected to be approximately $35.
82
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
6.
Long-Term Debt and Credit Facilities
Long-term debt consisted of the following at December 31:
Notes
Commercial paper
Less: Current portion of long-term debt
Total
Weighted
Average
Interest Rate
2.0%
1.5%
Maturities
2018 - 2078
2018
2017
$ 6,542
24
6,566
—
$ 6,566
2016
$ 6,225
295
6,520
—
$ 6,520
The weighted-average interest rate on short-term borrowings of $11 in 2017 and $13 in 2016 included in Notes and
loans payable in the Consolidated Balance Sheets as of December 31, 2017 and 2016 was 2.8% and 1.6%, respectively.
The Company classifies commercial paper and notes maturing within the next twelve months as long-term debt when
it has the intent and ability to refinance such obligations on a long-term basis. Excluding such obligations, scheduled
maturities of long-term debt and capitalized leases outstanding as of December 31, 2017, were as follows:
Years Ended December 31,
2018
2019
2020
2021
2022
Thereafter
$
—
1,097
248
298
889
3,311
The Company has entered into interest rate swap agreements and foreign exchange contracts related to certain of these
debt instruments. See Note 7, Fair Value Measurements and Financial Instruments for further information about the
Company’s financial instruments.
The Company’s debt issuances support its capital structure strategy objectives of funding its business and growth
initiatives while minimizing its risk-adjusted cost of capital. During the fourth quarter of 2017, the Company issued $400
of five-year notes at a fixed rate of 2.25%. During the third quarter of 2017, the Company issued $500 of thirty-year notes
at a fixed rate of 3.70%. The debt issuances in 2017 were under the Company’s shelf registration statement. Proceeds from
the debt issuances in 2017 were used for general corporate purposes which included the retirement of commercial paper
borrowings.
At December 31, 2017, the Company had access to unused domestic and foreign lines of credit of $2,949 (including
under the facilities discussed below) and could also issue medium-term notes pursuant to an effective shelf registration
statement. In November 2011, the Company entered into a five-year revolving credit facility with a capacity of $1,850 with
a syndicate of banks. This facility was extended for an additional year in 2012 and again in 2013. In 2014, the Company
entered into an amendment of this facility whereby the facility was extended for an additional year to November 2019 and
the capacity of the facility was increased to $2,370. In 2016, the facility was extended for an additional year to November
2020. The Company also has the ability to draw $165 from a revolving credit facility that expires in November 2018.
Commitment fees related to the credit facilities are not material.
83
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
Certain 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.
7.
Fair Value Measurements and Financial Instruments
The Company uses available market information and other valuation methodologies in assessing the fair value of
financial instruments. Judgment is required in interpreting market data to develop the estimates of fair value and,
accordingly, changes in assumptions or the estimation methodologies may affect the fair value estimates. The Company is
exposed to the risk of credit loss in the event of nonperformance by counterparties to financial instrument contracts;
however, nonperformance is considered unlikely and any nonperformance is unlikely to be material, as it is the Company’s
policy to contract only with diverse, credit-worthy counterparties based upon both strong credit ratings and other credit
considerations.
The Company is exposed to market risk from foreign currency exchange rates, interest rates and commodity price
fluctuations. Volatility relating to these exposures is managed on a global basis by utilizing a number of techniques,
including working capital management, sourcing strategies, selling price increases, selective borrowings in local currencies
and entering into selective derivative instrument transactions, issued with standard features, in accordance with the
Company’s treasury and risk management policies, which prohibit the use of derivatives for speculative purposes and
leveraged derivatives for any purpose. It is the Company’s policy to enter into derivative instrument contracts with terms
that match the underlying exposure being hedged. Hedge ineffectiveness, if any, is not material for any period
presented. Provided below are details of the Company’s exposures by type of risk and derivative instruments by type of
hedge designation.
Valuation Considerations
Assets and liabilities carried at fair value are classified as follows:
Level 1: Based upon quoted market prices in active markets for identical assets or liabilities.
Level 2: Based upon observable market-based inputs or unobservable inputs that are corroborated by market data.
Level 3: Based upon unobservable inputs reflecting the reporting entity’s own assumptions.
Foreign Exchange Risk
As the Company markets its products in over 200 countries and territories, it is exposed to currency fluctuations
related to manufacturing and selling its products in currencies other than the U.S. dollar. The Company manages its foreign
currency exposures through a combination of cost containment measures, sourcing strategies, selling price increases and
the hedging of certain costs in an effort to minimize the impact on earnings of foreign currency rate movements.
The Company primarily utilizes foreign currency contracts, including forward and swap contracts, option contracts,
foreign and 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. The
duration of foreign currency contracts generally does not exceed 12 months and the contracts are valued using observable
market rates (Level 2 valuation).
Interest Rate Risk
The Company manages its targeted mix of fixed and floating rate debt with debt issuances and by entering into interest
rate swaps in order to mitigate fluctuations in earnings and cash flows that may result from interest rate volatility. The
notional amount, interest payment and maturity date of the swaps generally match the principal, interest payment and
maturity date of the related debt, and the swaps are valued using observable benchmark rates (Level 2 valuation).
84
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
Commodity Price Risk
The Company is exposed to price volatility related to raw materials used in production, such as resins, pulp, essential
oils, tropical oils, tallow, poultry, corn and soybeans. The Company manages its raw material exposures through a
combination of cost containment measures, sourcing strategies, ongoing productivity initiatives and the limited use of
commodity hedging contracts. Futures contracts are used on a limited basis, primarily in the Hill’s Pet Nutrition segment,
to manage volatility related to raw material inventory purchases of certain traded commodities, and these contracts are
measured using quoted commodity exchange prices (Level 1 valuation). The duration of the commodity contracts generally
does not exceed 12 months.
Credit Risk
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 with diverse, credit-worthy counterparties based upon both strong credit ratings
and other credit considerations.
The following table summarizes the fair value of the Company’s derivative instruments and other financial instruments
at December 31, 2017 and December 31, 2016:
Assets
Liabilities
Account
Fair Value
Account
Fair Value
Designated derivative
instruments
Interest rate swap contracts
Other current
assets
Interest rate swap contracts
Other assets
Foreign currency contracts
Foreign currency contracts
Commodity contracts
Total designated
Other current
assets
Other assets
Other current
assets
Derivatives not designated
Foreign currency contracts
Total not designated
Other assets
Total derivative instruments
Other financial instruments
Marketable securities
Total other financial
instruments
Other current
assets
12/31/17
12/31/16
12/31/17
12/31/16
$
— $
1 Other accruals
$
— $
7
20
46
—
73
$
—
— $
73
$
$
$
$
—
25
—
—
25
—
1 Other liabilities
29 Other accruals
5 Other liabilities
— Other accruals
$
36
— Other liabilities
— $
—
25
$
36
14
14
$
$
23
23
$
$
$
$
$
—
—
4
—
—
4
—
—
4
85
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
The carrying amount of cash, cash equivalents, accounts receivable and short-term debt approximated fair value as of
December 31, 2017 and 2016. The estimated fair value of the Company’s long-term debt, including the current portion, as
of December 31, 2017 and 2016, was $6,799 and $6,717, respectively, and the related carrying value was $6,566 and
$6,520, 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).
Fair Value Hedges
The Company has designated all interest rate swap contracts and certain foreign currency forward and option contracts
as fair value hedges, for which the gain or loss on the derivative and the offsetting gain or loss on the hedged item are
recognized in current earnings. The impact of foreign currency contracts is primarily recognized in Selling, general and
administrative expenses and the impact of interest rate swap contracts is recognized in Interest (income) expense, net.
Activity related to fair value hedges recorded during each period presented was as follows:
Foreign
Currency
Contracts
2017
Interest
Rate
Swaps
Total
Notional Value at December 31,
$
1,231
$
Gain (loss) on derivatives
Gain (loss) on hedged items
Cash Flow Hedges
(7)
7
1,000
(9)
9
$ 2,231
(16)
16
Foreign
Currency
Contracts
$
204
$
5
(5)
2016
Interest
Rate
Swaps
1,250
(5)
5
Total
$ 1,454
—
—
All of the Company’s commodity contracts and certain foreign currency forward contracts have been designated as
cash flow hedges, for which the effective portion of the gain or loss is reported as a component of Other comprehensive
income (“OCI”) and reclassified into earnings in the same period or periods during which the hedged transaction affects
earnings.
Activity related to cash flow hedges recorded during each period presented was as follows:
2017
Foreign
Currency
Contracts
Commodity
Contracts
Total
2016
Foreign
Currency
Contracts
Commodity
Contracts
Notional Value at December 31,
$
702
$
— $
Gain (loss) recognized in OCI
Gain (loss) reclassified into Cost of sales
(25)
(3)
—
—
702
(25)
(3)
$
643
$
12
4
7
(1)
—
Total
$
650
11
4
The net gain (loss) recognized in OCI for both foreign currency contracts and commodity contracts is generally
expected to be recognized in Cost of sales within the next twelve months.
86
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
Net Investment Hedges
The Company has designated certain foreign currency forward and option contracts and certain foreign currency-
denominated debt as net investment hedges, for which the gain or loss on the instrument is reported as a component of
Cumulative translation adjustments within OCI, along with the offsetting gain or loss on the hedged items.
Activity related to net investment hedges recorded during each period presented was as follows:
Foreign
Currency
Contracts
2017
Foreign
Currency
Debt
Foreign
Currency
Contracts
Total
2016
Foreign
Currency
Debt
Total
Notional Value at December 31,
$
478
$
Gain (loss) on instruments
Gain (loss) on hedged items
(71)
71
601
(112)
112
$ 1,079
(183)
183
$
498
$
1,118
$ 1,616
22
(25)
35
(35)
57
(60)
Derivatives Not Designated as Hedging Instruments
Derivatives not designated as hedging instruments include foreign currency contracts for which the gain or loss on the
instrument is recognized in Other (income) expense, net for the twelve months ended December 31, 2017. During the
second quarter of 2017, the Company de-designated foreign currency forward contracts previously designated as net
investment hedges and entered into new derivative instruments with offsetting terms. Gains or losses on these de-
designated derivatives were substantially offset by gains and losses on the new derivative instruments.
Derivatives not designated as hedging instruments consisted of a cross-currency swap that served as an economic
hedge of a foreign currency deposit, for which the gain or loss on the instrument and the offsetting gain or loss on the
hedged item was recognized in Other (income) expense, net for the twelve months ended December 31, 2016.
Activity related to these contracts during each period presented was as follows:
Notional Value at December 31,
Gain (loss) on instruments
Gain (loss) on hedged items
Other Financial Instruments
2017
2016
Foreign Currency
Contracts
Foreign Currency
Contracts
$
$
3
—
—
4
5
(5)
Other financial instruments are classified as Other current assets or Other assets.
Included in Other current assets at December 31, 2017 are marketable securities, which consist of bank deposits of $14
with original maturities greater than 90 days carried at fair value (Level 1 valuation) and the current portion of bonds
issued by the Argentinian government in the amount of $4 classified as held-to-maturity and carried at amortized cost.
Through its subsidiary in Argentina, the Company has invested in U.S. dollar-linked devaluation-protected bonds and
Argentinian peso-denominated bonds issued by the Argentinian government. As of December 31, 2017 and 2016, the
amortized cost of these bonds was $4 and $52, respectively, and their approximate fair value was $4 and $64, respectively
(Level 2 valuation).
87
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
8.
Capital Stock and Stock-Based Compensation Plans
Preference Stock
The Company has the authority to issue 50,262,150 shares of preference stock.
Stock Repurchases
On February 19, 2015, the Board authorized the repurchase of shares of the Company’s common stock having an
aggregate purchase price of up to $5,000 under a share repurchase program (the “2015 Program”), which replaced a
previously authorized share repurchase program. The Company commenced repurchase of shares of the Company’s
common stock under the 2015 Program beginning February 19, 2015. 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 Company repurchased its common stock at a cost of
$1,399 during 2017 under the 2015 Program.
The Company may use either authorized and unissued shares or treasury shares to meet share requirements resulting
from the exercise of stock options and the vesting of restricted stock unit awards.
A summary of common stock and treasury stock activity for the three years ended December 31, is as follows:
Common
Stock
Outstanding
906,712,145
Treasury
Stock
558,994,215
(22,802,784)
7,394,839
1,434,318
892,738,518
22,802,784
(7,394,839)
(1,434,318)
572,967,842
(19,271,304)
8,536,639
1,105,110
883,108,963
19,271,304
(8,536,639)
(1,105,110)
582,597,397
(19,185,828)
9,670,988
1,106,995
874,701,118
19,185,828
(9,670,988)
(1,106,995)
591,005,242
Balance, January 1, 2015
Common stock acquired
Shares issued for stock options
Shares issued for restricted stock units and other
Balance, December 31, 2015
Common stock acquired
Shares issued for stock options
Shares issued for restricted stock units and other
Balance, December 31, 2016
Common stock acquired
Shares issued for stock options
Shares issued for restricted stock units and other
Balance, December 31, 2017
88
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
Stock-Based Compensation
The Company recognizes the cost of employee services received in exchange for awards of equity instruments, such as
stock options and restricted stock units, based on the fair value of those awards at the date of grant. The fair value of
restricted stock units, generally based on market prices, is amortized on a straight-line basis over the requisite service
period. The estimated fair value of stock options on the date of grant is amortized on a straight-line basis over the requisite
service period for each separately vesting portion of the award. Awards to employees eligible for retirement prior to the
award becoming fully vested are recognized as compensation cost from the grant date through the date that the employee
first becomes eligible to retire and is no longer required to provide service to earn the award.
The Company has one incentive compensation plan pursuant to which it issues restricted stock units and stock options
to employees and shares of common stock and stock options to non-employee directors. The Personnel and Organization
Committee of the Board of Directors, which is comprised entirely of independent directors, administers the incentive
compensation plan. The total stock-based compensation expense charged against pretax income for this plan was $127,
$123 and $125 for the years ended December 31, 2017, 2016 and 2015, respectively. The total income tax benefit
recognized on stock-based compensation was approximately $42, $40 and $39 for the years ended December 31, 2017,
2016 and 2015, respectively.
Stock-based compensation expense is recorded within Selling, general and administrative expenses in the Corporate
segment as these amounts are not included in internal measures of segment operating performance.
The Company uses the Black-Scholes option pricing model to determine the fair value of stock option awards. The
weighted-average estimated fair value of stock options granted in the years ended December 31, 2017, 2016 and 2015 was
$8.37, $8.10 and $7.25, respectively. Fair value is estimated using the Black-Scholes option pricing model with the
assumptions summarized in the following table:
Expected term of options
Expected volatility rate
Risk-free interest rate
Expected dividend yield
2017
4.5 years
16.0%
1.8%
2.2%
2016
4.5 years
16.7%
1.2%
2.1%
2015
4.5 years
17.6%
1.5%
2.5%
The weighted-average expected term of options granted each year was determined with reference to historical exercise
and post-vesting cancellation experience, the vesting period of the awards and the contractual term of the awards, among
other factors. Expected volatility incorporates implied share-price volatility derived from exchange traded options on the
Company’s common stock. The risk-free interest rate for the expected term of the option is based on the yield of a zero-
coupon U.S. Treasury bond with a maturity period equal to the option’s expected term.
89
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
Restricted Stock Units
The Company grants restricted stock unit awards to officers and other employees, including long-term incentive
awards. Under the Company’s long-term incentive plan, awards are granted following a three-year performance period.
Awards vest at the end of the restriction period, which is generally three years from the date of grant. As of December 31,
2017, approximately 9,870,000 shares of common stock were available for future restricted stock unit awards.
A summary of restricted stock unit activity during 2017 is presented below:
Restricted stock units as of January 1, 2017
Activity:
Granted
Vested
Forfeited
Restricted stock units as of December 31, 2017
Shares
(in thousands)
2,945
916
(1,057)
(74)
2,730
Weighted Average
Grant Date Fair Value
Per Award
$
$
66
74
62
67
70
As of December 31, 2017, there was $52 of total unrecognized compensation expense related to unvested restricted
stock unit awards, which will be recognized over a weighted-average period of 2.1 years. The total fair value of restricted
stock units vested during the years ended December 31, 2017, 2016 and 2015 was $66, $61 and $70, respectively.
Stock Options
The Company issues non-qualified stock options to non-employee directors, officers and other employees. Stock
options generally have a contractual term of six years and vest over three years. As of December 31, 2017, 20,997,000
shares of common stock were available for future stock option grants.
A summary of stock option activity during 2017 is presented below:
Options outstanding, January 1, 2017
Granted
Exercised
Forfeited or expired
Options outstanding, December 31, 2017
Options exercisable, December 31, 2017
Shares
(in thousands)
43,692
7,798
(10,118)
(393)
40,979
25,349
$
$
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual Life
(in years)
Intrinsic Value
of Unexercised
In-the-Money
Options
61
73
53
68
65
62
4
3
$
$
420
351
As of December 31, 2017, there was $45 of total unrecognized compensation expense related to unvested options,
which will be recognized over a weighted-average period of 1.5 years. The total intrinsic value of options exercised during
the years ended December 31, 2017, 2016 and 2015 was $201, $221 and $200, respectively.
90
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
The benefits of tax deductions in excess of grant date fair value resulting from the exercise of stock options and
vesting of restricted stock unit awards for the years ended December 31, 2017, 2016 and 2015 were $47, $59 and $55,
respectively. Through December 31, 2016 these amounts were recognized in equity and were reported as a financing cash
flow. Effective January 1, 2017, as a result of the required adoption of ASU No. 2016-09, excess tax benefits from stock-
based compensation have been recognized in the provision for income taxes as a discrete item in the quarterly period in
which they occur and classified as an operating cash flow. Cash proceeds received from options exercised for the years
ended December 31, 2017, 2016 and 2015 were $507, $386 and $299, respectively.
9.
Employee Stock Ownership Plan
In 1989, the Company expanded its Employee Stock Ownership Plan (“ESOP”) through the introduction of a
leveraged ESOP that funds certain benefits for employees who have met eligibility requirements. As of December 31, 2017
and 2016, there were 18,400,412 and 21,082,162 shares of common stock, respectively, outstanding and issued to the
Company’s ESOP.
During 2000, the ESOP entered into a loan agreement with the Company under which the benefits of the ESOP may be
extended through 2035. As of December 31, 2017, the ESOP had outstanding borrowings from the Company of $5, which
represents unearned compensation shown as a reduction in Shareholders’ equity.
Dividends on stock held by the ESOP are paid to the ESOP trust and, together with cash contributions from the
Company, are (a) used by the ESOP to repay principal and interest, (b) credited to participant accounts or (c) used for
contributions to the Company’s defined contribution plans. Stock is allocated to participants based upon the ratio of the
current year’s debt service to the sum of total outstanding principal and interest payments over the life of the debt. As of
December 31, 2017, 14,809,986 shares of common stock had been released and allocated to participant accounts and
3,590,426 shares of common stock were available for future allocation to participant accounts.
Dividends on the stock used to repay principal and interest or credited to participant accounts are deductible for
income tax purposes and, accordingly, are reflected net of their tax benefit in the Consolidated Statements of Changes in
Shareholders’ Equity.
Annual expense related to the ESOP was $0 in 2017, 2016 and 2015.
The Company paid dividends on the shares held by the ESOP of $32 in 2017, $35 in 2016 and $38 in 2015. The
Company contributed to the ESOP $0 in 2017, 2016 and 2015.
10.
Retirement Plans and Other Retiree Benefits
Retirement Plans
The Company and certain of its U.S. and overseas subsidiaries maintain defined benefit retirement plans. Benefits
under these plans are based primarily on years of service and employees’ earnings.
In the U.S., effective January 1, 2014, the Company provides virtually all future retirement benefits through the
Company’s defined contribution plan. As a result, service after December 31, 2013 is not considered for participants in the
Company’s principal U.S. defined benefit retirement plan. Participants in the Company’s principal U.S. defined benefit
retirement plan whose retirement benefit was determined under the cash balance formula continue to earn interest credits
on their vested balances as of December 31, 2013 but no longer receive pay credits. Participants whose retirement benefit
was determined under the final average earnings formula or career average earnings formula continue to have their accrued
benefit adjusted for pay increases until termination of employment.
91
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
In the Company’s principal U.S. plans and certain funded overseas plans, funds are contributed to trusts in accordance
with regulatory limits to provide for current service and for any unfunded projected benefit obligation over a reasonable
period. The target asset allocation for the Company’s defined benefit plans is as follows:
Asset Category
Equity securities
Fixed income securities
Real estate and other investments
Total
United States
International
27%
53%
20%
100%
39%
41%
20%
100%
At December 31, 2017 the allocation of the Company’s plan assets and the level of valuation input, as applicable, for
each major asset category were as follows:
Level of
Valuation
Input
Level 1
Level 1
Level 1
Level 1
Level 2
Level 2
Cash and cash equivalents
U.S. common stocks
International common stocks
Pooled funds(1)
Fixed income securities(2)
Guaranteed investment contracts(3)
Investments valued using NAV per share(4)
Domestic, developed and emerging markets equity
funds
Fixed income funds(5)
Hedge funds(6)
Multi-Asset funds(7)
Real estate funds(8)
Pension Plans
United States
International
Other Retiree
Benefit Plans
$
$
21
127
—
138
843
1
1,130
350
122
82
115
38
707
11
4
3
94
24
53
189
189
167
5
3
22
386
—
575
$
$
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Other assets and liabilities, net(9)
Total Investments
(25)
1,812
$
$
92
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
At December 31, 2016 the allocation of the Company’s plan assets and the level of valuation input, as applicable, for
each major asset category were as follows:
Level of
Valuation
Input
Level 1
Level 1
Level 1
Level 1
Level 2
Level 2
Cash and cash equivalents
U.S. common stocks
International common stocks
Pooled funds(1)
Fixed income securities(2)
Guaranteed investment contracts(3)
Investments valued using NAV per share(4)
Domestic, developed and emerging markets equity
funds
Fixed income funds(5)
Hedge funds(6)
Multi-Asset funds(7)
Real estate funds(8)
Pension Plans
United States
International
Other Retiree
Benefit Plans
$
$
27
127
—
134
767
1
1,056
323
118
96
52
43
632
13
3
3
84
22
49
174
155
155
3
3
19
335
—
509
$
$
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Other assets and liabilities, net(9)
Total Investments
(42)
1,646
$
$
_______
(1) Pooled funds primarily invest in U.S. and foreign equity securities, debt and money market securities.
(2) The fixed income securities are traded over the counter and certain of these securities lack daily pricing or liquidity and as such are
classified as Level 2. As of December 31, 2017 and 2016, approximately 50% of the U.S. pension plan fixed income portfolio was
invested in U.S. treasury or agency securities, with the remainder invested in other government bonds and corporate bonds.
(3) The guaranteed investment contracts (“GICs”) represent contracts with insurance companies measured at the cash surrender value
of each contract. The Level 2 valuation reflects that the cash surrender value is based principally on a referenced pool of investment
funds with active redemption.
(4)
Investments that are measured at fair value using net asset value (“NAV”) per share as a practical expedient have not been classified
in the fair value hierarchy. The NAV is based on the value of the underlying investments owned, minus its liabilities, divided by the
number of shares outstanding. There are no unfunded commitments related to these investments. Redemption notice period
primarily ranges from 0-3 months and redemption frequency windows range from daily to quarterly.
(5) Fixed income funds primarily invest in U.S. government and investment grade corporate bonds.
(6) Consists of investments in underlying hedge fund strategies that are primarily implemented through the use of long and short equity
and fixed income securities and derivative instruments such as futures and options.
(7) Multi-Asset funds primarily invest across a variety of asset classes, including global stocks and bonds, as well as alternative
strategies.
(8) Real estate is valued using the NAV per unit of funds that are invested in real estate property. The investment value of the real estate
property is determined quarterly using independent market appraisals as determined by the investment manager.
(9) This category primarily includes unsettled trades for investments purchased and sold and dividend receivables.
93
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
Equity securities in the U.S. plans include investments in the Company’s common stock representing 7% of U.S. plan
assets at December 31, 2017 and December 31, 2016. No shares of the Company’s common stock were purchased or sold
by the U.S. plans in 2017 or 2016. The plans received dividends on the Company’s common stock of $3 in 2017 and 2016.
Other Retiree Benefits
The Company and certain of its subsidiaries provide health care and life insurance benefits for retired employees to the
extent not provided by government-sponsored plans.
The Company uses a December 31 measurement date for its defined benefit and other retiree benefit plans.
Summarized information for the Company’s defined benefit and other retiree benefit plans is as follows:
94
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
Pension Plans
2016
2017
2016
2017
International
United States
Other Retiree
Benefit Plans
2016
2017
Change in Benefit Obligations
Benefit obligations at beginning of year
$ 2,298
$2,201
$ 800
$ 802
$ 923
$
862
Service cost
Interest cost
Participants’ contributions
Acquisitions/plan amendments
Actuarial loss (gain)
Foreign exchange impact
Termination benefits (1)
Curtailments and settlements
Benefit payments
Other
Benefit obligations at end of year
Change in Plan Assets
1
94
—
—
110
—
24
—
(164)
—
1
105
—
—
129
—
3
—
(141)
—
$ 2,363
$2,298
16
22
2
(6)
(11)
72
—
(11)
(36)
(1)
$ 847
16
25
2
1
76
(47)
—
(37)
(36)
(2)
$ 800
13
40
—
—
21
3
(3)
—
(37)
—
13
43
—
—
39
1
1
—
(36)
—
$ 960
$
923
Fair value of plan assets at beginning of year
$ 1,646
$1,624
$ 509
$ 520
$ — $
Actual return on plan assets
Company contributions
Participants’ contributions
Foreign exchange impact
Settlements and acquisitions
Benefit payments
Other
Fair value of plan assets at end of year
Funded Status
Benefit obligations at end of year
Fair value of plan assets at end of year
Net amount recognized
Amounts Recognized in Balance Sheet
Noncurrent assets
Current liabilities
Noncurrent liabilities
Net amount recognized
Amounts Recognized in Accumulated Other
Comprehensive Income (Loss)
Actuarial loss
Transition/prior service cost
225
105
—
—
—
(164)
—
88
75
—
—
—
(141)
—
$ 1,812
$1,646
42
30
2
40
(11)
(36)
(1)
$ 575
46
54
2
(43)
(33)
(36)
(1)
$ 509
—
37
—
—
—
(37)
—
$ — $ —
14
1
21
—
—
—
(36)
—
$ 2,363
$2,298
$ 847
$ 800
$ 960
$
923
1,812
1,646
575
$ (551) $ (652) $ (272) $ (291) $ (960) $
509
—
—
(923)
$
$ — $ — $
22
(13)
(281)
$ (551) $ (652) $ (272) $ (291) $ (960) $
$ — $ —
(44)
(879)
(923)
8
(12)
(287)
(24)
(628)
(44)
(916)
(24)
(527)
$ 911
$ 962
$ 209
$ 254
1
2
1
5
$ 912
$ 964
$ 210
$ 259
$ 338
(1)
$ 337
$
$
330
(2)
328
Accumulated benefit obligation
$ 2,293
$2,230
$ 787
$ 739
$ — $ —
95
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
Weighted-Average Assumptions Used to Determine Benefit
Obligations
Discount rate
Long-term rate of return on plan assets
Long-term rate of compensation increase
ESOP growth rate
Medical cost trend rate of increase
Pension Plans
2016
2017
2016
2017
International
United States
Other Retiree
Benefit Plans
2016
2017
3.73% 4.27% 2.53% 2.59% 3.80% 4.41%
6.60% 6.80% 4.04% 4.14% 6.60% 6.80%
3.50% 3.50% 2.79% 2.58% 3.50%
—%
—%
—% —%
—% —%
—%
—% 10.00% 10.00%
—% 6.00% 6.33%
_________
(1) Represents pension and other retiree benefit enhancements incurred in 2017 and 2016 pursuant to the Global Growth and Efficiency
Program.
The overall investment objective of the plans is to balance risk and return so that obligations to employees are met.
The Company evaluates its long-term rate of return on plan assets on an annual basis. In determining the long-term rate of
return, the Company considers the nature of the plans’ investments and the historical rates of return. The assumed rate of
return as of December 31, 2017 for the U.S. plans was 6.60%. Average annual rates of return for the U.S. plans for the most
recent 1-year, 5-year, 10-year, 15-year and 25-year periods were 14%, 8%, 6%, 8%, and 8%, respectively. Similar
assessments were performed in determining rates of return on international pension plan assets to arrive at the Company’s
2017 weighted-average rate of return of 4.04%.
The medical cost trend rate of increase assumed in measuring the expected cost of benefits is projected to decrease
from 6.00% in 2018 to 4.75% by 2023, remaining at 4.75% for the years thereafter. Changes in the assumed rate can have a
significant effect on amounts reported. A 1% change in the assumed medical cost trend rate would have the following
approximate effect:
Accumulated postretirement benefit obligation
Total of service and interest cost components
One percentage point
Increase
Decrease
$
$
123
9
(100)
(7)
Expected mortality is a key assumption in the measurement of pension and other postretirement benefit obligations.
For the Company’s U.S. plans, this assumption was updated as of December 31, 2016 in order to reflect the Society of
Actuaries’ updated mortality improvement scale published in October 2016. This resulted in a decrease of 1% and 2% to
the benefit obligations for the Company’s U.S. pension plans and other postretirement benefits, respectively. This
assumption was previously updated for the Company’s U.S. plans as of December 31, 2015 in order to reflect the Society
of Actuaries’ mortality tables and mortality improvement scale published in October 2015 which resulted in a decrease of
1% and 2% to the benefit obligations for the Company’s U.S. pension plans and other postretirement benefits, respectively.
96
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
Plans with projected benefit obligations in excess of plan assets and plans with accumulated benefit obligations in
excess of plan assets as of December 31 consisted of the following:
Benefit Obligation Exceeds Fair Value of Plan Assets
Projected benefit obligation
Fair value of plan assets
Accumulated benefit obligation
Fair value of plan assets
Years Ended December 31,
2017
2016
$
$
2,834
1,992
2,641
1,905
2,973
2,024
2,840
2,003
Summarized information regarding the net periodic benefit costs for the Company’s defined benefit and other retiree
benefit plans is as follows:
Pension Plans
2017
2015
2017
2016
United States
2016
International
2015
Other Retiree Benefit Plans
2015
2016
2017
Components of Net Periodic
Benefit Cost
Service cost
Interest cost
Annual ESOP allocation
$
1
94
—
$
1
$
2
$ 16
$ 16
$ 20
$ 13
$
105
—
100
—
22
—
25
—
28
—
Expected return on plan assets
(111)
(109)
(117)
(22)
(23)
(28)
Amortization of transition and
prior service costs (credits)
Amortization of actuarial loss
—
48
—
41
—
44
—
10
—
8
2
11
Net periodic benefit cost
$ 32
$ 38
$ 29
$ 26
$ 26
$ 33
$ 66
Other postretirement charges
24
3
16
4
11
Total pension cost
$ 56
$ 41
$ 45
$ 30
$ 37
(1)
$ 32
(3)
$ 63
$
$
40
—
—
—
13
13
43
—
(1)
—
14
69
1
70
$ 14
44
—
(2)
—
25
$ 81
1
$ 82
Weighted-Average Assumptions
Used to Determine Net
Periodic Benefit Cost
Discount rate
4.27% 4.93% 4.24% 2.59% 3.17% 3.06% 4.41%
4.97% 4.36%
Long-term rate of return on plan
assets
Long-term rate of compensation
increase
ESOP growth rate
Medical cost trend rate of
increase
6.80% 6.80% 6.80% 4.14% 4.62% 5.05% 6.80%
6.80% 6.80%
3.50% 3.50% 3.50% 2.58% 2.78% 2.83%
—%
—%
—%
—% —% —% —% —% —% 10.00% 10.00% 10.00%
—% —% —% —% —% —% 6.33%
6.67% 7.00%
Other postretirement charges in 2017, 2016 and 2015 include pension and other benefit enhancements amounting to
$21, $4 and $17 respectively, incurred pursuant to the Global Growth and Efficiency Program. Other postretirement
charges in 2017 and 2016 also includes charges of $4 and $11, respectively, in part due to retirements under the Global
Growth and Efficiency Program.
97
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
The Company made voluntary contributions of $81, $53 and $0 in 2017, 2016 and 2015, respectively, to its U.S.
retirement plans.
The estimated actuarial loss and the estimated transition/prior service cost for defined benefit and other retiree benefit
plans that will be amortized from Accumulated other comprehensive income (loss) into net periodic benefit cost over the
next fiscal year is as follows:
Net actuarial loss
Net transition and prior service cost
Expected Contributions and Benefit Payments
Pension
Plans
$
Other Retiree
Benefit Plans
17
$
—
54
—
Management’s best estimate of voluntary contributions the Company will make to its U.S. postretirement plans for the
year ending December 31, 2018 is approximately $75. Actual funding may differ from current estimates depending on the
variability of the market value of the assets as compared to the obligation and other market or regulatory conditions.
Total benefit payments to be paid to participants for the year ending December 31, 2018 from the Company’s assets
are estimated to be approximately $82. Total benefit payments expected to be paid to participants from plan assets, or
directly from the Company’s assets to participants in unfunded plans, are as follows:
Years Ended December 31,
2018
2019
2020
2021
2022
2023-2027
Pension Plans
$
United
States
137
141
144
143
151
737
$
International
37
$
35
37
38
39
222
Other
Retiree
Benefit
Plans
$
45
46
46
47
48
250
Total
219
222
227
228
238
1,209
98
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
11.
Income Taxes
The components of Income before income taxes are as follows for the years ended December 31:
2017
2016
2015
United States
International
Total Income before income taxes
$
$
1,072
2,415
3,487
The Provision for income taxes consists of the following for the years ended December 31:
United States
International
Total Provision for income taxes
2017
338
975
1,313
$
$
$
$
$
$
1,191
2,547
3,738
2016
395
757
1,152
$
$
$
$
1,118
1,645
2,763
2015
376
839
1,215
Temporary differences between accounting for financial statement purposes and accounting for tax purposes result in
the current provision for taxes being higher (lower) than the total provision for income taxes as follows:
Goodwill and intangible assets
Property, plant and equipment
Pension and other retiree benefits
Stock-based compensation
Tax loss and tax credit carryforwards
Other, net
Total deferred tax benefit (provision)
2017
2016
2015
$
$
$
135
84
(192)
(28)
(4)
(103)
(108) $
$
18
(3)
—
15
5
(106)
(71) $
3
(25)
36
11
(4)
98
119
99
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
The difference between the statutory U.S. federal income tax rate and the Company’s global effective tax rate as
reflected in the Consolidated Statements of Income is as follows:
Percentage of Income before income taxes
2017
2016
2015
Tax at United States statutory rate
State income taxes, net of federal benefit
Earnings taxed at other than United States statutory rate
Charge for U.S. tax reform(1)
Excess tax benefits from stock-based compensation(2)
(Benefit) charge for foreign tax matters(3)
(Benefit) from Venezuela remeasurement(4)
Tax charge on incremental repatriation of foreign earnings(4)
Venezuela deconsolidation(5)
Other, net
Effective tax rate
35.0%
0.5
(3.4)
7.9
(1.4)
—
—
—
—
(0.9)
37.7%
35.0%
0.5
(2.7)
—
—
(0.8)
(5.6)
5.6
—
(1.2)
30.8%
35.0%
1.0
(3.6)
—
—
0.5
—
—
12.8
(1.7)
44.0%
_________
(1) On December 22, 2017, 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. In accordance
with ASC 740, Income Taxes, and Staff Accounting Bulletin 118, the Company recognized a provisional charge in the fourth quarter of 2017 of
$275 related to the TCJA based on its initial analysis using available information and estimates. The provisional charge is comprised of $451 related
to the one-time deemed repatriation of accumulated earnings of foreign subsidiaries and related withholding taxes and $20 related primarily to the
remeasurement of net deferred tax assets as a result of the reduction in the corporate income tax rate, which are offset by $196 of income taxes
which had been previously provided for planned repatriations of undistributed earnings of foreign subsidiaries. As a result, applicable U.S. and
foreign taxes have been provided on substantially all of the Company’s accumulated earnings of foreign subsidiaries previously considered
indefinitely reinvested. Given the significant complexity of the TCJA, anticipated guidance from the U.S. Treasury about implementing the TCJA
and the potential for additional guidance from the Securities and Exchange Commission (“SEC”) or the FASB related to the TCJA or additional
information becoming available, the Company’s provisional charge may be adjusted during 2018 and is expected to be finalized no later than the
fourth quarter of 2018. Other provisions of the TCJA that impact future tax years are still being assessed.
(2) As a result of adopting ASU No. 2016-09 “Compensation–Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment
Accounting,” effective January 1, 2017, the Company recognized excess tax benefits from stock-based compensation of $47 (resulting from an
increase in the fair value of an award from the grant date to the vesting or exercise date, as applicable) in the Provision for income taxes as a discrete
item during the year ended December 31, 2017. These amounts may not necessarily be indicative of future amounts that may be recognized as any
excess tax benefits from stock-based compensation recognized would be dependent on future stock price, employee exercise behavior and applicable
tax rates. Prior to January 1, 2017, excess tax benefits from stock-based compensation were recognized in equity. See Note 2, Summary of
Significant Accounting Policies - Recent Accounting Pronouncements for additional information.
(3) The benefit from a tax matter in 2016 relates to several Supreme Court and Administrative Court rulings in a foreign jurisdiction allowing certain tax
deductions which had the effect of reversing prior decisions. The charge for a tax matter in 2015 relates to several Supreme Court rulings in a
foreign jurisdiction disallowing certain tax deductions which had the effect of reversing prior decisions.
(4) The effective tax rate in 2016 included a $210 U.S. income tax benefit recognized in the first quarter of 2016 principally related to changes in
Venezuela’s foreign exchange regime implemented in March 2016. Although, effective December 31, 2015, the operating results of CP Venezuela
are no longer included in the Company’s Consolidated Financial Statements, under current tax rules, the Company is required to continue including
CP Venezuela’s results in its consolidated U.S. federal income tax return. In order to fully utilize the above mentioned $210 tax benefit in 2016, the
Company repatriated an incremental $1,500 of earnings of foreign subsidiaries it previously considered indefinitely reinvested outside of the U.S.,
and accordingly, recorded a tax charge of $210 during the first quarter of 2016.
(5)
See Note 14, Venezuela.
100
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
The components of deferred tax assets (liabilities) are as follows at December 31:
Deferred tax liabilities:
Goodwill and intangible assets
Property, plant and equipment
Other
Deferred tax assets:
Pension and other retiree benefits
Tax loss and tax credit carryforwards
Accrued liabilities
Stock-based compensation
Other
Net deferred income taxes
Deferred taxes included within:
Assets:
Deferred income taxes
Liabilities:
Deferred income taxes
Net deferred income taxes
2017
2016
(311) $
(306)
(182)
(799)
375
39
197
90
82
783
(16) $
(451)
(380)
(202)
(1,033)
599
34
246
127
82
1,088
55
2017
2016
188
$
301
(204)
(16) $
(246)
55
$
$
$
$
In addition, net tax benefit of $37 in 2017, net tax benefit of $85 in 2016, and net tax expense of $78 in 2015 were
recorded directly through equity. The net tax benefit in 2017 predominantly includes current and future tax impacts related
to benefit plans. The amounts in 2016 and 2015 include current and future tax impacts related to employee equity
compensation and benefit plans.
The Company uses a comprehensive model to recognize, measure, present and disclose in its financial statements
uncertain tax positions that the Company has taken or expects to take on an income tax return.
101
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
Unrecognized tax benefits activity for the years ended December 31, 2017, 2016 and 2015 is summarized below:
Unrecognized tax benefits:
Balance, January 1
Increases as a result of tax positions taken during the current year
Decreases of tax positions taken during prior years
Increases of tax positions taken during prior years
Decreases as a result of settlements with taxing authorities and the expiration of
statutes of limitations
Effect of foreign currency rate movements
Balance, December 31
2017
2016
2015
$
$
201
13
(9)
15
(15)
9
214
$
$
186
9
(45)
71
(18)
(2)
201
$
$
218
20
(25)
61
(79)
(9)
186
If all of the unrecognized tax benefits for 2017 above were recognized, approximately $205 would impact the effective
tax rate and would result in a cash outflow of approximately $185. Although it is possible that the amount of unrecognized
benefits with respect to our uncertain tax positions will increase or decrease in the next 12 months, the Company does not
expect material changes.
The Company recognized approximately $11, $2 and $2 of interest expense related to the above unrecognized tax
benefits within income tax expense in 2017, 2016 and 2015, respectively. The Company had accrued interest of
approximately $28, $17 and $16 as of December 31, 2017, 2016 and 2015, respectively.
The Company and its subsidiaries file U.S. federal income tax returns as well as income tax returns in many state and
foreign jurisdictions. All U.S. federal income tax returns through December 31, 2011 have been audited by the IRS and
there are limited matters which the Company plans to appeal for years 2010 through 2011, the settlement of which is not
expected to have a material adverse effect on the Company’s results of operations, cash flows or financial condition. With a
few exceptions, the Company is no longer subject to U.S. state and local income tax examinations for income tax returns
through December 31, 2011. In addition, the Company has subsidiaries in various foreign jurisdictions that have statutes of
limitations for tax audits generally ranging from three to six years.
102
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
12.
Earnings Per Share
For the years ended December 31, 2017, 2016 and 2015, earnings per share were as follows:
2017
2016
2015
Net
income
attributable
to Colgate-
Palmolive
Company
$
2,024
Net
income
attributable
to Colgate-
Palmolive
Company
Shares
(millions)
Per
Share
Net
income
attributable
to Colgate-
Palmolive
Company
Shares
(millions)
Per
Share
Shares
(millions)
Per
Share
881.8
$ 2.30
$
2,441
891.8
$ 2.74
$
1,384
902.2
$ 1.53
6.0
6.6
7.5
Basic EPS
Stock options and
restricted stock
units
Diluted EPS
$
2,024
887.8
$ 2.28
$
2,441
898.4
$ 2.72
$
1,384
909.7
$ 1.52
Basic earnings per common share is computed by dividing net income available for common stockholders by the
weighted-average number of shares of common stock outstanding for the period.
Diluted earnings per common share is computed using the treasury stock method on the basis of the weighted-average
number of shares of common stock plus the dilutive effect of potential common shares outstanding during the period.
Dilutive potential common shares include outstanding stock options and restricted stock units.
As of December 31, 2017, 2016 and 2015, the average number of stock options that were anti-dilutive and not
included in diluted earnings per share calculations were 11,056,725, 3,187,485 and 3,228,359, respectively. As of
December 31, 2017, 2016 and 2015, the average number of restricted stock units that were anti-dilutive and not included in
diluted earnings per share calculations were 91, 2,693 and 120, respectively.
13.
Commitments and Contingencies
Minimum rental commitments under noncancellable operating leases, primarily for office and warehouse facilities, are
$188 in 2018, $163 in 2019, $143 in 2020, $106 in 2021, $93 in 2022 and $44 thereafter. Rental expense amounted to $211
in 2017, $204 in 2016 and $214 in 2015. Capital leases included in fixed assets, contingent rentals and sublease income are
not significant. The Company has various contractual commitments to purchase raw, packaging and other materials totaling
approximately $467 at December 31, 2017.
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,
privacy, 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.
103
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
The Company also determines estimates of reasonably possible losses or ranges of reasonably possible losses in excess
of related accrued liabilities, if any, when it has determined that a loss is reasonably possible and it is able to determine
such estimates. For those matters disclosed below for which the amount of any potential losses can be reasonably
estimated, the Company currently estimates that the aggregate range of reasonably possible losses in excess of any accrued
liabilities is $0 to approximately $250 (based on current exchange rates). The estimates included in this amount are based
on the Company’s analysis of currently available information and, as new information is obtained, these estimates may
change. Due to the inherent subjectivity of the assessments and the unpredictability of outcomes of legal proceedings, any
amounts accrued or included in this aggregate 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.
Brazilian Matters
There are certain tax and civil proceedings outstanding, as described below, related to the Company’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 $165.
This amount includes additional assessments received from the Brazilian internal revenue authority in April 2016 relating
to net operating loss carryforwards used by the Company’s Brazilian subsidiary to offset taxable income that had also been
deducted from the authority’s original assessments. The Company has been disputing the disallowances by appealing the
assessments since October 2001. Appeals are currently pending at the administrative level. In the event the Company is
ultimately unsuccessful in its administrative appeals, further appeals are available within the Brazilian federal courts.
In September 2015, the Company lost one of its appeals at the administrative level and filed a lawsuit in Brazilian
federal court. In February 2017, the Company lost an additional administrative appeal and filed a similar action in Brazilian
federal court. 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.
104
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
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 $74, at the current exchange rate, based
on a claim that certain purchases of U.S. Treasury bills by the subsidiary and their subsequent disposition during the period
2000 to 2001 were subject to a tax on foreign exchange transactions. The Company had been disputing the assessment
within the internal revenue authority’s administrative appeals process. However, in November 2015, the Superior Chamber
of Administrative Tax Appeals denied the Company’s final administrative appeal and the Company has filed a lawsuit in
the Brazilian federal court. In the event the Company is unsuccessful in this filing, 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.
Competition Matters
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 December 31,
2017 is set forth below.
In December 2014, the French competition law authority found that 13 consumer goods companies, including
the Company’s French subsidiary, exchanged competitively sensitive information related to the French home
care and personal care sectors, for which the Company’s French subsidiary was fined $57. In addition, as a
result of the Company’s acquisition of the Sanex personal care business in 2011 from Unilever N.V. and
Unilever PLC (together with Unilever N.V., “Unilever”), pursuant to a Business and Share Sale and Purchase
Agreement (the “Sale and Purchase Agreement”), the French competition law authority found that the
Company’s French subsidiary, along with Hillshire Brands Company (formerly Sara Lee Corporation (“Sara
Lee”)), were jointly and severally liable for fines of $25 assessed against Sara Lee’s French subsidiary. The
Company is entitled to indemnification for this fine from Unilever as provided in the Sale and Purchase
Agreement. The fines were confirmed by the Court of Appeal in October 2016. The Company is appealing the
decision of the Court of Appeal on behalf of the Company and Sara Lee in the French Supreme Court.
In July 2014, the Greek competition law authority issued a statement of objections alleging a restriction of
parallel imports into Greece. The Company responded to this statement of objections. In July 2017, the
Company received the decision from the Greek competition law authority in which the Company was fined
$11. The Company is appealing the decision to the Greek courts.
Talcum Powder Matters
The Company has been named as a defendant in civil actions alleging that certain talcum powder products that were
sold prior to 1996 were contaminated with asbestos. 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 December 31, 2017, there were 193 individual cases pending against the
Company in state and federal courts throughout the United States as compared to 115 cases as of December 31, 2016.
During the year ended December 31, 2017, 132 new cases were filed and 54 cases were resolved by voluntary dismissal,
appeal in the Company’s favor or settlement. The value of settlements in the years presented was not material, either
individually or in the aggregate, to each such period’s results of 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 and excess insurance carriers, subject to deductibles, exclusions,
retentions and policy limits.
105
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
While the Company and its legal counsel believe that these cases are without merit and intend to challenge them
vigorously, there can be no assurances regarding the ultimate resolution of these matters. Since the amount of any potential
losses from these cases currently cannot be reasonably estimated, the range of reasonably possible losses in excess of
accrued liabilities disclosed above does not include any amount relating to these cases.
N8
The Company was a defendant in a lawsuit that was brought in Utah federal court by N8 Medical, Inc. (“N8
Medical”), Brigham Young University (“BYU”) and N8 Pharmaceuticals, Inc. (“N8 Pharma”). The complaint, originally
filed in November 2013, alleged breach of contract and other torts arising out of the Company’s evaluation of a technology
owned by BYU and licensed, at various times, to Ceragenix Pharmaceuticals, Inc., now in bankruptcy, N8 Medical and N8
Pharma.
In 2016, the Company resolved the claims brought by BYU and N8 Medical. These claims were each resolved in an
amount that is not material to the Company’s results of operations. In the first quarter of 2017, the court dismissed the
claims of N8 Pharma and, in the third quarter of 2017, N8 Pharma appealed the decision.
ERISA Matter
In June 2016, a putative class action claiming that residual annuity payments made to certain participants in the
Colgate-Palmolive Company Employees’ Retirement Income Plan (the “Plan”) did not comply with the Employee
Retirement Income Security 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.
106
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
14.
Venezuela
Effective December 31, 2015, the Company concluded it no longer met the accounting criteria for consolidation of CP
Venezuela and began accounting for CP Venezuela using the cost method of accounting. As such, effective December 31,
2015, the Company’s Consolidated Balance Sheet no longer includes the assets and liabilities of CP Venezuela. As a result
of this change in accounting, the Company recorded an aftertax charge of $1,058 ($1,084 pretax) or $1.16 per diluted share
in 2015. The charge primarily consists of an impairment of the Company’s investment in CP Venezuela of $952, which
includes intercompany receivables from CP Venezuela, and $111 related to the reclassification of cumulative translation
losses. Prior periods have not been restated and CP Venezuela’s Net sales, Operating profit and Net income are included in
the Company’s Consolidated Statements of Income through December 31, 2015.
Since January 1, 2016, under the cost method of accounting, the Company no longer includes the local operating
results of CP Venezuela in its Consolidated Financial Statements and includes income relating to CP Venezuela only to the
extent it receives cash for sales of inventory to CP Venezuela or for dividends or royalties remitted by CP Venezuela, all of
which have been immaterial. Although CP Venezuela’s local operating results are no longer included in the Company’s
Consolidated Financial Statements for accounting purposes, under current tax rules, the Company is required to continue
including CP Venezuela in its consolidated U.S. federal income tax return. In the first quarter of 2016, provision for income
taxes included a $210 U.S. income tax benefit principally related to changes in Venezuela’s foreign exchange regime
implemented in March 2016. See Note 11, Income Taxes for additional details.
Prior to the change in accounting, CP Venezuela’s functional currency was the U.S. dollar since Venezuela had been
designated hyper-inflationary and, as such, Venezuelan currency fluctuations were reported in income. The Company
remeasured the financial statements of CP Venezuela at the end of each month at the rate at which it expected to remit
future dividends which, based on the advice of legal counsel, was the SICAD rate (formerly known as the SICAD I rate).
During the year ended December 31, 2015, the Company incurred pretax losses of $34 ($22 aftertax or $0.02 per diluted
common share) related to the remeasurement of CP Venezuela’s local currency-denominated net monetary assets at the
quarter-end SICAD rate for the second and third quarters of 2015. The SICAD rate did not revalue during the fourth
quarter of 2015 and was 13.50 bolivares per dollar as of December 31, 2015.
Included in the remeasurement losses during 2015 were charges related to the devaluation-protected bonds issued by
the Venezuelan government and held by CP Venezuela. Because the official exchange rate remained at 6.30 bolivares per
dollar, the devaluation-protected bonds did not revalue at the SICAD rate but remained at the official exchange rate,
resulting in an impairment in the fair value of the bonds.
15.
Segment Information
The Company operates in two product segments: Oral, Personal and Home Care; and Pet Nutrition.
The operations of the Oral, Personal and Home Care product segment are managed geographically in five reportable
operating segments: North America, Latin America, Europe, Asia Pacific and Africa/Eurasia.
The Company evaluates segment performance based on several factors, including Operating profit. The Company uses
Operating profit as a measure of operating segment performance because it excludes the impact of Corporate-driven
decisions related to interest expense and income taxes.
The accounting policies of the operating segments are generally the same as those described in Note 2, Summary of
Significant Accounting Policies. 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 costs 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.
107
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
Approximately 75% of the Company’s Net sales are generated from markets outside the U.S., with approximately 50%
of the Company’s Net sales coming from emerging markets (which consist of Latin America, Asia (excluding Japan),
Africa/Eurasia and Central Europe). Oral, Personal and Home Care sales to Wal-Mart Stores, Inc. and its affiliates
represent approximately 11% of the Company’s Net sales in 2017. No other customer represents more than 10% of Net
sales.
In 2017, Corporate Operating profit (loss) includes charges of $333 resulting from the Global Growth and Efficiency
Program. In 2016, Corporate Operating profit (loss) includes charges of $228 resulting from the Global Growth and
Efficiency Program and $17 for a litigation matter and a gain of $97 on the sale of land in Mexico. In 2015, Corporate
Operating profit (loss) included charges of $1,084 related to the deconsolidation of the Company’s Venezuelan operations,
$254 related to the Global Growth and Efficiency Program, $34 related to the remeasurement of CP Venezuela’s local
currency-denominated net monetary assets as a result of effective devaluations and $14 for a litigation matter and a gain of
$187 on the sale of the Company’s laundry detergent business in the South Pacific.
Net sales
Oral, Personal and Home Care
North America(1)
Latin America
Europe
Asia Pacific
Africa/Eurasia
Total Oral, Personal and Home Care
Pet Nutrition(2)
Total Net sales
2017
2016
2015
$
3,117
$
3,183
$
3,887
2,394
2,781
983
13,162
2,292
3,650
2,342
2,796
960
12,931
2,264
$
15,454
$
15,195
$
3,149
4,327
2,411
2,937
998
13,822
2,212
16,034
_________
(1) Net sales in the U.S. for Oral, Personal and Home Care were $2,865, $2,932 and $2,896 in 2017, 2016 and 2015, respectively.
(2) Net sales in the U.S. for Pet Nutrition were $1,246, $1,243 and $1,223 in 2017, 2016 and 2015, respectively.
108
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
Operating profit
Oral, Personal and Home Care
North America
Latin America
Europe
Asia Pacific
Africa/Eurasia
Total Oral, Personal and Home Care
Pet Nutrition
Corporate
Total Operating profit
Capital expenditures
Oral, Personal and Home Care
North America
Latin America
Europe
Asia Pacific
Africa/Eurasia
Total Oral, Personal and Home Care
Pet Nutrition
Corporate
Total Capital expenditures
Depreciation and amortization
Oral, Personal and Home Care
North America
Latin America
Europe
Asia Pacific
Africa/Eurasia
Total Oral, Personal and Home Care
Pet Nutrition
Corporate
2017
2016
2015
$
986
$
1,030
$
1,162
599
841
179
3,767
653
(831)
3,589
$
1,132
579
887
186
3,814
653
(630)
3,837
$
$
974
1,209
615
888
178
3,864
612
(1,687)
2,789
2017
2016
2015
$
74
$
151
$
2017
$
$
127
63
125
13
402
33
118
553
58
82
74
101
8
323
53
99
2016
$
$
94
51
120
17
433
38
122
593
54
76
64
96
7
297
53
93
2015
$
$
207
110
40
121
12
490
34
167
691
47
88
67
99
8
309
52
88
449
Total Depreciation and amortization
$
475
$
443
$
109
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
Identifiable assets
Oral, Personal and Home Care
North America
Latin America
Europe
Asia Pacific
Africa/Eurasia
Total Oral, Personal and Home Care
Pet Nutrition
Corporate(1)
Total Identifiable assets(2)
2017
2016
2015
$
$
2,608
2,423
3,781
2,244
544
11,600
1,026
50
12,676
$
$
2,685
2,314
3,554
2,006
499
11,058
1,009
56
12,123
$
$
2,622
2,314
3,308
2,031
476
10,751
1,006
178
11,935
____________
(1)
In 2017, Corporate identifiable assets primarily consist of derivative instruments (5%) and investments in equity securities
(86%). In 2016, Corporate identifiable assets primarily consist of derivative instruments (24%) and investments in equity securities
(68%). In 2015, Corporate identifiable assets primarily consist of derivative instruments (76%) and investments in equity securities
(23%).
(2) Long-lived assets in the U.S., primarily property, plant and equipment and goodwill and other intangibles represented
approximately one-third of total long-lived assets of $7,908, $7,642 and $7,420 in 2017, 2016 and 2015, respectively.
16.
Supplemental Income Statement Information
Other (income) expense, net
Global Growth and Efficiency Program
Amortization of intangible assets
Gain on sale of land in Mexico
Charges for litigation matters
Venezuela remeasurement charges
Gain on sale of South Pacific laundry detergent business
Equity income
Other, net
Total Other (income) expense, net
Interest (income) expense, net
Interest incurred
Interest capitalized
Interest income
Total Interest (income) expense, net
Research and development
Advertising
110
2017
2016
2015
$
$
$
$
169
35
—
—
—
—
(11)
1
194
2017
156
(3)
(51)
102
$
$
$
$
105
33
(97)
17
—
—
(10)
(11)
37
$
$
170
33
—
14
34
(187)
(8)
6
62
2016
2015
155
(6)
(50)
99
$
$
139
(6)
(107)
26
2017
2016
2015
$
$
285
1,573
$
$
289
1,428
$
$
274
1,491
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
17.
Supplemental Balance Sheet Information
Inventories by major class are as follows at December 31:
Inventories
Raw materials and supplies
Work-in-process
Finished goods
Total Inventories
2017
2016
$
$
267
$
42
912
266
42
863
1,221
$
1,171
Inventories valued under LIFO amounted to $289 and $278 at December 31, 2017 and 2016, respectively. The excess
of current cost over LIFO cost at the end of each year was $63 and $30, respectively. The liquidations of LIFO inventory
quantities had no material effect on income in 2017, 2016 and 2015.
Property, plant and equipment, net
Land
Buildings
Manufacturing machinery and equipment
Other equipment
Accumulated depreciation
Total Property, plant and equipment, net
Other accruals
Accrued advertising and coupon redemption
Accrued payroll and employee benefits
Accrued taxes other than income taxes
Restructuring accrual
Pension and other retiree benefits
Accrued interest
Derivatives
Other
Total Other accruals
Other liabilities
Pension and other retiree benefits
Restructuring accrual
Other
Total Other liabilities
111
2017
2016
$
$
$
$
$
$
159
1,655
5,165
1,481
8,460
(4,388)
4,072
2017
510
325
123
181
81
34
20
557
1,831
2017
1,724
53
478
2,255
$
$
$
$
$
$
147
1,544
4,971
1,280
7,942
(4,102)
3,840
2016
491
309
112
112
80
29
4
590
1,727
2016
1,794
69
172
2,035
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
18.
Supplemental Other Comprehensive Income (Loss) Information
Other comprehensive income (loss) components attributable to Colgate-Palmolive Company before tax and net of tax
during the years ended December 31 were as follows:
Cumulative translation adjustments
Reclassification due to Venezuela
deconsolidation(1)
Cumulative translation adjustments
Pension and other benefits:
Net actuarial gain (loss), prior
service costs and settlements
during the period
Amortization of net actuarial loss,
transition and prior service costs(2)
Reclassification due to Venezuela
deconsolidation(1)
Retirement Plan and other retiree benefit
adjustments
Available-for-sale securities:
Unrealized gains (losses) on available-
for-sale securities(3)
Reclassification of (gains) losses
into net earnings on available-
for-sale securities(4)
Reclassification due to Venezuela
deconsolidation(1)
Gains (losses) on available-for-sale
securities
Cash flow hedges:
Unrealized gains (losses) on cash flow
hedges
2017
2016
2015
Pre-tax Net of Tax
Pre-tax Net of Tax
Pre-tax Net of Tax
$
218 $
285
$
(97) $
(125) $
(721) $
(745)
—
218
—
285
—
(97)
—
(125)
111
(610)
111
(634)
21
71
—
92
—
—
—
—
9
45
—
54
—
—
—
—
(231)
(152)
182
115
63
—
43
—
82
44
52
29
(168)
(109)
308
196
—
(1)
—
(1)
—
(1)
—
(1)
(18)
(12)
14
(10)
(14)
11
(6)
(7)
(25)
(16)
11
8
18
12
Reclassification of (gains) losses
into net earnings on cash flow
hedges(5)
Gains (losses) on cash flow hedges
Total Other comprehensive income
(loss)
_________
(1) Represents reclassifications from Accumulated other comprehensive income (loss) due to the deconsolidation of the Company’s
(16)
2
2
(14)
(230) $
(314) $
(259) $
(3)
5
(4)
7
288 $
(22)
325
3
$
$
(10)
2
(443)
Venezuelan operations. Cumulative translation, net actuarial gain (loss) and unrealized gains (losses) on available-for-sale securities
were reclassified into the Charge for Venezuela accounting change on the Consolidated Statement of Income.
(2) These components of Other comprehensive income (loss) are included in the computation of total pension cost. See Note 10,
Retirement Plans and Other Retiree Benefits for additional details.
(3) For the year ended December 31, 2015, these amounts included pretax net losses of $50 related to the remeasurement of the bolivar-
denominated fixed interest rate bonds and the devaluation-protected bonds in Venezuela.
112
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
(4) Represents reclassification of losses on the Venezuela bonds into Other (income) expense, net due to an impairment in the fair value
of the bonds as a result of the effective devaluations in the second and third quarters of 2015.
(5) These (gains) losses are reclassified into Cost of sales. See Note 7, Fair Value Measurements and Financial Instruments for
additional details.
There were no tax impacts on Other comprehensive income (loss) attributable to Noncontrolling interests.
Accumulated Other Comprehensive Income (Loss)
Accumulated other comprehensive income (loss) is comprised of cumulative foreign currency translation gains and
losses, unrecognized pension and other retiree benefit costs, unrealized gains and losses from derivative instruments
designated as cash flow hedges and unrealized gains and losses on available-for-sale securities. At December 31, 2017 and
2016, Accumulated other comprehensive income (loss) consisted primarily of aftertax unrecognized pension and other
retiree benefit costs of $923 and $977, respectively, and cumulative foreign currency translation adjustments of $2,927 and
$3,212, respectively. Foreign currency translation adjustments in 2017 primarily reflect gains from the Euro. In 2016,
foreign currency translation adjustments primarily reflect losses from the Mexican peso and the Euro, partially offset by
gains from the Brazilian real.
113
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
19.
Quarterly Financial Data (Unaudited)
2017
Net sales
Gross profit
Net income including noncontrolling
interests
Net income attributable to Colgate-
Palmolive Company
Earnings per common share:
Basic
Diluted
2016
Net sales
Gross profit
Net income including noncontrolling
interests
Net income attributable to Colgate-
Palmolive Company
Earnings per common share:
Total
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
$ 15,454
$
9,280 (1)
2,174 (2)
2,024 (2)
2.30 (2)
2.28 (2)
3,762
2,269 (3)
$
3,826
2,300 (5)
$
3,974
2,383 (7)
$
3,892
2,328 (9)
611 (4)
570 (4)
0.64 (4)
0.64 (4)
560 (6)
524 (6)
0.59 (6)
0.59 (6)
650 (8)
607 (8)
0.69 (8)
0.68 (8)
353 (10)
323 (10)
0.37 (10)
0.37 (10)
$ 15,195
$
9,123 (11)
2,586 (12)
2,441 (12)
3,762
2,248 (13)
$
3,845
2,304 (16)
$
3,867
2,324 (18)
$
3,721
2,247 (20)
574 (14)
(14)
(15)
533
638 (17)
600 (17)
746 (19)
702 (19)
628 (21)
606 (21)
Basic
Diluted
2.74 (12)
0.60 (14)
0.67 (17)
0.79 (19)
0.68 (21)
2.72 (12)
0.59 (14)
0.67 (17)
0.78 (19)
0.68 (21)
____________
Note: Basic and diluted earnings per share are computed independently for each quarter and the year-to-date period
presented. Accordingly, the sum of the quarterly earnings per common share may not necessarily equal the earnings
per share for the year-to-date period.
(1) Gross profit for the full year of 2017 includes $75 of charges related to the Global Growth and Efficiency Program.
(2) Net income including noncontrolling interests, Net income attributable to Colgate-Palmolive Company and Earnings per common
share for the full year of 2017 include $246 of aftertax charges related to the Global Growth and Efficiency Program and a $275
charge related to U.S. tax reform.
(3) Gross profit for the first quarter of 2017 includes $14 of charges related to the Global Growth and Efficiency Program.
(4) Net income including noncontrolling interests, Net income attributable to Colgate-Palmolive Company and Earnings per common
share for the first quarter of 2017 include $31 of aftertax charges related to the Global Growth and Efficiency Program.
(5) Gross profit for the second quarter of 2017 includes $21 of charges related to the Global Growth and Efficiency Program.
(6) Net income including noncontrolling interests, Net income attributable to Colgate-Palmolive Company and Earnings per common
share for the second quarter of 2017 include $115 of aftertax charges related to the Global Growth and Efficiency Program.
(7) Gross profit for the third quarter of 2017 includes $16 of charges related to the Global Growth and Efficiency Program.
114
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
(8) Net income including noncontrolling interests, Net income attributable to Colgate-Palmolive Company and Earnings per common
share for the third quarter of 2017 include $39 of aftertax charges related to the Global Growth and Efficiency Program.
(9) Gross profit for the fourth quarter of 2017 includes $24 of charges related to the Global Growth and Efficiency Program.
(10) Net income including noncontrolling interests, Net income attributable to Colgate-Palmolive Company and Earnings per common
share for the fourth quarter of 2017 include $61 of aftertax charges related to the Global Growth and Efficiency Program and a $275
charge related to U.S. tax reform.
(11) Gross profit for the full year of 2016 includes $46 of charges related to the Global Growth and Efficiency Program.
(12) Net income including noncontrolling interests for the full year of 2016 includes $169 of aftertax charges related to the Global Growth
and Efficiency Program. Net income attributable to Colgate-Palmolive Company and Earnings per common share for the full year of
2016 include $168 of aftertax charges related to the Global Growth and Efficiency Program, a $63 aftertax gain on the sale of land in
Mexico, $11 of aftertax charges for a litigation matter and $35 of benefits from tax matters.
(13) Gross profit for the first quarter of 2016 includes $8 of charges related to the Global Growth and Efficiency Program.
(14) Net income including noncontrolling interests, Net income attributable to Colgate-Palmolive Company and Earnings per common
share for the first quarter of 2016 include $38 of aftertax charges related to the Global Growth and Efficiency Program.
(15)
In the first quarter of 2016, provision for income taxes included a $210 U.S. income tax benefit principally related to changes in
Venezuela’s foreign exchange regime implemented in March 2016. In order to fully utilize the above mentioned $210 tax benefit in
2016, the Company repatriated an incremental $1,500 of earnings of foreign subsidiaries it previously considered indefinitely
reinvested outside of the U.S., and accordingly, recorded a tax charge of $210 during the first quarter of 2016. See Note 11, Income
Taxes.
(16) Gross profit for the second quarter of 2016 includes $12 of charges related to the Global Growth and Efficiency Program.
(17) Net income including noncontrolling interests for the second quarter of 2016 includes $45 of aftertax charges related to the Global
Growth and Efficiency Program. Net income attributable to Colgate-Palmolive Company and Earnings per common share for the
second quarter of 2016 include $44 of aftertax charges related to the Global Growth and Efficiency Program and a $13 benefit from a
tax matter.
(18) Gross profit for the third quarter of 2016 includes $11 of charges related to the Global Growth and Efficiency Program.
(19) Net income including noncontrolling interests, Net income attributable to Colgate-Palmolive Company and Earnings per common
share for the third quarter of 2016 include $32 of aftertax charges related to the Global Growth and Efficiency Program, a $63 aftertax
gain on the sale of land in Mexico, a $4 aftertax charge for a litigation matter and $22 of benefits from tax matters.
(20) Gross profit for the fourth quarter of 2016 includes $15 of charges related to the Global Growth and Efficiency Program.
(21) Net income including noncontrolling interests, Net income attributable to Colgate-Palmolive Company and Earnings per common
share for the fourth quarter of 2016 include $54 of aftertax charges related to the Global Growth and Efficiency Program and a $7
aftertax charge for a litigation matter.
115
COLGATE-PALMOLIVE COMPANY
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(Dollars in Millions)
Additions
Balance at
Beginning
of Period
Charged to
Costs and
Expenses
Other Deductions
Balance at
End of Period
Year Ended December 31, 2017
Allowance for doubtful accounts and estimated
returns
Valuation allowance for deferred tax assets
Year Ended December 31, 2016
Allowance for doubtful accounts and estimated
returns
Valuation allowance for deferred tax assets
Year Ended December 31, 2015
Allowance for doubtful accounts and estimated
returns
Valuation allowance for deferred tax assets
$
$
$
$
$
$
73
$
— $
8
9
$ — $
$ — $
4
$
— $
59
$
— $
18
$ — $
— $ — $
4
$
— $
54
$
— $
7
$ — $
— $ — $
2
$
— $
77
9
73
—
59
—
116
COLGATE-PALMOLIVE COMPANY
Market and Dividend Information
The Company’s common stock is listed on the New York Stock Exchange and its trading symbol is CL. Dividends on
the common stock have been paid every year since 1895, and the Company’s regular common stock dividend payments
have increased for 55 consecutive years.
Market Price of Common Stock
Quarter Ended
March 31
June 30
September 30
December 31
Year-end Closing Price
Dividends Paid Per Common Share
Quarter Ended
March 31
June 30
September 30
December 31
Total
2017
2016
High
$ 74.44
77.23
73.94
75.99
Low
$ 64.53
70.76
70.78
69.20
High
$ 70.72
73.20
75.27
73.62
Low
$ 62.45
68.96
70.86
64.63
$75.45
$65.44
2017
2016
$
$
0.39
0.40
0.40
0.40
1.59
$
$
0.38
0.39
0.39
0.39
1.55
117
COLGATE-PALMOLIVE COMPANY
Market and Dividend Information
Stock Price Performance Graphs
The following graphs compare cumulative total shareholder returns on Colgate-Palmolive Company common stock
against the S&P Composite-500 Stock Index and two peer company indices for the twenty-year, ten-year and five-year
periods each ended December 31, 2017. The peer company indices are comprised of consumer products companies that
have both domestic and international businesses. For 2017, the peer company index consisted of Campbell Soup Company,
The Clorox Company, The Coca-Cola Company, ConAgra Brands, Inc., The Estee Lauder Companies, Inc., General Mills,
Inc., Johnson & Johnson, Kellogg Company, Kimberly-Clark Corporation, The Kraft Heinz Company, Mondelez
International, Inc., PepsiCo, Inc., The Procter & Gamble Company, Reckitt Benckiser Group plc and Unilever N.V. This
index is identified as the “New Peer Group” on the graphs. Last year, the peer company index consisted of Avon Products,
Inc., Campbell Soup Company, The Clorox Company, Coca-Cola Company, ConAgra Foods, Inc., Estee Lauder
Companies, Inc., General Mills, Inc., Johnson & Johnson, Kellogg Company, Kimberly-Clark Corporation, The Kraft
Heinz Company, Mondelez International, Inc., PepsiCo, Inc., The Procter & Gamble Company, Reckitt Benckiser Group
plc and Unilever N.V. The prior year index is identified as the “Old Peer Group” on the graphs.
These performance graphs do not constitute soliciting material, are not deemed filed with the SEC and are not
incorporated by reference in any of the Company’s filings under the Securities Act of 1933 or the Securities Exchange Act
of 1934, as amended, whether made before or after the date of this Annual Report on Form 10-K and irrespective of any
general incorporation language in any such filing, except to the extent the Company specifically incorporates these
performance graphs by reference therein.
118
COLGATE-PALMOLIVE COMPANY
Historical Financial Summary
For the years ended December 31,
(Dollars in Millions Except Per Share Amounts)
(Unaudited)
Continuing Operations
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
Net sales
$15,454
$15,195
$16,034
$17,277
$17,420
$17,085
$16,734
$15,564
$15,327
$15,330
Results of operations:
Net income
attributable to
Colgate-Palmolive
Company
Earnings per
common share,
basic
Earnings per
common share,
diluted
Depreciation and
2,024 (1)
2,441 (2)
1,384 (3)
2,180 (4)
2,241 (5)
2,472 (6)
2,431 (7)
2,203 (8)
2,291
1,957 (9)
2.30 (1)
2.74 (2)
1.53 (3)
2.38 (4)
2.41 (5)
2.60 (6)
2.49 (7)
2.22 (8)
2.26
1.91 (9)
2.28 (1)
2.72 (2)
1.52 (3)
2.36 (4)
2.38 (5)
2.57 (6)
2.47 (7)
2.16 (8)
2.18
1.83 (9)
amortization expense
475
443
449
442
439
425
421
376
351
348
Financial Position
Current ratio
Property, plant and
equipment, net
Capital expenditures
Total assets
Long-term debt
Colgate-Palmolive
Company
shareholders’ equity
Share and Other
Book value per common
share
Cash dividends declared
and paid per common
share
Closing price
Number of common
shares outstanding
(in millions)
Number of common
shareholders of
record
Number of employees
1.4
1.3
1.2
1.2
1.1
1.2
1.2
1.0
1.1
1.3
4,072
553
12,676
6,566
3,840
593
12,123
6,520
3,796
691
4,080
757
11,935
13,440
6,246
5,625
4,083
670
13,968
4,732
3,842
565
13,379
4,911
3,668
537
12,711
4,417
3,693
3,516
3,119
550
575
684
11,163
11,125
2,806
2,812
9,970
3,576
(60)
(243)
(299)
1,145
2,305
2,189
2,375
2,675
3,116
1,923
0.28
0.03
(0.04)
1.55
2.79
2.60
2.71
2.95
3.26
2.04
1.59
75.45
1.55
65.44
1.50
66.62
1.42
69.19
1.33
65.21
1.22
52.27
1.14
46.20
1.02
40.19
0.86
41.08
0.78
34.27
874.7
883.1
892.7
906.7
919.9
935.8
960.0
989.8
988.4
1,002.8
22,700
35,900
23,600
36,700
24,400
25,400
37,900
37,700
26,900
37,400
27,600
37,700
28,900
38,600
29,900
30,600
31,400
39,200
38,100
36,600
_________
Note: All per share amounts and numbers of shares outstanding were adjusted for the two-for-one stock split of the Company’s
common stock in 2013.
(1)
Net income attributable to Colgate-Palmolive Company and earnings per common share for the full year of 2017 include $246 of aftertax
charges related to the Global Growth and Efficiency Program and a $275 charge related to U.S. tax reform.
119
COLGATE-PALMOLIVE COMPANY
Historical Financial Summary
For the years ended December 31,
(Dollars in Millions Except Per Share Amounts)
(Unaudited)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
Net income attributable to Colgate-Palmolive Company and earnings per common share for the full year of 2016 include $168 of aftertax
charges related to the Global Growth and Efficiency Program, a $63 aftertax gain on the sale of land in Mexico, $11 of aftertax charges
for a litigation matter and $35 of benefits from tax matters.
Net income attributable to Colgate-Palmolive Company and earnings per common share for the full year of 2015 include a $1,058
aftertax charge related to the change in accounting for the Company’s Venezuelan operations, $183 of aftertax charges related to the
Global Growth and Efficiency Program, $22 of aftertax charges related to the remeasurement of CP Venezuela’s local currency-
denominated net monetary assets as a result of effective devaluations, $120 aftertax gain on the sale of the South Pacific laundry
detergent business, a $14 aftertax charge for a litigation matter and a $15 charge for a tax matter.
Net income attributable to Colgate-Palmolive Company and earnings per common share in 2014 include $208 of aftertax charges related
to the Global Growth and Efficiency Program, $214 of aftertax charges related to the remeasurement of CP Venezuela’s local currency-
denominated net monetary assets as a result of effective devaluations, $41 of charges for litigation matters, $3 of aftertax costs related to
the sale of land in Mexico and a $66 charge for a tax matter.
Net income attributable to Colgate-Palmolive Company and earnings per common share in 2013 include $278 of aftertax charges related
to the Global Growth and Efficiency Program, a $111 aftertax charge related to the remeasurement of CP Venezuela’s local currency-
denominated net monetary assets as a result of a devaluation, a $23 charge for a litigation matter and $12 of aftertax costs related to the
sale of land in Mexico.
Net income attributable to Colgate-Palmolive Company and earnings per common share in 2012 include $70 of aftertax charges related
to the Global Growth and Efficiency Program, $18 of aftertax costs related to the sale of land in Mexico and $14 of aftertax costs
associated with various business realignment and other cost-saving initiatives.
Net income attributable to Colgate-Palmolive Company and earnings per common share in 2011 include an aftertax gain of $135 on the
sale of the non-core laundry detergent business in Colombia, offset by $147 of aftertax costs associated with various business
realignment and other cost-saving initiatives, $9 of aftertax costs related to the sale of land in Mexico and a $21 charge for a litigation
matter.
Net income attributable to Colgate-Palmolive Company and earnings per common share in 2010 include a $271 one-time charge related
to the transition to hyperinflationary accounting in Venezuela, $61 of aftertax charges for termination benefits related to overhead
reduction initiatives, a $30 aftertax gain on sales of non-core product lines and a $31 benefit related to the reorganization of an overseas
subsidiary.
Net income attributable to Colgate-Palmolive Company and earnings per common share in 2008 include $113 of aftertax charges related
to the 2004 Restructuring Program.
120
COLGATE-PALMOLIVE COMPANY
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in Millions Except Per Share Amounts)
EXHIBIT 12
Earnings:
Income before income taxes
Add:
Fixed charges
Less:
Income from equity investees
Capitalized interest
Income as adjusted
Fixed Charges:
Interest on indebtedness and amortization
of debt expense discount or premium
Rents of one-third representative of interest
factor
Capitalized interest
Total fixed charges
Ratio of earnings to fixed charges
2017
2016
2015
2014
2013
$ 3,487
$ 3,738
$ 2,763
$ 3,533
$ 3,565
226
229
216
212
196
(11)
(3)
$ 3,699
(10)
(6)
$ 3,951
(8)
(6)
$ 2,965
(7)
(4)
$ 3,734
(5)
(3)
$ 3,753
$
153
$
149
$
133
$
130
$
116
70
3
226
16.4
$
74
6
229
17.3
$
77
6
216
13.7
78
4
212
17.6
77
3
196
19.1
$
$
$
[THIS PAGE INTENTIONALLY LEFT BLANK]
Shareholder Information
Corporate Office
Colgate-Palmolive Company
300 Park Avenue
New York, NY 10022-7499
(212) 310-2000
Stock Exchange
The common stock of Colgate-
Palmolive Company is listed
and traded on the New York
Stock Exchange under the
symbol CL.
Transfer Agent and Registrar
Our transfer agent, Computershare, can
assist you with a variety of shareholder
services including change of address,
transfer of stock to another person,
questions about dividend checks, direct
deposit of dividends and Colgate’s
Direct Stock Purchase Plan.
Direct Stock Purchase Plan
A Direct Stock Purchase Plan is
available through Computershare,
our transfer agent. The Plan includes
dividend reinvestment options, offers
optional cash investments by check or
automatic monthly payments, as well as
many other features. If you would like to
learn more about the Plan or to enroll,
please contact Computershare:
Computershare
PO Box 505000
Louisville, KY 40233
1-800-756-8700 or (201) 680-6578
Email:
shrrelations@
cpushareownerservices.com
Website:
www.computershare.com/investor
Hearing impaired:
TDD 1-800-231-5469
Annual Meeting
Colgate shareholders are invited to
attend our annual meeting. It will be
held on Friday, May 11, 2018, at 10:00
a.m. in the Broadway Ballroom of the
Marriott Marquis Hotel, Sixth Floor,
Broadway at 45th Street, New York, NY.
Even if you plan to attend the meeting,
please vote by proxy. You may do so
by using the telephone, the internet or
your proxy card.
Independent Registered
Public Accounting Firm
PricewaterhouseCoopers LLP
Communications to the
Board of Directors
Colgate shareholders and other
interested parties are encouraged
to communicate directly with the
Company’s independent directors
and committee chairs by sending an
email to directors@colpal.com or by
writing to Directors, c/o Office of the
Chief Legal Officer, Colgate-Palmolive
Company, 300 Park Avenue, 11th
Floor, New York, NY 10022-7499.
Such communications are handled
in accordance with the procedures
described in the Governance section
of the Company’s website at
www.colgatepalmolive.com.
SEC and NYSE Certifications
The certifications of Colgate’s Chief
Executive Officer and Chief Financial
Officer, required under Section 302 of
the Sarbanes-Oxley Act of 2002, have
been filed as exhibits to Colgate’s
Annual Report on Form 10-K for the
year ended December 31, 2017. In
addition, in 2017, Colgate’s Chief
Executive Officer submitted the annual
certification to the NYSE regarding
Colgate’s compliance with the NYSE
corporate governance listing standards.
Forward-Looking Statements
This 2017 Annual Report may contain
forward-looking statements. These
statements are made on the basis
of our views and assumptions as
of this time, and we undertake no
obligation to update these statements.
We caution 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. Investors should consult
the Company’s filings with the
Securities and Exchange Commission
(including the information set forth
under the caption “Risk Factors” in the
Company’s Annual Report on Form
10-K for the year ended December
31, 2017) for information about
certain factors that could cause such
differences.
Investor Relations
Contact Investor Relations:
n by email,
investor_relations@colpal.com
n by calling (212) 310-2575 or
1-855-322-3551
Institutional Investors:
n call John Faucher at (212) 310-3653
Reports
Copies of annual reports, press
releases, company brochures, SEC
filings and other publications are
available on our website at www.
colgatepalmolive.com. Other reports
available on our website include our
most recent Sustainability Report
and Colgate’s policies on Diversity of
Colgate People, Code of Conduct,
Ingredient Safety, No Deforestation,
Environmental, Occupational Health
& Safety, Product Safety Research
and Research Quality. For information
about our products and our Programs
and Policies on Animal Research and
Development of Alternatives, please
call 1-800-468-6502.
Consumer Affairs
For Oral, Personal and Home Care
1-800-468-6502
For Hill’s Pet Nutrition
1-800-445-5777
Corporate Communications
(212) 310-2199
More information about Colgate
and our products is available on
the Company’s website at
www.colgatepalmolive.com.
© 2018 Colgate-Palmolive Company
Design by Robert Webster Inc. (RWI),
www.rwidesign.com
Major Photography by Richard Alcorn
and Greg Morris
Printing by Universal Wilde
30693 CPAR17_FINAL_021518 cc18.indd 4
3/15/18 1:20 PM
300 Park Avenue New York, NY 10022-7499
300 Park Avenue New York, NY 10022-7499
Greece
Colgate-Palmolive Company is a $15.5 billion global company serving people
in more than 200 countries and territories with consumer products that make
lives healthier and more enjoyable. The Company focuses on strong global
brands in its core businesses – Oral Care, Personal Care, Home Care and Pet
Nutrition. Colgate follows a tightly defined strategy to grow market shares for
key products, such as toothpaste, toothbrushes, mouthwashes, bar and liquid
soaps, deodorants/antiperspirants, dishwashing detergents, household cleaners,
fabric conditioners and specialty pet food.
30693 CPAR17_FINAL_021518 cc18.indd 5
3/15/18 1:20 PM